Archive for the 'Brand Equity' Category

How Apple bet the brand—and won

Wednesday, July 23rd, 2008

Apple’s breakout success with its iPhone exemplifies how an elite company can, in rare and exceptional cases, “bet the brand” on a new product introduction and gain significant market advantage.

Betting the brand is for a select few

Most companies should never even consider “betting the brand.” They have too much to lose, and they’re generally not brand capable for such a high-stakes strategic action. For a small number of companies, however, betting the brand need not be a reckless toss of the dice. It can be a measured risk that favors the prepared brand—with the prospect of market-changing payback. It comes into play when such a company has no other choice but to leverage its brand to seize a compelling market opportunity. It either bets the brand or cedes strategic advantage to competitors.

What is “betting the brand?”

A company “bets the brand” when it risks substantial brand equity in a strategic move to unlock new customer value. In betting the brand a company believes that it can create a new kind of customer by introducing a new brand/customer context beyond the reach of incumbents. The risk in betting the brand is that a failure to achieve brand objectives may cause brand-wide collateral damage.

When a company “bets the brand” it is betting its proposed brand context against the reigning brand context of incumbents. It attempts to raise customers—dramatically—to a higher plane ofexperience. In this process it uses the “chips” of its brand equity. These “chips” are much more than “brand assets,” however, as we’ll see below.

A “bet the brand” scenario may involve changing the brand game.

Don’t bet a weak hand brand

First off, we should reiterate that it’s extremely difficult for a company with an average brand to bet the brand and win. It most likely won’t have the cards. Generally, it shouldn’t even try. Let safer strategies prevail, as discussed here and here.

This caveat would also apply to brands modeled as communications. While these may be rich in stories and images, they typically lack the platform depth (and the will) to raise customers to the next level.

How brands can stack the odds in their favor

If a brand-capable company desires to seize an opportunity with a high-stakes brand initiative, its first priority is to stack the odds in its favor. It will need to insure that its brand has definitive control of both its present context, and of the new context it intends to introduce. This means (at least notionally) that the brand evokes a superior customer model in both areas.

Fundamental steps to improve such a company’s odds include:

  1. Architect the brand to create customers
  2. Structure the brand as integrated platforms to advance customers in the direction you’re headed. (You want customers already on the way to your new promised land.)
  3. Build the brand as an enabler for customer innovation, rather than an “asset” or static icon.
  4. Adopt an extensible customer model so that the seeds of “the next big thing” are present in the customer of today.

The Key Posts section in the right column may have some useful links.

A fresh look at “brand equity”

To understand the process of betting the brand we need to extend the concept of “brand equity.” I define brand equity as a company’s strategic ability to create customers. This is an activist concept of brand equity. It is quite different from an accountant’s view, where brand equity mirrors share value, or the conventional concept that brand equity consists of a company’s many “brand assets.” In my view, these conventional concepts are too static. They often exclude customer initiative, and they can constrain brand innovation by ignoring the creative and qualitative elements that can make customers come alive (which is the purpose of brands in the first place).

I prefer to consider brand equity as a force, not an asset. It is the strategic firepower of a brand. And it is primarily composed of brand platforms for changing markets.

As I see it, a billion dollar brand may have multiple portfolios of brand assets, but if those assets are not configured into platforms for creating customers—and changing markets— their strategic value is limited.

Brand platforms power brand bets

A brand is vertically integrated value. When property constructed, a brand is a customer-creating machine made up of platforms of integrated brand elements, all geared to advance the customer through a singular brand vision. (Apple is a good example here, BTW).

Brand platforms give a company the greatest possible leverage in the event it makes a strategic brand bet. In this regard, the best brand platforms are customer platforms. They enable customers to advance themselves, and to add value back to the brand in the process. Proactive customers create more brand equity than passive ones, a crucial advantage when the chips are down. (Note how the iPod brand increases Apple’s market leverage, while Microsoft’s Zune brand, with a retrograde customer model, does nothing for Microsoft.)

The iPhone example

The weblog counternotions does a nice job of enumerating the major challenges that Apple faced in bringing the iPhone to market. (It lists 15 high-stakes issues.)

For Apple, bringing the iPhone to market was one gutsy move: a bold stroke to carve out a strong, sustainable position in a mature market controlled by powerful handset makers and entrenched (dominant) carriers known for their choke-hold on the industry. Apple’s only real option was a blockbuster product that could change the mobile paradigm—with a new brand context of the user.

Apple’s brand bet with the iPhone

It’s fair to say that Apple was betting the brand with the iPhone. An Apple mobile phone was widely expected, with speculation rampant. Anything less than a breakthrough innovation would be grounds for disappointment. Because the iPhone occupies a prominent plank in the strategic customer platform developed by Apple (integrated hardware, software, OS, user interface, applications, services and a new model of digital user), an iPhone failure would be far more profound than that of a single device that simply didn’t pan out. It would have serious repercussions for Apple’s ability to create new customers in the direction it’s heading.