Valuing your good name - Part 2: Putting Theory into Practice
This paper, the second of 2 on Valuing Your Good Name, looks at some simple and cost-effective ways for SMEs to start the brand building process for themselves.
The 1st paper in this series, "Valuing Your Good Name - The Benefits of Reputation", explored some key aspects of building a valuable reputation, showed why it's so hard to quantify, but uncovered some real business benefits in the process. Our concluding thoughts were:
- Brand and reputation are your key differentiators to give you a real competitive edge
- Excellence is expected, necessary but not enough
- Brand is about managing the emotional and symbolic relationship with your market and your customers
- Strong brands and good reputations deliver vastly improved business valuation
- Absolute market or business value will get revealed when you float or sell equity in your business, but there are financial valuation metrics you can apply at any time
- The benefits of good brand are many and self reinforcing
- Most importantly, a recognised and trusted company will weather the hard times better and recover faster in the good times.Invest in your reputation - you're worth it!
We suggested that many SMEs would still be trying to take an accounting approach to business or brand valuation and, realising that traditional measures don't really address intangible payback, will choose a risk-averse course of non-investment.
The evidence of brand and reputation benefit in the corporate world is strong. It is reckoned that brands such as Coca Cola may have up to 90% or more of their market worth in their name alone; and were their physical asset base to be traumatised on some global scale, it would interrupt operations rather than destroy the company - so long as they still had the Coke brand name to use.
A Call to Action for the middle market
A common and perfectly understandable objection from the medium sized enterprise - when presented with exciting brand stories from Global Corporate plc - is that a large mature multinational will have a different dynamic from a startup or SME and brand economics won't apply on such a small scale.
Yes there are differences, but these can be taken into consideration when you start dissecting what actually comprises your good name. The earlier you can begin to do this the better; for example, the more mature the business the more history and foundation is already established - this may make it harder to change reputational perception; your brand may already be working in ways you don't know. If you're young, you can get it right from the word go. But at least you must invest in understanding what you mean right now to your public.
"Every morning you need to ask yourself this question: 'Why does anybody want to do business with me today?'"
- Ray Jutkins
The watchwords for big business today are "Think Global Act Local", which means addressing brand issues now as a smaller midmarket player is incredibly important. There are big players crowding into your space; ignore them, and the way they build their brands, at your peril!
When you look at "customer touchpoints" - that complex web of interactions with stakeholders and the impact you can make on their subsequent perception and behaviour towards you - locale is critical in the way you set out your stall (whether local neighbourhood or different country). If you do operate in different markets, you must measure them all, not just one. You may also have to get your channel on board if you're using a local distributor. The US doughnut giant Krispy Kreme has recently extended its franchise model in the UK and will soon begin to make its presence felt - it is quite excellent at developing reputation through innovative store experience, quality product and focused commitment to its local community. How will your family cake shop compete?
Your call to action will also depend on your own ambition as a middle market player; if you accept the premise that investment in brand does pay back, then the degree of investment might depend on the size of your ambition. If you build value in your brand and develop a positive reputation, this will enable you to:
- Attract further investment
- Expand organically or by M&A
- License the brand
- Realise better sale/exit value
- You don't do only this of course - you do it at the same time as everything else. Brand isn't a solution or a separate business entity, it's the way you run everything else - keeping brand principles in play and managing and creating value at the same time.
Brand principles - what do they mean in practice?
In practice, you have to take your business and your good name apart conceptually to see what the customer (and other stakeholder) drivers are, and which ones give you the most leverage in your sector.
"Customers buy for their reasons, not yours."
- Orvel Ray Wilson, The Guerrilla Group
This means some analysis, some audit of what's there, some gap analysis and judgements on strengths and weaknesses. SMEs can be notoriously reluctant to do this, partly because it's not always clear where it will lead or what the outcome might be. Partly too because it can require specialist skills and expertise from outside the business, which costs money. Large organisations which understand the vital role of branding have developed in-house teams of brand managers, capable of working with sophisticated modelling techniques and statistical correlations; but for most smaller businesses some simple alignment can achieve effective results.
For example, look at how closely your products, your staff, and your processes are aligned to deliver the best possible experience to customers:
- What do your people understand about what drives the business, what values underpin the enterprise, and what behaviours and competences are required from them for everyone to be successful?
- What do your customers and other stakeholders in the outside world get to see of any of this? How consistent is the message they get? What opinions have they already formed about you?
Given quality thinking time and some independent help, CEOs can develop a deeper understanding of the drivers and critical success factors for their business. Using some simple steps borrowed from brand management together with an assessment of current alignment (as presented above) any smaller business can develop a sustainable reputation building strategy. Key steps along the way would include:
- 1. Creating awareness of your name with your target stakeholders
- 2. Creating strong functional attributes - how you can do the job, why they should trust you, how you perform, what's essential, what's negative, what's primary?
- 3. Creating strong symbolic representation in the way you "package" your business - look and feel, tone of voice, be memorable and meaningful
- 4. Creating powerful emotional attributes - you've shown how and why you mean business, now show your customers what associating with you will say about them
- 5. Creating relationships that buzz! Stakeholder advocacy is your ultimate goal - this is when your brand attains its greatest worth.
The more time and financial resource invested in this process, the more robust your strategy will be and the more effective in building real brand equity, which is measurable.
How to benefit on a tight budget
We accept that while SMEs may wholeheartedly buy in to the benefits and methods of brand-building as described, the realities of time and financial resource will usually fall short of ideal. So without research budgets, analysts or market auditors (for the time being…) what can a business do to get the ball rolling?
In our view the answer is incredibly simple, but so often overlooked.
You have to look first for those things most likely to support you in growing your good name, and for those things most likely to inhibit your efforts. People! Customers. Communities. Public. They can be your fans, your foes, or just plain indifferent. Advocates and detractors.
You have to grow your reputation curve upwards - by optimising nett pull upwards (do more of what your fans want, and less of what your critics criticise you for). At the extreme, your problems are slightly different; antagonists will share none of your values - so much so, they are highly motivated to speak out against what they perceive to be your values (not necessarily the values you believe you hold and demonstrate) so it's in your best interest to pay close attention to what your values are and how you are communicating them.
"Genuine listening ability is one of the few true forms of competitive advantage."
- Feargal Quinn, Chair, Superquinn
So the key to fans and foes is LISTEN to them and ACT on what you hear.
Listen out for the praise and the complaint. Encourage them. Create simple customer surveys, feedback forms, be innovative but make sure you get the views. There is plenty of anecdotal evidence that the most vocal amongst your fans or foes can be opinion leaders - they influence the "indifferents" (the vast majority) towards their way of thinking. So minimise the detractors and maximise the advocates. Many companies fail to heed this advice - at their cost. Look at how the GM movement has virtually forced Monsanto out of the UK and European markets or how the growth of McDonalds is now being reversed. It's not good enough to write off those who aren't ever going to buy your products; you must understand and engage them, listen and act.
Stakeholder "touchpoints"
The source of most complaints is something you've said, or something you've done (or not done). And this will have happened at any of a number of "touchpoints" - interaction events where your good name can assert itself or create irreparable harm.
"Customer satisfaction - deep satisfaction, the kind that creates loyalty - isn't likely to result from one big thing…A customer's decision to be loyal or to defect is instead the sum of many small encounters with your company."
- Thomas A. Stewart writing in Fortune magazine
Every point of contact should contribute consistently to an excellent customer experience in line with your values and promise. We often refer to a company's brand as being "a promise, delivered". Building your reputation means mapping out all your touchpoints, ensuring your staff are capable of delivering the right words and deeds at each, doing it with passion and conviction and seeing to it that they in turn are supported by processes - and backoffice staff - which are likewise tuned in to the needs of the customer. Test the touchpoints - put yourself in your customers' shoes - what happens?
Most companies try and obtain at least some measures of customer satisfaction; but relatively few extend this to other stakeholders. We contend that you have to listen on every front - and especially to your own staff - what's their motivation, their understanding, their desire to share your values, achieve your targets and deliver your results? Are they proud of the company they work for? Are they champions and advocates outside of the work environment? Find out. Test and measure. Then act to improve.
"Poor service will destroy a business's standing faster than good service will build it,"
- James McGrigor, head of financial services for e-business strategy at Halogen
"A reputation once broken may possibly be repaired, but the world will always keep their eyes on the spot where the crack was".
- Joseph Hall
Reputation is perishable. It's a snapshot. At any time your detractors could rise and bring you down. For example, Enron, WorldCom, Arthur Anderson in the US and, closer to home, TransTec. Some firms have survived, but are damaged. So good reputation management is good risk insurance; and because your brand is perishable, you should regularly measure and review your touchpoints, and your stakeholder sentiment - regularly, not every now and then. Every now and then might be too late! Re-auditing is always worth doing. Ongoing is best.
Actively managing your good name
So you measure. You ask. You find out. You monitor. You listen. This will already be a giant leap forward for many organisations, but they should ensure the touchpoints work is performed systematically. In other words, make sure you are getting the maximum value out of what you learn. Take all the positive feedback, for example, and ask:
- Am I making the most of it?
- Can I make a virtue out of what I'm hearing?
- Can I make it even better?
- Can I create an important new brand attribute out of it?
Then take the negatives: same process, but look for mitigations.
Your next step is to evaluate what you have as a basis for some decision-making. Remembering that you want to achieve a nett fans>foes outcome, how can you get the best result with the resources available? Might you need to add to your investment to enable a proportionately greater nett outcome? The judgement calls are yours, but the important thing is you have created those choices for yourself. Your actions might be some or all of:
- Adjusting your marketing communications (their look and feel, their tone of voice or content)
- Adjusting your brand symbols (is your imagery doing the right job?)
- Adjusting your processes
- Adjusting people behaviour
- Adjusting products and services (both functional and emotional features and packaging)
- Developing a more innovative culture
Brand value is closely aligned with innovation. We know from the statisticians at BrandEconomics, New York, that if brand strength fades (through lack of differentiation or innovation) then the intangible value drops significantly and dramatically. It will look like milking for earnings at the expense of the future essence of the firm, so investors mark you down.
Summary
In this paper we have looked at some logical and robust structures for developing reputation building strategies in middle market companies that don't have the marketing muscle enjoyed by the corporates. In many cases its plain common sense, but businesses fail to do it because they perceive brand development as a cost rather than an investment.
We believe that the "think global act local" corporate strategy will increase pressure on smaller local businesses, but that the brand lessons are there to be learned - and copied. SMEs should consider this a call to action and no longer procrastinate about their marketing expenditure - judicious investment will pay back.
There are simple ways to apply the disciplines of brand management to smaller organisations - some searching questions the enterprise must ask of itself, and an understanding it must strive to embrace about how brands (and reputations) actually "work" in the minds of stakeholders. This will help to drive marketing and communications plans, ensuring focused spend.
Where finance is scarce, we have suggested a commonsense approach to key measurements and gathering of feedback - with the important caveat that you must never ignore the minority voice; you don't need to agree with them but you must be careful not to simply argue with them head-on - you must address the concerns.
Finally, the mapping of a company's "touchpoints" with its stakeholders - including staff - is an essential tool in the diagnosis and cure of dissatisfaction and complaint; but also provides the best opportunity to surprise and delight. The secret is in the listening, really entering the heads of all your stakeholders (which must include your detractors) and then in the ability to identify priority touchpoints where adjustment will create the most impact.
"Regard your good name as the richest jewel you can possibly be possessed of - for credit is like fire; when once you have kindled it you may easily preserve it, but if you once extinguish it, you will find it an arduous task to rekindle it again. The way to gain a good reputation is to endeavor to be what you desire to appear"
- Socrates
Authors:
Peter Roberts and Richard Jefferies
Managing Partners, Achieving the Difference LLP
October 2003