Peter Hutton, Managing Director, Brandenergy Research

Understanding Brand Energy

Peter Hutton, Managing Director, BrandEnergy Research

Admap /WARC

7th Annual Advertising Research Seminar

London, 21 October 2004

Synopsis

Top level thinking about what business is ultimately about has shifted from profit generation to value creation and value creation for all stakeholders. Developed economies have shifted from being based predominantly on the manufacture and trading of tangible goods to the creation and delivery of intangible services. The thinking and language of ‘branding’ is still largely tied to consumer products and does not work well for service industries. A more appropriate concept of the brand relates to the experience of products/services/suppliers. ‘Brand energy’is a concept that fuses the idea of value creation andbrandexperience across the stakeholder system.

If you view advertising from a brand energy starting point you are likely to develop a quite different understanding of what it does and how it works. Similarlyyou will see research in a different light. Quantitativeresearch that seeks to evaluate advertising campaigns is seen as unable to provide much insight into how the advertising is affecting the brand and can be misleading in what it implies about the processes at work.

This paper suggeststhat advertising research works best when put in the context of a clear framework of understanding of how the brand works in its entirety and the way in which advertising is expected to influence it. Advertising ‘evaluation’ research needs to move away from major quantitative tracking surveys applying standard questions and standard methodologies and develop approaches and measures that reflect the way in which each brand actually works and how the advertising is expected to influence that.

Introduction

I am going to talk about three things.

First I am going to tell you about Brand Energy and why I think it is such an important, revolutionary concept.

Second I am going to talk about why and how it is relevant to advertising.

Third I am going to say why and how research is failing the advertising sector.

Brand Energy

Brand energy is defined as:

‘The energy that flows throughout the system that links businesses and all their stakeholders and which is manifested in the way these stakeholders think, feel and behave towards the business and its products or services’

It is a concept that evolved in my mind over a number of years but really fell into place around 18 months ago.

I should first say that I have spent nearly all my career as a researcher. I was at MORI for nearly thirty years and in that time was responsible for hundreds of projects – projects to do with consumer and b2b marketing, ad tracking, corporate reputation, employee surveys, investor relations, social research, PR surveys and political opinion polls.

At the same time I have always been interested in how surveys are used by decision-makers to improve their decision-making. Indeed, I even wrote book about it in the 1980s[1]. This lead me to take a particular interest in how individuals, organisations, markets and cultures work and the management frameworks and assumptions which defined the context in which decisions are made on the basis of research.

During the late 1980s and 1990s there was an increasing questioning by leading businessmen and business academics about what business was really all about. The old model that saw business as ultimately about generating profit was increasingly seen as limiting its real potential. This had became particularly apparent as post-war Japanese businesses increasingly outshone their American and European counterparts by adopting different models of business that were much more long term and inclusive.

As part of the various debates there was an increasing shift towards acknowledging the contribution of all the different stakeholders in business performance. Critically, also, the notion that businesses are ultimately about creating value, not generating profit moved to centre stage for the most successful companies. To me this was succinctly summed up by Sir Brian Pitman, then chairman of Lloyds TSB, speaking at a Henley Management Centre conference in 1999 when he said:

“We used to consider ourselves a bank. Then we considered ourselves providers of services. Now we see ourselves as creators of value”[2]

The brilliant thing about the idea that a business is about creating value is that it opens the door for a totally different way of thinking about what you should be doing. The central notion here is not an economic one, it is about creating value in people’s lives; it is only by creating goods and services and working environments that mean something to people that they start undertaking the economic transactions that create economic value.

The great companies have always known this. Marks and Spencer became the gold standard of British retailing for many decades, not by focusing on how to generate maximum profit for its shareholders, but by its founder’s obsession with creating valued products and valued experiences for its customers and staff.

But curiously this was never really acknowledged in books about management and business which tended to focus on one aspect of business at a time– accounting, process management, marketing, people management and so on.

The growth of the business schools in the US in particular did much to change this and question the predominantly accountancy-driven management frames that pervaded the thinking of western boardrooms.

The publication and popularity of Kaplan and Norton’s Balanced Scorecard in 1992 epitomized the enormous desire ofbusiness leaders to break out of the functionally based silo mentality thatcharacterized, and still characterizes, most businesses. The idea of the balanced scorecard is that each function whether it isfinance, HR, IT, production, marketing or whatever, has a different way of thinking about the business and this can be highly counterproductive as each mind frame competes to dominate. The balanced scorecard was about getting all these functions to agree on a common view of the business and to build an integrated strategy on this. The scorecard is about developingmeasures so that you can monitor progress towards your end corporate goals.

One of the key underlying drivers of this global change in management thinking has been the massive shift from our economies being largely based on trading tangible goods to being largely based on intangible services. And the value of even the tangible goods are largely now intangible – such is the nature of branding. We cannot even buy loose apples in the supermarket these days which do not have a little branded label stuck on them designed to make us appreciate the value and quality of the product and therefore to be prepared to pay more for it!

Another major shift, which I believe is critical to all ournotions of marketing and advertising and the role ofresearch,is a redefinition of the brand. Now I know that if you look into literature you will find 682 different definitions of the ‘brand’, but one thing that struck me as I got increasingly interested in the whole concept of branding and brandmanagement is that if you say ‘brand’ to most people, what flashes through their minds is normally a) a consumer product brand and b) a visual manifestation of that brand.And this idea that brands and branding really have to do with marketing consumer products and that the purpose of marking is to create and sustain the brand in the minds of consumers, is something which really dominates the literature on branding.

But this idea of the brand really does not work for service industries including the whole of the public sector. If you include the public sector and the not for profit sectors, the vast bulk of economic activity in the developed countries is now non-product based and intangible. Yet most of our thinking aboutbranding and marketing and the language that goes with it really relates to the selling of tangible goods.

Not only has the service sector grown and with it a need to discover and manage its own brands, but governmentshave also been redefining the way they view their role and the role of the services they provide. It’s been a long term revolution. In Britain the key milestones have included Mrs.Thatcher’s’ privatization programme, John Major’s outsourcing of government services, and Tony Blair’s Best Value initiative, but the underlying theme is to change a back-end process-driven model based on the 19th century military, into a 21st century model that starts with customers’ needs and works back from there.

We are now seeing an awakening in the public sector of the need for marketing and branding but often a frustration with the established notions of what these mean since most of the language and thinking in these areas fit uncomfortably in a public service environment.

Necessitybeing the mother of invention,as the world changes so the ideas we use to make sense of it have had to change. Which is why I took a flying leap a year or so ago and developed the concept of brand energy.

What had increasingly struck me was that research is generally commissioned in silos. What I mean by this is that marketing research is commissioned by people reporting into the marketing function, customer satisfaction research is commissioned by people reporting into the customer service function, HR research is commissioned by the HR function, corporate reputation research is commissioned by people incorporatecommunications or public affairs, and so on. As thesefunctions all think about the business in different ways, the research never joins up. We ask different questions of consumersthan we do of customers or employees or opinion leaders and so on.

But this is now out of tune with the way our top level leadersin business and government are thinking. The most successful businesses are those that have broken down their internal silos. They have open cultures, learningorganisations, flexible structures and a pragmatic approach to solving problems.

They are also ones that see value as something that is created across the stakeholder system. And it is not a linear system – in other words itis not just a case of a back-end system producing goods which are shoved out into the distribution system and sold like commodities to desperate consumers. Rather it is a highly complex system where the processes are not so much linear but highly iterative; every part of the system is interacting with other parts, learningfrom the interacting and adjustingwhatthey think and do accordingly. Effective businesses are doing this internally but also recognise that this is happening externally with theircustomers and potential customers, their suppliers and all other stakeholders. The job of management is not to control these processes but to influence them and to aim to orchestrate them to move in the desired direction. That is what business leadership is about in the 21st century.

This is a particularlyimportant realisation for a service organisation where a lot of what you are delivering is human interaction;people interact with people supported by other people interacting with them. It is a highly complex system but it is at the heart of what business is all about.

In that contexta notion of the brand as a set of associations in the mind of the consumer is very inadequate. In service organisations and,nowadays, in non-serviceorganisations, the brand needs to live and work across the wholestakeholder system. Everyone in the system needs to identify with it and what it stands for and if you are an employee or a supplier you literally have to live the brand values because that is the way businesses nowadays create value.

To really realise this, the notion of the brand has to shift. It can no longer be seen as merelyconsumers’ perceptions. It really needs to embrace the idea that it is about stakeholderexperiences. What defines thebrand is how it is experiencedby all its stakeholders.

This idea is the foundation of the notion of brand energy. It seemed tome that if businesses were to have a defining generic concept of what theyare about that can be embraced by any function and that recognizes the systemic nature of howvalue is created, then brand energy is not a bad one to try.

To remind you again of what it is:

What every organisation is trying to achieve is a buzz; the buzz that comes from everyone buying in to a common set of values, of working together to create something of value for everyone in the system and where there is a very high degree of alignment of the interests of the different stakeholders held together by a strong central focus and purpose.

I called it brand energy because to me the brand is all about meaning which leads to fulfilment. Meaning is what motivates you to get up in the morning, to do what you do, associate with whom you associate with, to buy what you want to buy, to work where you wantto work. Businesses thrive by creating meaning to influence people to do the things that make the business work.

For me what this concept does is to bring together the core notion that businesses are primarily about creating value withthe idea that brands are actually about creating meaningful experiences for all stakeholders – which is the same as creating value. In other words managing the business to create value and managing the brand are the same thing.The business as a whole delivers the brand, not the marketing department ortheadvertising agency!

The Implications of Brand Energy for Advertising

So what has this got to do with advertising and what has it got to do with research about advertising?

I would first say that I do not consider myself an expert on advertising. As someone in the advertising industry once said, everyone approaches advertising with an open mouth! As a layman I think advertising in this country is generally brilliant, at least the high profilebroadcast stuff that I am most aware of. I take my hat off to the creatives and others who devise them.

Butclearly some advertising is better than others and it can only be as good as the clientand the advertisers allow it to be. And you cannot help but think that a lot of advertising is constrained by clients, and maybe the advertisers themselves, living in the old paradigms.

In recent years there have been significant moves towards developing a more integrated approach to marketing but one senses that clients and suppliers still largely see different above and below the line media working in parallel rather than in an integrated and iterative way.

This is, perhaps, understandable. The delivery of advertising is largely about the application of a linear process: determine content, identify target audience, decide on the channel, shove it out and hope it works, get on to the next project! The problem with this is that, for the best of practical and commercial cost control reasons, the process, rather than the end objective of the client’s business, can easily become the main driver.

When advertisers are brought in, particularly if it is a big campaign, there is often animplicit assumption that advertising will work in a linear way and that it is the agent of change in the brand’s fortunes. Moreover, clientshave high expectations of whattheadvertising will achieve. ‘If we are spending all this money then we MUST have a measurable and significant increase in sales’. But often, maybe most of the time, this does not happen. As Colin MacDonald put it in an excellent paper he gave to a recent IndependentConsultant’s Group meeting and echoing the work of Andrew Ehrenberg and others:

“The prevailing culture misunderstands what advertising is really for. Growth is not (cannot) be the normal state for most brands, unless the category itself is new or the market as a whole is growing. In established markets, one brand’s growth comes at the expense of others. If one brand does succeed in growing share, others must make room for it.”[3]

In this context, given intense competition to squeeze your brand, standing still or arresting decline is arguably a very good result.

But there is another reason why I wouldsuggestthatadvertising rarely has a dramatic impact and that is because it is not advertising that is drivingthe brand in the firstplace.

This as brought home to me when I once gazed at some tracking research and, like so much tracking research, you could either read into it that there were indications that the advertising was working (whatever that means) or that actually there was no convincing evidence that it had had any effect at all! The reason, I concluded,why the second view was quite likely to be correct had to do with the way thebrand actually worked, so I mapped out how I thought the brand worked which I share with you now in generic form.

Essentially most brand communications, at least for established brands, is through the day-to-day use of the product or service and by its presence in the high street or on the retailers’ shelves. A lot of other communications comes from the media through news stories around thecategory or business or sector or competitors all of which is unplanned and uncontrollable. Then there is a limited amount of media coverage that you can influence, but not control, through PR or marketing communications and through influencing your internal culture and especially the behaviours of your client-facing staff and their support staff. All this is ongoing and defines the brandexperience on a day to day level. Into this is injected an advertising campaign which is a) short in duration b) channeled through specific media and c) limitedto a very few key messages.