International brand positioning - Corporate Excellence

Insights Strategy Documents I28/2012

Brand

International brand positioning: improving use, protection and the performance of intangibles At times of crisis many companies choose to invest in branding rather than in their capacity to protect their interests and defend the intangibles that constitute the main interest of their companies and products. But do firms know how to use that value, especially in processes of internationalisation, and how to make the most of it? Domestic firms that begin to expand outside their natural frontiers often neglect or underestimate the importance of strategically managing the value of their own brands. The same goes for many successful start-up companies in the technology sector: they are accustomed to taking risks and frequently take too many when it comes to managing their brands. Spanish legislation on branding considers brands as signs that served to distinguish the products and services of certain companies from those of their competitors in the market, according to Carlos Fernández-Nóvoa, an expert in industrial

property development and a legal adviser at Pons Patentes y Marcas. He asserts that the three key elements are: 1. Graphic representation and symbol 2. Identification of products and services 3. Distinction from competitors. Brands can also be classified according to three different criteria: 1. Their constituent elements: this may include names and figurative/sensory features (sound, touch, taste and smell).

This document has been prepared by Corporate Excellence – Centre for Reputation Leadership. I t has cited, from among other sources, speeches by Mario Santos, Head of International Relations at Pons, Carlos Fernández-Nóvoa, Legal Adviser at Pons, José Antonio Moreno, General Manager of ANDEMA (National Association for the Defence of Brands) and Rocío Peralba, Manager of Positioning Systems,delivered at the seminar organised by Pons Patentes y Marcas and ANDEMA in Madrid on June 19, 2012.

International brand positioning: improving use, protection and the performance of intangibles

2. Their ownership: this may be individual (a single company), collective (several companies) or guarantee-based (several companies, but the holder cannot use the brand). 3. How widely they are known: they may be “well-known” (familiar to their target groups) or“renowned” (familiar to the general public).

brand with exactly the same characteristics, not just a certain degree of potential mental association.

It is the second group -renowned brands- that enjoy the highest level of protection: the better known they are, the more legal protection they enjoy. It is forbidden to register a brand that may be confused with an existing renowned brand, while for brands which are merely “well-known” registration is only forbidden if it can be shown that there is already a

Fernández-Nóvoa therefore asserts that holding a renowned brand should be the maximum aspiration of firms, as it transmits all possible information on quality, the product and the firm itself to consumers.

In other words a renowned brand has a territory that is protected by law. This happens not only in Spanish legislation but in many other bodies of mercantile law, to judge from the Paris Convention.

The reputation of a brand, which is the result of the overall perception of it, can have a psychological

Graph 1: Product specifications Type of specification

“By protecting their brands, firms also protect society as a whole by favouring the investment, innovation, employment and public revenue required for social redistribution”

Brand specific definitions Single brand specified

Multiple brands specified

Generic definitions Described as “wellknown brands” but brands not specified

Without a brand Described as “brandless”

ìBrandî not a relevant term

Refers to

Multinational(1) or regional(2) brand(s) or shop chain(s) Multinational(1) or regional(2) brand(s) or shop chain(s)

Multinational or regional or national(3) brands or shop chains

Goods without a brand label or with a “pseudobrand” label that is meaningless to consumers(4)

Most services and certain types of goods such as fresh food

Brand value

Yes

Yes

No

Not applicable

Selling argument

Reputation of the producer(s) or shop chain(s) and assumed quality of the product

Reputation of the producers or shop chains and assumed quality of the product

Low price(5)

Not applicable

Reference to “wellknown brands” and a detailed list of relevant technical parameters

Reference to “brandless” and a detailed list of relevant technical parameters

A detailed list of relevant technical parameters but no reference to Brand

Product description comprises

To be collected and reported

Brand, model and some technical parameters

Brands, (models) and a detailed list of relevant technical parameters

Only prices of the specified brand(s) and model(s)

Name of model priced

Names of brands and models priced

Prices for wellknown branded goods meeting the technical parameters of the product description Names of brands and models priced

Prices for products meeting the technical parameters of the product description

If labelled, names Of “pseudobrands” priced

Not applicable

(1) Brands that are available in the majority of participating countries and are internationally well known. (2) Brands that are available and well known in a number of neighbouring countries. (3) Brands that are available and well known in a single country. (4) Often the “pseudo-brand” labels will have fantasy names which sound like the name of an established brand or logos that mimic the logo of an established brand. Also includes “own brands” of shops when the selling argument is the low price. (Note, that products with names and logos that imitate those of established brands are not the same as fake brands that pirate the products and names of established brands and which have no place in the typology above.) (5) The selling argument is that the good has a low price and not that it has the lowest price. Source: Eurostat, 2010

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influence on stakeholders, leading them to decide to make purchases, investments and provide support.

There are three basic approaches to calculating the financial value of a brand:

Registering brands means protecting business

1. Costs: it assesses above all the cost of positioning and defending a brand. 2. Revenue: it entails discounting cash-flows. 3. Market: it analyses comparable transactions.

But for this to happen, companies must first register their commercial brands and their own corporate brand properly. Another excellent reason to register brands is to combat falsification, a problem which is on the increase due to the boom in electronic trading, and is no longer confined to luxury brands.

“The Customer Loyalty Engagement Index measures attitudes, predispositions, decisions and behaviour to determine the value of brands.”

According to José Antonio Moreno, General Manager of ANDEMA (National Association for the Defence of Brands), it is necessary to fight against such fraud, which does a great deal of damage to the value of brands, their creators and their owners, by taking legal action, especially since many consumers show a favourable attitude towards it if they consider the original to be expensive (33% according to Eurostat data from 2010). In this regard it is also important to have worked out the financial value of a brand, so that legal claims for damages can be filed accordingly. Ideally, such valuations should be drawn up by a reputable independent specialist or organisation. The protection of a brand, from legal registration to financial valuation, provides a shield against attacks from competitors, falsification and unlawful sales through conventional or digital channels and an aid when entering a new market. By protecting their own interests, companies and their brands also protect the best interests of society as a whole by favouring the investment, innovation, employment and public revenue required for redistribution.

Making good use of the enormous potential of intangibles Valuation is an essential tool if proper use is to be made of the intangible assets of a firm. However, in the opinion of Mariano Santos, Head of International Relations at Pons Patentes y Marcas, few firms are fully aware of the financial potential of the intellectual and industrial property rights entailed by brands and how to use them. The value of brand is the net result of the extraordinary contribution to profits that can be accounted for by intangibles. A good strategy will seek always to mark distinctions from competitors, also in the use of brand value and all the intangibles contained in it. The value allocated also depends on the reason for the valuation: a valuation with a view to entering a new market and protecting the brand is one thing, and a valuation with a view to making a sale or claiming compensation for falsification is another.

Achieving the right position on the international stage According to a study conducted in 2011 by Brand Keys (which surveys 50,000 consumers every year in almost 100 countries all over the world in regard to 600 different brands), only 21% of all brands are clearly distinctive and actually perceived as such by customers. This figure is 10% lower than that of the 2003 survey, according to Rocío Peralba, Manager of Positioning Systems. These data reflect an increasing lack of differentiation of brand values on the market -at least in regard to original brands or front-line brands-, which has been exacerbated by the economic crisis and the need of consumers to reinforce the rational side of their decisions, so that brands end up sacrificing positioning in favour of price so that they can continue to compete with low-cost competitors. The survey by Brand Keys is conducted using the CLEI (Customer Loyalty Engagement Index), which is designed specifically to measure attitudes, predispositions, decisions and behaviour. The method blends rational elements (profit, accounting for around 30% of the different categories or sectors on average) and emotional elements (values, accounting for around 70%). Between them they provide a sound basis in terms of attributes for measuring brand values through a triple factorial, regressive and causal analysis. Robert Passikoff, President and Founder of Brand Keys, creator of the CLEI and an expert on loyalty and engagement,defines four points which are imperative for an understanding of how branding works and of the mindsets related to brands: 1. There is a perfect “ideal” in the mind of the customer 2. The rational must be blended with the emotional 3. It must be understood how each category acts. 4. It must be understood that the final decision is emotional. This method gives great importance to categories as the way in which consumers approach brands and their present and future loyalty to them, i.e. not how customers related with brands in the near or distant past but how they do so now and, more importantly, why they are loyal to them. This is what enables one to forecast the reasons for future loyalty.

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Graph 2: The Brand Key Methodology Fusing

Emotional

Rational Category Attributes, Benefits & Values

Psychological Jungian-based Personification Questionnaire

Factor Analysis + Regression Analysis + Causal Path Modeling

Brand Equity Metrics

Expressed as easey-to-read indez numbers and diagnostic bar charts

Source: Brand Keys, 2012

For Peralba, positioning a brand at times of crisis such as the present and in new environmental countries is a twofold challenge that must be met by achieving an understanding of the following seven basic criteria or aspects: 1. The game has changed completely 2. Markets are actual individuals 3. Individuals have perceptions 4. Perceptions are reality 5. Competition lies in perceptions 6. Competition is now global 7. Positioning needs to be global.

Only renowned brands enjoy the highest standards of legal protection and are assured easier entry into new markets. It is these brands that usually achieve the clearest, simplest, most distinctive positioning among customers and other stakeholders, which makes them more valuable, resulting in a better performance of all the intangibles expressed and projected through brands.

Conclusion: improving protection and positioning These are the two keys to success in an environment which is increasingly turbulent, due to the economic situation and to globalisation.

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Leading by

reputation

©2012 Corporate Excellence – Centre for Reputation Leadership Business foundation created by large companies to professionalize the management of intangible assets and contribute to the development of strong brands, with good reputation and able to compete in the global market. Its mission is to be the driver which leads and consolidates the professional management of reputation as a strategic resource that guides and creates value for companies throughout the world. Legal Notice This document is property of the Corporate Excellence – Centre for Reputation Leadership and has as its objective to share business knowledge about Brand, Reputation, Communication and Public Affairs Management. Corporate Excellence – Centre for Reputation Leadership is the owner of all the intellectual property rights of the images, texts, designs and any other content or elements of this product and has the necessary permission for its use, and therefore, its copy, distribution, public release or transformation is prohibited, without express authorization from the owner.