Brand management-What's in

Have you noticed that every time the popular press editorializes on the effects of telecommunications reform, the scenarios include harried consumers routinely interrupted during dinner by a feverish tidal wave of telemarketing calls?

Consumers will be the winners in the new competitive communications environment. But veterans of the early marketing skirmishes among the long-distance companies (and that's pretty much all of us) know that sometimes more service choices and lower rates come with a price tag-the time we spend fielding pitches and sorting offers, counteroffers and discount plans from providers aggressively competing with each other for our business.

We also know that sometimes competing marketing messages become so frequent and intense-the noise level gets so high-that a kind of consumer mental gridlock sets in. Choices become bewildering instead of exciting, and we begin to fear that we don't have the ability to make a prudent decision. When that happens, we cut through the clutter by gravitating back toward the familiar. In a crowded or confusing market, we tend to choose a product brand that we know and trust, and as long as it satisfies us, we tend to stick with it.

Brand recognition is the act of staring at 400 boxes of cereal on aisle 12 and gravitating toward Corn Flakes or Raisin Bran because we've known them all our lives. Brand loyalty is the act of placing Corn Flakes in our shopping cart without price shopping among other cereals made from flakes of corn or exploring alternative cereals made from other grains or that include fruits, vitamins, fiber or frosting. Brand recognition is about attracting customers; brand loyalty is about retaining them.

When an enterprise communicates the unique qualities of itself and its products carefully and consistently over a long period of time, that's called brand management. Effective brand management is one of a handful of leadership skills that are critical for a fully competitive communications company. Becoming a known and trusted brand is the most effective way for a full service provider to succeed in a crowded and confusing marketplace.

One of the strongest arguments for approaching the market through a brand strategy is that the result benefits both the company and its customers. Brands serve an essential function for consumers by reducing the number of decisions they feel they need to make (see sidebar on page 32). A brand communicates a set of qualities to the marketplace, and once a consumer is persuaded that a brand image is rooted in reality-Toyotas really are reliable, Saturns are in fact a great value-then a decision is made that does not have to be revisited. The knowledge that "if it ain't broke, don't fix it" gives us the ability to go car shopping or to visit that cereal aisle with brand names already in mind.

This symbiotic relationship between the company and its customers creates a huge competitive advantage for the brand leader: Consumers appreciate the simplifying service that a brand provides so much that they are willing to pay for it. Brand-leading products consistently command a 15% price premium over their competition. This phenomenon, quaintly called the "brand tax" by marketing students, has been documented for products at all price levels and in all consumer and most commercial markets. From projection TVs and washers and dryers to acetaminophen, consumers will gladly plunk down a little extra money for the peace of mind that comes from familiarity.

The Perks of Leadership Brand leadership, with its attendant customer loyalty, has several other advantages as well:

• A natural barrier to new competitors. Established brand leaders enjoy the role of the incumbent; they are the beneficiaries of their customers' brand loyalty. New entrants into their market must demonstrate a clear reason for those customers to change brands. They must argue that something is in fact broken (the incumbent offering has some significant shortcoming) or that while it ain't broke, it could be better (the incumbent offering could have more features, more horsepower or better construction, for example). Market entrants do not become brand leaders simply by offering comparable products at a reduced price. A new entrant must position its offering as a demonstrably better mousetrap. Building that mousetrap and saturating the marketplace with persuasive messages about it are formidable (and expensive) propositions.

• Eased product extension. The same customer loyalty that protects established products for a brand leader eases efforts to offer new products to the market. AT&T has had excellent early success offering Internet access. Other Internet access products come from young companies operating in a new service segment. Consumers have little knowledge of what they should shop for in an access service, so they have a big fear of making the wrong decision. A new offering clothed in a well-known brand calms the fear of the unknown by leveraging an established image of competence in communications technology and services.

Brand leadership also buys an enterprise time to respond to new competitive threats. A brand leader can be the second or third entrant into a new product or market segment and still depend on developing a healthy market share.

• Reduced marketing costs. Brand management is achieved primarily through consistent, effective advertising strategies, so creating and sustaining a national brand image is never an inexpensive endeavor. Because the incumbent is innocent until proven guilty, however, its market share can be protected-and even grown-without the costly media saturation and deep price discounting associated with new product launches.

Overcoming the Noise Telecommunications is becoming a very crowded field. In the long-distance industry, we have seen three major competitors work hard to position themselves in the marketplace. How will a dozen full service providers propose unique reasons that consumers should prefer their services in multiple markets-long-distance, wireline, wireless, video and messaging? The noise level could become deafening.

Establishing and enhancing a leadership image in the marketplace through an aggressive brand management strategy will simultaneously protect established markets, ease entry into new markets and provide maximum leverage of marketing investments.

What will such a strategy look like for a telecom company? Based on some of the best practices we have observed among brand leaders, here are four keys to implementing a brand management strategy in the telecom marketplace:

• Understand your market(s). The goal of brand management is the creation of a sustained favorable impression of your company and its products with potential customers. You can't create that impression if you don't know what your potential customers want, need and value. Market research is the lifeblood of the consumer products company. Many mass marketers monitor their customers daily.

Market understanding leads to market segmentation-dividing the total market into discrete groups of potential buyers with common values and then creating strategies to serve them effectively. The chief telecommunications officer of a Fortune 100 corporation, for example, has buyer values infinitely more complex than those of a rural, residential telephone customer.

Likewise, high-volume business cellular customers value coverage and call quality above all other considerations because mobile telephony is essential for them to conduct their business. If they are reimbursed by their companies for their air time charges, they may be completely price insensitive. A heavily price-oriented offering will not attract this valuable market. On the other hand, cellular customers who purchase their phones for convenience or security have different values and will respond to different product promotions.

The dramatic differences between these various market segments have profound implications for every aspect of a carrier's marketing strategy, especially brand management. The brand image that leadership chooses must align with the 80/20 rule-80% of revenues come from 20% of the company's customers-by directly addressing the needs of the few vital market segments that will account for the majority of both revenue and profit margin. Competitors know who these customers are and will be exerting heroic efforts to win them away. At the same time, the carrier must cultivate future revenue streams by understanding, attracting and serving its other markets-while ensuring that all marketing messages harmonize with the overall brand positioning.

• Build on your strengths. Brand management is a company's effort to communicate the unique qualities of itself and its products. This means that brand positioning is not based exclusively on the needs and wants of the company's markets. It must also be rooted in the company's unique strengths as an enterprise, the unique benefits that it brings to the marketplace. Brand image must always clarify what the company is-and for that matter, what the company isn't. When brand image and reality are incongruent within a company, brand equity is destroyed.

A start-up company should emphasize its newness, communicating the virtues of responsiveness, creativity and nimbleness that characterize a young, dynamic organization. An established carrier will want to communicate the strengths that come from experience-achievement, stature or the number of satisfied customers it serves. It would be disingenuous for either company to pretend it is fundamentally what it is not.

• Back up your brand. Brand leaders are able to avoid competing on price by promising the consumer quality and value. And they command a loyal following year after year, despite the price premium, by delivering on the promise. Brand equity is sustained by consistently offering high-quality products and services-there is simply no substitute.

The temptation here is to attempt to compensate for internal weaknesses through sophisticated image management. But brand management is not smoke and mirrors, not the process of cynically pulling an image out of the air and not a quick fix for organizational or product woes. Logos, corporate slogans and award-winning advertisements are highly visible elements of brand image. But every interaction that a customer has with a company or with one of its products either adds to or subtracts from the brand equity of that enterprise.

This means that every employee of the enterprise is a brand manager. Sales professionals, the service force and especially customer service representatives are all primary contact points through whom customers discover whether the brand and the reality are in harmony. Brand equity increases every time a new service provides the value it promised and every time a bill is logical, clear and accurate. Brand equity is built by consistently delivering the quality that the brand promises.

• Consistency is critical. Brand management is a long-term game. A study conducted several years ago asked consumers to name by memory as many consumer product brands as they could. They were able to name about 28 brands each. Eighty-five percent of the brands they named were more than 25 years old; 33% of them were over 75 years old. Sprint's continued use of the pin drop is an example of long-term brand positioning, as is MCI's consistent marketing focus on price leadership.

Consistent communication must occur not just across time but also across all markets and product offerings. Telecom companies will offer many products and services with discrete advertising and promotional campaigns. The ability to reach into the network parts bin to configure its elements into value-adding products and solutions could be a key to success for carriers. These promotions will demand a careful integration with overall brand management.

This integration increases in difficulty in direct and exponential proportion to the number of markets served, the number of products offered and the number of competitors. When one company offers one product to one market against one competitor, finding a distinctive brand position and communicating it consistently is a straightforward proposition. If a communications company serves 10 market segments (five business and five consumer) with five core products (local telephony, long-distance service, wireless voice, wireless messaging and video) against a total of 10 competitors, as many as 500 marketing messages must address market segment needs while harmonizing with an overall brand position.

An integrated marketing strategy for a communications company will take a middle road between corporate brand management, such as Nike's "Just do it," and product management, such as the Procter and Gamble/General Mills approach, in which each product is its own brand that competes-sometimes against sibling brands-on its own merits. Product and service introduction and promotion will be essential, but they must be done with the end game of increased brand equity in view.

Can it be done? Many successful firms currently thrive in crowded markets. Drive down the new car row nearest your house and think about the brand image you associate with each marquee (and many of them are siblings) or even with each dealership. Or keep on eye on all those cereal boxes in the grocery store. Creating and sustaining a distinctive brand image in a crowded field can be accomplished. And the returns on that investment will be reaped far into the next century.

Thomas L. Elliott III is a Managing Partner at Arthur Andersen Communications Industry Practice, Atlanta.