[VIEWPOINT]Can’t judge a book by the cover? Well...“A good name is better than riches,” noted Cervantes’ Don Quixote.
In corporate terms, a good name equals a good brand ― and according to a rash of local press reports, brand management is the latest buzz in Korean business circles.
It’s about time: an article in this newspaper quoted a Ministry of Commerce Industry and Energy report stating that over 70 percent of local firms lack brand management departments. So it is good news that this intangible, but vital asset is finally achieving visibility. But why has it taken so long?
Perhaps because, until very recently, the leaders of Korea Inc’s flagships had come up through the “hard” side of business: engineering, manufacturing, finance or microeconomics. Expertise in the “soft,” creative side of business ― such as marketing and design ― was rarer. This managerial imbalance resulted in a commercial environment where size equaled strength, and where market share was pursued at the expense of profitability.
In terms of increasing brand value, this strategy was suicidal.
Firstly, Korean companies were into everything ― from cars to petrochemicals to semiconductors. Massive portfolios meant that consumers had no clear idea what sector Daewoo, Samsung or Hyundai represented.
Compare this to foreign multinationals, such as Nokia, Microsoft and Gillette, which are clearly specialized and dominant in their respective sectors of the market, and thus in those same sectors in the consumers’ mind. Secondly, as Korean multinationals competed purely on the basis of price, brand building measures were overlooked in favor of a fast, cheap sell.
So it is a major plus that leading Korean companies have divested non-core lines and specialized to move up the value chain. “Brand power lies in dominance,” marketing guru Al Ries states. “It’s better to have 50 percent of one market than 10 percent of five.”
Samsung Electronics is now a global leader in its sector and has, in fact, become one of the world’s top 50 brands according to the influential Businessweek/ Interbrand survey of this year, largely on the strength of advertising and sports marketing initiatives. Hyundai Motors is now one of the world’s top car producers. Mind you, I’m still not sure what their “parent” groups do.
All this begs the question: “What actually is a brand?” In laymen’s terms, it is simply a trademark: the swoosh on a pair of Nikes or the patch on a pair of Levis. In marketing terms, it is much more. A widely accepted definition is: “The set of perceptions about a product, service or company that exist in the mind of consumers and stakeholders.”
Branding experts have pinpointed four components of “brand essence”: Functionality (what it does); personality (its characteristics); source of authority (credibility and/or endorsement); and differentiation (what makes it unique). In today’s fast-moving environment, when competing products and services are constantly hitting the market, differentiation is recognized as most crucial.
Herein lies the problem. If, as brand strategist Shelley Lazarus has noted, “Brands compress data better than anything else,” then many domestic products are compressing competitors’ data. Look around local supermarket shelves, and note the number of products that, even today, are still copying benchmark foreign product designs in their packaging (and even names). Or, take the popular, unofficial bumper sticker, “I (heart shape) Seoul.” What this says to a foreign visitor is not, “I Love Seoul,” but, “Why have they copied New York’s brand design?” I understand there is even a local car that derives much of its popularity from its physical resemblance to a BMW.
Is it, then, any wonder that Korean consumers ― to the eternal lament of Korean op-ed writers ― have historically preferred foreign to local brands? In a society where the Chinese concept of “face” is so important, and where outward appearance is so heavily weighted, the prestige of a leading, differentiated brand is significant. That of a follow-the-leader isn’t.
Then there is the emotional factor. Example: In blind tastings some years back, “New Coke” beat Coca-Cola hands down. But when the product was released, consumers rebelled ― not in defense of taste, but in defense of brand. Brands appeal to emotion ― a powerful segment of the Korean character.
If I were a Korean chairman today, I would be wondering how to overcome my company’s historical resistance to outside services like advertising, public relations and research. Then I would be asking my brand managers how to differentiate my brand(s) to seize consumer’s minds. What data do I have about my brand perceptions and those of my competitors? Who has set up a strategy to develop my brand essence? How well is it reflected in my advertising? How successfully is my public relations team in disseminating key messages? What kind of corporate social responsibility projects are building brand goodwill? Should I be focusing on my corporate brand (McDonalds) or my product brand (Big Mac)? How high-profile is my CEO?
The problem is that differentiation requires strategic planning, managerial decontrol, moving beyond imitation and thinking “outside the box.” Until these things are permitted to happen, Korean firms are going to face brand problems, with all that that entails, in corporate visibility, consumer mind-share and the ability to charge premium prices for premium products.
Because, to return to Don Quixote, for today’s corporations, a good name may not be better than riches ― it may result in riches.
* The writer is a senior public-relations consultant at Merit/Burson-Marsteller.
by Andrew Salmon