You don't understand Brand Strategy

If you think branding is good for visuals, colours and logo only, then I hope to change your mind by the end of this essay.

In this post I argue that good Brand Strategy is actually a core differentiator for business success among firms competing at any scale for market share.

Part 1: The Brand Framework - Primary & Derivative Levers

Much has been written and spoken about branding, what it is and how to do it. While I will try to not repeat most of them, I believe that you will benefit from a shared definition of Brand and what comprises of the same. These are of course my words, but you will see that the core is consistent across environments.

Brand strategy is the ongoing, active management of the perception of value that your company holds in the mind of the user. The end objective is to ensure that this perception of value is permanent and ever-appreciating.

A natural question here obviously becomes, so what does one actively manage? These are the foundational components or the primary levers of a brand:

As you might see, barring a few things on here, most customer don't really interact with some of them - in fact, they might as well be unaware of it. Most of your customers/users will interact and remember the derivative levers of your brand:

I call them derivatives because they cannot be created effectively without having the foundations done well. Which is why you see a vast majority of companies who attempt to create content, experiences or communications in silo come up with generic stuff that does that opposite of setting them apart.

So far we have established the following:

• A framework to understand brand strategy and its levers

• That the objective of brand strategy is the active management of the perception of your company's value for your customers.

But why manage this perception of value? Is there a fundamental truth for customers that necessitates the need for a sound, well thought through brand?

Part 2: Good brand strategy saves time for customers

That is it.

This is the reason why a company must invest in a Brand Strategy or perish.

The real problem that branding solves for a customer is that of reducing the time it takes for them to make a purchasing decision.

Humans are like rivers - we are wired to take the path of least resistance. A fascinating study by elifesciences in 2017 illustrated that 'decisions are recursively influenced by the physical resistance applied to the response'. The low hanging fruit in an apple orchard, this study showed, would look more ripe and appealing than the one at the top of the tree simply because it is more accessible to you.

Broadly, while making purchases about anything that is significant, a customer is thinking about the following:

Of these steps, there are 3 things that matter more than others:

1. Urgency: How severe is the problem for which the I, the customer, am looking for solutions?

2. Comparison: How cheaply can I acquire said solution?

3. Post Purchase Experience:

• Durability: How long can said solution reliably service my needs without needing service?

• Support: How effectively can the owner of the solution service/troubleshoot if there are problems post purchase?

• Satisfaction: How happy am I with the purchase?

Clearly we see that the real objective for a company to acquire more customers and grow is to:

• Create effective solutions for customers' most pressing problems.

• Reduce the decision making time for customers by communicating a reduced need for post purchase support

It is the latter that good brand strategy enables. A belief that if I buy Product X from AcmeCo., I have the peace of mind that I will not regret the decision.

It might start with specific products and services, but your eventual goal is to extend that credibility for your entire brand. That's when you get to a place where your customers trust your brand blindly. They will gravitate toward not just your existing offerings, but also anticipate future releases. This is the same phenomenon that makes my father say that 'Apple products - any product, are 'quality' products' even when he has no technical know how or has done limited research.

Why? Because humans want to simplify decision making. They generally do not make informed decisions and rely on heuristics & populist truths.

Brand Strategy is a strong lever to contextually live in your customers mind.

And the best thing about convincing your customers/prospects about your quality is that once their minds are made up, they are not likely to change it. Loss aversion theory states that customers would be more likely to stay with a company/brand than change it owing to familiarity & a low-risk appetite.

But maybe the best way to prove that having good brand strategy helps with business growth is to examine what happens when you try to replicate everything without having a good brand backing you.

Part 3: The Hameez Case Study

Source: Good Economics for Hard Times. Abhijit Banerjee & Esther Duflo

Under its Aid for Trade initiative, the WTO attempted to impact developing economies by supporting international trade. The core hypothesis was that these countries could trade their way out of poverty. Under this programme in 2009, the small, hyper-local artisans of handmade products in Egypt were to be supported in every sense to ensure that their product - rugs - reaches international markets. The hope was that by selling in markets like the US & EU, the same artisans could charge higher for the rugs and completely eliminate the middle-man brands who would buy cheap and make margins.

The procedure was:

• Looked for suitable products for high income markets that was produced in the markets cheaply . (Carpets & hand made rugs)

• Find a central location. They Chose Fawa: Which was home to many small firms making that particular rug. Most were 1 man operations consisting of families operating one loom.

• Find a local intermediary: Egypt already had a natural intermediary: Hameez which was already operating at some scale.

• They would support Hameez with market intelligence & strategy to help decide what carpets to make & export.

• Help find buyers & develop markets

• Provide support over 5 years and then transition out with the hopes that Hameez can continue its growth to become the Amazon of Egyptian rugs.

Not only this, Aid for Trade bought the Hameez management for training courses & networking events in the USA, hired an Italian designer to make collections and even helped with promotions & marketing.

The results were lack-lusture. With all this effort, it took 18 months to finally find a German buyer. It took about 5 years to get the company to have revenues of $500K.

Let's take a pause and understand what went in: An intermediary with high global credibility & respect, more than sufficient financing, investing in enablement rather than a short term approach of outputs and a special focus on making it for high income target markets. Why would it not work? Why can Hameez not become the next Gucci?

Because for the consumer - time is money.

When a customer buys from Gucci they know that they are getting a very premium product from a highly respected and aspirational brand. But more importantly they now that they are getting the highest quality in class - nothing less. For the customer, each second spent returning / refunding / repairing is costly. And the savings that comes from a new entrant offering rugs at cheaper prices is not worth the risk of losing time in repairs or refund. Hence at the outset, consumers want to ensure that they pick products from retailers & brands which they feel will function excellently.

What Gucci has - and Hameez lacks - is the almost universal perception of trust & credibility that their customers have in their minds. So even when one might argue that the value of their products are equivalent (good rugs), Hameez cannot compete with the assurance that years of Gucci branding exudes.

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Conclusion

According to the Washington State Department of Agriculture, branding first began in 2700 B.C. with the Egyptians. It was done as a way to communicate to the buyers about the authenticity & quality of the cattle by having a shape that was the primary identification of their ownership. The important lesson to take here is that the symbol was representative of trust & credibility. Which means branding is about cultivating trust and credibility - and thereby maintaining the perception of value for your customers. The tools to achieve this for a company has to be more than colors, logos & taglines. By this logic, your brand strategy is quite literally married to your business strategy. They are complimentary, and just like a marriage, it can get tough when only one of the participants is pulling their weight.

This is getting even more relevant in times like now when customers are individuals. A McKinsey report states that the consumers of today and tomorrow - Gen Z are more ethical and communaholic in nature and expect the brands they subscribe to to declare corporate citizenship. Brand Strategy is more important now when companies are expected to take a stand. Values, Vision & Mission become important.

And this is nothing new, public institutions have always been brand conscious - just that it is more pronounced now. Investors' purchasing decision is literally & figuratively tied to what the Federal Reserve is willing to do in these difficult times. Their service positioning has changed from 2008/09 times of 'no bailouts' to now where the role of the central bank is much more than inflation targeting and price control. Used to be that Hank Paulson spent quite a lot of internal meetings and liaised with media to ensure that the message went out during the Lehman collapse - 'No more bailouts'. But now, Neel Kashkari of the Fed came on 60 minutes to say that 'The Fed has unlimited tools to deal with economic crises'. It is now buying distressed corporate bonds.

Just this strong a service positioning change with massive impact on the markets. So much so that it has started to diverge from the real economy:

Still think brand don't matter?

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