Challenging Asia: The pursuit of brand leadership

Take a look at the latest ranking of the world’s 100 most valuable brands by branding consultancy Interbrand. This might be the much-touted Asian century, but apart from a few Japanese and South Korean examples, Asian brands, it seems, are notably failing to make much of a presence.

Indeed, aside from the “old boy’s club” of Sony, Toyota, Honda etc, just one of the new generation of Asian firms makes it onto the list – Taiwanese smartphone manufacturer HTC scraping in at number 98.

Of course there are many Asian companies making a strong impact in global markets with electronics and technology firms in particular seeing their market share soar in recent years.

For example Chinese names such as Haier, TCL and Lenovo – brands unheard of outside China just a few years ago – have achieved sizeable global market share, benefitting from low-cost manufacturing and economies of scale to produce vast quantities of goods at highly-competitive prices.

But as they have grown in market share they increasingly face a new challenge. In the quest for sustainable and profitable long term growth, using such volume-driven strategies alone to achieve market share leadership is not enough.

Low loyalty

While aggressive pricing may deliver broad market penetration, the flipside is that this position is often founded on razor-thin margins and with little consumer loyalty. In other words, their position is extremely fragile: their customers are, at best, fair weather friends.

In today’s fast-changing competitor environments and with ever more fickle consumer trends, leadership in market share can evaporate almost overnight.

So to build the basis of future profitability they must also seek to marry that position with brand leadership. Companies with brand leadership enjoy strong customer awareness, recall and loyalty, and as such are able to charge a price premium.

Indeed, a select few those firms who have really sussed brand leadership can not only charge a higher price for their products but also enjoy the services of customers as devoted brand evangelists. Anyone who’s found themselves pinned in a corner by a fanatical Apple devotee will know the type.

Like market share leadership however, brand leadership is also highly vulnerable. In the socially-connected, hyper-aware market, as customers become savvier they demand more of brands and brand owners.

As such, brand owners must be agile, plugged-in and responsive to the high-flux environment in which they operate. Like any relationship, you need to give love to receive love: simply achieving brand leadership and resting on your laurels is not a viable option.

Let’s take as an example the contrasting fortunes of two Asian consumer electronics giants, South Korea’s Samsung and Japan’s Sony.

Raising equity

Ironically Samsung started out in the electronics business primarily making products which were then badged with other brands, including Sony. Samsung itself was not seen as an especially strong brand. Indeed, for years Samsung’s own-branded products tended to be classed at the very low end of the market – cheap, high volume, high turnover goods, sold in WalMart and other giant warehouse-style outlets.

brand280It was a strategy that served the company well and delivered strong sales. But by the late 1990s, Samsung management realised that sticking to the market share game alone in the highly competitive arena of consumer electronics would prove costly and unsustainable in the long-run.

It needed to move to the next level and as a result the company made the decision to strategically invest in raising the brand image and equity of its product line.

Backed by heavy investment in product design and innovation, Samsung shifted focus to leverage its significant market shares in segments such as flat panel TVs and mobile phones, reinventing itself as a quality brand. In mobile phones, for example, a brand which just a few years earlier had been categorised as low-to-middle market, turned almost completely toward the premium end of the market.

The effect was dramatic: in 2004 the Interbrand rankings put Samsung at number 21 in the world’s top 100 brands, taking it up from the number 42 spot just three years earlier and doubling its brand value.

Crucially this also ranked Samsung just behind chief rival Sony – a company that for years had commanded the premium end of the consumer electronics market, seen as the unassailable industry leader in innovation and quality.

Convergence leader

Indeed the rise of Samsung also marked a turning point for Sony. Since 2004 it has seen its brand ranking fall from number 20 to number 35.

ThinkAloud4While Samsung retained its position through aggressive innovation, introducing a steady stream of new products and positioning itself as a leader in the emerging field of digital convergence, Sony stagnated and stumbled.

Its highly siloed divisions meant innovation had become a slow and costly process. As a result the firm’s grip on its premium brand status began to erode, and the effect on the company has been painful: a series of billion dollar losses and thousands of jobs cut.

Now some analysts have suggested that Sony should consider exiting entirely from markets such as TV manufacturing – a sector where it was once seen as a leader.

Samsung, by contrast, has seen its brand value soar and likewise its earnings. It currently contributes around 20 per cent of South Korea’s entire GDP.

As companies seek to achieve sustainable and profitable growth therefore, marrying market share leadership with brand leadership becomes all the more important.

The glue that binds these two together I refer to as customer intimacy – building an emotional connection between the consumer and the brand.

Connectivity

Nike, Microsoft, Apple and Coke are perhaps some of the best examples of global brands that have achieved and sustained both market share leadership and brand leadership by pursuing customer intimacy.

As well as aggressively pursuing cost reduction, innovation and market coverage these brands have also clearly articulated and executed strategies to invest in emotional branding, experiential marketing, developing strong brand communities and dedication to customer service.

In today’s globalised, socially-connected market, building emotional connectivity is increasingly important and research has shown that emotional experiences associated with a brand carry a strong resonance with customers.

Apple is one such brand that excels in these areas, building a brand presence through its network of slickly designed stores, passionate staff and commitment to service and quality – backed up by a steady stream of desirable products.

Another example is Nike’s heavy investment in its network of Nike Town experience centres, as well as its frequently generous sponsorship in support of grassroots organisations and community events.

This customer intimacy is what bonds consumers emotionally to the brand, building customer “heartware” and loyalty towards those companies enabling them to enjoy price premiums that translate to healthy bottom lines.

  • Author Profile

    Dr Prem Shamdasani is Associate Professor of Marketing at NUS Business School. His research and teaching interests include Brand Management, New Product Marketing, Retail Strategy, Relationship Marketing, and Cross-Cultural Consumer Behavior. For a full profile click here.

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