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executive summary The Authors: John Gerzma is Chief Insights Office for Young & Rubicam Group. Ed Lebar is Chief Executive Officer of BrandAsset® Consulting. PART ONE: INTRODUCTION Business is riding on yet another bubble: a brand bubble. The first half of this book explains the research Y&R performed. The second half is a guide to how to develop an irresistible brand as well as how to completely alter your organization to become consumer-centric. You can watch a 2-minute introduction on YouTube here: www.youtube.com/watch?v=hixzdC9Sne0 CHAPTER 1 Financial markets think brands are worth more than the consumers who buy them. While Wall Street has been bidding brand values ever higher, consumer perceptions towards brands are substantially eroding. Brand names, logos, and other intellectual property are part of a company’s overall intangible worth. In fact, a Fortune survey of 2006 found that 72% of the Dow Jones Market Cap is now intangible. Are intangibles important? John Stuart, former chairman of Quaker Oats thinks so… “If the businesses were split up, I would take the brands, trademarks, and goodwill, and you could have all the bricks and mortar – and I would fare better than you.” But consumer confidence in and appreciation for brands as a whole are slipping for three key reasons:

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Page 1: Executive Summary: Brand Bubble

executive summary

The Authors: John Gerzma is Chief Insights Office for Young & Rubicam Group. EdLebar is Chief Executive Officer of BrandAsset® Consulting.

PART ONE: INTRODUCTIONBusiness is riding on yet another bubble: a brand bubble.The first half of this book explains the research Y&R performed.The second half is a guide to how to develop an irresistible brand as well as how tocompletely alter your organization to become consumer-centric.

You can watch a 2-minute introduction on YouTube here:www.youtube.com/watch?v=hixzdC9Sne0

CHAPTER 1Financial markets think brands are worth more than the consumerswho buy them. While Wall Street has been bidding brand values ever higher,consumer perceptions towards brands are substantially eroding.

Brand names, logos, and other intellectual property are part of a company’s overallintangible worth. In fact, a Fortune survey of 2006 found that 72% of the Dow JonesMarket Cap is now intangible.

Are intangibles important? John Stuart, former chairman of Quaker Oats thinks so…“If the businesses were split up, I would take the brands, trademarks, and goodwill, andyou could have all the bricks and mortar – and I would fare better than you.”

But consumer confidence in and appreciation for brands as a whole are slipping forthree key reasons:

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1. Excess CapacityWith 285 varieties of cookies, 275 cereals, 175 salad dressings and 80 different painrelievers, consumers are largely sleepwalking through their relationships with familiarbrands from too many rational appeals and too much repetitive marketing that showsup in all the same old familiar channels and doesn’t say anything new or exciting.

A Harvard Business Review stuffy found that only 7 percent of ads out of a study of340 prime-time commercials included a “differentiating” message.

2. Lack of CreativityWhen brands can’t differentiate by simply being better and more affordable, thepressure to be more creative is even greater. Real creativity is the only way to breakthrough the clutter.

3. Loss of TrustA 1997 study shows 52% of brands enjoyed exceedingly high levels of consumertrust. By 2006, because of scandals and failure of brands to adapt to consumers, thatnumber had slipped to 25%.

If marketing’s role is to create value for the consumer, many marketers have forgotten thedefinition of marketing. They have replaced the word value with sales. Consumers thenvalue brands less because business has forgotten what a brand really is. A brand is, after all,a promise.

CHAPTER 2Energy is the consumer perception of motion and direction in a brand. If you add energy,you become irresistible.

• The principles of an Irresistible Brand:• They are highly irrational and yet entirely irrefutable.• The move with innate purpose and conviction.• They constantly reinvent themselves.• They engage consumers on their own terms. They talk not of attribute but of ethos.They have a point of view on the world beyond profit making.• They don’t force devotion – they compel it. Their presences extends to a wide group ofpeople without marketing.• They move culture as well as categories.

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An assortment of brands with high energy.

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Energy is necessary because they keep brands constantly evolving, refreshing, andstaying in step with consumers. Simply put, marketing based on uniqueselling propositions – USPs – no longer works. For a brand to sustainconsumer interest, it can’t just be different; it has to keep being different.

For example, the energy of brands like Virgin Atlantic, Southwest Airlines andJetBlue translates into loyalty almost twice as high as the rest of the airline category.

The authors invested a hypothetical $10,000 in the top fifty energy-gaining brandsand compared their investment against a $10,000 investment in the S&P 500. Afterfive-and-a-half years, the energy portfolio beat the S&P 500 by 30%.

CHAPTER 3Consumers now select brands based on the same principlesinvestors use to select stocks. Successful companies consider the lifetimevalue of their consumers. They see them as investors.

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Successful, energized brands realize there is a delayed impact of energy on sales, anddon’t mind this. For example, if thirty people feel more favourably toward Puma today,ten of them will go out and buy new sneakers, while twenty will buy Pumas in the not-so-distant future. Both groups feel the brand has improved in their estimation, they justbehave differently.

CHAPTER 4With creativity, brand integrity becomes believable. At its most primallevel, creativity promises happiness, honesty, and hope. For now, creativity is the newmust-have of the marketplace because it offers honesty, progress, and a place to turn tofind answers to life’s uncertainties. Innovation comforts like never before.

CHAPTER 5In ConsumerLand, people are using new media to behave differently,blurring the lines between consumers, advertisers and entrepreneurs.But they are still pursuing timeless human wants and needs. The problemis, many companies cling to the old thinking of persuasion, metrics and an “us-them”landscape, and remain blind to the behavioural shifts transforming customers right infront of their eyes.

Consumers now trust each other more than they trust brands. Mediaedge:CIA foundthat 76% of people rely on what others say versus 15% on advertising. Review sites likeDigg and Reddit have become the third-most-common use of the internet after e-mailand search.

In 2004, a consumer-generated video of a Kryptonite bike lock being picked with a Bicpen caused problems for the company. But the company made it worse by failing toengage in the dialogue, which went something like this:

Day 1Kryptonite: Our bike locks are the best.The Market: Yes, your bike locks are the best.

Day 2Kryptonite: Our bike locks are the best.The Market: Yes, your bike locks are still the best.

Day 3Kryptonite: Our bike locks are the best.The Market: Ummm…Yeah I’m sure they are, but what’s all this about some recent video onthe net that’s supposed to show how you can crack your locks in ten seconds using a Bic pen?

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Day 4Kryptonite: Our bike locks are the best.The Market: Hey, I just saw that video on a friend’s Web site. And I’m kinda ticked offbecause I just paid $60 for one of your new locks three weeks ago, and I’m wondering if aBig pen can crack my lock or not⑺oes the pen crack all Kryptonite locks or just one or twomodels?

Day 5Kryptonite: Our bike locks are the best.The Market: Hey, I just visited your Web site and saw no mention of the Big pen problem.What are you doing about it? Are you going to fix the locks? Are you going to give me arefund?

Day 6Kryptonite: Our bike locks are the best.The Market: No, they’re not. My bike just got stolen! A whole bunch of my friends are goingto hear about this.

Brands are a belief system. And all belief is based on trust, honestly and transparency.

PART TWO: APPLICATIONEveryone must become a brand manager. Accountability for the brandmust reside in every department. The entire company must transform itself into amarketing-driven firm, rather than a firm with a marketing department.

Too much time is spent on thinking what a brand is, rather than what it can be.

CHAPTER 6Energy can be generated for brands as reliably as it can begenerated for homes.

Most of this chapter is an in-depth look at how Y&R’s BrandAsset Valuator ratesBrand Strength vs. Brand Stature. It’s a background to understanding how to use thetools provided on www.thebrandbubble.com.

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The First Law of Energy: Creativity spreads out risk.Many companies confuse risk avoidance with risk management. A common myth aboutoutside-the-box thinking and creative risk taking is that it is the sole domain of iconoclastsand small, challenger brands.

In this everything-is-media world, the burden of creativity no longer rests solely onadvertising, because now everything – or even just one thing – communicates toconsumers. Creativity not only spreads risk, it spreads responsibility.

Case study: LEGOThe LEGO group used their customers enthusiasm, loyalty and passion to turn around their brand that lost $120 millionin 2001. They reinventing themselves, spreading out intonew product and story lines (e.g., Bionicles), as well asinteractive websites. They also launched MINDSTORMS,a product that allowed users to create and program robots thathooked up to computers. This caused a massive influx of peopleinterested in LEGOs as a hobby. LEGO now uses a MINDSTORMScompetition to invite hundreds of devoted uses to help with new producttesting and development. LEGO has become an energized, elastic brandthat spreads out its risk by innovating across as range of initiatives.

CHAPTER 7Companies must use brands as an organizing principle. What’s interestingabout companies like Apple, Starbucks and Google is that their brands are more anembodiment of their executive leadership than an artifact of their marketing departments.

The Second Law of Energy: Brands don’t control, they enhance andextend.We can no longer doubt that we can control our brands no better than we can control ourstock prices. But when a company shares its brand, the consumer actually starts to comeinside the organization.

An example of this is Duncan Sheik’s albumWhite Limousine, which was released as a two-discset, with Disc 1 titled “Mine” and Disc 2 “Yours.”The former was Sheik’s new CD, while the laterincluded software allowing listeners to remix tracksany way they liked.

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Case study: Virgin AtlanticUsing the simple maxim “Brilliant Basics,Magic Touches,” Virgin Airlines has builtits reputation by enhancing and extending.Virgin identifies markets where consumersare getting a bad deal and provides analternative, tangible Virgin solution. Theirflights give incredible attention to detail,giving consumers not only what theyexpected, but astonishing them with thingsthey never imagined (haircuts, massages,personal TVs, etc.).

CHAPTER 8Building an energized value chain is not corporate restructuring. It’smore like reawakening and repositioning the current company to thinkfrom the perspective of the brand. To quote a Harvard Business Review paper, “Ifbrands are built over years, why are they managed over quarters?”

The Third Law of Energy: A brand is not a place, it’s a direction.We can no longer rely on positioning a brand with the hope that it will stay in place. Weused to think of positioning as a hole in the ground in which to plant a brand. But themarketplace is in constant motion. And the best way for a brand to own a position is tobe constantly dynamic within it.

Case study: XeroxWhen Ann Mulchay took over as CEO of this fallen brand, she recognized the culture ofloyalty in the company and drove the brand back through the organization. Part of thatwas reawakening the dormant value of Xerox’s innovation. “Our financial advisorsthought that slashing R&D was a no-brainer. But we knew it would have been a hollowvictory if we avoided financial bankruptcy today only to face a technology droughttomorrow.”

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CHAPTER 9The key to making progress stick is when people in the organizationbegin to own the brand, the business challenges, and the culture aswell. Companies don’t need a bigger marketing department. They need a marketingmindset that permeates the entire organization. “Marketing is too important to leave tothe marketers.”

The Fourth Law of Energy: Brands with remarkable marketing accessremarkable privileges.No one ever questioned whether a coffee chain had the credentials to sell books andmusic. No one admonished iPod for the highest cost per gigabyte in its category.JetBlue’s customers forgave it for its logistical failings. And Google’s aura was enough toget it landing rights at a NASA-managed airstrip seven minutes from its offices.

Case study: Mumbai Tiffin Box SuppliersThis remarkable company’s business model is quite simple: Deliver home-cooked mealsto over 200,000 workers among millions scattered throughout vast city office buildingsevery workday in Mumbai. Its product has a five-hour shelf life and requires a logisticssystem of 2.4 million hand movements each day. And yet the company’s workforce isnearly 100 percent illiterate, equipped only with pushcarts and bicycles. Other than atrain ticket, they employ zero technology. Yet they enjoy remarkable marketing accessand privilege because they achieve nearly a 100 percent accuracy rate, making only onemistake in 16 million transactions.

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CHAPTER 10Purchase funnels are really purchase pretzels. Any picture of an orderly,patient, and controllable consumer marketplace is presenting something that justdoesn’t exist anymore. Let it go.

The Fifth Law of Energy: Tactics are strategy, strategy is tactics.A sailboat tacks (that is, changes direction) to maximize the benefit of the wind, but itkeeps its destination point fixed. Similarly, a defined brand strategy may be the endpoint, but it needs tactics to respond to the winds and reach its destination.

A new rule of brand management is “Act accurately, but by all means, act.”

Case study: UNIQLOOriginally, a relatively staid brand in a static Japanese fashion world, UNIQLO hasmaintained a state of perpetual metamorphosis in its business model to stay ahead.During the recession of the 1990s, it appealed to the Japanese youth by being an anti-statement with their manta “Clothing says a lot, but you can say it better,” and makingtheir logo nearly invisible, tucking it away inside each garment. It has evolved andrestructured to address the saturation of its competition like Gap and H&M, extendedits brand by reaching out to artists, musicians and designers, and recently turned itselfto international markets.

EPILOGUERedefining the future of brand management to both grow and protect shareholdervalue is now a key imperative for business.