Wolff Olins Booz Research Report
Wolff Olins Booz Research Report
Wolff Olins Booz Research Report
Gregor Harter
[email protected]
Alex Koster
[email protected]
Michael Stomberg
[email protected]
What is a brand-guided company? From talking to hundreds of companies across Europe, we identied three categories of organizations:
Brand-guided companies: recognize the importance of brands and sound management of brands for their business success. They have established a common understanding of what the company stands for, and hence assigned clear brand ownership at top management level. Brand-guided companies occur across all industries. Emerging brand companies: have not yet fully recognized the importance of brands for their business success, but expect brands to become increasingly important over the next ve years. They are working on establishing a common understanding of their brand within their company, but have not yet established clear brand ownership. Brand-agnostic companies: do not consider brands to be an important factor to their business success today, and do not believe they will be important in the next ve years. They do not intend to develop a common understanding of their brands within the company, and have no interest in establishing clear brand ownership in their organizations.
Exhibit 1
92%
97%
Minor contribution of the brand to the success of the company Focus on costs, process optimization less on client requirements
Significant importance of the brand in securing market share and in realizing a price premium Partly alignment of brand with strategy Consistent brand understanding within the company
Profound customer insight Strong alignment of brand values with strategy, company processes and the organization Sophisticated brand control tools
Source: Booz Allen Wolff Olins European Survey among Marketing- and Sales-Officers, 8/2004
Exhibit 2
Branded-guided companies
82%
18%
Case study banks: Brand-guided companies surveyed achieve a return on equity of 19% against 8% for remaining players Case study industrial goods: Brand-guided companies surveyed achieve an EBITDA of 17% against 10% for remaining players
Other companies
4%
56%
40%
According to the statements of the interviewees Source: Booz Allen Wolff Olins European Survey among Marketing- and Sales-Officers, 8/2004
1 2
Our analysis, for example, shows that Coca-Cola, Microsoft, IBM, GE, Intel and Nokia all achieve impressive brand values of $50-100bn with comparatively low budgets. Booz Allen Wolff Olins European survey among Marketing- and Sales Ofcers, 8/2004.
In brand-guided companies, employees have more enthusiasm about their work and communicate this enthusiasm to customers. They have a greater clarity about what is expected of them and how they need to do their everyday tasks dierently to deliver on the brand promise. The brand-focused employee contributes to a common understanding of what the company stands for and what its ambitions are. This leads to a clearer picture of the companys goals. As a consequence, a clear understanding of the brand can facilitate strategic goals. In return, the brand-guided company pays more attention to its employees. The research shows that brand-guided companies are twice as likely to assess the performance of individual employees and their activities on a regular basis, compared with brandagnostic or emerging brand companies. How can a company put all this into operation? First, a company has to clearly dene the market position it aspires to and dene the strategic goals. Based on this, a brand proposition can be developed and then translated into all key constituents of the business (see Exhibit 3).
Exhibit 3
Strategic Management of a Brand
is four times shorter than of its CEO. The failure of so many CMOs, and the persistent reorganizations of marketing functions, indicate a serious disparity between companies needs and the solutions oered by marketers. This has led some people to question the relevance of CMOs. Our research suggests, however, that the problem does not lie with the CMO role per se. Rather it lies in the fact that the CMO agenda in non brandguided companies is not eectively aligned with the CEOs agenda. If CMOs can demonstrate the benets of brand management to their companies, they can boost the impact of their marketing function and fully leverage the potential of their brand. By employing more focused metrics and acting on the results of marketing ROI (return on investment), CMOs can transform the performance of the company and the marketing function. Tougher metrics for more sophisticated CMOs How can CMOs prove that being brand-guided works for companies? The answer lies in having more eective metrics.
Company goals Product / service strategy Positioning Brand proposition Rational benefit Emotional benefit Brand values
Detailed proposition with rational and emotional benefit Brand Values Align Constituents of the Business to Brand Marketing & Distribution R&D Operations Supply Chain Admin.
Culture
Brand Master CMO A strong CMO role is essential for companies that want to become brand-guided. If branding is truly at the heart of an organization, then the marketing function needs to be there too. The lack of brand focus in underperforming companies explains why marketing does not seem to deliver on the expectations set by CEOs. The life expectancy of the average CMO, for example,
The Booz Allen Hamilton Wol Olins survey shows that brand-guided companies are more willing and able to use disciplined ROI marketing techniques, instead of making intangible promises or using marketingspeak. This willingness to focus on harder metrics leads to success. Why are most marketers reluctant or unable to use solid metrics? Because marketing ROI is more complex
than nancial ROI. With nancial ROI, the return and the investment can be measured equally. But to measure the success of marketing, a number of key performance indicators (KPIs) must be collected and computed to produce a reliable basis for measurement. Brand-guided companies are more successful at this complex measurement of marketing ROI than are brandagnostic or emerging brand companies. This starts with brand-guided companies collecting the necessary KPIs to assess marketing performance more regularly than the other types of company. For example, 45 per cent of brand-guided companies regularly assess share of wallet (their share of sold product as a percentage of the customers total expenses) compared to only 24 per cent of emerging brand and brand-agnostic companies surveyed. Sixty-four per cent of brand-guided companies regularly investigate whether their brand
Measurements and Link to Market Position A Number of Regularly Collected KPIs
concerned that too much science might detract from the art of marketing. In many marketing functions, creativity and innovation are valued more than the ability to number-crunch and design models to extract scal results. This is understandable. But the lack of hard measurement abilities in senior marketers may be contributing to the lack of success and acceptance of CMOs in many companies. The challenge is to focus creativity on the activities which add the most value to the company. To gain inuence among their C-level colleagues, CMOs need to be more comfortable with using nancial metrics in this way. They need to demonstrate that they are as nancially smart as other directors on the board. We would advise CMOs in emerging brand companies, as well as in brand-agnostic companies, to look more carefully at measuring KPIs (see Exhibit 4).
Exhibit 4
Comments Comments
Customer satisfaction
91% 80%
100% 70%
Customer loyalty
82% 70%
Share of wallet
45% 24%
82% 56%
Operational Measures
Incremental sales
100% 82%
64% 32%
Productavailability
Pricecomparison/ margin
45% 24%
Brand-guided companies assess complex Return-on-Investment Marketing ratios significantly more often and secure customer satisfaction across all client interfaces specifically Degree / intensity of customer loyalty Share of wallet the share of the sold product among the customers total expenses Product availability a quick response to demand swings Price margin above-average margin enabled by the brand These performance indicators additionally play a key role in strategy development, positioning, employee incentives
Brand-guided companies
Other companies
Source: Booz Allen Wolff Olins European Survey among Marketing- and Sales-Officers of the Top 500 companies, 8/2004
permits them to charge a price premium, and they then adjust their price points accordingly. Only 20 per cent of brand-agnostic and emerging brand companies do this. Why are the other types of companies so reluctant to do this? One possible explanation is that marketers of brand-agnostic and emerging brand companies are
Becoming a brand-guided company The reality is that many companies are not doing justice to their brands. As our survey shows, getting the most value out of the brand means moving the brand to the center of the management strategy. The key to making this happen is the CMO. He is responsible for developing a brand that is
closely tied to the companys strategy and for deploying the brand consistently across all constituents of the business (see Exhibit 3). CMOs can play a crucial part in boosting bottom-line performance if they put the capabilities in place to turn their business into a brand-guided company. At present, many CMOs lack the power to inuence or even drive the overall company strategy. However, our research indicates that if CMOs utilize ROI marketing techniques to direct budgets and other resources, in combination with incentive systems for employees, the resulting improved nancial performance signicantly underpins the value of marketing. Our examples show how a brand can be the cohesive force to implement a new company strategy. It also
demonstrates how the brand is seamlessly integrated into the strategic management process including performance measurement. In brand-guided companies, the brand is not only about communication and attractive packaging it is also a serious instrument of corporate management. By following Booz Allen Hamiltons proven three-step methodology for managing brands (see Exhibit 3 and case example below), CMOs can achieve the triple whammy of improving company performance, increasing the relevance of the CMO function in company value creation, and realigning their role towards the full C-level agenda. Booz Allens global Customers, Channels and Marketing Management practice serves numerous clients in all aspects of branding, sales, marketing and customer relationship work.
How brand-guided is your company? 10 Attributes of Brand-Guided Companies Booz Allen Hamilton and Wol Olins have identied 10 key attributes of brand-guided companies. How many of the following describe your company? 1. You recognize that the brand is a key asset in delivering your companys strategic targets at a level that is higher than the industry standard 2. Your company doesnt consider the brand as merely a communications issue brand is recognized as the key platform to link the company strategy with customers and employees 3. Your brand management processes are integrated seamlessly into the companys processes i.e. Branding is not a separate activity 4. Success is generated by corporate condence the brand delivers that success by providing a catalyst for the companys products, services and employees 5. Your senior management is accountable for the brands continued health brand responsibility resides at Clevel 6. All your employees share a belief in the brand as well as a common understanding of it, the power of the brand acts as an incentive to employees, employees activities are aligned with the brand values and contribute to building and strengthening the brand, and employees are measured and rewarded by the success of these brand-guided activities 7. Your marketing department is able to talk in terms of expected return on their investments marketers can leverage customer insights to make the most eective marketing decisions, they can also analyze what they know about customers to contribute eectively to strategy in the future, and your marketing activities are always closely aligned with the core brand values 8. You have sucient IT capability in place to capture data on customers, segment them eectively, respond to their needs, and catalyze marketing techniques to deliver high ROI 9. You assess key performance indicators, such as share of wallet, on a regular basis as a result of these assessments, you take appropriate management action 10. You identify your brand equity (the nancial value of your brand) you understand the brands value drivers and the levers required to inuence these drivers Gregor Harter, Vice President, Munich, [email protected] Alex Koster, Senior Associate, Zurich, [email protected] Dr. Michael Peterson, Principal, Munich, [email protected] Michael Stomberg, Principal, Munich, [email protected]