Thursday, March 25, 2010

How To Make Functional Brand Equity Ethical

How To Make Functional Brand Equity Ethical



1. Real vs. Perceived Functional Benefit


In a recent presentation before the Federal Communicators Network, Carin Van Vuuren, executive director in the New York office of the brand consultancy Landor talked about the importance for brands of delivering an emotional benefit to the customer. Curiously to me, she did not talk about the functional benefit. I found this odd because other formulations appear to include a functional aspect:


  • The WPP Group’s “BrandZ” method begins with the proposition that customers have both a rational and an emotional attachment to the brand and that the value of the brand derives from both of those factors.


  • Young & Rubicam’s Brand Asset Valuator (BAV), talks about brands deriving equity from four sources. (Forgive me, but I am going to use an acronym here that means something nasty in Yiddish.) The attributes are “DREK,” for differentiation, relevance, esteem, and knowledge. I read “Esteem” as the functional one – a measure of the customer’s perception that the brand has quality.

2. It’s All Emotional


When I thought about it again, I realized that Landor’s worldview is consistent with the above. For both BrandZ and BAV treat the functional benefit as essentially a matter of perception, not reality.


  • From the BrandZ perspective, for instance, it is not the functional benefit itself that creates brand equity, but rather the customer’s rational “attachment” that creates it.  
  • Again, in BAV, it is not the functional benefit that we are concerned with, but rather the customer’s esteem for the brand—the perception or belief that the brand is logically worthwhile.


3. If A Real Benefit Is Unnecessary, Why Does The Perception Build Equity?


I am willing to bet that few brand-driven buyers really do their homework in terms of finding out the truth about which product is best. Rather, it is enough for the customer to have the sense or belief that the quality of their preferred brand is actually better than its competitors.


Why isn’t the reality important when it comes to building brand equity?


The answer is fairly simple. Branding is based on image – perception – not a commodity advantage. Anybody can copy that. Plus, just because you have a functional advantage doesn’t mean that the customer knows it – a mistake I think a lot of otherwise good potential brands make.


Nobody is going to tell me that there is a serious difference between funny looking exercise sneakers that cost more than $100 at Skechers and less than half that price at Payless. Yet I will not set foot (so to speak) in a Payless store. Why?


Well – let’s answer this question with more questions.

  • Do Sunkist oranges taste better than non-Sunkist ones? (doubt it)
  • How about Chiquita bananas? (again, probably not)
  • Or, dare I ask, how about any brand of water? (you can tell yourself otherwise, but I also don’t think so)

So why do I pay more for any of these?


Forget the non-functional benefit for now. Forget whether Chiquitas make me feel happy or Aquafina brings on the aura of clean.


On a strictly functional level, I fear the consequences of choosing a generic over the brand.


4. Fear: The Secret Ingredient to Functional Branding


Ever been to the dollar store? Where they sell everything from soaps, to foil pans, to coloring books? You know how you’ll only buy things that you aren’t afraid will break?


That’s why brands matter.


I saw an article this week about Wal-Mart, and how customers revolted when they decided to pull Glad bags from the shelves. (“When Brands Disappear, Shoppers Do Too,” March 17, I can understand the logic on Wal-Mart’s part: They probably think that if people are going to their stores, they are not brand-driven but rather are looking for the lowest price.


But the response of customers proves that at every price point, people will pay more for things they perceive to be of higher quality. After all, think about trash. If you put it in a lousy bag, and it breaks, you’re going to have smelly garbage all over the place. So it pays to have a strong bag you won’t have to worry about.


Are Hefty trash bags actually better? Again, just like with the other products mentioned above, I don’t know, though I suspect that they’re not. (It’s like Papa John’s pizza, where they say it’s got “Better Ingredients.” Better than what? They won a lawsuit in the Supreme Court where the ruling was, the ingredients don’t have to be better at all, because the customer is going to know, or should know, that it’s just a tagline.)


Think about water. Why is it so hard to brand one water over another? It’s because the brand equity is all functional. In my mind, I’ll take any bottled water over the tap because I have bad images of drinking something from the sewer. The choice of Dasani or Aquafina doesn’t really matter because I’m trying to escape a fear of filth.


5. “Emotional Emotion” vs. “Function-Driven Emotion”


This, then, is the distinction between functional and emotional brand equity. Functional brand equity is the emotion associated with the perceived quality of the brand. Emotional is the emotion (yes, that’s redundant) that has nothing to do with quality at all. Sometimes they mesh (e.g. “Mercedes makes me feel pampered because I feel safer”), but not necessarily, or all the time. Either way, as soon as a product or service attribute generates a feeling in the customer over and above its actual value, brand equity has developed.


6. The Ethics Question


All of this leads to a difficult question about ethics.


By and large, I think most people know that they have a choice about whether to buy into the “emotional emotion” side of branding. That’s advertising fantasy, and they know it.


But I don’t think most customers know about the potential difference between actual functional benefit and the perception of same. I think that most people conflate the two, and are willing to pay more for certain brands because they have been tricked into believing (or trick themselves into believing) that the $60 T-shirt in the highly branded store at the mall is really worth more than the $5 street version.


Obviously this leaves the creators of brand with a real opportunity to be evil. For if brand equity derives from perception, not reality – whether functional or emotional – then theoretically, the smartest way to make money from a brand is to keep the cost of creating it as low as possible, and the perception of quality as high as possible. That way, you can sell it for a price premium, hopefully in high volume and for a long time before somebody else catches up.


If you’re living in a brand-based economy (which we are), and you need to make things cheaper than your competitors (which you do), then the pressure is on to cut corners, even to the point of breaking the law or at a minimum behaving unethically. Like using victims of human trafficking as slave labor. Like using inferior or counterfeit ingredients or components. It gets dirty pretty fast.


7. Help for Good Marketers


Despite all of this, it is not necessary to be evil in order to be a successful marketer.


In fact, it’s not even smart.


First all, evil is not a sustainable strategy, because we now live in a social media world. So whatever you are doing to create your brand, someone is going to find out about it. A good example is labor driven by human trafficking. There is growing momentum around the world to find and stop the perpetrators of this horrible crime, and those who practice it won’t be in business forever.


Second of all, evil is not a necessary strategy. It might be a little more difficult in the short term, but there are ways to ethically establish, and profit from, functional benefit in a way that creates brand equity. The logic here is that you offer real qualitative advantage to the customer in order to gain their trust that you will continue to do so in the future – a reserve of equity against which you can borrow time to innovate so as to keep ahead of the curve.


8. Five Specific Suggestions


1.     Actually make your products better.


2.     Add a disclosure to your price tag that explains why the markup is X percent to cover it – that shows the customer transparently what advantage they are paying for.


3.     Make a public commitment to truth in advertising and put some teeth behind the commitment (a guarantee that you stand behind.)


4.     Keep innovating so that your window of functional advantage remains solid.


5.     Perhaps most importantly, set appropriate expectations upfront. Remember, your product doesn’t have to be the best out of all possible products to command a price premium. It only needs to be better than all the competitors in its class.


In a world where the perception of a functional benefit matters, there is a way to benefit from that perception without hurting people. You may have to try a little harder, but the long-term brand equity that accrues – both functional and emotional, because you are building the kind of trust that supports the customer’s willingness to buy into the positive brand fantasy – is, in my view, going to be worth it.




Posted via email from Think Brand First