Saturday, 14 Jul 2018
STUDY the minutes of board meetings of companies and the discussions mainly centre on performance, governance, managing risk, reputation and maybe about people. Only in rare cases is branding discussed.
Elaborating on the above scenario, International Advertising Association (IAA) Malaysia president John D. Chacko tells StarBizWeek: “When you ask board members what is the most important asset of the company, they will invariably cite ‘our people and our brands’, usually, in the context of risk and reputation. Rarely is there real strategic discussion about branding.”
When asked if board directors understand the role of branding and marketing, Chacko, who is also the vice-president of development for IAA Asia and a member of the IAA World Board, says that boards must realise the fundamental difference between brand and branding, and, between branding and marketing.
“Brand and branding are words used interchangeably and loosely, that in itself reflects a cosmetic understanding of the subject.
“The brand is a name, symbol, logo or sign given to the product or service which identifies and differentiates it from others, whereas branding is the art and science of creating convergence between what you want people to think of your brand and what they actually think of the brand. Do understand that the brand is the company as there is an inextricable link between the brand and the company culture,” he explains.
To this end, Chacko cites the April 2017 United Airlines kerfuffle where a passenger was physically extracted because he refused to vacate his seat for the airline’s crew.
The usual practice in an overbooked flight situation is for the counter staff to call out for volunteers, during check-in or after check-in, to give up his or her seat in exchange for cash compensation and a seat on a later flight.
The removal process of the said passenger was recorded and posted on social network for the whole world to see. That video elicited highly unfavourable view of United.
“What the episode highlights is the lack of branding strategy and the branding culture inculcated within the corporate. Does the board of United understand the importance of branding? Is the corporate culture of this airline in sync with its brand promise? Lacking a precise response during a crisis is simply unforgivable in this day and age,” Chacko says.
He opines that many directors think of branding as simply marketing communications and visual identity systems, for example the corporate logo, symbols, colour, font and not as a core driver of shareholder value.
Chacko says that is attributable to directors having a very limited understanding of the difference between branding and marketing.
“Often quoted is that 60% to 80% of the market capitalisation of public companies is due to intangibles such as its reputation in the marketplace, with the remainder accounting for tangible assets. After all, if given the choice between buying a company’s good name or its buildings and machinery, the former would be a far more enduring investment; that is, as long as it is managed correctly.” he adds.
“Take the Coca-Cola company, where I spent the longest time in my international career across the UK, Latin America, Middle East, Africa and Asia. Today the Coca-Cola company has a market cap of around US$192bil. Without the power of brand Coca-Cola and its stable of trademarks, I dare say its market cap would be hardly worth writing home about,” he adds.
Chacko also says there has been a widening gap between tangible assets such as factories, equipment, inventory and intangible assets, such as brand and intellectual property, in determining a company’s market value.
Quoting a report by Deborah DeHaas, national managing partner of the centre for board effectiveness for Deloitte LLP, he says in 1985, 68% of a company’s market value was determined by tangible assets. Ten years later, tangible assets made up 32% of a company’s value, and in 2015, tangible assets accounted for only 13% of a company’s value.
“In corporate history, a much discussed and debated deal was why Philip Morris, a tobacco company, acquired Kraft Foods in 1988 for a then astronomical US$13.1bil. I spent the second longest time in my international career with Kraft Foods in Australia. The board of Phillip Morris realised the brands in the Kraft Foods stable, alongside with the Kraft corporate brand, have immense legacy value around the world.
“For directors to properly carry out their responsibilities, they must incorporate branding strategy as a key part of corporate strategy, as well as into their decision-making processes, to ensure that every decision is consistent with the brand promise,” he notes.
He stresses that fundamentally, boards need to understand that branding is the strategic domain of a corporation and marketing is the operational domain. While branding is in the strategic domain, boards cannot simply abdicate this responsibility to marketing.
If the brand is one of the most important assets of a corporation, he says branding must be a board level topic, not just from a reputational risk perspective, but from a culture and performance perspective.
Whether branding and marketing have a firm seat on the boardroom table, Chacko explains that the composition of boards invariably will see professionals from fields in finance, legal, human resource, information technology, operations, and from backgrounds that could be valuable to a board in terms of their network and standing in the corporate, government or political sector.
“How often do you see a real strategic branding and marketing professional on boards? Not necessarily someone who has had some exposure to marketing, but someone who is an experienced strategic marketing thought leader who can lead and guide a strategic dialogue about branding and marketing?
“The Coca-Cola company has brand health firmly on its agenda and KPIs at several levels reflect this. It tracks the health of the brand locally, regionally and globally because it is their most important asset. So shouldn’t the KPIs of a board include the health of the brand with metrics that measure it?”
Boards need to give branding and marketing a firm seat at the board room table and not abdicate this responsibility or act only when there is a crisis, according to Chacko.
The IAA is a worldwide network of the most influential and inspirational marketing, advertising and media professionals that sets and maintains the standards in the industry. It provides a leading platform for sharing knowledge on industry issues, best practices and insights in a rapidly changing business environment.
Read more at https://www.thestar.com.my/business/business-news/2018/07/14/tips-for-a-healthy-brand/#mMSUulGsJfHG6M5M.99
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