Sunday, June 12, 2011

The Opportunity for Industrial Branding

Recently a group of industrial sales and marketing professionals met to review the product offerings of their competitors' products. One competitor stood out from all the others: It charged up to 40% more than other companies and seldom discounted.

Detailed analysis showed that the competitor did nothing special in terms of manufacturing, and was saddled with an inefficient distribution channel. In spite of its pricing policy and lackluster production and distribution, the competitor held a strong #2 position in the market, compared to our distant #6 position (the top 3 companies hold 70% of the market).

This success was attributed to "marketing ploy." Oddly, nobody spelled out what the ploy was, or why it worked so well. The implication was that customers had no right to be so satisfied: Any industrial buyer that pays premium prices for undifferentiated products must be either stupid, or misled.

Actually, there was no trick, just good marketing practice. It's called branding.

Branding explains why some products command higher prices and intense loyalty from customers. How else could you explain Harley Davidson motorcycles? Harley employs engine technology and styling from the 1940s, yet it outsell bikes that are faster, more comfortable, more efficient, and less expensive. In fact, there is currently a waitig list to buy one.

Industrial marketers tend to ignore or underplay the benefits of branding. To many industrial marketers, branding is something for consumer products. They simply donÕt understand how branding works for industrial products.

Brands vs Products

Industrial organizations tend to be product focused. Look at your own organization and count how many "Product Manager," or purely product focused roles exist. "Brand Manager" roles generally do not exist in industrial companies, which may explain why there are so few brands and so many products.

But there is a world of difference between brands and products.

Products are defined by the physical properties of what they are and what they do. Products have prices, specifications, lead times, shipping containers and disposal requirements. Product attributes are communicated relatively easily in a variety of ways. Product marketing is all about understanding what people need, and aligning key attributes of products to meet these needs.

Brands are almost the opposite of products. Where a product has a physical presence, brands exist in the hearts and minds of people. Brands convey a character, a promise, and a vision that connects with consumers. Where product attributes can be communicated quickly, a brand's character requires takes time to mature.

Some industrial marketers believe that by creating a unique name and logo for a product that they are creating a brand. These symbols are virtually meaningless if they do not reach out to users with some kind of connecting force. At best, logos and trademarks make it easier for buyers to remember your product.

What Great Industrial Brands Do

Unlike consumer brands, industrial brands may be household names in some industries and unknown in others. Some great brands on my list, like Fluke, Hewlett-Packard,, Fisher-Rosemount, DuPont, 3M, Caterpillar, and Millipore, may not be on yours. Regardless of the industry, consumer and industrial brands must succeed on several levels.

  1. Long-term perspective. Great brands are not trendy. They evoke unique values in users minds and remain there for decades. Companies that own great brands constantly work to build and maintain this sense of worth. Short-term decisions to cut cost or gain a few points of market share can hurt a brand if they conflict with the brandÕs character. Remaining relevant over the long term is based on a commitment to quality.

    For example, IBM's decisions to cut back on service in the 80s, to develop non-standard PCs in the late 80s, and its manufacturing problems with laptop computers in the 90s have diminished the faith that many industrial buyers invested in the IBM name. Still, there many corporate buyers who still pay a premium to do business with Big Blue, because the believe in IBM and trust its reputation. Harley Davidson nearly went bankrupt twice before a new group of managers changed course and committed the company to representing the biker lifestyle with high quality product.
  2. Defined character. Great brands have a defined character, and the people who manage the brand are very aware of what it is. The process of defining brand character involves understanding what end-users like and dislike, and what values they associate with the core of the brand concept. Using this knowledge, smart managers decide what not to do. A well-known example is how McNeil Pharmaceutical handled the Tylenol scare several years ago. When the safety of Tylenol was suspect, the company recalled all the product at a huge cost. One of McNeil's managers described the decision to me as follows: The decision to recall was easy. There was nothing else we would have done. The hard part was figuring out how to get it done fast enough. More recently the company has stumbled becasue the current group of managers did not live up to the brand promise as well as their predecessors.
  3. Invention. Great brands invent or reshape categories. Just as Procter and Gamble created the disposable diaper category with Pampers, DuPont created the man-made fibers category in the 1930s when it invented Nylon. As Apple reshaped the personal computer category, 3M created reshaped the engineered materials category and Cummins reshaped the OEM engine market.
  4. Emotional wellspring. The common link between great industrial and consumer brands is the ability to tap into consumer emotions. Nike is a master at tapping into consumer emotions. Nike commercials are works of art, they inspire. The shoes are almost incidental. Industrial products sometimes achieve an emotional tie-in too. For instance, many professional truck drivers are passionate about Mack trucks. Many truckers also prefer Michelin tires, and will tell you they simply feel better riding on Michelins.
  5. Never ending Story. One reason why logos and trade names fail to constitute a brand is because a brand is really a metaphor that is constantly evolving. Great brands employ metaphors that connect with people at very deep levels. The Harley Davidson example at the beginning of this article is an excellent example. People connect with Harley partly because the looks, feel and sound of the machine speaks of an earlier time. Harley owners feel part of a life style, and connected to an enduring philosophy.

    That's a lot to ask of any brand, let alone an industrial one. Lincoln Electric, the only American manufacturer of electric arc welders, has lived a story that includes beating back intense Japanese competition, a phenomenal workforce that understands customers, and standard of excellence that has not wavered for over two decades. Lincoln's customers are among the most intensely loyal in any industry.
  6. Design consistency. Great consumer brands have a consistent look and feel. All Nike shoes, for example, have a distinctive look. Everything carrying the Tommy Hilfiger brand has a consistent design. Great industrial brands also maintain design consistency. For example, everything about Snap-On-Tools has a consistent design, including the trucks that call on customers. There is a consistency of design in General Electric's industrial products, even across divisions. For example, GE's industrial turbines carry design elements of its medical imaging magnets and aircraft engines.

"Even if I wanted to, I couldn't afford it"

Branding takes time and dedication, not money. Some of the most respected brands, whether consumer or industrial, have been built with little or no advertising, and without complex market research.

Lincoln Electric spends next to nothing on advertising, and when I last checked, had no marketing department. But all of its employees spend time with customers as a matter of policy. In the past, when bad economic conditions have slowed sales, the company send its plant workers into the field.

Here is a four step process for building a brand:

I. Build a community

Harley Davidson spends no money on advertising, and shut down its branding department in 1995. The company created the Harley Owners Group (HOG) to sponsor rallies, special promotions, and serve as an information clearing house for Harley owners. Today HOG has 365,000 members in 950 chapters around the world. Harley views HOG as so important that even the CEO attends rallies.

The key activity here is not the forming of a user group, but the Harley's focus on intimacy with its customers. The company could have done a half dozen other things that accomplished the same result.

II. Give them a reason to belong

Make membership in your community worthwhile by providing special benefits and greater access to your companyÕs leadership. For example, if you set up local user groups, always give your members something extra, like early releases of product improvements, access to prototype products, or access to your R&D facilities for work related to your products.

III. Extend the brand

Using Harley Davidson as an example, the company began merchandising and licensing the Harley name and logo in 1986. Today the company sells $210 million a year on clothing, parts and accessories. By carefully choosing products that support the Harley image, the company has extended the brand profitably.

In industrial markets, brand extension usually takes the form of alliances. For example, chemical companies are extending their brands by allying with chemical management companies. In another example, a manufacturer of fluorinated compounds allied with the leading recycling and recovery company for those compounds. Brand extension can also take the form of adding services to support the product. (See our workbook, "Value Added Services That Sell.")

IV. Extend the enterprise

Build up your distribution channel by supporting your distributors to the hilt, and adding new ways for customers to acquire your products that do not undermine your distributors' profits. (See our June 1997 issue for ideas about ways to improve your distributor network).

The basic approach to extending the enterprise is to pump more goods through your distribution channels. Give your sales force more products to sell, and lower your wholesale prices to your largest dealers.

V. Add Value

Marketing students are sometimes taught that industrial buyers don't buy for themselves. I remember being taught that industrial buyers generally employ a rational, systematic process to decision making, and that they only buy products that are needed.

Reality is different, as we all know. Personal choice does play a factor in industrial decisions, although the parameters are more narrowly defined. We also know that industrial decisions are influenced by many factors. There is no straight path in industrial buying choices.

That's why there are always opportunities to add value.

For industrial products, "value" has a different meaning. Price matters to industrial customers, especially in replacement and aftermarkets. Price alone could account for 50% or more of the value equation.

If your pricing is not competitive, you will have trouble with the value equatoin of branding. This is not to say you must have the lowest prices, but your perceived prices must be competitive. For industrial products, price premiums for leading brands average about 10%.

Other than price, should focus on building brand value in four specific areas. All of them may be fit into the structure of a brand's character.

Product related value stems from tangible factors such as the products' performance attributes. But intangibles count too, in areas such as good design, innovation and the overall fit of the products with their purpose.

Distribution related value stems from a function of tangibles such as product availability and intangibles such as delivery reliability. Short standard lead times (tangible) are important, but the ability to respond to emergency situations (intangible) is much more critical.

The availability of EDI is important, but intangibles such as the overall ease of ordering and the willingness to help the customer with inventory costs, are probably more important. Some companies will value a global supply network, depending on their sourcing policies.

Support related value includes tangibles such as technical support, design advice, and the amount of onsite support. What may matter more is the ability of your support staff to demonstrate empathetic knowledge of the customerÕs business and help out with troubleshooting. More companies are providing technical support earlier in the selling cycle.

Finally, the company itself contributes to brand value. Established companies with global presence and good regional coverage contribute to the support of all the products and brands offered. As with the other categories, however, it is the intangibles that offer special opportunity for branding. How well the company positions itself as a world class, leading organization makes a difference.

5 Branding Home Runs you can do for Low or No cost

  1. Create company sponsored user groups. Hold regional meetings where customers can meet manufacturing, R&D and customer service people. Allow enough unstructured time to allow customers to share their concerns at their own pace. After the meeting, spend at least two hours with your team debriefing what was learned and formulating action plans.
  2. Start a "university" for users of your products. For example, suppose your company manufactures industrial cleaning compounds. You could sponsor a "cleaning college" where your customers can send employees for training in the proper way to use the chemicals.
  3. Find out interesting ways your product is used and sponsor activities that support them. For example, if you manufacture flow meters, you could survey your customers to determine the most common types of systems, materials, and situations that involve your products. Contact the top suppliers of the other components and jointly sponsor an event that combines education, idea exchange, and fun.
  4. If you know how your customers are using your products, you should be able to determine what types and brands of equipment are most often used with your products. Work with the market leaders of these companies to design-in features that will add value to both products.
  5. Visit your customers. Put on small demonstrations of your products right on their premises. People will share information with you face to face that you will never learn otherwise. Over time, you will develop personal relationships with users. Many will take you into their workplace and show you how they use your products, and gradually reveal the information you need for branding.
- Prentis Hall


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