Millward Brown's Nigel Hollis on how smart brands make more money

  • Marketing
  • April 29, 2014
  • StopPress Team
Millward Brown's Nigel Hollis on how smart brands make more money

Nigel Hollis, author, award-winning thinker and executive vice president and chief global analyst at ColmarBrunton’sglobal partner Millward Brown, brings 30 years of research experience to bear on his understanding of how marketing communications can build and maintain brands. He gave a presentation in New Zealand this morning. And he answered a few of our curly ones. 

Your latest book is called Brand Premium. What’s it all about? You talk about the need for a brand to be meaningful but what separates a meaningful brand from a non-meaningful brand? 

Brand Premium is all about how brands can create stronger financial value growth and one of the ways in which a brand can create that growth is through commanding a price premium over its competitors. Unfortunately, this is something that many marketers appear to have forgotten. All too often I observe brands chasing after sales growth without giving thought to whether that growth will be profitable or not. The best approach is to identify a profitable price point and identify ways in which to grow sales at that price point without discounting. To do that effectively you have to start with what makes your brand meaningfully different from the competition.

So what makes a brand meaningful? People value anything that makes a difference in their lives. Something that empowers them, enthuses them or inspires them. So at its most basic a meaningful brand is one that meets someone’s needs of the category but which also evokes a positive emotional response and appeals to them more than other brands in the category.

The subtitle is ‘how smart brands make more money’. What’s the best example you’ve seen of that process in action?

That is a tough question because every brand faces different challenges. In the USA, luxury car brand Audi challenged people’s perceptions in order to grow its brand. The problem facing Audi was that while it was often part of the consideration set early in the purchase process, most people ended up ignoring the brand in the later stages of purchase and buying a BMW, Mercedes or Lexus. Audi set out to boost its premium image by launching new models. Innovation of this sort is often necessary to change people’s perception of a brand. In the years following these launches, however, Audi then challenged buyer perceptions more directly and focused on the new-found momentum that the Audi brand had developed and reframing its competition as ‘old luxury’. The end result is that Audi’s market share grew by 70 percent between 2007 and 2011.

  • Check out some of the ads featured in his book here

As Bob Hoffman, AKA the Ad Contrarian, says, “brand power is real, but it’s highly contingent”. Consumers have preferences and habits, but very little love for brands and they’ll happily switch if the price is right. Do you agree with that? And how can brands that aren’t Nike or Apple drive loyalty?

I happen to agree that most brands evoke little love in their consumers but that does not mean they are not valued. People value brands that make their lives better in some way and while everyone likes a good deal not all consumers are price-driven. Besides, isn’t it the marketer’s job to understand and reinforce preferences and habits? Our data demonstrates that any brand that is perceived to be meaningfully different from the competition has the ability to command a price premium. That difference does not need to be a tangible product advantage. In Australia Bega cheese created differentiation in the everyday cheese category by focusing on where the cheese came from, a town called Bega, and the people who produced the milk that made the cheese. The campaign helped Bega sustain a price premium in the face of stiff price competition. In the USA Dos Equis, a small Mexican beer, managed to boost sales and the perception that it is worth the price by launching the Most Interesting Man in the World campaign.

Does your framework also work for premium as well as value brands?

I would say that it is even more relevant for premium brands. After all, a value brand simply needs to offer a good enough product with a low price and then make its offer as salient as possible. As I have mentioned, premium brands also need to differentiate themselves in a way that resonates with their consumer. Why does being seen to be different matter so much? There are three basic reasons. First, a difference of some sort helps us choose between close alternatives. That difference may be trivial and not easily remembered after the event. Second, however, if a brand wants to be chosen and command a price premium then people need to be able to justify paying the extra money (even if it is only to themselves). Thirdly, the more easily people can justify their decision the more satisfied they are likely to be with their purchase after the event. Of course, that last one assumes that the actual experience of the brand lives up to their expectations.

Brands play on human irrationality. And there are many examples of consumers paying more for pretty much the same product or service if it has a different badge. What’s a good example of that?

I think I have to disagree with your premise. Just because people’s behaviour is based on instinct, habit and feelings does not mean they are irrational. In fact, those things ensure that we can act quickly and safely most of the time. Who does not want to repeat a good experience and avoid a bad one? If something makes you feel good is it irrational to pay more for it? I buy Motrin ibuprofen even though I know the store brand is cheaper. I feel that the brand name is more trustworthy and may be better quality. I feel better about my decision to buy the brand and spend less time on it than if I tried to convince myself that buying the cheaper version was a safe decision.

A lot of brands struggle to differentiate themselves. Is brand the only thing businesses in certain low interest categories have in their arsenal?

Is there a product or service category where the product offerings are truly indistinguishable? If so, shame on the company for not pushing their innovation agenda hard enough. Is the mainstream beer category indistinguishable? I bet a lot of people would say Steinlager Pure tastes different from Classic or Heineken. What about milk? In the UK Cravendale uses a unique filtration process to produce a better tasting, longer lasting milk. However, is brand important to the success of both those products? Absolutely. No one would pay attention to yet another product claim unless it was made in a compelling and engaging way. In the US, the insurance category seems undifferentiated (until you try to make a claim and the reality of your policy strikes home) and it is not a category that attracts a lot of interest so brands like Geico and Progressive have resorted to creating advertising icons that lend interest to the category. Differentiation is not just about product or advertising. It is fundamental to all aspects of the brand experience from product to customer service, from advertising to social media, packaging to point of purchase.

Do you think there is too much focus on campaigns rather than on long-term brand development? And does the ephemeral nature of social media help grow meaningful brands?

I think there is a natural tendency for people to think of marketing in terms of advertising campaigns rather than crafting the whole brand experience to be more compelling. A couple of examples come to mind of brands that have built credibility beyond just advertising, both from China. The first is Blue Moon, a laundry detergent brand. Blue Moon used to invest heavily in above the line advertising, then one year it stopped almost completely and diverted funds to in-store activation. This was not the usual price promotion or display, however, instead promotional girls drew shopper’s attention to the detergent’s fragrance and suggested it was more like a fine perfume than a detergent. The brand’s share increased dramatically and all while commanding a price premium over the brand leader. The second is Häagen-Dazs, the ice cream brand. In China, Häagen-Dazs is positioned as a luxurious treat for your loved one and, in addition to more traditional desserts sold through its cafes, sells wedding cakes. The cakes can cost as much as US$5,000 so only a few people, like pop stars, sports stars and other celebrities can afford them. The combination of star power and the symbolism of marriage says more about what Häagen-Dazs stands for than any TV commercial and is precisely the sort of thing that gets a brand featured in social media. Following on from that, does social media help grow meaningful brands? It can do provided the brand knows what it stands for and there is a clear understanding of what the brand should say and do and what it should not. Otherwise it is too easy to end up chasing superficial buzz rather than really building your brand.

There seems to be a movement towards brands with a purpose, whether it’s helping the environment, improving society or adding utility. Do brands need to stand for something? Or is financial motivation still enough?

To answer the last part of your question first, brands always need to stand for something. In fact, everything you do creates perceptions and feelings in the mind of your consumer so you create a brand whether you choose to manage it as such or not. Does a brand need purpose? Well, no brand is going to sell if it does not satisfy people’s needs in some way. My definition of purpose is perhaps a little more prosaic than the more idealistic ones that you mention. If your brand is not going to make a difference in people’s lives then it is unlikely to be financially successful. That may mean pursuing a higher order purpose like Dove’s Campaign for Real Beauty or IBM’s Smarter Planet, but that sort of approach will only work if your basic product or service is a good one.

How do brands find their purpose? And how do you amplify what it stands for? How much of a role does advertising play?

Often it is a matter of digging back into why a brand was created in the first place. The founder of a brand usually has a clear sense of why they believed their brand had something better to offer even if that purpose might get lost over time. For other brands it may be a matter of brainstorming what the brand could adopt as its purpose. In that case, however, it needs to be something that will enthuse the company’s employees, not just consumers because they are the ones that will exemplify what the brand stands for. In that regard it may not be necessary to amplify what the brand stands for externally but it is important to communicate it internally. If your employees buy into the idea and are eager to put that purpose into action then customers and consumers will experience it directly.

Advertising and research often seem to be uneasy bedfellows. Why? And is it close-minded for agencies not to use modern testing like that offered by Millward Brown to improve their output?

Yes, it is an uneasy relationship. It does not have to be, but in part that is a function of why and how pre-testing gets used. If a client uses pre-testing to beat the agency into submission or give go/no go decisions then it is no surprise that the ad agency will hate pre-testing. If the pre-test results are used as a start for discussion and find out why people reacted that way and what might we do about it, then perhaps it is less threatening. And ad agencies are not entirely averse to pre-testing. I have heard people from the agency world admit that they love it when pre-testing validates their ideas in pitches. Perhaps a less tongue-in-cheek reason is that when creating advertising for a completely different culture it helps to have some feedback from the target audience, whether it is in a different country or a different demographic from the advertiser.

In New Zealand, almost 60 percent of groceries are bought on special. Is that a race to the bottom? And is a meaningful brand partially defined by how often it’s bought at full-price?

A while back McKinsey calculated that to offset the profit impact of a five percent price decrease the average company would need to sell 18 percent more volume. There are precious few brands that sales elastic. The outcome of having a meaningfully different brand should be that it is more often bought at full-price than its competitors and I am willing to bet there are some brands in New Zealand that still manage to command a price premium. Millward Brown’s Meaningfully Different Framework includes the Brand Premium metric, which allows marketers to understand what premium their brand might be able to command. The Brand Premium metric is based on how meaningful, different and salient people find the brand and has been validated against shopper behaviour using the Shopcom panel in the USA. On average, we find that consumers with high premium scores spend 13 percent more for a brand than those with low premium scores. Those people are a lot more valuable to the ones that always buy on deal and choose based primarily on price.

What are some mistakes marketers regularly make when it comes to their brands?

Marketing is about spending money in order to make more money than you would have done otherwise. All too often these days marketers try to justify their impact on the grounds of efficiency not effectiveness. Unfortunately, the two do not necessarily go hand in hand. Reusing global copy in a smaller market is a classic cost saving tactic. Yes, you save money on production but could potentially waste all the media budget on ineffective copy (chalk that up as another reason agencies should be more welcoming toward pre-testing). Another example is the relationship between excess share of voice and changes in market share. The evidence suggests that if you spend more than your brand’s market share this year then your market share will increase next year. It is not guaranteed, obviously, but it is a pretty robust generalisation. Now let’s put it another way. It is pretty difficult to achieve more with less, and yet marketers acquiesce to doing so all the time.

If you had one piece of advice for New Zealand marketers and agencies, what would it be?

Ask yourself, what does the brand you work on stand for? Do you know what difference your brand makes or could make in people’s lives? Is your understanding the same as your colleagues in the company or its agencies? If not, then there is a good chance the brand’s marketing is fragmented and inconsistent, and it is time to take a step back and reimagine what the brand could stand for.

  • Millward Brown findings revealed that meaningfully different brands capture five times more volume, command a 13 percent price premium and are four times more likely to grow value share during the next 12 months, compared to brands lacking meaningful difference. In fact, meaningfully different brands are expected to grow value share an average of 6.9 percent per year. Want to be one of those brands? Contact Rochelle Sands on 09 91992257 or email rochelle.sands@colmarbrunton.co.nz to discuss how Millward Brown’s Meaningfully Different Framework can be applied to your business. 

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