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Branding in A Deregulated Environment Arun Sinha: Post-Expo 2003 Keynote Address Slide #1

Good morning.

I’m very happy to be here today to talk about branding in a

deregulated environment.

Branding is a subject that I’ve had much experience with. I’ve

helped create marketing and branding strategies at some of the

world’s biggest brands –Colgate-Palmolive…Ford…and Philip

Morris, the tobacco giant that owns Benson and Hedges and

Marlboro, among others. Each brand was at a different place along

the regulatory scale. From toothpaste, where there’s not too much

you can’t do, to cigarettes – which are, of course, highly regulated,

both in terms of who you can sell to and how you can promote

your product – particularly in the U.S. and Europe.

And now, I have close connections to the postal industry through

my role as vice president and chief marketing officer at Pitney

Bowes.

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I see many parallels between the challenges in this industry and

those in other companies I’ve worked for … and in a deregulated

environment in general. Here’s what’s happening:

Slide #2

The postal industry is changing dramatically. So are all businesses.

Technology is driving it, but so are social changes. And regulatory

changes. What this means is the competitive environment will

grow.

Posts are diversifying. Some are extending the range of their

services organically. Others make acquisitions. And this

fundamentally changes who you are. You’re bigger…broader…

So now, how do you communicate the value and purpose of your

brand, especially as the market becomes more fragmented?

In the next 20 minutes, I hope to provide some insight into that

question. Let me first examine:

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Slide #3

• Why it’s important to build your brand, especially in today’s

deregulated postal environment.

• Why you need to differentiate your business from the rest of the

pack.

• How trends in marketing can take you from where you are to

where you need to be.

• And finally, we’ll talk about how you can build a strong brand.

Slide #4

The reality is that one size no longer fits all. This is true in the

marketplace in general. And it’s true in our industry.

Slide #5

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You have new technologies.

Competitors are fierce, and, as I mentioned earlier, you now have

more of them.

Your customers are becoming increasingly segmented, responding

to trends more rapidly.

And like all of us, there are financial pressures in the marketplace.

So, to compete on more fronts, and against new competitors…

to improve services… marketers need to understand the

complexities of the business they’re in, anticipate consumer needs,

and differentiate yourself from the crowd.

The question is . . .

Slide #6

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How do you turn this minefield into a competitive advantage for

you?

The answer …

Slide #7

By building a powerful brand!

So first…what is a brand? This may seem like a straightforward

question. But I find that no matter who you talk to, everyone has

their own understanding about what a brand is.

Here’s mine:

Slide #8

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To me, a brand is the shorthand that summarizes a person’s total

feelings toward a business or product.

It’s an emotional thing, far beyond rational thinking.

A brand has personality.

It is trusted.

Brand captures the hearts and minds of its customers.

And through this, it builds relationships.

A brand is more than a product.

But not every product is a brand.

Indeed, David Ogilvy, who founded what is now a worldwide

advertising and marketing consulting firm, defined a brand as this:

Slide #9

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The intangible sum of product attributes.

Now, here are some examples of great brands:

Slide #10

Coke…Intel…Mercedes…IBM…Rolex…Amex…Virgin

Atlantic…Marlboro. All are great brands. All are famous brands.

But what makes them great?

They connect with their customers… and these brands have done

an exceptionally good job at that.

They also make an emotional connection with their audience.

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In fact, some of the world’s greatest brands evoke a lot of emotion.

Think about Mercedes or Rolex. Even if you don’t drive a

Mercedes or wear a Rolex, you know how their owners feel …

Like high successful achievers, and not purely because of the price

they paid. It’s a much more emotional link. And there’s value in

that.

Great brands do that. And great brands can survive an attack from

competitors and from market pressures, because they have built

this connection.

Great brands can be significant drivers of intangible value. They

cost money to build, but they pay it back many times over. In fact,

on many balance sheets, they are a significant portion of a

company’s valuation.

Slide #11

Let’s look at Coca-Cola, for example. Just what is Coke? Examine

the label on the bottle, and it will tell you it’s carbonated water,

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with added sugar, caffeine, and color. But turn to Coke’s balance

sheet and you see the value of brand.

According to a marketing industry group, Coke’s brand value –

which has been estimated at $70 billion – is about four times

greater than the company’s worldwide revenue of $18 billion!

Now let’s take a look at an example of how Coke reinforces its

brand value:

Slide #12

This is a great commercial with an added benefit…it can be

understood in ANY language!

So, to continue…

Slide #13

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It’s important to keep in mind that no matter how old or how new

your brand is, and how great your brand may be NOW, you must

ALWAYS keep your eye on the competition in the marketplace.

Let’s look at what happened in the U.S., when the express mail

market opened up at the beginning of the 1980’s. Seven private

firms created a market for express mail. They now hold more than

80 percent of the market.

One of those brand names is part of the business lexicon today, and

not just in the states either. Want to send something overnight?

Slide #14

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You Fed Ex it! Now what do we know about Fed Ex that caused them to take so

much of a lead from the U.S. Postal Service in this market?

Well . . .

Slide #15

• They were able to take advantage of deregulation – a

springboard for their market domination.

• They also got their act together early. But they’re still a

relatively young company.

• And, they created a category. Sure, businesses sent

documents and parcels before there was Fed Ex. But they

created the express market, and made overnight, long-

distance delivery a necessity for business. Before them, it just

didn’t happen.

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Fed Ex carved out a unique, but surprisingly simple category for

itself.

Guaranteed express delivery. Then, they communicated what they

did very clearly, very loudly and very consistently.

In fact, they were so successful, they were even featured in a major

motion picture starring Tom Hanks.

Slide #16

The movie Castaway was a 2 ½ hour Fed Ex commercial that

people paid ten dollars each to see. There was great branding…

Fed Ex trucks, Fed Ex posters and Fed Ex planes all over the

place!

The lesson here is that you must be nimble and innovative…ready

to spot opportunities before your competitors do…and move to

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differentiate yourself from the pack. You must be attuned to

changes in your industry and in the marketplace.

Just think about the changes we’ve seen over the past three

decades in marketing and branding strategies.

Slide #17

In the seventies and eighties, the emphasis was on mass marketing.

Coke, Pepsi and Nike are a few examples of this. So was shipping

“one size fits all” products to customers across the globe. It was

“cool” to be seen with the same brands, in the same style as

everyone else. Differentiation wasn’t that important in the eighties.

Mass marketing was king.

Then came the nineties, when the emphasis turned to customers.

Slide #18

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In the nineties, marketing was focused on acquiring new customers

and retaining old ones. It was a period of tremendous success for

companies like America’s Wal-Mart, the giant superstore.

Wal-Mart based its proposition on great customer value, and

attracted people from a wide geographic area to their stores.

Just last week in fact, it announced plans to expand its presence in

both the U.S. and around the world.

Customers worldwide may not be familiar with the Wal-Mart

name. But you may be familiar with their customer-focused

strategy. Europeans certainly add to Wal-Mart’s profits by

shopping at the company’s European businesses, like Asda in the

U.K.

Now, here we are in the third year of a new millennium, and the

business emphasis has changed again…but this time, to

relationships.

The most successful brands develop intimate relationships with

their customers.

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Slide #19

Now, customer relationship is king.

Businesses must continue to make the customer first in everything

they do, from providing them with the best products, to offering

the most innovative services. Only now, you must go much, much

further.

You need to:

Slide #20

• Initiate meaningful dialogue between the brand and the

customer.

o Ideally, you must invest in developing one-to-one

relationships, which can be accomplished through

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database management, personalized services and

intelligent communications.

o This also means segmenting your customer base. The rule

of 80/20 applies more than ever. That is 20% of your

customers provide 80% of your profit.

o Also, you need to communicate with people only in ways

that are appropriate to them, and about products and

services they are interested in.

• And, integrate your marketing activities.

o Everything you do must have a clear brand proposition;

something that expresses benefits that are of direct

relevance to your customers.

o You express your brand position through all the marketing

mix…be it advertising, direct marketing, web, PR, internal

marketing, and all other medium. We call that 360- degree

marketing.

o And, your brand proposition must be understood

throughout your organization, from marketing, to sales, to

service, to finance.

Dell does a great job of this.

Slide #21

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You don’t see anything from Dell that is not consistent.

Their advertising is exclusively focused on their products.

Logo, typeface, color – it’s all the same, everywhere in the world.

Dell’s website is very functional, too.

And, once customers start interacting with them, Dell gathers

enough information to start a very personal dialogue.

In the end, you build the computer you want to buy – not the one

they want to sell you.

And how has Dell built such a consistent, recognizable brand?

Slide #22

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I’d argue that it has an awful lot to do with differentiating itself

from the rest of the pack.

When the computer world was selling its products through stores,

or through a direct sales force, Dell did something different.

They launched a web-based, built-to-order business. They focused

on their customers. And they’ve built their brand through single-

minded attention to those customers.

Dell is a good example of how one company created a new

marketing model for an entire industry.

Slide #23

But what happens when the industry drives change?

That’s what’s happening in the postal industry. Here again, the

smart players…the brand-savvy competitors…will figure out how

to differentiate themselves from more and more competitors in a

fragmented market.

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The good ones will succeed. It’s the same story in every industry,

whether you think globally or locally. There are a handful of

companies that consumers will recognize. The rest will lag behind.

But don’t make the mistake of thinking that once you have

differentiated yourself, you can sit back and let your brand manage

itself.

The truth is, if you don’t continue to differentiate as the market

changes, and don’t keep investing in your brand, this is what

happens:

Slide #24

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Coca -Cola Commercial

That’s a commercial where recently, the market for telephone

directory services in the UK was completely opened up. The old

established number from British Telecom was abolished.

Seventeen companies are now fighting for the business.

Slide #25

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Who should have a head start? British Telecom, of course.

But if you asked customers in that market to tell you BT’s new

directory number today, I would guess that they could not. They’d

probably know Double One Double Eight Double Eight (118888),

and One One Eight One One Eight (118118) instead. These

commercials have been a dominant media presence. And these two

new companies built a strong market presence – from scratch –

way before the end of the old BT number. And way before the

public was even aware of what would happen to their cherished –

and, now, relatively cheap – BT service.

Slide #26

There’s an important lesson here as our market becomes

deregulated. And that is, START EARLY, before you have to.

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Don’t squander your advantage. And differentiate, because you can

be sure that the competition will.

I’d implore you to consider just what assets you have in your

postal business.

Most postal players right now, enjoy considerable loyalty and

goodwill from their customers.

They have a name that is already very well known in their market.

These are assets on which to build a brand.

[BRIEF PAUSE]

Now, how can you use your assets to build your brand?

I’d like to point out that, at their core, all great brands have

something that gives them strength.

Slide #27

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This is what’s known as Brand DNA. Brand managers need to

understand what the DNA of their brand is before it can thrive. So

ask yourselves:

• What, in simple terms, are your brand values?

• What makes your brand relevant to your audience, both

internally and externally?

• Do your employees “walk the talk” of your brand? Do they

understand the brand’s relevance? Too many organizations

focus more on communicating their brand to external audiences,

but forget to bring their employees on-board. This is critical.

Your employees are your brand ambassadors. They have to

understand and believe in your brand even before consumers do.

If your employees don’t understand the relevance of your brand,

neither will anyone else.

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• Also, what human characteristics are associated with your

brand? Brand personality should be both distinctive and

enduring. Think about traits such as warmth, concern,

sentiment.

• If your brand were a person, who would it be? What gender,

age, socioeconomic class? Is it exciting? Daring?

Sophisticated?

Remember in 1993, IBM had a Big-Blue image of a cold, high-

tech machine that lacked humanity.

Slide #28

This brand perception was made even worse by Apple Computers,

which had a very warm, consumer-friendly image and a culture of

innovation. IBM launched their own brand journey to change this

perception and to become viewed as more warm and human.

Let’s take a look at this IBM commercial.

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Slide #29

Today, IBM is perceived to be a very successful company with

innovative solutions.

Slide #30

Now I’d like to tell you about some of the things you can do to

further differentiate your brand, and make it strong and resilient.

First…form strategic alliances. Co-brand. Finding the synergies

between two or more brands is a powerful way of engaging with

customers and growing new revenue streams.

For example,

Slide #31

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Pitney Bowes and Royal Mail recently announced a joint venture

to offer customized document management and mailroom-related

services in the U.K.

Slide #32

Next…explore brand extensions. You can not be all things to all

people, but by moving into areas that are aligned with your core

business, extensions can introduce you to new customers and new

revenues. You can introduce new product and service categories …

They can be very powerful for your brand -- if you focus on the

most profitable customer segments.

But just a note here…

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As Posts, you perform a public service that impacts a huge

universe of people. You can’t focus on your most profitable

customers and ignore everyone else. So how do you provide

quality service to ALL your customers? The answer is to build

relationships with others through strategic partnerships, because

this will help extend your reach.

Also… Think about whether it’s appropriate to create sub-brands.

This can avoid diluting your core brand.

Slide #33

• Establish new distribution channels. Look first at your core

product category. By finding new ways of getting to market,

you can grow your brand, rather than dilute it.

• Explore acquisitions and partnerships. I mentioned earlier that

partnerships are important to extend your reach. Consider a

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partnership by postal operators and postal technology suppliers

… one provides an integrated, end-to-end channel.

I’ve talked earlier about how we have evolved from mass

marketing to an era in which customer relationship is king. But

how do you create relationships?

To start with, you need to develop an emotional bond with your

customers. This is something that transcends a product-only

relationship between the customer and the brand, and includes the

way consumers feel about the brand.

But a genuine emotional connection must be intrinsically relevant

to what your brand stands for. With an emotional connection, you

can make your brand come alive.

For example, a few years ago, British Petroleum was an

undistinguished player in an industry that few people spoke well

of…oil.

Slide #34

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But they succeeded in changing their brand personality by

confronting a key issue that oil companies face today…the

tradeoffs between the ecology and the world’s need for energy.

They also updated their old corporate colors, and developed a new

logo and tag line….

BP’s consumer ranking rose from number four to number one.

They made their brand an asset…instead of the liability it could

have been.

Slide #35

Well…we’ve covered a lot of ground today in a short period of

time. The road ahead may not be easy, but you can be successful

in building your brand.

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I say that from my most recent experience in re-defining and re-

launching the Pitney Bowes brand.

Slide #36

Last February, we started our own Brand journey. We launched a

new 360- degree, integrated marketing campaign to re-define our

brand.

Instead of simply being a franking machine company – which is

how most people knew us for more than 80 years –

Slide #37

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. . . we’ve become the company that helps “Engineer the Flow of

Communication.” This tag line includes the scope of solutions

Pitney Bowes offers its customers.

Slide #38

Our integrated marketing campaign targets customers, employees

and other stakeholders.

And the results of our new branding effort have been dramatic.

Slide #39

In just three months, we were able to change the perception of

Pitney Bowes among our key audiences by 30 percent!

So stay tuned! You will see more transformation of our brand in

the years to come.

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Slide #40

So, to summarize…the rewards that go with building your brand

will be realized in establishing better relationships with your

customers, generating additional revenue, and building a brand that

will be strong enough to survive the blows that can come from the

marketplace and the competition.

The key is to:

Slide #41

• Differentiate your brand

• Build meaningful, one-on-one relationships with your customers

• Make your brand relevant to your employees, your customers

and other stakeholders

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• And build a brand that is both distinctive and enduring

But first:

Slide #42

• Define your brand values in simple terms

• Establish what makes your brand relevant

• Determine your brand’s personality

• And make your employees ambassadors of your brand.

Slide #43

You can further differentiate your brand by:

• Forming strategic alliances and partnerships

• Exploring brand extensions

• Considering how appropriate sub-brands are to your brand

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• Establishing new distribution channels

• And developing an emotional bond with your customers that is

intrinsically relevant to what your brand stands for.

Slide #44

With that, I wish you much success in your own brand journey.

Thank you for the honor of speaking with you today.

I look forward to answering your questions later on in the panel

discussion.