Brand Building Takes Patience—Right Now
from
September/October 2007
by Charlie Hughes & William Jeanes
Building great brands takes time. In a world where new CEOs typically have three years or less to prove themselves, this is upsetting news. With your board of directors clamoring for immediate results, it takes conviction to conduct your business in a way that builds brand equity. This often means putting the good of the brand ahead of even such important considerations as you and your career. And it means that boards that want strong brands have to become part of the solution.
Even though a great many companies have patiently spent decades successfully building up their brand’s equity, most executives don’t want to hear stories that include the word “decades” unless they deal with their deferred-compensation plans. That being the case, perhaps you should listen to how Nissan—by being patient for almost a year—turned itself around. The lessons apply far beyond the car industry.
Throughout most of the 1990s, Nissan muddled about in the market with weak product offerings and constantly changing advertising themes. Dull products and uninspired marketing led to—you guessed it—advertising and selling on price. Not the world’s freshest or brightest strategy, but the company took it to a whole new level. Rapidly changing and ever-escalating incentive plans earned Nissan the nickname “the irrational discounters” among its West Coast competitors.
Nissan dealers immediately got hooked, even though they had a hard time following some of the logic. Still, they enjoyed playing the “let’s give cars away” game. Many of them added their own insane ingredients to the pricing stew. Nissan’s discounting at the time was dizzying, yet it would look almost normal in today’s marketplace. For the time, however, Nissan’s behavior looked radical, particularly when viewed in light of the other big Japanese companies, Toyota and Honda, which did almost no discounting. Nissan went from being the Japanese brand second only to Toyota to a distant third behind Honda. Distress merchandising, when done long-term, will lose market share, not gain it.
When Carlos Ghosn, who soon became everybody’s candidate for messiah of the car industry, took over Nissan, it was wobbling on the edge of bankruptcy. During his first visit to the U.S., Ghosn asked his local executives what it would take to make Nissan profitable in North America. His strategy was to build a profitable business, not to keep plants busy making high-volume money losers. Their answer was new products and a move toward advertising product, not price.
This raised a knotty question: When do you change strategies? Old habits die hard, and if you wait until you have new products, the market—and the dealers—will exert tremendous pressure to continue selling on price. Stop discounting before the new products arrive and sales could drop like a rock.
The Nissan leadership agreed to dramatically reduce discounting at the beginning of 2001 and suffer a decline in sales prior to the introduction of the first new car. That car, the Altima, would not be introduced until fall. Nissan then took an overdose of brave pills and went on the road to share the new strategy with its dealer body.
The story line was simple: The new strategy would generate more profit for both dealers and Nissan. Rarely is money made giving cars away, and most people attending these meetings knew it. Nissan’s team was honest in admitting what would happen before the new Altima arrived. They predicted a sales decline of 12%. They also sold the idea that the new cars would be more competitive and interesting than the old ones, and the new Nissan Altima would make good on this promise. Last, they told the dealers that the new cars alone would not generate more profit—unless the dealers collectively fixed their own behavior.
In the end it worked, but getting there was hell. The dealers bought into the strategy, but as the discounting went down, followed quickly by sales, they howled. To stir the pot a bit more, as if it needed it, Nissan mandated that there would be no discount-price advertising for the new Altima when it came to market. The losing tactic that the dealers had grown to love was now forbidden.
Nissan withstood the heat for more than half a year while sales went down. Happily, the new Altima was everything everyone had hoped it would be. With virtually no incentives, it allowed both the factory and the dealers to concentrate their marketing money on telling the world what a great car it was. They launched with a new campaign called “Shift,” and it indeed shifted consumer perception of Nissan.
Nissan had done its product homework: The new Altima was bigger, good-looking, well designed, and offered a V-6 for the first time. Moreover, its price was $200 below the old Altima, a dated, unattractive toad of a product. It was thus a relative bargain compared with either a Toyota Camry or a Honda Accord. Incentive spending plummeted from almost $2,200 a car to $250. With everyone solidly marketing the same product story, sales took off immediately. Dealer profitability jumped dramatically, and the dealers became converts to a strategy that they knew was right but had complained bitterly about during the months before the new Altima appeared.
Nissan thus turned the corner and went on to introduce a string of successful new products, all marketed on its corporate vision of offering cars with a touch more style and performance than the competition. Smart pricing and small discounts where market pressures require them have replaced the irrational discounts. And Nissan has become very profitable––a marvelous result based on its having had the courage of its convictions and the patience to stand six months of heat from its dealers.
If you were paranoid, you’d think sinister forces are at work, pushing us into extremely shortsighted actions. Well, look around and you’ll spot trends that continue to condition many executives’ thinking about the value of patience.
Customer value versus shareholder value is a dilemma that management has wrestled with since the first shareholder invested in a company. But the Information Age has accelerated the pressures that push shareholder value ahead of customer value.
Bill George made the point in his book
Authentic Leadership
that the companies that perform best for the shareholder over time are the companies that focus their attention on the customer first, the employee second, and the shareholder last. It is called winning in the marketplace with customers.
Yet it’s the domestic car companies—losing market share because of having lost touch with the market—that constantly yap about shareholder value. They talk while the share price falls. It would be fascinating if it were not so sad. A share of General Motors bought 40 years ago would be two shares today—and worth about what you paid for the original single share.
We know it is difficult for leaders to stand up to a stream of criticism and second-guessing from stock analysts who have instant access to almost
as much information as management itself. But we are hard-pressed to think of an example of a successful company that got that way by putting shareholders first and customers second. Well, there was Tony Soprano’s Bada Bing topless bar, but you get the point.
A slavish focus on short-term business results aimed at impressing the analysts inevitably comes at a cost to your customers. Over time, customers will gravitate to companies that transparently put the customer’s interests first. Analysts will sing your praises if your customers do. You absolutely must concentrate your effort on inspiring customers to pick you out of the crowd.
It’s ironic that companies stay up nights looking for the smallest competitive advantage, yet often manage to miss the big advantage: the compounding effect of standing for the same important thing, year after year. Look at BMW, Ferrari, and Lexus. Each of them dukes it out in the marketplace each month, but each also has the advantage of having spent years demonstrating who it is and what it stands for.
Unwaveringly.
If great brands are a promise wrapped in an experience, how long do they take to build? Like all serious promises, a brand promise takes trust, and building trust takes time. Trust can be earned or lost through experience.
Customers will, however, reserve judgment. Simple as this sounds, your business grows when more and more people try your product and enjoy the experience. People initially attracted by your promise will learn firsthand that you deliver a different and better experience. Your hard work and effort will have paid off. But there’s a catch: It takes time. Although we live in a world of constant, rapid communication and epidemic message overload, consumer perceptions change at glacial speed. This reality can be a good thing if you embrace it—and if you believe that time can be on your side.
The notion that it takes a long time to build a successful brand conflicts with our culture of instant gratification. It is discouraging to those who live in the moment, must succeed in the moment, chase what is hot in the moment, and let the exigencies of the moment control them. How many times have you heard, “We’ll really start building our brand as soon as we get rid of this excess inventory”? Or “when we launch the new product” or “after we’ve fixed our retail problems”? Sounds familiar, doesn’t it? A company must be abuzz with enthusiasm for getting on with what needs to be accomplished, but it must also remain steadfast to its master plan.
Most pundits agree that it takes a long time to build a successful brand. We say it takes one day—today. Great brands are built by doing the right thing today and every today thereafter.
You first have to build a branded culture, which means that a company’s people are aligned in a cause or a mission that is absolutely clear to them. Now ask yourself, what makes it so clear? Is it flowery words or brave speeches? Hardly. It is joining with others in a steady march toward a shared, inspiring vision. It is demonstrating over and over again that the leadership has the courage of its convictions—that as problems arise, both expected and unexpected, the company will stay the course. We will keep our promise and find new ways to make that promise valid and enticing to customers.
Being steadfast to your vision, to your promise, and to your customers unlocks some powerful organizational benefits. Employees are released from the anxiety that plagues so many workplaces. They know where “we” are headed, and they know the context for every problem the company will face. They know what they are expected to contribute and how they will be judged. And they see the determination their leaders demonstrate every day, determination that reinforces attitudes and performance.
Too many companies have become job shops, working project by project to hit the numbers. It is scary to compare General Motors with Toyota. As General Motors continues to scramble to reverse market-share losses, it blows one way and another, chasing marketing programs designed and redesigned to sell more cars and trucks. Toyota just keeps working its plan and growing its business, spending less on incentives than the domestics and bringing desirable innovations such as hybrids to market.
Without the foundation of having the courage of your convictions, employees will judge management instead of the other way around. Once that judgment reversal sets in, getting people engaged takes more time than it should because they spend time weighing what you want them to do.
Being steadfast by holding to your vision sets the stage for greatness. It naturally directs the vast majority of work in the right direction and gives people confidence. Confidence in leaders who know where “we” are going and have the courage to face down and solve the inevitable problems—and not to execute knee-jerk and out-of-character reactions that adversely affect morale.
The marketplace continually tests every brand to see if it will remain true to its charter. BMW underwent just such a test during the 1990s as sales of SUVs continued to explode. Its dealer body began agitating for an SUV. The company’s dilemma was that SUVs were then built on truck platforms. That meant large, heavy frames that ensured off-road capability, but it also meant a very trucklike personality. Doesn’t sound much like a BMW, does it?
BMW’s first solution was to purchase Land Rover, which gave it a respected, although separate, sport-utility brand. The U.S. BMW dealers, however, continued to demand their own SUV because they were losing customers to the competition. At this point, the industry started developing “crossover” vehicles that looked like SUVs but were based on car platforms. Crossovers were ideal for customers whose biggest off-road excursion was a gravel parking lot and who wanted a more carlike feel. Lexus got to market first with the RX300. BMW decided that its dealers were right: A market existed for a BMW SUV.
BMW would design an SUV its way—loud on sport and quiet on utility. To deflect criticism that it was not a real SUV, they called it an SAV, for sports activity vehicle. Never mind that not one customer is known to have uttered the term “SAV” out loud—BMW designers and engineers built a genuine BMW clad in SUV clothing. Like all BMWs, its final test was at the Nürburgring, a long and difficult German racetrack. There the new BMW X5 was held to BMW’s “ultimate driving machine” performance standards. It passed.
The company created the X5 only after worrying about the implications of building a BMW SUV, buying another brand, and then figuring out that it could do it best by just being BMW. They patiently worked through the issue, taking actions in keeping with their vision of the BMW brand. The market and BMW dealers screamed, “Build an SUV!” BMW screamed back, “Only when it can be a real BMW!”
We are impatient and we enjoy being so. Knowing this, how do we get time to be on our side? How do we give ourselves permission to take the time to make it work? We are tempted to say confidence and faith are the simple answer, but it is being in love with your vision that gets you past the harsh realities of life.
As the market shifts and your customers’ tastes evolve, you must also change. This does not mean changing who you are; it means getting better at what you’ve promised the marketplace. It means constantly improving the customer’s experience. In the car business, improvement is most often viewed in terms of product. Product improvement generally falls into one of two categories. One is improving the general excellence of your products, how well they work and their quality. The other is improving being the best at what you promise to be. Highest quality, ultimate driving machine, a different kind of car company, or whatever. Interestingly enough, the world will cut you some slack on the general excellence if you really excel at what you promise. Some slack as in some time to improve your general excellence or quality, not a hall pass that says, “You don’t need to worry about it.”
Land Rover struggled with poor quality, yet sales still grew for a time even though quality problems seriously irritated its customers. Saturn coasted along with virtually no new products for a decade, getting by on the strength of the company’s consumer-friendly retail approach.
For the best, the promise defines them while they evolve the experience. In 2005, BMW ran a commercial to introduce its new 3 Series sedan that said, “We invented the sports sedan in 1968, and have been reinventing ever since.” While the commercial is far from breakthrough, it makes the salient point. We strive to be a better BMW with each new generation of car, and we have been doing this for almost 40 years.
If you say it—promise it—you must mean it. BMW does. Each new generation of cars contains new technology and engineering with the sole goal of being the best. It is a self-acknowledged evolutionary approach. Each new BMW’s steering, brakes, chassis, and engine improve upon the prior version’s capabilities. This is no simple feat. BMW had the courage to invest in itself and the drive to constantly raise the bar. The result is arguably the best automotive brand in the world. And guess what? It’s also among the most profitable.
Competitors take aim at BMW all the time. Each year car companies introduce a declared or implied BMW fighter. For Lexus, it has been the IS300, now the IS350. Infiniti has enjoyed success with sporty offerings such as the G35 sedan and coupe and the M35 and M45. Yet BMW continues to grow its business. The company refuses to rest on its laurels, impressive as they are. Do some of the competition’s BMW fighters actually outperform real BMWs? From time to time they do—except in credibility, prestige, and trust.
What makes BMW such a wonderful example of patience and conviction is that the entire automotive industry knows exactly what BMW is doing. If, as we’ve said, it’s a copycat world, why aren’t more companies emulating BMW? Because it takes courage—courage to settle on a consistent, admirable vision, courage to say publicly that you will be best at something, and the patience to see it through.
Markets can change slowly or overnight. A rapidly changing market can badly damage your near-term plan. A brand, on the other hand, should evolve. It can’t change overnight to accommodate changes in the marketplace. Having virtually ignored cars for a decade to concentrate on trucks and SUVs, the domestic automakers are now rushing to embrace them. Their brands are not evolving, which should come as no surprise, because they didn’t stand for much to begin with.
We can’t always anticipate change, but we can interpret it within the context of our brand promise. How will a change in the marketplace require us to change—not our promise, but rather the experience we deliver—so that we remain relevant to our customers?
Your brand promise will take time to be understood and absorbed—and more time and experience to be believed. People must be convinced that you are who you say you are, even if they want to believe you. The majority of your competitors don’t have the vision, courage, or stomach to stand for something consistently over the years. Which means that your patience can create a major competitive advantage.
To set yourself apart, you must have the patience to prove over and over again, year after year, that you are who you say you are—building trust and letting the market come to you. Patience is the final test, and the one that most companies fail.
Charlie Hughes, who heads the marketing consulting firm Brand Rules, was the founding CEO of Range Rover of North America. William Jeanes, a former editor in chief of
Car and Driver
, now writes regularly for
Winding Road
. This article is adapted from their book,
Branding Iron: Branding Lessons From the Meltdown of the U.S. Auto Industry
(2007), published by Racom Books (racombooks.com).
