Some 40 years on, brand management is more important than ever. Getting all aspects of brand management right has never been more critical shareholders. Much of their wealth is tied up in them. Marketers have to set aside their traditional arrogance and refocus on the essentials.
When I first became a Brand Manager in 1978, my job description concluded by saying I had ‘overall responsibility for the entrusted brand’. Clarification sought from a senior colleague was definitive: the brand was there before I received it and it had better still be there when I finished with it!
I knew what marketing did. It managed and developed the company’s most important and valuable assets…it’s brands. Its job was to ensure the realities of the outside world, and what consumers thought, were brought to the attention of the company and acted upon. A whole range of business partners and agents were appointed and coordinated to help put together everything from the packaging and presentation of brands, to what was said and how it was communicated to target audiences across media. Marketing ensured the whole company acted in a coordinated way.
Today’s business world
Today’s world is different from the one I set out to conquer 40 years ago. The of consumer technology has provided millions with instantaneous global communication, undreamed-of computing capability and access to information. The political and economic landscape at home and abroad has increased risk and uncertainty for business and consumer alike and has led to significant levels of economic migration. Whilst changes in employee and consumer demographics and attitudes require us to adapt leadership styles and revise understanding of consumer targets. Environmental and human health issues in rich and poor countries alike demand a different approach.
The central role of management, however, continues to be to maximise shareholder value. The market of the great branded companies far exceeds the tangible assets that accountants can show on the books. High market caps the disproportionate value of branded businesses to shareholders.
A brand name is a shorthand to which consumers attach both rational and emotional beliefs. Because of this, a brand can create significant affinity and loyalty amongst its users, which can be leveraged by the brand’s owners.
Shareholders also know that brands are critical to retailers. In the grocery trade, manufacturer brands account for over 50% of volume in all but the most areas. In value terms, branded products account for 75% of turnover in most categories because they sustain 25 – 75% price premiums.
Furthermore, given their direct consumer franchise, brands are more resilient to economic stress. This allows greater demand predictability and forecasting stability than with commodities. Their cash flow predictability allows greater confidence in forecasting investment returns and allows cost management efficiencies.
Finally, because they are legally protectable, brands (although intangible and existing only in the minds of consumers) have significant similarities to tangible ones. They are ‘ownable’ assets which can be bought, sold and expanded internationally.
And who, with their knowledge of consumers’ needs and aspirations, is charged with managing these most important of corporate assets and developing new ones? Not HR, Procurement, IT, Sales, Factory operations or Finance.
Profitable development of brands
Marketing. Marketing is responsible for the profitable development of brands. And the people and institutions who own the company value brands above all things. Hence, Marketing is unquestionably at the of creating shareholder value.
Unfortunately, some marketers don’t fully understand their responsibilities to ensure shareholders’ assets are nurtured, investments are wise and risk is. They are imbued with an arrogance of ‘knowing best’ by
- Hiding in the ‘fluffy’ end of creativity, as they struggle with financial concepts.
- Preferring subjective and qualitative assessment based action, thus avoiding data-based measures of their efforts.
- Not including colleagues from other disciplines in debates of value creation and marketing strategy.
- Assuming an air of intellectual detachment from the ‘nitty gritty’ of the day to day business.
- Believing marketing investments should be evaluated against different criteria to other company investments – despite being one of the largest discretionary spending categories.
- Refusing to slaughter ‘sacred cows’, despite knowing how many expenditures, like price discounting, are unprofitable.
The fundamental role of a marketer remains much as it was in 1978. However, the environment in which brands are managed has never been more challenging or competitive. Success drivers may have changed as consumers and technologies have changed. Yet shareholders still expect an appropriate return on their investment. And it continues to be up to marketers to deliver that shareholder value. Time for some humility?
Edited from a speech originally delivered to Microsoft UK in 2013