How Brands Grow

by Byron Sharp

  UPDATE: In 2011 Millward Brown published independent data, in effect a replication of our work across more brands, countries, categories and a different questionnaire with different perceived differentiation questions.

  “we [Millward Brown] find in the BrandZ database, which contains information on over 6,000 brands collected over 10 years from category buyers around the world - on average, the proportion of people willing to endorse any brand as ‘different from other brands of (a specific category)’ is low”. - Nigel Hollis, 2011.

  Nigel goes on to write that perceived differentiation is higher among people for whom the brand is acceptable (presumably that means they buy it): “Among those that consider a brand acceptable, an average of 18 percent agreed that it was different from others, with a range of endorsement from 0 to 86 percent.”

  Yes, that’s right, Millward Brown data shows that the low level of differentiation is higher amongst these people, that is, it leaps to a massive 18%. Or put another way, on average 82% of people who find the brand acceptable to buy will NOT endorse that it is "different from other brands in the category". For the technically minded, that average of 18% is based on a skewed distribution. A few brands score quite high (e.g. expensive, high quality brands or very cheap poor quality brands), but most will be less than the average. That is, for almost all brands in the BrandZ database the vast majority of their customers do not see them as different.

  This is a perfect replication of our findings, by an independent group of researchers – very independent given their a strong record of promoting the gospel of differentiation.

  The empirical data is clear, most of the successful brands in the world have very low perceived differentiation, yet they have loyal customers, they earn profits, and many of them have done so for many decades. And will continue to do so, and with low perceived differentiation.

  Recently, it has been suggested that awareness and salience play a greater role in buyer behaviour and how brands compete than current differentiation theory would suggest (Ehrenberg, Barnard & Scriven 1997; Romaniuk & Sharp 2004a&b). The data from the Ehrenberg-Bass Institute, Young & Rubicam, and Millward Brown on perceived differentiation all support this. All brands are 'differentiated' (they do not compete as perfect substitutes), in the sense that for each buyer there are brands that they know well and other brands they think very little about. For each buyer there are many brands he or she never or seldom considers purchasing. But this is not textbook brand differentiation in the sense of buyers perceiving brands as being meaningfully different from others.

  Distinctiveness: an alternative perspective

  Paradoxically, the reduced emphasis on meaningful differentiation makes branding even more important. Loyalty is largely underpinned by mental and physical availability not love/hate. To encourage brand loyalty a brand must stand out so that buyers can easily, and without confusion, identify it. The focus on meaningful, perceived differentiation in marketing literature has distracted from this traditional aspect of branding practice.

  The fundamental purpose of branding is to identify the source of the product or service. This is the reason that branding was first developed. Branding must have qualities that distinguish the brand from other competitors. One obvious characteristic is the brand name itself, which is, by law, unique. There are also other distinctive elements that, as part of a brand's identity, can supplement or substitute for the brand name. These qualities help the consumer to notice, recognise and recall the brand – when the brand is advertising and in buying situations. These elements can include:

  •colours – such as the Garnier green and the TNT orange

  •logos – such as McDonald's golden arches

  •taglines – such as Nike's 'Just do it'

  •symbols/characters – such as Mickey Mouse's ears

  •celebrities – such as Tiger Woods for Nike

  •advertising styles – such as MasterCard's 'priceless' campaign.

  A distinctive asset is anything that shows people what brand is being offered for sale. These can be used on packaging and in advertising, in-store displays and sponsorships – they can be used in any marketing activity where the marketer wants the consumer to be able to identify the brand. This might be to build, refresh or reinforce consumer memory structures or to facilitate purchasing by making the brand easier to locate. The stronger and fresher the links between these distinctive elements and the brand name, the easier it is for the consumer to identify the brand. While for packaged goods bought off retail supermarket, pharmacy or hardware shelves this link to the brand name isn’t even necessary. The distinctive asset alone can brand the product.

  Benefits of a distinctive brand

  Distinctive brand assets benefit both the marketer and the consumer. A brand loses custom if its potential customers can't find it. Also, communications are more effective if correctly branded. Much has been written about the cluttered environment, the overload of information due to the greater number of choices available. Distinctiveness reduces the need to think, scour and search – thus making life easier for consumers, without them even realising it. This is a very different consumer benefit from that offered by differentiation, and it has an intrinsic value to the consumer. For example, I value service; therefore I seek a brand that will give fabulous service.

  Consumers do not use American Express because they value the colour blue; but seeing the distinctive blue allows people to easily identify that this ad, piece of direct mail, sponsorship is by AmEx (Gaillard, Romaniuk & Sharp 2005).

  Unlike 'meaningful' differentiation, these qualities can be trade-marked and legally protected (Johnson 1997). It also becomes foolish for a competitor to use the same elements in their advertising, as the advertising is then misattributed to the original brand.

  The difference between differentiation and distinctiveness is not just semantics; it is a very real difference that is respected in law.

  What makes a distinctive asset more valuable?

  There are two criteria that make some branding assets worth more than others. These two criteria are:

  •fame - how many people associate the brand with that asset

  •uniqueness - of those people how many only associate that brand with the asset

  This assessment must come from consumer research67. Marketers and agencies tend not to research and, therefore, they massively over-estimate the strength of their distinctive assets. In turn, this leads to both overestimating the degree of branding that really exists in advertising copy and over-estimating how easy a brand is to notice on shelf. We can’t stress enough how important these errors are. It is a very fundamental failure for a marketer not to have carefully market researched their brands’ distinctive assets.

  The purpose of building strong, distinctive assets is to increase the number of stimuli that can act as identification triggers for a brand. Distinctive assets improve advertising effectiveness by making it more likely that viewers will correctly identify which brand the advertising belongs to. In a shopping environment, distinctive assets make it easier for consumers to notice and purchase a brand.

  It is important that each distinctive element is uniquely linked to its brand. If consumers also think of competitors when prompted with that element, then the element fails to act as a brand name substitute. If a shared, distinctive element is substituted for the brand name, the risk is that consumers will think of a competitor rather than the target brand. The second criterion for considering an element to be a distinctive asset is that it is prevalent. This means that the majority of consumers link the brand to the element. A distinctive element that is unique, but unknown, cannot act as a substitute for the brand name because most people who encounter it will not think of the brand name.

  The purpose of building strong, distinctive assets is to increase the number of stimuli that can act as identification triggers for a brand. Distinctive assets improve advertising effectiveness by making it easier for viewers to identify which brand t
he advertising belongs to. In a shopping environment, distinctive assets make it easier for consumers to notice, recognise and therefore purchase a brand.

  Building distinctive assets

  Distinctive assets need to be learned by consumers. Until the links between distinctive elements and the brand are learned they cannot function as a substitute for the brand. To successfully teach the link requires a commitment over many years, even decades. For example, the Nike 'swoosh' was first introduced in the 1970s; for a long while it was shown alongside the brand name, prior to being used as a solo brand identifier. The strong recognition that the Nike swoosh has today is because of the consistent investment over many decades. A brand can’t be distinctive unless it is consistent.

  To build strong, distinctive elements the brand must be consistently communicated to consumers across all media and over time. The importance of consistency has been emphasised by many branding commentators, and particularly by the proponents of integrated marketing communications. They have advocated consistency across campaign elements and media, rather than over time. It’s something of a mystery why some marketers embrace the idea of consistency across media but not consistency across campaigns. And the consistency emphasis has been too much on the brand's message and positioning, rather than to the visual, verbal or style of branding elements. Consistency in brand identity is something that many brand strategies lack, particularly across campaigns. For example, when a new campaign is created, most of the attention is placed on what is new and fresh. More attention should be placed on making sure the branding elements are similar and consistent; someone who saw the last marketing campaign should understand that the new campaign comes from the same brand. It is only when there is discipline in this consistency that distinctive brand assets build.

  In Chapter 4 we saw how all brands have a ‘long tail’ of very occasional buyers; because most of a brand's buyers rarely buy and rarely think of it, they are easily confused by inconsistent communication and packaging changes.

  A new research focus

  While there has been considerable literature on the different elements that could represent distinctive assets, a great deal of this research has been misdirected. It has tried to establish the value of potential distinctive assets to consumers, from a differentiation-style perspective. For example, research into the colours associated with brands often focus on what the colours mean to consumers, or try to identify the best colour for a brand (Bellizzi et al 1983; Grimes & Doole 1998). However, the real value of building strong links to an element such as a particular colour is not that people may like, say blue more than yellow (and so a brand should choose blue over yellow in its packaging, communications, etc). The value is that if a brand consistently uses blue in its packaging and communications, and it is the only brand that uses blue, consumers should quickly and easily identify that blue represents the brand. This will hopefully mean that colour can replace the brand in some circumstances, or extend the branding quality of any communication beyond simply mentioning or showing the brand name.

  Conclusion

  Scientific laws, theory and direct empirical evidence challenge the importance placed on meaningful perceived differentiation. Differentiation does exist, but the degree of differentiation is weak and varies little between rival brands, and it is far less important than is portrayed. Brands within a category do not vary markedly in their degree of differentiation, perceived or otherwise. While Pizza Hut, McDonald's and KFC sell different products (pizza, burgers and fried chicken, respectively) the reality is that they compete as fast food brands.

  This finding has resulted in the presentation of an alternative strategic emphasis: marketing should build distinctive qualities that increase the visibility of the brand in its competitive environment price (i.e. branding matters). Distinctive assets make it easier for consumers to notice, recognise, recall and (importantly) buy the brand. An emphasis on distinctiveness means less of trying to find unique selling propositions and more trying to find unique identifying characteristics. Distinctive assets are not what motivate consumers to buy brands; it's how they know where the brand is and what brand they bought. They allow for the development of loyalty.

  The next three chapters present empirical evidence on how marketing interventions, like advertising and price promotions, work. Then we can return to this topic of how brands compete and what marketers must achieve in order to grow market share over the long term.

  Chapter 9:

  How Advertising Really Works

  Byron Sharp

  Once upon a time there were two little girls, Georgiana and June, who lived in a little French village. Their parents had a beautiful orchard with many lemon trees. So one day they decided to make lemonade. Over time they became very proficient lemonade makers. Each summer, during school vacation, they sold their lemonade to friends and neighbours.

  The little girls grew up, got married and moved to the big city. They lived on opposite sides of the town and, sadly, they saw little of each other. However, they both continued to make and market lemonade.

  Georgiana had married the owner of a newspaper (her sister June had married a lawyer) and one year she decided to place advertisements for her lemonade in her husband's newspaper. They said “Georgiana's lemonade: real lemony”. Nothing dramatic happened but Georgiana's sales steadily grew – eventually she had to source additional supplies of lemons. In the following years, her sales continued to grow slowly, with occasional jumps when a new store started stocking Georgiana's lemonade.

  Meanwhile, the sales of June's lemonade also grew for a while, then for a long time they were steady and then her sales started to decline slightly. One Christmas she discussed this with her sister Georgiana, and on her advice began to advertise. June's advertisements featured the cunningly crafted message “June's lemonade: lemon goodness”.

  Today Georgiana's brand is the largest with slightly more than 60% market share. It is stocked in more stores, it gets more publicity, has more buyers and more people say they prefer it. June's lemonade also continues to sell well and make a profit. She has almost 40% relative market share and her sales decline has stopped. The percentage of June's buyers who say it tastes great is similar to the percentage of buyer's who like the taste of Georgiana's lemonade.

  If you accept that Georgiana and June's story is plausible, then you believe advertising works. This is logical, because billions of dollars are spent on advertising; an amazing 2% of the world's entire production (GDP) is devoted to advertising. Yet, things are never as clear as they are in Georgiana and June's world; in the real world, mysteries and contradictions abound. For large brands that have the biggest advertising budgets, sales seldom rise when advertising starts, nor slump when it stops68. Also, most buyers say that advertising rarely affects them. Even advertising agencies are extremely reluctant to say that advertising causes sales; they'd much rather talk about engagement, building brand equity, emotional commitment, and added values. In contrast, opponents of advertising say it is a powerful manipulative force. “Advertising troubles both sociologists and financial directors: the former because they think it works, the latter because they think it does not” (Bullmore 1999).

  What is going on? Who is right? What evidence is there that advertising drives sales? How does advertising really work? How should marketers use advertising? How should marketers measure advertising's effects? This chapter answers these questions and presents a model of brand advertising that is consistent with what we know about brand buying behaviour and memory. The shift in thinking is summarised in Table 9.1.

  Table 9.1: Advertising

  Advertising

  Past world view Rational or emotional Message comprehension Unique

  selling propositions Persuasion Teaching Positioning

  New world view Emotional and rational Getting noticed Relevant associations Refreshing and building memory structures Reaching Salience

  Neuroscience and psychology have recently advanced our u
nderstanding of how memories and brains work. These discoveries have important implications for advertising, because advertising works by creating and refreshing memories. It is now known that much thinking and decision-making is non-conscious and emotional. Yet traditional theories of advertising are based on a dated view that we are usually rational (occasionally emotional) decision-makers, with near perfect memories.

  Before we discuss how advertising works, we look first at the evidence for advertising sales effects (i.e. how advertising nudges buying behaviour). This insight, from marketing science, complements the perspective above. It is a story that has not been told before, yet it provides a deep understanding of how advertising works and why the sales effects are so hard to measure reliably.

  The sales response to brand advertising

  The purpose of brand advertising is to affect the buying behaviour of consumers. Don't let anyone tell you otherwise. The billions of dollars spent on brand advertising are spent to protect and build sales; logically, this can only happen by affecting buying behaviour and by enhancing and restoring purchase probabilities.

  Many people involved in crafting advertising get squeamish with this idea. The reason for this odd behaviour is that they associate sales effects with a limited type of advertising (e.g. “Sale starts this Thursday” and “Crazy discounts – buy now, now, now!”). This sort of advertising often results in observable sales increases, whereas much brand advertising has little or no demonstrable effect on next week’s sales figures. This observation leads to the assumption that advertising does something else other than affect buying. So to justify advertising, marketers invoke concepts such as brand equity, commitment and loyalty, often in a very mystical manner. This makes financial directors and hard-nosed CEOs suspect that the money they spend on advertising is going down the drain.