18/ 08/ 2013

From Product Brands to Concept Brands: How to redefine the customer landscape and

grow brand value.

We Will Cover

In this presentation:• I explore “concept brands”, a term I first used in 2005, what it is, why it is important and what

it means for brand differentiation in an era of many new brands, strong competition and product category convergence. – It is a fact, that based upon category intrinsic factors alone, brands in the same product or service category are

becoming more similar - less different.

• I explain the concept by using examples of brands that I believe did it well - and others that are struggling to do it. I identify how I believe these brands have done it. – I differentiate between concept brands and brand line extensions. – On the basis of this, I believe concept brands to hold greater potential for building greater brand value.

• I then give pointers to brands as to how use the idea of concept brands to extend the credibility and strength of their brands and value propositions beyond their current product or service parameters. This can enable them to grow the value of their brands; their markets and their product and service range. – I believe concept brands, and the principles behind them, can be leveraged to increase the impact and value of a

brand portfolio, more so than traditional concepts like line extensions.

The idea behind “concept brands”.

• I first used the term “concept brands” around 2005, trying to describe a new generation of brands that do not adhere to strict product or service category definitions. These are brands that are able to naturally “extend” their usage because they have a raison d’etre that goes beyond one particular use or application. – Many brands that define the history of marketing, are totally associated with their prime industry, i.e. car companies,

telecommunications companies, banks, insurance companies and retailers. In fact, for many leading brands, their “ownership of industry generics” dominate any potential area of differentiation. Toyota = cars, no less and no more. And Toyota did a very good job at dominating that category, as did GM or Ford. These brands always inherited the generic traits of the industry as a bonus, the stronger the brand, the more it “owned” generics. That became one its its biggest strengths. Category dominance in marketing often also meant market share dominance.

• Yet, we have another reality that has become more or more evident since the late nineties. These are the emergence of what I term “concept brands”.– Concept brands are brands that overcame the restrictions of “marketing myopia” as defined by Theodore Levitt more

than fifty years ago, when he described the demise of the American railroad industry because it defined its business as “railroad”, instead of the broader concept of “transport”.

• “Marketing myopia” clearly stated that such a narrow definition will inevitably lead to the demise of any industry as new brands offered solutions to the same underlying consumer need, but with updated technology - or a new industry (i.e. airlines).

– And whilst we may concede it will take along time for some industries to be threatened, i.e. car companies, history will tell us that in the long run, all industries face challenges from non-traditional competitors. This is when a concept brand is useful, as the strength of the brand itself, will transcend the historic category it dominated - or was defined by.

The idea behind “concept brands” (cont.).

• For me, “concept brands” are a much wider concept - it is when a brand gets defined in terms of a particular way of solving consumer problems, rather than to either stick to a given product or service category, or even to a given “set” of solutions. – Some brands have been able to do this, whilst most have failed. – Some entire industries have been far less successful in this respect than others, i.e. the ICT industry, the

telecommunications industry, the banks, airlines, car companies or life insurers. Most innovation within these industries actually came from new brands that defined themselves differently.

• It seems even within brand “line extensions”, the most successful of these are the ones where brands were able to define themselves as brands with a particular value proposition that straddles product or service category definitions, i.e. brands like Swarovski, Dove or Nivea, where the brand and what it stands for, enables it to compete across traditional boundaries of competition.

• So the brand values and essence that defines the very DNA of a brand, may or may not enable it to transcend its category during times of paradigm shifts across industries. The last twenty years have seen an acceleration of these changes, far more and faster than ever before.

• So can your brand credibly and seriously extend its traditional boundaries and appeal as brand, beyond its traditional product and/ or service offer?

The idea behind “concept brands” (cont.).

• Historically, a brand like Sony have been very successful at being a concept brand, largely in respect of its highly innovative product lines like Bravia, Walkman & Playstation.

• Today, brands like Samsung and Apple are more successful at doing this, than Nokia or RIM. – In fact, it is difficult to typecast Samsung as a brand for being good at one thing, it is good at many things… but all

applications/ products share an underlying DNA and are all highly innovative and attuned to customer needs and the latest technology capabilities.

– One may say both Apple and Samsung are brands that respond to customer needs in an intuitive way.

• It is also apparent to me, that brands that are able to transcend traditional product and service boundaries, generally have distinctive capabilities that are deeply rooted in real product or service delivery credentials.

• Without serious craftsmanship capabilities (or inherent integrity), it is unlikely that strong marketing alone can turn a brand into a concept brand. – Swarovski had a limited market appeal with largely being a manufacturer of small glass ornaments, yet, at its core, it

had serious manufacturing credentials in its ability to craft very high quality crystals. • So within the DNA of the company, was its ability to transcend its traditional product range.

– In doing so, it not only leveraged its core craftsmanship competence, it also created partnerships with iconic brands to create a “multiplier effect” that benefits all the associated brands. This also opened up avenues for brand innovation, way beyond the traditional.

– In the process, Swarovski has multiplied the value of the brand in the minds of its customers, partners and as a financial asset for its owners. It has become a much more serious, larger business, with much greater revenue and potential.

What is the difference between a concept brand and a normal brand line extension?

• For me, an important one. • Line extensions (or as it may also be called “brand stretch extensions”) can be done from any brand name, regardless

of their meaning or their historical industry strengths and connotations. – Normally a brand owner would define its core brand as the “master” or “mother” brand, and extend from there. It would ascertain what attributes

apply to its master brand and then apply them across. – Some of these extensions have been fairly simplistic, i.e. “If we manufacture a good soap, we must also be able to manufacture a good shampoo.”

• Whilst this sounds logical, this was not always practical as fairly simplistic extensions entered markets where established competitors were strong and equally well established.

• So maybe in the new market, another shampoo brand was already the strongest… and the new entrant brand did not have the credentials to compete on an even footing there.

• In fact, the general marketing practice has been to take a brand that is very strong within its defined market, often the market leader in a category, and then extend it into related products. – So a dishwashing liquid will be extended into detergent or other related products, or a bar soap will become a shower gel or shampoo.

• The difficulty with many line extensions is often that most extensions lag the original brand by a very long shot. So although some of the extensions will gain traction in the marketplace, they hardly ever become as big as the original product. So although Virgin does many things, it is still best known for being an airline, even its megastores are not as widely known as the airline.

• Even then, there may be benefits to the original brand, in that the amount of shelf space allocated to it in stores increases dramatically, pushing-up the overall visibility for the brand. – This was very evident when Cadbury some years ago took ownership of its brand name and its unique purple colour by in store displays and

merchandising, as well as in aligning all packaging to become more purple. It leveraged the strongly differentiated imagery of the brand for the benefit of the brand as a whole. According to market reports, it increased the market share of all Cadbury products in the process.

• So whereas any brand can line extend, very few line extensions are concept brand extensions. A simple acid test would be to ascertain what percentage of market share the new spaces the brand entered holds in its new markets. In most traditional line extensions, this market share is small.

Customers do not make decisions purely based upon product or service category.

• Although it is fair to say that customers historically made decisions based upon very definite product categories (“I need a bank” or “I need a television set”), it is fair to assume that the convergence of categories have blurred the finite distinctions between categories, i.e. banks are today only one of the options to save, transact or borrow money. – There are many other options outside of the traditional boundaries of banks, like retailers, credit card companies,

investment companies and insurance companies, to mention but a few. Likewise, today you can watch television without owning a television set, or even without owning a computer.

• In business-to-business categories, much of this has occurred. – Whereas there were finite distinctions between consulting firms, information technology firms, Internet service

providers, telecommunications companies and hardware firms, the lines between these kinds of companies have become totally blurred. • Consulting companies now often straddle all of these categories and are able to offer integrated strategically aligned solutions across many

boundaries. Increasingly, this territory is even now made more complex with “Big Data” service providers and media companies.

• As Gary Hamel stated years ago, “99% of what you need to know about the future as a company, now comes from outside of your industry.”

Customers do not make decisions purely based upon product or service category any longer.

• The “uses and gratifications” theory (Blumler & Gurevitch, 1974) stated that consumers choose the media - or other sources of information (one can also say “content” as we call it now) - based upon the ability of these media to satisfy their needs for information. – Should one medium not satisfy their needs, they will simply use another medium - or more than one medium. – The Internet has made this access easy.

• So arguably any brand name is able to straddle a wide range of associated product or service value propositions (or offers) to its existing or potential customers.

• In a world where the brand dialogue is as strong as the product or service dialogue, brands have replaced generic category definitions and have become “customer problem solvers” whose only definition is based upon the appeal of a given brand to solve problems… – The only exceptions to this rule are the product or service categories where the degree of brand differentiation is so low,

that any one brand is unable to deliver a discernable point-of-difference that is better than average. – To site an example, many consumers make airline brand decisions purely based upon price, as they do not believe any

airline to offer something that is worth paying more for.

• The credibility and ability of a brand to be seen in a wider context, will determine whether it can be a concept brand.– This may be by offering a similar product, i.e. like Swarovski, or it maybe by offering a new category of product (i.e. Apple

iPad).

• If a brand is strong and has the potential to be a concept brand, it will be a good platform, regardless of whether the new innovation is incremental or revolutionary.

“Unlearning” perceptions is difficult and can take very long.

• One of the key challenges brand owners face, is that they “create a given meaning for their brands” in the names of stakeholders, if we adhere to the traditional definition of “brand positioning”, the greater the clarity and single-mindedness of this perception, the stronger the brand was positioned – so the stronger is the brand able to withstand competition (i.e. Ries & Trout, 1972 and later). – This means this very strength often stood against the ability of the brand to straddle product or service categories. – The more a brand is associated with only one industry, the more limited its wider use may be. – One may even claim that at a certain level, it makes no sense to force a highly dominant product brand to become a

concept brand as it may undermine its very dominance in its original category. So maybe you do not want to weaken Toyota = cars.

• In many consumer research surveys I conducted on behalf of brands, I experienced this: once a brand has attained a given set of perceptions, it becomes very difficult to change this perception as we need to “unlearn” existing perceptions – one of the hardest things to do in marketing. – In product or service categories like banks, telecommunications companies, or even car companies, perceptions can take

very long to change for most brands. – Even if we take fast moving consumer goods, perceptions are highly resilient against change: most brand leaders thirty years

ago, are still leading today if you compare the brands of companies like Unilever, Proctor & Gamble or Nestle.

• This means a new brand, with a distinctive value proposition, are often able to offer something new that creates a new “space” in the mind of the consumer.

• So, can your brand become a concept brand, will it be good for its growth potential, or will it weaken its current franchise. These are key questions to ask.

Examples of traditional brands versus concept brands.

Product & service brands, where what they offer fits into a narrow band.

Concept brands - or brands that seem to succeed in transcending one offer.

Brands that succeeded in becoming concept brands, from being product or service brands.

Swarovski leveraged its core skill, to craft superior quality crystals, to extend its brand appeal by extending into product categories where the demand for high quality crystals opened-up new markets.

What new products could it offer customers that could leverage the same skill, yet would still be able to use the same brand name credibly?

It combined this with a shift into fashion products by partnering with many high profile brands that appeal to key fashion, lifestyle and home and accessory markets.

The DNA of the brand therefore enabled its stretch beyond small glass ornaments.

Brands that succeeded in becoming concept brands, from being product or service brands.

Apple even changed its name from “Apple Computer” to “Apple Inc” to reflect its broadening of its product category offers.

Ironically, this move made Apple stronger than ever before in its computer market! One may even claim the distinctiveness and credibility of the new products or services of Apple such as iPod, iTunes, iPad and iPhone, made its computer products more credible than before.

Yet, the basis for its being a concept brand, is its depth of differentiation in brand design and delivery. It is not the Apple name alone that could do it, it design credentials were a vital part of it.

Brands that succeeded in becoming concept brands, from being product or service brands.

Brands born in the Internet era has generally had it easier to extend, yet very few did it as well as Amazon.com. In my mind, two of the key reasons for that are:• Amazon has focused upon how it understands and uses its own user data from day 1.• Amazon has always defined itself as a content vehicle, it never saw itself merely as as an online retailer.

Brands that succeeded in becoming concept brands, from being product or service brands.

Dove is arguably one of the most successful brand line extensions of Unilever ever.

I believe the reason fundamentally lies in taking a highly distinctive (and relevant) consumer value proposition and extending that value proposition into related product categories where the same distinction matters to how the product performs for consumers. (see the quote from the Dove website on the next slide which endorses this view).

Arguably, very few brands offer such a relevant, distinctive basis for extensions: that turns a brand into a concept brand. It also means unless a brand has such a deep basis for differentiation that can credibly extend into other applications, it is almost impossible to turn it into a concept brand.

From the Dove website:

“The Dove Difference

The Dove brand started its life in 1957 in the US, with the revolutionary new beauty cleansing Bar. With its patented blend of mild cleansers and ¼ moisturising cream, Dove’s iconic Beauty Bar rinses cleaner than soap, leaving skin clean, soft and smooth. It is #1 Dermatologist Recommended brand in the US, Canada and France and strongly endorsed by Dermatologists across the world.

Dove brand’s heritage is based on moisturisation - proof not promises grew Dove from a Beauty Bar into one of the world’s most beloved beauty brands. Today Dove offers a range of products: Body Washes, Hand and Body Lotions, Facial Cleansers, Deodorants, Shampoos, Conditioners and Hair Styling products, all developed on the universal premise of real care.”

The real - and credible - offer of “moisturisation” is the foundation that enables Dove to be a concept brand.

Brands that seem to struggle to redefine themselves.

• Operating systems?• New, universal, cross-device operating systems? • Hardware?• Consulting?• Data?• Information?• Integrator?• Content?

Can Microsoft ever again attain the omnipresent, omnipotent position it once held?

Does it have a competence-base that can credibly extend its brand – and if so, what is it? This is not apparent.

Given the financial muscle of Microsoft, as well as its geographical and numerical dominance in operating systems, it does have a window within which to investigate and redefine itself credibly: but little of what it has done to date, convinces me of that it will retain its dominance ten years from today.

What is the basis Microsoft can use to become a concept brand? It does not lie in its historic dominance of operating systems, even if that buys it time.

What is Microsoft really good at? Does anyone know?

Brands that seem to struggle to redefine themselves.

• Bookstore.• Online bookstore.• eBook readers.• Etc.

It may be that the historical strength of Barnes & Noble, actually undermines its future potential! What made it hugely successful (category dominance), is now its demise!

This may be in many ways, the way its brand is positioned so clearly within a bricks and mortar book emporium, the way in which staff thinks and works - its name even?

Does the name itself – and what it means –matter in concept brands?

• A key question is as to whether the name can “stretch” beyond one given product or service category.• Can a name like Toyota be more than a car?• This question has several answers:

– Theoretically, many brand names can stretch much wider, yet is is the weight of perception that either enables or restricts that. – If a brand name does not contain a generic word, i.e. Vodafone, it is easier for it to stretch.– If a brand name is lateral, i.e. Orange or Apple, it is very easy.– If a brand name is a family or common name, is it technically able to straddle other categories. – Yet, the weight of historic investment in the brand name will make it easier or more difficult. If Toyota has always sold cars, it is very difficult to

get it to become more than a car brand, and whatever else it does will always remain small within its range of product offers. In fact, most brand “line extensions” are still anchored by the first products the brand made (i.e. luggage within Louis Vuitton is still a dominant part of its business).

– Sometimes you may not want to undermine the strength of your key brand - or risk doing it.– If the name itself stands for a certain philosophy (i.e. being trendy), property (i.e. a superior skill), or any association that dominates the

overall perception of the word, then it can easily become a concept brand. The brand name Virgin stands for a certain brand attitude (being irreverent and challenging) that competes in product or service areas where they believe consumers are “under-serviced”, so Virgin offers better value.

The benefits of concept brands.

• The ability to evolve into new product, service and value proposition spaces without having to launch new brand names.

• The ability to leverage the positive user franchise of a given category and extend it into another one, thereby enabling user growth into new value propositions or applications.

• The fact that the overall brand concept becomes so strong that it becomes less dependent upon the marketing of any one given use of the brand. This enables a more economical growth for the brand into new users.

• A concept brand that is strong overcomes the straightjacket of its original industry and enables a less risky entry into new markets.

What does it take to become a concept brand?

A strong philosophy, ideal or purpose behind the brand. One that forms the basis for a strong, identifiable DNA all staff can adhere to.

A very strong core capability set, not only based upon strong brand management principles, but also based upon deep company manufacturing, skills or customer

centric capabilities.

One that transcends everything the brand does in its own name, i.e. representing a particular way in which it approaches everything it does.

Brands that are able to do this, often have a very strong value system that regulates how it operates; the kind of people who works for it and even how it relates to its

stakeholders.

Moving to becoming a concept brand: questions to ask.

• Is your company value system able to deliver upon a concept brand? – What are the benefits of a concept brand for you – as against launching a new brand?

• Can your company capabilities stretch beyond its current applications? – If so, how?

• Can your current perception stretch beyond limited product or service categories?– Define what your brand stands for in the minds of existing and potential stakeholders. – Will extending the brand strengthen or weaken your current franchise?

• Can your brand compete effectively against strong brands within the new product spaces you will now enter into?– If there are dominant existing brands, can your brand credibly compete with them?

• Define the products, services, emotions, values, benefits, symbols, features, icons associated with your brand name. – What enables you to define it as a product brand? – Is its category strength too good?

• What factors can be used to straddle existing product or service categories? There may be none, some or many… if there are, these can form the building blocks for the concept behind your brand.

• These factors are more likely to be softer variables, but need not only be that, as examples:– Its ability to manufacture crystals of the highest quality, enables Swarovski to manufacture many different kinds of products. By

leveraging this ability and by expanding its “glamour IQ”, the brand has widened its appeal.– Its ability to manufacture household products of high quality that are fun to use, has enabled Alessi to produce household items,

jewellery, fashion accessories and other products, all sharing a certain “attitude” and stylistic concept.

De-constructing the building blocks of concept brands.

• I find the approach (or “tool”) by Osterwalder & Pigneur, in their book Business Model Generation (2010), useful to de-construct the what they call “The Business Model Canvas”.

• It acts as a useful prompt list, and also as a useful way to generate alternative options within the defined categories.

• The define the categories as: – Key partners.– Key activities.– Value propositions.– Key resources.– Customer relationships.– Customer segments.– Cost structure.– Revenue streams.

• This is a useful list to 1. “unpack” the current brand and business; 2. assess “gaps” and new areas of opportunity for new brands or even for new competitors; 3. identify trends that are apparent in consumer behaviour, technology, cost structures, channels - or other areas; 4. “generate” alternatives within each defined category and 5. enable a “reconstruction” of new value propositions for the brand.

• I also appreciate the fact that it has an inherent “test of co-dependence” - or how the different areas impact one another.

Deconstructing the building blocks of concept brands: using a key conceptual property to straddle product or

service categories.

Nokia “owns” a very powerful property, the concept of “human touch” or human connection.

This property conceptually enables the brand to straddle other product categories where this kind of promise or philosophy is important, i.e. consumer products, applications.

Yet, it uses this property in a very limited way, so much so, that it has probably lost the potential contained within the concept by now.

Sometimes you may as a brand own a property that enables you to straddle, like Nokia.

Yet, Nokia does not use it that way!

Concept brands also have a far wider definition of brand interface, and redefines “brand meaning”

ongoing.

• Unlike product or service brands, concept brands define themselves far more centrally within the lives of their customers.

• The “meaning” contained in concept brands are thus far more dependent upon “co-creation” between brand owner and brand user.

• The meaning created is a function of the amount of information, or information content, added. As all communication is about the creating of meaning between parties, concept brands enable the growth of meaning and perceptions in an incremental way.

Conclusions.

• Concept brands are able to straddle traditional boundaries of brands. • They enable a brand to extend its markets, segments and value propositions. They make

market entrance easier and create a good barrier to entry. • Yet, before it is done, it is important to question:

– Whether the brand can extend?– Whether there are lateral opportunities for creating a concept brand?– What meanings the brand contain today - and how far it can stretch.– Where it competes and whether it can compete with existing strong brands within new markets it enters.– What fundamentals underlie it, and what perceptions underlie it.

• Does the brand have strengths it can leverage, intrinsically, in skills, in capabilities, in competence – and/ or perceptually?

– How can the brand ensure that it leverages these strengths and in the process build a still stronger brand, but also open-up new opportunities for market, segment, product, service or revenue growth.

• To do that well, we need to ask the right questions and use a few analytical tools. • If we do that right, concept brands will build brand and business value.