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Every month, The Big Question video series brings together a panel of experts for an in-depth discussion. In this edited excerpt from February’s episode, Ann L. McGill, Sears Roebuck Professor of General Management, Marketing, and Behavioral Science at Chicago Booth, and Pradeep K. Chintagunta, Joseph T. and Bernice S. Lewis Distinguished Service Professor of Marketing at Chicago Booth, are joined by Ann Mukherjee, president of global snacks and global insights at PepsiCo, in a conversation about the importance of brands. The discussion was hosted by Hal Weitzman, Booth’s executive director for intellectual capital.
(light piano music)
Hal Weitzman: Brands are estimated to account for about one-third of a stock market value of companies in the S&P 500 index. A company’s brand is often thought of as a critical part of its business strategy, but constructing and managing a brand is complex. There are numerous examples of corporations building a reputation over decades, only to have it quickly tarnished by a poor decision or a misconceived tweet. So how should companies develop brands?
Can you measure brand equity, and how can firms use brand value? Welcome to The Big Question, the monthly video series from Capital Ideas at Chicago Booth. I’m Hal Weitzman, and with me to discuss the issue is an expert panel.
Ann McGill is the Sears Roebuck Professor of General Management, Marketing, and Behavioral Science at Chicago Booth. Her research focuses on areas such as consumer evaluations of products and services and product and brand anthropomorphism. A former financial auditor, she won the 2005 McKinsey Award for Excellence in Teaching at the University of Chicago.
Pradeep Chintagunta is the Joseph T. and Bernice S. Lewis Distinguished Service Professor of Marketing at Chicago Booth. He conducts research into the analysis of household purchase behavior, pharmaceutical markets, and technology products. He’s the editor of Quantitative Marketing and Economics and was named one of Chicago Booth’s top professors by Businessweek.
And Ann Mukherjee is president of global snacks and global insights at PepsiCo, where she’s affectionately known as the Queen of Corn. PepsiCo has 22 different brands that each generate more than $1 billion in annual retail sales. A Chicago Booth alum, she was formerly Frito-Lay North America’s chief marketing officer, and was named by Forbes as one of the top 50 most influential CMOs. Before PepsiCo, she worked in brand management and marketing at Kraft and Citibank.
Panel, welcome to The Big Question. Ann McGill, let me start with you. A very basic question. What function does a brand serve?
Ann L. McGill: That’s a basic question, but the answer is complex, and it’s one of the reasons brands are so powerful: they do many things. At the simplest level, they help you identify the ones you like and don’t like, but even more, they fill in for information you can’t observe at the time of purchase. I don’t know: How is this gonna taste? Will the car be reliable? The brand tells me about that. It promises me something around what I can’t see.
Sometimes I like brands, even aside from that information, because they signal prestige or I have an emotional attachment to the brand. And even more, research is beginning to show that the brand serves as an overarching filter through which we interpret everything else that the marketer presents to us. So a very powerful tool, brands.
Hal Weitzman: OK, so Ann Mukherjee, from a corporate perspective, why is the brand important?
Ann Mukherjee: Look, every corporation today is looking to build sustainable business results for their shareholders. What a brand does is connect your product, your service to a consumer. You want that growth to be sustainable? You better have very strong brands.
Hal Weitzman: OK, so it’s the connection between the company and the consumer that really makes it important.
Ann Mukherjee: Absolutely.
Hal Weitzman: And break that down a little bit for us. What’s actually going on? Is it consumer loyalty that we’re talking about then?
Ann Mukherjee: In today’s world of infinite choices, I mean, that’s what technology has done for consumers. Building loyalty could actually be now a very quick thing. You have loyalty today and not tomorrow. What brands do is create a relationship. And I think in today’s world of marketing, we have to ask ourselves. It’s not just buying brands, but this notion of buying into brands. And when you do that, that’s when you get the results.
Hal Weitzman: Does that mean that then, Pradeep Chintagunta, let me bring you in, does that mean that a consumer’s identity is somehow connected with the brands that she or he purchases?
Pradeep K. Chintagunta: I think you can think of it that way. I think in some sense, the brand is just a mental shortcut for the consumer when thinking about a brand. So if I see a boxy car in the driveway, it’s just a boxy car in the driveway, but if there’s a Volvo brand on it, then I’m thinking of something else, like safety. And I think it taps into what Ann said previously as to what exactly a brand stands for.
Hal Weitzman: Ann Mukherjee, is branding a strategy or just a tactic? How do you think about it from a corporate perspective?
Ann Mukherjee: From a corporate perspective, look, it always has to tie to what your overall corporate and business strategy is. Brands don’t live in a vacuum. And so you have to understand where you want to take your company. What is its competitive advantage? Where is its growth, and how does the brand ignite that growth? It becomes a part of that strategy.
And clearly there are things that you do with your brands that are tactical, but you have to think about brands in a very strategic way.
Hal Weitzman: But I mean, when we think of the value of companies, it’s estimated about a third, as we said at the beginning, about a third of the value comes from the brand. If you think about a company like Apple, it’s probably much more than that. So in some companies presumably branding really is the main strategy.
Ann Mukherjee: Absolutely. There are fast consumable products that are out there. You know, fast-moving products. In that world, it’s the brand that really sets you apart. And there are companies that have built their entire business system around that relationship that they create on an everyday basis.
Hal Weitzman: OK. Ann McGill, what’s your view on this idea of brand as a strategy?
Ann L. McGill: I agree. I think it sits inside something that the company owns long term from which they can generate growth and profitability, as opposed to a tactic, which is a periodic expense to get something else done. Brands live on.
Hal Weitzman: OK, so a brand is important. It’s valuable. Pradeep Chintagunta, what is the value, first of all, and how do you measure it?
Pradeep K. Chintagunta: This is, I think, a very big question. And there are, I think, many different ways of approaching how to measure brand value. I think at the very sort of basic level, it’s coming up with some quantification of what the brand is worth. And I think there are many ways of approaching that. I think one way of thinking about it is: suppose I remove the brand name from the brand, what exactly would the consumer be willing to pay for it?
I think others have looked at it based on proxies for brands, which could be: What is the brand strength? What are the stages of the brand, etc.? And then, of course, there are many statistical methods for measuring brand value as well that companies use.
Hal Weitzman: OK, and Ann Mukherjee, what kind of methods do you use at PepsiCo to look at brand, analyze brands, measure them?
Ann Mukherjee: In today’s world of big data, it’s really critical to understand how brands and the strength of a brand can not only realize pricing power, but how do you understand the brand strength to be able to be predictive of how a brand can build a business? And it’s in that connection that we really have to understand how you take a brand and move it forward for your company’s objective. And so it is important to have that relationship, but it’s also important to understand how that relationship can create pricing power and sustainable growth for your company.
Hal Weitzman: OK, but, how do you actually measure that? You control a lot of brands, as we said in your bio, how do you measure for each one of those brands? How much is brand equity, and how much is the product in itself?
Ann Mukherjee: I think in today’s world, just looking at one measure or one piece of data is a mistake. It’s about a triangulation of data to make sure you understand your brand’s capability in building your business.
So you’re looking at measures like brand equity—and by the way, over a trended basis. This one, kind of, I see a pop, and it means something; you need to see things on a longitudinal basis.
Second, you need to understand how that brand translates as you use it in communication. What kind of return is that giving you from a volumetric perspective? Whether that’s a regression-based analysis, whether that’s a marketing-mix analysis.
And finally, you need to understand: Is your brand strong enough to really realize price? If you’re discounting your brand over and over again, is it as muscular as you need to be? So you have to really triangulate all of that to really understand the strength of that brand.
Hal Weitzman: So you don’t necessarily take out, you know, this part is the brand equity in itself?
Ann Mukherjee: Brand equity in and of itself is not predictive of any kind of future action. I have yet to see someone make a decision out of a brand-equity measure. So it really has to be in conjunction with other data and analysis to understand the strength.
Ann L. McGill: Aside from the critical importance in measuring the value of the brand, you also need to measure the content of the brand. Because a brand needs to be something other than “I’ve heard of it” for the consumer, or “It seems good or bad to me.” It needs to have specific meaning, like Volvo means safety, and there the tools get remarkable.
Sometimes they’ll do something as—. If you ask a customer, what do you associate with the brand? That’s a hard question. It’s weird. They don’t know how to answer it. But if you say something like, so you were at a party and you ran in and you look up and BMW’s at the party, what does BMW like? People don’t say “cars don’t go to parties.” They’ll actually say something like, oh, BMW is wearing a tie even though it’s a casual party, but oh, he’s good looking. But he brags, although he’s got a lot to say for himself. And in those answers, you learn a great deal about what BMW means aside from: it’s a luxury-car manufacturer.
Hal Weitzman: You’re talking about characteristics, and your research is about anthropomorphism. You’ve just done it there. “What kind of person is BMW?” But I guess to an outsider, the question is, OK, so I understand there’s something there, but is it important to measure it? How do I measure it? How do I understand what value it has? Apart from these associations you were talking about.
Ann L. McGill: Well, this goes back to our question, is it a strategy or a tactic? BMW needs to be recognized as distinct from its competitors, otherwise they’re gonna compete on price. They’re all good cars. So now how are we going to split the difference? And the brand is a way of separating them in a long-term, strategic way.
And that’s why when you want to measure that he’s powerful and refined as opposed to comfy and luxurious, how do you find out people have this meaning except via these kind of quirky measures that say, well, what would it be like if he were a person? Or, draw a picture of it.
Hal Weitzman: OK, yeah, Pradeep Chintagunta.
Pradeep K. Chintagunta: Yep, yeah, can I come at this from a slightly different angle? The brand also is a reflection of the culture of the company, and so it reflects the people who are within the organization. And in some sense, you can think of the kind of people that a company is attracting as a measure of the value of the worth of the brand. Because unless you have a strong brand, you’re not going to have strong people who are willing to come and work for the organization.
Hal Weitzman: OK, and so, in your view, Pradeep, how should firms actually be using that brand value?
Pradeep K. Chintagunta: There are many ways that you can think about it. So a few years ago, there was a company that one of our former students was working at, and what they realized when they measured the value of their brand was that it was actually lower than the market leader. So for them, the idea was: if our brand value is lower than the market leader, how can we perhaps compensate for this difference?
And so they looked at: What are the attributes that you can provide with the product that can overcome this differential in the brand value? So you can think of first measuring it, but it’s important also then to manage the brand.
Hal Weitzman: Absolutely, and Ann Mukherjee, seeing as you’re right at the cull phase there, managing the brand value, how do you increase the value of a brand? I understand that it’s a generic question, but give us some thoughts about if you take a product, you’ve determined that it does not have the brand value that you want it to have, how do you go about increasing it?
Ann Mukherjee: It’s a great question for us, especially at PepsiCo, when we have so many brands. And what’s interesting for us is: this point about brand distinction is so important, because if you don’t have it, other than the fact that you’re not creating competitive insulation, you’re actually probably gonna cannibalize yourself. And one of the things—. This is why I love being a Booth alum, because this is a place that taught me that intersection between the rigor of science that unlocks that disruption of art.
And what you have to do is convert that art, that association that you’re making, and use real analytics to understand, back to your point, what are the attributes that matter? Can you be predictive of choice? What are the attributes that matter in a particular context and how do you then leverage the distinction of your brand to own it?
And the more you play against that, the more you own that, the more distinction and the more advantaged position you have in the marketplace. I think the danger that a lot of people run into is it’s the curse of what we call the “brand-manager rotation.” New brand manager comes in. “I wanna do something new.”
It’s about consistency, because consumers aren’t interested in what’s the latest. They want consistency. They want Volvo to mean safety. They don’t need it to mean pizzazz the next day. And it’s that consistency and driving it, that’s what really creates brand value over time.
Hal Weitzman:I mean, it’s interesting you mentioned that. There are some obviously very high-profile branding mistakes. We won’t mention the one by your main competitor, but over the history of corporate America, there have been a lot of big branding mistakes. And I wonder, branding is so important to companies nowadays. We’ve just seen the new head of McDonald’s came from the branding side.
Why do these errors, mistakes occur? Is it because companies aren’t paying enough attention? Or is it just mismanagement, what do you think?
Ann Mukherjee: This is a big passion point of mine. I will tell you, when I see brands get in trouble, there’s a slowdown in their business. And they immediately want to go to say, “The brand is sick.” And to recover the brand, what they do is they take the brand and find a way to overcome the why-nots of why people aren’t buying the brand.
When you start marketing your brand against the why-nots and the barriers, that’s when your brand goes off track. McDonald’s is a great, great example of that. And what we have to do is always reinforce the why. That’s what draws people in. Celebrate who you are and do it in a way that’s meaningful.
Hal Weitzman: OK, that’s a great point. Ann McGill?
Ann L. McGill: Oh, I was gonna jump in at, well, two parts. One, where do they get it wrong?
They start managing for the short term when the long term and brands are a long-term relationship. You can’t start shifting all around.
The other is—. We’re watching right now a brand put itself at risk intentionally in a way that will probably work for them because they’re being careful, and it’s Porsche. Porsche to most people means sports cars. They can’t sell enough sports cars. So they have moved into SUVs with the Cayenne, and then four-door sedans with the Panamera. And now back to SUVs, with the smaller one, the Macan.
But it led the Wall Street Journal to ask a few years ago, is Porsche really a sports carmaker? And the challenge—because there are way more, there are far more, tens of thousands more units of these other vehicles on the road than, say, the 911. But the reason those other products command a great demand and a high price is because of the 911. So the job that Porsche has to do is yoke that brand meaning of a sports car to all these other vehicles. So it props that up because otherwise you’ll meet a 20-year-old who will someday say, oh, they make sports cars too?
Hal Weitzman: But that’s a really good example. I mean, if people are not buying the core original product, and you want to go to the [inaudible] or whatever it is, why shouldn’t you do that? I mean, how can you grow the original products if the fastest-growing things are really elsewhere and the market has just changed?
Ann L. McGill: Well, it’s the difference between the brand and the product category, I think. The brand means the thrill of driving, the excellence of engineering that is at the heart of a sports car. It doesn’t actually have to be a two-seater sports car to deliver that. And Porsche recognizes that, understanding that there is some blur between the product category and the brand. And they’re attempting, if you see the new Macan ad, the one that has the background song “I’m a Believer,” it’s 60 seconds long. You don’t see the SUV until about :30. The first 30 seconds are all about the sports car and the sports-car heritage, which they embed into the brand, and that’s smart long-term management in a kind of risky move as they take the sports car into larger vehicles that cart families around.
Hal Weitzman: And history is actually something you often see, brands referring to their history when they lose their way.
Pradeep Chintagunta.
Pradeep K. Chintagunta: Indeed, I think another great example is Lego. If you went back several years, I mean, Lego was in real trouble because they’d forgotten that it was all about innovation and coming up with that connection between them, the parents, and the kids. They started making movies and such. But now I think the brand is doing extraordinarily well, largely because they’ve rediscovered their core, which is innovation. How do we make great toys that parents are convinced communicate some skill to the kids?
Ann Mukherjee: It’s so funny. The death of a brand is when you bring it down to its lowest common denominator, which is its product category. I get this all the time. What’s our share in potato chips?
When we talk about Lay’s potato chips. Who cares? Lay’s is not just about a potato-chip experience. It’s about this notion of enjoyment and taste and indulgence and food value. And when you get down to the product category, that’s not how consumers think. Consumers think about life. I want to say, I had a hard day. I want to celebrate. I want some comfort. If we let brands ever get down to that common denominator, that’s when a brand will lose its value.
Hal Weitzman: That’s fascinating. What do you think about the global perspective? You play globally. Is there something that works about brands better in developed markets than in emerging economies? Shed some light on those kind of geographical differences.
Ann Mukherjee: Sure, listen, at the end of the day, can brands play a different role in different parts of the world? Absolutely. But here’s the thing that I find fascinating in my global role. When I go around the world, there are some emotions that transcend borders. A mom is a mom is a mom, OK? Wanting to protect her child. That’s gonna go on in any country.
One of the brands that we have at PepsiCo is the brand Doritos, and that is a brand that really speaks to young adults. And if you go to a young adult—. I was just in Shanghai two weeks ago and I’m hearing them talk in Mandarin. I got a translator. They’re literally saying the same words I just heard in the United States, right?
These guys! There are digital natives all over the world. Can you have a brand like Doritos that speaks to anyone? Yes, because you’re speaking to a human insight.
And if people want to build powerful brands that cross borders, if you can find that unifying insight that really resonates with the product benefit and what that experience the brand can give, you can have global brands.
Hal Weitzman: Some American brands in the old days would depend on the fact of being American and the sort of aspirational aspect, is this a change about where you’re talking directly to the consumer in the emerging markets?
Ann Mukherjee:I think we’ve really got to get past the fact that people want American brands, right? We live in a world now where it’s connected, right? There are very, very popular brands that are now in Japan that are in China and Korea. And they’re looking at American brands going, yeah, whatever.
And so it’s really not about that. It’s about understanding that human insight. And in some cases, I’ll take—. I’ll go back to Lay’s for just a second. That has a universal appeal, but that is a product that has local expression. I mean, we have Caviar Lay’s in Russia. We have Chicken and Waffles here in the United States, but it’s a local expression of a global kind of canvas. And it’s really understanding, therefore, how can your brand play and how does that build into that strategy that you tried to build as a company?
Pradeep K. Chintagunta: Yeah, I completely agree that, I think, that if you reduce it just to the functional attributes of the product, then you’re really in trouble, right? The brand has to transcend simply the functional attributes and perhaps make that emotional connection.
I’m always reminded of a Cadbury’s ad, where the ad could have talked about how creamy the chocolate was, but it actually shows a gorilla on drums. And I think—yeah, playing to Phil Collins’s “In the Night.” So and I’m always reminded of that ad. And it’s such a great ad because I think it communicates the enjoyment that you feel when you eat chocolate, rather than talk about the creaminess of the chocolate itself, and I think that emotional connection transcends countries. And I think if you can find that connection, you should be successful globally.
Ann L. McGill: A thing that’s coming out here, which is a distinction we didn’t make earlier, is the brand is this rich, conceptual, emotional connection. We distinguish that from the product category. In between them are all what we would call brand elements, the reminders and the carriers of the brand: the brand name, the look, the spokesthing.
And those you might want to be especially attentive to different culture. What are the imagery that would resonate with a culture? And that you might vary, these brand elements. But the underlying emotions? The world is united around a central humanity.
Hal Weitzman: I was gonna ask, does a brand have to be consistent across all messages? So your audience on social media might be very different to your Super Bowl TV audience, might be very different to your international audience. How do you think about branding across different media? Or is it just one message?
Ann Mukherjee: It goes back to, I think what Ann said, which is: different brands have different starting points in different parts of the world. And you have to take into account, you can have an underlying insight, but a different culture might consume content in a very different way. And so you have to understand what is the consumption of that content to really understand, do I have a consistent way of communicating? Do I need to adjust to a country?
For nine years now, we’ve had consumers make our Super Bowl ads on Doritos. And this is the second year that we’ve opened up the contest globally, and people are like, globally? But they only play Super Bowl in the United States. But you know what, it’s transcended the sport, because now in the digital age, people are Googling ads, pre-, post Super Bowl, ’cause they know there’s gonna be an ad fest.
Hal Weitzman: The ads are bigger than the event.
Ann Mukherjee: And so people, and we’ve got submissions from people in Australia and China, like, and it’s interesting to see that it’s that common love and passion of the product and the brand that’s creating some amazing ads. I mean, we’ve actually got them as finalists, and they’re not all from the United States. It’s kind of cool.
Hal Weitzman: But I was thinking more of, let’s say, you talked about moms earlier. So if you’re selling a product to moms, or you’re selling a product to teens or tweens, and you’re using social media to reach them, are you consciously segmenting the message in different ways there?
Ann Mukherjee: Yeah, I think the essence of what you’re trying to say is consistent, but you might personify it in a different way depending upon the culture.
Ann L. McGill: Different media might be suited to different components of your message. You can think of Nike wanting to communicate authentic athletic performance, which is a bit of a chant with them. And maybe “performance” is better delivered on television, whereas “authentic” is delivered more in a conversation over social media.
So the brand will have rich meaning, not always just a single word. So you may play up different parts of it where the media is best suited to it.
Hal Weitzman: And I mean, social media offers the opportunity to really have a conversation with people, which TV and newspapers never did in the old days. Are companies really using that to its full power, Pradeep Chintagunta?
Pradeep K. Chintagunta: Yeah, I’m reminded of the Gatorade Mission Control downtown, and that’s such an amazing place where you have all these monitors, which are looking at every influencer, every sports personality that Gatorade is connected with, and constantly monitoring what is happening with the brand. And I think it all starts with the monitoring function.
So I think the more companies start monitoring, I think the natural move to measurement will come after that, and then managing the brand from there. But I think you have to start somewhere, and I think companies are increasingly monitoring what’s happening on social media.
Hal Weitzman: Are you being very scientific at PepsiCo about how you use big data to measure brand equity?
Ann Mukherjee: Yes, we do. And as I said, we just don’t look at brand equity alone. We use regression-based modeling to understand ROI. We use CRM tools to understand the best ways of targeting more on a one-on-one basis. How do you get to that whole notion that everybody wants to have customization, but how do you do it with scale?
So more and more, big data’s playing a massively important role as marketers. As a matter of fact, there’s a lot of talk about future marketers really being technology experts, and this world of technology and the CIO and the CMO and all of that, it’s beginning to merge, because what we’re really in the business of is the business of human behavior. It’s the science of human behavior and putting behavioral economics behind it. So that’s where the future’s going.
Hal Weitzman: Do you set out to build a brand or do you kind of measure it and reinforce the messages that you find?
Ann Mukherjee: I think if you’re going to really have a great brand, you have to build it every day. People who think, oh, I built the brand and I’m just gonna milk it. Yeah, you’re not gonna have a brand much longer. People always have to—. It’s like taking care of a child. You just don’t do it the first day and walk away. You got to keep nurturing that thing. That’s important.
Hal Weitzman: And like we said, at the beginning, I mean, that can be destroyed very quickly.
Ann Mukherjee: Overnight. Overnight.
Hal Weitzman: How do you at PepsiCo, how do you make sure that doesn’t, how do you guard against that rapid collapse in brand reputation?
Ann Mukherjee: Well, it’s really funny. It’s the balance between . . . You really got to trust your consumers. When consumers are passionate about your brand . . . I mean, we gave many of our brands over to the hands of our consumers long ago, and you’ve got to trust them. And at the same time, you have to put the mechanisms in place to make sure that there isn’t damage being done to your brand. Social listening is critical, because the moment—.
I’ll give you a great example, Taco Bell. There was an employee that, you know, put it on YouTube. He licked the taco. Their sales went like this [diving arm toward the ground] in 48 hours. That’s today’s world. And so you have got to be guardians of your brand. And at the same time, balance how you trust the consumers with your brand.
Ann L. McGill: It’s very challenging because brand managers think very carefully about: What aspects of the brand do we want to play up? Your customers can be very passionate. They’re not on the org charts. They have their own opinions. So they might start saying things about the brand that you’d rather not have played up. It’s not part of the long term.
So how do you manage that with respect for what the customer wants to say? And it’s not necessarily negative things. We may end up cutting this, but Gatorade is reputed to be an excellent hangover cure. This is antithetical to the Gatorade: my body is a temple. What do you do when somebody says, oh, I got myself horribly polluted last night, but thank god for Gatorade. This is both passionate and positive and problematic. So it leads to the social listening and responding gently, I think.
Ann Mukherjee: Absolutely, and I think that’s where you have to understand the difference between brand appreciators and brand lovers. I mean, people who are brand appreciators appreciate Gatorade for the fact that, you know, for a hangover, it was great. But the core of the brand, the lover of the brand understands its core essence of letting you win from within.
And so brands are always going to have what I’m gonna call spillover consumption. Best example I’d give you is when I worked at Kraft on Kraft Macaroni and Cheese. And people were like, why don’t you market Kraft Macaroni and Cheese to college people? It’s cheap. They love it. It’s comfort food. And I’m like, yeah, but that spillover consumption happens because we stoke that little child. We stoke that family experience. And as they grow old, it spills over. But the core of the essence lies in the heart of the lover.
Hal Weitzman: OK, Pradeep Chintagunta.
Pradeep K. Chintagunta: I think the bigger challenge is for startup companies, small companies that just begin because I think a lot of the focus is on building demand, but I think you have to start thinking about the brand and the company’s core mission right from the start.
I think good examples of this are Warby Parker and Harry’s, where I think when the company began, they started off with this additional mission, which I think sets them apart from any standard purveyor of spectacles. And I think, being able to do that and sustaining that over the growth of the company is really quite critical.
Hal Weitzman: Tell us a bit more about that example.
Pradeep K. Chintagunta: So Harry’s, for example, I think has something called—I don’t know whether you’re familiar with Harry’s. It’s the shaving-club kind of a company, which was actually founded by one of the founders of Warby Parker. And they have something called one-plus-one, where 1 percent of their net revenues goes directly toward charity, and workers or employees spend 1 percent of their time also contributing to charity. So they have this one-plus-one kind of rule.
Warby Parker has this buy-one, give-one thing, where for every pair of glasses you buy, they make a donation, which then makes glasses available to people in other parts of the world.
So I think these are all missions that you can begin the organization with and then use that as a way of first of all motivating your own employees, because that’s going to be a very powerful way in which an employee is going to think that there’s a reason for working for this company. But it’s also, I think, a nice way to differentiate yourself in the mind of the customer. And I think for young companies to do that, it’s much more difficult than more-established companies.
Hal Weitzman: OK, I just very briefly want to touch on the idea of what the psychological processes are behind branding. We’ve talked a lot about it from the company perspective, but from the consumer, what’s actually going on in the mind of the consumer when she sees a brand and makes that association?
Ann L. McGill: The world that we try to perceive as we bring it in is more complex than we can bring in. So we sample a subset of the environment. We look at some things and not others, and what we bring in we interpret in different ways. And what the brand is doing is changing what we sample and changing our interpretation.
To go back to cars: you can imagine test-driving a BMW. You’re in the car for 20 minutes. You get out. And I say, so how was it? And people will tell you about the handling, and the acceleration, and I would say, so how was the lumbar support? Were you comfortable? And they’re, like, I sat in that car for 20 minutes, and I honestly couldn’t tell you, They weren’t sampling that. Whereas a test drive of a Lexus, that’s what they’d be sampling.
So the brand teaches you what to pay attention to. And then when the information comes in, when you’re checking the acceleration, you get a little extra bump. You “assimilade”—is the technical term—your perception to the brand meaning. So the brand gets to be good in the ways it wants to be so long as it’s trying hard to keep its promises.
The brand can also change your behavior. Apple’s associated with creativity. If I put an Apple logo out there, you’ll behave in a more creative way. Without aid of the computer, you’ll just act more creative because it’s on your mind. Well, that’s gonna help the brand, because you’ll do some work on an Apple, be more creative, and of course you’re gonna attribute it to the machine and not to the fact that you changed your behavior.
So to go back, the brand changes what you sample, how you interpret what you sample, and it changes how you act. That’s pretty powerful stuff for a set of meaning in the minds of the customer.
Hal Weitzman: Absolutely, well, unfortunately, on that note, our time is up. So my thanks to our panel, Ann McGill, Pradeep Chintagunta, and Ann Mukherjee.
For more research, analysis, and commentary, visit us online at chicagobooth.edu/capideas. And join us again next time for another The Big Question.
Goodbye.
(light piano music)
McGill: Brands fill in information you can’t observe at the time of purchase. How is this going to taste? Will the car be reliable? The brand tells me about that. Sometimes I like brands even aside from that information because they signal prestige or I have an emotional attachment to the brand. Research shows that brands are filters through which we interpret everything else that the marketer presents to us.
Mukherjee: A brand connects your product or service to a consumer. Consumers have loyalty today but not necessarily tomorrow. Brands create a relationship. It’s not just about buying brands, but buying into brands.
Chintagunta: Sometimes the brand is just a mental shortcut for the consumer. If I see a boxy car on the driveway, it’s just a boxy car on the driveway. But if there’s a Volvo brand on it, then I’m thinking of something else, like safety.
Mukherjee: It has to tie to your corporate strategy. Brands don’t live in a vacuum. Clearly there are things you do with brands that are tactical, but you have to think about brands in a very strategic way. There are fast-moving, consumable products out there where it’s the brand that really sets you apart.
McGill: A brand sits inside the company. It owns it, and over the long term the company can use it to generate growth and profitability—as opposed to a tactic, which is a periodic expense to get something else done.
Chintagunta: At the very basic level, it’s coming up with some quantification of what the brand is worth, and there are many ways of approaching that. Suppose I remove the brand name; what would a consumer be willing to pay for the product? Others have looked at it based on proxies for brands—the brand’s strengths, its stature, etc. And there are many statistical techniques for measuring brand value.
Mukherjee: Just looking at one measure is a mistake. Brand equity alone is not predictive of any kind of action. I have yet to see someone make a decision on a brand-equity measure. It has to be used in conjunction with other data and analysis. First, look at brand equity over a trended basis. Second, understand how the brand translates in communication. Finally, ask if your brand is strong enough to realize price.
McGill: You also need to measure the content of the brand. A brand needs to be something other than, “I’ve heard of it,” or, “It seems good or bad to me.” It needs to have specific meaning. Volvo means safety. If you ask a customer, “What do you associate with the brand?” that’s a hard question. But if you say, “If you met BMW at a party, what would it be like?” people will say something, like, “Oh, BMW is wearing a tie even though it’s a casual party. He’s good-looking, but he brags, although he’s got a lot to say for himself.” In those answers, you learn a great deal about what BMW means, aside from “luxury-car manufacturer.”
Chintagunta: The brand reflects the culture of the company and the people in the organization. You can think of the kind of people the company is attracting as a measure of the worth of the brand. Unless you have a strong brand, you’re not going to have strong people willing to come work for you.
Mukherjee: Brand distinction is important. Without it, you’re probably going to cannibalize yourself. What are the attributes that matter? Can you predict choice? The danger that a lot of people run into is the curse of brand-manager rotation. A new brand manager comes in and wants to do something new. Consumers aren’t interested in the latest trend; they want consistency.
Mukherjee: When brands get into trouble, corporations immediately want to say, “The brand is sick.” They find a way to overcome why people aren’t buying the brand. When you market your brand against the “why nots” and the barriers, your brand goes off track. McDonald’s is an example of that. You should reinforce the “why.” That’s what draws people in.
McGill: We’re currently seeing a brand put itself at risk intentionally in a way that will probably work. That’s Porsche, which to most people means sports cars. But the brand can’t sell enough sports cars, so the company has moved into SUVs and four-door sedans. That led the Wall Street Journal to ask a few years ago, “Is Porsche really a sports car maker?” There are tens of thousands more units of these other Porsches on the road than Porsche sports cars, but the reason those other vehicles command a great demand and a high price is because of the sports cars.
Chintagunta: Another example is LEGO. Several years ago, LEGO was in trouble because they’d forgotten that it was about innovation and the connection between them, the parents, and the kids. They started making movies and such. But now, the brand is doing extraordinarily well, largely because the company rediscovered their core, which is innovation: How do we make great toys that parents are convinced communicate some skill to kids?
The brand has to transcend simply functional attributes and make that emotional connection. I’m reminded of a Cadbury ad, which could have talked about how creamy the chocolate was, but actually showed a gorilla, on the drums, playing to Phil Collins’s “In the Air Tonight.” It communicated the enjoyment you feel when you eat chocolate.
Mukherjee: Different brands have different starting points in different parts of the world. You could have an underlying insight, but a different culture might consume content in a different way.
McGill: The essence of what you’re trying to say is consistent, but you might personify it in a different way depending upon the culture. Different media might be suited to different components of your message. Nike wants to communicate authentic athletic performance, and maybe performance is better delivered on television, whereas authenticity is delivered more in a conversation over social media. The brand will have rich meaning, not always just a single word. So you may play up different parts of it through the media that’s best suited to it.
Mukherjee: A great brand has to be built every day. People who think, “Well, I built the brand, now I’m just going to milk it” are not going to have a brand much longer. You’ve got to keep nurturing that thing. You’ve also got to trust your consumers. We gave many of our brands over to our consumers long ago. At the same time, you put mechanisms in place to make sure that there isn’t damage being done to your brand. Social listening is critical.
McGill: Brand managers think carefully about which aspects of the brand they want to play up. Customers can be very passionate. They have their own opinions. They might say things about the brand that you’d rather not have played up. How do you manage that with respect for what the customer wants to say?
Chintagunta: The bigger challenge is for start-ups, because a lot of the focus is on building demand. But you have to start thinking about the brand and the company’s core mission right from the start. Being able to do that and sustaining that focus over the growth of the company is quite critical.
McGill: The world that we perceive is more complex than we can bring in, so we sample a subset of the environment and interpret it in different ways. The brand is changing what we sample and our interpretation. Apple is associated with creativity. If I put an Apple logo on a computer, you’ll behave in a more creative way in association with it. That’s going to help the brand, because you’re going to attribute that creativity to the machine. The brand changes what you sample, how you interpret what you sample, and how you act. That’s pretty powerful stuff for a set of meanings in the minds of the customer.
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