The challenge of global brands

Globalization has caused dramatic changes to business practices around the world and people have been talking about it since I can remember. But undoubtedly, the technological advancement from widespread Internet access to mobile technologies, social media and rapid global transportation, brought us to unprecedented levels.

Moreover many companies in several industries need to be global to be successful. Take pharmaceuticals for example, while the U.S., EU5, and Japan account for just above half of the total global medicine spending, the growth will come from China (34%) and ROW (41%) (1). Therefore many companies that want to be successful will need both the volume from one side and the growth from the other side. And I suspect that this is the case in many other industries.

But going or being global comes with warnings (2). For example, a company cannot forget that people are connected and talking about brands regardless of where people are. We are also travelling and being in contact with our "home" brands no matter where we go. It may sound trivial, but forgotten within the complex global organizations.

A very simple example, the other day I was having lunch in Madrid and decided to take one Coca-Cola Light. But to my surprise I couldn't find the cans like I'm used to. They had different colors and design than they have in any other country I’ve been. As a simple customer I was surprised. This simple event reminded me of the challenges that global (or regional) marketers face today: Balancing a connected and globalized world with local requirements.

Some brands have a very strong global positioning, like MacDonald's. Almost anywhere in the world, the golden arches stand for affordable meals for families. However, their local menus always have local customization to support local taste and culture. Like the McKroket in Holland or Masala Grill Veg in India. Conceptually, McDonald's seems to have a good balance between global and local.

But Stella Artrois, the Belgium beer, has a different situation. In its home country, it's positioned as a simple, cheap, everyday beer. However, in the USA, the same brand stands for a hip, sophisticated beer with premium price.

How to go about it then? There are some, but not many papers about this balance. Therefore I refer to a couple of recommendations below. My takeaway based on readings and personal experience is BALANCE! Specifically, the balance between consistency and adaptation is the key.

Given the nature of the connect world, I do believe that global brands need a coherent and consistent positioning. On the other hand, a customized execution is warranted. That's because frames of reference (regulations, competitors) and life cycle are different by region or country (or even within a country). Therefore, the traditional concept of the 4Ps of Marketing can be customized when required. But again, this customization has to be in line with the global positioning and not cause any confusion to customers. And it should also be a strictly necessary requirement supported by a solid business case. Otherwise, it may be more valuable to preserve the consistency. Finally, the involved countries need to have a strong culture of knowledge sharing.

In sum, going global may be required for many brands to be commercially successful. But that comes with challenges and marketers have to learn how to balance consistency and adaptation in order to preserve the brand while growing the business.

(1) November 2013: The Global Use of Medicines: Outlook through 2017

(2) The globally effective enterprise

Recommended Readings:
Global Brand Management: Best Practices and Learnings from Efforts to Build the Business "Over There

The four global forces breaking all the trends

Management Lessons from Stannis Baratheon

Let's start by reviewing some concepts.

1. Escalation of commitment
I remember back when I started business school at Kellogg, one of the first things I learned was the concept of escalation of commitment. What that means is that "negative consequences may actually cause decision makers to increase the commitment of resources and undergo the risk of further negative consequences." as described by Barry M. Staw in his 1976 paper.(1)
Relate to this concept, later when studying microeconomics we also read about sunk cost fallacy. The phenomenon where people justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the cost, starting today, of continuing the decision outweighs the expected benefit.

2. Confirmation Bias
In the same course during my first weeks in business school, we also discussed this psychological phenomenon that explains why people tend to seek out information that confirms their existing opinions and overlook or ignore information that refutes their beliefs. (2)

Now, after the years since I graduated from Kellogg, I have seen people falling in those traps several times. Let's analyse a "real" example...

SPOILER ALERT: Game of Thrones Season 5 details discussed.

Most recent example that have caught my attention was the saga of Stannis Baratheon during the fantasy series Game of Thrones from HBO.

Stannis displayed classical confirmation bias when ignoring the data (winter is here, enemy knows how to fight during winter, the Wildlings did not join his army) and advice from Davos Seaworth ("it's not the right time to march to Winterfell"). And on the other hand whatever Melisandre told him something that confirmed what he wanted (take the Iron Throne), Stannis would take it as truthful, so much so it led him to burn his own daughter alive!

The escalation of commitment also caught Stannis. For example, despite refusal from Jon Snow and the Wildlings to join him, he didn't change his mind about marching into Winterfell. Then the snow started and despite the snow and harsh weather, he continued his escalation and marched into Winterfell. His troops were dying and sick during the journey and still he didn't adapt his strategy. Then Ramsay raided his camp and burned his food and horses, but also that didn't change the plans and he killed his daughter instead. Half of his men left with all horses and he went to battle and ultimately demise.

Why did this happen? and why so many projects and business managers can fall into the same situation? The fact is that it's indeed hard to stop a commitment that it's escalating. Once it has began it's like a snowball rolling down a mountain...keeps getting worse and bigger. Ultimately this is happening because people still believe that the future gains are achievable ("in the end I will get the Iron Throne"). They also become irrationally optimistic and ignore the facts (as with Stannis). And last but not least, they are public committed - it's hard to change the course or stop a project when you have been bragging about it to everyone.

One of the ways to avoid the escalation of commitment is to get outside perspective (and Davos tried...)...finally sometime we need to stop put emotions aside and think rationally. Stannis should have asked himself " Given what I know now (lost half of my man, have no horses, no supplies, winter is here) would I have marched into Winterfell?"

"If at first you don't succeed, try, try again. Then quit. There's no point in being a damn fool about it."
WC Fields


(1) "Knee deep in the big muddy: A study of escalating commitment to a chosen course of action"
(2) http://www.investopedia.com/terms/c/confirmation-bias.asp#ixzz3dJ2fSPQd

Zara Home: A Branding Issue?

Last weekend I walked in a recently opened Zara Home Shop. I had seen it before as a section of Zara, but this was the first time I actually looked around.
As a customer it didn't take long to become quite confused. The shop didn't look like Zara, of course it had nice linen and small decor items. But still my thought was "I can probably find some decent stuff here at good prices" and that was my biggest surprised. I felt that all items were not cheap at all. Certainly not what I would expect from a Zara brand. So I was wondering is Zara changing prices now? or Zara Home is something else? but if it is why is it called Zara anyways?

Nowadays is pretty well known that there are two extremes of brand portfolio models: House of brands and branded house. Most companies however use some kind of hybrid model. Take Inditex for example who possesses eight fashion brands, the major one being Zara (about 60% of the group revenue). Others include Massimo Dutti and  Bershka. This would typically indicate a house of brands where you have a number of different brands with many in the same category. That makes sense for Inditex as each brand exists on its own and have different positioning. For example, Zara's is something like "fashionable product line for moderate costs and good quality". Massimo Dutti on the other hand "classic/office wear with good quality" and focus on an older and more affluent demographic.
The advantage of the house of brands is that the customer targeting and positioning of each brand is clear and independent. Of course one of the downsides is the lack of synergy and scale.

However, with the launch of Zara Home 10 years ago, the company went into a hybrid model by extending the Zara brand into a different segment, home décor and linens.
The brand experienced significant growth in 2013. Zara Home has been opening several stores globally and online sales channel. This all sound very positive, however its revenue is a mere fraction of the main brand Zara,

In principle wxtending the Zara brand makes sense, Zara is probably the attention focus of the company since most revenue comes from it. This also maximizes scale as many Zara Home shops are extensions of a Zara shop. So it's understandable the pressure to leverage the existing brand. But the question is: Does it fit under the primary brand and share a common positioning statement? Based on my personal experience, I'm afraid it doesn't.

With that said, one can argue that they went with the Brand System Approach in which you can, based on some similarity ( a shared brand experience/perception), establish a brand positioned differently in different categories. Take for example the heavy band Iron Maiden that has launched a beer under its brand.

So I suspect Zara is trying to relate the two different positioned brands by using the same essence, arguably, "fashionable product lines". But in my own experience that didn't work as I don't see Zara having its essence on fashionable items. The affordable part of Zara positioning is key and apparently missing in Zara Home.

For more info on Brand Systems and Brand Innovation check "Kellogg on Marketing" by Alice M. Tybout (Editor), Bobby J. Calder (Editor), Philip Kotler (Foreword)

Book Tip #1

Defending Your Brand offers a straightforward and  practical approach, May 28, 2015  This review is from: Defending Your Brand: How Smart  Companies Use Defensive Strategy to Deal with Competitive Attacks Defending Your Brand offers a straightforward and practical approach  to a topic rarely addressed in the marketing literature: Why and How to  defend a business. This book instantly became part of my required  reference library. During many passages of the book it felt like  Mr. Calkins was with me when I lived some of the same situations  described. Spot on! But I had never thought in this structured way,  so the book is already helping me in my daily work.

to NPS or not NPS

"Net Promoter Score" is a customer loyalty metric developed by (and a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix. It was introduced by Reichheld in his 2003 Harvard Business Review article "One Number You Need to Grow". (1)

Over the past few months I have seen an indiscriminate use of NPS surveys which fed my curiosity - is the NPS question always relevant? As a result, I went to the source, the original HBR article. (2)

Very shortly, the concept is about a company profitable growth. Specifically, how survey answers on customer loyalty were correlated with growth. The concept can be extrapolated to a brand as well. That seems reasonable in many cases. But the paper concludes that "for most companies in most industries, getting customers enthusiastic enough to recommend a company appears to be crucial to growth."

To me, the first issue is that the paper is about "most" but not "all" industries. Therefore the environment of the company will play a role: regulated industries and/or with several key stakeholders making purchasing decisions will probably not have the same NPS and growth correlation found on the paper. For example, the original study was not done with the Pharma/Devices industry. So the correlation was not proven there. From the paper itself: "The “would recommend” question wasn’t the best predictor of growth in every case. In a few situations, it was simply irrelevant." Those include dominated by monopolies and near monopolies, or when decisions are taken by multiple stakeholders where one specific consumer type may have little choice. A scenario very likely for most companies in the healthcare industry.

Secondly, because of the overuse of the NPS many people are aware of the question and its implications. So I do feel that this is already a bias in the respondents. By the way, the question itself presupposes a positive response "How likely would you...". In addition to it, despite the fact that some may answer 9 or 10 - are they really recommending it to someone else? or just saying...

Thirdly,  a NPS score based on one customer interaction or event is going beyond the original definition and demonstrated correlation. I'd argue that you need repeated events and a relationship to be truly loyal to a company or brand. But to an event or meeting? What a NPS of a meeting means anyways? The meeting is not happening again, so how can I recommend it to someone? How can I be loyal to a meeting or a IT support phone call? Even if I call my IT service and it went well, I can't say that based on this one call, I'd recommend the company to a friend. A true recommendation would come based on a long term relationship with a company. Those examples just show that the whole thing got out of hand.

Finally, NPS also ignores the power of the promoters or detractors. A famous blogger as detractor who will write a bad review is much more powerful than a silent person who rated 0. The same goes for promoters. So a positive and high NPS from a bunch of quiet people is much less powerful than if the NPS comes from vocal thought leaders.

In sum, please before assuming that NPS is the holy grail of market research, do some research yourself and understand your situation. When appropriate and relevant prepare a better survey or question. Propose a research that is thoughtful, and customized to your industry/company/situation.

(1) http://en.wikipedia.org/wiki/Net_Promoter
(2) http://hbr.org/2003/12/the-one-number-you-need-to-grow/ar/1

Kellogg's® Special K® Cracker Chips

Recently while doing my groceries, I saw this big shelf announcing a new comer: the “Special K^® Cracker Chips”

My observation: As a consumer I was really confused, I did not understand what this was. Is this breakfast chips? Is this potato chips? Is a different form of cereal? Does it replace cereal bars?

As a marketer, I did not understand the connection of the Special K brand with chips (a “not-so-healthy” segment)

Regardless, I was so intrigued I took two boxes to try. It actually tastes OK, but certainly not as good as Pringles, and it does not taste healthy at all.

Therefore, to me this is a bad example of line extensions; and it is also a story about branding.

For a line extension product to be part of a branded house, the product brand concept has to fit the core meaning of the brand. Special K is about “staying on track” with healthy eating.
While checking their website, I realized that there are so many products in this branded house that the core meaning is getting lost. And this Cracker Chips doesn’t seem to fit.

However, while doing my research I understand where the pressure comes from. One of the strategy tracks of the company is to “Become a global snacks player”.
As a consequence, in 2011 they introduced the Special K Cracker Chips which remained successful in 2012 according to the company’s annual report. But clearly that wasn’t enough to fully step into the category. Then, in 2012 the company completed the acquisition of Pringles from Procter & Gamble (PG).

The strategic rationale is good - Kellogg increased its snack business and became a leading player. This gives a platform on which to drive growth in both established and developing markets The US Cereals segment hasn't been performing well and the company needs to look elsewhere for growth. Since the 2000s, with the acquisition of Keebler, Kellogg gained terrific brands in the cracker and cookie categories. These include the iconic Keebler brand, Cheez-It crackers and others such as Famous Amos, Austin and Murray cookies.

Therefore the Cracker Chips could indeed be a good addition, but under a different brand and not Special K. It seems that they now have all those other brands in this segment that could be leveraged. And probably one of those has a core meaning that fits better with this Cracker Chips. That would also minimize the cannibalization of other Special K products.

Given what I learned, It was not surprising to see that during 2013 Special K Cracker Chips is presenting an issue as it is coming down and that's weighing upon the snacks business. Internal sales in the cracker business declined in the last reported quarter. Additionally, during the last analysts meeting, there was a concern that innovation is cannibalizing the existing business. Also not a surprise given the “over extension” of this brand.

Special K is a brand that people care about. It is still unique and has meaning, but, as this example shows, the threat of loosing that meaning with line extensions is real.