Intel, Stainmaster, Goretex prove the power of "ingredient" brands
By Dick Pirozzolo, Pirozzolo Company Public Relations
“Building a brand is a long term investment in the financial health of the company.” Prof. John A. Quelch
Can Vietnam’s leading producer of sheet steel, pipes and girders establish a global brand since the products it manufactures are components that go unnoticed by consumers?
According to Prof. John A Quelch the answer is an unequivocal, "Yes."
Prof. Quelch recently addressed some 40 senior managers of Hoa Sen Group who were at Harvard University to study contemporary marketing strategies—including the latest global branding principles. Harvard Graduate School of Business Prof. Quelch has just been named vice-provost for Executive Education and Dean of the School of Business Administration at the University of Miami.
Prof. Quelch told the executives a brand is not merely a trademark or logo; it is an “experience consistent with a promise.” He explained that when Starbucks, which started out in Seattle selling coffee beans to brew at home, expanded to become a global icon, the company did not focus on the coffee but rather on “providing a safe place for women to gather. The coffee is good, but it was secondary to the Starbuck's experience that customers participated in creating.”
Before a brand can rise to the level of a Starbucks, GE, Toyota, Apple, Coca Cola, or American Express to name a few big world brands, it must evolve through three distinct levels. Explained Prof. Quelch, the company must first have a history and a reputation for quality before it can move up to creating user imagery followed by winning over customers so that they come to appreciate the company values and establish an emotional bond with the brand.
Even though Hoa Sen, produces only components for the finished product—ingredients as Prof. Quelch notes—it is still possible to establish a Hoa Sen as a world brand. He pointed out a number of famous ingredient brands that are respected worldwide and showcased as part of the finished product’s quality positioning— Gore-Tex, Shimano bicycle shifters, Dolby Sound, NutraSweet, Stain-Master and Intel are among the examples.
For example, explained Prof. Quelch, Intel, the maker of computer microprocessors, launched the “Intel Inside”campaign to
co-market this internal PC component or ingredient directly to the PC customer. “Intel Inside” became a catch phrase synonymous with speed and reliability.
The same goes for bicycle racers who are assured by Shimano components or homeowners who perceive value in buying a new
carpet treated with Stainmaster to repel dirt and spills. Even though these ingredients are not immediately obvious, these brands offer convenience, assurance, satisfaction, product differentiation and affiliation. Rather than Hoa Sen, being perceived as a supplier of commodity steel products, Prof. Quelch said the company needs to focus on branding the experience of dealing with the Hoa Sen and its people. “Brands have value especially if things go wrong. When the computer system crashes, and the IT manager can say ‘I chose IBM’ it gets him out of a jam because he chose a brand that everyone recognizes and trusts.”
A number of brands engage their customers emotionally by getting them to feel they are part of an exclusive “club” such as Harley Davidson and American Express. Their products bestow prestige upon their customers who become attached to a larger family. To underscore the point, a Hoa Sen manager at the seminar said he likes to use the American Express Card when he checks into a hotel because of its prestige, and the feeling he will be treated more respectfully. This prestige comes in several levels ranging from green, to gold, to platinum and black—all at escalating prices.
Though GE produces locomotives, jet engines, wind turbines and even toasters, that single GE brand is successful across the entire spectrum of business and consumer markets. In the case of Toyota, however, the market would not accept the company as a maker of luxury cars until it created the Lexus brand, said Prof. Quelch.
For the most part, new markets will accept the brand as is. However, adaptation may be required to respond to local conditions. When Marlboro entered China it also acquired a less costly local brand to tap into a segment of the population that could not afford the pricier Marlboro brand. Likewise, toothpaste companies had to introduce new flavors such as green tea to appeal to Chinese tastes. “Do not adapt for the sake of adaptation," warned Prof. Quelch, "Adapt because you will sell more product at a higher margin.”
And don’t hold back. When HSBC acquired Great Britain’s venerable Midland Bank, it immediately replaced Midland with the HSBC brand “despite protestations from Midland employees who believed the customers would be put off by losing the old name so abruptly.”
In addition to commanding a higher a well-known brand’s price and sales volume will fall less in poor economic times and recover more quickly when good times return. Additionally, brands enhance employee retention, speed distribution and encourage shareholder loyalty. Added Prof. Quelch, consumers do expect companies behind their favorite brands to have active Corporate Social Responsibility programs to channel some of their profits from the higher prices into social good works.
The biggest brands in the world are: Apple, Google, Coca Cola, Microsoft, IBM, Toyota, Samsung, GE, McDonalds and Amazon.
Dick Pirozzolo is managing director of Pirozzolo Company Public Relations in Boston, a corporate communication firm serving clients in the US, UK, EU, China, Japan and Vietnam. He is active in Vietnam-US business and cultural relations as a member of The Boston Global Forum Editorial Board and coauthor of "Escape from Saigon."