The Brand: What is it and How Important is it? Part 6
By Dave Chapman
The
shock wave of change
The
impact to the brand
The
importance of brand
The
ingredients of the brand
The
strategy to manage it
And
The
analytical ingredients
The
value to the business model
Making
the brand a competitive asset
Making
brand the customer loyalty process
The
customer case study provides an accurate and compelling insight to the effect of
a slipping brand metric and its impact on the enterprise performance.
Management
becomes a respected force when it is fortified with important, accurate
knowledge.
ABSTRACT
Most
successful executives are concerned about their brand, which is usually loosely
defined as customer satisfaction and the enterprise reputation. Brand is usually
treated as a subjective only metric with some mystical ingredients and is used
as a comfort index. Nothing could be more off target, as is outlined in this
article, as brand is now one of the most important management metrics.
History
says that customer satisfaction is generally overstated and customer loyalty is
usually understated. The shock wave of a new business environment is, and can
be, the positive opportunity of a much needed culture change, as it relates to
brand measurements, if it is identified and managed. The need is for a more
effective and efficient understanding of the accurate ingredients that are
integral to the Brand Index (BI).
Once
the brand analytics for the enterprise has been identified, the next step is to
understand how it impacts the sales cycle and business model. A low BI will
seriously impact the sales cycle as is shown in the customer case study in this
article.
Customers
want to be treated like they want to be treated, not how we think they need or should be
treated. Most organizations view contract compliance as customer satisfaction.
This view alone can serve as the first step to a sliding brand, as contract
compliance doesn’t directly translate into high customer loyalty.
This
paper does a dive into the underwater elements of the brand and what is the
dangerous undertow that drags one off their feet and destabilizes the enterprise
as described in the case study.
THE
BRAND
Brand
is not about customer satisfaction. It is about customer loyalty and its
impact on the sales cycle and the resulting metrics. Some wise person made the
point that “customer satisfaction is worthless and customer loyalty is
priceless.” Brand is about success
in sales performance and loyalty as a competitive asset.
So
what is in a brand, why is it so important and why such an emphasis now? First it can fall faster and deeper than
viewed just a few years ago. This can be directly linked to the technology
changes such as the internet and bloggers. That includes the business model, the
market message being obsolete, fragmented and/or incomplete where it is more
about promotion than value and risk to the buyers.
Lack
of customer connectivity with a disciplined effective process allows the dark
forces to take charge and the enterprise never sees or hears those darkened
communications. When that force swings into action it can be with devastating
results lowering the brand in the mind of potential buyers and even effecting
customer loyalty. Most times the enterprise management never sees or even hears
these uncomfortable customer and new buyer communications.
In
addition, WEB 2.0 and WEB 3.0 do, or will soon, facilitate decisions of
potential purchase that are influenced by what bloggers and articles say about
the enterprise and its offering. With these new capabilities, new buyers can
make preliminary decisions and influence their constituencies without ever
talking to an enterprise directly about their offerings.
So
we know that in the past brand was a point of perception with potential new
buyers and customers. Today, given
an over supply of nearly everything, lack of innovation in most market segments,
makes brand a key imperative, with understandable, measurable metrics. The BI is now more important than ever,
as it is critical to the life support of the enterprise as we are hit by the
shock waves and underground currents of this new economy. For the most part it
takes a shock to make change happen quickly and now we have that in this new and
uncertain, demanding economy.
BRAND
ASSESSMENT OF A SUCCESSFUL COMPANY – A Case Study
The
results in Figure -1 are of a successful enterprise where the CEO and CFO could
not understand the performance of their enterprise in a market environment
attractive to their business model. Their enterprise should have increased its
growth rate and margin but instead missed their revenue plan. The enterprise is
a well known company with an established customer base, revenue of approximately
$500 million, with growth rates ranging between 14% and 21% and with very
predictable margins. Their business model was to identify where organizations
placed their cash, help them optimize it and reduce any risk or exposures to any
potential losses. In this more demanding market for cash management, their
business should have been growing above the 21% range, but instead only achieved
12.3% growth.
What
happened and what was the prevailing question from the management and the
board? Every functional
organization became the suspect as to the cause of this performance degradation-
R&D to Sales, Marketing, and Finance. The initial recommendations were to
reduce the price and do more pro-bona assessments on new accounts. However, none
of these recommendations addressed the root cause to their problem or
challenges.
Sales
believed they were not getting the required internal support and their
executives were not readily available to visit accounts to help close the
deals. Sounds like what we have all
heard before and is the preverbal flashing red light.
NorthPoint was asked to analyze the issues and as such we utilized the Brand Assessment Software and associated Database.
The
results of the assessment are shown below in Figure -1
Figure
-1
The
results were eye-opening. For the
first time they had a complete picture of what their BI was and its impact on
the business. Quickly assessing the sales cycle they found it was more than 2x
what it was when they last measured it back in 2004. This became the fire for
change. How could this happen to such a successful
organization?
Upon
further analysis, the organization had slipped in all areas that comprise the
BI. As one executive stated, “it
appears that we have moved from an intelligent approach to sales management to
let’s use brute force to make the sales numbers.” Make the contacts and make the sales was
the mantra of the sales management and the management in general.
In
our world, leading organizations have a BI of 85% or higher. Index scores below 85% result in
significant lengthening of the sales cycles and, in turn, financial performance
of the enterprise. In this case, the organization’s BI was in the 37% range,
resulting in a sales cycle that was 40% to 65% longer than their competition.
Unfortunately
in most enterprises, sales cycles are not effectively tracked or recognized as
one of the Key Metrics for Success. Clearly this is changing in this new
economic environment.
Based
on the results of the brand assessment (2.3x the sales cycle), here is the
impact on the organization’s financials:
- The sales force
Actual Contract Value (ACV) is obviously negatively impacted. For example, if
the benchmark sales target for each sales person is $1,000,000, then the
impact on actual performance is a fraction of the target (approximately
$490,000).
- This means the
revenue goals will not be achieved, unfortunately many times a shock to the
organization.
- It also meant that
the cost of the sales personnel will also increase as a percent of revenue.
Conventional thinking would say to archive the original revenue target as it
will require more sales support and sales personnel. While the assessment said
“Fix the Brand”
- This gave the
competition a free ride, instead of having the shortest sales cycle in the
industry that places the competition on the defensive; it was the other way
around.
- The loss of interest
in established customer accounts precipitated a deeper dive which revealed
that a number of established customers were entertaining a competitive
offering and solution.
In
this case, marketing was about promotion and not about customer and new buyer
connectivity. No one had identified the value propositions of the latest
offering and validated them with new buyers or customers. The market message was
inadequate, incomplete and only managed though less that one-half of the
required marketing channels.
In
addition, they had added new sales personnel; however the training was not
developed or executed as required to be effective. The training curriculum and
content scoring was in the high 40% on a scale of 1% to 100%.
The
company had slipped in the most basic sales fundamentals and lacked the metrics
to give them any diagnostic precision of their illness. It was like they moved
from a healthy diet to fast food without the blood tests that would have
identified signs of trouble. We all understand that good healthcare requires
routine testing on a regular basis. The same thinking should prevail for the
enterprise – get the fundamentals identified, get the test results and take
action.
In
this case study, this did not happen until the brand test was performed and then
the diagnostics produced the demographics of the illness. Then, and only then, did the
prescriptions begin with a new sense of immediacy.
With
the brand results as their diagnostics they are back to taking each of the
summary parts of the brand listed in Figure -1 and developing a high speed rail
to their customers with a real, effective connectivity process with a new and
much improved market message that is carefully developed and executed though all
of the required communications channels.
Improvements
quickly appeared, as entry points into accounts increased and at higher levels
with new buyers and existing customers. The market messages are now focused on
buyer needs and not on sellers products.
SUMMARY
What
we have found is that brand is easy to lose and difficult to improve. Now more
then ever, it is an enterprise barometer. Without metrics and an analytical tool
that is accurate, predictive and quantifiable, issues will not be diagnosed and
a recovery process put in place until the organization’s financials have been
impaired. The best people in the enterprise should own each of the metrics in
Figure-1 as they will have considerable influence in bringing the enterprise
back to a leadership position and gain the customer loyalty, which is priceless.
Brand
will always be stretched and needs to be proactively assessed based on the
following activities:
1.
Entering
new markets and market segments not previously addressed
2.
New
technology as part of a new offering
3.
New
offering not previously part of the enterprise history
The
“loose confederation of warring tribes” between R&D, marketing and sales has
to recognize that combined work has to be done to address the change of
opportunity for any enterprise. Additionally, marketing has to take new
leadership in assessing new buyers’ and customers’ unmet needs.
The
metrics need to be both prescriptive and predictive, accurate and reliable, and
be used with confidence to run the business.
Last,
but not least, is to find the best way to identify costs that can be reduced,
eliminated or postponed. Follow the
yellow brick road of your brand assessment with all of the ingredients that
make-up the brand index and ROI.
Figure -1 shows a very attractive ROI (41%) for our case study. Making the ingredients of the brand, the
focus of the effort will point to a new, more resilient and streamlined business
resource management; and therefore new improved cost opportunity.
Couple
this with the last article, on how to assure achievable revenue, is the wining
game plan for enterprise management in this new season of a new economy where
everyone is keeping scores of the wins and losses. As WEB 2.0 and 3.0 gain
maturity they will provide both accurate and inaccurate knowledge to prospective
new buyers as well as customers.
Unfortunately, we deal in a world where data and knowledge move at web speeds and can be totally inaccurate or in many times, just plain in error. Once obtained, false knowledge is likely to be more easily accepted than the determined search for truth. The time for analytics, real time, static, prescriptive and predictive is here and the time to implement brand as a strategic weaponized metric for competitive advantage is now.
Dave Chapman is the CEO of NorthPoint Software & Services and can be contacted at 508-942-6440. For more information visit: http://www.thenorthpointgroup.net
XONITEK
Corporation is a management and technologies consulting firm with a world
wide presence and a reputation for excelling in the optimization of
business synchronization