Posts

Florian Haller

How vertical brand stretching opens up further income groups

Business in growth markets has become increasingly important for multinational companies over the past decade. However, many companies are focusing too much on the premium segment when expanding into new markets, neglecting the large mid-market segment. Western managers like to underestimate how much purchasing power there is between the top ten percent of the population, the “super-consumers”, and the lower-income consumers in rural areas of the respective hinterland.

The potential of the upper middle class and the economy class is enormous. Therefore, smart brand stretching provides an effective opportunity to expand a brand’s reach and sales beyond the premium segment. It is often used as a strategy in growth markets because it also allows much faster access to the market and causes significantly lower communication costs. For example, it is not necessary to inform and educate consumers about a completely new brand. This is described in detail in our new Springer publication “Successful brand development in the major emerging markets” (written in German) by Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).

Market analysis: Relevant segments and customer requirements

Many questions must be answered before a brand is stretched. First of all, the market opportunities need to be analyzed. How large are the relevant middle segments? How intense is competition there? What are the prevailing customer wishes and trends? And one of the most important aspects: What are the expected profit margins? Another crucial factor to consider is the cost of manufacturing and organization and the company’s ability to adapt. In our experience, this is the most difficult and tricky aspect. Many companies worldwide are doing outstanding work when it comes to developing complex, high-performance products. But precisely because of their engineering skills and the way they think and work aimed at optimizing quality, it is difficult for them to make products less complex, less powerful and more cost-effective. Finding back to the strategic flexibility of “learning” and reinventing important aspects of a business model is important in building a strong and sustainable position in the growing mid-market segments of emerging markets.

Reach: Including neighboring income groups

In emerging markets, vertical brand stretching is very often used to increase product reach. This innovative strategy has been used in the automotive sector for many years. One speaks of a vertical brand expansion, if one looks at the price and/or the quality of the core brand down or above to reach additional market segments. Mercedes, for example, uses this procedure for vertical brand stretching from the S-Class to the A-Class. Volkswagen also uses the entire range of models from the luxury flagship Phaeton to the miniature car up! Cunning marketing managers see brand expansion as the fastest way to leverage the value of a core brand to be attractive in more market segments.

Identity: The core brand and the new brand must be different

However, vertical brand stretching should include more than just pricing. It can also include a change in product composition or packaging to appeal to a wider range of customers and increase sales. To avoid over-emphasizing the core brand, it is advisable to distinguish between the core brand and the new brand in terms of taste, smell, functions, performance, applications, packaging and brand communication. If the price were the only difference, customers from higher income groups could be tempted to switch to the cheaper brand, which would lead to a loss in sales. The “Crest” toothpaste produced by Procter & Gamble is a good example of how successful brand differentiation can work. To further expand in the mid-market segment in China, Procter & Gamble changed the composition and packaging of the brand. The premium version “Pro Health Complete 7” is aimed at upscale consumers. It has been positioned to combat seven oral hygiene problems caused by modern lifestyles. The property and claim to restore natural tooth whiteness has been reserved exclusively for Crest’s premium products. On the other hand, the basic properties of the cheaper products for caries prophylaxis were the focus of attention.

New research confirms that brand expansion is a key factor for sustainable growth in the major growth markets. In a featured insight, research institute Nielsen described the results of a comprehensive market study that examined 82 brand extensions in 46 different categories in the Indian fast-moving consumer goods (FMCG) market. According to the study, 30% of sales of the top 23 FMCG brands are already achieved through brand expansion. More importantly, it was found that the likelihood of successful brand extension is five times greater than that of new product launches.

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Florian Haller

Drawing strength from the DNA of the target market: how local myths and fairy tales offer additional impetus for brands

Without a deep understanding of local culture and myths, hardly anything works in the major growth markets, even if the rest of the preparations are perfect. Whether it´s about gods, festivals and colors in India, Chinese legends and Confucianism, or infectious joie de vivre and folk tales in Brazil: those who do not internalize the cultural DNA of the target markets and coordinate their own marketing accordingly will run into a wall. From Chinese philosophy to Hindu mythology, the extremely diverse future markets offer endless analogies to link a brand with the prevailing symbols, beliefs, tastes and myths. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group) explain the four factors that are especially important for this undertaking. All details can be found in our new Springer publication “Successful brand development in the major emerging markets”, written in German.

1. Referencing local worldviews: Reincarnation is a telling example

Each region has its own beliefs, religious convictions and myths. They express themselves in colorful rituals and festivals, in serious processions, or in traditional narratives. Western companies and brands have imaginatively used local myths and beliefs in many target markets. Volkswagen in India is a great example. For a while, the car manufacturer drove an ad alluding to the topic of reincarnation. Reincarnation is very important in Hinduism. The ad showed an old VW Polo, which was highly appreciated by its owner. Even in old age the man still took care of the vehicle. But he died when his daughter was expecting a child. The daughter and her husband buy a new Polo and discover that their grandson appreciates the car as much as his late grandfather. The analogy here is that the grandfather must have reincarnated himself in his grandson and thereby also transferred the love for the vehicle. The advertising spot culminates in the slogan: “The new Polo – so good that you will come back for it”.

2. Use local festivities: How to make effective connections

Religious and other traditional festivals in some countries initiate massive migration of peoples. Hundreds of millions of Chinese return home to their families to celebrate Chinese New Year. The whole country is on its feet for these emotional celebrations. They are wonderful occasions for brands to establish or expand connections with their target groups. Starbucks used the Chinese calendar in a clever advertising campaign to increase sales. The Seattle-based coffee chain developed a 30-day calendar around the annual Spring Festival, when all of China is on its feet and all Chinese give their loved ones red envelopes with gifts of money. The Spring Festival is often used in China for weddings, travel or other important events. One day in the Starbucks calendar was declared to be good for visiting relatives. Another day was reserved for blind dates. The calendar was distributed on social media platforms and the various days were linked to special offers in the coffee chain stores. Once, customers were asked to hug their parents in a shop to take advantage of an “order three, pay two” offer. On another day the drinks were free and customer cards were offered. With relatively little investment, Starbucks made its “Campaign of Daily Friendliness” a huge success. It is said to have increased sales revenues tenfold compared to other advertising campaigns.

3. Local research: Identifying future global trends at the source

Global trends usually emerge from the largest, most agile and creative markets. The large growth markets are therefore increasingly becoming the source of new standards and trends. For this reason, Western brands have been strengthening their local research and development in the markets of the future for some years now. Mercedes-Benz was one of the trendsetters in China. The car manufacturer opened a center for advanced design in Beijing in the first half of the decade. The reason was the farsighted assumption that the preferences of Chinese consumers will set global trends in the future. In addition to adjustments to infotainment and driver assistance systems, the R&D center is also researching the vehicle design of the future and the specific preferences of local consumers. Parallel to the opening of the R&D center, Mercedes presented its first local concept car, an SUV coupé crossover called “G-Code”. The car features numerous adaptations that serve the special taste of the local target group. In addition to borrowings from traditional national architecture, fashion and calligraphy, the design was also influenced by specific tastes of modern customers. The Chinese prefer an expressive and dominant design to demonstrate their individual social rise. This even includes striking gimmicks such as a radiator grille that can change its color.

4. Well translated is half integrated: When BMW turns into a “precious horse”

A local adaptation can be really tricky when it comes to the language. There are pitfalls lurking here. They can prove expensive if something goes wrong, especially when it comes to translating the brand name. Names are very important, for example, in the Chinese culture. Before the Cultural Revolution, it was a widespread custom to add a pseudonym to the family name and first name when you reached adulthood. From this self-chosen name one could deduce characteristics and activities of the name bearer. The same applies to brand names. From the point of view of Chinese consumers, the brand name is a manifestation of the culture and values of the product advertised. But with about 50,000 characters and hundreds of dialects, negligence in translation can end in disaster. Some German companies have succeeded in making successful transfers with the help of experts. The name for Siemens – “Xi-men-zi” – means “Gateway to the West”. In Chinese, the name BMW is “Bao-ma” – “Precious Horse”. And “Ben-chi” as a transmission from Mercedes-Benz is translated as “galloping fast”.

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Florian Haller

The appeal to emotions: how to address the rising individualism among consumers

As a result of rapid social and economic change all over the world, individualism is on the rise everywhere, especially in large growth markets, which up to now were characterized by a rather collectivist mentality. The drivers of this change are better income and an expanding middle class in large parts of the world. Consumers are enjoying to finally catch up with Europe and North America. They want to make inspiring and fascinating experiences. They want to make up for what was once an impossible dream. Along with disposable income, demand and the strive for independence are growing. This means that emotional factors are increasingly coming into play on top of purely functional aspects as a factor for consumption that is aimed at demonstrating social status, individual taste and being part of the “global village”. The level of individualism, though, still varies from country to country. Successful brand differentiation must therefore address these factors, if international brand development is to succeed. The way this works is described in detail in our new Springer publication “Successful brand development in the major emerging markets”, written in German, by Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).

No contradiction: emotionality and functionality must go hand in hand

Marketing scientists and managers have known for quite some time that successful brand differentiation can also be achieved by emotionalizing the brand, which addresses the trend towards individualism. The emotional benefits that brand consumption promises must be linked to the brand identity in a way that reflects the self-image of the target group. Like people, brands have an identity consisting of personality traits, values, a vision, competencies and brand origin. It is important to integrate the emotional personality traits into the functional benefits associated with a brand. The ideal watch should not only look beautiful, fit and function reliably, but also emphasize the personality of the owner. The ideal handbag for women should not only be easy to wear, but also underline the fashionable individuality of the woman. Particularly in industries where functional differentiation is more or less exhausted, emotional differentiation can make all the difference compared to the competition.

How Adidas increased its market share in the women´s category

As one of the leading sports brands in China, Adidas was faced with the challenge that Chinese consumers felt less and less addressed by the more masculine-oriented brand communication of sporting goods manufacturers. Market surveys had shown that Chinese consumers rather rely on the factor of fun and bonding power – i.e. the shared experience with friends and acquaintances – during sporting activities. With the “all in for #mygirls” campaign, Adidas therefore developed a campaign aimed at using this high value of friendship in brand communication. The campaign communicated the fun, the bonding power and the “coolness” factor of sport. Messages that brought the sense of togetherness to the fore were at the heart of the campaign. With the well-known Chinese singer Hebe, Adidas was also able to win a high-profile brand ambassador, whose passion for sport and dancing was well received by the target group. In the campaign commercials Hebe was staged with her “sisters”, i.e. with women practicing sports together. The TV commercials all ended with Hebe speaking directly into the camera: “These are my sisters, what about your sisters?” The campaign, which was played out cross-media and accompanied by various events, led to an increase in sales of 40% in the Adidas women’s category and, in addition, actually inspired Chinese consumers to more sporting activities (studies have measured an increase of 3.45%).

Opportunity for prestige brands

In general, foreign brands enjoy an advantage particularly in larger growth markets. Due to their reputation, they are generally more likely to serve the emotional needs of consumers. A pronounced self-confidence or the will for self-expression and self-development promote an emotional expectation among consumers towards these brands. Durability, good quality and functionality are still important criteria, but they are increasingly complemented by factors such as attractive design and other aspects that serve personal enjoyment. This phenomenon varies from consumer segment to consumer segment: This individualization trend and the growing need for an emotional appeal can be observed especially among younger generations who have grown up with social media, as well as in higher income households.

The worldwide trend towards individualization marks a paradigm shift in brand communication. Ideally, the strongly fact-oriented product communication is supplemented by a fascination level that appeals to the emotions of consumers. Against this background, more and more companies are defining a purpose – a higher corporate purpose – for their brand communication that is intended to cover exactly this level of fascination.

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Florian Haller

Culture drives consumption: Why cultural values are important in brand building

Authors: Florian Haller, CEO Serviceplan Group, and Niklas Schaffmeister, Managing Partner Globeone

The rapid changes of our time lead to conflicts between cultural traditions and new ways of life. Career advancers spend more time in the office, they often go on business trips, they have less time for themselves and their families. The lack of time changes everything from eating habits to family orientation, the way of communicating and consumer behavior. And in many international markets, foreign influences, industrialization or massive urbanization are turning even ancient traditions upside down. Individualization is increasing and consumer behavior is spreading, particularly in the middle classes around the globe, which is intended to showcase the newly acquired status.

There can be no question: culture is and remains a decisive factor for consumer behavior and thus also for brand positioning. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group) therefore explain why an intensive examination of the culture and cultural values in the target markets is indispensable for successful brand development or repositioning. Read more in detail in our new Springer publication “Successful brand development in the major emerging markets”, written in German, by Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).

Powerful factors: culture and cultural values

The definitions for the term culture have become as diverse as the cultures of this world. Things may become clearer if the term culture is separated from cultural values: Culture then refers to the totality of human behavior in a society, while cultural values refer to a series of beliefs about certain behaviors that are considered particularly desirable in a society. In marketing, the conviction has therefore developed that cultural values are a powerful factor that has a decisive influence on the motives of consumers. This applies to their lifestyle as well as their product selection.

In the jungle of values: What is decisive for brand development

Foreign brands that want to address these different cultural preferences must therefore familiarize themselves well with the cultural environment in the local target market. In view of the diversity of values and moral concepts, however, this is easier said than done – brand managers are often faced with the challenge of identifying the consumer-relevant value dimensions for brand development. In such cases, so-called catalogues of values have proven to be a helpful instrument. Sociologist Shalom Schwartz, for example, has developed a catalogue of values that identifies seven important cultural value dimensions on the basis of data from 73 countries. On the basis of these dimensions, it is not only possible to differentiate between the essence of cultures worldwide, but also to record individual, culturally specific and consumer-relevant value dimensions.

According to Schwartz, the most important dimensions of value include:

  • Harmony (harmony with the environment)
  • Social embedding (social order, obedience, respect for tradition)
  • Hierarchy (authority, social power, orientation towards wealth)
  • Ability (ambition, daring, success)
  • Intellectual autonomy (open-mindedness, curiosity, freedom)
  • Affective autonomy (joy of life, pleasure, tension)
  • Egalitarianism (social justice and responsibility, equality)

Infographic cultural values

It quickly becomes apparent that there are enormous differences along these value dimensions, for example between European countries and the major emerging markets such as China and India. While in China and India hierarchical values are given high priority (e.g. in the form of the caste system), in Europe the focus is on egalitarian values and intellectual autonomy. Put simply: people want to enjoy their freedom, work creatively and realize their full potentials.

Significance for brand communication: cultural values and consumer motives

Besides the family, society, religion and educational institutions, the mass media – not least digital and social media – have developed into important carriers and mediators of cultural values in the post-industrial age. However, it has been shown time and again that advertising also has a great influence on the representation and communication of cultural values. Advertising is based on linguistically powerful images and metaphors. These, in turn, are strongly influenced by cultural values which have an influence on culture, insofar as they are received by a broad circle.

The “similarity acceptance hypothesis” is regarded as a rough compass for successful brand communication in the local target market. Its message: The more similar the values communicated by a certain brand are to the values of a certain social class, the higher the probability that the brand is attractive for this grouping.

Conclusion: culture has a strong influence on consumption. In marketing you have to find the most effective levers to use this influence. This requires a profound knowledge of local cultural values.

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Florian Haller

Market-driven positioning: Only the best value proposition guarantees success

Authors: Florian Haller, CEO Serviceplan Group, and Niklas Schaffmeister, Managing Partner Globeone

Insiders have known it all along: When foreign companies succeed in growth markets, half of the success factors are directly related to the adaptation or localization of key elements of the brand strategy. The key question is how best to adapt a brand to local expectations and requirements. Based on multiple years of consulting experience, we at Globeone have developed the so-called market-driven positioning process. This multi-stage process ensures that all relevant internal and external factors are taken into account in the analysis and development of the positioning strategy. The result is a positioning concept that is actually tailored to the needs of consumers and at the same time protects the brand itself from overstretching. The six steps can be read in detail in our new Springer publication “Successful brand development in the major emerging markets”, written in German, by Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).

1. Market analysis: Gaining an overview

The problem many companies are facing is not that they miss information, but often the available information is simply not prepared in a way that makes sure it promotes the development of meaningful and realizable strategies. The first step is therefore to collect all relevant data within the organization and – if necessary – to supplement it with additional market and consumer research. From the available company data, competition analyses, market statistics and relevant media reports, an overview of the target market and initial positioning options can then be obtained.

2. Relevance analysis: Understanding what is important to consumers

The prerequisite for a successful positioning is always the local relevance of a brand or product. Therefore, in a second step, the most important decision drivers for the brand are identified. It needs to be analyzed how the brand can best support the development of certain preferences. The evaluation does not only need to take into account the functional brand drivers. It is important to include those that appeal to the customer at the emotional level as well. In our experience, many foreign companies do not begin with this relevance analysis, but instead assume a much narrower starting position from the outset. However, this carries substantial long-term risks.

3. Feasibility: Not every consumer wish fits the brand

Recognizing the needs of consumers is one thing – but serving them successfully is another. If a company has analyzed the local target market and the target group without bias, it must of course decide which consumer needs and wishes it can satisfy best. What can actually be achieved may depend not only on the portfolio but also on the current image of the brand. The image must match the brand offering, otherwise there is no convincing basis for consumers to buy. If the company or brand lacks the relevant image associations for certain products, systematic brand development is necessary.

4. Consistency analysis: Beware of excessive adjustments

Balancing the global brand promise and local positioning is incredibly important in order to avoid brand dilution. Adaptation to the local target market must not conflict with global brand positioning, because otherwise there will most likely be conflicts in brand management. In this fourth step, the consistency of the positioning route with the global brand promise must be checked. If the adjustment to the local target market threatens to be too strong, companies are generally well advised to build up a separate brand.

5. Differentiation: How to draw the best distinction

In a further step, the positioning strategies of local and global competitors must be analyzed because the composition of competitors in individual markets can vary greatly. More importantly, however, competitors themselves sometimes choose different positioning strategies for each country. Therefore, brand managers cannot blindly rely on a competitor’s positioning in one market corresponding to its positioning in another. The communication between competitors must also be scrutinized: How is positioning implemented in print media, advertising campaigns, digital channels and elsewhere? Based on this analysis, a positioning chart can then be created. It can be used to identify the positioning gaps.

6. Positioning: Finding the best value proposition

The remaining options resulting from the previous steps can now be validated for their attractiveness through detailed quantitative and qualitative tests. This last step should not be underestimated, because only the truly optimal market-driven positioning helps the brand to remain relevant in the local target market in the long term. This process can also be used to develop similarly convincing product and service concepts.

Infographic market-driven positioning

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