A STRONG BRAND CAN BE USED TO PROP UP A BAD BUSINESS

A brand is not seen as separate or distinct from the business it serves. They are in fact integral to each other.

Brands are often credited with powers that they simply don’t have. Chief among these is the idea that a strong brand can successfully mask the deficiencies of a bad business. There may have been a time when a strong brand (or strong advertising) was simply seen as a badge or sticking plaster that could be ‘applied’ to a business in order to cover up a myriad of ills, but whatever the historic situation that is certainly not the case today.

The digital revolution of the last decade has effectively left a ‘bad’ business with no place to hide. If you are a bad business the chances are you will be quickly found out. The huge increase in e-commerce together with the power of social media has combined to provide a plethora of forums for customers to share their views and experiences. Nothing (it turns out) is as powerful as a third-party recommendation. A positive rating on Amazon can transform your commercial success. Specialist websites and publications provide weekly rankings of the best products or service experiences across a multitude of categories. Prices can be compared instantaneously and providers compete via programmatic media for your custom.

Against this backdrop it is obvious why a brand can’t just be an attractive logo or a nicely packaged product. In today’s world we judge a brand by what it does. This has profound consequences, not least for the Chief Executive. If the brand is the sum of everything the business does, then doesn’t that make the Chief Executive the ultimate brand guardian?

Image is no longer enough

Even those businesses operating in categories where ‘image’ has a strong influence on the purchase decision (fashion, tech, luxury etc) will still need to be able to reference distinctive and interesting product attributes. The mobile operator Orange – often heralded as the textbook example of what can be achieved with a strong image – was founded on a democratizing vision that included changing the way customers were billed. Orange was the first mobile operator to bill customers by the second (as opposed to the minute) and this supported their claim to be the UK’s first personal network.

So what do we mean by a bad business? Well, ‘bad’ in this context means a business that is failing its customers. A business that is offering poor quality, a business that is offering poor value, a business that is offering poor choice or is out of step with what its customers want. ‘Bad’ also extends to the way a brand (or brand owner) behaves, as well as how it treats its staff. None of these things can be masked by good graphic design or great communication.

The importance of staying relevant

Woolworths in the UK serves as an interesting example. A much-loved and – for most of its history – a highly regarded brand, Woolworths was intimately entwined with the history and growth of Western capitalism. It had a whole series of branded hallmarks, which included the famous Pic’n’Mix – so famous that the phrase finished up entering the common vocabulary – yet none of this stopped Woolworths in the UK going out of business. A 100-year-old retailer went under because it had ceased to be relevant. It wasn’t able to offer enough of what its customers wanted. The context had changed; what was previously an endearing and eclectic mix of household products, clothing, music, toys, sweets and entertainment, could now be bought more cheaply and more conveniently elsewhere. A powerful brand couldn’t save a bad business.

Take Nokia, the Finnish one-time world-beater, a global leader in mobile technology and the creator of desirable and highly innovative mobile devices. Yet Nokia failed to spot early enough the shift towards the smartphone. Nokia was a hugely respected brand and yet that wasn’t enough to stop it losing its ascendancy and yielding leadership to other brands like Apple and Samsung. Microsoft recently sold Nokia for $350m – at the height of its ascendancy it had been valued at close to $300bn. A good brand is not always a good guarantee of future performance.

More recently we’ve seen businesses like BHS and Austin Reed fail, because they stopped offering enough of what their customers wanted. Before BHS collapsed it had been portrayed as the jewel in Sir Philip Green’s empire, hugely successful and highly cash generative and yet in the space of a few short years it ceased to be relevant. New entrants like Primark were proving better attuned to the taste for fast and affordable fashion. Supermarkets were moving into the category and proving highly effective at retailing children’s clothing. E-commerce was providing new and innovative ways of shopping online. BHS found itself surrounded and its competitive advantage swiftly eroded. Similarly Austin Reed, another stalwart of the UK high street, just couldn’t find its niche. Caught between the new generation of high street fashion retailers and the more upscale luxury brands, Austin Reed’s mix of conservative fashion allied to good quality just failed to excite. All that is left of Austin Reed now is an online site and representation at a few outlet stores.

The clothing retailer Gap found to its cost in 2010 that simply using your brand identity as a way of refreshing your business has the potential to cause problems with customers. The mistake Gap made was to try to introduce a new logo without first explaining why the change was necessary. Customers smelt a rat; they believed that Gap was meddling with an iconic identity because it was flat out of ideas about what to do with the rest of its business. The mistake proved costly as in the end Gap was forced to revert to their original logo, an embarrassing and damaging climb down.

The inside matters as much as the outside

A good brand cannot hide a poor internal culture either. Some of the celebrated tech businesses like Amazon and Uber are fast discovering that it pays to treat your staff well. A poor culture can have a number of negative consequences. These can range from poor productivity, through to bad customer service and damaging PR. But it can also cause you big problems at the regulatory and societal level. Even if, as in Uber’s case, the majority of your customers love you, it counts for very little if the regulator does not trust you and is suspicious of your culture and values, especially in instances where the regulator has the power to revoke your licence to operate! Customers and regulators are increasingly looking at how a business behaves and how it treats its people, as well as the purpose and values that sit at the heart of an organization.

In today’s economy a ‘brand’ is really shorthand for the way in which the entirety of a business operates. What is the idea that sits at the heart of the business? And how is this evidenced in the way that the business treats its staff, customers and partners?

Rolls-Royce (both the automotive and aero businesses) would not be the well-respected and highly valued brands that they are today without their respective owners investing huge amounts of money in product and service development. Customers believe that Rolls-Royce (in all of its incarnations) stands for quality and engineering excellence, but that wouldn’t last long if the cars continually broke down or its turbine engines started malfunctioning or customers continually received bad service. Reputations can be built upon or even enhanced but they can’t be faked (at least not for a sustained period of time). Metro Bank – the first new bank to appear on the UK high street in over 100 years – is able to deliver its unique brand of customer service because it treats its staff well and has systems designed to empower (as opposed to constrain) great service. Metro Bank ensures that everything it does is focused on delivering a distinctive service experience.

Using your brand as a sticking plaster to cover up a bad business usually proves counterproductive. What does work is to use a good business to fix a bad (or failing) brand. Fix the brand and it can often amplify and accelerate growth. The automotive sector provides some great examples of this in action. Let’s start with one of the most audacious, Skoda.

Fixing failing brands

Skoda Auto was a private Czech business founded in 1895. By 1925 it had become a state-owned company (under communism) and by the 1980s was exporting a range of cheap cars across Europe. It is also fair to say that at that time most Western European markets viewed the Skoda as emblematic of all that was wrong with the communist regime. The cars, while cheap and affordable, were by comparative standards awful. Poor quality, old fashioned, unreliable and slow, perhaps their only redeeming quality was that they were relatively easy to fix. Of course for some families, Skoda did offer affordable motoring. But by the late 1980s even this point of difference was being eroded by the entry-level models of better manufacturers. Skodas were generally treated with derision and in the UK they were regarded as something of a national joke. Then in 2000 Skoda became a wholly owned subsidiary of the Volkswagen Group and things rapidly began to change.

VW wanted a brand that could compete in the value segment but not tarnish the upscale image of VW. They also wanted a brand that was well known across the whole of Central and Eastern Europe. VW realized that they could exploit Skoda’s reputation for affordability and then use their own expertise to directly address the product and manufacturing issues. The strategy proved an enormous success. VW started using older platforms and tooling from within their existing portfolio and within just a few months the product was transformed. VW only lightly endorsed Skoda, but savvy customers knew what was going on. Within just a few years (nothing in automotive terms) Skoda went from national joke to a purchase now made by the value-orientated and well-informed. Skoda now represented a fair deal, with reliable engineering and design, utilizing well-established technology at an affordable and highly competitive price.

VW also did something similar with SEAT, the Spanish automobile manufacturer. SEAT started out with a much better reputation than Skoda, but when VW bought the business, it was able to use its heft and resources to improve both the quality and overall attractiveness of the cars. SEAT, already imbued with a degree of Latin flair, provided a means of accessing customers and markets who were turned off by the VW brand, finding it a little too Teutonic or unexciting.

In both instances VW didn’t shout about their new ownership. They quietly got on and fixed these businesses. They let the products (the cars) do most of the heavy lifting and it didn’t take long for the marketplace to realize that some pretty seismic shifts had taken place. A good business had provided a new context in which these established but underperforming brands could be reappraised. They are now thriving and play a strategically important role within the wider portfolio of VW brands.

The same pattern has been repeated with the Italian motorcycle manufacturer Ducati, often considered as the ‘Ferrari’ of motorcycles. Ducati was famed for the unique design of its powerful and charismatic engines as well as the beauty of its motorcycles, but they were also notoriously fragile. Small volumes and constrained R&D budgets resulted in unreliable and ‘highly-strung’ motorcycles. All of this changed when Ducati became part of the VW subsidiary Audi. Money and expertise were used to fix the reliability issues and the business significantly expanded via the introduction of new models aimed at new exploitable niches.

A return to the editor-in-chief

Sometimes it is simply the return of a founder that is enough to rekindle a once successful brand. This is because the brand and the business ought not to be separated. Apple and Starbucks are both businesses that were reinvigorated by the return of their founders. Steve Job’s return to Apple heralded a return to form. Jobs quickly realized that for the business to be successful it needed to focus on just a few game-changing products and it needed to champion an intuitive user experience. This, combined with a hate of mediocrity, was sufficient to reset what is now one of the world’s most valuable companies. Similarly, the return of Howard Schultz in 2008 saw Starbucks effectively reset its business. Over-extended and less distinctive, Starbucks was damaging its business and its brand. By closing unprofitable stores and refocusing attention back on what was distinctive about Starbucks, both for staff and customers, the business started to recover.

In today’s marketplace a brand is not seen as separate or distinct from the business it serves. They are in fact integral to each other. Attempts to use brand identity and advertising as a way of hoodwinking your customers into a poor purchase is likely to prove unsustainable and counterproductive. At the same time if you are a good business and you can apply that virtue to a business and brand that is underperforming you are likely to be able to accelerate the growth and value of your business.