Strategy

The new brand challenge

A panel of marketing experts considers the future of branding--and what Canadian marketers can do to ensure their brands' success.

These are challenging times for corporate brand managers. While more money and energy are being spent introducing new brands and defending established ones, the strength of the brand appears to be on the decline. Consumers used to cleave to brands as a way of defining who they were; people who drove Chevys drove them their whole lives. But not anymore. Now, media-savvy consumers are less brand loyal than ever, willing to jump ship at the first sign of a better deal. The market is even more challenging for Canadian brands that still have to reach domestic consumers while competing against global powerhouse brands. Branding may not be dead, but it certainly has a bad cold.

With that in mind, senior writer John Gray assembled a panel of four marketing experts–Gary Prouk of Toronto's Sebastian Consultancy; John Bradley, a former vice-president of marketing with Cadbury Trebor Allan and now a branding consultant; Henry Fiorillo, president of Toronto's Research Management Group; and Niraj Dawar, Nabisco professor of marketing at the Richard Ivey School of Business–to discuss the future of branding and what Canadian marketers can do to ensure their brands stay in consumers' shopping carts.

Q: There was a time when a brand really meant something. People would pay more for a Sony or go out of their way to get a pair of Levi's. Today, all the beer is cold, all the cellphones ring and all the cars run pretty smoothly. In a world of increased commoditization of products, do brands–particularly Canadian brands–still have a role to play?

Fiorillo: I think there is an important distinction between a corporate brand and a brand that represents the product that created the business, like Starbucks or Nike. I think it would be wrong to say that the banks don't have a message of trust or reputational values. But at the corporate level, those brands aren't necessary to the differentiated selling message that creates market share or category growth. It's not like the Disney brand that has value in the consumer's mind.

Prouk: It's up to the marketer to set the ground rules for what the brand stands for. Canada's banks are not so much a brand as they are a commodity. People change their bank every year or so, but they don't change Apple computers. Now what is a bank? That is a more interesting question.

Dawar: And few marketers address that question. The ones that do address it stand out. Let's look at what happens if you were to build a brand in the banking industry from the ground up–as Arkadi Kuhlmann did in Canada nine years ago with ING bank. That brand clearly stands out. And that brand is differentiated through the message, through the value proposition, through the advertising and through the kind of relationships it has with its customers. ING is the microbrewery of the banking industry. Maybe the idea that brands in a commodity industry are doomed is overstating the case. Those are the areas of opportunity for brands.

Fiorillo: Great brands can't be built unless they are fully supported out of the CEO's office. Only the CEO has the power to allocate resources and create differentiated products. Look at the Virgin brand created by Richard Branson; there was a larger brand vision behind that. Nike and Starbucks are other examples, or Roots here in Canada. Who is the custodian of the brand vision? In many large companies run by operations people, they might have heard of branding or read the occasional article, but they really don't understand it the way real brand visionaries do.

Prouk: You can have all the money in the world and still fail. Look at Virgin Rail–a disaster–and Nike got killed in the soccer business. Even Coke with New Coke. There are lots of examples where money is not enough.

Fiorillo: Money is not enough, although money is important. It requires the vision of a CEO that understands the requirements of a great brand. Most don't have a clue; they think it's only about building awareness or how many times their name is on a billboard. As opposed to people that understand it's about creating and selling an experience.

Bradley: That is one of the key changes in branding that I have seen. Twenty-five years ago it was very difficult to fail using the tried and tested 42 weeks of TV followed up with print. It was very affordable and very powerful and the consumer at the time was very uncritical and undemanding. Now, we are in a world where there is absolutely no market for second-rate quality in products or services. You have to be very good to even play the game. Branding has become a lot more emotionally based now.

Prouk: But emotional connections are the foundation of all marketing tactics and always have been. Or at least they should be. Truth is irrelevant for a brand. What matters is perceptions among consumers. However, if you are running a business, you had better be truthful and truthfully scrupulous.

Q: Does that emotional connection still matter when there is now so much information out there on which consumers can base their decisions?

Dawar: The brand becomes even more important in that context. One of the reasons consumers use brands is to simplify the purchase decisions and the choice process. A brand is a simple promise that this is what you want, this is what you bought the last time and you are going to get exactly the same thing next time. When they get an overload of information, consumers automatically want to cut through that and look for something they can trust. So the role of brands has not changed but has become even more relevant in an information-complex world.

Bradley: It makes it more important to be consistent. There is total transparency now. Any product claim is going to be instantly proven or disproven. It's no coincidence that the food industry is reacting so fast now to things like trans fats and allergens.

Q: With so many huge global brands, what chance do Canadian brands have?

Fiorillo: If you look at the Interbrand global survey of most valuable brands, you will not see a Canadian brand on it. If you look at the Top 500 companies in Canada and strip out the global brands and strip out the brands that were simply trademarks or corporate names to people in industrial services, or a piece of mining equipment, you would only have five or six brands. So the vast majority of people that practise marketing in this country aren't really contributing to branding because they don't have the opportunity.

Bradley: Marketing is now controlled by the global head office. But there are some fantastic Canadian brands. As an immigrant to this country, Tim Hortons is probably one of the strongest brands I have seen in my entire life.

Fiorillo: That is my point. You can name a few brands: Tim Hortons, President's Choice, Roots. But it is a very small list. For the most part, we are branch plant marketing managers.

Dawar: I don't really buy that the Canadian gene pool of marketers is not very strong; there are good marketers and there are good examples of Canadian brands that do well here and elsewhere, as well. I think the environment here, rather than the gene pool, may have more to do with the absence of big Canadian brands on the global stage. Canada is a smaller market, and as soon as you have scale in this market you want to move your head office south to the U.S. since that market is 11 times the size of here.

Prouk: President's Choice and Tim Hortons were run by two very driven guys, Dave Nichol and Ron Joyce. There aren't many like them in Canada. God help you if you got in the way of either of those guys. But neither one of those brands would have happened without those guys.

Dawar: Look at the Telus brand. That is a very powerful brand that has been built from scratch in this country. And built in an innovative way. They have established the emotional connection with the consumer that you were talking about earlier. They have differentiated themselves in what is essentially a commodity business and have developed a segment of the market very well, the pre-paid telephone cellular card area. They have been able to capture the imagination of the 15- to 25-year-old segment, which is a very heavy user of cellphone services. Their per-card, per-subscriber revenue is much higher than the industry average, which tells you something about the power of their brand.

Prouk: I'm not saying that it doesn't exist here. I think it is not proportional to the market.

Fiorillo: You can name examples but they are few and far between. And Canadians can make their mark on the world stage like everyone else can; it's not a gene pool issue, it's an opportunity issue, it's an environmental issue. I have four children, none of whom I would advise to go into marketing in Canada. It's just not the place to build a career. They should go into gold mining or looking for oil and gas. There aren't a lot of great Canadian brands. Telus is an excellent example, but I don't think that Virgin Mobile is going to do well here because the entrenched competition is so strong. I think they have an uphill battle.

Dawar: The territory that Virgin would normally occupy has been pre-empted by Telus, and it will be very difficult to differentiate with an entrenched player occupying that real estate.

Bradley: Virgin is the fifth entrant into the market; by right they should have no chance of succeeding. Their only hope is to make Telus seem like the old and established brand, make them seem like Bell Canada to that age group, and hope that Telus has been asleep at the wheel. Would I bet my house on it? No way.

Prouk: One of the things that doesn't happen here is a lot of product development. And one of the best ways for marketers to flex their muscles is with new products. When you learn to take possession of a brand from its gestation, you learn a great deal.

Fiorillo: You need a sense of ownership across the organization. It has to come from senior people. If they don't feel that pride and support, and make that known throughout the company, then you just have talented marketing people trying to push an idea uphill.

Bradley: There are a lot of great branded businesses that were driven by very unreasonable people at the top of the organization. They knew which pieces of information to ignore. That is a key skill that has been lost today where people rely too much on surveys and data to make decisions. There are too many people that are just passing through the brand and don't have the passion and commitment to make effective decisions for the brand.

No one succeeds with average anymore. In the heyday, average marketing used to actually work. I think it is amazing that a brand like Red Bull, which is now a Top 10 brand in the U.S., was able to succeed in the face of competitors like Coke and Pepsi that could throw anything at it. Why did it succeed? Because I, the founder, say so. And that attitude has been responsible for the success of many great brands.

Q: How are companies dealing with the fact that it's so difficult to build a successful brand now?

Dawar: Once a company has that success, the temptation is to expand the number of products that are carried by that brand platform. That temptation is greater today than ever before because the costs of building a brand are bigger than ever before and you make mistakes, you sell things that the platform can't carry. The question many companies never ask is: What permanent damage does this do to the brand platform?

Fiorillo: I saw a study that said there were something like two million branded products out there. That tells me there is a lot of brand pollution. The smart companies like Nestlé and Procter & Gamble are trimming their brand portfolio and realizing that, as a corporate strategy, it is better to focus on a smaller number of brands. They have figured out that a lot of their brands are not brands but just trademarks. A lot of the great Canadian brands are public now, but they weren't when they were built. They were private companies. Tim Hortons, Sleep Country, Roots: they were entrepreneurial companies that were built on simple but compelling ideas.

Bradley: Marketing is in a bit of a doom spiral at a lot of large companies. If your company is run by an accountant or a lawyer, the role of marketing ceases to be about emotion, but becomes rational. The role of marketing is to make more profit for the shareholders than if we didn't do marketing. And the problem is too much marketing doesn't make profit for the shareholder. But marketing will never make as much money for shareholders as cost-cutting does–at least short-term.

Dawar: They say that Canada is a big country, but it is a small country; it just looks big. Companies are a lot more willing to spend $100 million on information technology, but not on building a brand or building mental real estate. Marketers are beginning to realize they can re-establish the relationship with the consumer by investing in information technology, for which budgets are available. These database systems allow marketers to target the consumer on an individual basis and provide them with information that is customized to their needs. And that could change the role of brands. Brands have traditionally been used as the mechanism to build the customer relationship. Now you have the ability to communicate with the consumer on an individual basis. And not only can you tell them things, but you can also listen. A brand by its very nature was mass-produced. It was a monolith. It had to be the same for everyone. Now, a brand can be tailored to individual needs.

Prouk: That is one model. But by the time certain information reaches the civilized world, the trend is over. And most people running companies have no idea about what influences their audience. No one gets out of their offices. They are out of touch with their customers. Without contact with people on the street, this is all just theory.

Bradley: I never had a good idea in my office; it was either on the street or in the factory. When I was at Cadbury, the factory was 10 feet away and guys in the marketing department didn't want to go in. It's a chocolate factory, why would you not want to go in there? That's why so many marketing departments are seen by the rest of the business as people in an ivory tower who are out of touch.

Q: Is all branding ultimately doomed in the face of the new empowered consumer?

Bradley: I wouldn't be as cataclysmic as all that. Look at Swiffer. Getting people to pay $20 for five dusters is incredible. You can buy 10 for a dollar anywhere else. Convincing people to pay a premium in a totally commoditized market is incredible. Also, look at Curves for women, one of the fastest-growing franchises in the world. It's a gymnasium for women, and they understand that most women accept they will benefit from exercise but hate going to the gym. So they have engineered out everything–from a woman's perspective–that is bad about the gym: men, complex machines that no one instructs you in, impersonal staff. And they are a licence to print money.

Prouk: Look at Target. Design has been democratized. The place is an intersection of lowbrow and highbrow. So insightful. The point of all of this is that nothing is over. Brands aren't forever. It's business Darwinism, and the smartest, fastest and most insightful marketing will survive. But some won't and neither will the companies that make them.

Bradley: I see the brands being built today are not being built by traditional means. Curves has only just started, but it is growing by word of mouth. But the science of marketing, as it is practised by the average company, has not evolved sufficiently to match the new environment.

Dawar: Marketing is heading toward building brands in non-traditional ways. The media is changing: the 30-second ad is no longer the standard medium of communication.

Prouk: The 30-second ad is more of a millstone around our neck. We should get rid of it as fast as we can and move on.

Fiorillo: Marketing as it's been practised since the '40s or '50s has always been about control and consistency. But now the control is transferring past the retailer to the consumer, and the emergence of blogs is a good example. Your reputation can be destroyed in blogs and chat rooms instantly. Your brand is now managed by the customer in real time.

Prouk: Companies own products but consumers own brands.

Dawar: In a certain sense that has always been true. When Levi's tried to sell three-piece suits, no one would buy them because the consumer knew that this just wasn't appropriate for the brand real estate. Firms often forgot what their brand was about, but the consumer always remembers.