In the mid-’90s, on a trip to San Francisco, my mom brought an empty suitcase with her on the flight. We thought it was for souvenirs, but sadly, we were wrong. She was on a mission: A Trader Joe’s mission. And sure enough, on the way home, the suitcase was so full that we had to sit on it just to get the zipper closed. In it was 50 pounds of Trader Joe’s products. If that isn’t the definition of brand loyalty, I don’t know what is.

For years after, in an effort to avoid having to lug a suitcase cross-country just to get her Trader Joe’s fix, my mom wrote letters to their headquarters making a case for why they should open a store in Atlanta. This seemingly insane desire for a local Trader Joe’s is why it comes as no surprise to me that the brand is the first grocery store identified in the 2017 Prophet Brand Relevance Index™ (BRI).

Consistent & Authentic Customer Experience

Whether visiting a store in San Francisco or Atlanta, the Trader Joe’s in-store experience is uniform, yet true to the culture of the city that it’s in. In our Brand Relevance Index, Trader Joe’s scores high marks for the consistency and dependability of its customer experience.

Each store is modeled on a similar scale and the employees always sport iconic Hawaiian shirts, but the locations also draw from the personality of the local community. For example, a local artist is hired at each location to create unique hand-drawn designs for the product identifiers and signage.

By featuring local produce, murals incorporating local sports teams, and reusable bags with designs for that city, Trader Joe’s creates unique experiences that are still true to their overarching brand.

Unwavering Customer Trust

In the BRI, the metric Trader Joe’s ranks highest for is “I trust.” With no sales, no special clubs and no loyalty cards needed, customers know the price they see is what they get.

Buyers can also purchase with confidence, as you can try anything in the store before purchasing, and return any item for any reason. I’ll never forget the time when I was checking out and mentioned to the cashier the bad kiwis I had purchased the week prior. Without a second thought and without prompting, he reimbursed me.

Commitment to Inspire Customers & Employees

Trader Joe’s ranks highly in one of our key principles of building a relentlessly relevant brand, distinctively inspired. It does more than just supply a carton of eggs or gallon of milk to customers – it inspires them. Whether motivating my mom to lug a suitcase cross-country or attracting employees who are proud to work there, Trader Joe’s goes above and beyond.

Employees get to know your buying habits, recommending a wine that compliments your other groceries, a seasonal pumpkin-flavored Joe Joe (Trader Joe’s take on Oreos), or a mac and cheese recipe that your family will love. Trader Joe’s works to facilitate connections and experiences beyond that of a typical grocer.

“If that isn’t the definition of brand loyalty, I don’t know what is.”

Recently, there has been an outflow of cash from Chinese brands into global blue-chip sponsorships.

In January, Alibaba shelled out $800 million to become a top-tier Olympic Games sponsor until 2028, and last month Vivo signed a $450 million deal to sponsor the 2018 and 2022 World Cups, joining Wanda and Hisense on the roster of FIFA’s top tier partners.

It is well-publicized that Alibaba has aggressive growth goals, and with less than 10% of revenue coming from outside of China today, it must win overseas in order to meet its targets.

“Alibaba shelled out $800 million to become a top-tier Olympic Games sponsor.”

With the recent signals from Beijing that brand-building is a key growth imperative for China (as evidenced by the proclamation that May 10 is now “Chinese Brands Day”), it is likely that we will see more and more Chinese brands using global sponsorships as a platform to drive greater awareness and consideration as they enter new markets.

It remains to be seen whether these sponsorships will promote consideration of Chinese brands in Western markets, but spending the cash needed to get their brand in front of more than 3 billion eyeballs is certainly a good start.

3 Key Elements of Successful Brand Sponsorships in China

To create a return on the investment, brand sponsorships must amount to more than putting a company logo on a T-shirt or billboard. They need to deliver on three things:

1. Serving Clear Goals that can be Measured

Surprisingly, many companies focus more on what to sponsor than on the business impact the sponsorship will make. First, identify the objective of the sponsorship. (e.g., Are you trying to increase awareness, advocacy or engagement?) Make sure leadership is aligned on the goal, and then build the team and capabilities needed to deliver against your objective.

2. Authentically Linking to the Brand

Sponsor companies often struggle to show a connection between their brand and the event that customers can easily understand. For any brand sponsorship to be effective, there must be congruence between your company and the values of the property you’re sponsoring. For example, Visa sponsored members of the IOC refugee team. This resulted in customers associating positive values of “acceptance, partnership and innovation” with the Visa brand.

3. Ensuring Sponsorship Activation is Integrated

Every brand associated with the Olympics or World Cup (officially and unofficially) competes for the same customers’ attention, making it hard for any to stand out. So companies need to look for integrated experiences across digital and physical channels that elevate their sponsorship to a bigger idea. (e.g. Abbott nicely linked social media and smart offline tactics with their sponsorship of World Marathon Majors to encourage advocacy among fans and reinforce their message of “human potential.”)

2015 and 2016 were record years for mergers and acquisitions, and 2017 appears to be more of the same. According to MergerMarket, H1 recorded an 8.4% increase in deal value globally, compared to the previous period. 17 mega-deals equating to more than $10B have already been announced in 2017 – including Amazon/WholeFoods, Essilor/Luxotica and Mars/VCA. And with PE raising record buy-out funds, and several massive deals announced in 2016 that have yet to close – see AT&T and Time Warner or Qualcom and NXP – M&A will remain at the top of the agenda as the search for growth continues.

But will all these deals payout?

It’s not entirely clear that they will. M&A has an inconsistent record. Mega-deals tend to underperform while other M&A strategies appear to fare much better. Last year HBR challenged the industry, stating that M&As are a “mug’s game” with 70-90% of acquisitions ending up as “abysmal failures.” Despite the debate, M&A deals, especially for larger organizations, will continue. The prospects for organic growth are simply too low and the competitive risk of not moving is too high.

How to Build a Successful M&A Strategy

M&A transactions are modeled against a value creation logic: the economic theory for how a new combination of assets will create shareholder value through superior use of funds. The larger the deal, the harder it is for this logic to play out.

Mega-deal success demands that multiple strategic and operational assumptions of staggering size and complexity fall into place. Future market dynamics must play out as envisioned. Large employee populations and cultures have to mesh. Cost-savings schemes requiring intense operational discipline must be driven to completion in a marathon of sprints. Throw in systems integration, customer defection risk, key talent discounts and the occasional black swan event and the checkered history of mega-deal M&A becomes more understandable. But not inevitable.

3 M&A Strategies to Drive Mega-Deal Success

Drawing from decades of experience helping executives through M&A integrations, we have identified a blueprint for managing downside risk and accelerating growth.

From that blueprint, here are three plays to run at the beginning of the M&A process to maximize the possibility of success:

1. Model Marketing and Branding Decisions Before You Make Them

After the deal is signed and bankers clear the room, the hard work of realizing new value begins. Typically, this involves dozens of parallel initiatives including system integration, organizational restructuring, expense rationalization and branding/customer experience workstreams. These projects are bundled into a broader integration plan, coordinated through a PMO and funded from tax-advantaged integration budgets. Curiously, while essential to the post-close success of the deal, the marketing/branding workstream is often not managed with the rigor of other integration initiatives.

We frequently observe teams passing on high-potential strategies either because of a lack of analytical rigor or a failure of strategic focus. Often, companies do not recognize the power of available financial and risk modeling tools to support marketing and branding decisions. Additionally, because these techniques are often less familiar to marketing leadership, their insights can fail to sufficiently influence internal decision-making.

Case in point: Recently, a large multinational made a transformative acquisition (>$10B) that extended its reach into an adjacent category. Using an econometric model based on-demand analytics, we estimated the potential market share increase of several new brand and product architecture scenarios. In the leading scenario, the model estimated a multiple-point increase in share on the acquired company’s base business. Unfortunately, that scenario never made it to market as executives selected a suboptimal strategy based on pre-merger working assumptions.

The same holds on the cost side. Post-deal integration of a marketing system will demand significant resources of capital and time. The data is available to model scenarios that remove cost and process layers, while optimizing the capital deployed. The tools and capabilities are available but too few, we find, take advantage.

The lesson: the marketing and branding moves that could tilt the balance of power in your favor require:

1. Decisions based on analytical precision
2. The leadership wherewithal to make them

 2. Operationalize the Value Creation Logic Into a Plan to Win

Execution creates new value, not strategy. Almost all mega-deal structures rely on often aggressive cost-savings assumptions. They are central to securing financing or shareholder approvals. However, this focus on cost-take-outs and backend integration often distracts leadership from building actions plans that bring the new assets of the post-deal firm directly to customers.

“How does this deal actually create value for your customers?”

A few years ago, we were working with the CEO and executive committee of a Fortune 200 financial services player. The company had nearly doubled in size through a mega-deal that combined banking and asset management into a single entity and brand. The firm was tracking on its multi-year cost reduction plan but wasn’t gaining traction with clients. During a working session with the executive team, it occurred to us that the combined company had never articulated new customer (or employee) value propositions. At one point, we asked the straightforward question: “How does this deal actually create value for your customers?”. The absence of an answer from leadership was startling. A year later, an activist investor was in the boardroom and the CEO was out amid calls for a breakup.

The value creation logic will vary from firm to firm. For deals of significant size, the logic always features significant cost savings components (scales economies, tax inversion strategies, etc.). But M&As also present an opportunity for firms to significantly increase the value of their products and services to customers. Smart deal-makers realize this top-line advantage by building a plan to win that operationalizes the value creation logic. These plans will include an expanded customer value proposition, updated strategies for key accounts, product enhancements and an expanded client servicing model that uses data and UX to enrich the customer experience, among other moves.

When Microsoft announced its acquisition of LinkedIn at $26B – the largest in the company’s history – they immediately articulated a new customer value proposition for the combined firms. Their investor presentation laid out realistic product use cases that showed how customers will benefit when Microsoft software is embedded into LinkedIn’s platform and UX.

Investors care about the cost base; customers don’t. In the M&A context, customer sentiment is clear: “I’m happy for you to bring new value to the table. Just don’t change my team”. Companies that operationalize the deal logic into a value-add for customers will simply create shareholder value faster than those that don’t.

3. Build a Culture That Keeps Faith With the Deal

Beyond the models and strategies, the deal’s value will ultimately be secured or forfeited through the actions of employees. Irrespective of the size of the deal, retaining talent, focusing teams and nurturing cultures is the most challenging M&A leadership task. It simply gets harder for mega-deals.

Success requires that the talent levers of the organization line up with value creation logic, which my colleague Helen Rosethorn in her seminal book calls “keeping faith with the deal”. This often includes reorganizing operating units around new capabilities, recoding sales scripts and customer engagement models, and reengineering operations. Heavy lifts, for sure. But tending to culture is probably harder and more important.

Nothing grinds post-M&A value creation to a halt like resistant culture. Mega-deals create change and ambiguity for large employee bases. The M&A stimulates the free-market dynamics among employees – basically, they become open to considering other deals. It occasions big questions like “How does my world change?”, “Am I still valuable?” and “What’s it in for me?”. Change is difficult to process at a human level; ambiguity is always interpreted negatively. To unlock the full value of the deal, leaders must frame the big move in the context of a deeper purpose for the organization, strengthening the employee value proposition by focusing not just on the “what,” but on the “so what?”

Satya Nadella was clear about how the LinkedIn acquisition fit into his broader goal of reanimating Microsoft’s purpose. Similarly, when Roche acquired Genentech, it ring-fenced the biotech’s vaunted talent and culture by retaining its identity and independence. Others have not been as successful.

When Xerox bought ACS, its largest acquisition ever, it correctly foresaw the need to swim upstream into higher-margin services. But the deal logic never panned out. Revenues failed to reach targets and the market cap had fallen 37% by the time CEO Ursula Burns capitulated to investors and abandon the vision, spinning out the old ACS business off in a stand-alone services play. While Xerox found some cost synergies, people and processes never coalesced around a shared purpose worth fighting for.

What is Co-Branding?

Co-branding is several companies partnering with other brands as a means to generate buzz, force reconsideration or even enter new markets. These partnerships can be a powerful tool to achieve specific brand and business objectives.

When Should You Co-Brand?

But when does co-branding make strategic sense, and what is needed to make sure you are partnering with the right brand? First, you need to have a clear objective. What are you trying to achieve from the collaboration? Here are a few examples of when co-branding could make sense:

1. Do you need help building a different brand image that is more desirable to your target?

Co-branding enables your brand to borrow equity through association with another brand. It can also create new equity for both brands. Think about Go Pro and Red Bull. Their partnership bolstered the images of both companies and reinforced the idea that they are brands that push boundaries.

2. Do you need to strengthen loyalty by enhancing the user experience in new ways?

Co-branding is an efficient way to introduce a tangible enhancement to your offer. Take Starwood Hotels and Uber, for example. By adding Uber rides as a way to earn points in their SPG loyalty program, Starwood provided a relevant value-add that further differentiated it from other programs.

3. Do you need new customers to consider buying your brand?

Co-branding allows you to showcase your brand in a new light, and convince consumers to discard previous perceptions. Look at companies Huawei and Leica. Through their unexpected partnership, Huawei was able to leverage Leica’s strong brand expertise to overcome negative associations consumers may have had about Huawei’s quality.

How to Find a Right Co-Branding Partner?

Once you have determined that co-branding is right for you, the next step is to find the right brand partner. During this process, you want to create good KARMA. That is, any future co-branding partner needs to be:

• Known– A brand that will be well recognized by your target
• Additive– A brand that brings new equities beyond what you stand for today
• Rare– A brand that is not associated with many others, so you can uniquely benefit from the association
• Matching– A brand that operates at a similar or higher price premium to bolster willingness to pay
• Attractive– A brand that is desirable enough to change your target’s purchasing behavior

“What are you trying to achieve from the collaboration?”

Our experience with Fortune 500 companies has shown that most have more brands than they need to effectively serve their customers. This is often a result of acquisitions, ingrained management beliefs and organizational silos that prevent the development of a comprehensive view of the business. Having too many brands in a portfolio means assets are underleveraged and under-resourced, leaving companies vulnerable to more focused competition. Does this sound familiar?

The solution is to identify and prioritize the most powerful brands in a portfolio, explore and select the optimal orientation for each and assign the roles and resources required for each brand to meet its objectives.

Brands vs. Brand Offerings

Unfortunately, many companies confuse offerings with brands. Offerings have a minimal level of connection with customers and can sometimes be called brand extensions. Brands, in contrast, promote an emotional connection with customers and build associations and expectations around their offerings. Examples of brands that have effectively leveraged their relationships with customers to expand their offerings include Dove (Men+Care and Baby Dove) and Tide (Tide Spin).

Step 1: Identify the Most Powerful Brands in a Portfolio

So how should marketers begin prioritizing brands in a portfolio? By looking at the strategic intent and financial performance of each.

Revisit Strategic Intent

Strategic intent usually offers the greatest insights into the future of a brand. It allows you to identify which brands have a clear, strategic role in the portfolio today, or importantly, could have one in the future too. Key questions include: Which brands have a clear target segment? Which brands have the potential to extend into other categories or markets? Which brands play a key offensive or defensive role?

Evaluate Financial Performance

Then, identify the brands that are important contributors to financial performance. Revenue figures typically help tell the story and guide the prioritization of brands from a financial perspective. For example, in a recent engagement with a leading CPG company, we found that close to 70 percent of the company’s revenues were driven by 25 percent of the brands in the portfolio. While EBITDA figures shed additional light on brand performance, they also provide input about key financial roles of secondary brands within the portfolio.

Applying both these lenses will help you identify which brands should be prioritized in the portfolio (strong financial performance and clear strategic intent), which should be rationalized (weak financial performance and lack of strategic intent) and which ones require further analysis.

The “Gray Assets”

While identifying the strong and weak brands is relatively straightforward, the real opportunity is to determine what to do with “gray assets,” those that have strong financial performance but weak strategic intent or vice-versa. The best way to understand the potential of these brands is to look at them as part of the overall portfolio, rather than as individual assets. Often, the interdependencies with other brands and the resources allocated to them or their category can explain their current performance and/or delineate their potential future role in the portfolio.

Step 2: Define Brand Portfolio Solutions

Once the most relevant brands have been identified, the next step is to establish brand portfolio solutions that respond to the needs of target customers in the market. To create these solutions, ask yourself the following questions: How are the brands aligned with customer segments? Are there customer segments that are being underserved? Are there brands that are overlapping in terms of what they offer? Are there strong brands that could expand cross-category or regionally to drive growth?

It’s true that driving commercial impact is the silver bullet in identifying the winning brand portfolio strategy. But we have found that customer preference, purchase intent, and the ability to attract new customers or increase loyalty are also metrics that can be used to determine a brand’s potential.

When you evaluate your brands and offerings as a portfolio, you may identify the need to divest brands to meet your strategic and financial objectives. This has been a traditionally difficult decision for executives, who are always concerned about the impact of giving away brands to competitors.  But consider the following: marketing behemoths such as P&G have taken significant steps to reshape their portfolios in the quest for profitable growth.

Most recently, Newell Brands announced a decision to sell off assets equal to about 10% of its portfolio, which came to about $1.5 billion of total 2015 sales. “The combination of Newell Rubbermaid and Jarden has created a unique platform for transformative value creation and the actions we are taking to reshape the company will unlock this opportunity, bringing greater investment and growth to our highest potential categories like writing, home fragrance, baby, food storage & preparation, appliances and cookware, and outdoor and recreation,” Newell President Mark Tarchetti said in a statement.

Step 3: Establish a Brand Portfolio Roadmap

Once the portfolio solution has been defined, a brand portfolio roadmap must be established to clearly outline the roles and priorities of each brand during the transition. Which brands will be invested in? Which brands will fund the growth during the implementation? What impact does this change have on the organization, both internally and externally? How will marketing investments be realigned to support the strategy?

Answering these questions requires an overarching view of the portfolio and the commitment of management teams to potentially change traditional ways of going to market. Successful efforts are often led by an empowered CMO with enough influence in the organization to make the tough decisions, and generate buy-in of the resulting brand portfolio strategy.

Organizations often have too many brands to serve their customers. An opportunity exists to do more with less by reevaluating the brand portfolio strategy.

In this series, we have laid out the marketer’s playbook for building a relentlessly relevant brand. So far, we have discussed how these brands consistently follow three critical principles: They are customer-obsessed, they know how to stay inspired, and they recognize the importance of building a culture of innovation.

Why is Pragmatism Important to a Brand?

Very few brands are able to pull off these three principles without owning a fourth–what we like to call being ruthlessly pragmatic. When a brand is ruthlessly pragmatic, it makes smart bets, takes bold steps, fails fast, and experiments consistently.

Pragmatism requires a commitment to finding and maintaining clarity across your brand’s ecosystem. When you have clarity around your brand’s vision, what you stand for (and don’t), how you want your customers to feel, employees to act, and the criteria for success, you have the blueprint through which to drive all brand decisions, strategically, tactically, and economically.

6 Principles to Become Ruthlessly Pragmatic

Being pragmatic may be the most important piece of the puzzle, but also the one that most marketers find the hardest. It’s essential because it’s the one that makes the other three possible. Using the following tenets is a good place to start when building a relentlessly relevant brand:

1. Be clear and consistent on what your brand is and is not

A strong brand vision guides every decision and action you take. When Prophet partnered with T-Mobile to help it become the “Un-Carrier” in wireless, we knew it would only be credible if T-Mobile lived up to that vision by walking away from historical practices that irked consumers, such as long-term contracts, termination fees, and predatory data plans. And it worked: T-Mobile gained 1.1 million customers after announcing the Un-Carrier strategy, quickly gaining market share from competitors.

https://youtu.be/e8fUXovvZcs

2. Strive for success, but be willing to fail (fast)

Brand leaders must know precisely what success looks like in every metric and key performance indicator available. With metrics in place at all levels, companies can accurately assess how well they are delivering.

Capital One conducts thousands of test-and-learn experiments and pilots every year to continue to hone in on what is resonating with customers from an offering, experience, communications, and brand perspective. It tries and limits its spending on each, succeeding or failing fast and scaling the successes even faster.

3. Empower your employees to be brand ambassadors

Creating a shared mindset across an organization enables employees to wow customers with consistent and compelling experiences. Nordstrom, Southwest Airlines, and Zappos seem worlds apart from competitors because their employee training goes beyond what to do and instead teaches how to think.

4. Have a clear, compelling message

Think about Apple, Patagonia and Disney. All three of these brands stay on message, on strategy and on-brand. They make it easy for customers to follow their plotlines and even easier for customers to want to stay connected with their brands. Clear and consistent messages lead to clear expectations, which lead to customers feeling empowered and loyal.

5. Create an experience that reflects your vision as a brand and company

The brand’s vision is a critical lens through which all business decisions should be made. Some of today’s most respected brands live this day in and day out. Think about the power of these brands’ policies and actions: Chipotle stopped selling carnitas when its sources didn’t meet its standards, eBay provides buyer protection with easy returns and money-back guarantees, and employees at Home Depot are encouraged to stay as long and as patient with every single customer as needed to make sure their home dreams come true.

“Pragmatism requires a commitment to finding and maintaining clarity across your brand’s ecosystem.”

6. Be where your customers are

One of the simplest but often most forgotten tactics, for those brands that are ruthlessly pragmatic, is that they build their brands by being there for their customers, when and where they need them, on their terms. Chick-fil-A is striving to be the brand that is creating 10 million different menus and being able to get your order to you how you want it—order online, in-store, get it delivered, have it catered, etc. They want to be present when it matters. Warby Parker found that customers still enjoy the physical experience of trying on multiple pairs of glasses, not just the five they could get by mail and are now in the process of opening some of the most successful retail operations in the U.S., rivaling Apple and Tiffany’s for sales-per-square footage. They followed their customers’ lead, replicating the best of their online experience and innovated in an “Apple-like” way to get to an in-store experience that is unique, relevant and meets customers where they are at.