Retail Marketing and Branding

A Definitive Guide to Maximizing ROI

Jesko Perrey, Dennis Spillecke

• Publisher: Wiley
• Year: 2013
• ISBN:
  9781118489512
• Edition: 2
• Topic: Business
• Subtopic: Sales
• Index: Business

Retail Marketing and Branding, 2nd Edition looks at how retailers can make more out of their marketing money with retail best practices in branding and marketing spend optimization.

The second edition of Retail Marketing and Branding includes the following updates:

*New and updated case examples

* Updated figures and examples throughout

* New interviewers with recent experiences

* Additional chapters

Part I

Building Superior Retail Brands

Chapter 1

PRINCIPLES OF SUCCESSFUL BRAND MANAGEMENT: ART, SCIENCE, CRAFT

Jesko Perrey, Dennis Spillecke

Every brand is a promise. And like any promise, brands attract and excite us; they capture our hearts and minds; they give us a glimpse of a better life. But most importantly, brands create tangible value. They are a retailer's most powerful connection to the outside world. Brands enable retailers to form deep and lasting attachments to customers and potential employees, and even investors, that translate into higher sales, stable profits, superior capabilities, and above-average stock market performance.

This chapter explores the three principal elements of superior brand management – art, science, and craft – and presents a wide range of case examples, illustrating how leading retailers bring these elements to bear on the management of their brands.

Branding is the secret weapon of retail marketing: it can create substantial value, but it is under-leveraged by most retailers.

Brands have many benefits, but above all, they create value. Brands help companies achieve price premiums, and they save costs due to their inherent appeal to customers. Companies with strong brands consis-tently outperform their peers in the stock market. According to a recent McKinsey analysis, brands with a top ranking in BusinessWeek's annual “Best Global Brands” report have consistently outperformed traditional benchmarks like the MSCI World or the S&P 500 index over the past 10 years (Exhibit 1.1). Credit Suisse came to a similar conclusion in 2010, based on an analysis spanning a 12-year period: companies that invest at least 2 percent of sales in their brand (“brand stocks”) have consistently outperformed the S&P 500.

Exhibit 1.1 Strong brands outperform the market consistently.

But to what extent do brands make a difference in retail? Research has shown that the impact of retail brands on consumer decision making is substantial; it is based on three key functions:

• Image: Retail brands help consumers express who they are, effectively making their choice of retail brands a lifestyle statement – think of IKEA.
• Orientation: Retail brands provide consumers with orientation. They make it easier to process information and help consumers save time – think of Amazon.
• Risk reduction: Retail brands reduce the perceived risks involved in making a purchase. They provide consumers with a “safe choice” – think of John Lewis.

Are leading retailers capturing the full value of these opportunities? You would think that at least some of them do. Surely, well-known global retail brands like H&M, IKEA, or Tesco must be among the world's most valuable brands? Not so: H&M, the top retail brand, does not make it into the top 20 of any brand ranking of note – and all other leading retailers are even further away from true branding excellence. (Source: Interbrand Brand Marketers Report.)

There is a simple reason for this situation. For decades, retailers have not made branding their priority. Until very recently, many retailers, especially those in Europe, have been focused on price, with leaflets promoting low prices being their most important marketing instrument. But retailers around the globe are gradually waking up to the challenge of professional brand building and management. For example, eBay, Sears, and 7-Eleven have received EFFIE awards in recognition of the effectiveness of their advertising.

It takes three elements to build and sustain a strong brand in retail: art, science, and craft

• The art is about endowing the brand with a relevant, credible, and unique value proposition that is up-to-date, consistent, and executed in a creative way.
• The science is about understanding and measuring relevant consumer needs, as well as the performance of the brand in the targeted customer segments.
• The craft is about managing the brand rigorously in all its individual aspects throughout the organization and across all customer touch points.

Of course, a brand can be strong without attaining perfection in all three areas. Inevitably, companies have different approaches to brand management, and their organizations have different strengths and weaknesses. Nonetheless, however well a company might master an individual element, we believe that this single element will be of little use to them if they do not achieve a minimum standard in the other two elements as well (Exhibit 1.2).

Exhibit 1.2 Three elements of successful brand management.

The art is about balancing creativity with consistency to endow a brand with an emotional appeal that builds on its heritage

To succeed, retail brands must strike the right chord to make them appeal to consumers and generate demand. They need to engage consumers emotionally, yet their claims must also be credible and trustworthy. But with which brand elements should you start as a retailer? Should you focus on rational elements, like price or location, which give consumers concrete reasons to buy or at least to visit a store? Or should you prioritize emotional elements like honesty or modernity that speak to consumers' feelings?

In fact, strong brands always do both, although the balance between the two varies. There are hardly any strong products or services that are not at least as good as the competition in their rational elements, and they are usually better in one or two attributes. At the same time, real brand champions, like IKEA, H&M, Nespresso, or Apple, stand out because of their emotional appeal. Although the products they offer may not be superior in all cases to competitors' alternatives, it is the way they make consumers feel about themselves and their purchases that differentiates these brands from others.

But the importance of the art element should not be misread as a license to go crazy. Frequent changes to a brand's positioning, target group, or communication style will eventually destroy its value. In fact, consistency is an important element of artful brand propositions. In a survey among 300 marketing experts, consistency was identified as the most important aspect of branding by far, with more than one third of respondents naming it as number one in an open-ended question. (Source: 2007 Brand Marketers Report, Interbrand.)

Consistency is not to be confused with stagnation. Had it stayed true to its roots as a run-of-the-mill DIY retailer, Germany's Hornbach would never have become the premium brand it is today. In effect, consistency is about balancing relevant innovation and originality with a brand's heritage. A now-legendary example is that of how Roberto Menichetti and Christopher Bailey rejuvenated the Burberry brand over a ten-year period. In 1998, Menichetti famously laid bare the company's traditional tartan lining and started using it as a prominent pattern for apparel and accessories. By turning a hidden asset into a tangible brand differentiator, his approach was original and creative, yet fully in line with the brand's heritage.

Another key prerequisite for bringing a brand's emotional appeal to life is the creativity of its communication. Some brands achieve consistent competitive advantage by means of superior creativity in their communication; they have mastered the art of placing the bait exactly where the fish will bite. Strong brands are highly effective in the use of creative campaigns that distinguish them from the competition, strengthen their brand image, and leverage this image to generate sales.

As a joint study by McKinsey & Company and the Art Director's Club on “Creativity in Advertising” has shown, creativity can take many different forms. (See Chapter 16: “Excellence in Classical Media” for details of this study.) Successful creative advertising often contains a disturbing element – one that initially seems irritating, provocative, or funny, whether in pictures or in words. One example of this phenomenon is a campaign by German DIY retailer Hornbach. In one of their TVCs, we see a shopper pouring out his heart to a store employee over the death of a beloved pet: “I ran over my son's rabbit!” he says, before bursting into tears. The spot closes to Hornbach's brand claim: “If you trust us with your remodeling, you can trust us with everything.”

There is more to strong brands than awareness: the science is in measuring a brand's strengths and weaknesses across the entire purchase funnel

Science is the second element of superior brand management. Most retail marketing managers and agencies still use brand awareness and advertising recall as the primary or even exclusive indicators of brand performance. While there is nothing wrong with these metrics in themselves, we believe they are insufficient to capture the specific strengths and weaknesses of a brand, let alone the root causes of its performance. In some cases, the focus on awareness and recall may even create the illusion of a healthy brand, when in fact the brand is in trouble. Retailers should expand their brand management toolbox and then use the extended toolkit comprehensively in their brand management decisions.

There are many hazards of the traditional approach. While a given brand may, for example, score highly on both awareness and advertising recall, its target audience may know next to nothing about the specific benefits provided by the brand. And how can you be sure the promoted benefits are even relevant to the target group? To distinguish a well-known brand from a really strong brand, you need a sense of whether consumers know what the brand stands for in terms of products or services, and whether they favor the brand over its competitors in their purchase considerations. In other words, strong brands perform well along the entire purchase funnel from awareness and consideration to purchase, repurchase, and loyalty. For details on the concept of the purchase funnel and its stages, please see Chapter 3: “A Guide to Excellence in Retail Brand Management.”

This is not to say that all strong brands perform equally well at each and every stage of the purchase funnel; most brands reveal slight weaknesses at one stage or another. Whatever the case, the accurate measurement of a brand's relative strengths and weaknesses in the target group's purchase funnel is the starting point for fact-based brand management.

Rigorous retail brand managers look beneath the surface of awareness and advertising recall. They explore the strengths and weaknesses of their brands across all stages of the purchase funnel and each customer's life cycle. They take detailed measurements and constantly hone their measurement techniques.

The craft is about bringing the essence of the brand to life at all touch points

It is one thing to put the brand positioning on paper, but it is quite another to make it a real presence in consumers' lives: in TV commercials, print ads, leaflets, newsletters, store displays, loyalty programmes, and personal interactions. Retailers with strong brands go to great pains to ensure a -superior and consistent consumer experience of the brand's proposition at all touch points. (See Exhibit 1.3 for an overview of in-store touch points.) For example, imagine “freshness” is one of the differentiating attributes in your brand positioning. While it may seem obvious what this means for touch point 5 (“products offered”), it is a lot less obvious how freshness could be brought to bear on the store's exterior or at the checkout.

In terms of holistic activation of the brand positioning at all touch points, many of us would agree that Apple sets the standard. The company does a fantastic job when it comes to translating their brand values of stylish design, creativity, and uniqueness into products like the iPod, the iPhone, or the iPad, as well as into a unique experience at its more than 300 Apple stores worldwide, many of which have won architectural awards.

Exhibit 1.3 Overview of customer touch points in retail.

Excellent execution is not necessarily limited to tangible touch points like store design. For Aldi, the discount retailer, price is key. Consumer perception of the company as a provider of good value for money has made the Aldi brand strong, and low prices are the source of Aldi's competitive advantage. Its private label products nevertheless provide A-brand quality. Right from the start, Aldi stressed tha...