Playing To Win
It’s All About Confidence
I get asked many questions about brands and their role in Playing to Win strategy. Branding is typically viewed as something that only B2C companies do to differentiate themselves. That doesn’t tell nearly enough of the story. That is why I have dedicated my 41st Playing to Win/Practitioner Insights (PTW/PI) piece to It’s All About Confidence: Mastering the Role of Branding in Strategy. (Links for the rest of the PTW/PI series can be found here.)
The Value of Brands
Every year, Forbes publishes a list of the most valuable brands in the world. They range across industries from #1 Apple at $241 billion to #11 Toyota ($42B) to #12 Intel ($40B) to #32 Hermès ($22B) to #41 Zara ($15B) to#99 FedEx ($8B). The calculation assigns the value based on the difference between the actual profitability of the company and the level that would be expected from an average performer.
As such, the Forbes calculation mixes in another big factor over and above brand: a winning strategy by which each company is better than anyone in its competitive space. For Apple it is a system that consistently produces the most elegant, user-friendly hardware/software solutions. For Toyota it is the production system that the rest of the industry attempts to copy but never quite catches up. For Intel it is leadership scale in logic chips. For Hermès it is a proprietary designer-driven fashion delivery system. For Zara it is Inditex’s competitively superior manufacturing/logistics system and its leading scale from creating the category of fast fashion. And for FedEx it is a leading scale, end-to-end system for reliable package delivery. In fact, there are arguably very few companies on the list that aren’t obvious outperformers in their industry.
Even if these companies made little or no effort to maintain or build a ‘brand,’ they would show up as having a valuable brand on the Forbes list because each has an advantaged business system that generates supernormal returns.
What is Branding?
If we want to have a useful understanding of the concept, we need a better definition of branding than the ability to generate high returns. That definition would make Saudi Aramco the most valuable brand in the world even though most people don’t know it exists. I define branding as a particular activity — the generation of confidence — that accentuates, and at its best maximizes, the value of a business system.
Effective branding activity results in customers having full confidence that they will receive the benefits that that your system is designed to deliver and that you promise to customers. That is, they will come to assume without conscious thought that your offering will deliver satisfaction. If they aren’t confident, you don’t have a brand worth having. That is why branding is centrally about customer confidence.
Apple has an awesome brand because customers are confident that the next Apple product that they buy will be easy-to-use out of the box, elegantly designed, and work well with all their other Apple products. Confidence is comfort and we all love comfort. Toyota customers are confident that their new vehicle will have the quality, reliability, and durability (QRD) for which Toyota is legendary. So, those customers are confident in making the big expenditure required to buy a new car if it is a Toyota. Intel customers are confident that their PC will work as expected if it has Intel Inside. Hermès customers are confident they will be (and seen to be) stylish if they are wearing Hermès. A husband is confident his wife will be pleased if he buys her a Hermès scarf. Meanwhile, a wife is confident her husband will be pleased if she buys him a Hermès tie. Zara customers are confident that if they walk into a Zara shop, they will find fashionable clothes at fantastic prices. And FedEx customers are confident that their package will absolutely, positively be there.
All are on the Forbes list because they have competitive advantage AND have generated full confidence on the part of their customers.
How Do You Master Branding?
Branding requires a simple cycle. You promise the customer that you are going to deliver and then you deliver. And then you repeat and repeat and repeat. The power is in the combination. If you do one and not the other, you will not grow a powerful brand.
If you are Tide, you promise that you will get clothes cleaner. And for 75 years, it has kept that promise. Plus, while doing so, it has repeatedly upped the definition of what getting clothes cleaner means. It compacted its powdered detergent to help you get clothes cleaner without wasting laundry space. It converted to liquid to make usage and dosing easier. It added bleach to Tide to get clothes cleaner plus whiter. It added fabric softener so that your cleaner clothes would also be softer. It enabled you to wash in cold water and still get clothes as clean as in hot water while saving on your electric bill. And it put all the ingredients in a single pod to make sure it cleaned in the easiest and most effective possible way. All along, it repeated a consistent promise and delivered on it faithfully in ever better ways, making it the dominant laundry detergent in America.
When there was a problematic gap between usage and a realization that the promise had been delivered, the same company, Proctor & Gamble (P&G), figured out a unique way to build confidence. In 1960, P&G promised that thanks to its revolutionary fluoride ingredient, its Crest toothpaste would prevent cavities. But because that effect was not immediately evident to the customer, it needed to find an innovative way to generate confidence. Future P&G CEO, John Smale who then ran the Crest brand, convinced the American Dental Association (ADA) to give its Seal of Acceptance to a toothpaste brand for the first time ever. Crest promised the customer that it would fight cavities and told the customer that the ADA Seal verified it — which built customer confidence until such time as the promised effect was realized at check-up time at the dentist.
Repetition is critical because it builds customer confidence over time with every cycle of promise and fulfilment. It hurts your brand if customers forget that they should be confident. This is why short-term campaigns are ineffective. I cringe every time I see a first-time advertiser spend millions on a single Superbowl ad and then disappear from the airwaves, thinking that its branding job has been done because 100+ million people saw its ad. But these advertisers and their expensive ads get forgotten in days.
Repeated cycles of promise and fulfilment build confidence. This reinforces why Byron Sharp is so astute about the importance of mental availability (his How Brands Grow is a must read). Customers can’t possibly be confident about your brand if they don’t know it exists, or if other competing brands are more prominent in their minds, or if they have forgotten about you because you aren’t in front of them, making and remaking your promise to them. This is why habit is so important and why the goal of branding is to have the cycle of promise and fulfilment become so automatic that customers engage in it without conscious thought.
It is Not Just B2C
Branding and this cycle of promise and fulfilment is equally applicable to the B2B world. Intel Inside is a promise made to Intel’s corporate buyers that buyers of the PCs they build with Intel processors will be happy that there is an Intel logic chip running their computer. Goldman Sachs promises that if a client hires one of its investment banking teams, it will get the desired transaction done and done well. Consistently fulfilling that promise is what has made it the top brand in that sector.
Perhaps my favorite B2B brand is FedEx’s. FedEx doesn’t just promise to deliver on time and then delivers on time building your confidence in FedEx. Its advertising copy explicitly tells you that you should be confident: absolutely and positively! So, when FedEx delivers on-time for you, your reaction is “of course, they did” because they told you that you should be confident. And if you are still a little bit squeamish, FedEx led in enabling you to track your package through the entire journey so that your confidence never lags during the entire shipping experience. That is all brilliant branding which has resulted in the highest praise a brand can get: ‘to FedEx’ is now a verb!
It is really hard to build competitive advantage — providing something valuable to your customers that your competitors can’t/won’t replicate. Because it is so hard, it is a real shame to leave it at that.
I’m sure P&G could have just put fluoride in Crest and let customers figure out over time that they got fewer cavities when they used Crest. I bet Crest would have eventually become a successful brand. But I doubt it would have rocketed to #1 share without advertising copy that promised cavity reduction and backed the promise with the ADA Seal. And without that, it is not clear that the Crest brand would have earned the resources to double down on its advertising and R&D to be able to both maintain high mental availability of its promises and deliver on ever-loftier promises over the decades with a flow of technical breakthroughs.
Likewise, instead of branded Tide, P&G could have sold its fantastic detergent as a store/private label brand, and it would have attracted customers because it is a great detergent. But it wouldn’t have enabled Tide to make and fulfil promises in a way that built the biggest and most profitable laundry habit in America.
So, when you think branding, think first about confidence. How can you make a distinctive promise to your customers and then fulfill that promise in a way that builds their confidence that you will always fulfill your promises? As their confidence builds, your brand strengthens, generating the incremental resources to make and fulfill more compelling promises. Don’t waste your time making identical promises to your competitors. That will only convince your customers that it doesn’t matter who they choose. And never make a promise that you can’t fulfill because it will shatter confidence and that will put your brand into a death spiral.