Brand builders

From Formula One cars emblazoned with corporate logos through to huge billboards in emerging markets, IT vendors genuinely understand the importance of brand equity. Deciding on the correct level of investment and measuring the return it achieves is a complex business balance to perfect.

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By  Alex Malouf Published  October 27, 2004

Creating the magic|~|vasuSamsung.gif|~|K S Vasudevan, senior manager at Samsung’s Gulf Electronics IT division|~|The million dollar question all companies face is how to sell products at a premium by virtue of their brand equity. But building a brand consists of much more than just throwing cash at marketing managers. Creating that brand magic takes imagination, experience, knowledge of local end-users and strong distribution channels. As Middle East customers move away from purchasing decisions based purely on price the power of the brand will grow. Vendors who succeed in creating a name in the market will move ahead, see profits soar and take ownership of the most prized possession in any industry: customer loyalty. In today’s world, where the majority of IT products are manufactured by the same companies in a corner of China called Shenzhen, how do vendors distinguish their goods before the gaze of the consumer? The elusive magic of branding, the image that end-users buy into, is the fine line between growing a business and floundering in the market. The goal of every smart vendor out there is to pull the consumer in and build a relationship that will last. “When we talk of a brand, we talk of public awareness, we talk of how much of a positive opinion exists and how favourable end-users are towards the brand name,” explains K S Vasudevan, senior manager at Samsung’s Gulf Electronics IT division. “Vendors have to develop end-user buying behaviour and encourage them to show loyalty towards us. Branding has to constantly work towards this and enhance the customer-vendor bond.” The trick is creating a name that consumers recognize and then let the equity filter down into product divisions. “You invest in a brand to create value and then you extract that value. The best way to achieve this is by pushing your product lineup because when people trust your brand they trust the products,” surmises Hamad Malik, senior regional manager for marketing and corporate communication at LG Middle East and Africa. “The brand helps significantly. Whenever you come up with a new product there is the automatic trust. It is like going to a foreign country and walking into McDonalds. You know what you are going to get.” Once name awareness is in place activity switches to the product and the branding cycle repeats itself. “Our endeavour is to build loyalty at both a product level as well as with the Samsung name,” adds Vasudevan. “Take printer products as an example. We are not in the stage of talking about loyalty but of awareness instead. You have six levels — awareness, positive opinion, familiarity, purchase intention, customer satisfaction and loyalty. Each of our products is ranked by this method, as is the brand name itself.” Vendors fostering a brand image use different activities when marketing a product segment. As part of its brand building activities Dell lit up the Burj Al-Arab hotel during the first night of Gitex, while simultaneously launching a TV campaign to drive desktop and notebook consumer recognition. “Anyone who drives past and sees this place lit up just goes ‘wow’,” explains Pim Dale, managing director at Dell’s European distribution business. “This is part of our relationship building with customers. Our TV advertising is aimed at a product segment and works for home-users. There is a clear distinction between the two.” Branding campaigns have to be carefully crafted according to the tastes of the end-user and the product type in question. “Marketing can vary markedly,” adds Dale. “TV advertising for servers doesn’t work. IT services advertised through white papers and targeted mailers at corporate IT managers services do work. TV advertising for the latest notebook works for the consumer. Direct mail works better for small and medium sized companies rather than print or TV. Different media, different products and different customers — that is the mix and you have to get the mix right on the customer side so it tallies with the product.” ||**||Tried and tested|~|LGmalik-side.gif|~|Hamad Malik, senior regional manager for marketing and corporate communication at LG Middle East and Africa|~|But tried and tested techniques for selling both a name and a product don’t always work as well in the Middle East as they do in Europe or the US and vendors who take differences into account flourish. “We at Philips have a global branding strategy, but the application of this strategy is definitely influenced by the dynamics and the level of development found in each country,” notes Louis Hakim, corporate communications and brand manager at Philips Electronics MEA. “You cannot apply the same branding approach you apply today to Western Europe or the US to the Middle East or North Africa. You need to factor in, and take into account, the level of market development and the mediums that are available to carry the message. As long as that message is consistent you will get it to your end users, partners and consumers by whichever medium you use.” Of course, some mediums are more acceptable than others in a region notorious for its cultural dos & donts. Panasonic aimed its current marketing campaign at Arab youth and employed popular songstress Amal Hijazi as a brand ambassador, but had to tailor its activities for certain countries. “We employed Amal and utilise her image to link fashionable and popular trends with our brand in the region,” says Atsushi Hinoki, general manager for advertising and PR at Panasonic Middle East. “We handle all the Middle East, Africa, Iran and Afghanistan from Dubai and we use the same message through all these markets. In some countries we cannot use Amal’s image, like in Iran, and so we have to remove her portrait. There are many cultural social restrictions like not using women in print. That is why satellite TV is more advantageous for us to spread the marketing message.” Pan-regional television has been a boon for IT vendors eager to push their image and products across to the consumer. “The influence of TV on consumers in the Middle East is very strong when compared to other regions, and in terms of marketing it is the strongest medium we can use,” adds Hinoki. “Satellite TV covers a huge area and Arab populations have their favourite channels. Contrast this to the press and you could say that print media has still not developed when compared to the Western world. Of course in Dubai there are new publications springing up but it is still not comparable to Europe. As we are an audio-visual company, TV advertising fits in with our product portfolio. So TV becomes a medium where we can communicate our product in a more animated way unlike press, which is flat.” No matter what medium, marketing doesn’t come cheap and vendors allocate substantial budgets to fund activities. While no vendor said on record what they spent, several revealed their budget percentage and the average allocated for most was 4% to 5% of sales revenues. “We use two methods for calculating how much to spend,” explains Max Chiu, deputy manager at Gigabyte’s pan Asia and Africa sales division. “The first is based on annual sales income and the second is what we think we strategically need to allocate on a product-by-product basis. We might have a resource pool and then we will think about a percentage to put aside for a strategic market.” But vendors walk a tightrope when deciding on that extra spending — spend too little and the brand will suffer, but spend too much and risk losing money for later projects. “Marketing is like fire — the more you put in it the more it takes,” admits Michel Sabbagh, marketing manager at Canon Middle East. “There is no limit to marketing. More press and publicity will always do us good, but certain issues have to be taken into account when deciding on how much to spend — where is the launch, when, what product is being unveiled and how should that product be launched. All these factors should be taken into consideration because budgets are difficult to set early and they change gradually after being set in motion.” ||**||Channel contribution|~|PimDaleDell.gif|~|Pim Dale, managing director at Dell’s European distribution business|~|When working on campaigns vendors will often combine with distributors to deliver a branding double whammy and get more bang for their buck. “Our funding is worked out in cooperation with partners,” says Dale. “We sit down together and discuss objectives for a campaign. What we don’t do is give soft dollars in marketing funds. We gather our regional partners and say this is what we want to do and they buy in. It is a different approach to our competitors and it has worked wonders for us.” On a retail level vendors find it much more difficult here than in Europe or the US due to the fragmented shopping landscape. “In this region the market still focuses a lot on individual retailers and wholesalers,” says Hakim. “Branding in a French chain store is totally different to a shop in Saudi. In one place you could have a shop-in-shop concept and in another place you could barely have a poster and you need to replace it every week as it will be damaged. This region is much more of a challenge on the retail side than Europe where the industry is much simpler and thought out.” This complex retail scene has a knock-on effect on pricing, and selling on quality rather than price can prove tricky in the Middle East. “Price is a major consideration in the region, unlike in Europe where shoppers are less taken by the price and more by brand, reputation and service,” says Sabbagh. “But there is an increasing realisation here of the benefits arising from a branded product and markets are changing from being price driven to more service and reliability oriented.” This opinion is reflected across the board but most vendors believe it is only a gut feel as there is no way they can measure the return on investment (ROI) they are making. “I don’t think anybody in the world can measure the return on the money spent — it doesn’t work,” comments Hakim. “Instead you go by learning, and re-apply best practices. The best anyone can do is use a sales objective when running the branding exercise. And I wouldn’t look at branding in this case as Philips branding but as product branding. If you succeeded in achieving your targets then build on that. If not, try to understand what went wrong and then change things around for next time.” A few do attempt to measure the returns on spending. “There are a few parameters which we use to check our spending and all our activities are measured against that,” notes Vasudevan. “One is the yearly brand attitude survey that provides a clear indication of ROI on a global level. Secondly, attitude surveys show growth year-on-year and brand equity. The third parameter is our own price positioning. Unless you are in a commanding position with a considerable brand image you cannot demand a premium. The final measure is average price index. Our index for any particular product line has to be more than the industry average.” Branding battles have been waging for years in the GCC but emerging markets are providing marketing managers with a tasty challenge and many are rising to meet the occasion. “Markets such as Libya, Iraq and Algeria are important to us,” states Malik. “We are investing resources in enhancing our partner capabilities there and developing channels, launching products and designing the best marketing programmes. There are companies that are waiting to move and they don’t want to make that investment in a risky situation where nothing is settled. LG is willing to take that risk. We believe in the potential of up-and-coming markets and we are reaping the benefits of that investment.” Others disagree with the importance of first-mover advantage in brand building. “I would rather not be the first mover,” argues Dale. “People are no longer naive: they understand what they are buying. Any supplier that believes customers are naive and they can go in there and make a pile of money is wrong. The internet has broken down all the barriers and people are smarter and more educated. Are they going to rush to the first glittery brand that turns up? No. They are going to take their time, understand and realise the value and then make their choice. An emerging market opening up turns like any other market very fast. Vendors dropping ship and going in there fast to establish a brand — I don’t think that world exists any more.” ||**||Branding power|~|LouisHakim.gif|~|Louis Hakim, corporate communications and brand manager at Philips Electronics MEA|~|Regardless of the market, channels have never been more vital to vendors building a strong brand image. “With no proper distribution network — no matter what the brand — you can’t reach out to the end user,” adds Vasudevan. “With [several countries joining] the WTO next year it will be more important to have a proper distribution network. If you don’t have the proper distribution network then opening up borders wont make any change. Today anything can move anywhere and vendors cannot stop it.” Unscrupulous players using the brand equity of vendors is major issue in the industry. “Others leveraging off our image does concern us,” explains Malik. “There have been instances when I have gone into markets and even seen shoes with the LG brand on. Recently we have been facing problems with our USB drives. We deal with piracy, fake products and grey markets. We have systems to look into these issues and we try to do the best we can with the relevant authorities to eradicate these practices when we find them.” The Middle East is poised to see another invasion of vendors originating from China. To some customers, vendor nationality is still an issue, but attitudes are changing. “To a certain extent there is a link between the brand and the home country in the beginning,” says Sabbagh. “When Japanese started manufacturing products people said, ‘its terrible’. Now Japan is seen as one of the most important manufacturing countries in the world. The same applies to the Koreans. Just ten years ago people would say they are not very good but now they have considerable brand equity. Five years ago people would say China is the lowest quality you can have but in fact in China you can also find good quality products. Many vendors have moved production to China or outsourcing from Chinese manufacturers to take advantage of low costs. This should have no impact on the brand as long as quality is not compromised. It is ok to give them a lower price but it is bad to give a lower quality product.” With the Middle East becoming more important to IT vendors, expect to see branding attain more importance. “As our sales revenues rise so will our marketing expenditure,” notes Vasudevan. “There are new markets and product segments and it is obvious that spending will go up. We are a profitable company and want to remain that way.” Vendors that build the brand will achieve the most valuable value-add in the industry : customer loyalty. “Pay a visit to any large store that sells watches to see the power and impact of branding,” notes Ayman Abouseif, senior Middle East and Africa marketing director at Oracle. “As we all know today all watches are very very accurate. Some may have more features than others but we also know that the difference in sales price between a US$15,000 watch and a US$15 watch is not due to higher accuracy, or more functionality. It is almost entirely the premium commanded by the brand. So that is an example of how a good brand can command a higher price premium.” ||**||

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