Tuesday, July 26, 2011
Wednesday, April 20, 2011
Branding Technology Products
Since the Inquirer is not publishing a column this Friday, here's a redux of a recent column on Branding Tech products. Have a safe and holy Easter break!
Q: We're not a marketer of consumer products like laundry soap or shampoo. We're a dealership chain of technology products like laptops and mobile phones (iincluding their servicing.) So we're marketing brands like Acer and HP for laptops, and Nokia and Samsung for mobile phones. In a supermarket, consumers shop and choose between, for example, a Surf or an Ariel for a detergent, and a Sunsilk or a Palmolive for a shampoo. These are brands of different multinational companies like Unilever, P&G and Colgate-Palmolive.
In our case we sell the company brand such as Acer, HP, Nokia, and Samsung. Acer has different laptops but we sell them as Acer not as Acer 5620. In the same way, we sell Nokia as Nokia and not as N-70, which is one of its variants. Our newly hired marketing director who came from Nestle recommended that we should brand the different variants of Acer and HP laptops as well as the different Nokia and Samsung mobile phone products. Everyone in the office rejected the idea saying that ours are technology products and they're all selling well as an Acer, an HP, a Nokia and a Samsung. The guy countered and said: "Can you imagine how much more they will sell if they are branded?"
Is this true? Aside from claiming increased sales and assuming that our principals will allow us, is there some other more convincing reason why we should brand a technology product? What does your branding experience say about these questions?
A: LET'S START WITH A FEW NECESSARY CLARIFICATIONS. "Surf," "Ariel," "Sunsilk" and "Palmolive" are product brands. On the other hand, "Acer," "HP," "Nokia," "Samsung," "Unilever," "P&G," and "Colgate-Palmolive" are corporate brands.
In the branding circle, the likes of Unilever, P&G and Colgate-Palmolive are known to practice what David Aaker in his 2004 book on Brand Portfolio Strategy, called the "house of brands" strategy to brand architecturing. Each of these FMCG (fast moving consumer goods) companies has several product brands under a given product category. For example, Unilever has several shampoo brands like Sunsilk and Clear. Most often, consumers are more familiar with the product brand like Sunsilk than with the corporate brand that owns the product brand as in the case of Unilever, owner of Sunsilk.
In the case of Acer, HP, Nokia and Samsung, the brand portfolio strategy adopted is known as the "branded house" approach. Here, the driver brand is not the product brand but the corporate brand as in the case of most technology products and companies.
Two exceptions
However, according to Professor Mohanbir Sawhney of Kellogg School's Center for Research in Technology and Innovation at Northwestern University, you should note at least two exceptions. The first is where the technology company created brands that were very product-specific. Such a case actually forced the company in question to adopt less descriptive brand names and to resort to acronyms. Well-known examples include BARCO from the original Belgian American Radio Co., 3M in place of Minnesota Machinery Manufacturing, and IBM instead of International Business Machines. These companies have experienced speedy evolution as well as frequent transformations of their original product category into new and radically different categories.
Just look at the history of IBM and its product's evolution and transformations. In 2004, business newspapers reported that IBM has started promoting its brand in the emerging market for the software of business processes on demand even when this was still in its infancy. This was just the latest in the relatively quick succession of product generations that IBM had experience through the last 3-4 decades. IBM survived and maintained its leadership from one adoption cycle to the next by showing its resiliency and readiness to quickly adopt.
Short-lived
Because technology products move speedily through the adoption life cycle, branding favored the corporate brand more than the product brand whose product category is relatively short-lived. This is in sharp contrast to, say, Colgate that for decades has been in the toothpaste category. It's rare to see a technology brand that is closely associated with specific a product category. The association is with the company and therefore the corporate brand.
Meaningless brand names
The second exception to consider is the set of technology companies who intentionally adopt meaningless brand names. These companies have 2 reasons for doing this. The first is the more compelling. These companies know that their business and original product will quickly evolve into better next-generations and/or morph into a different or even entirely different business and product. So why allow the product to drive branding?
The second reason is related to the first. Adopting a meaningless brand name is easier to get target customers, over time, to learn the meaning that the company wants it to have. That's a matter of repeated exposure. Learning a changed or a new meaning because of the migration into a new category is also a matter of repeated exposure. Which corporate brands belong to this practice? Corporate brands like Xerox, Kodak, Cisco, Adobe, eBay are cases in point.
The foregoing should give you the basis and sources for answering and guiding your newly hired marketing director from Nestle. He's probably misguided in believing in the universality of what he learned about branding at Nestle.
Q: We're not a marketer of consumer products like laundry soap or shampoo. We're a dealership chain of technology products like laptops and mobile phones (iincluding their servicing.) So we're marketing brands like Acer and HP for laptops, and Nokia and Samsung for mobile phones. In a supermarket, consumers shop and choose between, for example, a Surf or an Ariel for a detergent, and a Sunsilk or a Palmolive for a shampoo. These are brands of different multinational companies like Unilever, P&G and Colgate-Palmolive.
In our case we sell the company brand such as Acer, HP, Nokia, and Samsung. Acer has different laptops but we sell them as Acer not as Acer 5620. In the same way, we sell Nokia as Nokia and not as N-70, which is one of its variants. Our newly hired marketing director who came from Nestle recommended that we should brand the different variants of Acer and HP laptops as well as the different Nokia and Samsung mobile phone products. Everyone in the office rejected the idea saying that ours are technology products and they're all selling well as an Acer, an HP, a Nokia and a Samsung. The guy countered and said: "Can you imagine how much more they will sell if they are branded?"
Is this true? Aside from claiming increased sales and assuming that our principals will allow us, is there some other more convincing reason why we should brand a technology product? What does your branding experience say about these questions?
A: LET'S START WITH A FEW NECESSARY CLARIFICATIONS. "Surf," "Ariel," "Sunsilk" and "Palmolive" are product brands. On the other hand, "Acer," "HP," "Nokia," "Samsung," "Unilever," "P&G," and "Colgate-Palmolive" are corporate brands.
In the branding circle, the likes of Unilever, P&G and Colgate-Palmolive are known to practice what David Aaker in his 2004 book on Brand Portfolio Strategy, called the "house of brands" strategy to brand architecturing. Each of these FMCG (fast moving consumer goods) companies has several product brands under a given product category. For example, Unilever has several shampoo brands like Sunsilk and Clear. Most often, consumers are more familiar with the product brand like Sunsilk than with the corporate brand that owns the product brand as in the case of Unilever, owner of Sunsilk.
In the case of Acer, HP, Nokia and Samsung, the brand portfolio strategy adopted is known as the "branded house" approach. Here, the driver brand is not the product brand but the corporate brand as in the case of most technology products and companies.
Two exceptions
However, according to Professor Mohanbir Sawhney of Kellogg School's Center for Research in Technology and Innovation at Northwestern University, you should note at least two exceptions. The first is where the technology company created brands that were very product-specific. Such a case actually forced the company in question to adopt less descriptive brand names and to resort to acronyms. Well-known examples include BARCO from the original Belgian American Radio Co., 3M in place of Minnesota Machinery Manufacturing, and IBM instead of International Business Machines. These companies have experienced speedy evolution as well as frequent transformations of their original product category into new and radically different categories.
Just look at the history of IBM and its product's evolution and transformations. In 2004, business newspapers reported that IBM has started promoting its brand in the emerging market for the software of business processes on demand even when this was still in its infancy. This was just the latest in the relatively quick succession of product generations that IBM had experience through the last 3-4 decades. IBM survived and maintained its leadership from one adoption cycle to the next by showing its resiliency and readiness to quickly adopt.
Short-lived
Because technology products move speedily through the adoption life cycle, branding favored the corporate brand more than the product brand whose product category is relatively short-lived. This is in sharp contrast to, say, Colgate that for decades has been in the toothpaste category. It's rare to see a technology brand that is closely associated with specific a product category. The association is with the company and therefore the corporate brand.
Meaningless brand names
The second exception to consider is the set of technology companies who intentionally adopt meaningless brand names. These companies have 2 reasons for doing this. The first is the more compelling. These companies know that their business and original product will quickly evolve into better next-generations and/or morph into a different or even entirely different business and product. So why allow the product to drive branding?
The second reason is related to the first. Adopting a meaningless brand name is easier to get target customers, over time, to learn the meaning that the company wants it to have. That's a matter of repeated exposure. Learning a changed or a new meaning because of the migration into a new category is also a matter of repeated exposure. Which corporate brands belong to this practice? Corporate brands like Xerox, Kodak, Cisco, Adobe, eBay are cases in point.
The foregoing should give you the basis and sources for answering and guiding your newly hired marketing director from Nestle. He's probably misguided in believing in the universality of what he learned about branding at Nestle.
Friday, April 15, 2011
How can Mang Inasal sustain its success?
Republishing the most requested "Will Mang Inasal still be successful now that Jollibee owns it?" column.
___
Hi Dad,
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Hi Dad,
I just arrived in HK . I have a couple of hours before my connecting flight to Mla, so let me edit your follow up to my Mang Inasal piece.
I really like how you followed up with the marketing science and the ratio of Mang Inasal's probable success now that Jollibee owns 70% of it.
By the way, Injap emailed to me a response to the column and gives his regards and thanks. I'm sure he'll respond to the 15% probability of success of Mang Inasal...
~~~
"How can Mang Inasal sustain its success?"
By Dr Ned Roberto & Ardy Roberto
Q: Your column on Mang Inasal's success secret is still the continuing topic of our group's conversations. We're a foursome of Asian Institute of Management (AIM) Master in Entrepreneurship (ME) graduates and you taught our batch. There's one question raised during our past two weekly gatherings that we all tried answering. But we heard as many different answers as there were members. So we thought we'd pass on the question to you:"Assuming it's true that the 5 secrets you identified as responsible for Mang Inasal's Edgar Injap Sia's P3Billion success were correct, would these be the same 5 secrets that will sustain Mang Inasal's future success with Jollibee Foods Corp as it's new owner?"
A: CONVENTIONAL WISDOM PRESCRIBES that to do a good job at managing the future do so via the success of the past. But experience tells us that navigating the future with this mindset has proven to be a recipe much more for disaster than for success. For a more enlightened answer, we need a more enlightening framework. Because we're talking about the future, we need a better foresighting basis for diagnosing what can sustain Mang Inasal's success under Jollibee.
A particularly appropriate foresighting framework is in micro-economics and another one in the literature on sustainable competitive advantage. We diagnose by taking each at a time.
It's about "Complementarities"
Stanford University professor of micro-economics and "auctionomics," Paul Milgrom, coined the term "complementarities" to explain synergies from combining compatible business practices. In the case of Sia's Mang Inasal, its sustained competitive advantage over the 7 years when it scaled up to 303 stores came from not only repeating each one of its 5 secrets of success. The more significant factor was its maintaining the 5 practices' complementarity role for one another in the mix. In fact, it's more the mix that counted in the success than the individual elements in that mix.
Let's recall those 5 factors and practices that were supposedly behind Mang Inasal's superior competitive advantage. Those 5 are: (1) Ready, fire, aim!; (2) Work your butt off!; (3) Think innovation. Copy but add something of value; (4) Think BIG!; and (5) Think marketing.
We'll skip the explanation of each and rely on your memory to remember the Mang Inasal column 3 Fridays ago (or check out www.marketingrx.org or www.inquirer.net.) But what needs underscoring at this point is that none of these 5 practices can be said to be anything new or innovative. So treated separately, not a single one of them can be claimed to be a success secret.
The application and exercise of complementarities have shown that business success such as Mang Inasal comes from Sia's creativity. As the innovating entrepreneur, Sia had put to work each one of the 5 factors of success along with each of the other remaining 4 practices. For example, the surprising effectiveness of his peculiar but unknown way of combining "ready, fire, aim" with "work your butt off" yielded an outcome whose value was greater than the simple sum of the effectiveness of each of these two. There was synergy in the way Sia paired the two. And so it must have been with the rest of the mix of his 5 good but very ordinary business practices.
So is sustaining Mang Inasal's success in the future just a matter of maintaining the complementarities of its 5 success secrets and practices? Aren't complementarities just another way of saying you're managing from the past? Isn't this basically imitating the past?
It's about Synergy and the "Mathematics of Probabilities"
There is some truth in saying this and that's why we need to integrate into this discussion David Dranove's thinking about sustainable competitive advantage. Dranove is professor of strategy at the Kellogg School at Northwestern University.
Professor Dranove's provocative thesis came from his analysis of numerous cases of synergy. According to Professor Dranove, you can gain extraordinary results from just mixing but in the right proportions or levels ordinary means. So suppose under Jollibee Foods' system of doing marketing (in putting up in the next 300 more Mang Inasal stores) the new Mang Inasal is able to maintain practicing its 5 success secrets. Assume further that this continuation has a high probability of 70% success. Now, the chances of also successfully replicating all 5 practices in the way that Mang Inasal has done it in its first 303 stores is not going to be 70%.
Why 70%? That's the ownership split under the acquisition and assuming that Jollibee Foods will allow the 30% owning Sia to have his ways 70% of the time until the raising its number of stores reaches 300 more. Professor Dranove's mathematics of probabilities predicts that the likelihood of maintaining the complementarities is 0.70 to the 5th power which equals 0.17 or 17%. So there's just 17% chance that Mang Inasal will go on succeeding and repeat its success in its first 300 stores to be true for its next 300 more stores. That's risking at less than even chance of winning!
What if there's not 5 but 6 secrets to Mang Inasal's success? And what could the extra one secret be?
6th Secret
In Mang Inasal's line of business, that's choice of good location. Edgar Sia had the enviable knack of choosing the most suitable locations for his first to his 303rd store. That's suitable with respect to his target customer segment. With 6 instead 5 practices to maintain complimentarities, the chances of future success goes down from 17% to 12% ( = 0.70 to the 6th power).
But succeeding in the next 300 stores will mean that somewhere along the path toward the total 603 stores, Mang Inasal will have to shift from single market segment targeting to two or even multiple market segment targeting. That will impact the 70% success ratio and bring it down and therefore further bringing down the 12% success ratio.
All these are a form of foresighting according to marketing science. But even science is not fool proof. In fact, we hope Sia's and the new Mang Inasal's marketing art would remain superior over our marketing science. It's a great marketing story to not have a happy ending.
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The story is not finished yet, and my bet is that Mang Inasal and Jollibee will prove MarketingRx wrong! :-)
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