15 Oct’18

From Santa Claus to Kaepernick: The Role of Brand Association in Building Iconic Brands

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Iconic brands share many common attributes that a brand holder must build over time and actively manage in order to maximize the value of the brand, also known as “Brand Equity” (or Brand Value).  In a previous post, I explored the Brand Extendibility component of Brand Equity.  One other key component is Brand Association. Building a positive Brand Association is one of the critical components of building a relevant and valuable brand — Amazon is associated with efficiency; Apple is associated with innovation; the Gold Rush often triggers consumers to think of Levi’s; animated films are associated with Disney whether or not they are actually produced by the company.

Brand Association: Defined

“Brand Association” encompasses attributes such as emotions, products and images that trigger consumers to think of your brand, and that come to mind when they interact with your brand. The Coca Cola brand has done a great job evoking feelings of happiness and kinship from its consumers, and furthermore, the company has succeeded in associating itself with the Christmas holiday in the U.S. – so much so that it has actually had a tangible impact on the embodiment of Santa Claus as we know him today. Brand Association plays a key role in consumer purchase decisions, and can help bolster other components of Brand Equity, such as Brand Loyalty. Conversely, Brand Association can become negative very quickly, leading to consequences that are extremely difficult to undo; for example, the British Petroleum (BP) brand has developed a negative association as a result of the disastrous oil spill of 2010, which left many feeling angry and disappointed with the brand. Reversing this association and preventing consumers from immediately thinking of this event when interacting with the BP brand is the large and difficult task of the BP brand managers.

Creating an Emotional Brand

Brand Association is strengthened by the ability to conjure emotion from the brand’s consumers. The book Basics of Branding: A Practical Guide for Managers, by Jay Gronlund, discusses the key principles for developing and maintaining a strong brand. According to Gronlund, “you’re not there until you have an emotional brand;” echoing the notion that the most valuable and iconic brands have an emotional tie with consumers.

One way to evoke emotion is by taking a stance on a cultural issue. Whether or not specific consumers agree or disagree with the stance that a brand chooses to take, it is common wisdom that the action itself has the potential for great impact on Brand Association, and ultimately on Brand Equity. One could argue that Cheerios’ open embrace of “non-traditional” family constructs, and conversely, Chick-Fil-A’s embrace of traditional religious values, have each had a large impact on the respective companies’ Brand Equity.

One recent example of emotional branding by taking a stance is Nike’s “Dream Crazy” ad campaign featuring Colin Kaepernick. This campaign received enormous press coverage and viewership outside of just its paid placements (the YouTube video of the ad has over 26 million views on the company’s page as of this writing). Over the years, Nike has masterfully constructed an emotional brand that is often associated with overcoming adversity and celebrating one’s abilities. The company’s slogan of “Just do it” carries a certain emotional weight as a call to action for anyone doubting themselves. With the recent Kaepernick ad, the company is clearly trying to  appeal to the emotions of pride and passion by showcasing a variety of athletes overcoming hardship in the form of cultural, physical and societal barriers to achieve greatness in and out of their sports.

The Effectiveness of Cultural Branding

What made the “Dream Crazy” ad campaign highly efficient, is Nike’s utilization of Cultural Branding, a process that has taken shape in the digital era along with the rise of social media. Cultural Branding is a nice vehicle for emotional branding in that it makes the campaign highly targeted and focused, thus appealing to people’s emotions in the most effective way.  An HBR article titled “Branding in the Age of Social Media” breaks down the framework for Cultural Branding into 5 steps:

  1. Map the Cultural Orthodoxy – Identify the cultural conventions that the brand intends to challenge given its missions and role in society
  1. Locate the Cultural Opportunity – Identify the alternatives to the Cultural Orthodoxy that consumers are searching for
  1. Target the Crowdculture – Cater to the consumers that have pioneered the Cultural Opportunity. The rise of social media has allowed for increased access to subcultures that drive broader cultural change
  1. Diffuse the New Ideology – Communicate and make mainstream the new ideology that the brand is representing
  1. Innovate Continually, Using Cultural Flash Points – Continue this process as new Cultural Orthodoxies are identified and challenged in order to build and maintain the authenticity of the brand as a cultural icon

With the “Dream Crazy” campaign, Nike has embraced the elements of Cultural Branding. The Cultural Orthodoxy surrounding the acceptance of societal barriers and the current state of social justice is the challenge that Nike has chosen to pursue, recognizing the Cultural Opportunity to embrace the ideologies of freedom, equality, and unbounded opportunity. Naturally, the company has framed its efforts around the sports culture in general; but more specifically, we see the campaign targeting a number of different subcultures in the advertisement, collectively forming the Crowdculture, which Nike hopes would act as a conduit to Diffuse the New Ideology to a broader audience. In a pre-digital era, targeting these underrepresented cultures may not have allowed Nike to reach the critical mass it requires as a global, public company. However, in the age of social media, the targeting of subcultures has not only become easier, but has become an extremely effective tool for brand strategists to spread their message and impose their ideologies on the broader society.

The Aftermath of “Dream Crazy”

For Nike, much has been made about the decision to endorse Colin Kaepernick and launch the ad campaign. People have been seen across media platforms burning the company’s gear or otherwise publicly denouncing the brand. But did this decision actually hurt the brand? Or did the effort serve to bolster Brand Equity even further?

A recent study published by Quid, a big-data analysis and visualization company, provides some insight on the buzz generated by the campaign. According to the article, the “Dream Crazy” ad received 15% of all media coverage surrounding controversial ad campaigns over the past 16 months – more than any other campaign. Next, they analyzed 1,500 articles specifically covering the campaign and noted that 31% used language that was skewed negative, 13% positive, and the remaining 56% neutral – which is actually noted to be favorable compared to the “predominantly negative” reception of other campaigns such as the Kendal Jenner Pepsi advertisement and the H&M sweatshirt event. With these 2 analyses in mind, we see that the campaign generated significant press coverage for the brand, meaning its messages were conveyed (well-received or not) to a very large audience, thus fulfilling the 4th principle of effective Cultural Branding. The campaign seems to have strengthened Nike’s image as an emotional brand, unafraid to push boundaries and take a stance.

The Kaepernick campaign is just another example of how Brand Equity is built through positive Brand Association, achieved through emotional branding and carried through Cultural Branding. Somewhat counterintuitively, standing for something greater than the product itself, much like Cheerios, Chick-Fil-A and others, is a driving force behind the sale of Nike goods.

Full article here
05 Jun’18

Geoffrey the $500M Giraffe

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The Toys “R“ Us bankruptcy has been in the news over the last year. The company’s downfall has been well documented, and the unfortunate fate of the brand that has been ubiquitous in the toy world for several generations of kids and parents was emotional for many. Although a variety of shortcomings of the company’s long-term strategy and operations have come to light, it seems that a solid intellectual property strategy may be offering the toy retailer a small “saving grace” as its story comes to a close – or at least some hope for the company’s creditors.

As part of the bankruptcy proceedings, Toys “R” Us is auctioning off much of its intellectual property (IP) to help cover its debt and legal fees. The IP in the sale includes the Toys “R” Us name, the Babies “R” Us brand, a collection of domain names, and the beloved Geoffrey the Giraffe mascot and logo.  More specifically, according to an article on Entrepreneur.com, the sale of the IP is expected to cover $200 million in debt and anticipated legal fees of up to $348 million (fees which they keep accruing at an astounding rate of $1,745/hour, according to one NY Times article)– for a total of nearly $550 million. Important to note is that the IP value proxy for Toys “R” Us was determined based on a likely value to be realized at an auction. Historically, intangible assets have sold at steep discounts through the auction process, and the true value of the IP assets is presumably much greater in the hands of the buyer.

According to US generally accepted accounting principles (GAAP) as well as the international financial reporting standards (IFRS) a company’s internally-generated intangible assets, including brands and related trademarks, are not reported as an asset on the company’s balance sheet.  As a result of this reporting gap, investors, as well as the general public, never gain a full understanding of the fair value of such intangible assets. In this case, although an official valuation of the Toys “R” Us brand has not been disclosed in the company’s financial statements, we get a glimpse at just how valuable a solid IP portfolio can be, as we see its potential to cover millions in debt and legal fees. For purposes of this post only, we compared the anticipated IP value of $548 million against Toys “R” Us’ last available balance sheet as of October 28, 2017, as seen below:

We specifically highlight the comparison of IP value to the Total Asset Value of Toys “R” Us. We see that the assumed IP value represents 8% of the total reported assets for the company – a significant proportion for an asset that goes unreported. Naturally, one would classify any asset representing 8% of the total book value as a fairly significant asset. However, when we look at some of the world’s most valuable consumer brands, we see that brands can actually have the potential to account for a far more significant portion of Total Asset Value, as reported on the balance sheet. Every year, Interbrand (a UK-based marketing consulting firm) publishes its “Best Global Brand Rankings” in which it ranks companies by the value of their respective brands. To better understand the hidden, off balance sheet value of IP assets, we applied the same IP Value-to-Total Asset Value ratio that we examined with Toys “R” Us to 3 of the top-ranked consumer brands in the study. According to Interbrand’s 2017 brand ranking study, Apple, Coke, and Nike boast brand values of $184 billion, $70 billion, and $27 billion respectively. Taken alone, these values are significant; however, when compared to the Total Asset  Value on each company’s balance sheet, we begin to see the true magnitude of these unreported assets. Below is a table showing the brand value as a percentage of the most recently reported Total Asset Value for each of these 3 companies:

It is eye opening, to say the least, seeing the relative value of these “hidden” assets for some of the world’s largest companies. Nike, for example, owns a brand that is worth over 100% of the total value of its publicly disclosed assets. Apple’s brand is reportedly worth 50% of its total asset value – and it is important to remember that the Interbrand values do not include other forms of IP, such as patents, technology, know-how, etc. which are highly valuable intangible assets for Apple.

Since internally generated intangible assets are not reported in financial statements, in many cases, the public does not gain an understanding of the assets’ fair value until these assets are sold independently or as part of an M&A deal.  When a company experiences financial distress and is forced to liquidate its assets to pay back creditors (see the Nortel IP auction for one of the most famous instances), often IP assets are the only assets which have value, since they can be monetized at the hands of a new buyer. Such is the case with Toys “R” Us; we did not see the true value of Geoffrey the Giraffe until it was too late.

Full article here