Products (or services) and Firms: The Five Immutable Laws of Emotive Brand Loyalty

Normally, I do not post immediate sequels to my blog posts. However, the comments of my good friend and respected colleague, Dr Ganesh Nayak on my last week’s blog post, “Products, Brands and the Firm: The Five Immutable Laws of Branding”, Strategy Musings, February 16, 2014 (http://cbrao2008.blogspot.in/2014/02/products-brands-and-firm-five-immutable.html) have set me thinking on the emotional facets of branding. I believe I should not only clarify certain aspects of the previous blog post but also benefit from Dr Nayak’s thoughts to cover certain additional aspects through this blog post. As readers may recall, the previous blog post postulated that six attributes of a product or service, functionality, reliability, durability, maintainability, affordability and differentiability, result in sustainable branding. Dr Nayak rightly commented that important as these points are, a brand is beyond these points.

Dr Nayak mentions that the many of the six points are tangible which a customer can experience in many “me too” products as well. He points out that a premium sedan such as Nissan Teana may have all the six features to a rational mind but the said car as a brand may not be as powerful as BMW or Mercedes is. He follows up that a brand is more of emotions, as a result of which the customer does not think of critically evaluating the above six points in respect of a product under the brand; the customer takes the presence of the factors granted. He refers to Mont Blanc pen not necessarily scoring high on all the six factors but customers willing to spend a fortune to acquire one. Acknowledging the meaningful insights that Dr Ganesh Nayak brings but also reviewing Dr Nayak’s points objectively, it is clear to me that Dr Nayak’s insights point to the need to supplement my previous blog post by developing  appropriate constructs for the emotive aspects of branding.

Emotions and loyalty

Emotions are strong feelings, and are characterized by positive ones such as respect, love and attachment, and negative ones such as anger, fear and hatred. Emotions are considered to be independent of rational thought. An emotive act or product causes people to feel strong emotions. A strong brand, without doubt, is based on, and is capable of, evoking strong emotions. When Nokia decided to sell its Lumia smart phone business several people responded more emotionally than analytically; the emotions were feelings of sadness that it marked the end of a historic Finnish brand, rather than feelings of optimism that a new owner with deep pockets and an emerging mobile operating system would infuse new life. The latter was probably based on negative emotions that Microsoft could not yet make a success of computing devices and, in addition, a concern that Microsoft Windows would never be an OS platform that can revive and ramp up Lumia. Clearly, future is somewhat imperfectly but popularly prejudged on the basis of emotions rather than rational thought.

At the same time, in spite of Nokia trailing other firms and brands in product features and customer acceptance, millions of Nokia handsets continue to be sold globally, the reason being brand loyalty. Loyalty, as we know, is the quality of being faithful in support of someone or something. Like emotions, loyalty is also not necessarily based on rational thought but at the same time has necessarily a history of the customer benefitting from the product or service in terms of the six factors in the past. Emotions and loyalty reinforce or erode each other contextually. The objective of all marketing generally, and advertising specifically, is to cause positive emotions and build brand loyalty. That said, it is to be realized that both emotions and loyalty cannot materialize in thin air, and on the other hand require a record of past performance based on the postulated six factors. This blog post postulates five immutable laws of emotive brand loyalty to deepen the understanding of these processes.

The first law: An emotive brand is “product plus trust”

Certain products and firms evoke trust; a belief and an assurance that they reflect quality, dependability, goodness, service and ethics. The trust typically develops from a firm and its products consistently scoring well on the six attributes. Over time, successful firms and products get branded positively, or negatively, predominantly on a singular dimension. For example, certain firms and groups get known for ethical conduct. Certain others get known for consistently high quality of its products. Certain service providers get known for their timeliness while some others get negatively branded for their erratic schedules. Consistent delivery on product attributes leads to brand equity and sustained brand equity leads to brand loyalty. The leading and lagging brands of the world have their instructive lessons on compliance to this law. 

The second law: Branding is "banking of emotions"

A firm has to provide products of quality to be a player of any standing in an industry. Yet, some firms and their products gain a higher level of customer trust within an industry. This may be considered firm level aggregate branding. Once a firm achieves collective superiority in all of its products, occasional or isolated setbacks are taken in stride. For example, Toyota, the world’s leading manufacturer of automobiles had, two years ago, a series of product recalls in one of the most stringent markets of the world. Yet, the company could tide over the crisis rather comfortably, and even achieve higher sales in the year after. Apart from an unassailable reputation of quality, a humbled and focused response to addressing the quality concerns protected the Toyota brand. Branding is like a savings bank of emotions for the firm. The larger the account, the more secure is its future.

The third law: Firm branding is portable, product brand extendable

Firms which are fortunate to develop brands tend to be anxious to leverage the success of brands to drive success of new products. While doing so, firms tend to fritter away the opportunity by an inadequate appreciation of scope and limits for brand reformatting. As a principle, product branding can be extended in a product family but not portable across products. Any attempted portability across product lines could be suboptimal compared to develop distinctive line-specific brands. For example, Samsung could extend its Galaxy brand to all its smart phones but its porting to a camera lineup was not as successful. On the other hand, a firm which has high firm level brand equity can port its equity into new product lines. Conglomerates and firms with high brand equity are well positioned to achieve this. New firms of Tata and Reliance groups as well as new product lines of electronic giants are indicative of this.      

The fourth law: Low cost is never a high price for branding

Theories of marketing teach us that features with underlay of technology and overlay of luxury come with a price. Premium products demand higher price. That said, price competitiveness of a product, the other five attributes remaining the same, buys brand loyalty. A customer who prefers a Mercedes SUV to a Toyota Innova (also an SUV) typically has such preferences based more on the reputation of Mercedes as a luxury brand even if it is pricey. That said, the same customer who prefers the Mercedes SUV may not prefer a Land Rover SUV, despite Land Rover being better SUV brand because of the much higher price tag that a Land Rover has (Rs 2.5 crore versus Rs 1 crore of Mercedes). The practical application of the six attributes of functionality, reliability, durability, maintainability, affordability and differentiability varies from customer to customer based on the nature of the customer, the social and economic demographics and the product itself. Apart from the customer’s own preferences the overall social infrastructure influences brand acceptability.

The fifth law: Brand loyalty takes the vision of the viewer

Brand loyalty takes many forms. The reasons why a product, firm or brand commands loyalty varies from customer to customer. For someone who understands the entire spectrum of automobile industry, Toyota could be the most favored brand for its innovative accomplishments in manufacturing management, and not necessarily because of the quality of any particular model. For someone who understands aseptic practices, a hospital that has state-of-the-art aseptic practices could command respect while for many others the association of topnotch medical consultants could be the decider. It is for this reason that some brands, “super-brand” themselves to ensure higher brand loyalty. While Aquafina and Kenley mineral (pure) water brands command brand loyalty for purity, Evion and Himalayan evoke further connect with the emphasis on bottling at source of Alpines or Himalayas as the case may be.

Emotional connect

The relationship between a seller (the firm) and a buyer (the customer) is neither a selling relationship nor a purchasing relationship; it is one of human relationship. In an organization, for example, people may deliver  on performance and may get rewarded in terms of compensation, and teams may share bonuses amongst the members; however, unless there is an emotional connect or an empathetic rapport amongst the team members, the team may not be reaching the fullest potential. Even though a sales transaction between a seller and a buyer may be a onetime occurrence (or even a periodic occurrence in respect of retail transactions), the multi-factorial emotional feel of getting to know a brand, exercising a reasoned choice, being sold with care, actually experiencing the functionality and after-sales service care, and having options to upgrade to next generation products all add up to building the emotional connect around a product, firm and brand.

Wise companies, therefore, do not consider their responsibility fulfilled with delivery to the retail chain; they pursue a diligent and caring connect till the point of contact with the customer, at the time of potential sale and thereafter. While a firm cannot be present at all points of contact, the firm would choose associates and partners who are aligned with its own emotional code of connectivity. The emotive brand loyalty of a firm and its products is probably the most important determinant of sustainability in a hyper-competitive market. The emotive brand loyalty does, however, gets built on the foundations of the six fundamentals that characterize a product or service to the customer: functionality, reliability, durability, maintainability, affordability and differentiability.

Posted by Dr CB Rao on February 23, 2014  

Products, Brands and the Firm: Five Immutable Laws of Branding

The relationship between products and brands has been an exciting and fascinating area of research in marketing strategy. Products represent performance and functionality while brands represent experience and assurance. Typically, products build brands but once built, brands outlast products. Marketing strategy, oftentimes, has to face the intriguing dilemma of new products riding on the existing brands or steering off to develop new brands. The more interesting question is also whether the firm itself represents a brand, and in some cases the product as well. In the recent years of technological innovation and marketing acceleration, the relationship between products, brands and the firm has demonstrated multiple facets. The relationships could vary across firms and industries but certain generic principles represent the essence of such relationships.

There could be a view that products, brands and firms are not standalone phenomena but are dependent on certain other critical foundational factors. For example, products may be seen to be embodiments of technology while advertising may be seen to build brands. Firms may be expected to be built not merely by products but also by a variety of tangible resources like assets and finance and intangible resources like culture and values. While this reality need not be denied, products and brands represent the final outcomes of all efforts of a firm, and represent respectively the tangible and intangible assets that together drive the competitive advantage of a firm. This blog post proposes certain simple laws of product and brand performance as influencers of firm performance. Like Newton’s laws of motion, these laws are simple but universal, and immutable.

The first law: Distinctive products make sustainable brands

Products help consumers fulfill their needs. Products offered by several firms may have similar characteristics but only certain products end up building themselves into real brands. Products get transformed into powerful brands when they offer functionality, reliability, durability, maintainability, affordability and differentiability on a consistent basis to the customers. From an organizational process point of view, these product features are an outcome of quality and competitiveness in design, manufacture and service. Firms should direct their efforts to develop products that offer the six-feature bundle through requisite organizational processes.

Firms with global leadership or national leadership, in any product category, reflect the above theorem. They master the organizational processes to provide the six superior product features, consistently product after product. Brand building is a phenomenon that clearly goes beyond advertising. It is a total organizational paradigm. Toyota, Nissan, Honda, Sony, Panasonic, Apple, GE, and any of the  top firms with strong brands have organizational processes that enable exceptional products. There exist no shortcuts for building brands but there exist well proven multiple methodologies to achieve functional excellence and integration. Each of the firms listed above has relied on functional excellence within organizational integration to reach its respective pole position.   

The second law: Differentiated products make discrete brands

Brands are expressions of product differentiation. However, overuse of singular brands on multiple products leads to monotony while underuse of a successful brand for product extensions wastes valuable resources. Samsung, it appears, has overused its successful Galaxy smart-phone brand on multiple products. LG, on the other hand, has underused any of its brands to better represent its smart phones. Companies struggle with the right balance in brand-product nexus. Product differentiation is the key to discrete brand recognition. It would appear that weaving a unique brand around each unique design theme is a helpful approach.

 In an automobile lineup, hatchbacks, sedans, crossovers, utility vehicles and off-roaders qualify for discrete brands. Each of these product segments may be known by integrated brands but each product segment can house further differentiated products, each with a discrete brand. Titan’s Raga brand represents an ethnic uniqueness for ladies watches and the Edge watch brand represents slim design form factor. Both have been highly successful, as they continue to preserve their unique propositions. However, Titan’s sub-brand Fastrack which started as a youthful brand known for its funky designs has got lost in multiple themes. At times, sequential simplicity makes the brand-product bonding perpetual and continuously expanding.

The third law: A pioneering product brands the firm

Most companies have multiple products but just a few brands. However, it is left to a few pioneering firms to develop singular products with which respective brands, and even the firms, are completely identified. This is true in highly developed markets as well as naïve emerging markets. Typically, this happens when the product provides a unique need fulfillment and/or user functionality and experience like never before. Once this phenomenon happens the world starts referring to products and use of products by the pioneering product itself. For a firm to be in such an unassailable position, it needs market-savvy innovative technologies.

Several examples, from the distant past as well as contemporary present, come to mind. Coca Cola representing sweetened beverage as a product, brand and the firm, first in America and later globally, is a classic example. So does Xerox, the pioneering developer of photocopying machines, representing the process of photocopying as Xeroxing. Philips is still remembered as a company of bulbs. Even in contemporary times, people call searching the Internet as ‘googling ‘rather than by any other name; with Google getting identified with its pioneering search engine product, in the triple formats of the product, brand and firm. Clearly, product pioneering needs to be the goal of firms that enter sunrise industries with leading edge technologies.

The fourth law: Great brands are forever

The deep, and inseparable, bond between the consumer and the product as well as the brand has one downside. When the product becomes irrelevant the brand too becomes irrelevant. That said, great brands that are made by great products have a truly mystique effect. Within reasonable generations of mankind, they never wither away; they just remain frozen in a grateful and appreciative consumer memory to be thawed into life just at the right time. Firms that are engaged in divestments or acquisitions and firms that are phasing out technologically obsolete products must keep in mind that brands have lives far beyond the products that made them.

Sony’s Walkman was synonymous with a music device running on taped music. With the obsolescence of that technology and the related product, Sony had to jettison the Walkman brand. That did not mean the demise of the Walkman brand, however; the brand came back to brand Sony music cellular phones as Walkman phones. Nissan phased out Datsun line of cars, and the Datsun brand itself, as Nissan’s other automobile products became the mainstay cars for the company. However, when Nissan set out to launch a global low cost car series, Datsun reemerged as the ideal brand that brought back its mystique. It is no wonder that Nokia has only licensed, and not sold, its Lumia smart phone brand to Microsoft; who knows what Nokia could do with Lumia brand a decade hence!

The fifth law: With branding, strategy follows structure

One of the cardinal principles of the theory of the firm, as postulated by Alfred Chandler(1962), is that structure follows strategy. However, in respect of branding, strategy must follow structure, more specifically business-product structure. Firms, depending on the industry setting and their own strategy, require diverse business and organizational structures to deliver. This leads to a brand hierarchy that cascades down from the firm as an apex brand into multiple business brands, each of which will cascade down into further product-line brands. On the face of it, such a brand hierarchy makes branding complex but with logical definition of business and product lineage, simplicity can be achieved. It would also provide for future business optimization.

The ‘strategy follows structure’ branding theory is particularly relevant when different products cater to different markets. There exist certain businesses that run on discrete brands, for example, branded generics pharmaceutical businesses in emerging markets such as India which cater to different healthcare specialties; such businesses validate the theory of branding strategy following business-product structure. Conglomerates and diversified firms benefit from the structure-driven strategy route.  One of the well established ways to retain thematic simplicity in such structural complexity is to prefix the Group’s name or the Firm’s name to all the new businesses and product lines. The examples that come to mind readily are the Tata business structures (Tata Steel, Tata Motors, Tata Chemicals, Tata Power, Tata Consulting Services, and so on) and the Google product lines (Google Plus, Google Play, Google Drive, Gmail, Google Glass, and so on).

Lessons from laws

Not many Indian companies appreciate the theory and practice of strategic branding. Either the firms  see the brand as a target rather than as an outcome or they dissipate the potential power of branding in a crisscross maze of brands. The perfect brands are those which score a 10-10 on the dimensions of revenue and profits. Most firms, however, fail to appreciate that such a perfect branding is built on the product or service scoring a 10-10 on user experience and user trust. Apple, in several ways, comes closest to the concept of perfect brand in the above perspective. The organizational competencies and processes must blend into an optimal mix to achieve perfect brands.

Even more fundamentally, Indian companies should start cleaning up the brand clutter (for example, companies getting known by multiple and complex names, and product-brand overlaps confusing customers). Firms also need to identify areas in their business-product canvas where and how the five laws of branding postulated herein can be applied. Business leaders must see branding beyond advertising or even customer recall, essentially in terms of products and services that ride on technology, quality and competitiveness to deliver on need fulfillment with the six imperatives that were mentioned in the preamble. It is worth recalling these six product or service attributes as being functionality, reliability, durability, maintainability, affordability and differentiability.

Posted by Dr CB Rao on February 16, 2014