Monday, August 27, 2012

There are some things money can't buy

How Brands  and Advertising Create Value

An old wedding photograph.
That engagement ring.
The doll with the broken hand and tattered dress my little girl won’t part with.
The holiday with our parents.The look in their eyes, the smiles.
That super bike.
The Smartphone.
In fact, my first phone.
Our home.
Peace. Love. Trust.

How does one define Value?
Is it something we cannot even put a price to? Or something we are willing to put any price to.
Value is personal, intangible and loaded with emotions.

30% MORE or FREE  is a myopic way of defining Value.
What we call Tactical strategy as offering value is not wrong, but maybe myopic. Stems from the fact that we still operate in a world where we perceive the brand as the arbiter of value.
The baton has moved to the consumer for quite some time now.

The “what’s in it for me?” or “what difference will it make to my life” questions are being asked more often.

And after all, the More and the Free can become competing  propositions very easily. It’s after all, just about numbers.

Michael Porter’s Value Chain

The term ‘Value Chain’ was used by Michael Porter in his book "Competitive Advantage: Creating and Sustaining superior Performance" (1985). The value chain analysis describes the activities the organization performs and links them to the organizations competitive position.

Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization.

Key areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. The competitive advantage can be created by adding value at each of these areas.

From Needs to “Experience”: The Value Spectrum

Cadbury’s India has moved up the Value Chain very well, through its change of positioning and therefore product portfolio. From being a kids brand to an adult snack to finally a symbol of celebration, the brand has occupied a place of relevance that very few have been able to replicate.

Increasingly, it is the “experience” which is proving to be the strong Value Discriminator. Experience is no longer the forte of the service industry and every brand, across categories are making a beeline for that differentiated experiential quotient .

Experience creates the  quotient because it has the power of engagement.
The  buyer-brand relationship moves from being transactional to one of conversations and interactions. More time spent with each other. More knowledge. More inputs. More transparency. Works at various levels.

Luxury Brands have been good at creating intangible Value Perceptions

We don’t buy luxury. We buy exclusivity. We buy a slice of status. An empowerment.

The BMW, the super bikes, the luxury watches, vacations, apparel- all push for one thing. That the world of luxury is Small and Exclusive. No open entry. In fact there are entry barriers and that itself creates value.

Value Injection Points

a.       Find the Gap:  Identify new markets, define segments, find an unmet need or desire. The right Gap gives one a distinct  value creation edge. Apple has been doing this consistently. Consumers see value when there is innovation relevant to their lives. It all starts with the right market creation.

b.      What’s Next: Even if there is an existing need or segment, consistent innovations leading to upgrades, new experiences can again be a strong value creator.

c.      Communicate the Value proposition:  Consumers need to know what the differentiator is. Where the value lies.  The job is not so easy. Value, as we said earlier, can be quite personal, unique to users, and loaded with emotions. Some brands have managed to do this very well.

d.     Discover. Experience. Engage:  This can be the key differentiation, and leverage the value perceptions of a brand. That is why A Starbucks is not just another coffee. Or a Harley not just a bike. Or an Angry Birds is not just a game.

Role of Advertising in communicating value perception

Value, whether innovative, of finding the gap, or shared- has to be communicated to the consumer. This is where the role of advertising lies.

The communication strategy for creating value perceptions  depend on where or at which stage is the value being created in the system. For eg. If it is about catering to a new market or a segment- about Finding the Gap- the brand has to talk about the “gap” and how the brand offers a solution for bridging that gap. I remember a very old ad on “Ceasefire”- a home fire extinguisher that created waves when it was launched.  It identified and created a need when there was none and consumers paid for it. They saw value.  The most recent example that strikes me is the Nike Fuel Band, encouraging people to be fit, and keep track of their own fuel burn .  A gap on the wrist and Nike has started claiming it.

If the value is in the innovation itself, the communication clearly has to drive home the innovation. Ipad, ipod, the smartphones,anti aging wrinkle creams, fuel smart bikes and cars and so on.

When experience and solutions are the key drivers for value, the communication strategy focusses around driving engagement to bring alive the experience. Whether it is Apple’s legendary retail experience, or Zappos’ customer service.

Advertising   communicating the “Intangible”

The role of advertising becomes even more crucial when the value creation is a benefit which is a new mind space or life proposition, and not just a strong product or segment differentiation. For eg: Helix watches  and their recent “Waste Time” campaign. Or Fastrack and their communication of the smart and bold generation. Pepsi’s Change the Game. KitKat’s Break Banta Hai.  Bombay Times Be Glamorous.  The Times of India Lead India, Teach India, Aman ki Asha. Airtel’s Friendship campaign. Where the value creation is inspired from a life truth or insight and connects the brand proposition strongly with that insight.

Co-Creation: The new value generator
Consumers today are the new arbiters of value. Consumers input, discuss, build on, critique and co-create concepts and ideas which add value to their lives. This goes beyond mere consumer research to understand relevance and gaps, but actually involve consumers at various stages of the process , so that value is not handed down by the brand but shared by the users themselves.
Tanishq’s “My Expression” for their Mia range, Coca Cola’s “Energising refreshment” online cocreation, E.ON’s crowdsourcing initiative to support a documentary on Channel 4, Heineken’s Open Design Explorations Edition 1: The Club are some examples .
Still nascent. But is increasingly emerging as a trend.

Shared Value: When Business and Society is One

Creating Shared Value (CSV) is a concept first introduced in Harvard Business Review article Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility by Michael Porter.   The article provides insights and relevant examples of companies that have developed deep linkages between their business strategies and corporate social responsibility.  This  concept goes beyond a CSR program to identifying common goals between the business and society, or social good.
For example, Nestle’s global CSV program focusses on the future water challenge and Nestle.
Adidas has partnered with Nobel Laureate Muhammad Yunus’s micro-finance organization, Grameen bank to manufacture a low-cost shoe for the poor in Bangladesh.
Or the BMW Guggenheim Lab,  a mobile laboratory that will travel to nine major cities worldwide over six years. Its goal is to explore new ideas, experiment, and ultimately the create forward-thinking solutions for urban life. This program establishes a social purpose for BMW that could help address the exclusiveness/elitism of the “Ultimate Driving Machine”.

How Advertising as an industry creates Shared Value
The industry itself creates shares value and is not just a canvas where brands paint their promising dreams.
By creating choice for consumers.
By keeping the competition alive in the marketplace and minds
By raising public awareness and consciousness
By creating jobs, directly and through related fields

Finally, advertising creates conversations.
And creates interactions, perceptions, engagement.
Therein lies its role in communicating brand value.
After all, there are still some things money can’t buy.
That’s the ultimate value.