In reviewing the articles that I have published over the past ten years, I was struck by the number of them that relate to the theme of the role of brands in business success. They account for 10 of the 22 major articles I have written. Merger branding accounts for a further 6, brand valuation for 4, and marketing accountability for 2.
When you add in the three books to which I have been a contributor or author (“Brands: Vision & Values“; “Vulcans, Earthlings, and Marketing ROI“; and “The Sage Handbook of Marketing Theory“) which all focused on the business contribution of marketing/branding, then this theme represents the majority of my writing.
For most people in marketing, it seems odd that the business case for marketing needs to be made. They assume that everyone sees the world the way that they do, and therefore understand that human beings make choices on the basis of more than just functionality and price. After all, even economics talks about utility rather than price/performance – and defines utility as “what the product does for you” NOT just “what the product does”.
I spend a lot of time explaining to marketers that, in general, there is considerable skepticism about the role of marketing in business success. Many (if not most) people in business have an implicit assumption that human beings are “rational economic maximizers” and that their decisions are driven primarily by considerations of functionality and price. To those holding this view, the role of marketing is to get people to do things that they would not otherwise do by distorting or manipulating their perceptions of the product or service in question…
The starting point for any discussion about the strategic contribution of marketing must be an appreciation that marketing represents a form of value creation for the customer (how to address customer needs that go beyond functionality and price) rather than value extraction (how to get customers to buy our product, no matter what).
The second major point to clarify is that there are two disciplines at the core of marketing – value proposition (working out what customers value) and segmentation (clustering customers according to the types of benefits that they value most).
Branding is the means by which a value proposition is compellingly expressed to a specific audience. Branding is an increasingly important part of competitive strategy because the widespread implementation of TQM (Total Quality Management) has caused a severe convergence in the ratio of functionality and price offered by different companies. As a result, other factors are becoming significant drivers of the customer purchase decision.
if I categorize the 10 articles I have written on the topic the role of brands in business, three focus on establishing an appreciation of the way in which humans make decisions (“Emotion is not the opposite of reason“; “The hazard of having an accidental brand“; “Credit for credibility“); two focus on improving the relationship between marketing and finance (“Reconcilable differences“; “Learning to like each other“); three focus on defining brand equity in a way that bridges the gap between the marketing and finance perspectives (“In search of a reliable measure of brand equity“; “Varying perspectives on brand equity“; “Don’t confuse reputation with brand“); and two on incorporating the marketing perspective into business management (“Is private equity good for brands?“; “Using social media to understand the topic of marketing finance“).
The failure to achieve a shared understanding of the business contribution of marketing is what causes debate on the topic of marketing ROI to be so heated and often counter-productive. Marketers believe that “marketing ROI” is the cipher for “the financial value of the strategic contribution of marketing” and that it represents an exercise in measuring value creation. For finance people who think of marketing as a tactical discipline, “marketing ROI” is an exercise in measuring the short-term incremental margin captured through marketing spending. They simply do not think of marketing as creating a business asset that will generate returns in future time periods.
My advice to marketers is to stress three things:
- The goal of marketing is to increase the value of the business
- Marketing does this through understanding the full range of benefits that customer are seeking (not just functionality and price), and developing a compelling value proposition to specific groups of customers
- Some of marketing activities are designed to promote short-term sales, and some of the activities are designed to create customer preference that will drive sales in future time periods
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Jonthan, that’s a great insight into brands role. Thanks for sharing the valuable content.