How small and family firms can build a brand too

The Freight Forwarders' Association of India had invited me to speak to them at their annual convention in Goa in Jule 2009. The association consists essentially of small and medium sized family run businesses and they wanted to hear whether branding is a worthwhile and feasible option for them. I am hoping that you will find it useful too.

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Is Branding  a  good  strategy  for  your  business ?

Is  it  correct  for  me  to  speak  to  an   audience  of  Freight  Forwarding  companies  about  branding?  If  you  are  like  most  people  I  know  of,  I  am  sure  you cannot  conceive of  branding  without   advertising.  I  am  sure  you  would   automatically  assume   that  branding is an appropriate activity for a  consumer   product company but not necessarily for an   industrial  service  company  like  yours.  If so,  be prepared for this fact  : out of the  top 5 brands on earth, 4  are industrial brands and only one is a consumer brand.  The  figures  in  brackets  indicate  the  brand  valuation in 2003

• Coca Cola ( Rs 340,000 Crores )
• Microsoft ( Rs 300,000 Crores )
• IBM ( Rs 260,000 Crores )
• GE ( Rs 240,000 Crores )
• Intel ( Rs 180,000 Crores )

You  do  not  necessarily need  to advertise to  build your brand

It  is clear  that  these 4 industrial  brands  have  become  valuable  by  doing much  more  than  mere  advertising.  Advertising and branding are different.   Advertising may be pretty and attractive but it is more like the superficial clothes.  Brand  is  more  like  the  person  inside  the  clothes.  For  the  advertising  to  work,   who you are, and what you do,  must  be  worthy  of  advertising  in  the  first  place! Creating a  brand is not about spending on advertising but about 3 things 

• attracting customers by offering a unique value to them
• getting a better price out of  them than your competitors
• creating a stronger platform for your future growth.  

Anyone who is advertising but not achieving these three things is only advertising but not  building a brand. On the other hand, anyone  who is  achieving this is building a brand - and it does not matter whether he is advertising or not. The proof of branding is happy and loyal customers and not whether you are advertising. 

How a good brand will pay for itself 

Following 6 benefits of branding will add up to at least 10% - 15% of your Profit and Loss statement every year. Hence it is worthwhile to spend money to build a brand for yourself. Please realize I am not saying you need to spend money on advertising to build your brand ! It is possible that you are spending money on advertising and yet none of these 6 benefits are coming to you. If so, you are not building a brand even if you are spending a lot in advertising.  

1. New business :  You get more calls when new business comes  along.
2. Prices : Your  charging  becomes  the  norm  and  others face price comparison with you
3. Margins : are higher because your  quotes are  doubted  and  compared  less
4. Suppliers : more  keen to deal with you – even if your pricing is slightly unfavourable
5. Investors  are  keen  to  invest  in  your  business
6. Talented  employees  are  keen  to  get  experience  and  make  a  career  with  you

I do not know about you but, to me, these 6 benefits will add up to a benefit that is at least 10% - 15% of sales revenue. That is a pretty tidy figure for anyone! And, apart from these regular day to day benefits, you have to remember that there are 2 other benefits of branding you will get :

• BRANDING  APPRECIATES  WITH  TIME  :  physical assets like buildings, furniture and vehicles   depreciate with time  but branding is exactly the opposite. It gets more polished and more valuable with use.
• BRAND  BRINGS  GOOD PRICE WHEN SOLD :  shares  of  branded companies  are  sold  at  higher P/E multiples.  With  your  sales  and  profits  of  your  business  remaining  the  same,  your  business  will  get  much  more  valuation  if  you  are  in  possession of  the  brand. In fact they say that if Coke brand is sold, the buyer will not like to buy the physical assets of Coke like factories and buildings etc because 95% of the value of Coke brand is not in the physical assets. Where does the value of the brand lie then? It lies in the favorable opinion billions of people all over the world has of Coke!      

2 tests of a superior brand

The first test of a superior brand is the trust of “its customers” .  
The second test is that such customers must believe that the brand is better than its competitors. 

It is not necessary for a “superior brand” to be known by everybody! However "its customers” (we call them target customers in marketing) must know it well, trust it and believe that it is different and better than its competitors.   Let us take some examples of  such brands. The chances are you may not have heard of them but yet they are very strong brands among "its customers" 

1. Biogel is recognised brand in surgical glove business
2. Bill Shiner is a top brand in the industry of laser drill machines for the aerospace industry 

Case  study  of  an  industrial  service  brand

This  is  a  case  study  of  a  company  called  Forbes  Facility  Services  Limited  which  adopted  a  branding  approach  and,  in  spite  of  being  a  new  company,  and in spite  of  being  in  a highly  price  sensitive market,  showed  good profits and a high level of customer satisfaction.   

STEP 1 : HAVE A MARKET INSIGHT : An important step is to really know the different  types of customers there are; and to understand their expectations and buying behaviors.  After doing this, the company decided to focus on providing housekeeping and cleaning services to industrial companies and plants because it realized that slowly the market was changing from buying of "products" to buying "services" - because the customers did not want to have the hassle of dealing with multiple vendors like one for the products, the second  for product maintenance, the third for supply of  labor etc. They wanted to outsource the whole cleaning job to someone. The market was large and was estimated at Rs 4000 Crores and it consisted of all types of customers : offices, shopping malls,  guest houses, factories, airports etc.  

STEP 2 : to identify those customers to whom only you can make a  difference but your competitors cannot. These are called as the "target customers".  The CEO of this company identified that the company's offering was demonstrably clear to those customers who had 

1. large and uninterrupted floor plates (which permit mechanical cleaning )
2. situations where the dirt was stickier and more dangerous (which needed trained cleaning workers)

The company introduced a system for its sales force to administer a short questionnaire at the beginning of the sales call to establish if the customer fell in this slot. If not, the sales force was told not to proceed with the call because in that case the company was not sure of making a difference - and when you do not make a difference you do not get a better price.  The company chose to want to sell only to such customers. 

STEP 3 : when you are sure about which customers you are going after, it automatically becomes clear (1) what you need to do internally to satisfy them (2) who your competitors are and what you need to do to pr-empt them.  The CEO of this company realized that he needs to focus on creating and innovating on two key competencies  

• Being good at mechanical cleaning
• Giving a very good training to its front line staff  

EFFECTS  OF  BRANDING were several. The first is that the company aimed to go only to those customers who could not be satisfied by the competition because the floor could not be cleaned effectively by manual methods and by untrained contractual staff.  The second is that the company’s  business development  became more efficient because they knew which customer to look for and what to tell him. Third, once the customer was convinced that we were better than the competition, the price competition became less harsh. 

The last I know of, the company was getting paid double than its competitors.  Even its method of charging was different from the competition : competition charged on per person per month basis and hence their costs were completely visible to the customers. The company charged on per square foot basis and that too proportional to the consumer satisfaction (conformance to the pre-defined  level  of  service as per Service  Level  Agreement). Since the company sold performance, the costs of the company were never really visible to its customers. While competition sold people, the company sold performance.  The name spread due to happy customers : virtually every rupee worth of new business emanating from our existing customers came to the company. Not only that, happy customers liberally gave references and recommendations and brought the cost of new business acquisition down.

BEFORE BRANDING  BECOMES A STORY TO BE TOLD TO OTHERS, 
IT MUST COME TO LIFE  WITHIN YOUR COMPANY 

Branding is a story that you must tell and practice yourself. Only after the story is assimilated well can you go out and tell it outside your company. Going back to the example of this company, they not only told the story inside their company but wove it in the training, compensation and promotion of their employees.They created systems for customer satisfaction measurement and put it to use in how they laid out their contracts. They used this understanding to create their organization structure. Many things became simpler when the branding was understood - for example they realized that out of so many competitors  there was only one who was truly competing with them - this enabled them to evolve competitive strategies.  

Brand  Building  in  Industrial  Business

To sum up,  I  see  the  following  rules  for  building  brand  in  a  business  like  yours

1. Invest in studying and knowing the market -
   do this periodically because the marker changes
   Find the needs, expectations and behavior of different types of customers
2. Thoroughly analyze and choose those customers you want to go after
   for whom  you  can  make a difference and be better than your competitors
3. Plan to do better than your competitors
   on what matters to these chosen customers
   and plan to develop your internal competencies accordingly.
   Remember you do not need to do better than competition on all counts.
   You need to do better only on those things that really matter to your chosen customers.
4. Understand who  competes with  you  for  such chosen customers.
   You do not need to fear all competitors.
   You need to pay attention only to those who may take away your customers.
   Or to those whose customers you want to take away.
5. Monitor  your  sales, prices, efforts and also the customer satisfaction.
   Use this data to continuously improve.

I hope you noticed that advertising is nowhere in my list of brand building essentials! Please do give your feedback by commenting on this blog. Or call me on 9821046013 or send an e mail to me on skpalekar@hotmail.com