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BRANDS AND BRANDING

OTHER ECONOMIST BOOKSGuide to Analysing CompaniesGuide to Business ModellingGuide to Economic IndicatorsGuide to the European UnionGuide to Financial MarketsGuide to Management IdeasNumbers GuideStyle GuideDictionary of BusinessDictionary of EconomicsInternational Dictionary of FinanceBusiness EthicsBusiness StrategyChina’s ul InnovationSuccessful MergersWall StreetEssential DirectorEssential FinanceEssential InternetEssential InvestmentPocket AsiaPocket Europe in FiguresPocket World in Figures

BRANDS AND BRANDINGRita Clifton and John SimmonswithSameena AhmadTony AllenSimon AnholtAnne Bahr ThompsonPatrick BarwiseTom BlackettDeborah BowkerChuck BrymerDeborah DoaneKim FaulknerPaul FeldwickSteve HiltonJan LindemannAllan PoulterShaun Smith

THE ECONOMIST IN ASSOCIATION WITHPROFILE BOOKS LTDPublished by Profile Books Ltd58A Hatton Garden, London ec1n 8lxCopyright The Economist Newspaper Ltd 2003Text copyright Sameena Ahmad, Tony Allen, Simon Anholt,Anne Bahr Thompson, Patrick Barwise, Tom Blackett, Deborah Bowker,Chuck Brymer, Rita Clifton, Deborah Doane, Kim Faulkner, Paul Feldwick,Steve Hilton, Jan Lindemann, Allan Poulter, John Simmons, Shaun Smith 2003All rights reserved. Without limiting the rights under copyright reserved above, nopart of this publication may be reproduced, stored in or introduced into a retrievalsystem, or transmitted, in any form or by any means (electronic, mechanical,photocopying, recording or otherwise), without the prior written permission of boththe copyright owner and the publisher of this book.The greatest care has been taken in compiling this book.However, no responsibility can be accepted by the publishers or compilersfor the accuracy of the information presented.Where opinion is expressed it is that of the author and does not necessarily coincidewith the editorial views of The Economist Newspaper.Typeset in EcoType by [email protected] and bound in Great Britain byCreative Print and Design (Wales), Ebbw ValeA CIP catalogue record for this book is availablefrom the British LibraryISBN 1 86197 664 x

ContentsThe authorsviiPrefacePatrick BarwisexiiIntroductionRita CliftonPart 1 The case for brands1 What is a brand?Tom Blackett2 The financial value of brandsJan Lindemann3 The social value of brandsSteve Hilton4 What makes brands greatChuck BrymerPart 2 Best practice in branding5 Brand positioning and brand creationAnne Bahr Thompson6 Brand experienceShaun Smith7 Visual and verbal identityTony Allen and John Simmons8 Brand communicationsPaul Feldwick9 The public relations perspective on brandingDeborah Bowker10 Brand protectionAllan PoulterPart 3 The future for brands11 Globalisation and brandsSameena Ahmad12 An alternative perspective on brands: markets and moralsDeborah Doane11113274765777997113127143157169171185v

BRANDS AND BRANDING13 Branding in South-East AsiaKim Faulkner14 Branding places and nationsSimon Anholt15 The future of brandsRita CliftonIndexvi199213227242

The authorsRita Clifton is a leading practitioner, author and commentator onbrands and branding, and has worked with many of the world’smost successful companies. After graduating from Cambridge, shespent her early career in advertising, becoming vice-chairman andstrategic director at Saatchi & Saatchi. A frequent speaker at conferences around the world, she is also a regular contributor on cnn andthe bbc and to all the major broadsheets and business magazines.Since 1997 she has been ceo and then chairman at Interbrand, aglobal brand consultancy, and she was the editor of its recent bookThe Future of Brands.John Simmons pioneered the discipline of verbal identity and has consulted for brands around the world such as Guinness, Lever Fabergéand Air Products. He is a consultant and author, and his two books We,Me, Them & It and The Invisible Grail have become widely valued asauthoritative and engaging texts on the role of language in branding.Previously he was a director of Newell and Sorrell and then of Interbrand, where he was verbal identity director and led major brand programmes for companies such as Royal Mail and Waterstone’s.Sameena Ahmad is a business correspondent with The Economist, whohas written about marketing and brands. Formerly based in New Yorkand London, she now covers Asian business from Hong Kong.Tony Allen graduated from Cambridge University with a degree inPhysical Anthropology. He then joined McCann-Erickson where heworked on some of the agency's biggest accounts, and was involved inlaunching Diet Coke into the UK. In 1985 he joined corporate identitycompany Newell and Sorrell, known for its work with such clients asBritish Airways and Waterstone's the book sellers. He set up the firm’soffice in Amsterdam in 1995 where he worked on a number of crossborder merger projects including those for PriceWaterhouse and Coopers & Lybrand and Pharmacia and Upjohn. Following the purchase ofNewell and Sorrell by Interbrand in 1997, he returned to London tobecome the joint managing director of the new company in 1999 andthen its CEO in 2002.vii

BRANDS AND BRANDINGSimon Anholt is one of the UK’s best-known international marketingthinkers. After graduating in modern languages at Oxford University, heworked as international creative co-ordinator at McCann-Ericksonbefore founding World Writers, a culture consultancy, in 1989, which heran until 2001. He has specialised in the branding of places for over adecade, and advises many cities, regions and countries on public diplomacy and brand strategy, including the governments of the UK (and separately Scotland), Slovenia, Croatia, the Czech Republic, Germany andNew Zealand. He also advises the World Bank, the un, the World Traveland Tourism Council, the World Technology Network and several otherorganisations. He is the author of the best-selling AdWeek book, AnotherOne Bites the Grass, and Brand New Justice: The Upside of Global Branding, which was published in 2003. He is a founding director of Placebrands, an international consulting firm.Anne Bahr Thompson has worked as a consultant and strategist inmarketing, planning and research, and with brands including Chase,Citibank, Fidelity, Kraft Foods, Quaker Oats, Random House and ubsSwitzerland. She was formerly vice-president of market research andplanning at Bankers Trust and held product management and strategicplanning posts at Chemical Bank. She has an mba (International Business and Finance) from Darden Graduate School of Business at the University of Virginia and a ba in Communications and English fromRutgers University. She is currently head of consulting at Interbrand.Patrick Barwise is professor of management and marketing and chairman of the Future Media Research Programme at London BusinessSchool. He joined lbs in 1976 having spent his early career with ibm. Heis the author of Television and its Audience, Accounting for Brands, Strategic Decisions, Predictions: Media and Advertising in a Recession, as well asnumerous articles and academic papers, mostly on brands,consumer/audience behaviour and new media. His current projectsinclude a major study of global Marketing Expenditure Trends andSimply Better, a book on customer-driven strategy, to be published byHarvard Business School Press.Tom Blackett has been a leading expert on brands and branding for over20 years. He is the author of Trademarks and the co-editor of Co-branding: the science of alliance and Brand Medicine and a contributor to manyother key texts about brands. During his career the international brandviii

THE AUTHORSowners he has worked with include Heineken, Unilever, GlaxoWellcome, bp Amoco and Volvo. Now group deputy chairman of Interbrand,he is a regular conference speaker, media commentator and writer.Deborah Bowker has experience in strategic planning, change communication, media and government relations. Before joining BursonMarsteller she was director of PricewaterhouseCooper’s Centre ofExcellence for Strategic Communications and a technical adviser incommunications and marketing planning to numerous pwc clients. Shehas also served as an assistant postmaster general and vice-president atthe US Postal Service, and has directed major projects for usps, a worldwide Olympic sponsorship and a national literacy programme. Her promotion of the Elvis postage stamp earned her a place in the Ad Age 100.She is a Sloan Fellow of the Massachusetts Institute of Technology,where she earned a Master of Science in Management.Charles (Chuck) Brymer began his career at bbdo, opening its Houston office in 1982 before moving to the head office in New York. Sincemoving into branding, he has led branding programmes for mci,Compaq, Samsung, Discover, Procter & Gamble, Gillette and at&t. Asgroup chief executive of the Interbrand Group based in New York, he isresponsible for managing the company’s global interests as well asremaining involved in client projects. He has written and lectured extensively on brands, corporate identity, naming and brand valuation.Deborah Doane is programme director, Transforming Markets, at theNew Economics Foundation, a leading think-tank aiming to build a justand sustainable economy. She is an active campaigner and researcher inthe area of corporate social responsibility and chair of the core(Corporate Responsibility) Coalition, campaigning for stronger corporate accountability of business. She is a frequent speaker at internationalconferences, to both business and government audiences and contributes to broadcast and broadsheet media, including the bbc, theGuardian and the Independent. Previously, she was head of the International Humanitarian Ombudsman Project, and she started her career asa senior policy analyst with the Canadian government. She earned aMasters in Development Studies from the London School of Economics.Kim Faulkner has 20 years of experience in branding, marketing communications and design management, working with a diverse range ofix

BRANDS AND BRANDINGinternational and local client organisations in Asia. She was a foundingpartner of Interbrand’s office in Singapore and is now chairman of theoffice, as well as sitting on the board of directors of International Enterprise Singapore. She is also a council member of the DesignSingaporeCouncil and of the Action Community for Entrepreneurship, Singapore.Paul Feldwick joined bmp (then known as Boase Massimi Pollitt), anadvertising agency, in 1974. Today he is executive planning director forthe same company (bmp ddb) and worldwide brand planning directorfor ddb. He has been chairman of the Association for QualitativeResearch and of the Account Planning Group, and is a Fellow of the ipaand the Market Research Society. He has spoken at the US Account Planning Group Conference and twice won “best” paper at the MarketResearch Society Conference (UK). He is the author of What is BrandEquity, Anyway?.Steve Hilton is the founding partner of Good Business, a leading corporate responsibility consultancy. He is a prominent commentator on thesocial role of business, and the author Good Business – Your World NeedsYou, a constructive riposte to the anti-globalisation movement. Previously, he was campaign co-ordinator for the Conservative Party’s successful 1992 general election campaign and then worked at Saatchi &Saatchi, where he combined commercial and social marketing disciplines with clients ranging from British Airways to Boris Yeltsin.Jan Lindemann is global managing director, brand valuation, at Interbrand Group, responsible for the company’s brand valuation practiceworldwide. He has extensive experience in advising on brands, marketing and financial issues in all major industries and countries, with clientswho include American Express, at&t, axa, Bank of America, bbc, bp,bt, Gucci, Fujitsu, ge, Heineken, ibm, Japan Tobacco, L’Oreal, MasterCard, Nestlé, nyce, Olivetti, Orange, Pilsner Urquell, Prada, Powergen,Prudential, rhm, Samsung Electronics, Texas Instruments, tnt, Vodafone and Wells Fargo. His work has been widely published on thesesubjects and he is a frequent lecturer, commentator and broadcaster onbrand related issues, including the creation of the league table on theleading global brands. Previously he worked as mergers & acquisitionsadviser for Chase Manhattan Bank.x

THE AUTHORSAllan Poulter is a partner at Field Fisher Waterhouse, a London-basedlaw firm, practising within its Trade Marks and Brand Protection Group.He is qualified as a solicitor and as a registered trade mark attorney, andwas previously managing director of Markforce Associates. He hasmanaged the international trade mark portfolios of several householdname clients and has particular expertise in Community Trade Markproceedings. He is a member of International Trade Mark Association’spublications board and is editor of the inta publication on the Community Trade Mark. Conferences he has spoken at around the worldinclude Eurolegal’s Annual Trade Mark Conference and inta’s MadridProtocol Forum in Washington, Chicago and San Francisco.Shaun Smith is a leading expert in helping organisations create anddeliver customer experiences that differentiate their brands. A consultant to a wide range of organisations covering many different industrysectors, he is also author of Managing the Customer Experience andUncommon Practice. He started his career at British Airways, becominghead of Customer Service, Sales and Marketing Training worldwidebefore moving to Asia for 11 years as managing director of CathayPerforma consulting. He later joined the Forum Corporation as seniorvice-president of The Customer Experience Business with responsibilityfor their customer experience consulting practice in Europe. He nowruns his own businesss focussing on speaking internationally and advising companies in the area of brand experience.xi

Prefacehis collection of essays comes at an interesting time for brands. Thepast few years have seen the apparent triumph of the brand concept: everyone from countries to political parties to individuals in organisations is now encouraged to think of themselves as a brand. At its bestthis means caring about, measuring and understanding how others seeyou, and adapting what you do to take account of it, without abandoning what you stand for. At its worst it means putting a cynical gloss orspin on your product or your actions to mislead or manipulate thoseyou seek to exploit. These are hardly new ideas. What is new is theubiquitous and often confused use of branding terminology to describethem.This timely book aims to bring greater understanding into this complex and, to some, emotive area. Written by leading practitioners andanalysts, it puts brands and branding into their historical context,describes current thinking and best practice, and ventures somethoughts about the future.Part of the confusion about brands is that the word is used in at leastthree separate but interrelated senses:T In most everyday use (for example, “which brand did you buy?”)a brand is a named product or service. In some contexts (for example, “which brand shall we use forthis new product?”) brands are trade marks. In other contexts (for example, “how will this strengthen orweaken our brand?”), brand refers to customers’ and others’beliefs and expectations about products and services sold under aspecific trade mark or about the company which provides them;the best term for this is “brand equity”.The use of the same word to mean three categorically different thingsdoes not aid clear thinking; and the thinking gets muddier when the antiglobalisation movement refers to “brands as bullies”, when really theyare attacking the mostly American multinationals that own globalbrands.Again, brand valuation is an attempt to attribute part of the total valueof a firm to brand equity. But brand equity – especially for a corporation,xii

PREFACEsuch as Microsoft, ibm or ge, as opposed to a product, such as Windowsor Persil – is like reputation: it cannot be bought or sold. In contrast, atrade mark can be sold but has little inherent value apart from the associated brand equity.This is not to deny that brands – that is, brand equity – can be anextremely important component of a firm’s value. Most successful businesses today are valued by the market at far more than the value oftheir tangible assets. Brand equity, whether it is or is not a separableasset to which we can assign a single valid financial value, is often themost important intangible factor accounting for this difference. Thefinancial markets now understand this and are starting to require topmanagement to act as good stewards of this crucial aspect of businessperformance.If top managers are becoming brand stewards, what issues shouldthey think about?Brand measurement, accountability and understanding. To managebrand equity (or anything) requires current, valid data. This includesdiagnostic data about why the brand is where it is. Few brand ownersdo this well. Part of the failure of American “public diplomacy” (government pr aimed at foreigners) stems from not having bothered tounderstand systematically how “Brand America” is perceived. This failure poses a potential threat to American lifestyle brands such as CocaCola, Marlboro and McDonald’s, although it is too soon to tell how realthe threat is. Another accountability issue relates to marketing metricssuch as market share, customer loyalty, relative price and relative perceived quality. Managers should see these metrics regularly and reportthe main ones to shareholders.Brand support. Including a range of marketing metrics in performancemeasurement systems such as the balanced scorecard (to complementshort-term financial measures) should make it easier to maintain investment in activities that will build and develop brand equity. The maintrends are a gradual shift of resources away from traditional mediaadvertising towards direct and interactive marketing, and a gradualconcentration of resources on fewer, bigger brands, each capable ofsupporting more products. Relating back to measurement and accountability, managers should insist on quantitative evaluations (post-audits)of all brand investments even though these are unlikely to pin downthe full long-term effects. The three criteria for a post-audit should bexiii

BRANDS AND BRANDINGeffectiveness (did the campaign reach its objectives?), efficiency (was itgood value for money?) and learning (what have we learned which willhelp us do better in future?).The brand owner’s social and ethical stance. There is no consensusabout the net social impact of businesses, brands or branding, either ingeneral or in particular cases. Nor is there consensus about the implications for public policy (for example, regulation, investment incentives)or for businesses themselves; but because of attacks from diversegroups (both consumerist and anti-consumerist) brand owners mustaddress these issues. Brand owners rightly argue that many of the criticisms of them are confused and ill-informed; that, for instance, thelabour and environmental standards of multinationals in developingcountries are usually higher than those of local competitors; and thatthose who criticise their involvement in these countries rarely spell outthe likely consequences if that involvement were to cease. These arguments, however, are insufficient either to address the substantive issuesor to win the battle for hearts and minds. Brand owners today need totake account of the fact that these issues are starting to affect not onlythe brand choices of some consumers but also areas such as graduaterecruitment and government relations, and that in a digitally connectedworld anti-brand websites and e-mail campaigns can have a dramaticimpact within a few days.Making the experience of buying and using the brand reliably liveup to the promise. A recurrent theme in this book is that successfulbrand management goes well beyond the cosmetics of branding (brandname, packaging, advertising, and so on). All great brands are built on abedrock of trust derived from customers’ experience of buying andusing products and services sold under the brand name. The resultingbrand equity is then reinforced by excellent branding, usually playing asupporting role. Of those brands ranked the top ten in 2002 by Interbrand, a brand consultancy firm, in association with JP Morgan (seepage 29) only Coca-Cola and Marlboro have been created primarily bybranding, supported by a good product and great distribution. Intelowes some of its strength to its Intel Inside “ingredient branding” campaign, but more to its products’ price-performance, its strategic alliancewith Microsoft and its dominance of standards. The rest of this top ten– Microsoft, ibm, ge, Nokia, Disney, McDonald’s and Mercedes-Benz –are primarily customer experience brands.xiv

PREFACEThis represents the biggest opportunity for top management as brandstewards. After 25 years of total quality management (tqm), customerrelationship management (crm) and other such management prescriptions, there is still a huge gap between promise and delivery for mostbrands, especially service brands.I recently read a review of a book on “building great customer experiences”. The reviewer tells how he settled down to read the bookcoming back from Brussels to London by Eurostar, having had his original train cancelled and don’t ask. (This was a few weeks after Eurostarleft several hundred passengers stranded for five hours.) Imagine hisreactions on finding the managing director of Eurostar quoted threetimes in the book on his company’s wonderful customer-led culture. Didthis md have any idea of customers’ actual experience with the brand?My hope and expectation is that the next big brand thing will be topmanagers, as brand stewards, working to close the gap between thepromised and the delivered brand experience.Brands create customer value because they reduce both the effortand the risk of buying things, and therefore give suppliers an incentiveto invest in quality and innovation. Branding can also enhance the customer’s experience aesthetically and psychologically. Today, there is farmore interest in brands and recognition of their importance than therewas 10 or 20 years ago, but there is still great ignorance and misunderstanding of many of the issues. This book is aimed at any open-mindedperson who seeks a better understanding of the social and financialvalue of brands, current best practice in branding, and some of theemerging issues around this important, complex and ever fascinatingtopic.patrick barwiseSeptember 2003xv

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IntroductionRita Cliftonn great part, this book, and its treatment of the subject of brands andbranding, was inspired by the leader article “Pro Logo” whichappeared in The Economist on 8th September 2001. The date of publication may give some clue as to why the subject did not generate as muchfollow-up debate as it might have done.But there were, and are, other factors which have subdued the kindof support that the article advocated for brands. The title “Pro Logo” wasa witty response to the title and arguments in Naomi Klein’s 1999 bookNo Logo. The book had become an unofficial “bible” for the anti-capitalist and anti-globalisation movement, arguing that global brandsessentially had too much power and were the cause of a variety of evilsand injustices in world society. The Economist article essentially advisedNaomi Klein and her followers to grow up, and to recognise the importance of globalisation and brands to the economic and social development of all nations. Brands have been successful because people wantthem; and every organisation’s need to protect its reputation (and so itscorporate value) is a rather efficient impetus for them to behave well.The fact that The Economist article was a rare example of a sophisticated publication clearly highlighting the nonsense that lay behind somany of the anti-capitalist arguments was also thought-provoking in itsown right. Why is it that there seems to be less high-level advocacy forthe collective importance of brands than seems justified by the facts?Is it a lack of understanding of their nature and role? Is it a form ofpersonal denial about how much we are influenced by brands, a kind ofdeveloped-world guilt? Certainly, there is little evidence of this kind ofsoul-searching in a country like China, where the government hasexplicitly stated that it sees “branded commodities” as China’s way forward in world success.Contrast this with the sentiment of a letter from a ftse companyceo in response to an approach from a brand consultancy. No onecould blame the ceo for rebuffing such an approach from a supplier,but it was the reason given that was illuminating: “Branding is not ourmain preoccupation at the moment.” The letter was polite, but theI1

BRANDS AND BRANDINGimplication was clear. Basically, in the face of difficult market conditions, the ceo was preoccupied with “more important” things such as,presumably, cutting costs and restructuring. In contrast, branding was,to him, a discretionary cost and most probably to do with expensivelogo-twiddling. To equate “brand” with such superficial cosmetics is theequivalent of saying that people are really only the sum of their name,face and clothes.Thinking about all of these differently expressed (and indeed unexpressed) views, it seemed important for this book to air and explore themany different angles on brands and branding, both positive and negative, for a range of different audiences. This is indeed what the book hasset out to do, as is reflected in the chapter subjects and contributors.However, we should be clear that there is a central tenet for thisbook, whether it is reflected in the individual contributions or not. Thebrand is the most important and sustainable asset of any organisation –whether a product- or service-based corporation or a not-for-profit concern – and it should be the central organising principle behind everydecision and every action. Any organisation wanting to add value today-to-day process and cost needs to think of itself as a brand.The economic importance of brandsCertainly, all the hard economic evidence is there for the central importance of the brand. While the brand clearly belongs in the “intangible”assets of an organisation, this hardly makes its economic contributionand importance any less real. For example, the intangible element of thecombined market capitalisation of the ftse 100 companies hasincreased to around 70%, compared with some 40% 20 years ago, and itis likely to grow even further as tangible distinctions between businesses become less sustainable. The brand element of that combinedmarket value amounts to around one-third of the total, which confirmsthe brand as the most important single corporate asset. Globally, brandsare estimated to account for approximately one-third of all wealth; andthat is just looking at their commercial definition. Some of the world’smost recognised and influential brands are, of course, those of not-forprofit organisations, such as Oxfam and the Red Cross. This is an aspectof “global brands” all too rarely considered in the public debate aboutbrands and branding.The economic importance of brands on a national and internationalstage is undeniable. As an example, when the gdp of Thailand wasaround 115 billion in 2001, the combined value of the world’s two most2

INTRODUCTIONvaluable brands (Coca-Cola and Microsoft) was 134 billion. If the financial clout wielded by these companies makes some commentators nervous, it should not. The owners of brands are also highly accountableinstitutions. If a brand delivers what it promises, behaves in a responsible fashion, and continues to innovate and add value, people will continue to vote for it with their wallets, their respect and even theiraffection. If, however, a brand begins to take its position for granted andbecomes complacent, greedy or less scrupulous in its corporate practices, people will stop voting for it, with potentially disastrous effects forthe brand and its owner.In a word-processed, all-seeing digital world, where the ghosts ofcorporate malpractice are never laid to rest, there is every incentive forcompanies to behave well. One of the ironies of the recent anti-globalisation movement, in its original targeting of global brands, is the failureto acknowledge that the importance of brand reputation provides thestrongest incentive for a company to do everything to protect the reputation of its brand, its most valuable corporate asset. If the ability toincrease the value of that asset is the “carrot” for companies, then the“stick” is the knowledge of how worthless the once-proud names ofAndersen and Enron have now become.From an investment perspective, the brand provides a more reliableand stable indicator of the future health of a business. Inspection ofbrand value, equity measures and audience relationships will give amore complete and realistic basis for underlying value than short-termfinancial results, which often reflect short-term priorities. A recent studyby Harvard and South Carolina Universities compared the financialperformance of the world’s most valuable 100 brands with the averageof the Morgan Stanley Capital Index and the Standard & Poor’s 500. Thedramatic difference in performance gives further quantified substanceto what is qualitatively obvious. Strong brands mean more return, forless risk.The social and political aspects of brandsBrands, however, are not simply economic entities.Apart from the obvious social benefits of wealth creation onimprovements in standards of living both nationally and internationally, there are less recognised social effects and benefits. Most of theworld’s most valuable brands have been around for more than 50 years.Brands a

moving into branding, he has led branding programmes for mci, Compaq, Samsung, Discover, Procter & Gamble, Gillette and at&t. As group chief executive of the Interbrand Group based in New York, he is responsible for managing the company’s global interests as well as remaining involv