Change Agent spring 2007- the brand issue

THE MARKET RESEARCH MAGAZINE THAT IS DRIVING CHANGE IN GLOBAL BUSINESS – ISSUE 10 / SPRING 2007

TheBrandIssueBite into it

All products and services are commodities. No product in any one category can be said

to be better or worse than the numerous other competitors.

Thoughts like these might give business people (and marketers) nightmares.

But that is not the case. For while global systems of production and distribution are creating a surfeit of products like never before, people remain people. And that’s good news for companies with a healthy brand image.

Our collective desire to be loved and accepted, to feel connected to others, to be a part of something bigger than ourselves, is a human universal and part of our genetic make up. As the old saying goes, man cannot live on bread alone.

The saying may have originally been intended to describe the eternal need for something more in life than just mere sustenance, but we can extend that concept to the reality of brand power.

The idea of going into a supermarket full of products that are perfectly fine in terms of quality or performance, but packaged, priced and sold in exactly the same way, may be disheartening to consumers. The range of colours, styles, messages, fashions – even smells and sounds – associated with modern branding can be exhilarating to a shopper. It makes shopping fun – whether for a consumer electronics purchase, a loaf of bread or a car.

In this issue of Change Agent, we look at brands – what they are, how they function, how they are measured and the issues involved with building them. We feature an article penned by Dr Jan Hofmeyr, Synovate’s own resident expert on brands, about his new tool that’s designed to help brand managers correctly predict the value of their brand sales. It has a lot of potential for all those tasked with increasing the equity of their brand.

In short, we are living in the age of brands. That’s something that most people already know, either instinctively or rationally. Identifying the ways in which a brand can be made successful is the next challenge. It is the challenge that we take up in this Change Agent.

Enjoy. ▲

The almighty brand

EDITOR’S l NOTE

EDITORIAL TEAM ALICIA KAN Founding Editor

JOHN SURREY Managing Editor RYAN SWIFT Editor

EMILIO RIVERA III Design Director

CONTRIBUTORSLEWIS BORG-CARDONA

RADHA CHADHAJAN HOFMEYR

ELIZABETH JONESALEXANDRA SUTCLIFFE

DAVE WONG

PUBLISHING AND BUSINESS TEAMS

ALICIA KAN Publisher [email protected]

JOHN SURREY Managing Editor [email protected] BJORN FJELDDAHL Managing Director [email protected]

GERALDINE MOOR Editorial Director [email protected]

ELLIS TSANG Account Manager [email protected]

MIA SIU Circulation Manager [email protected]

Have a great idea for CHANGE I AGENT? Contact us and tell us what you’re thinking!

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Respectfully,

ALICIA KANEDITOR

CHANGE l AGENTTHE MARKET RESEARCH MAGAZINE

THAT IS DRIVING CHANGE IN GLOBAL BUSINESS

Change Agent is published by Eight Publishing Ltd on behalf of Synovate Ltd. All rights reserved. This publication may not be sold. No part of this publication may be otherwise reproduced, adapted, performed in public or transmitted in any form by any process without the prior authorisation of Synovate Ltd. © Synovate Ltd, 2007.

The articles in Change Agent do not necessarily reflect the views of Synovate.

ISSUE 10 / 2007 CHANGE l AGENT 3

THIS ISSUE

28

Brand values Figuring out how much a brand is worth is turning into an established business field

15Be the brand As consumers transform into brand ambassadors, companies need to live their own brand like never before

David vs Goliath What lessons can be drawn from the experience of small, local brands beating global brands at their own game?

Brand DNAThe building blocks of a successful brand get laid at the beginning

12

22Luxeplosion! Luxury brands are the ultimate in brand power – especially in Asia

32

Building brand salesSynovate’s leading brand expert explains a new way that companies can improve their brand-based sales

18

The case for intelligent design Product design must be in line with the brand, as well as consumer taste

35 Pharma-branding Drug companies are getting the message out to doctors and consumers

39

Beating breast cancer A new class of cancer fighting drugs comes into its own

43

Creating the global flyer Airlines face national barriers as they try to build global awareness

26

Editor’s note 3

Trend agent 6

Literary agent 46

PLUS A list of big national brands 25 Designing a brand logo 31 Celebrity endorsements 34 A product design story 37 The brand, quoted 42

6 CHANGE l AGENT ISSUE 10 / 2007

Trend agentResearch, stats and all that

43 %43% of American Internet users feel “as strongly” about their online communities as they do about real-world friends, according to the Center for the Digital Future at the University of Southern California. Online social sites, such as MySpace and Bebo, as well as virtual worlds such as Second Life, have become major forums for interaction. ▲

Virtually tied

People are more likely to buy a product if they know that a lot of other people have bought it, a study by Columbia University in New York reveals. The research team set up an artificial music market so that 14,000 people could download new music that they hadn’t heard before. Participants could see a selection of songs ranked by the number of times each song had been downloaded.

The songs that were highly ranked were downloaded before others – something which the researchers dubbed “the swarm effect”. But when the songs were not ranked in any order, the “swarm effect” subsided, according to a report in The Economist.

Which means that retailers might start using smart-card technology to help consumers identify which products most people choose. For example, a trolley receiving a radio transmission will be able to tell the shopper how many people in the store have purchased products the shopper is passing. Scientists at the Florida Institute of Technology say that Wal-Mart and Tesco are interested in the system. ▲

Swarming consumers

A Synovate survey on coffee habits shows that most Americans and people living in Hong Kong think of Starbucks first when they think of ready-made coffee. But the French prefer ready-made coffee from unspecified or unknown bars and cafés, with only 2% thinking of Starbucks. ▲

Coffee by any other name...


85% of Americans do not see vending machine products as good value according to a 2007 Harris Interactive survey. Among those who use vending machines, 37% cited availability as a reason to increase use, while 29% say a lack of healthy products is a reason to decrease use. ▲

Mending vending

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American auto consumers display more brand loyalty towards Asian brands than their European and American-made counterparts. Research reported on the Auto Spectator website also revealed that older customers tend to be more loyal to auto brands than younger people. ▲

Loyalty for miles

Groupthink without the Kool-AidSocial networking technology, famously used by websites such as MySpace, YouTube and Wikipedia, is now moving to the corporate world. IBM and Microsoft have both unveiled enterprise software packages that replicate these technologies specifically for the workplace, according to BusinessWeek magazine. Experts say this is the first instance of consumer-related software migrating to the business world, rather than the other way around. ▲

TOP TEN SEARCH TERMS IN 2006

1. Bebo 2. MySpace 3. World Cup 4. Metacafe 5. Radioblog

6. Wikipedia 7. Video 8. Rebelde 9. Mininova10. Wiki

SOURCE: BBC

“Click, mon chéri...” Synovate research reveals that the French are among the most likely to use online personal ads. The survey showed that 29% had used online personals for romantic purposes, compared to an average of 15% in eight other countries. The Philippines scored 21%, the US 15% and Singapore just 4%. However, among the French who haven’t used online personals, 57% say they would rather “see someone in person first”. ▲

TREND l AGENT


A psychologist from Queen’s University in Belfast, Ireland says dog owners are, on average, healthier than cat owners, according to the BBC. No specific reason has been discovered, though one health psychologist thinks it could be a combination of having to go for extra walks combined with the increased opportunities for social contact with other dog owners. ▲

Live longer: get a dog

E’gao is a popular new form of pop-culture satire in China that pokes fun at songs, movies, music videos and TV programmes. Artists such as the Back-Dorm Boys, based in Guangzhou, use multi-media forms to rework original pieces, sometimes maliciously. The Chinese characters for e’gao can be translated as “evil” and “to make fun of”, according to Xinhua news agency.

Examples include a graphic reworking of the Beijing 2008 Olympics logo and a mobile ring tone developed from the colourful comments made by an upset Chinese football announcer. The Back-Dorm Boys create new music videos in their university by lip-synching with western pop music backgrounds. E’gao parodies have even extended to patriotic songs written during the Mao era.

Xinhua reports that e’gao is popular also in Japan and Taiwan, and has become ubiquitous in China since it started in 2002. The Ministry of Culture is trying to rein in the phenomenon, which has spread to the Internet and via SMS and mobile ring tones. Creators of e’gao have also become feted artists in their own right: the Back-Dorm Boys recently signed their own contract with a Beijing talent company. ▲

Egads, it’s e’gao!WE WILL...

...WE WILL ROCK YOU!


Australiansbicyclesthan automobiles each year, according to a BBC report.

now buy moreEnergetic saving48% of Europeans have cut back on using electrical appliances to save energy. 76% think energy prices will double in the next three years, according to a Eurobarometer poll. ▲

Women in the US are becoming increasingly interested in American-style football, the Chicago Tribune reports. A Harris Poll found they ranked pro-football as their favourite sport, beating the combined percentage of women who picked baseball, basketball and NASCAR racing. Women in the 18-34 age range who watched National Football League games on TV increased by 6.5% in 2006.

Experts say that women’s interest in football may be more than just for entertainment. Being more conversant about football with men in the workplace may help advance their careers. The NFL has started offering Football 101 courses for women that introduce football history and strategy. ▲

Women and American football – what a match!

Don’t be healthy, look healthyA report on the food and beverage industry indicates that people in developed markets are more interested in looking and feeling good, rather than actually being healthy, according to Just Drinks, a beverage industry website. Business Insights surveyed food and drink industry executives, asking them to rate the importance of seven consumer attitudes towards buying healthy products. Some 69% of respondents said that improving health was important, though 76% said the desire to look and feel good was an important driver. Just over 80% agreed that consumers would shift to functional health foods in the next five years, but that consumers would also continue their unhealthy indulgences.

The report also noted that in some countries there is an inverse relationship between the attitude towards healthy living and the actual healthiness of a country’s people. Italians and Spaniards have the “worst attitudes” towards health, but due to dietary differences, are among the healthiest people in Europe. By contrast, many Americans, British and Germans are more interested in health, but are actually less healthy. ▲


A movement against the practice of pharmaceutical companies’ giving gifts to medical schools is gaining momentum in the US, according to a report in the Los Angeles Times. Research conducted in 2003 indicates that small gifts and free meals offered by pharmaceutical company representatives can be more effective in persuading doctors to prescribe certain drugs than lavish gifts. Big gifts have the tendency of putting the receiver “on guard” against questionable dealings, while small gifts create a sense of obligation, the report said.

As a result of a series of articles on the subject and a protest movement spearheaded by medical

Kicking the pharma habit

More people are travelling overseas by themselves, and many are women, according to the Sydney Morning Herald. The report cited statistics from Tourism Research Australia and the US Department of Commerce that show a big upswing in solo travel – as much as 20% since 2000.

The report quoted the manager of an independent travel operator as saying that women now make up 70% of its customers. Industry operators said that solo travellers desire more

freedom and want to show their independence. Many are also unable to schedule

concurrent time off with their partners or spouses. ▲

Going solo

TREND l AGENT

students and academics, several university medical centres have barred students and staff from accepting gifts of any size. Among the medical training centres that have introduced such bans are Stanford University, Yale and the University of Pennsylvania. ▲

Companies headquartered in Sweden or Canada are the most trusted globally, according to the 2007 Edelman Trust

Barometer. American brands are trusted much less by Europeans than

by people in developing countries. ▲

Who do you trust?

CHANGE l BRANDS

Brand DNA: the core valuesThe DNA “Our mission is to be the most essential global Internet service for consumers and businesses.” – Old Yahoo mission statement

“To organise the world’s information and make it universally accessible and useful.” – Google mission statement

“Yahoo’s mission is to connect people to their passions, their communities, and the world’s knowledge.” – New Yahoo mission statement (February 2007)

As two of the biggest Internet names slug it out, the change in Yahoo’s mission statement is telling. Originally, Yahoo’s statement was just an exhortation to be the most important Internet company. The new statement puts Yahoo on a different path than Google – it is now the company that connects people. These are not trivial differences in wording – they reflect the need for a company to be able to define itself accurately and succinctly. It is the DNA of a company.

To make sure that a company’s DNA will engender growth, there are five important questions to ask: 1. Is it relevant (do customers care)? 2. Does it make you stand out? 3. Does it turn customers on? 4. Is it credible? 5. Is it durable?

If the answer is yes to all five of these questions, then the DNA blueprint is ready to turn into a successful brand. Will Yahoo gain ground against its traditional foe? It will hinge on how well it delivers on its new promise.

The fractured whole Since the 1990s, M&M’s have been attached to movie characters that kids and adults can enjoy together, such as the cartoon character Shrek. Promotional campaigns deliver these messages via interactive websites, in TV commercials and with sales displays at vending machines. Customers must receive the same message in a consistent manner across all media.

Unthinkingly yours When Apple released iPod Nano, the critical element of the sleek, stylised MP3 player that flew off shelves wasn’t new features or expanded capacity – it was what PC Magazine called the “undeniable cool factor”. One blogger tried to dissect the decision-making process behind buying an iPod Nano and concluded that no conscious decision was involved. It goes to show that a consumer brand that’s carefully managed can quickly develop cult status. Followers find a means of personal expression by purchasing particular brand products and creating web forums to discuss the brand.


Building a valuable brand requires commitment, consistency, integrity and attention to detail. A successful brand is not just a marketing luxury anymore – it is the benchmark of overall success. And it all starts with the DNA – the core values – of a company:

Brand DNA: the core values

Keep the special ingredients In the 1990s, McDonald’s was faltering after a nearly 40-year uninterrupted growth story. Battered by bad press, a reputation for poor quality and a host of hipper competitors, McDonald’s was in trouble. In late 2002, a new executive team went to work. The quality of the original menu was restored, older methods of quality measurement brought back, and subsidiary brands sold off. The result? McDonald’s returned to profitability and its brand value is climbing. The moral: always be faithful to the qualities that built the brand in the first place. Delivering on a promise never goes out of style.

Money from nothing What’s a brand worth? For some enterprising New Zealanders, it’s US$91 million. That’s how much 42 Below, an upstart vodka brand started in 1999 netted from its sale to drinks giant Bacardi. Thanks to a clever combination of guerilla marketing, cheeky adverts and a website full of dirty pictures, 42 Below became an instant hit with partygoers worldwide. It’s not surprising to learn that Geoff Ross, the CEO and founding partner of 42 Below, was formerly a Saatchi and Saatchi executive. For many companies, the brand is easily the most valuable asset.

Internal affairs When a defect in a car appears on an assembly line, Toyota factory workers have the power to stop the line to find out where the problem originated. It’s one of the internal elements in a culture that’s steeped in a tradition of openly acknowledging and sharing ownership of problems. Toyota is one of the most trusted automobile brands. Imagine employees as individual brand ambassadors, rather than potential saboteurs, and you can see why UPS Vice President Ed Buckley referred to internal brand building as possibly the biggest missed opportunity in branding. Employees must understand the value proposition of the brand, and see it in action everyday.

Are you experienced? “The politicism of The Body Shop has always been its DNA – the shops became our billboards,” says Dame Anita Roddick, founder of The Body Shop. Roddick imbued The Body Shop, a retailer of specialty beauty products, with the sense that purchasers were taking part in a giant campaign for social justice. Whether it was in-store petitions against animal testing or installing child care centres for employees, every aspect of The Body Shop was a brand experience that reflected Roddick’s activism. In every retail outlet, everything from the petition paper to the colours of the packaging reflects that conscience. To be successful, a brand experience must also be a complete experience.


Branded to death Do people get sick of brands, or sick of branding? Adbusters, an organisation that began with a magazine which poked satirical fun at contemporary pop culture and advertising, has developed a series of black spot products that compete with major brand name products. The black spot is meant to be an anti-brand, though commentators now view the black spot as a brand.

brand-based content. Ten years ago, the book A Brand Called You introduced readers to the idea that even individuals can and should have a brand, just as much as a company might.

Such awareness accentuates the need for a brand to deliver on its promise. People who willingly find an identity in a brand will not be satisfied by empty slogans. They need a brand to fulfil its promise in order to feel like they are part of something important.

A brand must be more than a guarantor of product quality. It must be the guarantor of an experience. McDonald’s is associated with speedy service. If a menu item is not available at the moment it is ordered, a server will tell you in how many minutes it will be ready. In the developing world, McDonald’s is associated with modernity. The opening of the first McDonald’s in Moscow was a media sensation.

Above all, the leadership of a business must believe in the importance of its own brand, and in the importance of building a brand. Managers face

constant pressure from executives to cut costs and improve short-term numbers. But a brand is a long-term investment. Often the returns are only starting to be recouped after the initiating manager has left the company.

This means brand-aware leadership is essential. Employees take their cue

When women in Japan line up for hours to buy a Louis Vuitton bag they can’t afford, it’s much more than a bag or some accessory they hope to

own. They want an image – a lifestyle even. They want a modern brand.

A brand is a promise: it contains a set of emotional attributes for which a customer is prepared to pay a premium. Every aspect of a company’s message, product and service needs to be aligned with the brand promise. That promise must be unique, valued and consistently delivered. And whereas branding may once have been the primary domain of marketers, it is now the concern of everyone at a company.

In the past, brand marketers have benefited from a one-way relationship that consumers had with brands. Today’s consumers are conscious of what branding is, thanks in large part to information technology and that developed economies employ more people in the business of delivering


GRAPHICS BY RED

The brand is often the most valuable part of a company. It can also be the most fragile part By Charles Brian-Boys and Chris Fjelddahl

Brand and deliver

CHANGE l BRANDING

A brand must be more than a guarantor of product quality. It must be the guarantor of an experience

from their supervisors, and managers need to feel that actions taken to guarantee or improve the value of the brand will be rewarded.

Seeing the wholeJust over a decade ago, the nightly news TV broadcast was the public focal point of almost every developed nation, giving advertisers a one-way, direct line to consumers. Thanks to the Internet, the situation couldn’t be more different today. If you want to buy a digital camera, just check any number of websites that offer a complete list of brand names, models, features, comparison prices and user reviews, plus editorial comment. No longer will a simple slogan and jingle do.

The new media creates opportunities, such as viral marketing via the Internet. Almost unheard of a few years ago, viral marketing is

now essential. A good example is a commercial called The Cog, which features parts of a new Honda car to create a chain reaction as parts fell into each other, much like a line of dominoes. It makes the viewer aware of fine engineering, thanks to the precision of the set up. The ad created a sensation and spread via email to hundreds of thousands of people. In fact, The Cog was more likely to be viewed by someone sitting at an office computer than by someone at home watching TV – a startling consideration given that the ad was originally intended for TV.

It can also go horribly wrong. During 9/11, a story circulated on the Internet that a Starbucks near the World Trade Center had refused to give water to rescue workers, insisting the workers pay. The story spread via email and chatrooms, creating a PR disaster.

Within weeks, Starbucks put US$1 million into a fund for the victims’ families.

However, brand managers should not be completely seduced by the Internet. A survey by public relations firm Ketchum and the University of Southern California Annenberg Strategic Public Relations Center in September 2006 showed that while older generations are less likely to rely on new media such as the Internet or blogs for information, adults under 30 are likely to be well-rounded in media usage. In fact, new and old media often work well together. Radio can be broadcast on the Internet, most magazines and newspapers have a website counterpart, and movie trailers can be sent to video-enabled mobile phones.

This means a number of things for people communicating a brand promise. A brand must have a central idea or theme, and all communications across all media should stick to it. Internet users, TV viewers, radio listeners, newspaper readers and bloggers should come away with the same set associations


CHANGE l BRANDING

attached to the promise of the brand. Of course, there are instances

where one form of media is more conducive to the brand’s target audience and emotional appeal. Luxury brands might, for instance, benefit more from magazine ads with svelte models in an exquisite setting, as opposed to mobile marketing, which would better suit small electronic products.

The sameness of products and services – even brands – combined with the proliferation of media channels means that the emotive aspects and associations of a brand must be more prominent. This is true even for business-to-business brands.

Consumers are clustering around brands that best define who they want

to be. For example, the Apple brand of computers and musical devices has attracted a core group of people who regard Apple as a cool counterpoint to the supposedly monolithic edifice of Microsoft and the PC.

Brands like Apple have an image that works with other brands. The slogan “Think Different” and product launches made by casually clad Steve Jobs all give the impression of stylish rebellion. Any other brand, be it in clothing or food, that cultivates an appeal of stylish counterculture may find a ready audience among the Apple tribe. People who like the Apple brand may also gravitate towards other brands that are perceived to have similar attributes as Apple.

Industry experts may disagree about the actual merits of Apple products, but none can deny its brand power. Followers can be counted on to buy its products even if there are competing products that are technically superior, but lacking Apple’s brand cachet.

And Apple is not alone in terms of brand power. In many other product categories, brands are building that kind of immediate response to their image, goods and services. Nike, Coca-Cola, General Electric, Harley-Davidson, Toyota, Quaker Oats, Intel and many more companies have developed brands that influence consumers in ways far beyond simple rationality.

A brand purchase is not the reasoned decision made by a self-enlightened person imagined by early economists. It is a decision made by a 21st century creature: the brand agent. ▲


Internet users, TV viewers, radio listeners, newspaper readers and bloggers should come away with the same set associations attached to the promise of the brand

Charles Brian-Boys and Chris Fjelddahl are managing partners of Eight Partnership, a brand communications agency. For more information, visit www.eightpartnership.com.

The logic of most quantitative marketing research is relatively simple: find the number that will improve your business.

Which attribute will increase market share? Which

media channel will have the most impact? These are the kind of questions market researchers try to answer.

You would think that marketers want to know how valid their measures are – and that market researchers try to improve the validity of their measures and models. But you’d be wrong.

Consider the widely used customer satisfaction score. In a literature search going back over 30 years, I found the average correlation between how satisfied customers are, and what they actually do, is only about 0.2. In other words, 80% of what people do cannot be predicted by how satisfied they are.

It’s not much better for another widely used number: purchase intention. The average correlation between purchase intention and what people do is only about 0.27.

Then there is recommendation. Research shows the “net promoter” score has no correlation to business performance or market capitalisation.

Clearly these are not useful numbers. Why do these numbers perform so poorly and why does our industry insist on using


CHANGE l RESEARCH

Reinventing brand researchIf you want to know how your next marketing campaign will affect brand sales and equity, you can now get a much clearer picture By Dr Jan Hofmeyr


them? The answer to the first question has to do with theory – the second, with the nature of institutions.

Straight line thinking and incomplete modelsMarket researchers know there’s a difference between what people want to do and what people actually do. What gets in their way is circumstances. For example, children may want Coca-Cola, but mothers won’t buy it. Men might want fast, expensive cars, but affordability stops them. A brand may be out of stock or government regulations interfering with consumer choice. Barriers are present in all markets in varying degrees.

Failure to measure barriers to consumption is an important reason why market research systems predict poorly. It is one of the most important ways market research models are incomplete.

The other is what I call “straight line” thinking or modelling. This happens when a market researcher attempts to predict, say, the sales of Coca-Cola directly from the market spend of Coca-Cola. Another example is predicting the brand image of Coca-Cola from the advertising awareness of Coca-Cola. I call this “straight line” thinking because the attempt to explain something comes straight from an independent variable, say, an aspect of Coca-Cola’s marketing, to a dependent variable, such as the

consequences for sales. Straight line modelling ignores the fact that brand use has a much greater impact on brand image than brand sales. For example, what friends and associates say about a brand has a much greater impact than advertising. Communications by other brands also have an impact on one’s brand. Straight line modelling does not take such factors into account.

Measurements and models that predictWhen joining Synovate, I wanted to clean up brand equity measurement by measuring only what makes a difference to the brand, and thereby create a more useful model. Synovate’s Brand Value Creator (BVC) does just that. It offers marketers a measurement system that more accurately reflects what’s happening to their brand, and puts tools into marketers’ hands that enable them to make informed decisions.

The key is the recognition of at least two critical metrics to understand what’s happening to your brand. First, you need “attitudinal equity”: a measure of how strong the brand is in the minds of people. Secondly, you need “barrier effects”: a measure of the extent to which barriers enhance or depress the chances of a brand being bought. This research must be at respondent level, otherwise you cannot do a proper driver analysis.

PHOTOGRAPHS BY BRIAN CHING

Attitudinal equity measures the strength of a person’s desire to consume each brand in a product category. Like many measures, it is correlated with “share of wallet”. It’s a number that makes a difference to brand sales. Increase your brand’s attitudinal equity and sales of your brand will go up. If your brand’s attitudinal equity falls, sales will go down.

No matter how good they are, measures of attitudinal equity provide an incomplete picture. We also need to know how a person’s desire to use a certain brand may be distorted by market circumstances. That’s what the measure of barrier effects provides. It shows the extent to which barriers, such as cost, bad shelf space or poor store locations, might lead people to default brands.

By putting these two metrics together, Synovate’s Brand Value Creator improves marketers’ ability to identify the right ways to invest in a brand. The Brand Value Creator identifies why people are using what they’re using and predicts the likely future direction of their consumption.

Scenario planning and “what if” simulationSynovate has developed a unique range of desktop modelling tools embedded in PowerPoint charts that make interactive modelling possible.

The attitudinal equity simulator allows research or brand managers to


CHANGE l RESEARCH

For more information, contact Dr Jan Hofmeyr at [email protected].

simulate the impact of brand image changes on attitudinal equity for both their brand and competitor brands. What makes the simulation possible is the unique way in which attitudinal equity scores are interlinked for all respondents and brands. By using the simulator, you can:● Establish which brand attributes need

to be changed and by how much in order to achieve specific improvements in equity and therefore sales.

● Establish the negative impact on competitor brand equity (and therefore, sales) of improvements in aspects of your brand image.

● Model the potentially negative impact on your brand equity if competitors manage to improve their brand image on specific attributes.

● Explore portfolio strategies that maximise the total business owned by your portfolio of brands and minimise cannibalisation across your own brands.

By combining market mix modelling with the attitudinal equity simulator, we can improve the cost estimates associated with achieving changes in image, equity and sales.

A second simulator combines equity simulation with the simulation of barrier impacts. By combining the two, the simulator takes brand decision

support to total market management – a level far beyond attitude and communications management.

Although our simulators should not be used in a mechanical way, they do give brand managers a range of scenario planning tools which help to take the guesswork out of brand investment decisions.

Implementing the Brand Value CreatorThe system is based on a normal brand strategy or tracking survey that covers awareness, usage, attribute associations and so forth. The first step to implementing the system is to establish which brands are relevant to each respondent. We then ask four questions about those brands:

Attitudinal equity: a respondent level measure of the strength of each brand which establishes how each person prefers to distribute their spending across a spectrum of relevant brands.

Barrier effects: a respondent level measure of the extent to which market barriers, such as lack of in-home presence, poor distribution and so on, either improve or depress the chances of a brand being used.

1. Brand performance: how does the respondent rate each of their evoked brands relative to their needs in the category?

2. Brand involvement: how important is the role that each of the evoked brands plays in the respondent’s life?

3. Barrier attributes: a barrier-association question that establishes the barriers the respondent experiences in relation to each of the evoked brands.

4. Share of wallet: a question to measure the current share of a person’s spending that each brand in the category is getting.

Once the two key metrics have been established, desktop simulators in PowerPoint format then equip marketers to analyse the impact of various marketing scenarios and improve their decision-making.

Decision-making at the next levelI claimed at the start of this article that our industry appears to insist on using measures that fail to predict, even when many of us know that the measures concerned are weak. I also said that the reasons for this are institutional. In my experience, both our research executives and clients are far too hung up on “numbers” that they’ve been tracking for some years. They’re afraid of what might happen if they suddenly get a “new number”.

Synovate’s approach to brand and communications research aims to change all that. When we discover something that works better, we don’t hesitate to tell clients and to suggest that they change.

The Brand Value Creator is just the first step in this process of continual improvement. The system provides marketers with two powerful measures: attitudinal equity and barrier effects. When these numbers change, the real world changes. We hope that by doing this we make marketing research both more truthful and useful. ▲

with first-hand knowledge of what a major American fast food chain looks like, Tan reinvented his store using everything he had learned in the US. He introduced a friendly cartoon mascot, bright and cheerful uniforms for the staff, a child-friendly ambience, a menu of deep fried favourites, and the belief that there’s no such thing as too much marketing.

Tan also made adjustments to his menu, adding Filipino specialties to the regular fast food standards, such as pancit palabok, a popular noodle dish.

Jollibee was reborn and ready to fight. By 1981, when McDonald’s first set up shop in the country, they were forced to play catch up with Jollibee. The American chain simply didn’t offer anything new to the market, while the local franchise already had nine branches and a

strong brand position, thanks to aggressive advertising.

Brand building has always been a priority for Jollibee, and the company has spent millions appealing to children and families. The result is a level of brand awareness usually reserved for major global competitors like, well, McDonald’s. A mid-90s market study found that nearly 100% of respondents in the Philippines knew the Jollibee brand. According to Jollibee Vice President for Finance, Raffy de la Rosa, “The Jollibee mascot is probably the most widely recognised character in the country.”

The chain now has outlets in Taiwan, Indonesia, Vietnam and the US, and in the Philippines sales continue at roughly double those of McDonald’s.

The Jollibee story is legendary in


CHANGE l MULTINATIONALS

In the mid-70s, Tony Tan Caktiong had a successful small ice-cream parlour in Manila. When he expanded the business by adding burgers to the menu, he heard the news: McDonald’s

was preparing to enter the Philippines. Competing against one of the

world’s biggest brands is daunting to any small business owner. Tan’s friends and associates warned him that his store would be eaten alive, unless he considered selling his business to McDonald’s, or be its franchise holder. Both options were safe bets, but Tan didn’t play it safe: “I have a third option. I can fight McDonald’s.” And fight he did.

Tan flew to the US to learn exactly what he was up against.

Returning to the Philippines armed

Battling against a brand Big name brands pack a punch, but

do they always have the power to take down the local talent? By Dave Wong


the Philippines and still echoes in its business schools, perhaps because there are few stories like this left to tell. Take India’s Ramesh Chauhan, who fought valiantly against Coca-Cola with his own Thums Up cola – now a Coca-Cola owned brand. Or London’s sandwich specialists Pret a Manger, started by college friends with a £17,000 loan – now partly owned by McDonald’s.

McDonald’s has tried to learn from and address the issue of local tastes, wherever it operates. In Quebec, the French province of Canada, you’ll find McPoutine, the McDonald’s version of a popular dish made of french fries, gravy and cheese curd. McDonald’s in Brazil added the McCalabresa, a sandwich with a pepperoni patty coated in vinaigrette, based on a traditional Brazilian street food. In Germany and the Czech

Republic, McDonald’s serves beer. Nevertheless, even the biggest

players are not immune to backfiring when entering new markets. When Disney decided to open an amusement park in Hong Kong, the prospect of millions of visitors from the mainland had Mickey and Co drooling at the potential windfall. However, the theme park has faced unexpected competition from one of Hong Kong’s older amusement attractions: Ocean Park. Since Hong Kong Disneyland opened its doors, Ocean Park has had record attendances. In 2006, Forbes magazine named Ocean Park one of the world’s top ten amusement parks. Disney World in Florida, EuroDisney in Paris and Tokyo Disney were also on that top ten list, but Hong Kong Disney World wasn’t.

With its cheaper ticket prices,

diverse range of animal attractions (including two panda bears, a major draw in Asia), cable cars and stunning location, Ocean Park is a local brand that’s benefited from the presence of a global competitor.

Ironically, it was the Disney decision to move to Hong Kong that preserved Ocean Park. Just before 2000, the park was on the verge of closing its doors. It was run down and not popular with locals and tourists. Once word of Disney emerged, the park underwent massive renovations, took on new management, added new attractions that played to their strengths, and developed a fresh new image. Like Jollibee, they beat the big boys to the punch. In fact, the prospect of big brand competition turned out to be inspiring, not devastating.

Hong Kong Disney has worked

EDITORIAL CARTOON BY EMILIO RIVERA III

The American chain simply didn’t offer anything new to the market, while the local franchise already had nine branches and a strong brand position


CHANGE l MULTINATIONALS

What the American Apparel case shows, like Jollibee and Ocean Park, is that global brands can be beaten at their own game

hard to adjust to its new market, using widespread marketing and a stable of local celebrities to bolster the brand in Asia, particularly after a rocky start. Yet Ocean Park Chairman Allan Zeman is confident the future will continue to be bright for Ocean Park. “If we didn’t have the goods, people wouldn’t come,” he says. “I’m pretty confident we’ll keep appealing to locals and tourists.”

So much has the park’s image improved that it was recently named one of Hong Kong’s most admired brands in a survey conducted by brand management consultancy The Ingram Brand Company and Synovate. Ocean Park scored the highest rating for any brand in terms of “delivering on promises”. Ingram’s Wendy Lam adds that ultimately, real brand power is not simply about brand image. “Brand building is really much more about what you do, than what you say you do or how you look.”

A great example of that is American Apparel, the brainchild of Dov Charney, company founder and CEO. In a market that has long gotten used to the notion

that all clothes are manufactured in Asia because it’s too expensive to produce in the US, Charney decided to do exactly the opposite of what every business guru has advised since the early 90s.

Using anti-corporate, anti-globalisation attitudes as part of its marketing arsenal, American Apparel opened its first manufacturing location in downtown Los Angeles and then

its first retail shop in 2003. It now has 143 outlets in 11 countries. Much of its success has come at the expense of companies like Gap, a giant casual clothing retailer that has seen its share of market slide in the last few years.

American Apparel’s line includes T-shirts, jeans, khaki pants, hoodies and exercise wear – all strikingly similar to Gap. But Gap’s reputation and that of many other fashion retailers is the polar opposite to American Apparel. Many of these companies have been stung by allegations of worker exploitation in third-world countries. Over 80% of Gap’s production is in low-cost countries, compared to American Apparel’s LA-based production base, relatively high wages and benefits, and even free English classes. A video produced by American Apparel shows the employees engaged in a protest in favour of immigrant workers’ rights.

There are other brand lessons to be learned as well. Most clothing retailers, from Gap to Calvin Klein, rely on celebrity endorsements, waif-like models, professional photo shoots, and a distinctly chic image. On the other hand, the American Apparel website features attractive but everyday people in seductive poses, and photographed in homes or apartments. It bears the hallmarks of an online personals site.

What the American Apparel case shows, like Jollibee and Ocean Park, is that global brands can be beaten at their own game. “In The Art of War, Sun Tzu said that ‘the clever combatant imposes his will on the enemy, but does not allow the enemy’s will to be imposed on him’ – it seems to me that this is the key for smaller brands facing a larger, homogenised competitor, and that is well illustrated in these case studies,” says Ged Parton, CEO of Synovate’s Global Brand Practice.

Whether by taking a page out of a competitor’s playbook and adding a local touch, or by taking the role of an anti-brand, there is always room for the next big thing. ▲

While the Marlboro brand dominates most of the world’s best-known cigarette brands, Canadian smokers have a history with a different brand of cigarettes named Marlboro. Since 1932, a competitor of Phillip Morris has owned the Marlboro name in Canada, and has stubbornly held it to defend against Phillip Morris’ world-famous brand. Most Canadians are unaware of the “Canadian” Marlboro brand, and its sales figures barely even register each year. Yet it has kept Phillip Morris’ Marlboro brand out, and allowed lesser-known Canadian cigarette brands to keep their flame alive.

Marlboro Man frozen out

CHANGE l BRANDS

Big national brands

Tim Hortons CanadaAsk any Canadian where they go for a cup of coffee or a doughnut. Odds are, you won’t hear them say Starbucks, Dunkin’ Donuts or Krispy Kreme. When it comes to coffee, doughnuts, soup and sandwiches, Tim Hortons has a grip on Canada that’s almost as tight as that of hockey. Tim Hortons has captured 62% of the market for coffee, compared to runner-up Starbucks with just 7%. Even McDonald’s has only half the outlets compared to Tim Hortons. What’s going on in the great white north? The chain is now expanding in the eastern US, so maybe the secret is about to spill.

Natura BrazilBrazilians have a passion for looking good. Natura, a skin care and cosmetics company, is ranked third in terms of brand value (the top two brands are the nation’s two leading banks). Natura has become a household name in Brazil for its nature-oriented appeal to consumers – an appeal likened to that of The Body Shop. Natura began 2007 by announcing that its expansion plans were

to begin in that pickiest of fashion markets: France. The first Natura store in Paris is said to

be doing well, and distribution plans for the rest of the

country are underway. Watch out for products

to appeal to your inner Amazonian soon.


They dominate their home markets and are itching to go global...

Grupo Bimbo MexicoEstablished in 1945, Grupo Bimbo is one of the largest food producers worldwide. Its trademark brand icon, a white teddy bear in chef’s hat, is

widely known among Mexicans. The company specialises in

bread, though it does own other brands in Latin America. Bimbo has ambitious plans: recent purchases in China and the United States assure that this once national brand will develop an international presence, particularly as Mexicans moving north take their brand preferences with them.

Beeline RussiaMaking a straight shot for the top, Beeline is the brand trademark of VimpelCom, a Russian telecoms operator. It is the top telecoms company in Russia and an early convert in that country to the need for good branding. In 1996, it became the first Russian company to list on the New York Stock Exchange, and it frequently wins awards for good corporate governance. Its brand is already valued higher than such long time stalwarts as Kodak, but its activities are limited to the former Soviet Union. So far...

ASUS TaiwanIt was only a matter of time before the computer manufacturers in Taiwan – many of whom supply brand names like Apple and Dell with inexpensive but dependable hardware – would finally make a name for themselves. So it is with ASUS, a motherboard manufacturer that made the big time by solving computing problems for Intel. ASUS provides computer-crazy Taiwanese with everything from PDAs to notebooks to stylish cell phones. In Taiwan, ASUS ranks number two in brand value and is followed by fellow computer maker Acer. Ironic considering that ASUS started as the brainchild of four ex-Acer computer engineers. As one of the world’s top four notebook producers and enjoying high brand valuation in Taiwan, expect to hear more from ASUS on the information highway.

– route and schedule. This makes all airline brands regional. Even a world-renowned airline like Singapore, the brand is not part of the customer’s everyday experience,” says Delta Air Lines Manager, Customer Insights and Analytics, Frank Wrenn. It’s a view echoed by others in the industry. “There are no airlines that can claim to be global brands – British Airways and Singapore Airlines are the nearest,” says Emirates Divisional Senior Vice President, Corporate Communications, Mike Simon. But the world’s airlines are in pursuit of the elusive holy grail of global branding.

Since 2003, the number of airline passengers has risen almost 25% to over two billion last year. New routes and increased flights to business destinations are generating much of this growth, with many airlines trying to turn an identifiable national product into a global brand.

In its 80-year history, Delta Air Lines has gone from a southern US carrier to America’s fastest growing international airline. It serves 304 destinations in 52 countries. Brand awareness is strongest

in home markets like Atlanta and New York, but as Delta continues to grow, so does its global brand value. Last year the airline added 50 international routes – an ambitious expansion carried out following the results of a Synovate survey.

“Market research has been vital in determining customer expectations, perceptions of Delta and perceptions of local competitors. Research has also helped determine which new markets would be viable based on expected traffic,” says Wrenn. “A year ago, we worked with Synovate to hold focus groups of international travellers in the UK, France, Germany, Italy, Mexico, Argentina, Columbia, Brazil, Russia, India, Israel and Japan. As a direct result of these groups, we have since added new amenities to our international long-haul flights in the economy cabin, including free alcoholic beverages with meals, amenity kits and a mid-flight snack or ice-cream service.” Delta has also made its website accessible in French, German, Spanish, Italian and Portuguese, with more languages to be added later.

On the other side of the world,


CHANGE l AIRLINES

No airline features in the BusinessWeek top 100 survey of the best global brands by brand value. As long as existing regulations deny airlines

the opportunity to have the commercial freedom enjoyed by other industries, this seems unlikely to change. “Airlines need the freedom to serve markets where they exist, consolidate when it makes business sense, compete efficiently with one set of global rules, and generate profits and shareholder value,” says Giovanni Bisignani, Director General and CEO of the International Air Transport Association.

Even global player Singapore Airlines (the world’s second biggest airline by stock market value) can only go so far with its iconic brand and “Singapore girl” image. The airline went international relatively early in its history due to the lack of a domestic market, making it one of a handful of airlines to do so. But it is still bound by the peculiarities of its industry.

“Airlines are based on networks

Flying higherTurning a national brand into a global brand is a tough business – just ask any airline By Lewis Borg-Cardona


there is Emirates. Formed in 1985 as the international airline of the United Arab Emirates, Emirates’ growth has never fallen below 20% a year. The carrier currently flies to 87 destinations in 59 countries from its base in Dubai. “It is extremely expensive to become a global brand. Limitations include investments in equipment, traffic rights, marketing investments, and the ability to serve multinational markets 24/7,” says Simon.

The airline has marketed itself outside the aviation industry via a broad portfolio of sports sponsorships, ranging from Arsenal’s impressive new football stadium to the Emirates World Series horse racing championship. “Sponsorship enables Emirates to increase awareness swiftly in key markets like Australia,” says Simon. Last year Emirates became the first airline to be an official partner of the FIFA World Cup. “It is part of our bid to become a global brand – it has helped.”

National appeal – international scopeDespite its more modest network of 50 destinations in 28 countries, the

SriLankan Airlines experience mirrors that of its larger rivals. As Head of Corporate Communications Chandana de Silva explains: “A significant component of our decision making is based on market research. Our service needs to exceed customer expectations and for that we need to know what our customers want.”

The revelations came in 1998, when the newly privatised airline changed its name from Air Lanka to SriLankan. “We found that the global perception and top of the mind recall to the term ‘Sri Lankan’ was warmth, friendly and a nation full of smiles. Today the airline represents all these values and has taken it further with its world class service.”

For de Silva, it’s clear what’s required to turn a national airline brand into a global brand: “Consistently exceeding passenger expectation with a very high level of service and offering passengers access to a wider network of destinations.” SriLankan is achieving its aims, having won several awards from travel media and airline industry arbiters. For an airline brand expanding

beyond its regional boundaries, these awards provide another shop window, as SriLankan Airlines Head of Service Delivery Nigel O’Shea points out: “Winning awards such as Skytrax’s World’s Friendliest Cabin Staff gives us positive exposure, which it would be very difficult to achieve otherwise.”

That change in corporate identity coincided with the forging of a strategic partnership with Emirates. It’s not surprising that SriLankan also markets itself via sports sponsorship, including three surfing events and a regional rugby tournament. DeSilva calls these measures a “key component” of reaching out to potential customers and building on the positive outlook people have of Sri Lanka.

Wrenn is clear who best exemplifies this world-class service: “The role of the flight attendant is very important to the brand. At Delta, our flight attendants are really our brand ambassadors. They spend the most time with our customers during the travel ribbon, reaching more than a hundred million passengers a year. How’s that for advertising?” ▲

Market research has been vital in determining customer expectations and perceptions

CHANGE l VALUATION

Touching on the intangible

could walk into a bank the next morning and get a loan to rebuild everything.”

Perhaps. But if you were that bank manager, how much would you be willing to lend? Does Coca-Cola’s value as a brand stem from public recognition? Maybe it’s the

Carlton Curtis, formerly Vice-president of Corporate Communications for Coca-Cola, once said: “If all of Coca-Cola’s assets were destroyed overnight,

whoever owned the Coca-Cola name

relationships that the brand enjoys with suppliers. What would it lose to its competitors in a period of absence? What about the value of the secret recipe – is it worth anything?

These questions may have been hypothetical in years past, as accountants stuck to valuing factories, land and equipment, but since the 1980s the intangible value of businesses has grown by staggering proportions. The notion of valuing the intangible, particularly a brand, has become a serious concern.

David Haigh, CEO of Brand Finance, cites the changing market-to-book ratio, which compares the stock valuation of a company to the net value of its assets, of the Standard & Poor’s 500. From an average of 1.4 in the 1980s, it reached a value of 4.7 by 2003, indicating that investors put 75% of the value of a company to its intangible assets. Lowell Bryan, a director of the consultancy firm McKinsey, reckons that in 2005 the intangible capital of the world’s largest 150 companies was US$7.5 trillion. In 1985, the figure was $800 billion.

Figuring out how much a brand is worth is a global business, and becoming critical to boardroom decision-making By Ryan Swift


Interbrand’s evaluationThe way in which Interbrand tried to measure a brand’s dollar value has been called the “economic use” model by Jan Lindemann, Interbrand’s Global Managing Director for valuation.

Lindemann says the Interbrand method combines financial and market analysis to provide the truest estimation of a brand’s value. Interbrand first looks at the market segmentation of the brand to see how much the brand can influence customer choices based on factors such as geography, distribution, product sophistication and so on.

The next step is to forecast the intangible earnings that are likely to come from the specific segments identified above. Intangible earnings are defined as brand revenue minus operating costs, relevant taxes and a charge for the use of capital. The role of the brand in driving demand for a company’s services is then assessed, and the percentage of intangible earnings are attributable to the brand decided. From this is derived the brand-based earnings of the company.

A brand discount rate is then calculated. This is a measure of the strengths and weaknesses of the brand in relation to other brands, as well as other issues such as the volatility of the brand’s market and its legal status. The brand discount rate is subtracted from a net value to the company of the projected brand earnings. From this figure, a final brand value can be derived.


In the 1980s, accountants more or less put every part of a business that was intangible under the heading “goodwill”. Little provision was made for brands, trademarks, reputation or patents. Stock prices, the ability to finance large purchases, insurance policies – virtually everything connected to a business – stemmed from the valuation of its tangible assets. But that was set to change as a wave of mergers and acquisitions in the 1980s forced a rethink.

The most important indicator of the growing strength of a brand value came in 1988, when a UK-based food company, RHM, became the object of a takeover bid. In an effort to convince creditors and investors that the bid offer was inadequate, management conducted a valuation of all its brands, and added them to its balance sheet. It was the first time that such an exercise had ever been done. With this information, RHM’s management was able to convince investors that the bid was too low. The valuation was conducted by brand consultancy Interbrand.

“It took a long time, but now the goodwill portion of the business – even a manufacturing business – has become so huge that something had to be done, and that led to the change in accounting rules,” says Jan Lindemann, Global Managing Director for Interbrand’s brand valuation services.

Accounting regulatory bodies – the groups in the US and the EU that govern accountancy procedures – responded in the 1990s and in the early 21st century with rules that are supposed to identify the individual value of intangible items (trademarks, patents, brands and so on). Previously, they would all have been lumped together.

As the rules for accounting intangibles – and by extension, brands – have been clarified, so has the business of valuing brands and the need for a sophisticated and commonly agreed-on method. Interbrand, the first company to seriously look at valuing brands, is the market leader. The Interbrand method (see sidebar) is now widely reported in magazines such as BusinessWeek, which publishes a list of the 100 most valuable

brands as ranked by Interbrand. Lindemann regards the Interbrand

way as the most authoritative in the field. “We marry modern market research and financial analysis into this unique way of looking at brands, and that’s what’s changed the way people look at brands. We had a debate about it initially, but most people who are in this field, and most companies, will follow our approach, because there’s really no other way of doing it.”

But while Interbrand does rule the roost, the challenges are not over. In 1996, David Haigh, then the director of valuation at Interbrand, left the company to found Brand Finance. Primarily using a brand valuation technique known as the Relief from Royalty method, Brand Finance calculated the brand value of Coca-Cola at US$43 billion.

That compares to the valuation of US$67 billion given by Interbrand. Both companies maintain that their methodologies are the standards that matter to tax authorities and courts.

What is patently different between the companies is their orientation. Brand Finance is primarily staffed with chartered accountants. It even does referral work on behalf of the world’s top four accountancy firms, according to Rupert Purser, Brand Finance’s Managing Director for Hong Kong. “Our work is regularly peer-reviewed by the major accountancy firms, and our primary valuation approach has been deemed ‘fit for use’ by the IRS, Inland Revenue and the Australian Tax Office,” Purser says.

Interbrand is owned by Omnicom, a global media and marketing firm, and is tightly connected to the marketing

Brand Finance top ten most valuable brands 2006

Source: BrandFinance250 League Table

Rank Brand Country Value (US$m) Sector

1 Coca-Cola US 43,146 Beverages

2 Microsoft US 37,074 Computer software

3 Citigroup US 35,148 Financial services

4 Wal-Mart US 34,899 Retail

5 IBM US 34,074 Business services

6 HSBC UK 33,495 Financial services

7 GE US 31,850 Diversified

8 Bank of America US 31,426 Financial services

9 HP US 29,445 Computer hardware

10 Marlboro US 26,990 Tobacco

side of the branding. But there are challengers on that end as well. In 1999, Dr Roger Sinclair started Brand Metrics in South Africa after developing a brand valuation method in conjunction with a professor of corporate finance.

In 2004, Brand Metrics was asked by Vodacom to value its brand in South Africa, after Vodacom was given a public brand valuation by Interbrand that it disagreed with. While there is much that Dr Sinclair agrees with regarding the Interbrand methodology, there are important differences. “We use something called Brand Knowledge Structure, which depends on how the most relevant consumer segments are

disposed to the brand. Interbrand does not do this. We do it because that’s where the value lies,” he says.

Nonetheless, Dr Sinclair feels that the Relief from Royalty method favoured by companies such as Brand Finance is too bound up with accountancy to measure the true value of a brand. Clearly, there is still some sorting out to do.

In fact, there are a number of approaches to measuring the value of a brand, and it may be that the situation determines the approach, as much as the preferences of the valuing agency.

There are other considerations as well. While the accountancy regulatory bodies may have made strides in

getting intangibles accounted for under one set of governing rules, there are outstanding issues. A critical one is whether a brand value should be placed on a company’s books as an asset. At the moment, a brand is only recognised as an asset on a company’s books if the company purchased it. On the other hand, an internally generated brand (the company’s own brand) cannot be put on the books.

Such a discrepancy, as well as remaining grey areas in the existing regulations, have caused practitioners to criticise what seem to be obvious holes in the development of a standard way of measuring brand value. If a brand can be purchased and placed on a company’s books, why can’t a similar value be placed on a company’s own books? Brand Finance’s Purser thinks that is something that needs to be rectified. As accounting regulations are in a state of constant evolution, it is an issue that will come up again.

But if brand valuations were added to a company’s books, it would create a new set of issues in the boardroom. Very often, intangible assets on a company’s books must be subjected to an annual impairment test to see if they still retain their value. Should listed companies be required to add an internally generated brand value to their books, it could open up the field of brand valuation much further still. It would also mean that issues of brand management and marketing spend would get a much higher priority in the boardroom.

Large companies are currently using brand valuations as benchmarks for marketing performance, to assist merger and acquisition activity, to prepare joint-venture negotiations and even to secure financing. But if the field continues to develop as it has done, brand valuations may become just as important for listed companies as publishing an annual report. And that may force chief marketing officers and chief financial officers to see eye to eye – for once. ▲


Interbrand/BusinessWeek top ten most valuable brands 2006

Source: Interbrand

Rank Brand Country Value (US$m) Sector

1 Coca-Cola US 67,000 Beverages

2 Microsoft US 56,926 Computer software

3 IBM US 56,201 Business services

4 GE US 48,907 Diversified

5 Intel US 32,319 Computer hardware

6 Nokia Finland 30,131 Telecoms

7 Toyota Japan 27,941 Automotive

8 Disney US 27,848 Entertainment

9 McDonald’s US 27,501 Restaurants

10 Mercedes Germany 21,795 Automotive

Note: Interbrand does not include brands that are not considered global in their business scope.

CHANGE l VALUATION

CHANGE l LOGOS


The Countryside and Rights of Way Act 2000 (CRoW) was passed in 2005, designating about 3.4 million acres of land

in England and Wales as “access land”. The act meant that the public could legally wander and explore vast new areas of the countryside.

A symbol was needed that would identify the new access areas, and that could be used on signposts and in a very small scale – as small as three millimetres – on maps. The Countryside Agency and the Countryside Council for Wales commissioned a UK-based brand design agency, Logo Design & Marketing, to develop a suitable logo.

“After our research and consultation with all the relevant parties, it was clear that the symbol had to be unobtrusive, visually attractive, simple and pictorial rather than typographical,” explains Lawrence Roberts, the lead designer

for the project at Logo. “It also needed to be distinct and able to gain public recognition in a very short time.”

The design team wanted something that reflected the idea of freedom to roam. Some initial designs represented the human form, then the direction changed towards humans interacting with land formations.

The designers’ attention then began to focus on a precise landform shape combined with a human form. Initially, the human figure had movement and a celebratory feel. Research and feedback caused a change in emphasis towards a more instructional symbol. The client also decided that the symbol might reflect the way people should behave

on open access land. The symbol had to impart the notion that it is great to get off the beaten track, but in a quiet and sensible manner.

The final phase involved subtle adjustments to allow for different production methods. The symbol had to suit reproduction in materials such as slate, granite and wood. It also needed to be suited to production methods such as routing, engraving, sandblasting or casting. The final choice was an image of a “person” combined with a landscape within a circle. ▲

Logo design: getting the right of way

Evolution of a logo

The symbol needed to be distinct and able to gain public recognition in a very short time

Logo Design & Marketing’s website: www.logodesign.co.uk.

Cult statusEating instant noodles for a month

in order to buy the next LV bag is an easy choice for many Asian women

By Radha Chadha

CHANGE l LUXURY



In Tokyo, 94% of women in their 20s own a Louis Vuitton bag... Hong Kong boasts more Gucci and Hermès stores than Paris. China’s passion for luxury has grown with such gusto that the

Chinese consumer is already responsible for 10% of global luxe sales... And, in India, there are three-month waiting lists for the latest trendy accessories.

In the last two decades a “luxeplosion” has been rocking Asia, carrying in its sweep not just the wealthy but also secretaries toting their Burberry bags, junior executives sporting Rolex watches, and university students strutting in Salvatore Ferragamo shoes. Luxury brands have become an everyday reality for millions of Asians – cutting across countries and income segments.

The luxury brand cult is so powerful that Asian consumers account for half of the US$80 billion global luxe industry. Europeans have more money and Americans are among the wealthiest consumers in the world, but it is Asians who are the world’s biggest consumers of luxury brands.

Why are millions of Asians, many of them not wealthy, rushing to buy outrageously expensive designer label bags, shoes, clothes, watches and jewellery?

The answer lies in the massive economic and social changes that have transformed Asia, in the process dismantling centuries-old ways of denoting one’s place in society. In Japan, Taiwan and South Korea, the development of export-oriented economies led to high technology industries and capital formation that would subsequently fuel economic booms in China, and now India as their economies opened up. In place of rigid social orders defined by birth, family position or profession, there is suddenly a free-for-all, in which the key criterion is how much money you have. “Asians

Radha Chadha is the author of The Cult of the Luxury Brand: Inside Asia’s Love Affair with Luxury and founder of Hong Kong-based Chadha Strategy Consulting (www.chadha-strategy.com), which specialises in brand strategy and consumer insights.

have to show their status somehow, and luxury brands are a great way to do this,” says Jill Telford, Managing Director of Synovate Hong Kong. “Just look at the Asia-wide acceptance of the Mercedes-Benz as a sign that you have made it – there is nothing shameful in buying luxury brands in Asia.”

But how do you turn a sizeable bank balance (or the dream of one) into commensurate social esteem? Enter Western luxury brands with their loud logos and unmistakable sign language. Carrying a US$700 Louis Vuitton handbag signals you are from a family of decent means. Flaunt a US$10,000 Hermès Birkin and you are several notches higher.

Many Asians of moderate means are spending their way up the social hierarchy, often in amounts out of line with their income. Office ladies in Hong Kong or junior executives in Shanghai

will blow a month’s salary on a luxury purchase, even if it means living on instant noodles for a while.

The prospect of attracting wealth with a show of wealth is probably more important to younger people. A report on the luxe industry in China by KPMG found that consumers tend to be between 20 and 40, while in western countries, typical luxe consumers are over 40. In 2005, three of the top five richest men in China were still in their 30s. Luxury brands are a modern set of symbols that Asians are wearing to redefine their identity and social position, and signal their readiness to do business. It is a way of doing things that older generations, who may have grown up wearing Mao suits or working hard to provide bare essentials, may not appreciate.

The luxe industry has adapted to the Asian psyche by tailoring its marketing strategies: visibility is a key element. Consider the “logofication” trend, where bags have instantly recognisable symbols in a continuous pattern all over the bag – Gucci G’s, Fendi F’s or the LV monogram. Twenty years ago few brands carried logo lines, but the rise of the Asian consumer has pushed almost every brand to introduce one. Coach’s spectacular success in Japan happened after it developed a distinctive signature series. Across the industry, logo lines have grown so fast that they account for up to 80% of sales for some brands.

Luxe brands are investing in building other sets of visual identification points. Besides its well-known intertwined C’s logo, Chanel has a whole symbolic language to draw upon – gold chains, quilted leather and signature tweed. In the case of Hermès’ highly sought after Birkin and Kelly bags, the distinctive shape and design of the bag has become its symbol. The waiting list in some places is as long as three years.

In Asia, you are what you wear. ▲

SG Asset Management, the investment unit of Société Générale, has started a luxury goods fund that will be based in Singapore, according to a report in the International Herald Tribune. The fund will eventually be offered in Hong Kong, Malaysia and Taiwan, with a minimum investment of US$647. According to sources in the bank, the industry benefits from very high entry barriers and is in a high growth sector. The fund will invest in such companies as LVMH, which is the owner of the Louis Vuitton, Christian Dior, Fendi, TAG Heuer and Marc Jacobs brands, among others.

Bankers take note

Developing a luxury brand in China requires considerable lead time before market entry, according to a KPMG report on luxe consumption in China. The report cites Moët Hennessy, part of LVMH, which began market research on consumer psychology, distribution and media in 1996, five years before its entry into China in 2001. By 2005, the company, a maker of luxury wines and spirits, had achieved annual growth rates of up to 20%.

Brand new luxury

In Asia, you are what you wear

How much for that celebrity in the window?

CHANGE l CELEBRITIES

Celebrities endorsing products has been going on for years. But in today’s brand-focused environment, the search for the

right celebrity to match a brand has taken on Olympic proportions.

Davie Brown Entertainment, a US-based marketing agency, specialises in mixing entertainment and branding. They provide movie product placement services, buzz marketing and the Davie-Brown Index, a research tool that purports to measure the impact of a particular celebrity’s endorsement of a brand in terms of consumer purchase intent. The index, which was launched in March 2006, uses a 1.5 million-strong research panel that assesses a list of 1,500 celebrities on traits such as appeal, trendsetting ability, trust and influence.

Movie stars such as Will Smith and Tom Hanks rank highly on the index, as well as sporting celebrities. Other celebrities, such as Paris Hilton, may rank highly in terms of awareness, but low in terms of trust, making them unsuitable for certain brand images. According to a report in New York Magazine, access to the index runs at US$20,000 a year.

The endorsers...

Nicole Kidman: ChanelChanel chose the glamorous blonde for their Chanel No. 5 campaign because she embodies the elegance of the fragrance. The company also hired award-winning director Baz Luhrmann (who worked with Kidman in her Oscar-nominated role in Moulin Rouge) to direct and produce No. 5 The Film. The 180-second adver-film cost Chanel US$42 million to produce.

Nicolas Cage: MontblancMontblanc employs Cage partly because of his link to success and charity work – two qualities the company promotes

as part of their brand image. Cage also has the distinction of having starred in popular action movies and in small-scale, art-house productions, giving him household recognition around the world, as well as the respect of art aficionados.

Angelina Jolie: St JohnJolie was chosen to replace supermodel Gisele Bundchen as the face of St John Knits as part of the fashion brand’s continuing strategy to give the company a younger edge. Jolie is contracted to appear in ads and to only wear St John’s garments for red-carpet events.

Jonathan Rhys-Meyers: VersaceRhys-Meyers replaced Halle Berry and appeared in a campaign surrounded by a collection of female supermodels, including Kate Moss and Christy Turlington. He is the first male face of Versace in some time, following a line of female stars that includes Madonna and Demi Moore.

Scarlett Johansson: Louis VuittonAfter appearing in the fashion house’s 2004 campaign, the actress (right) was asked, in a rare move, to pose once again for Louis Vuitton’s spring 2007 campaign.

Lindsay Lohan: Miu MiuThough Lohan has been considered too much of a “teen queen” to act as the muse of a major fashion label (rumours that she would sign with Louis Vuitton or Chanel stayed just that), the starlet was tapped as the next face of Miu Miu, bringing a desirable sense of notoriety to the Miuccia Prada’s younger line.

Jude Law: DunhillLaw is the face of Dunhill in Asia only, and is a wise choice for the brand, which has had trouble appealing to younger generations. ▲


HECTOR MATA / AFP / GETTY IM

AGES

The first part of the process is to identify product characteristics or attributes that consumers will delight in

A Luddite friend who’d always sworn by his grandfather’s camera, recently cracked during a sojourn at Zurich airport and bought a digital one. Why that particular

brand over all the others? “It felt so comfortable in my hands, the grip was so much more reassuring; it felt light but solid, and the screen is beautifully clear.”

These days, consumers are faced with a bewildering array of choice, and are turning to design as a way of distinguishing between and, deciding on, which products to buy. Not only should they do their jobs, new products must also boast the “Wow!” factor. This means manufacturers, facing fierce global competition, are turning to design for the kind of innovation that will generate new revenue and greater profit margins, while increasing brand awareness.

Never has strategic design research been more important. Its tools, such as consumer observation and fast prototyping, are now being used to challenge conventional wisdom and promote innovation.

“The first part of the process is to identify product characteristics or attributes that consumers will delight in,” says Mary Beth Lake, head of Synovate’s product design and development practice. “Very early on, we create an experimental design and manipulate ingredients together in a systematic fashion before asking

CHANGE l DESIGN


Product design and marketing are constant bedfellows in the quest for a winning brand By Alexandra Sutcliffe

Branded by designconsumers, ‘Do you like this product? Would you want to buy this product?’ From their responses, we can learn which are the areas or characteristics that are truly appealing, and so advise our clients about the kind of products consumers are looking for. Then their product development team sets about creating prototypes for the consumers to evaluate.”

As well as designing products that will meet consumer preferences and needs, one of the challenges a design research team faces is identifying products with the greatest business potential. Pricing research is critical to consumers and manufacturers, and prototypes are vigorously assessed for marketplace feasibility.

“Because the client has to make products that are going to be reasonably priced in their categories, we might have constraints in terms of how much different characteristics will drive the cost of these products,” Lake explains. “This is more the case with fast-moving consumer goods, such as food and beverages or personal care items, which people buy on a regular basis. There’s a lot of development of new products, particularly in fast-moving consumer goods, because the

Need x Emotion = X ??

CHANGE l DESIGN


manufacturers are always trying to differentiate themselves from their competition. For example, how to modify a product or introduce a new product that would meet a consumer need that’s currently not met, or to delight a consumer in some way.”

At the other end of the spectrum are the durable goods, items such as that new camera, PC or car. These are the items a consumer might choose infrequently, not only because of the financial commitment involved, but also because of the commitment and patience needed simply to learn how to use them. Does the research process differ for these higher ticket items?

“Naturally there’s a far greater resource and monetary investment required for the prototype development of these items,” Lake says. “But essentially our research philosophy is the same. We try to understand the emotions that are evoked by different product characteristics, such as feeling luxurious when driving a top-of-the-range automobile. This helps the client understand how to position their product in the marketplace, and the kind of strategy they should implement to get the essence of their product across through marketing and advertising.”

As good design can enhance an image and breathe new life into an existing brand, so manufacturers are using design to reinterpret existing categories

and open up new marketplaces for their brands. Design can be used to understand what the brands really stand for in the minds of consumers.

“We do quantitative work in terms of packaging, where we’re looking at the impact that packaging has on the product itself,” Lake continues. “As the package often reflects the brand, it’s critical that we understand what’s driving people to purchase a particular brand and what makes them identify the product. There are several key components and a lot of integration of what we’re doing and so we really try to take that holistic approach.”

Cultural differences also have to be taken into account if a manufacturer is to compete successfully in the global arena, and that requires customised design research for each market. “It’s vital to understand which product satisfies the consumer in which regions, and whether the client is able to design products that would be appealing to consumers in more than one area or country,” Lake says. “It’s interesting to see how consumers behave based on their current marketplace availability.”

Even after a product’s design and launch, the research team’s job is far from over. By aligning product design with marketing, packaging and service, their clients can then deliver a powerful brand image.

“After the product has launched,

we bring all the information together in a step we call Concept Product Fit,” explains Lake. “This ensures that the advertising, or the way they’re going to position the product in the marketplace, is effectively communicating the product deliverables and, of course, that the product actually delivers on the concept being communicated. In that sense we bring together the price, the package, and all of the components of a new product, including its branding, to assess how it’s going to fit within the current or existing portfolio. It’s a critical component to make sure that the product is delivering and that there will be no negative impact on the brand.”

As companies are increasingly investing in design as a fundamental way of distinguishing their brands, design is no longer a superficial matter of showy attributes – the design must contain the essential promise of a brand. “What we do ultimately impacts the brand,” Lake concludes. “But a lot of what we’re doing up front happens even before the brand is introduced.”

In the world of brand-name products, design is part of the message, as well as a product. Getting the design in line with a brand is now fundamental to building brand value. ▲

Brand + Design =WOW 2

It’s critical that we understand what’s driving people to purchase a particular brand and what makes them identify the product

For more information, contact Mary Beth Lake at [email protected].

CHANGE l PRODUCTS


Kodak faces a very peculiar brand challenge. Film photography, the business that made Kodak a household

name, has been rendered obsolete with the onset of digital cameras. It’s old business model destroyed in a flash, Kodak has tried to move into a field already beset with competitors and lookalike products. There’s even competition from the latest camera phones, which are getting as powerful as digital cameras.

However, Kodak’s brand still retains some cachet. Executives plan to develop Kodak’s digital business while the name lingers in people’s memory, and product design is playing a critical part in that plan. Kodak places much of its brand equity in quality combined with ease of use. The design story of Kodak’s V570 digital camera shows how research, design and branding are inseparable.

To satisfy the need for striking technical innovation, the camera contains two lenses – one for normal shots, the other allowing wide-angle shots. This was a first for digital photography, permitting lay users to take pictures that might only be possible with bulky extra lenses.

The V570 is strikingly simple in appearance, with smooth planar forms and chic, elongated proportions. The design was tested in one of the most tech-savvy markets in the world: Tokyo. Kodak’s design team often met with end-users. All respondents were favourable to the simple, sleek look of the V570. Some even described it as being “unlike” a digital camera.

Designers continued to focus on the V570’s

appearance by softening the corners of the

casing and adding a chrome bar. All controls were made flush or nearly flush with the casing, and all

protrusions from the casing were

minimised as much as possible. Another

round of interviews, this time in North America, resulted

in further refinements: the pop-up flash system was hidden and recessed.

In the end, Kodak released a digital camera that has done much to restore the brand in the mind of consumers. The V570 won a gold medal from the 2006 Industrial Design Excellence Awards.

Can Kodak rely on its brand while reinventing itself? The jury is still out, but in 2006, Kodak’s digital earnings growth finally exceeded the earnings decline in its original businesses. ▲

Kodak gets its groove back Kodak places much of its brand equity in quality control combined with ease of use

Aquick test: Tylenol, Prozac and Viagra. Headache, depression and erectile dysfunction. Three different drug brands, three different conditions – can you match

the ailment with the cure?Chances are you’re well aware of

these brand names and their uses – no matter whether you have ever needed

Pharmaceutical companies vigorously promote their brands – a quest for market share or a necessary evil?

By Elizabeth Jones

The brands in your

bloodstream


CHANGE l DRUGS

them or not. And that’s the point. The reason we know these

drugs is because they are extremely powerful brands.

According to Stephen Godwin, Synovate Healthcare Group Research Director, branding pharmaceuticals is much like any other brand-building initiative. The goal is to make your brand distinguishable against products that

are becoming increasingly similar in the decision-maker’s mind.

“If you are marketing the fifth drug in a class, you rather hope that you will be able to make doctors remember your brand,” says Godwin. “We all know that Michelin and Goodyear tyres look identical. The branding by each company is there to persuade us that their particular tyre is better. It’s no different with drugs.”

advertising for pharmaceutical brands. In the US, debate has raged for years over the ethics and effectiveness of such advertising.

In the case of prescription drugs, it may seem a little odd that pharma companies would target an audience (the patients) that doesn’t directly decide what drugs they are prescribed.

However, Passikoff feels that there is still merit in creating awareness. “There was a need for people to have some sense of familiarity with the names of the drugs that they were going to be given, and drug manufacturers wanted there to be a resonance when a doctor made a recommendation.”

While Passikoff believes that DTC advertising has been effective in product acceptance, he grants that it is difficult to say whether or not sales have matched awareness. “I’m not sure that [DTC advertising] has done anything more or less in terms of sales because there the ‘gatekeeper’ has been the doctor.”

But this hasn’t stopped pharmaceutical companies from putting a lot of money behind their marketing. According to a study by the industry trade group Pharmaceutical Researchers and Manufacturers of America, drug companies spent US$2.5 billion on mass media pharmaceutical advertisements in 2000 – and that figure is estimated to be well over $3 billion today.

If you have seen a typical US drug commercial, it’s pretty clear where much

CHANGE l DRUGS

of this money is going. Elaborate, dramatic scenes are concocted, with no heartstring left untugged. A report in Medical News Today highlighted the findings of researchers who found that 36 out of 38 unique TV ads for pharmaceuticals used emotional appeals, and none mentioned lifestyle change as an alternative to products. That same report found that the average US TV viewer sees up to 16 hours of pharmaceutical advertising each year.

“There is bitter controversy about whether DTC works in the US or not,” says Godwin. “Undoubtedly there are some cases where it has been effective, but in my opinion most of that money has been tipped down the drain.”

Innovate or dieAll of that said, marketing costs pale in comparison to the price tag on getting a drug to market. From a colossal £800 million in 2000 to a staggering £1.7 billion in 2003 (the last available estimate), the cost is still rising. The shift is largely attributable to more stringent regulation – prompted in part by safety concerns following highly publicised drug withdrawals. The US Food & Drug Administration, for one, is demanding bigger and longer studies. To compound the situation, there’s an increasing requirement for post-marketing surveillance.

With such a big hit to the purse strings, shelf life is fundamental to a

However, Robert K. Passikoff, Founder and President of Brand Keys Inc, feels that there are some peculiarities to branding in the pharmaceutical industry. “These companies are dealing with an intermediary controlling what consumers might or might not end up purchasing – the doctor,” said Passikoff in an interview with The Wise Marketer.

Passikoff points out that in the over-the-counter (OTC) category the situation is different, with consumers given wider access to traditional marketing information and issues of pricing, and placement becoming more complex.

“These issues don’t really apply to prescription drugs,” says Passikoff. “And as a result, promotion of the brand somehow needs to be managed in a way that’s far different than the usual packaged goods brand effort.”

Mike Rea, CEO of IDEA Pharma, a pharma strategy consultancy, sees things somewhere in between. “There are ways that [pharma branding] should differ, and unfortunately, fewer ways that it does differ,” he says.

What about the numbers?Advertising, normally one of the strongest tools in a brand-builders’ arsenal, is another area where pharmaceutical companies differ from conventional brands. The United States and New Zealand are the only countries that allow direct-to-consumer (DTC) television



For more information, contact Stephen Godwin at [email protected].

brand’s survival. But generic drugs – copies after a patent expires – are always hot on its heels. According to the National Association of Chain Drug Stores in the US, the average price of a generic prescription drug is less than half that of a brand name one.

The patent on a new drug may be 20 years, but with over a decade needed for R&D, testing and approvals, the profitable lifespan for a new drug can be short.

Commented Bob Douglas, Managing Director of Global Custom Research for Synovate Healthcare, “Unlike the consumer industry, pharma brands are under constant threat from generics. Once a patent has expired, they lose significant market share overnight. If I were to fast-forward ten years, I would still expect to see Mars Bars and Kellogg’s cornflakes on supermarket shelves – but I would barely recognise a pharma company’s portfolio.”

So having finally reached the marketplace, a brand has on average less than ten years of patent life in which to recoup investment costs and generate a profit. Branding is of course an important component in this – on one level, a short-term mechanism to claw back R&D costs in a short space of time.

A brand or class effect?But is it a case of the industry wilfully pulling the wool over our eyes? In a word, no. Pharmaceutical branding has some positive, and indeed very necessary, effects.

Primarily, branding is a statement about quality – a strong brand is a guarantee of superior manufacturing and testing processes. Here, the brand is your warrantee.

Secondly, there is the issue of “bio-equivalence”. Take two similar drugs with similar molecules – similar, but not the same – and you are inviting a diversity of reaction. Drugs are increasingly complex and their effects on the body more variable, and an individual may well react differently to the different compounds. Here, the brand is a signpost for doctor and patient alike.

Thirdly, brands are supported by comprehensive clinical trial results, which are a statement of their performance, not necessarily of the performance of the broader drug class to which they belong. In an age where evidence-based prescribing decisions are required, widespread clinical trial results provide justification for use and reassurance.

Finally, patients recognise and trust brands. You may think, “so what?”, but non-compliance is a major issue for the healthcare industry. When a patient believes in a drug, it is far more likely that they will actually take it, and get the intended benefits.

The consumer responseConsumers are taking steps to cut through marketing with the help of online resources: sourcing drug information,

pricing, effectiveness and so on. But big name brands continue to

prosper, particularly in the OTC category where there is no doctor between marketer and consumer. Many prescription brands fight to make the switch to OTC for this reason. Yet with around 20 major drug brands coming off patent in 2008, an ever-growing market for generics and a more sceptical, inquisitive consumer base, brand names will have to rely on more than media firepower and well-dressed reruns to stay in the spotlight.

“The biggest challenge is the need to brand appropriately – to consider audiences like payers, prescribing decision makers (which may not always be physicians in the future) and patients,” says Rea of IDEA Pharma. “The same old challenges remain: persuading others that a brand is everything, and not just a nice logo that gets added before launch.”

Clearly, the industry is not shy of throwing big money at branding and advertising. But nor is it necessarily trying to hoodwink the consumer. The truth lies somewhere in between. It’s a risky business, which has latterly become even riskier. The pharma industry must stay innovative or it’ll die – and there are distinct benefits to the marketplace of it, being alive and innovative. ▲

When a patient believes in a drug, it is far more likely

that they will actually take it, and get the intended benefits

CHANGE l BRANDS

The brand: in quotesEconomics is (now) about emotion and psychology.

– Robert Shiller, professor of economics at Yale University

Customers must recognise that you stand for something.

– Howard Schultz, CEO of Starbucks

In today’s Internet-enabled world, products will become commodities.

– James Spencer Hall, vice-president of marketing, branding and advertising for Xceed

If this business were split up, I would give you the land and bricks and mortar, and I would take

the brands and trademarks, and I would fare better than you.

– John Stuart, former CEO of Quaker Oats

I think we’ll still be a family restaurant, we’ll be contemporary,

we’ll be lifestyle, we won’t be old, we won’t be 60 years old

in the view of the consumer. – Jim Cantalupo, former CEO of McDonald’s

Suppliers and especially manufacturers have market power because they have information about a

product or a service that the customer does not and cannot have, and does not need if he can trust the

brand. This explains the profitability of brands. – Peter Drucker, American management consultant

Advertising is a tax for having an unremarkable product.

– Robert Stephens, founder and “chief inspector” of the Geek Squad

I want to work for a company that contributes to, and is part of, the community. I want something not just to invest in – I want something to believe in. – Anita Roddick, founder and former CEO of The Body Shop

Steve said he had an idea for a name: Apple Computer. We both tried to think of names that were more suggestive or technological words for the name of the company. The more we thought, the more they all sounded boring compared to Apple. – Steve Wozniak, co-founder of Apple Inc

A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well. – Jeff Bezos, CEO of Amazon

It’s hard to build a brand, competitively, and tell people what you do as well. – Jay Chiat, co-founder of Chiat/Day advertising agency

When your values are clear to you, making decisions becomes easier. – Roy Disney

The least of things with a meaning is worth more in life than the greatest of things without it. – Carl Jung, Swiss psychiatrist


CHANGE l PHARMACEUTICALS

Biology to the rescue

Pharmaceutical companies are turning to biological treatments to fight breast cancer By Ryan Swift

‘‘You have breast cancer.” For a woman sitting in a doctor’s office, receiving that news may have

once seemed like a death sentence. In developed economies, particularly in

the UK, that news is being delivered with increasing frequency. The

incidence of breast cancer is rising, even in younger women, although

this may simply be because the screening process is more thorough.

But there is good news: deaths from breast cancer are going

down. Early detection not only increases the odds of survival, it

also puts more tools in the hands of the patient and her doctor.

It doesn’t seem that long ago that cancer patients had few therapeutic options, none of which could discriminate healthy from cancerous cells. Chemotherapy

was developed in the 1940s by the United States Department of Defense after autopsies showed that people exposed to certain chemical warfare agents had suppressed white

blood cells. Those same chemicals were administered to people with advanced lymphomas and their health improved, but at a cost. Chemotherapy worked by killing all cells and the hope

was that the patient would survive the poisoning, but the tumour would die.


ILLUSTRATIONS BY EMILIO RIVERA III


CHANGE l PHARMACEUTICALS

Radiotherapy uses ionised radiation to kill cancer cells, but it too kills healthy cells as well as those of malignant tumours. Surgical treatment meant a radical mastectomy – the complete removal of the breast. In some cases where a family history of breast cancer exists, women may have been encouraged to have radical mastectomies on both sides to reduce the chance of breast cancer.

Thankfully, the intervening years have made treatment more bearable for breast cancer patients. Hormone therapy (also used for men in cases of prostate cancer) can be used to deal with certain types of breast cancers that rely on hormones to grow. The prevalence of a mastectomy as a means of treatment seems to be receding, thanks in part to better diagnoses and knowledge. Of particular interest is the development of a new class of cancer-fighting drug,

known as biological therapy. Rather than trying to poison or

remove a large number of cells, in the process damaging healthy cells as well as cancerous cells, biological therapy allow doctors to target and kill cancer cells with much greater accuracy, and less damage to a patient. They also present new options to prevent a recurrence of breast cancer, and for complementing new versions of the original treatments.

“Drug developers are getting smarter at killing cancerous cells specifically,” says Leah Krukowski, Head of European Tandem Oncology Monitor for Synovate Healthcare. “Biological therapies are starting to come into their own since the launch of Herceptin nearly ten years ago.”

Herceptin (generic name: trastuzumab), was developed in 1998 by pharmaceutical firm Genentech, a

company now owned by Swiss drug giant Hoffmann-La Roche. The drug works by attaching itself to HER-2, a specific type of protein that is related to cell growth. HER-2 is found to be overproduced in roughly 30% of breast cancer tumours. When Herceptin is ingested, it interferes with the tumours’ cell reproduction, reducing the chance of recurrence. Usually Herceptin is used in tandem with more traditional chemotherapies for greatest effect.

Since Herceptin was introduced to the market, Roche has become the recognised leader in the field of biological therapies for cancer, according to Krukowski. Roche currently has four tumour-fighting biological agents in the market.

Herceptin and other biological therapies have been a big financial success for Roche. Initially only designated for late-stage breast cancer treatment, Herceptin was later given fast-track approval for use on patients with early-stage breast cancer in the UK by the National Institute for Health and Clinical Excellence (NICE), which supplies the UK National Health Service (NHS) with guidance on medicines and usage. After protests by women with breast cancer, the British government agreed that Herceptin should be covered by the NHS – a critical step considering that one year of treatment with Herceptin costs US$40,000.

And while Herceptin has been shown to be effective in preventing the recurrence of breast cancer tumours, there have been some accusations in the media that NICE was pushed too quickly into approving it for use in early stage breast cancer treatment.

However, the potential for financial growth is there. Not only are incidence rates of breast cancer rising in the UK, the incidence of cancer in the EU is expected to rise as the population continues to age. A study conducted for the Annals of Oncology, a medical research journal, showed that the number of new cancer cases in the EU rose from 2.9 million in 2004 to 3.2 million in 2006.

The promise of a new line of cancer treatments for an ageing population with ready access to state-sponsored

There are several types of drugs that are defined as biological therapy.

4 Monoclonal antibodies: These are proteins that are made from a single human antibody. They are designed to identify and kill cancer cells, just as immune system proteins would. Herceptin is an example.

4Cancer vaccines: Still at very early stages of research, cancer vaccines work by causing the body with a cancerous tumour to improve its own defenses, rather than by preventing a cancer from occurring, as happens with a normal vaccine.

4Growth factors: These are natural substances that are produced in a lab and cause the bone marrow to make red, white or stem cells in the blood.

4Cancer growth blockers: This type of drug takes advantage of the substances that cells use to signal one another. These signals control the growth and multiplication of cells, and by block-ing those signals these drugs can arrest the growth of tumours. Glivec (US: Gleevec), which is a Novartis drug and designed to stop gastrointestinal tumours, is a cancer growth blocker.

4Anti-angiogenesis treatments: Just like any healthy organism, cancerous tumours need to grow new blood vessels as they increase in size. Anti-angiogenesis treatments (angiogen-esis means to grow blood vessels) prevent cancer growth by stopping new blood vessels in tumours from forming.

Types of biological therapies

SOURCE: CANCER RESEARCH UK www.cancerresearchuk.org

Biological therapies are starting to come into their own since the launch of Herceptin nearly ten years ago


fighting drugs is the fact that many biological therapies that were originally intended for a very specific purpose are being used for other cancers as well. With Herceptin, the original use was to help patients with late-stage breast cancer from having their tumours progress further. That was extended to treat early stage breast cancer. Another biological drug, Avastin, which was intended as a treatment for colorectal cancer, is in clinical trials for use against lung and breast cancer. Approval is expected.

“Extending the use of these

drugs to cover other areas of cancer continues to help fund the research and development process,” Krukowski says.

It all adds up to a promising future for cancer patients, and particularly those dealing with breast cancer. The range of options means that treatment for cancer is moving away from the all-or-nothing struggle to beat cancer and towards “maintenance therapy”, as Krukowski describes it. Even chemotherapy, which began with chemical warfare experiments, has been moving towards a quality-of-life focus for patients, with greater care for the side effects.

Certainly there is much that remains to be done, and there will be cost issues down the road – biological therapies are not cheap.

But competition plus demand should bring costs down. Which means that in the near future, women who

receive the news that they have breast cancer will not automatically think it’s the beginning of the end, but the end of the beginning. ▲

Biological therapies are not cheap. But

competition plus demand should bring costs down

health plans must be tempting, and pharmaceutical firms are trying to move into the field. GlaxoSmithkline is putting its own horse in the race with the soon-to-be launched Tykerb, a drug that “promises to be a next generation version of Herceptin,” according to Krukowski.

Tykerb is in last-stage trials now and industry-watchers are expecting big things. One analyst at Collins Stewart, a stockbroker and corporate finance firm, thinks sales of Tykerb could reach nearly US$2 billion per year, primarily due to the requirements of breast cancer patients, according to a report in the Daily Telegraph. Other experts expect sales revenue in the range of $1 billion. On 14 March, the US Food and Drug Administration approved Tykerb, and a decision from European regulators is expected in September.

Another aspect behind the development of high-cost cancer


LITERARY l AGENT

Brand lands, hot spots & cool places

The long tailThe new economics of culture and commerce

AUTHOR: Chris Anderson IN SUM: The Internet is changing the focus of business from big-

demand items to an endless array of niche products

REVIEW: Chris Anderson is uniquely qualified to discuss the subject of the Internet: as the editor of Wired magazine, a reporter for The Economist, Nature and Science magazines, Anderson’s work is both readable and well-informed. And while the subject of how the Internet is impacting business may seem stale, Anderson breathes life into the subject by looking at the cultural effects of the Internet on economics.

In short, the “long tail” refers to the greater weight of sales that can accumulate to a wide range of niche products than to a few blockbuster hits. For example, online bookseller Amazon might record just as much sales volume from a wide range of niche titles as from top ten bestselling books. While a bookstore may use its available space to stock nothing but bestsellers, an online seller can benefit from the long tail of subset markets.

Matching telling anecdote with insightful analysis, and tying it together with sharp prose, The Long Tail makes a convincing case for a fresh look at anyone’s business model. ▲

AS AN AGENT OF CHANGE:

Made to stickWhy some ideas survive and others die

AUTHORS: Chip Heath and Dan Heath IN SUM: Making ideas “stick” in the minds of recipients is an

essential element in effective communication

REVIEW: It’s always refreshing to hear that two social researchers don’t have a new formula about society, but rather a set of traits that the reader should pay attention to. So it is with the Heath brothers and their book about what gives an idea longevity – or stickiness.

Why, for example, did the Halloween story about razor blades in apples and poisoned candy remain in the public imagination long after the original stories had proven false? Why did Jared, the boy who lost 200 pounds eating at Subway everyday, become such a compelling poster boy for the sandwich restaurant chain?

For the Heath’s, the answer comes down to six traits: simplicity, unexpectedness, concreteness, credibility, the emotional element and the story factor. The authors cite examples from politics, public health, movies, teaching and, of course, business. For business people trying to communicate an idea in a way that it takes a life of its own (a marketer’s dream), this book is required reading. ▲


AUTHOR: Christian MikundaIN SUM: Third places, away from home and work, are becoming

branded experiences with enormous potential for marketers

REVIEW: Christian Mikunda is described as “an internationally acclaimed dramatist, guru, psychologist and trend scout”. In some ways, that describes his interesting, if somewhat scattered, book. Welding pop culture, architecture and marketing, Mikunda espouses his view of the Third Place – the emotional necessity people have for a “temporary home away from home”. Traditionally, this may have been a pub

or a coffee house, or even a bowling alley. Now, it has become a branded

experience, and Mikunda walks the reader through a tremendous number of examples.

In fact, Mikunda offers so many examples that his efforts at

creating how-to rules are almost unnecessary. From hip restaurants

to what Mikunda calls “brandlands”: permanent exhibitions that extol the

virtues of a brand, the author derives some impressive insights. That alone

makes this book an interesting addition to a brand manager’s library. ▲


Welcome to the third place and the total marketing experience

Change Agent spring 2007- the brand issue

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Transcript of Change Agent spring 2007- the brand issue