Here Jamie Diaferia and Benjamin Thiele-Long of Infinite Global provide Finance Monthly with expert insight on the growing needs of branding and why the right balance of considerations will allow your business’ brand to thrive among the competition.
Last month, Brand Finance published its Global 500 report which saw Lego regain its position as the world’s most powerful brand. But while it’s hard to refute that the ultimate and overriding purpose of building a powerful brand is to make money — after all the business of business is business — it raises the question: Why do some brands fare better than others in establishing their brand strength in the market?
Whatever sector a company works in it needs a unique reason to exist, something to set itself apart from competitors. The skill is in how it communicates this reason, and history has given us examples of brands that have failed and those that have succeeded against the odds. When we talk about ‘brand’, we must go beyond the look and feel of the product or offering that a company provides. Instead, brand sits more with the idea of reputation and how this is leveraged to make a company successful.
Firstly, there’s a question to be asked: What is the purpose of a strong brand? For a commercial brand the starting point must always be ‘to make money’. However, when you look at companies like Google, Apple and Walmart, these are companies that are regarded as doing more than simply generating a profit — they also attract customers, build loyalty and motivate staff.
The enduring strength of Lego’s brand is without doubt linked to both its simplicity and the breadth of its appeal which spans generations and genders, treasured by households for its ability to inspire creativity and nostalgia. What is most interesting about Brand Finance’s research, however, is that Lego scores highly on a wide variety of Brand Strength Index (BSI) measurements including; familiarity, loyalty, promotion, marketing investment, staff satisfaction, price premium and corporate reputation.
The matrix of factors that contribute to the BSI are worth exploring further, as they demonstrate that brand power is not dictated by the size of the organisation but factors such as loyalty and staff satisfaction, which are far more difficult to control and measure.
It’s also interesting to see that brand power is not unique to any particular sector. The top 10 most powerful brands according to Brand Finance’s research, all of which achieve a AAA+ rating on the BSI, spread across a range of sectors including banking, tech, media and professional services. So, it appears that brand strength relies on much more than just generating a large customer following.
Building brand power relies on leadership placing equal importance and resource on internal and external factors and audiences. Lego’s bounce back from near bankruptcy in the early 2000’s is largely attributed to the appointment of Jørgen Vig Knudstorp, a former McKinsey consultant and the first person outside the founding family to run the company when he was appointed CEO in 2004.
Knudstorp was able to stem the bleeding by selling off peripheral businesses such as theme parks and video games, and discontinuing unpopular ranges in turn ensuring that all products were compatible with the core offering both in their look and mechanical compatibility.
Rather than accrediting his revised strategy for Lego’s return to form, Knudstorp attributes the company’s ongoing success to its employees and customers. When asked about turning Lego around, he points out that employee engagement serves as the foundation of the company’s reward system, while customer loyalty gives Lego the chance to serve multiple generations of family members. Prior to the turnaround, Knudstorp noted that Lego had taken this loyalty for granted by stretching the brand too thin. Instead, he wanted Lego to be an irreplaceable but also irresistible brand for children.
The balance, achieved perfectly within Lego, was in rewarding financial value creation with having creative and engaged employees. In Knudstorp’s words, creating a culture where at the end of each year he could stand in front of everyone and say, “thank you for doing all of the things I never asked you to do”.
How is this done? It’s not about control where people are simply doing what they are told, because that simply creates bureaucracy. Instead, it’s about communicating to stakeholders, both internal and external, the reason for doing things, the context. Creating clarity of culture and strategic choice in turn gives clarity of purpose, i.e. Why do I want to do a good job?
Brands can spend a fortune on communicating their message and values to customers, in the hope it brings them to their doors. The value of selling a brand promise, rather than simply the product, to consumers has long been understood. Increasingly, there is equal importance in the approach of ‘internal marketing’ – communicating brand values to employees.
It’s a very simple premise: Employees, whether working for a consumer brand or a professional services company, are more likely to get fired up and remain engaged if they feel they are doing something that’s actually worthwhile. Steve Jobs, for example, was renowned for being less concerned about making a profit than ‘thinking differently’, yet Apple became the most profitable company in history.
In a recent TED talk, Simon Sinek argues that the most successful companies have products, cultures, and marketing strategies that all stem from their raison d’être. This is why companies like Apple and Tesla have grown into such powerhouse names – consumers and employees alike know exactly why the company does what it does (and in the way it does), because it helps both audiences meet the human craving for authenticity, purpose and meaning. In this same way Lego’s focus on core values and its alignment of commerce and culture enabled the toy manufacturer to put all the pieces together again.