Brand battles

The communications industry is facing a full-scale brand war. Internet growth, electronic commerce and deregulation of local and long-distance will place some of the world's biggest brand names in head-to-head competition.

AT&T WorldNet, Bell Atlantic, America Online, Microsoft, Cellular One and others will vie for a share of a communications, information and entertainment wallet that will grow by more than $40 billion in the next five years-but not nearly as fast as the companies' growth expectations.

The potential is huge for price slashing, consumer confusion and service commoditization as new and old brands vie for attention. And industry and company value destruction is a likely outcome.

In this environment, brand is more than an identity. It is a unique asset and source of power that companies can use to cut through market clutter and defend and develop their customer franchise. But this asset must be managed carefully. Should a telco seeking growth in new businesses use its existing brand? When two giants such as AT&T and Tele-Communications Inc. merge, should one or two brands survive? How should multiple brands be managed to maximize company growth?

These are important and expensive strategy decisions, but many intelligent companies will not make the right calls because they fail to understand what drives their brand equity and how to manage it for competitive advantage.

What brand equity is and isn't Brand equity is not the same as brand image.

Brand image is the set of characteristics that a customer associates with a brand: perhaps fun, sexy, well managed, friendly or high-tech. But many of these attributes are unimportant because they do not affect customer decision-making. A user may perceive the leading brand as high-tech and high-quality and still buy based on who provides the cheapest, most convenient solution.

Brand equity is the subset of characteristics unique to a brand that gives it the ability to shift demand and extract a competitive price premium or share advantage for an otherwise undifferentiated offering.

The economic value of brand equity can be huge. A strong brand such as AT&T, IBM or Bell Atlantic can be worth as much as $40 billion in the marketplace, a figure that rivals a company's fixed assets. But brand power does not guarantee success. Remember AT&T computers? And why hasn't AT&T WorldNet killed AOL?

While brands convey power, they also call for humility. Each brand has competitive strengths, weaknesses and marketplace permissions that make it unique and more or less capable than other brands of exploiting opportunities in alternative businesses, products or customer segments.

As communications services such as long-distance, Internet access and wireless service become commodities, brand becomes the primary element distinguishing a company's offering. It conveys who its customers are, what the company cares about and what it does well. The key to superior brand management is understanding how to exploit and extend the positive equity elements of your brand, attack or reposition a competitor's brand, and defuse or address your brand's weaknesses.

Understanding the dashboard Most companies track brand image through advertising research. A typical brand image output is a descriptive but not very useful mirror (Figure 1). It doesn't tell which aspects of the brand affect customer decision-making or how to enhance brand value. To manage brand value, you don't need a mirror. You need a dashboard and a steering wheel. The diagnostic picture, like a dashboard, tells you where you are and how you are doing. That is what brand equity analysis provides.

Such analysis lets managers understand the aspects of the brand that create economic value, the customers they affect and why they believe what they do. The information can be used to address a number of important telecommunications strategy issues. Which customer segments will be easiest to attract to your brand? How can you stem share losses to cable, interexchange carriers or non-communications brands? Will a single or multibrand bundling strategy be best to penetrate a broader services market? What brand characteristics must you continually reinforce with product enhancements, service strategies and advertising to maintain a competitive edge? How should you price relative to different competitors? If a new brand entered your market with a particular value proposition, how would you respond? What new businesses could you successfully enter as a reseller based on your brand's strengths and permissions?

A disguised example of a brand equity dashboard shows that the new brand can command $3 to $6 a month more than incumbent brands for one kind of service. It is believed to be more popular and easier to use than existing brands, a net advantage despite perceptions that it is viewed as commercial and less of a first-class company. Note how this brand equity profile isolates the factors that drive demand, and how this differs from the information provided by brand image data. Not all users are fans. To some, being easy and popular are important; to others, they're the kiss of death. Sophisticated users shun the brand because it is easy. They prefer complexity, and complexity is the high ground of an existing brand.

The dashboard may tell you where you are and how you are doing, but not which strategies will pay off and which won't. To get at strategy, we need to understand how a company creates and enhances its brand equity. This is the steering wheel.

Getting brand traction Many investments that a telco or an IXC makes in the marketplace are a waste of money. They create no sustained loyalty or buying affinity. Price discounting in long-distance is a classic example. The net effect of long-distance price wars is to devalue brand. The more a company talks about price, the more customers assume that nothing else matters, and the only reason they buy the service is because it is on sale.

But investments to enhance the speed of an answer in a call center, to provide 24-hour service and to provide customizable features on a system may also fail to pay off economically. The issue is to understand which investments build the brand by changing people's beliefs and behaviors, and how a company acts to make people trust and identify with its brand.

To build brand equity and competitive advantage, telcos must understand how company and environmental influences lead to customer experiences and affect brand purchase. These influences include company interactions-the user saw an ad, visited a Web site, called for help-and interactions over which a company has little control-a friend recommended it, my child begged for it, I bought a new PC.

The power of these influences will vary according to customers' characteristics, such as whether they embrace technology or have three phone lines and two children, for example. By understanding which influences lead people to develop high brand equity, a management team can successfully drive brand strategy and investment decision-making (Table 1).

Some brand-building and brand-breaking influences suggest certain strategies. The best answer will vary by brand, customer segment, product category, stage of market evolution and competitive environment.

Brand equity information can also be used in war games. A Bell company moving into cable TV, long-distance or enhanced information services can use this information to identify and attack a competitor's brand weaknesses by customer segment instead of price discounting, and use alternative brands or partnering strategies to offset its own brand vulnerabilities.

Perhaps most exciting for an industry in constant flux, brand equity analysis can uncover new business areas into which a brand can successfully expand without compromising its strengths in core customer groups and products, and identify the best way to attack these opportunities. Services such as electronic retailing, business information, logistics management or personalized entertainment could be opportunities or potential cash traps for a strong communications brand. Brand equity knowledge can help make the difference.

Successful brand management is a complex, long-term undertaking. From its inception, Telus-one of Canada's largest telecommunications companies-faced multiple brand management challenges.

These hurdles included fierce competition in a newly deregulated marketplace and the burden of its history as a government-owned enterprise. To succeed, Telus not only had to defuse negative perceptions in the marketplace, it had to focus attention on its brand attributes and develop and communicate strong new ones.

The carrier was formed as a holding company when the Alberta provincial government privatized Alberta Government Telephone. Initially, AGT continued to operate under its own name, as did newly acquired Edmonton Telephone, a former competitor.

The Telus name remained largely unknown (fewer than 10% of Alberta residents recognized it) because the company had marketed a myriad of sub-branded products and services under the AGT and Ed Tel names.

While the Telus name-derived from a combination of "telecommunications" and "universality"-was intended to convey a company that was both friendly and forward-thinking, the sub-brands projected an old-fashioned, slow-moving and government-owned image. As its share of the Alberta long-distance market began to erode, Telus faced the prospect of overcoming the weak image of its key marketing brands.

Recognizing the competitive advantage of projecting a unified, customer-focused image, the carrier's CEO initiated a major evaluation of Telus' brand identity structure. To help guide this important undertaking, Telus called on Lippincott & Margulies.

Based on extensive internal and external research, the consulting team recommended a master brand strategy, using the Telus name to communicate a company with a rich tradition of innovation, a breadth of competencies and a responsive, customer-friendly attitude. This approach would entail a single name for most operating units.

A detailed plan established guidelines for communicating a unified message about Telus' strengths, culture, style and future direction to each key audience: end users, employees, agents/partners, potential employees and the financial community.

Telus' goal was to be seen as open, accessible, responsive, dynamic, trusted and uniquely Albertan, yet world-class. The new Telus brand identity would be centered on a dynamic visual identity system to be used for all signs, uniforms, vehicles, marketing materials and advertising. Change, however, had to be more than cosmetic; it had to signal the launch of a newly energized, customer-centered enterprise.

To provide an improved customer experience, the entire company was involved in a series of service-driven initiatives. A new 24-hour repair service was introduced, as well as a highly competitive pricing strategy. Each was timed to support the launch of the Telus master brand. Employees were trained to help customers in a more friendly and responsive way.

If the introduction were to be executed with impact, employee involvement was essential. A massive implementation effort, facilitated by employee volunteers, enabled the new Telus identity to be incorporated-virtually overnight-on more than 16,000 pay phones and 2000 vehicles. The identity was also integrated into corporate, marketing and internal communications, and in print and television advertising. A teaser campaign helped generate anticipation for the launch and conditioned the market for the change. A separate "new promise" campaign introduced Telus' new brand attributes.

Several publicity coups helped launch the new brand in dramatic fashion. Across the province, Telus held ceremonies to retire existing brands with dignity and respect. And just before the public brand launch, a repair person and truck, both displaying the new Telus logo, appeared prominently in an episode of the popular TV show "The X-Files." This surprise appearance energized employees and created enormous interest and awareness throughout the marketing area. The company's CEO received a wave of phone calls-some from competitors-marveling at the speed and effectiveness of the brand launch.

AGT had a top-of-mind awareness among 52% of Albertans, the best of any brand in any category in the province, 96 years into its existence. But within six weeks of its launch, Telus had achieved a 60% top-of-mind awareness, well surpassing management's 40% goal.

Within the same time frame, ratings for Telus' image attributes quickly outstripped those of AGT:

* Service-AGT, 78%, Telus, 88%

* Innovation-AGT, 66%, Telus, 90%

* Competitiveness-AGT, 70%, Telus, 86%

* Solutions-AGT, 72%, Telus, 82%.

Subsequently, Telus has retained 70% market share in long-distance, while every other provincial telephone company lost between 8% and 10% market share over the same period.

Telus' success reflects its ability to complement a strong brand communications plan with a positive brand experience. Alignment of brand experience with brand promise-a key to effective brand management programs-has enabled Telus to establish and maintain its image as a provider of flexible, customer-focused service. As a result, Telus remains a powerful competitor in the marketplace.