The Right to Brand by Trax Publishing Sdn. Bhd.

The Right to Brand Levelling the brand playing field: Lessons from an emerging market by Yasmin Merican

Trax Publishing

Part 1 The Method

Extent 31 — 49

1.1 Introduction: The hidden advantages of the branded

Part 1 The Method

In the second quarter of 1993, Caltex Oil Malaysia Limited3 introduced a new fuel to motorists. It was Techron Unleaded.4 Amidst a waning unleaded gasoline (ULG) market, the company doubled its sales of unleaded fuel to achieve strategic growth objectives within twelve months from the date of the product launch.5 Over the next few years, and until the fuel was withdrawn from the Malaysian market towards the end of the 1990s, Techron would become the first additised fuel to be successfully promoted in the country,6 delivering one of the best retail performances in the history of the 50-year-old petroleum company in Malaysia. Today, the patented fuel-cleansing additive is synonymous with Caltex fuels where it shares retail visibility and market prominence as Caltex with Techron. How did Caltex build the country’s first stand-alone fuel brand? With a smaller distribution network relative to Shell, national oil corporation Petronas, and Esso (now ExxonMobil), how was Caltex able to galvanise rapid market acceptance for Techron when market leaders had twice to three times its market share and promotional budget? Many engaged at Caltex then would later say that Techron’s phenomenal success was due to product superiority. The gasoline was just better than all other unleaded fuels offered at that point in time. Others working with the competition during the Techron market launch contends that it was not product superiority, but the effectiveness of the Caltex brand building effort, asserting that the attributes of unleaded gasolines were equal, and Techron was not the better product. Just as many, however, would concede that Techron’s success was a lesson in competition. Industry participants were simply caught unaware by a new ability to compete through brand building, and were unprepared for the rivalry that ensued. Generally, it was acknowledged that the capacity to respond to market opportunities does not always reside with market leaders, but that success could also go to smaller 33

Part 1 The Method

market challengers with stronger insights and capabilities. The Techron experience demonstrated that with the right product and the right brand formula, the dynamics of competition can be overturned, not just through business, but through brand advantage.

1.1.1

The Opportunity: Differentiation in a competitive market Until 1990, all fuels retailed in Malaysia were leaded gasolines (LG). With the introduction of Primas by Petronas, Malaysia started the process of converting from leaded to unleaded gasoline (ULG) usage. However, by the end of 1992, the ULG market started to decline, with national sales dropping to below 30 percent of total gasoline consumption.7 Despite efforts by the government and the industry, the ULG market remained resistant and leaded fuels continued as the choice of the majority. Curiously, although motorists were willing to try unleaded fuels when first launched, there was little repeat purchase. Amidst the fast-diminishing ULG market, industry players faced a serious deadlock.8 To stabilise the cost of fuel, pump prices in Malaysia was, and is, regulated through an automatic pricing mechanism (APM).9 With controlled pricing and the high cost of dual distribution structures for leaded and unleaded gasolines, industry players had little choice but to refocus investments on other retail opportunities, such as the promotion of lubricants and services, instead of fuels. In April 1993, Caltex launched Techron Unleaded into the Malaysian market. The fuelâ&#x20AC;&#x2122;s successful market entry triggered intense industry rivalry, which ultimately doubled national consumption of unleaded fuels from less than 30 percent from mid-1993 to 60 percent by mid-1994.10 Within the first few years of its development, Techron reigned 34

Part 1 The Method

supreme as the premier unleaded fuel brand. But, its brand supremacy in Malaysia would be short-lived. As an isolated market experience, the fuel was subsequently withdrawn and replaced by Vortex in 1998, returning to the Malaysian market as a patented fuel additive in 2006.11 In the intervening years, the next super fuel made its debut. In 2000, Shell launched a new high performance gasoline. It was V-Power.

1.1.2

The Significance: Impact of brand knowledge on competitiveness The key to Techron’s success in Malaysia was the ability to exploit a market opportunity through new knowledge and capabilities. In a book on how brands were created from the 18th to the 21st century in the United States and Europe, Nancy F. Koehn offered the following characteristics as common to those who have built some of the world’s most famous brands:

› ‘They had deep knowledge and personal experience of  their product or service.’ › ‘They learned quickly from their mistakes and made  rapid adjustments.’ › ‘They created meaningful brands that distinguished their  offerings and responded to consumers’ changing priorities.’ › ‘They initiated a process of reciprocal learning  with their customers that resulted from ongoing two-way  communications with them.’ › ‘They created a range of organisational capabilities that  delivered on the promises of their respective brands.’ 12 During the building of the Techron brand in Malaysia, Caltex had access to extensive research and deep knowledge on its product and market. Although relatively new to the 35

Part 1 The Method

process, the Caltex leadership and employees not only adjusted business strategies in response to market oversights quickly, but were willing to engage in reciprocal learning with their customers throughout the brand building experience. More important, Caltex was able to evolve a branddriven organisational mindset which delivered on the promise of Techron as the first eco-friendly super fuel to be offered in the country. As documented by Koehnâ&#x20AC;&#x2122;s findings in 2001, the Techron experience in 1993, shared the same hallmarks with the brands built centuries or decades earlier, where brand thinking had been intrinsic to business action. By and large, while monopolies enjoy market advantages without the threat of competition, brand building is usually a competitive process where the dynamics of rivalry is determined not just at business, but also at brand levels of industry. While enough is known today about how to compete on business platforms, there is insufficient focus and perhaps even knowledge, on how the concurrent ability to brand offers unfair advantages to those with the knowhow. Within the pace-setting Malaysian petroleum retail industry in the early 1990s, what determined success within the nascent ULG market in Malaysia was not just business strengths, but also the brand strengths of industry players engaged in the production and marketing of fuels. At the end of 1992, Caltex Petroleum Corporation, the parent company of Caltex in Malaysia, had begun the audit and research of Caltex operations as part of a worldwide retail transformation programme. However, as global brand policies and strategies were still on the drawing board in early 1993, the Techron brand blueprint in Malaysia was developed locally. As a field office initiative, insufficient market evidence elsewhere delayed the effectiveness of competitor responses, which expedited the building of Techronâ&#x20AC;&#x2DC;s brand equity in less than a year from the date of the product launch. 36

Part 1 The Method

1.1.3

p. 38

The Barriers: An elusive advantage Techron has been chosen with Telekom and Tenaga as case studies, as the learning captures the development of three significant brands from within an emerging market. Two built within a captive, and the third within a competitive market in Malaysia. The cases demonstrate how branding as an orientation, strategy and business process, offers competitive advantages to those with the commitment and the knowledge. Yet more than twenty years later, there is still leadership confusion as to what it takes to brand, and how brand building should be executed not just through marketing and communications, but also cohesively through strategy, structure, knowledge, people, process and systems. Why has the ability to brand eluded so many? Why are there differences in the way brands are built in mature versus emerging markets? Is this a stage of economic growth symptom, or are there other reasons? In a pioneering survey on brand practices in Malaysia conducted between 2003 and 2004, Trax Associates,13 in collaboration with the Malaysian Institute of Management14 (MIM), PricewaterhouseCoopers (PwC) Malaysia,15 and the Federation of Malaysian Manufacturers (FMM), found that there were apparent disconnects between leadership belief on the value of brand building and resultant action [Table 1.1]. The key findings of the survey revealed that: › While local managements believe in the economic value of branding, more than 60 percent said that not enough was being invested in brand building at their organisations. › Reasons offered were the lack of brand knowhow and experience, the absence of a brand unit or function, and the responsibility of sales and marketing for the creation and management of brands. 37

Part 1 The Method

Table 1.1

Brand Perceptions and Practices of Malaysian Companies, 2003â&#x20AC;&#x201C;2004

Perceptions

Brand Value Strong belief in the economic potential of brand building

Branding is for customer loyalty and premium pricing

Brand Practices The globally branded align key business decisions and processes behind their brands

Brands in Malaysia are at early growth phase and therefore not built in tandem with business growth

Brand building efforts are very effective

Brand building efforts are satisfactory

Brand Investments Strategic investments driven by business, and not brand considerations

We do not invest sufficiently in brands

Brand investments are captured under advertising and promotions

Brand investments are adequate

Unsure whether brand investments are adequate

Brand Knowledge The missing competency in branding is knowledge and experience

The missing competency is in design

Brand Skills/Capabilities We do not have a brand unit

We do have a brand unit at sales & marketing, advertising & promotions

Brand Custodians Brand building should be managed at the highest levels of organisation

Brand building should be managed at marketing and sales departments

Source: Malaysian Brand Practice Report 2003, p.10 16

â&#x20AC;şâ&#x20AC;ŻInterestingly, while 70 percent of respondents said they were driven by business and not brand considerations, 60 percent of the chief executives and board members on the survey were of the opinion that branding should be managed at higher levels of organisation.

1.1.4

The Imperative: Levelling the brand playing field Therefore, if brands have been around for such a long time, and decision-makers believe that the ability to brand offers competitive advantages to owners, why are they not levelling, or attempting to level, the brand playing field as they build their businesses? As consumers, we often respond to brands as they interact with us in our daily lives. Across every product and service category, we have conscious or unconscious conversations with brands from the impulse purchase of toothpaste and detergents to the high-ticket acquisitions of automobiles and computers. While the impact of brands on our behaviours may appear trivial or superfluous, brands sell because they are able to attract, engage and retain their markets better than those without similar commitments and capabilities. For those in the know, brands are the visible outputs of corporate ambition and strategy. Yet, as companies strategise for growth, planners often fail to realise that those from the outside, and sometimes, even those from inside the organisation, cannot easily see the value of business strategy. What they clearly see and evaluate is the effectiveness of strategy. Essentially brands. If brands signal who you are and what you represent, those responsible for strategic inputs should start to connect their corporate missions with market aspirations. They must be able to make better decisions between what the organisation seeks and what markets want. The good news here in 39

Part 1 The Method

Malaysia is that there is enough understanding about the value, and the commitment to brand. The bad news is that barriers to better branding prevail, where without the benefit of history and precedence; it continues to be difficult to invest in the intangibles of brand creation. As an expense, branding suffers from the lack of immediacy in returns on investment. With corporate measures predisposed to the performance of tangibles, but not on the intangibles of goodwill, such as reputation; customer loyalty; product or service uniqueness; or brand equity,17 the intent versus the ability to brand, remains unresolved. Nevertheless, in the interest of market growth and sustainability, resolution to this issue can no longer be deferred. How will Malaysian businesses confidently grow and protect relationships with customers, partners, suppliers, distributors, employees and a whole host of other stakeholders without the enhanced ability to brand? What guarantees would leaders have to ensure the consistency of market support when brand reputation is not effectively harnessed through product, people, process or technological capabilities? Many of todayâ&#x20AC;&#x2DC;s stakeholder management processes are seldom holistic enough. Few consolidate the requirements of brand identity, personality and experience with business plans and investments. Think of the processes and technologies essential to branded customer experiences, and it becomes immediately evident that staff recruitment and training alone will not deliver on what customers seek, relative to what may already be offered by the competition. As long as brand building functions as a remote activity within marketing, communications or sales and not operationalised as part of business policy, the market power of brands will elude the majority and the global future of home grown enterprise. To match the competencies of the branded, emerging brands need to accelerate the acquisition 40

Part 1 The Method

and integration of brand knowledge within business models and objectives. And they must to do this sooner, rather than later.

1.1.5

p. 46

The Right to Brand: An alternative approach to better branding The book argues for the right to brand: that every endeavour, regardless of whether driven by social, commercial or political values, should start to create its own brand history, and commit to branding as a growth strategy, if not sustainable advantage. Emerging brands tend to suffer from the lack of institutional knowledge where brand action is dependent on external capabilities from advertising, public relations and design to other expertise offered by a fast growing and increasingly sophisticated brand ecosystem. While this external support is essential to better branding, such knowledge cannot replace brand-related business decisions which only organisations can make. Neither will the outsourcing of brand expertise adequately prepare internal stakeholders for brand opportunities, or protect brands against threats, if and when they occur. To move from the unbranded to the branded state, or the emerging to the maturing brand condition, the book offers solutions to accelerated branding. Figure [1.1] is one perspective where the structural and process requirements from brand audit to evolution is consolidated within an institutionalised brand programme. For access to the methods, processes, case studies, interviews and information graphics, the contents are presented in five parts: method, design, execution, learning and expertise.

Part 1 The Method

p. 31

p. 51

p. 93

Part 1—The Method The opening chapters introduce the market-think® method and frameworks. Designed to address gaps in the knowledge and practices between the branded and unbranded, these chapters propose the structure, knowledge and processes for better business and brand integration. To jumpstart the process of brand learning, a glossary on brand terms and related terminologies is offered in Part 6—Appendix. Part 2—The Design The design process begins with orientation and blueprinting. › Step 1: Brand Orientation illuminates the differences in the commitment levels and perspectives of emerging, maturing and mature brands, and the barriers which prevent progress towards better branding. › Step 2: Brand Blueprinting offers new frameworks such as the Brand Orientations©, Brand FCD© and the Brand Pyramid© to facilitate brand strategy development. Part 3—The Execution There are three steps in the brand execution or action phase: Alignment, measurement and institutionalisation. › Step 3: Brand Alignment looks at how branding can be integrated with the business across, people, process, technologies and work cultures. As brand knowledge and experiences differ from one enterprise to the next, the advantages and disadvantages of the short-term Brand Champion Model, versus the longer term Brand Programme Model, are discussed. › Step 4: Brand Measurement explores how brand impact can be quantified through the Brand FCD and CSE© methods. › Step 5: Brand Institutionalisation describes how brand learning can be integrated into mainstream organisational processes over the medium to longer term.

Part 1 The Method

To demonstrate the development, evolution and impact of a brand programme, Part 3 concludes with the piloting of the market-think System at Petronas between 2002 and 2004. p. 169

p. 557

p. 705

Part 4â&#x20AC;&#x201D;The Learning In Part 4, three brand cases are presented: The first relates to how the Telekom Malaysia brand was built through an advertising focus. The second draws parallels and differences between the Telekom Malaysia and Tenaga Nasional brand building experiences at privatisation, where public relations instead of advertising, led the brand effort. The third demonstrates how Caltex succeeded in delivering Techron as the first additised fuel brand in Malaysia within a competitive petroleum retail market. Part 5â&#x20AC;&#x201D;The Expertise The book closes with inputs from experts in brand-related fields on the impact of strategy, marketing, research, finance, organisation, intellectual property, advertising, public relations, media and design on business and brand success. Part 6â&#x20AC;&#x201D;Appendix Glossary, Notes and Index.

Part 1 The Method

1.2 The market-think frameworks: Tools for emerging brands

Part 1 The Method

In Malaysia, branding began from a communications perspective. To build the Telekom Malaysia brand in 1990, the USP,18 a marketing and advertising framework was used. In 1992, a PR-driven flotation-marketing model successfully positioned Tenaga Nasional, while the approach adopted by Caltex for the branding of Techron in 1993 was premised on the tenets of Michael E. Porterâ&#x20AC;&#x2122;s Competitive Strategy.19 Each of the companies profiled, took a different brand delivery path in the achievement of their business and market objectives. From these experiences we learned, like the other brand builders from around the world, that many interacting factors influence the direction and health of brands and that there is no single formula for brand success. Instead, the common threads which unified the early brand cases were commitment, knowledge and innovation. For example, to reach the growing number of todayâ&#x20AC;&#x2122;s technology-enabled consumers, almost every branded or branding company is learning how to improve the way they communicate with customer networks online and offline through the rigour of experimentation. While digital applications offer new and exciting platforms for the distribution of information, communications and entertainment, the rapid growth of these divergent channels compound the complexity of brand building, especially for those without the advantage of history and experience. However, the fastest way to learn anything new is simply to get started with enough commitment and skill. Having said that, commitment is just one part of the equation. The other is the will and ability to learn. While many in Malaysia believe in the market power of brands and are investing in new brand capabilities, we tend to pursue the brand building methods of the more mature brands operationalised through marketing and communications, but not always anchored through policy and investment. 45

Part 1 The Method

Figure 1.1

The market-think® Brand System

market-think® Structure

Knowledge

Customer

People

Strategy

Process/Systems

Communications

Performance

Source: Trax Associates 2000–2012

market-think® Process

market-think® Frameworks/Approaches

Audit

Brand Orientation Build a brand-driven business, not a business-driven brand

Design

Brand Blueprinting Converge brand form with character and delivery with appropriate investments/ KPIs

Act

Brand Alignment Align business with brand processes across all brand-related functions

Brand Championship & Brand Programme Model

Measure

Brand Equity Development Measure quantitative/qualitative impact of brand delivery on business performance

Evolve

Brand Institutionalisation Commit to branding as work in progress to strengthen competencies for sustainable market advantage

p. 46

p. 51

An example of a mature brand building approach is the popular BMS or Brand Management System with its army of empowered brand managers. While the BMS survives today as the most widely used brand management model since it was first created in 1931 by Procter & Gamble (P&G),20 the method works best only when brand development is activated and coordinated by policy. Without the full mandate and resources to brand, there are limitations to the effectiveness of the BMS approach. P&Gâ&#x20AC;&#x2122;s core strengths today reveal that the companyâ&#x20AC;&#x2DC;s legendary ability to build brands centres not just on the efficiencies of the brand management system it pioneered, but also on the active pursuit of customer intimacy, innovation, scale and reach.21 Although emerging brands cannot match the scale and reach of the branded overnight, building brands the P&G way through research and development, innovation, distribution, community and connectivity is not beyond the grasp of would-be brand builders, especially when business will is matched with commitment, knowledge and the resources to brand. The market-think System was designed to address the knowledge and decision-making realities of modern brand building [Figure 1.1]. As a modular and integrated approach, the method builds new competencies to start the alignment of business with brand activities from strategic, instead of functional levels of organisation. The objective is not just to develop brand managers to operationalise brands, but to build a longer-term, brand-driven business through a centralised capability. In ensuring structured and accelerated learning across multiple disciplines, each phase of the brand process, from audit to evolution, is supported by a series of self-tests and frameworks, details of which are presented in Part 2.

Part 1 The Method