Brands are essential for establishing relations between companies and their stakeholders. They generate links and create connections, which enable companies to obtain support, trust and cooperation of their stakeholders and thus create value and become the cornerstones of the business strategy.

However, there are different kinds of brands apart from those associated with business (product and corporate brands): personal brands, city brands, country brands, etc. In all these cases, brand management should be strategy-driven.

Borja Borrero, Executive Creative Director of Interbrand Spain says that initially, branding was almost exclusively focused on design (a small part of what in reality is a brand). The idea was that the visual aspect played a key role and frequently was not linked to the strategic dimensions of the business. According to Borrero, currently brands

are competing on the fi eld of strategy – something expressed by Interbrand’s tagline “Brands have the power to change the world”.

Brands have the power to change the worldOften we underestimate the power of the brands to drive behaviours and to a large extent create contexts and conditions in which people live and act afterwards. This is because brands, above all, are culture, says Ángel Alloza, CEO of Corporate Excellence – Centre for Reputation Leadership, and it is the identity of the brands that becomes the starting point for the vision and values which then are projected by companies to the society.

But even in these moments it is possible to see how brands facilitate the development of social values. Social values can be expressed and extended by means of brands, and when it is done, companies achieve better understanding of what is expected of

Branding evolved from the focus on the visual design, logos, symbols, colours and fonts to a broader concept, where strategy plays a fundamental role. Brands became the drivers of differentiation and reputation and a key action tool.

Strategy documentsI14/2012

The Role of the Brand in Differentiating Companies in the New Economy of the 21st Century

Marca

Insights

This document was prepared by Corporate Excellence and contains references, among other sources, to the statements made by Borja Borrero (Executive Creative Director of Interbrand) and Ángel Alloza (CEO of Corporate Excellence-Centre for Reputation Institute) during the Branding Days event organised by the University of Complutense in Madrid, on January 17 and 18, 2012.

Insights 2

The Role of the Brand in Differentiating Companies in the New Economy of the 21st Century

“A brand is described

through what is said

by people about it, because

brands are evaluated

by what they

say and, especially,

by what they do”

the brands and thus respond to these expectations in a more effective manner, thus improving the reputation of these brands.

That’s why branding is not a static discipline. It is an ever-changing field that adjusts to the changes in values, lifestyles, behaviours and demands of the stakeholders, enabling this combination of tangible and intangible attributes symbolized by names and registered symbols – one of the definitions of the brand – when they are properly managed – to create value and have a social impact.

Another function of branding is to tell stories about brands, or if you will, create their stories through communicating with the audiences in the medium and long run, attracting followers and ensuring the consistency of experience delivered by the branded product. All elements have to tell the same story and explain the same idea.

The importance of brand clarityFor many companies a brand is still nothing more than a logo, as was suggested in the beginning of this text. The word brand is associated with something almost exclusively visible and tangible. But a brand is much more than this, it goes far beyond the tangible qualities. The idea of branding is to transform the brand into something much more meaningful than just a logo.

The identity of a brand is not a claim or a slogan, it is the heart of the brand, the promise of an experience, something different from others, something unique and special. The identity goes beyond the logo – it is the DNA, the content. Values help to reinforce exactly this idea and are the basis that holds the value of the brand.

Harley Davidson is about liberty – the story that this brand tells is all about this idea. BMW is about pleasure, the pleasure of driving. Apple is about intelligent simplicity and intuition, it is a brand with sex appeal. Ikea is about reinvention, where each client becomes a designer. Volvo is about security – security drives everything it does and the way it is done. Whereas Danone is about health and care about people.

This is what in practice is the idea of the brand. Ultimately, it is the storyline that defines the behaviour and communication of the brand, that makes it clearly identifiable and valuable in the perception of its stakeholders, thus leading to sustainable differentiation from the rest of the competitors.

On the other hand, the differential of the economic value of a brand compared to other brands serves as a tool that allows one to measure its robustness and health on the market. Branding increases the average market value of a company by 38%,

as suggested by Interbrand, which has a special evaluation methodology. This is due to the fact that the value of intangibles is increasing because products and services turn into commodities, and there are few opportunities for differentiation.

Another element that increases the value of the brand is the number of fans or “evangelists” that it has – a concept that goes beyond traditional loyalty – as well as the kind of activities designed to promote or defend the brand, depending on the situation.

Brands of the FutureThe brands that understand branding as a proactive rather than a reactive activity will drive the future, because branding is no longer governed by the cyclical model, where the objective was absolute consistency. Now it is a continuous process, where the objective is relevant consistency.

The new model that governs the brands is based on a progressive focus and the following features:

1. A change that creates the need: anticipate what the people want.

2. A dialogue and a connection that encourages people to take part in the experience.

3. An open and living expression that at the same time always tells the same story.

4. An expression of continued evolution in order to stay relevant.

Finally, branding no longer aims to ensure that brands change continuously with their stakeholders. The aim is to involve the stakeholders in the process of creating value.

Integrated and Reputational Vision of the BrandAccording to Angel Alloza, brands require a multifunctional and integrated vision, because they are assessed by what they say and, above all, by what they do. The founder of Amazon Jeff Bezos agrees that a brand describes itself through the words of

Source: The Brand Gym, 2010.

Brand from Business

Total Business Delivery

Brand Idea

Brand Communication

Insights 3

The Role of the Brand in Differentiating Companies in the New Economy of the 21st Century

“Brands are no

longer the property of companies, developed

for consumers.

Instead, they are a property of users

developed to address

their specifi c needs”

Conclusions: from Consumers to UsersThe brand emerged as a product associated with the logo, based on the marketing and advertising strategy and aimed at consumers, and then evolved into an idea designed to transmit trust, passion, pride of sharing the values and aimed at clients, employees, providers and other stakeholders and applied to products, services, companies, persons, places or groups.

Currently, surprisingly, brands are turning into verbs used by stakeholders. Here are some examples suggested by Meg Whitman, the former President of eBay: to google a word, to skype with a friend or to photoshop a picture. This is because now brands are functioning in a different way: they are used to share images, exchange objects, get in touch with friends, broaden the knowledge or search for information.

The search – in the new digital economy – is exactly what makes the difference in the world of commodities, the world of the 21st century. This is a world, where brands are no longer the property of companies, manufacturers or advertisers developed for consumers and other stakeholders. Instead, they are the property of those people who use the products, and are developed to address their specifi c needs.

the people. A brand is what is seen (the logo, the colours, the fonts, the design and graphics) and what cannot be seen (the ideas, the personality, the values, the positioning, the processes, the communications, the quality and the talent).

Thus, the two most important elements in a brand are alignment and engagement or, in other words, commitment of its talent (its professionals) to the values of the brand, how they align with these values and encourage other stakeholders to align with them. The brands are expressed by means of the fi ve senses and in the way consistent with their stakeholders (a very important function called the brand guardianship), but this starts with the robustness of its internal experience and its external promise.

Finally, the reputation of a brand starts with its identity, which is closely linked to the experience of the employees. Along with the Greek philosopher Socrates, who said that “the way to gain a good reputation is to endeavour to be what you desire to appear”, we suggest that it is a contrast between what one wants to be, what is expected from one and what is actually achievable. According to Alloza, the best way for a brand to gain a good reputation with time is to avoid empty promises.

Interbrand Methodology

Source: Interbrand, 2012.

Operating Profi ts –Taxes =

NOPAT –WACC =

ECONOMIC PROFIT

Economic Profi t xRole of Brand =

BRANDED EARNINGS

=$Branded Earnings xBrand StrengthDiscount Rate

BRAND VALUE

©2012, Corporate Excellence - Centre for Reputation Leadership Business foundation created by large companies to professionalize the management of intangible assets and contribute to the development of strong brands, with good reputation and able to compete in the global market. Its mission is to be the driver which leads and consolidates the professional management of reputation as a strategic resource that guides and creates value for companies throughout the world.

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