Branding in B2B markets- Myth or Reality

Can we brand a brick?

ACME Bricks, USA: Founded 1891

Manufacturers of brick used for construction

Decided to brand their product: Bricks

Present yearly sales: $200 m

Results (1998): Brand preference of 84%, a premium of 10%

How they achieved it:100 year guarantee as against industry norm of

5 yearsStrong commitment to communitiesSupporting charitiesPartnerships with professional sport celebrities

and teams

If a brick can be branded, then others can also be…

Power of a business brand

Saint-Gobain (1665) Siemens (1847) Bosch (1847)General Electric(1892) IBM (1924) Hewlett-Packard (1934) Federal Express (1973) Microsoft (1975) Intel (1991)

Tata Steel: Steel from a commodity to a brand

Rank Brand

2

3

4

5

6

Microsoft

IBM

General Electric

Intel

Nokia

13

27

32

33

45

51

54

70

Hewlett-Packard

Oracle

UPS

Morgan Stanley

Siemens

Accenture

Xerox

Caterpillar

Interbrand ranking of word’s most valuable B2B brands 2005

B2B brands: The important brand functions

• Increase information efficiency

• Risk reduction

• Value-added image creation

41%

45%

14%

37%

23%

40%

Brand Function B2B B2C

Differentiate: decommoditize product categories

Secure future business: (Caterpillar and Koamatsu are the only surviving brands in Japan)Create brand loyalty: from transaction based to relationship based

Command price premium: reflected in acquisition prices

Differentiate market efforts: improve communication effectiveness

Proposition-1Brands are just names, logos or slogans and are irrelevant to a B2B customer’s choice of a supplier

• Names:- After founders: Ford, Morgan, Siemens, Tata- Descriptive: Telekom, International Business Machines,

General Electric - Acronyms: IBM, HP, SAP, UPS~ sometimes becomes

confusing - Fabricated: Accenture, Exxon - Metaphors: Oracle, Apple• Logos: Are used with the same intention as in B2C. • (E.g. UPS, IBM, CAT)

• Tag-line/ slogans: Not commonly used, but can be compelling. (E.g. GE- Imagination at work, HP- Invent, Xerox- The Document Company)

• Brand story: Stories about heritage, memorable events work well.- E.g. FedEx- The young ambitious student whose idea of a specialised overnight delivery did not at all impress his Professor at Yale.- HP- Bill Hewlett & Dave Packard started in a small garage

Proposition-1(contd..)

Proposition1 is not supported as brand elements do influence customer’s choice of supplier.

* B2B products and services need to have common brand values across markets so as to reap the benefits of efficiency and economies of scale and hence brand elements play a significant role in such markets.

* Brand name gives a Teflon effect to products that protects them from any tainting or disrepute by rivals or otherwise

Delgado-Ballester et al(2007)

Proposition-2Brands are for products and though a B2B firm might have a portfolio of products it is really the company that customers are buying.

           

* As far as risk is concerned customers of B2B markets are risking significant business processes on the product, taking a significant standardization risk, and risking a fair amount of money (not to mention putting their own careers at risk if they make a wrong move)

Fischler, 2002

Seeks: SecurityBehaves: Actively Loyal

Seeks: Assurance & ValuesBehaves: Enquiringly

Seeks: An easy ChoiceBehaves: Passively Loyal Seeks: Savings

Behaves: Promiscuously

Low

Low

High

High

Relative Spend

Significance

(adapted from Understanding brands, Peter Cheverton)

Proposition-2 (contd..)           

Corporate brands as outlined in proposition 2 do play a major role in the customers’ decision process and hence this is

supported.

* The firm’s reputation in the marketplace and the customer base and their testimonials are all part of the branding exercise to remain relevant in the customer mindspace.

* B2B customers consistently value reliability and responsiveness as the two most important aspects of loyalty and they can be enhanced through relationship building.

* Relative spends in B2B markets are normally high and of much significance to the buyers

Proposition-3Brands are needed when there is no tangible difference. In B2B business there is a real point of difference

* General Electric (GE) netted a bonus of about $10 billion in 1999, roughly equal to its entire net income that year when revenues were $111.6 billion. GE management attribute much of impressive growth and success to the cultivation of intangible brand value or the GE "trust factor."

Robert Lamons in Marketing News

* Over the last decade, the Techtel study has consistently found on average a 70 % correlation between brand equity and stock performance.

* What B2B customers really want is a name or people they can trust; and strong brands play to these important drivers.

Proposition-3 (contd..)

           

* IBM, GE, and Intel are among the most valuable brands. Their intangible asset of "goodwill" is driving billions of dollars in value and market capitalization. IBM's 2005 brand value was $53.4 billion (GE, $47.0 billion; Intel, $35.6 billion). The 2005 Interbrand/Business Week "Best Global Brands

by Value," * IBM in the 1990s, under Lou Gerstner also

created transformative growth and value, reengineering itself with a brand-centric offering and culture, moving away from its product-focused legacy to value-added services.

In B2B business intangibility in the form of emotions (such as trust & goodwill) is significant from the buyer’s point of

view. Thus proposition 3 is not supported

Proposition-4B2B brands are tangible and based on logic; there is no room for emotion; customers work on facts & experience * Customers are not devoid of all human emotion

as soon as they assume 'work mode'?

Heimsch, 2006

* “Nobody gets fired for buying IBM,” means commercial buyers buy on more than product performance.

* Organisational purchases are influenced by emotional considerations such as trust, security & peace of mind

* Since the buying center is involved, the brand values need to be adapted accordingly for each:

Proposition-4 (contd..)

* “The brand has to become reference. (It is) important to say that XYZ company uses it; a reference of who your customer is, is important. Rajesh Hukku, chairman, I-flex solutions, India

In B2B business emotions (especially trust) does play a role in the selection of a supplier. Thus proposition 4 is not supported

* Peter Drucker has identified five eras from business point of view: natural resources (till 1875), industrial production (till 1915), mass markets (till 1955), information (till 1995) and to the fifth era (called trust networks by Moon et al, 2001) (till 2035).

* Brand trust is that “consistently keeps its promise of value to consumers through the way the product is developed, produced, sold, serviced and advertised” Delgado-Ballester et al, (2003)

Proposition-5FMCG brands have to convince an individual, B2B firms have to convince the whole company. This calls for creative selling, not branding.

* B2B transactions often involve lots of money, complexity, and people and thus there is even more need for a common set of values to guide a firm through the whole transaction process.

* The brand building tools include… • Personal Selling: Due to restricted number of customers, close personal interaction is required

• Direct Marketing: Direct mail, fax, e-mail, catalogues, internet

• Public Relations: For credibility and authenticity

• Trade Shows & Exhibitions: To get access to new suppliers & customers

• Advertisement: Balance between factual info. & emotional appeal

• Sales Promotion: To encourage trial and increased usage

Proposition-5 (contd..)           

* A strong brand with an effective positioning strategy speaks to and taps into the totality of these buyer needs.

* Lindstrom, (2007) has studied a few micro organisations which have demonstrated the effective usage of network building (at low cost) to advocate their brands

Having a enterprise-wide value system centered around the brand goes beyond creative selling. Hence

proposition 5 is not supported.

* B2B marketing looks at adaptations made to the various elements of the marketing mix :

– e.g., less emphasis on mass advertising and more emphasis on personal selling

– a central focus on the inter-firm relationships and business networks within which firms have to operate

Proposition-6

B2B customers make it very clear that price is all that matters

           

* Purchase managers, in order to enhance their negotiation power, attempt to convince suppliers that their offerings are the same as their competitors- that they could be easily replaced.

* Competitive advantage would accrue out of the company’s efforts at creating superior customer value.

Woodruff (1997)

* Customer value cannot be constructed only by quality and price considerations, but that customers take into account all the ‘get and give’ components to arrive at the value consideration.

Zeithame (1988)

Proposition-6 (contd..)           

* In a B2B environment, the buyer is using the company’s money, and the key driver may be career advancement or even job protection. This means that avoiding making a mistake may be more important than making the best decision. So there are many B2B brands such as Intel, which have achieved and retained a status that justifies a price premium.

* Instead of just focusing on the price aspect, building an integrated brand is many times more likely to create deep, long lasting relationships with its best customers.

Lepla et al, 2003

Price does matter in B2B markets but so does other aspects like security on the job and perceived quality,

which does not support proposition 6.

Proposition-7You need millions before a brand means anything- cost of advertising, or quality brochures, and a B2B firm does not have such a budget for it.

            * In B2B markets, a firm needs far more factual

positioning and a longer contact that is carefully prepared to interact mutually with the prospective customer.

* The advantage is that if done properly, the cost is far lower and, if done correctly, the risks involved far smaller than in consumer advertising. * In 1991, Intel launched a $100 million cooperative "Intel Inside" brand campaign with PC makers, to build "consumer pull" for the Intel component. The brand itself contributes about $2 billion annually to Intel's market value and today is the fifth most-valued brand in the world, with intangible financial worth estimated at $35.6 billion

(Interbrand/Business Week)

Proposition-7 (contd..)           

* Only 15% of brand loyalty is generated by up front promotions, while 85% comes from the point of sales contact and beyond. In the B2B market, this means that what the sales teams are saying, the tools they are using to deliver their message and the customer’s total experience with the firm, become more important in creating the brand image.

Booz, Allen, Hamilton

Firms are already investing in ‘advertising’ through various means; they need to proritise the promotion

mix. Hence proposition 7 is not supported

* In fact unknowingly, a firm may be actually investing in “advertising” through the training of its sales force, printing leaflets, improving websites, sponsoring events, etc.

What a B2B firm should do..* “It is not just about what you say but what you do as a

company (to build a brand).” Len Vickers, Former head of corporate marketing at GE

• Estimate the brand health. The key elements are * Leadership (availability of brand, its reputation &

point of presence) * Liabilities (negative associations and customer

reluctance)* Attractiveness (positive associations)

* Distinctiveness ( perceived relevance of a brand) and * Satisfaction ( performance against customer

expectations) Berg et al, 2007“The more successfully you develop and exploit your

relationships with a whole range of other businesses, the more effective your strategy will be. So the fundamentally most important factor has to be the ability to manage relationships between businesses effectively.”

Brennan, Canning and McDowell

What Customers Expect…

B2B brand performance expectations and rising brand significance (adapted from Understanding brands, Peter Cheverton)

- a market builder - a business improver - tuned into the business

environment Increasing brand - a solution providersignificance - a performance enhancer

- a life saver - steady as a rock - easy to do business with - cost reducer - price buster

* Brands drive B2B. Those who recognize this fact and leverage their full brand assets can create a true, strategic, competitive advantage. Enterprise customers will reward with repeat business those brands that deliver a unified, consistent, and satisfying brand experience.

Customer experience and success

Every customer experience with the product

Customer’s brand impression

What the customer decides to do

Product’s success & growth in revenue

Definition of success

Higher market share among premium shirts

Who are our customers and what actions of theirs will help in achieving success

What thought in their mind will most likely encourage them to do what we want them to do

What orchestrated product experiences will encourage the customer to think the way we want them to

•Perception of class

•Reliability•Value added•Convenience

•The MOTs•Communication mix•Service provided•Pampering•Packaging•Environment

•The upper class• Visits to store•Hits on website•More calls/enq.•Orders on-line•Recommendations•Complaints