It Takes a Village to Raise a Brand
When a product loses consumer appeal, it’s usually because the company’s support system has broken down.
When Howard Schultz resumed his role as CEO at Starbucks in 2008, the brand he’d created was losing ground. During the eight years that Schultz had been chairman while Orin Smith and then Jim Donald served as CEO, the focus had been on rapid expansion instead of on the attributes that had made the brand special. The number of stores around the world had grown from about 5,000 to 15,000 during that time, but the stores weren’t enticing customers. The espresso machines were too large, hiding the baristas from view; the grilling of cheese sandwiches added an unsavory odor to the stores; and even the coffee was stale, because it was shipped to stores ground rather than as whole beans. Schultz embarked on a mission to reverse course, adopting an organization-wide strategy that included better training, tools, and products; a renewed focus on store-level economics and operational efficiency; improvements to the supply chain, back-end IT systems, store operations, and store design; and significant improvements to the customer experience. A new policy mandated that baristas make coffee only from beans that had been ground less than a half hour before.
Today Starbucks is back as one of the companies that instantly come to mind when we think of strong brands. Others include Apple, Bose, and Clorox. These “leader brands,” built around distinct consumer needs and aspirations, have produced nearly five times the value growth of the average S&P 500 company over the last 15 years. Yet for every brand that continues to fulfill its promises, there are countless others, such as Nokia, Compuware, JCPenney, and Radio Shack, that have lost their way.
In a 2015 study, “Bonfire of the Brands,” PwC traced the long-term success of more than 6,700 brands from around the world over the previous 16 years, using data from BAV Consulting on consumer perception of brands. The study found that consumers expect the best-known brands to do nothing less than have a role in shaping their world; the brands they favor must be innovative and, increasingly, trustworthy and visionary. But of the U.K. brands that consumers ranked as leaders in meeting their needs, only eight that were in the top 20 in 1999 made that same list 15 years later, and many others saw a dramatic decline in popularity. We were compelled to ask why this happens so frequently, and what companies can do to keep their brands — and their valuations — on track.
Only eight of the 20 top U.K. brands in 1999 made that same list 15 years later.
A beloved consumer brand can erode and self-destruct for many reasons. We’ve seen celebrated cases in which technology disintermediation, unaccountable leadership, or broken cultures have changed everything. But much more frequently, brand devaluation comes from subtle breakdowns inside the organization that diminish the brand’s appeal, leading consumers to embrace more compelling alternatives. Sometimes the devaluation is triggered by something as simple as cutting costs in areas that once provided distinction. In other instances, companies lose their focus on the product or service attributes that brought the brand to prominence in the first place. Other companies simply expand too far too fast, and overstress their brand value.
Clearly, Starbucks executives understood that it takes all parts of a company — an entire village — to create winning brands and keep them strong. To build and maintain strong brands, companies must know what customers want, understand how to innovate, build customer intimacy and innovation into everyday operations, and continually fine-tune operations to stay aligned with customer needs. This approach poses tough challenges for many CEOs and their management teams. They might know they need to move the needle on brand loyalty. But it’s not clear how to do so.
According to “Bonfire of the Brands,” consumers no longer respond to single-minded brand propositions. At the most basic level, they look for products that are not just innovative, but also trustworthy, authentic, reliable, and visionary. Some voice more specific preferences: transparency about processes (Adidas and Zara are known for this), diversity in the workplace (as with Kaiser Permanente and JPMorgan Chase), or a complete buying and service experience (the province of Amazon, Apple, and Mercedes-Benz). Still other consumers — especially young people — respond more emotionally, choosing brands that make them feel “excited.” (BuzzFeed, Netflix, and CVS Health score high.)
But how do you keep a brand abreast of what consumers are thinking, and understand the kind of experiences they crave? For leader brands, this process often begins by moving senior executives closer to the customers — and closer to operations as well, so they can work together across disciplines.
For example, senior executives at United Parcel Service are assigned line jobs, which provide firsthand experience with functional responsibilities and direct contact with employees and customers. Some executives participate in voice-of-the-customer sessions — focus groups that encourage dialogue about product and service issues. These experiences give corporate leaders cross-functional insights and a context for evaluating future recommendations from brand, product design, and operations managers.
Vast reservoirs of customer information also exist outside an organization’s four walls, and leader brands use digital technology to access it. Many companies routinely survey customers and purchase outside data to determine market sizing and understand Web search trends. But leader brands dig deeper. They design surveys that invite open responses and target specific customer segments to identify problems and discover unmet needs. They also use ethnographic research to identify where customers are having bad experiences. And by monitoring chatter on social media, they can capture changes in consumer attitudes and perceptions in real time. They’re casting a wide net that covers the “social Web” — including blogs, Twitter, Facebook, forums, and news outlets with comment boards — by creating searches of keywords, fine-tuning and optimizing their findings, then analyzing the data against situational context. If a clothing company introduces a new line, for example, it can sift through the online commentary, and if the buzz is negative, it can pull and redesign the line or just respond proactively on the forums.
With this cross-disciplinary approach, new capabilities become possible. Companies can use the data they gather to calculate a net promoter score — a metric that reveals every customer’s propensity to recommend their products. Armed with a clear understanding of these customer value drivers, organizations can spend time figuring out what key capabilities they must have to deliver the value proposition.
Brand-Oriented Operations and Innovation
Though marketing organizations often drive voice-of-the-customer research, it is the operations division that holds the key to building and maintaining strong brands. That’s because operational choices continually strengthen and reinforce the capabilities that truly distinguish brands and the experiences they deliver. Operational functions can include the gathering of customer insights or support for marketing and sales. This often means building direct lines from those customer insights to product and service development and manufacturing.
For example, for its build-to-order motorcycle offering, Harley-Davidson designed an end-to-end operations capability that could collect customer preferences for fit, finish, and functionality and create each motorbike to match. To interpret customer orders correctly, it was necessary to develop a multistep learning process that blended Web-based data with the information employees picked up from marketing, retailers, and sponsored events. In short, Harley aligned the ordering experience with the assembly line and entire manufacturing and dealer footprint; this gives it the ability to deliver custom-built bikes within three weeks.
Once intimacy, data, and operations are all aligned, a company’s brand will probably be more powerful. But it will not truly engage consumers unless it is recognized as repeatedly bringing valuable new products and services to the market. That’s particularly important in such fields as consumer products, retail, automobiles, and technology, where companies distinguish themselves by identifying desires consumers didn’t know they had.
Leader brand executives know that only a culture of innovation and development excellence can bring these experiences to life. To build such a culture, companies must abandon traditional functional thinking and instead prioritize a few cross-functional capabilities that directly support the company’s mission.
Leader brands share four particular characteristics that help them drive innovation across the organization:
They embrace technology. Leader brands build cultures of excellence by continually looking for opportunities to digitize the business. They evaluate many emerging technologies and figure out how to use them to advance their business.
They leverage customer knowledge. These companies take an inclusive approach to innovation, drawing on knowledge from employees, vendors, customers, and industry peers. For example, Cisco and Procter & Gamble have both established collaborative innovation platforms that use crowdsourcing to generate new ideas, often from unexpected areas.
They focus innovation initiatives. Leader brands use agile yet structured processes to make the right choices about new products and other portfolio strategies. For example, senior executives at a multi-branded food company recently found that its established snack products were losing traction. To find out what consumers actually wanted, marketing executives brainstormed possible breakthrough concepts with consumers, internal experts, and external partners. The company then focused its innovation pipeline on a few new concepts. It jump-started growth by introducing new products aimed at contemporary tastes, with an emphasis on premium ingredients and health benefits.
They integrate management. Leader brands integrate the management of business lines and product portfolios. They define specific manufacturing philosophies — mass customization, for example — that support their product portfolios. Then they apply appropriate techniques that may include open source innovation, modular design and platforming, design-to-value, or rapid prototyping.
Executives today must work harder than ever to be sure their brands stand out and operate with a clear purpose, and to build sustained and meaningful consumer relationships. Leader brands make fluid connections across consumer touch points and use these social connections to understand what consumers want and need. But they also depend on a coordinated set of capabilities that make these brand promises possible. When brand strategy and operations align, brands can move past purely transaction-based relationships to deliver experiences that are relevant, resonant, and beyond the reach of competitors.
- Rodger Howell is a recognized innovator in the strategy and operations practice at Strategy&, PwC’s strategy consulting business. He is a principal with PwC US. Based in Chicago, he assists clients with market and customer studies, product and service innovation, and operations strategy.