16 Jun 2003  Research & Ideas

Peeling Back the Global Brand

The global brand is a hard nut to crack. In a session devoted to these seemingly all-powerful brands, professors and practitioners exposed the fault lines.

 

Few would argue that detergent is about as dull a product as might exist. Yet the odyssey of laundry soap and dishwashing liquid in Europe, according to two presenters, shines a streak of sunlight on some of the messier issues of marketing, specifically the persistent dictum that brand and product should not be separated.

In their session, "Managing the Brand-Product Continuum in Global Markets," David Arnold, a former professor at Harvard Business School and author of the forthcoming book The Mirage of Global Markets: How Globalizing Companies Can Succeed as Markets Localize, and Hans-Willi Schroiff, vice president of market research and business intelligence for the German company Henkel, described why detergent has made a valuable case study for new and edgy marketing. (They cautioned that they are not ready to claim any validity beyond that particular industry at the moment.)

Why detergent? Why Europe? In Europe, consumers in individual countries may cling to a long-standing loyalty to certain beloved products: so-called heritage brands. In Europe, sometimes the same product is offered in different countries under different brand names, said Arnold. And sometimes the same brand is offered in different countries with a different product formulation. Depending on the country, people usually wash clothes with hot or cold water, so the product formulation needs to be adapted, he said.

Idiosyncratic customer preferences also played into their research. Italians, for example, preferred blue flecks in their detergents—blue being the color of the favorite Italian soccer team, Arnold noted with a grin. On the other hand, residents of the Netherlands, considering themselves environmentally friendly, favored soaps with green flecks. In both cases, the colored flecks served no purpose at all beyond cosmetic appeal. Yet, silly as it seemed, the effect was real in terms of consumer preferences, he said.

We talked about brand more and more as a hierarchy of persuasive elements.
— Hans-Willi Schroiff

Henkel, like many companies everywhere, ascribed to the "don't touch the brand" school of thought, admitted Schroiff. Yet Henkel also wrestled with questions of economies of scale and consumer penetration.

"If you were to flood Europe with standardized products under a few brand names in order to achieve the sacred economies of scale, what would happen to the other element we were so keen on, consumer penetration?" went the worried discussions in Henkel meetings.

"We talked about brand more and more as a hierarchy of persuasive elements," said Schroiff. In their Henkel discussions, they agreed that brands feature a range of elements from the real, tangible, and functional to the virtual, intangible, emotional, and unspecific.

Henkel decided to tweak the conventional wisdom that a brand "is some sort of holistic entity" that had to consistently blend various product attributes and intangible benefits such as personality and values, said Arnold. Different strategic options emerged.

While the results are still rolling in, Arnold and Schroiff agreed upon two main lessons of the Henkel experience: The persuasive elements that constitute the brand offer are not inseparable, and different elements drive brand perception for different consumer groups. These elements must be agreed upon, however tacitly, between company and consumer.

"There are ways to make the dovetails join," concluded Schroiff. "In any case, it is the consumer who decides" whether the dovetails may join, they learned.

Corporate brands crossing borders

In the second presentation of the Global Brands session, HBS professor Douglas Holt described a work in progress that he is conducting with HBS professor John Quelch and Earl Taylor of Research International in Cambridge, Mass. Their latest paper, "Managing the Transnational Brand: How Global Perceptions Drive Value," drew inspiration from Theodore Levitt in order to probe a missing link: the management of the transnational brand. Transnational brands are corporate brands that cross national borders even though individual product-level branding may vary. A missing dimension to the global versus local debate is that global corporate brands compete with other global brands, said Holt.

Consumers usually evaluate transnational brands through five different lenses, he said:

Perceived quality—when people expect that transnational companies produce higher quality products

Global status—the idea that transnational brands confer an elite status on the buyer

Country-of-origin quality—the idea that "a food chain" of production means that higher-quality goods are created in the U.S., Europe, and Japan. Holt and colleagues suggest that this idea has been dampened by the preponderance of outsourcing.

Citizenship—Transnationals ride a see-saw on citizenship in the eyes of consumers. Transnationals may be either admired or derided for their perceived power as social forces.

American values—Coca-Cola, Marlboro, Nike, Pepsi, and McDonalds are all linked to this.

In their survey in twelve countries of seventeen leading transnational brands in categories ranging from the quotidian (petrol and dairy) to the trendy (cell phones, athletic wear, autos, and soft drinks), Holt and colleagues learned some preliminary lessons.

"The most powerful countries—homes of transnationals—are less persuaded by the dimensions," said Holt. And as national borders become less important, niches or pockets of consumer preferences become more important.

A good global brand strategy requires four components, Holt suggested. First: transnationals can enhance the perceptions of product and service quality. Second: be aware that good corporate citizenship matters as much in emerging markets as it does in the world's richest countries. Third: target segments with a transnational "halo," since perception matters. Fourth: be aware that an association with American values can help or hurt. Companies such as Disney, Levi's, Harley-Davidson, and Marlboro may benefit from links with the American Dream, but others such as Microsoft or Motorola, which do not claim an overt interest in such values, may find the American tag a hindrance, they discovered.