Effective Branding Builds Profitable Businesses

What is it about Starbucks?!! Why am I so willing to go out of my way to stop and get a tall vanilla latte ‘fix’ each morning – at nearly $3 a shot? It is only coffee, for goodness sake! It is gone within 30 minutes. The benefit doesn’t last. I could get nearly the same decent-tasting, caffeine boost (in a larger, longer-lasting portion) for about 1/3 the price at any number of more convenient locations. Clearly it is not Starbucks value proposition that appeals! What could possible account for this ‘pavlovian’ response that, by the way, I shared with 20 million other Starbucks customers in just the last week!

Pure and simple, Starbucks has mastered the art of effective branding! They clearly understand who they are targeting, how to position themselves, how to most cost- effectively communicate to their audience, and they do a superb job of reinforcing what they stand for – their brand equity. They stand for the experience of enjoying coffee. Those who have lived or traveled extensively in Europe recognize it as the small, familiar, coffeehouse experience that Starbucks has ‘mass produced’ – ‘mass’ being the operative word -- with over 6000 outlets in 30 countries, increasing by nearly 1000 a year! Revenues up for 11 consecutive years growing by 20% on average each year and, as ubiquitous as they seem, they still only serve less than 7% of the coffee-drinkers in the US and less than 1% outside the US. Surely, a company of their size must spend a bundle on marketing to capture their customers. Surprise – it’s less than 1% of revenue!

Any business owner or leader would love to be sitting on a sustainable profitable growth engine. So what is holding you back? It starts with clearly defining your brand’s equity – whether for an individual product or service, a portfolio of them, or a company – each may be used to leverage its “brand equity” to drive growth, acquire and retain more customers, improve marketing productivity and dramatically increase profitability.

If it sounds like a magic bullet, it’s not. It is more like the gun that fires the bullet. A clearly defined statement of a brand’s equity is the ‘gun sight’ that gives the business leader better aim and control over their branding strategy. The branding strategy that enables Starbucks to achieve the kind of spectacular growth that it has had is not unique – you find the same key strategic elements in other B2C and B2B businesses such as Wal-Mart, Lexus, Victoria’s Secret, Cardinal Health, DeWalt, and BlueOcean Software to name a few. These businesses have all clearly defined their brand’s equity – what they want to stand for in their respective business categories – as a first step in developing their business strategy.

Determining the equity that a brand wants to own is tough work. Most brands have established some kind of perceived equity - it is not always what they want it to be (and is seldom what senior management is convinced it is!). A well-known story among P&G managers is the search for the appropriate brand equity for the Tide brand. Even a company as ‘brand savvy’ as P&G spent close to 15 years tinkering and trying to define the core brand equity for its laundry flagship! It generally takes an ‘outside in’ review of the market trends, the customer needs and perceptions, the competitive gaps, and the brand’s own capabilities to credibly fill those gaps. A review of the category customer satisfaction and loyalty drivers often reveals indicators of higher potential equity positions. This analysis must be done from a 360° perspective of the brand-customer experience and it must be factually and objectively presented to key decision makers before deciding on their desired brand equity.

With this necessary step completed, the best brands have gone on to determine precisely who they are targeting and why, developing a positioning that reflects the brand equity in a meaningful way to their target audiences, methodically choosing the most cost-effective ways to communicate that positioning, and – most importantly - using every customer interaction to reinforce their brand equity. In our experience, most brands spend a lot of time thinking about their communication strategies and plans, about 50% do a good job of working through their positioning, but less than half spend adequate time choosing who to target and why, and most don’t systematically consider how to better reinforce their brand’s equity with each customer interaction. With that in mind, here are some hints on developing a more effective branding strategy for your business.

Effective Targeting is being able to identify the ‘MVPs’ in a given category; these are the ‘most valuable prospects’ – those are not just the heaviest category buyers, but the most profitable category buyers; and ‘the most vulnerable prospects’ – those who are most likely to be looking to switch providers due to cynicism, dissatisfaction, or change in circumstance.

Effective Positioning is being able to translate the brand’s features and attributes into meaningful benefits for that target audience. These benefits must be overt and should be perceived as distinctly more connected to the brand vs. those of any competitor. There should also be compelling reasons to believe that the brand can consistently deliver these important benefits more cost-effectively than any one else.

Effective Communication is being able to clearly and succinctly inspire the target audience to either try, or continue to invest in, the brand. This is more than just developing creative advertising and a robust media plan, or clever direct mail pieces, or an intuitive website. It entails thinking through and prioritizing how each target audience gets their information on category products and services, who influences them in their decision process, and how they initially interact with the brand – is it hearing from an associate, seeing it in a store, having it recommended by an expert, or all of the above?

Effective Reinforcement is being able to consistently reinforce the belief of the customer that they have made the right choice in choosing the brand. This takes identifying all the ways that a customer can interact with the brand – not just the initial sales and advertising, but actual use, customer service, invoicing, interaction with company associates, trade shows, product upgrade information, and placement in stores. Being able to call a vendor’s customer service center and get a live person quickly goes a long way to reinforcing the equity of a company who prides itself on ‘always being there to support its customers!’

Remember, once a customer chooses your brand, you have entered into a friendly relationship with that customer, and people are judged by the friends they keep. How they continue to value that relationship will determine how much value the brand gains from that relationship.

This is one of the key reasons why so many companies suffer from waning brand loyalty – they fail to look for even simple ways to reinforce the reasons their customers chose them in the first place. This is one of the key areas that truly separate good brands from great brands – the discipline of reinforcing a brand’s equity at each and every customer touch point.

Developing and executing an effective branding strategy will improve any business’s profitability by enabling them to attract and retain more customers and improve their marketing and sales productivity. Being clear on what perceptual space it wants to own in the minds of its target audience, and by clearly positioning, communicating and reinforcing that equity, will help avoid confusing prospective customers about the value that business provides.

If, as Peter Drucker has said, the only valid purpose of a business entity is to create customers, then the branding strategy of that business is the necessary framework upon which it is built. Just ask some of the more successful business leaders you know – you can probably catch them in line waiting for their double espresso macchiato at Starbucks!

To learn more, contact Dan Knowles at 639-3900. Dan is a strategic alliance partner of KMKC and President of Brand Ubiquity, Ltd.