As MNCs Retrench, Reigniting the Power of Global Brands

In an era of diminishing profits for global corporations, brands are bulwarks against commoditization. They are not expenses. Strategic investment is required.

New World Disorder

The Economist recently published a survey on the retreat of multinational companies (MNCs). More than a response to President Donald Trump 's protectionist browbeating, retrenchment is a result of structural headwinds including: local governments increasingly committed to enabling small business; supply chain decentralization; and instant global markets for small companies courtesy of the internet.

Not surprisingly, the financial performance of organizations that generate more than 30% of revenue outside their home country have regressed markedly; over the past five years, profit is down 25%. For forty percent of MNCs, return on investment (ROI) hovers around 10%, the danger zone of underperformance.

Selective Investment Required

In boardrooms around the world, cost cutting is the rage.

Centralization of resources is a rallying cry. Local marketing budgets have been slashed. From Mattel's Barbie (a very American girl) to Rolex's Submariner (aspirational in the West but "clunky gold" in much of Asia), globally-produced content -- too often tone deaf -- is the norm.

Unilever and Procter & Gamble have imposed top-down decision-making infrastructures. Only low-end "activation" -- that is, transactional promotions -- have been left in the hands of local managers.

But cost cutting is a low road. Marketers should lift their sights by harnessing the power of global brands. They are MNCs' greatest assets because they convey trust and epitomize value. Indeed, there are few local products that compete at a price premium versus international brands.

This advantage, however, should not be taken for granted. In some sectors, local players are lifting their game. China's Alipay, a sub-brand of e-commerce behemoth Alibaba, has evolved from a Paypal knock off to a "digital wallet" tailored to Chinese spending habits. (Its Red Envelope service is youthful spin on ancient gifting traditions.) WeChat, once a pale imitation of WhatsApp, is now an indispensable social connector.

In the face of increasing local nimbleness, global brands must reinforce bonds with consumers around the world.

Four Questions

It won't be easy. Success will hinge on both analytic acumen and courage. CEOs should ask four questions before marching into battle.

Has your brand been defined as a "relationship" to ensure relevance and consistency?

Technological upheaval is disorienting. As a result, conceptual clarity is forsaken, leading strategic and executional chaos.

Some call a brand's North Star -- its raison d'tre -- a "brand essence." Others, a "purpose." I prefer the term "brand relationship" because it implies consistent bilateral engagement that deepens over time -- across all touch points, analog and digital.

Great brand relationships are rooted in:

A universal "consumer insight" -- that is, a human truth that answers the question "Why?" Local brands are cultural-specific. But global brands must transcend geography. Sometimes they miss the mark. Unilever's Dove's "real beauty" is rooted in a woman's desire to define beauty for herself. But in market non-Western markets, self-esteem is a function of societal acknowledgement. Identities are externalized.

The "unique brand offer" -- that is, a "product truth" or "brand truth" capable forging long-term competitive differentiation.

LEGO, a brand that has celebrated creativity since 1932, appeals to human truth. The name lego is derived from Danish phrase "Leg godt," which also means "I put together" in Latin. Every manifestation of LEGO's brand relationship, "inspiring the builders of tomorrow," strengthens brand equity. The company's award-winning retail outlets are designed with innovative displays and spaces for family "building" events and kid-friendly exploration areas. At several locations worldwide, LEGOland encourages kids to open their imaginations at construction sites that dot the theme parks. To the tune of almost $500 million in global ticket sales, the 2014 film The LEGO Movie is perhaps the most successful branded entertainment in recent years. It tells the tale of an ordinary construction worker, Emmet, battling nefarious Lord Business whose ambition is to glue everything in the adaptable LEGO world into place.

Have you leveraged your brand relationship to forge a strategic brand portfolio?

In markets in which "bigger is better" -- Northeast Asia, for example, where the scale of conglomerates is considered reassuring -- brands are "stretchable." Consumers are willing to embrace brands that extend across disparate categories. This is true across Japanese keiretsu, Korean chaebols and Chinese state-owned enterprises (SOEs).

The vast majority of local brands, however, manage their portfolio in a ham-handed way. China's Xiaomi, a manufacturer of low-priced mobile phones that once boasted a dedicated fan base, is typical. It squandered a shot at greatness through promiscuous diversification across an ever-widening range of products presumptuously dubbed an "ecosystem." Xioami's founder, Lei Jun, never clarified the brand's role in life. There is no meaningful brand relationship so sales strategies are price-driven. The same is true for many indigenous brands from Korea's Lotte to Japan's Hitachi.

Global brands are skilled in articulating relationships, a competency that can: a) reinforce superiority versus local challengers and b) facilitate profitable management of sub-brands and new categories. A good example: Under Armour's brand relationship -- champion of underdogs who dare to compete against the best -- provides coherence across sub-brands including UA Heat Gear, UA Coldgear and the UA Glow Collection. It also infuses soul into efforts to scale the business. According to branding guru David Aaker, "Under Armour has systematically added lines of clothing while continuing to focus on delivering the functional and self-expressive brand promise. The latest venture into women's clothing has the earmarks of future success."

Have you harnessed the assets of your brand relationship for maximum relevance in consumers' lives?

In a hydra-headed digital world, the ultimate commandment of marketing still holds: relevance is sublime.

Consumers suffer from disorientation wrought by technological change -- a universe of bits and bytes, atomistic fragmentation that dulls the senses.

Digital technology offers an infinite--and intimidating--range of ways for brands to engage with consumers. Connections happen in real time. Augmented reality redefines individual field of vision. Social network feeds provide consumers with non-stop "news" as they go through their day.

Some brands use technology in a way that confuses or commoditizes. For example, in 2014, several McDonald's franchises in Spain took advantage of their powerful wifi network signal to hijack customers who were eating in nearby establishments. By changing their signal name into a message--for example, "Free drink with your McMenu," or "Come eat with us and have a sundae on the house"--the McDonald's franchises lured people into their restaurants. The local stunt was clever and generated a burst of incremental sales. But the fast-food chain missed an opportunity to combine hard-hitting discounts with reminders of why people love McDonald's--that is, quality food and family friendliness.

But more and more brands -- not only ecosystems such as Amazon , Google and Apple -- invest in technology that makes lives better. Johnson & Johnson produced Band Aid "Magic Vision," an augmented reality app in which Muppets laugh away the "ouch." Procter & Gamble's Pampers asks tired parents to tune into ZZZ FM, a radio station that broadcasts white noise so babies can sleep soundly. Brand experiences--from Trailhead, The North Face's hiking path locator, to Allergycast, Johnson & Johnson's pollen index counter--transform passively received "propositions" into actual services.

Importantly, data should be used to identify what experiences can deepen a given brand relationship. Prophet, the global strategic consultancy, encourages marketers to pursue continuous -- or "relentless" -- relevance. The firm's Brand Relevance Index (BRI) recently surveyed 45,000 consumers around the world to find which brands they "can't imagine living without."

To derive the BRI, Prophet measured four pillars of relevance:

Customer obsession: "Everything that is invested in, created, and brought to market is designed to meet important needs in people's lives."

Ruthless pragmatism: "Products are available where and when customers need them, deliver consistent experiences, and just make life that much easier for people."

Pervasive innovation: "Even industry leaders don't rest on their laurels. They push the status quo, engage with customers in new and creative ways, and find new ways to address unmet needs."

Distinctive inspiration: "Emotional connections are made, trust is earned, and often exist to fulfill a larger purpose."

Prophet's United States top ten list was a nice combination of brands that "born digital" and others that weren't: Apple ("the gold standard for practical innovation"), Amazon ("What can't it do?"), Android ("the green guy strikes back"), Netflix ("Cant. Stop. Watching."), Google ("making search sweet"), Samsung ("the innovation trail blazer"), Nike ("celebrating unlimited you"), Pinterest ("the apex of inspiration"), Pixar "(sticking to its story") and Sephora ("ever more digital").

Have your markets been culturally "clustered" to achieve balance between global and local execution?

At WPP's 2015 Board of Directors meeting in Beijing, CEO Martin Sorrell stated, "Clients want either global or local. They tell me all the time. Nothing else interests them."

Too many companies swing between "one size fits all" and localization of everything from packaging design and retail design to content creation. The former precludes affinity. The latter is messy and financially unsustainable.

Instead, markets can be "clustered" according to culture. Global brands -- again, rooted in human truth -- must be brought into alignment with worldviews. Culture-based clusters -- across which common marketing programs can be executed -- balance relevance with operational efficiency.

Whenever I am asked what makes Confucian countries -- China, Korea and Vietnam -- really different from the West, it's not just the lack of individualism--it is the level of ambition. In China, for example, everyone is ambitious. Women want their piece of the sky, just as men do. A study by the Center for Work-Life Policy found that just 36 percent of college-educated women in America described themselves as "very ambitious," compared to 65 percent in China. A further 76 percent of women in China aspire to hold a top corporate job, compared to 52 percent in America.

The "tiger mom," forcing extracurricular activities upon her child to make sure he gets into Harvard 18 years later, is not a myth. Not all mothers are like this, but ambition remains a palpable force in Confucian societies. They were the first to become socially mobile societies; engrained in the Chinese psyche is people can achieve success by mastering convention and internalizing the rules. The desire to get ahead binds people together. From the bourgeoisie in the bustling metropolises of Seoul, Beijing, and Hong Kong right down to the farmers in the fields, all want to be an emperor of their small corner, no matter how modest their origins.

So the relationship between individual and society in Confucian countries is fundamentally different than in Anglo-individualistic ones. Across the Confucian cultural cluster, brands need to do more so cross-market resources should be pooled accordingly.

In Northeast Asia, Ford's "Go further" can align a global focus on "democratic technology" with how its cars and "mobility solutions" help the new middle class get ahead in life.

Nike's "Just do it" is a rallying cry to release individual potential. Everywhere. But, across Asia, the brand's shoes, apparel, Nike+ social platforms and wearable tech products are tools on the battlefield of life. In one recent campaign, Nike actually exhorted Millennials to yong yundong, or "use sports." Social platforms generate social currency by broadcasting achievements to a wide audience.

Forward momentum in life can also be warmly emotional. In many Northeast and Southeast Asian countries, expecting fathers are not allowed to join their wives in ultrasound rooms. For women, it only makes the pregnancy journey lonelier than it already is. So Bayer's Elevit, a prenatal nutritional supplement that "nourishes your unborn baby's heart," developed a wearable device that enabled fathers to actually feel the heartbeat from far away.
___________

In conclusion, multinational companies face tough times. But blind cost-cutting triggers low relevance and low margins. Instead, marketers should unleash the power of global brands by: a) achieving consistency born of a clearly-defined long-term "relationship" between consumer and brand, b) leveraging "stretchability" to introduce a broad-yet-cohesive brand relationship portfolio, c) pursuing "relentless relevance" enabled by technology and d) deploying resources across culture-based clusters.