5C's(forces) analysis of a brand.

I wrote the following as part of a paper titled “Strategies for building sustainable Indian brands”. Due to time and word limit constraints, I could not explain some of my points completely. Anyways here is what I wrote –

Strategic Brand Management (5 C Model) :

The strategic planning for a brand starts with an understanding of an organization’s business strategy. The business strategy is usually aimed at achieving particular consumer behavior. Only if consumers actually purchase, use goods (more often), pay a higher price or donate (more) will the objectives of a business strategy be met. These objectives may include a larger market share, increased returns, higher margins and increased shareholder value. Brands are designed to persuade consumers to exhibit the behavior that will make these objectives come true for the organization. Thus, the influence of business strategy upon brand strategy is direct and compelling. In order to formulate an effective strategy we propose the use of the ‘five forces analysis of the brand’. These are the five forces which are constantly acting upon the brand and shrinking its value. The success or failure of a brand will depend on the organization’s response to each of these potential threats.

5 C’s analysis of a brand
Competition
Company
Consumers
Complements
Culture

First Force - COMPETITION:

Brands face the threat of competition on a continuous basis. New products are being launched more frequently, each luring consumers away from the brand. In order to counter this threat, companies have to be innovating and evolving the underlying product represented by the brand and at the same time be boringly consistent about the value or promise that the brand is supposed to deliver.

The bottomline is to deliver the promise or value represented by the brand better than anybody else. For example, a soap brand that promises freshness, should at all times communicate and deliver freshness. But the means by which that freshness is delivered can be changed over time through new formulations, new ingredients, new fragrance, new packaging etc. But the core value that the brand promises should never be changed or diluted.

Substitutes are brands or products that do not provide the same value or promise that the concerned brand offers but something substantially different. Yet, these can act as substitutes that can erode the brand’s value. These disruptive brands have the potential to make any brand irrelevant.

The first step in countering this threat is to identify them. The following signals can help companies identify these substitutes. First and foremost, the company has to find out through standard techniques whether the brand value or market share for its own brand/product is dwindling or whether internal growth targets are not met. If yes, then the second question is whether this is in fact due to a competitor. A simple check on the competitor brands’ will provide that information. The next step is to look at what the potential/existing consumer is doing without the brand to solve his problem. This can be done through a market research survey. This step usually reveals the details of the substitute. The question of why we do not recommend the third step directly is irrelevant because of increasing costs involved with each step.

Once the substitute is known, the decision of whether to dilute, extend or launch a new brand to counter this threat has to be considered by the company. This requires careful analysis and is beyond the scope of this paper, but to start with the following questions should be answered by the company.

Does the substitute solve the consumer’s problem in a better way?
Does it provide better value?
Does its value proposition make mine irrelevant?
What will happen if I position my brand to emulate his model? What will happen if I don’t?
What is the consumer’s perception of the substitute? What is the best strategy for me to create a similar perception?

Second Force - COMPANY:

One of the main threats for brands especially successful ones does not come from outside but from inside i.e. from the company which owns the brand. Some of the greatest brand failures such as New Coke, Harley Davidson perfume, R.J Reynolds smokeless cigarettes, Fiat Palio, HM Ambassador etc. have been because this force more than any other force that we discuss.

There are several reasons for the company to act as a threat to its own brand, the most important being the compelling need to satisfy short term financial goals. A simple idea to overcome this is to have long term brand commitments like a brand vision and mission. Any action that pushes the brand towards this medium term mission and long term vision should be undertaken and every other idea dismissed. Internal auditing of such decisions, 360 degree feedback mechanisms etc. can be employed to ensure compliance.

Having such commitments clarifies internally what the brand stands for and helps the employees better understand and communicate the brand value outside. If possible, employees must experience the brand as a customer during training.

It is important to communicate internally that every employee is part of what we call the brandosphere. This consists of the brand at the core, the other sister brands and company brand as the shell and every employee, partner, associate etc forming the outer covering. Every time the customer comes in contact with any of the entities within the brandosphere, he forms an impression about the brand. The deeper is the contact within the brandosphere, the stronger is the impression created.

Third Force - CONSUMERS
Peter Drucker said, "The purpose of business is to find a customer." Theodore Levitt elaborated that "the purpose of business is to create and keep a customer". However, today business is moving towards what Jason Jennings and Laurence Houghton said, "The purpose of business is to find, keep and grow the right customer."

In fact, consumers are the sole reason for a brand’s existence. So how can these consumers be a threat? This is because of the declining loyalty of customers and their fast changing preferences. The "habit-driven" consumer, who was the bedrock of many "iconic, heritage" brands, might soon be an extinct segment.

The first and foremost step for companies to find, create and retain consumers is to listen to them. Since a brand is based on perceived value and the only perception that matters is the customer's and the potential customer's, then the starting point is to find out what is of value to these people. This can be done by moving from existing CRM solutions that companies use wherein the company gets a 360 degree view of the customer to a model called Customer Experience Management (CEM) which is a customer’s 360 degree view of the company. The CEM system can be used to attain a complete perspective of the consumer.

Once the company has an in-depth knowledge of the customer’s preferences, it can begin to work backward and focus on delivering the top priorities of the consumer. The bottom line being customer satisfaction and loyalty as these are, and will be, the drivers of long-term sustainable brand value.

Fourth Force - COMPLEMENTS
Brand complements are support brands that keep the consumer from switching from the brand. The presence of these acts as a barrier for potential new entrants into the brand’s value zone. These complements help in creating new customer experiences, thus satisfying the specific needs of individual customer groups without affecting the main brand’s core values. Examples for what we call brand complements are Fanta and Sprite for Coca Cola, the innumerable support software products for MS Windows etc.

Fifth Force - CULTURE
Culture or environment in which the brand exists is an important force that acts on the brand. The value conveyed by the brand was conceived in a certain cultural setting and this we say should not be changed. But, the cultural setting keeps changing all the time. The challenge for a brand is to maintain relevance in this changing environment.

The key to success in this environment is to move the brand along with the consumer. Although the core value represented by the brand will not change, the way in which it reaches the consumer will have to change according to changing consumer culture. This includes the packaging, the brand communication delivery pipeline (media), the PR activities of the company including its Corporate Social Responsibility activities etc.

Challenges for Businesses in the 21st Century

I was reading an article on the greatest challenges for business in the 21st century. It talked about operational excellence, quality and cost control, talent acquisition and retention, being employee and customer focused among other things.

If you ask me, the most important thing that should worry companies of the 21st century is that ‘THE CUSTOMER KNOWS TOO MUCH’. Same is the case with your employees. If you think about it, companies have always been thriving on the information asymmetry that existed between them and their customers and employees. For example think about the(ir)relevance of wage negotiations , about the sales guy’s black book (which contains the costs of his product and helps him during bargaining with customers) in an information symmetric world.

The Goal

What is your goal in life, I ask my MBA colleagues. A few said that becoming a CEO was their goal; many said that they want to have a lot of money and enjoy life. Some said that they wanted to be in powerful posts from where they can help other people. An astonishing number of them actually said that they did not know.

Try to answer the following 4 questions in two minutes.

1. Name the CEOs of the top 5 Indian companies in terms of profit margins for the past five years?
2. Name the top 5 richest Indians who hold an MBA degree?
3. Name the top 5 philanthropists of our country?
4. Name any 5 people other than your relatives, friends or teachers who hold an MBA degree?

If you are not part of Mensa and you are not a hypocrite, I am sure that you will admit that you were not able to answer most of the above questions. If you were completely honest you would agree that you could answer none.

Now try answering these in a similar timeframe –

1. Name five of your closest friends?
2. Name five of your favorite teachers?
3. Name five people you admire?
4. Name five of the happiest moments of your life?

Again if you do not belong to the above said group (I got nothing against Mensa, except that I ain’t in it ;-), you could answer most of these questions.

Now think again. What is your Goal?

Two thoughts to ponder on this subject-
1. “Reclaim your life!” – Tata Sumo Ad.
2. “When you want something, all the world conspires in helping you to achieve it.” – Paulo Coelho in the Alchemist. (Better be very careful about what you want ‘coz you will surely get it :-)

The Power of Logic 2

If you haven’t read my earlier post called ‘The Power of Logic’, I strongly suggest that you do exactly that before proceeding further.

Ok, what is this logic after all? Logic is the set of rules by which one can formulate convincing arguments. It is the science of argument. When presenting an argument, one takes a set of premises that are proven to be true, and uses logic to show how they prove a certain foregone conclusion. It is helpful to know that this type of argument is not just a presentation of facts, but is, rather, an effort to prove a conclusion that was previously reached. (If you are not convinced, please read Blink! This Gladwell guy better pay me for this free publicity ;-)

So what’s the point? Well, the point is this - The human mind is wired(or rather educated) in such a way that it believes in logic so much so that even extremely irrational stuff when presented in a logical manner will be accepted as true. Marketers should begin to exploit this basic weakness of the human mind.

Not convinced? Let me give you some basically irrational stuff that sounds logical.

1. More people die in hospitals than anywhere else. Therefore, hospitals are dangerous.
2. 97% percent of the polled people like this brand. (Yeah, the old trick. I never tell them that I polled only 3 people. Don’t ask me what 97% of 3 is ‘coz 93.5% of all statistics are cooked up on the spot including this one :) Gotcha.)
3. Or the classical Indian consumer logic, “Don’t buy that car, my friend has one and it continuously gives him trouble”

So far so good. The problem comes in implementing this new found knowledge in real life marketing communication. How can I tell my audience what I want to say and convince them to act as I tell them to?

Before answering that let me compare two types of communications presently bombarding the consumers. One is what I call the emotional trap promotion wherein the marketer says “Buy 5 of my products and get a chance to win a date with Aishwarya Rai”. With all due respects to Aish and the marketer, what do they take us customers to be? Nincompoops? Of course there will be some nincompoops who fall for this trap dreaming about the date and what will happen after that ;) The car ads we talked about in my earlier post belong to this category.

The other type of communication is the logical trap. Here the marketer says “If you buy 5 of my products, you save Rs.50”. The question the consumer has is whether he really requires 5 of your products in the first place? But invariably many consumers do fall for this trap(Don’t ask me for the statistics. You know that I’ll provide them ;) Most sales promotions fall in this category.

Although the second model is close to what I call logic marketing, it is too simplistic. In the logical marketing framework, marketers need to develop a sequence of logical steps in the communication like the proof of a mathematical theorem. There should be clarity in the message and continuity in the communication right from the first ad the customer sees to the point of purchase(sales pitch) and beyond. More on this frame work in my future posts.

I believe that in the future, advertisements will be so effective that if a rational person who has the resources to buy the product sees them, he will go buy the product. This I believe will be achieved through a communication frame work which has emotion as its core and logic and persuasion as the outer layers which will convince him about the product.

This of course does not mean lying. I leave you with two great statements from two people I adore.

David Ogilvy said: “Never write an advertisement which you wouldn’t want your family to read. You wouldn’t tell lies to your own wife. Don’t tell them to mine.”

And Scott Adams says - “For companies to survive, they will have to become experts at confusing the public into thinking their generic products are better than their competitors’ generic products.”

Running the show

My friend started a software firm and it went burst recently. The following are the key takeaways from his experience. It is a step by step account on how to start a software business. This is what he has to say about it -

"Go and get a particular name to the registrar of companies.

They will check and see whether it is available and give it to u. This should be done with the Registrar of Companies.

After doing this, file the articles of memorandum and associationship with the government and wait for the sanction.

Once you get the sanction,there will be a form which the government will give you. You can use this to get ur bank accounts opened.

Ensure that your bank accounts are opened from the first day of operations.

Ensure that phone connections, broadband and all other utilities are in the name of the company.

All payments should be done through your bank. This is to ensure that you can keep track of the expense.

STP registration is not required. It is only required and will benefit you if you are a complete exporter and if you dont cater to the indian market and only if you cater to the international market

Say 80% of all your company are exports, by registering in STP u will get tax sops and can purchase hardware . But u must cross the threshold limit. Even software services can be considered under exports

VC funding - U are eligible for it once u have a good tech team, 4-5 people and a good marketing presence .Important-> All VCs look for this. A good marketing presence in addition .

VC funding - it is essential that u run the company for atleast 1 and half years to be considered for a VC fundigng. I dont know how this works in the US. But as far as a beginner entrepreneur, VC funding can be expected only after 1 and half years. If you already have a successful company under u belt the process will be different

VC funding - it is advisable to delay the VC funding to the later stages to ensure that u get a good deal. Otherwise it will not be worth it and u wont be left with any stakes. So try to run the company as long as possible

Accounting - Since you are going to handle the company for 2 years, there must a solid knowledge of accounting . Follow double accounting standards. This is especially necessary if we have to go for a VC funding
This would involve maintaining of journals, daybooks etc.

Web site - Get this outsourced . Unless u want to save every penny and u are literally like us do it by urself . But even if u plan to do it get it done by people who are willing to help. I wud say get this outsourced. Even 20 k shud be a decent to get a unique design.

Server - Get your own server with a public ip on the net. This is mandatory and nowadays it is cheap

Server tools - Try to do something innovative like running a SVN server and sharing code in time part time people work on it. The main aim get as many part time people to help u. This wud help u know how much the part time people are interested in joining you and whether they really deserve a good place in the company in the future

Version Control - As i mentioned above version control is very important and have it in place from day one.

Resource - Start atleast with three people who are ready to face three years without money.

This is important.Since we are not putting in any capital, it is necessary that we alteast sacrifice our salary and not expect too much. keep it to 12 k or something . This may sound silly but ignore people who want to be a part of it to enhance their profile and go for their MBAs. These people dont stick for long and are really not worth it and their loyalty fades

Open source - Get as much open source tools as possible . Try to have one machine with a proper build environment and pay only for this license

Biz plan - Have a good biz plan ready and keep on going to biz conferences and present it even if u dont want funding for the company . It will help u broaden ur links and contacts

Two people with contribution - Other than the minimum 3 people there shud be some person who guides u on the accounting side , bank transactions ( a good CA wud do i guess)
A good marketing person with experience - a marketing person who will fetch u links is necessary. This person is very much necessary for carrying out ur marketing to companies.Focus on mail marketing.

Cash Flow - Cash flow for a company in India provided they have above constraints can be run in say one and half lakh rupees. The project pipelines are equally important and u can disregard cash flow if u have a good pipeline of projects

Tie Ups - The name of the game is tie ups . Have technology partners in the form of solution partners, marketing partners and so on

The board - The board is supposed to be of only people who contribute to the contacts and are influential and can guide its path. No tech people on the board unless it is cofounded by them. Maybe it can be given to people who can adapt to both settings and play the roles with equal ease.

There has to be space on the board to accomdate the VC. No tech people on the board unless the ideas are very unique.

Social circle - A membership in TIE and all the entrepreneurship . An association with all the colleges and their incubator cells. A circle which comprises of other CEOs. Pay attention to ur calling cards. Get as much as possible other people's cards. Start doing this immediately. As far as i know, TIE would not help that much and only in terms of confidence. Once u make the first million u can gain access to the next elite membership clubs where only a select circle is allowed. Business contacts will start flourishing only when u reach this circle.

Shares and capitals - Please split the shares when the company starts. U have to make sure that u have around 35% of the companies for attracting resources. Once the company starts to grow this wil be imporant. Other than the cofounders people who join the company will get 0.5 percent of the company outside the cofounders. Cofounders are those people who are from the inception and who stay stead fast

MBA- A MBA will probably help u especially if you do not know accounting and about capital management. Anyway I feel a US presece woud help more than an MBA.

These are some of my learnings. There may be many things that I have left out. The most important aspect we techies ought to remember is the human aspect of business which is very important. Be it your customers, partners, employees etc., take good care to interact properly with them and be completely honest.

Thats it from me now...Goodluck and Godspeed."