Posts

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

Again and again, brand managers underestimate the simple fact that brands are first and foremost created in the minds of local consumers. The results don´t always meet the expectations of the top management at HQ. A Volkswagen may be a mid-size car in Germany, in China it is definitely a premium car for most buyers and perhaps even a luxury car in India. The development of an international positioning strategy therefore requires a thorough analysis of one’s own brand perception in the target market. This is necessary to ensure that the communication of one’s own strengths can be aligned with consumer needs. In recent years, we at Globeone and Serviceplan have advised numerous blue-chip clients and brands in international expansion projects. Based on this experience, we have identified four major stumbling blocks in brand communication that may cause an international positioning to falter. For all the details, see 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. Brand awareness: Wishful thinking should not subdue reality

It is an old truism: awareness is not everything, but without awareness almost everything is nothing. However, brand awareness cannot be achieved with the crowbar – especially not in large emerging markets, which are difficult to understand due to their enormous geographical spread and diversity. In addition, there are often horrendous costs for classic media, frequently forcing brands to switch to cheaper digital advertising channels. This, however, runs the risk of communicating below the critical perception threshold in the fight for the attention of target groups. The development of brand awareness should therefore not be based on intuitive assumptions about consumer needs, but on empirically proven facts and a well thought out communication concept.

2. Brand image: Known but without profile

If a brand enjoys excellent recognition values but is hardly bought, it usually has a veritable image problem. The brand has not been sufficiently focused on the wishes and needs of local consumers or is simply interchangeable because it is not sufficiently differentiated from competitors. In this case it is important to act quickly in order to not jeopardize the success of market entry in the long term. A clear understanding of the brand drivers – i.e. the most important decision factors for a brand – must be developed and translated into a convincing communication concept and storytelling that sufficiently differentiates from local champion brands.

3. Country-of-origin: Communicating the strengths of the country of origin correctly

Notably in the premium segment, brands can often benefit from the image of their country-of-origin. This so-called image transfer from the country-of-origin to the brand (e.g. “Made in Germany”) is an important competitive advantage that is difficult to imitate. Nevertheless, brands frequently fail to properly bring this advantage of a strong and positive country-of-origin image to bear in their communication concepts. Often there is simply no strategic storytelling that systematically establishes the connection between the brand tradition and the history of the country-of-origin. But strong brands live from exciting stories about their origins.

4. Purchase activation and loyalty: If the customer still does not show up

Even with high popularity and image values, sales figures may fall short of industry standards. Usually two things lead to this problem: either a narrow focus on an undersized target group, or an incomprehensive local sales and logistics structure. Brands must regularly ask themselves whether they are attractively priced for a sufficiently large target group and whether they are actually available everywhere. Digital sales channels may help, if a brand can’t build enough local branches.

A comprehensive brand monitor in the corresponding target country will help to identify and avoid these stumbling blocks. However, the conceptual effort should not be underestimated: careful preparation is essential in order to understand the local perception and performance of your own brand correctly.

 

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

Despite the protectionist demeanor in Washington D.C., German companies have realized record investments abroad in 2017, according to the German Chambers of Commerce and Industry (DIHK). The degree to which a company is prepared to adapt to local market requirements decides which path for the market entry is chosen. Following, we briefly present the four most important strategies. For more detail see the 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. Global strategy – Maximizing global efficiency and centralized decision-making

In industries that are characterized by high integration pressure and short innovation cycles, a globally oriented strategy is recommended. In this case, the corporate headquarter controls the operation. Economies of scale enjoy top priority, the brands are highly standardized. However, adaptation to specific local market needs is limited, which may result in problems with local acceptance.

Example: Apple applies this strategy to its iPhones and iPads. Design, production and marketing are controlled by one single unit worldwide. Market-specific adjustments are usually limited to details such as the power cable, which must satisfy different voltages varying from county to country.

2. Multidomestic strategy – Strong decentralization with significant product adaptations

In this strategy business models and products are strongly adapted to local consumer needs. Country units operate largely independently. Economies of scale are neglected in order to achieve a higher acceptance in local markets. However, the high degree of adaptation can turn out to be a problem when the brand has to hold its own against competitors in a highly globalized environment.

Example: US restaurant giant Yum! Brands, operator of Pizza Hut, Taco Bell and KFC, tailors its menus to local tastes and culinary specialties in every single market.

3. Transnational strategy – Combining the strengths of the first two strategies

The transnational strategy aims to combine the flexibility of the multidomestic strategy with the efficiency gains achieved by global standardization. This difficult undertaking is recommended when companies are equally dependent on economies of scale as well as on adaptation to local consumer needs. Despite these adjustments, brands managed under a transnational strategy can continue to use the reputation of their country of origin for their branding.

Example: The Swedish furniture group Ikea is committed to providing its global customers with a unique shopping experience that defines the global recognition value of the Ikea brand. In addition to the standardized portfolio, there are numerous local adjustments. This is why Ikea sells harder mattresses in China at a lower overall price level compared to other parts of the world.

4. Home replication strategy – Limited standardization and little local customization

The home replication strategy is applied when there is little or no need for flexibility or standardization. This strategy aims to open up additional international markets without major adaptations for products primarily developed for domestic consumers. In the long run, however, this strategy includes the risk of not completely grasping local market conditions and thus losing competitiveness.

Example: Media Markt transferred its concept one-to-one to China and ultimately failed because the chain could not prevail over its local competitors with its classic concept and without major adjustments.

The choice of the right strategy will be rewarded in any case. After a short cooling interval, the emerging markets are currently registering a new dynamic. China will outperform the US as the world’s leading retail market in 2018. India overtook China in GDP growth at the end of 2017.

 

Florian Haller, CEO of the Serviceplan Group, explains in an interview with Marketing Review St. Gallen on how the agency group is positioned and on current developments in marketing. He was interviewed by Sven Reinecke, Director of the Institute for Marketing at the University of St. Gallen and Friedrich M. Kirn, CEO of MIM Marken Institut München GmbH.

At the University of St Gallen (HSG) we teach students marketing and management. However, many of the people employed by agencies have not studied these subjects. You are a rare example of someone who has. Do you think that your training was helpful or would you choose a different approach now?

I benefited greatly from my time at HSG. And that’s because the advertising agency business has undergone some extreme changes over the last 20 years. Our core business used to be driven by gut instinct and was primarily creative;   I suspect a technical angle would not have been at all useful then. That’s all completely different now. Advertising agencies operate in a much more strategic and complex way. Advertising used to run on four or five channels; now we’re faced with twenty to thirty.  Not only that, these channels are also supposed to be interconnected. Apart from that, numerous new careers in the sector have developed over the years and now we can’t even imagine the advertising landscape without them:  just consider the digital forms of advertising. Business models have also developed enormously. It is nowadays essential that the management of a company the size of ours is based on strategic and theoretical principles. In this respect, I have no doubt that my course at the University of St. Gallen provided me with fundamental knowledge of great value. I think it’s a shame that so few high-achieving graduates from prestigious universities choose to work for large communication agencies.  However, maybe we should take it upon ourselves to put out a stronger message about the jobs and promotion prospects we can offer.

What were the events in your career so far that you would consider particularly “critical” and which have brought you insight?  

Each of the key points in my career was a real “aha moment”. Starting, obviously, with the course in St. Gallen and the “St. Gallen Management Model”. The most crucial thing I learnt was that managers should not settle for a superficial approach, but must recognise structures. The understanding and development of structures result in the design of successful strategies. Contact with businesses was strongly encouraged at St. Gallen: we gave presentations and contributed to manager seminars early on in the course. Even though we were quite young, it was quite normal for us to come into contact with senior management from Swiss and European companies. As a matter of course, this resulted in contacts which have endured now for decades. While I was at university, I realised how fantastic advertising can be. Incidentally, it was not clear at the time whether I would go to work in my father’s agency at some point.

Starting at Procter & Gamble after I graduated was an important time for me.  Going to Brussels and working for a pan-European brand in an international team was great fun.  The management helped us young marketing professionals feel personally responsible for our brands and we related very strongly to them. Over the six and half years at Procter & Gamble, I gradually realised that I would eventually want to work more independently so I joined my father’s agency.

How do agencies differentiate themselves from the others? Positioning, vision and principles at most PR agencies are very similar with little room for individuality, the focus is on brand management and creativity.

That’s true.  It is really difficult for an agency to set itself apart from the others in public perception. That is simply because agencies must live up to certain values. Customers expect agencies to be highly creative and not to damage their brands. It’s in their nature. There are no uncreative agencies.

We distinguish ourselves on the market with our four ‘i’s: innovative, international, independent and integrated. We are independent and partner-led.  We have an integrated structure, which, it should be noted, is not just theoretical, but actively part of our practice in the Houses of Communication. In our agency, traditional PR people work closely with media planners, data analysts and market researchers. Each agency within the group is a standalone unit. We have depth of specialisation but also integration. We achieve this by giving the teams geographical proximity and grouping them into customer teams. The other values that distinguish us are innovation and internationality.

Companies are increasingly pursuing a “one-brand” philosophy. Serviceplan operates as a group, but maintains very many “subbrands” and regional links. Is that not contradictory at some level?  Is it still necessary to maintain such a pronounced national presence in these global times?

There is a distinction between the service level and the brand level. At the service level, we do have separate agencies for specialist areas. For example, one undertakes nothing other than business intelligence. Another specialises in search engine optimisation. We see these specialist agencies as tools which customers can buy individually. Very specific expertise is developing in the specialist units.   Creatives look for other creatives and people working with technology need technology enthusiasts. As a group of agencies, we need to create the right environments and find employees that fit into the various areas. On the other hand, we are trying to cut back on the brand level. We don’t want each service area to have its own brand. That is not sustainable on the market. That’s why we have a brand for the creative product in the broadest sense:  Serviceplan. We have a brand for the ability to deal with channels – Mediaplus. The Plan.Net brand represents the digital segment, Facit covers market research and our newest brand, Solutions, deals with the realisation side of the business. The service areas are organised under these brands.

Does it make any sense at all now to maintain a regional presence in so many countries and on so many continents or should agencies rather look for synergies in the individual markets?

The Serviceplan Group is the first German agency to have a significant international presence.  We have either our own offices or partnerships in other countries. We currently have a presence in more than 35 countries, ranging from France to Dubai to China. Although Germany is so export-oriented, no German agency has ever  operated on such an international level as Serviceplan. This is unusual because German companies are valued for their reliability and technology-oriented thinking, amongst other qualities.  Global players such as BMW want to work with partners who can design international advertising campaigns and localize them for the country in question, so a company needs different expertise in the various markets. Anyone planning a campaign for the BMW 7-series must understand the Chinese market where many more cars are sold than in Germany, for example. In a nutshell: our customers are adamant that internationalisation is essential. I must point out that internationalisation is hugely enriching for the Serviceplan Group. Kick-off events at which teams from China, Europe and the USA get together and jointly develop a vision are memorable experiences for me. Internationalisation is unquestionably also an emotive matter for us. It is clear that our expansion concentrates on hubs which are economically significant. It is important to us that the agencies in the different countries are independent and look after their customers.    Synergies are created between countries, of course.

Serviceplan’s “House of Communication” model has integration at its heart. I don’t want to ask you about your favourite campaign – no one likes to rank their customers –  but which Serviceplan campaign best showcases integration?

(He laughs) We provide every customer with the service that is right for them. I am proud of that. Our day-to-day operations produce real flagship projects, of course.   I am proud of much of the work we do for BMW in which we combine creativity, media and the digital approach. A good example is the launch campaign for the i8. It is quite simply a fantastic product and developing the campaign for it was a pleasure. And then there’s the global aspect and the roll-out on every channel. This is a challenge even for a large agency. Everyone likes to see a satisfied customer. However, there are also less high-profile cases which I find really exciting. For example, we developed a campaign for the German Bar Association that worked mainly on a viral basis. Innovative thinking is paramount in a case like that.

360-degree communication is frequently called for – however, SMEs with modest budgets prefer an 80:20 approach.  Can you give examples of when “integrated PR” might not be the aim and what the importance of branding is?

In my view, the term 360-degree communication is not very helpful. The primary aim today can’t be to advertise on every single possible channel. Firstly, there probably is not enough money in most cases and there is also the question of the logic behind it. Innovative concepts do take careful account of the channels available, but try to find an intelligent way of linking that makes sense sequentially.

The current trend towards digitalisation presents us with more than one issue. Increasing digitalisation has the effect of bring the competition closer together. I think this makes the brand more significant. There used to be high barriers to entry. Customers had to go into a shop for advice before deciding on a new jacket. Nowadays we have the Internet and it is normal to carry out the comparison with a series of mouseclicks. It is therefore easy to defend the proposition that brand work today is as important as never before.

Research is currently examining the subject of “sponsor activation”. Why is sponsorship in many cases, despite the high costs of rights, insufficiently used and integrated in brand management?  Are there any examples of best practice?

The Serviceplan Group has a small business unit which is concerned specifically with sponsorship. This is an exciting subject and sponsorship can be enormously effective advertising. At the same time, sponsorship will never occupy a central place in agency operations.  Sponsorship decisions are often made with a great deal of emotion and caution is advised especially in planning a budget. Anyone who invests in a sponsorship, which usually involves a considerable sum of money, must ensure that enough remains in the budget to follow up with advertising.  Only this approach makes sponsorship efficient.

The communication landscape is diverging into many parts; it’s almost impossible to keep track of it.  The digital advertising sector is dominated by two major players. What will communication and advertising look like in 2015? How are corporate budgets changing, what is happening to the work done at agencies and by other market players such as market researchers

I’m not at all concerned about this. There are many subjects not discussed in the current hype surrounding digitalisation. Going forward, companies will still need partners who can develop creative ideas. Even in digital advertising, there is a huge need for consultancy. Agencies which rely on their purchasing power in the media will disappear, because computers will take on this work. There are still no answers to the questions of which customer data I can have, what price do I pay for it and how do I segment the available data? The need for consultancy will grow, not diminish. When I translate my channel strategy to Google or Facebook, it is probably  quite clear which channels my budgets are being used for. That is not something that advertising customers will want. Our future opportunities will lie in using different sources and putting together efficient offers for our customers.

Looking ahead: what will Serviceplan look like in 15 years time?

Let’s be happy if Serviceplan gets through the next five years successfully. Joking apart,  whatever happens, we will be even more digital in 15 years time. The proportion of digital services at our company is already over 50%. Today, 30% on average of our customers’ advertising budgets is spent in the digital area. The topic of data will be important in the future. Serviceplan will be doing more content marketing than is currently the case and will be even more international. Despite the justified scepticism concerning the frantic collection of data and the analysis of big data in many countries on this earth, we in Europe must be careful that we are not left behind. I am a committed defender of data protection and the controlled use of data, but the future will be to a great extent digital and the business models developing from this future are also digital. If we want to participate in this massive trend, we must remain open to the digital world. Particularly in advertising, we must ensure that it is not only companies in the USA in their safe harbour that do everything that is not allowed here and earn good money with it.  It is therefore important to stop people being afraid of Big Data.

Finally, can we have a few words on your commitment to Switzerland, where Serviceplan of course has a branch?

Happily. My father is Swiss and so am I. I did my military service in Switzerland and I’ve studied and worked there and I have many reasons to be grateful to the country. All things considered, we are the largest Swiss agency in the world.  Switzerland is also an important market for us, because it is a hub for companies with international operations.  For example, we work for ABB international global, which is based in Zurich. I feel very at home in Switzerland.

This interview was published in Marketing Review St. Gallen.