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The Best of Aaker on Brands – 2017 Blog Recap

Three topics were covered most: Better storytelling, the power of purpose and achieving uncommon growth.

The most impactful blogs I’ve written in 2017 fall within three categories that are reflective of my research and writing interests. The first category, brand stories, is driven by my new book, “Creating Signature Stories” which is available now for pre-order. The other categories are about having a higher purpose and business growth strategies. Let’s walk through some of my blogs and explore each topic.

Creating Signature Stories

Higher Purpose

Growth Strategies


FINAL THOUGHTS

Stay tuned in 2018 for more about my upcoming book, Creating Signature Stories. And of course, if you’d like to read more of my shared thoughts and insights, subscribe to my blog Aaker on BrandsHappy New Year!

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Why Healthcare Orgs and Digital Startups Should Partner

Established healthcare brands can draw energy and agility through tech-focused collaborations.

As regulations continue to evolve toward value-based care and patients become more empowered to make healthcare choices, it’s more important than ever for healthcare companies to create compelling and satisfying experiences. In 2017, the industry saw an increase in digital healthcare startups dedicated to delivering consumer-centric healthcare experiences. This new crop of companies is disrupting the larger healthcare providers, payers, and pharmaceutical companies who are struggling to keep up. However, rather than seeing these startups as a threat, legacy healthcare companies can create valuable partnerships to help them deliver more consumer-centric experiences.

Key Steps to Partnering with Digital Healthcare Startups

Creating strong, mutually-beneficial partnerships with healthcare startups does not happen overnight. The best partnerships are formed with clear business goals for both parties in mind. To get started, Prophet has identified a few key steps to creating strategic partnerships:

Assess Internal Gaps

Assessing where internal gaps are will help find where partnerships are going to drive the most impact. Establish a clear vision for how partnering will improve consumer experiences and ladder up to broader business goals. We’ve found these gaps are commonly around data, interface, community, content or platforms. Assess current initiatives with a critical eye and define where the company can buy services, build the experience in-house, or develop a partnership. 

Map a Landscape

Mapping a landscape will narrow the field based on business priorities. There are hundreds of healthcare startups, so creating a specific set of criteria to focus the search will prevent companies from pursuing a partner only to find out later that it is not the right fit. This prioritization also helps companies understand the landscape of potential competitors.

Define a Clear Value Proposition

Establishing a clear value proposition will help jumpstart partnership conversations. Defining a common value proposition is often where healthcare partnerships go awry. Healthcare startups can benefit from the institutional knowledge and scale that large healthcare players have. Legacy companies also need to think through what benefits they can receive from the partner and come to the table with proposed synergies to generate excitement. These mutually beneficial partnerships can also drive innovation and result in a culture shift in larger organizations.

Don’t Just Fund, Co-Create

Big healthcare companies can avoid the risks of becoming just another investor by starting the partnership with collaboration sessions. Bring ideas to the table, but understand those ideas can only be improved upon through iteration. Set up teams and workshops to continue the collaboration and drive new solutions that deliver on the shared value proposition.

“Rather than seeing these startups as a threat, legacy healthcare companies can create valuable partnerships to help them deliver more consumer-centric experiences.”


FINAL THOUGHTS

Developing a strategic partnership can help large healthcare companies jumpstart their journey to customer-centricity. When forming a partnership, many larger healthcare companies hit roadblocks created by existing cultural norms – whether that’s overcoming a “do it alone” mentality, accepting more transparent processes, or tolerating the uncertainty of test-and-learn.

However, companies that succeed in building strong partnerships often see benefits beyond an improved customer experience – they gain exposure to new cultural norms and more agile ways of working. These effects can spread across an organization and help large companies drive a wider transformation to customer-centricity.

Want to learn more about consumer-centricity in healthcare? Read Prophet’s recent report, “Making the Shift: Healthcare’s Transformation to Consumer-Centricity.”

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3 Ways to Activate Your Verbal Branding Strategy

Make launching a verbal strategy easier with global approaches, optimized engagement and plenty of training.

Whether it’s defining their voice, shaping their messages or creating a more adaptive content strategy, many brands recognize that a strong verbal branding strategy has a tangible impact in the market—helping them show up with a consistent, differentiating presence across social, digital marketing, product interfaces, and whatever comes next.

But unlike other branding tools, like a new logo, visual identity or product name, verbal branding strategies can too often wind up replaced or simply forgotten. It doesn’t matter how brilliant the insight was or how powerful the strategy is—if it isn’t being used, it can’t make an impact.

But it doesn’t have to be this way.

3 Ways to Activate Your Verbal Branding Strategy

By managing and planning the launch of your verbal branding strategy, you can truly put it to work for your business. Here are three ways to ensure your verbal branding strategy makes an impact in the real world.

1. Make it real with training

Any change in how a brand operates requires education in order for it to be fully adopted, and verbal branding is no exception. Training teams need to understand a verbal strategy. This is a crucial step that is often overlooked—perhaps due to the daunting task of simply getting entire teams of marketers in the same room for several hours.

But in order for marketers and writers to be able to deliver against the new strategy consistently and confidently, they need to do more than read your guidelines; they need to learn the ideas within them. Consider learning your voice and messaging like learning a second language—proficiency takes practice.

At Prophet, we believe that the best trainings are in-person and high-touch. When we train communication teams, we pair educational content with interactive exercises, break-out activities, and group writing and editing. And don’t forget the fun—playful ice breakers, prizes, snacks and breaks are a great way to keep people engaged. Trainings are most successful when people are comfortable opening up, trying new things, asking questions, and challenging thinking—both their own and that of their peers.

2. Make it easy to engage with

With a little practice, your teams can become fluent in the new verbal branding strategy. But just like speaking a second language, people need to engage overtime to keep their skills sharp. To drive engagement, we have two principles. First, share content frequently and consistently. And second, make it easy to access.

Digital technology can provide a central reservoir to house your content and engage your teams. With something as simple as an intranet hub, you can “push” updates to your strategy, replace old files and fix “bugs” or tactics that proved to be ineffective—all while alerting teams to what’s been added or changed. It’s not unlike how software companies deliver updates to your smartphone.

“It doesn’t matter how brilliant the insight was or how powerful the strategy is—if it isn’t being used, it can’t make an impact.”

To optimize engagement, it’s important to keep updates frequent and at regular intervals, planning out your internal employee engagement the way you plan your content calendar. Maybe you begin every quarter by highlighting best-in-class pieces from different teams or sharing an interview with a lead content creator. Or you could publish a new version of your guidelines every twelve months, with new proof points, examples and updates. Your timing will likely depend on your resources, but whatever you do, make it consistent. And remember to communicate before, during and after you share updates to ensure teams know what’s available to them.

Finally, just like brands across categories are learning, a great way to drive engagement is to gamify it. Rewarding employees for answering questions correctly, commenting or evaluating others’ pieces, or engaging overall is an easy way to keep your teams coming back for more.

3. Make it global

In today’s world, growing your business increasingly means entering and strengthening your presence in global markets. And with increasingly global commerce and consumers, it’s more important than ever to deliver a cohesive, consistent brand in every market.

But while your visual identity can’t get lost in translation, your verbal branding strategy can. If you’re in the U.S. and considering entering China, Latin America or even the United Kingdom, you need to consider the cultural and linguistic nuances unique to each market. Increasingly brands are moving towards more casual, colloquial expressions—but is that the right tonality in Asia where communications tend to be more formal? In the U.S., directly addressing customers may sound simple, but what does that mean in Spanish-speaking countries that have two different versions of “you”?

The answer is not translation, but transcreation, or adaptation of strategies to work in local markets. At Prophet, when we transcreate verbal branding strategies, it’s not about creating translated, identical tools in each market, but rather, upholding the objective of the original work while reflecting the cultural and linguistic nuances of the language(s) spoken in the new markets. This might mean re-articulating, re-interpreting or re-prioritizing core ideas and tactics.

But equally as important as the process you follow are the people you partner with. True transcreation can only be done with in-market, native speakers that also have a deep understanding of the business and verbal strategy.

In transcreating your verbal strategies, your voice and messages will sound very different in English, Korean or Russian—but the relationship you build with customers through your communications will be the same.


FINAL THOUGHTS

Verbal branding tools can be some of the most effective in a marketer’s toolkit—helping to draw audiences in to a new idea, alleviate customer frustrations when experiences fall down, and most of all, build relationships that drive loyalty. By taking an active and ongoing approach to your verbal branding strategies, you can help your organization use them to their full potential.

Prophet helps companies develop verbal branding strategies that encourage brand growth.

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What Brands Inspire?

LEGO, Fitbit, NPR and Etsy all understand the importance of speaking to consumers’ hearts.

Many brands attempt to inspire customers with energy, purpose or by creating a customer experience that is uplifting. Being inspired is one of the most admired and sought-after brand achievements. What brands have gotten there and which have disappointed?

The new 2017 Prophet Brand Relevance Index™, which measures the strength of 275 top brands from over 25 categories, helps provide some answers. One of the 16 measures in the survey was “Makes me feel inspired.” Looking at the results of that question there are some surprises.

The Brands That Inspire in Prophet’s Brand Relevance Index™

The headline of the 275-brand survey: Pinterest was way out in front in terms of being inspiring. Way out in front! Why? Pinterest is the go-to place if you want to do something new and creative.

You can ask for help with a project important to you, such as cooking for your kids, decorating a room in your home, getting started on a craft, learning about a particular exercise, or really anything you want to do that is beyond your current activities. You’ll be connected with ideas and people that are also interested in your challenge.

When you go to the site, you’ll be greeted with content that’s selected based in part on past requests or interactions. These options, all presented with pictures that draw you in, are personalized to your interests and passions.

“You’ll be connected with ideas and people that are also interested in your challenge.”

Pinterest perceives itself to be the world’s catalog of ideas and has a mission to help people discover the things they love and inspire them to do those things in their daily lives. It stretches boundaries by enabling a person’s creativity and desire to try something new. The experience promises to deliver connection with others and a feeling of a sense of accomplishment.

These Pinterest themes can also be found in at least seven of the other top 15 brands in the “Makes me feel inspired” dimension.

  • #3. Food Network provides a way to make a person feel creative and accomplished in the kitchen with ideas and recipes, some from leading chefs, all in entertaining and digestible formats. The brand also inspires by its visible support for the NoKidHungry program.
  • #5. An Etsy devotee will admire the creativity and initiative that is abundant on the e-commerce site. Further, there is the ability to “discover” something unique and the satisfaction of finding a new gift concept. Etsy’s mission which includes harnessing the power of business to strengthen communities and empower people is itself inspiring.
  • #7. NPR inspires by challenging its audience with issues and stimulating topics, many of which would not be found elsewhere, and presents them with depth and style. Its mission is to promote personal growth, respect differences, and encourage a sense of active participation. It is noteworthy that NPR separated itself from news channels like CNN and others which were near the bottom of the ratings.
  • #10. Fitbit becomes an ongoing enabler of living a healthier, more active life by tracking activity, exercise, sleep, weight and more. Using Fitbit, you can design or try new exercise programs with the added motivation generated by the ability to measure progress and results. And there is the promise of a sense of accomplishment.
  • #12. LEGO provides children both the joy and satisfaction of creating a new structure. The ultimate purpose is to inspire children to think creatively and reason systematically. Inspiration also comes from LEGO’s sustainability efforts which not only involves wind farms but also the “planet promise” where a kid at any home can commit to be a part of the solution in simple ways, like turning off lights.
  • #14. M·A·C allows customer access to vivid and interesting colors that makes cosmetics glamorous, dynamic and personal. It is about being creative, experiential, and proud of their appearance. The inspiration could come in part from the fact that M·A·C since 1994 had a VIVA GLAM line featuring a bright red color, the proceeds of which donated over $400 million to AIDS. #15. IKEA, the “world of inspiration for your home,” has people pick out affordable, stylish, unique furniture and then assemble it at home—an effort which requires creativity and ability to face a meaningful challenge. IKEA has an aggressive sustainability program and, additionally, supports those uprooted such as giving 5,000 beds to refugees.

Again, the common themes are enabling creativity, discovering the new, stretching yourself, interacting with others about a passion, and feeling accomplished.

3 Other Ways Brands Are Inspiring Consumers

Three other routes are suggested by the other top “inspiring” brands. The first is to provide entertaining stories of role models, real or fictitious, that are inspiring. Pixar at #2, Disney at #4 and Marvel at #11 all provide characters and vicarious experiences that can inspire. Each provides entertainment which undoubtedly creates involvement and heightens the emotional response and the potential to inspire.

A second is to be inspired by the mood or feelings that are put in place. Spotify at #7 and Pandora at #13 create music experiences that can add inspiration to the enjoyment of the moment and even contribute a mindset that leads to excelling in other activities. It is noteworthy that Spotify and Pandora, like Pinterest, also personalize content.

A third is illustrated by #6 Apple and #9 Nike. They are both known for being inspiring for their products, personality, message and expectations by their customers. Apple was #6 in part because of its leadership role, its relentless innovation record, its design flare, the fact that its products have enabled people’s lives to do more, and the dazzling retail presence. Nike at #9 is a brand that has always stood for performance that inspires. This consistent message has been long supported by innovative products and visible spokespeople.

It should be emphasized that the subjects in this survey are those that are active in the category and are familiar with the brand. In most brand surveys, many respondents may not be familiar with a brand or it might not be relevant to them and, as a result, brands that inspire their customers do not show well.

Additional Observations from the Brand Relevance Index™

Why are the credit card brands in the bottom one-fourth of all brands? MasterCard has the 20-year-old priceless campaign and American Express is the quintessential statement brand. Have credit cards moved to be functional and taken for granted?

There was a time when the most inspiring products and brands were in the auto sector. Not now. A few car brands like Toyota and Tesla were in the top 15 percent of brands and a few more like Honda, Ford, BMW and Chevrolet were in the top 75, with Lexus a bit behind. But half of the 18 car brands in the survey including Mercedes-Benz and Cadillac were in the bottom half. Why are automobiles not as inspiring as they once were and why do these two brands score lower on inspiration than other car brands?

Why is KitchenAid #27 while Whirlpool and General Electric are not in the top 100; and Frigidaire, Maytag and Haier are not in the top 180? One explanation is that KitchenAid has added dozens of innovative new areas notably small appliances and offer some color options that allow a person to use KitchenAid to make a personal statement in their kitchen.

Why are Betty Crocker, Hershey’s, and Pillsbury in the top 75 and Heinz, JELL-O, Oreo and Kraft in the bottom one-fourth? It might be that the heritage effect of the first three is simply stronger with more warmth and positive memories.

Why is Alexa (#57) so much higher than Siri (#161)?  Is it because Siri is a less robust iPhone?  Or is it because Alexa has a different personality? Or is it something else?

What other questions can advance the brand inspiration conversation? What brands inspire you?

Prophet’s team of experts help brands create customer experiences that inspire.


FINAL THOUGHTS

Brands that inspire people understand the importance of emotional triggers. Thye make people happy, deliver joy, help them feel safe. Speaking to people’s hearts is always an effective way to build relevance.

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The Final Word: Do You Need a Brand Tagline?

The right phrase can create a new category, reposition a brand and deliver unique value.

When you hear the word “tagline” what comes to mind?

Perhaps “Where’s the beef?” “I’m loving it,” “Think different,” or “Just Do It.” These are unforgettable, timeless classics. But most of the taglines people remember are just that—classic and old. Where are the new classics?

Lately, taglines have fallen out of favor, and much has been written questioning their value. In this article, we’ll explain what’s really going on with taglines and why they still might matter for your business.

Where Did Taglines Go?

In the past, considerable focus was placed on taglines. They were often evaluated and scrutinized with the same rigor and energy we now reserve for new product launches and acquisitions.

Today, taglines are less critical. The power and effectiveness of advertising-centric marketing have been replaced by more personal brand engagement. In many cases, customers are simply not influenced by a short, static statement attached to a logo or used as a sign-off in an ad. Instead, customers are motivated by compelling, timely offers and intuitive experiences that demonstrate a brand’s relevance to their lives.

Considering the cost of taglines

Tactically, taglines can create layers of complexity and cost. They need to be locked up with logos and translated for different markets—all while fitting into the hierarchy, both strategic and visual, with headlines and product messaging, creating significant work for brand managers.

Despite these changes and challenges, a tagline can still deliver unique value. A compelling verbal shorthand can convey the same meaning as a 60-second advertisement or a six-paragraph About Us section, capturing attention and moving audiences to a specific thought or action. In short, there is still undeniable magic to getting the words just right.

Four Purposes a Brand Tagline Can Accomplish

With this perspective, we’ve identified four scenarios when an organization should consider using a tagline—either introducing one or changing an existing line—and the questions they should answer along the way.

1. To showcase your reason for being

More and more, employees want to work for an organization with a strong sense of purpose and a values system that reflects their own. Meanwhile, customers are increasingly interested in understanding the character, purpose, culture and business practices of the organization behind the brand.

A tagline can be an effective tool to speak directly to an organization’s employees and speak to the world on employees’ behalf.

In this way, a tagline reveals a deeper insight about the company, its people, how they work and what they value. Siemen’s “Ingenuity for Life” and TransUnion’s “Information for Good” are examples of this type of tagline at work. They don’t necessarily describe the organization’s value proposition, but rather seek to tell a more emotional story about who the company is and why it matters in the world.

Questions to consider:

  • Do you need to inspire and re-energize your people and teams around a core idea?
  • Do you believe that customers do not fully understand your purpose?
  • Can you create greater value by engaging stakeholders (employees, investors, customers, influencers, communities) in a shared purpose?

2. To reposition your company

A brand tagline can effectively help organizations reframe what customers believe about them and enhance their overall value proposition. For GE, “Imagination at work,” helped to elevate the brand’s innovation profile and created a sense of whimsical curiosity, which was echoed in advertising. For McDonald’s, “I’m lovin’ it” shifted the fast-food chain’s story from convenience to enjoyment, and paved the way for the more ingredient-focused stories that followed.

It’s important to be substantive when repositioning. As these examples illustrate, successful taglines must be part of a larger marketing or branding investment. Cosmetic communication, which includes taglines, can frustrate or alienate customers if real change is not evident in the brand’s experiences.

Questions to consider:

  • Do you need to reshape perceptions of your brand?
  • Are you struggling to clarify how you are different from competitors?
  • Are you finding customers are uninformed about your full value proposition?

3. To create a whole new category:

In the start-up world where organizations are creating entirely new value propositions and business models, a tagline can help the brand introduce itself clearly and effectively.

In 1998, eBay introduced the descriptive tagline “Your personal trading community.” In 2001, it was replaced with the more aspirational “The world’s online marketplace,” and in 2007, it was replaced again with the much more suggestive “Shop victoriously.” Over time, eBay no longer needed to educate the market and could instead focus on making an emotional connection.

“Customers are motivated by compelling, timely offers and intuitive experiences that demonstrate a brand’s relevance to their lives.”

Brands still deploy this tact today. Dollar Shave Club’s “Shave time. Shave money” not only articulates the brand’s core value proposition, but also hints at the brand’s sense of humor in a “more blades is better” market.

Tactically, these kinds of taglines work well at launch, and as eBay illustrates, they can be used more sparingly or replaced when market education is no longer needed.

Questions to consider:

  • Are you introducing a new service or business model that might need additional explanation or context?
  • Do you have limited resources for articulating what you offer to customers, where a tagline that travels with the name would do heavy lifting?

4. To stand out and inspire loyalty:

In markets with high levels of competition, price-conscious customers and intense marketing activity such as telecom, automotive, food and beverage and CPG taglines can support awareness, memorability and recall.

In these cases, brands use taglines to cut through dense communication environments and create a more emotional, memorable connection. Examples of this approach are BMW’s “Freude am Fahren” or “The ultimate driving machine,” Carlsberg’s “That calls for a Carlsberg,” and Nike’s “Just Do It.”

These taglines do little work to articulate the brand’s value proposition or core differentiators. Instead, they appeal to consumers’ emotional nature to drive loyalty to the brand.

Questions to consider:

  • Do customers make decisions about your products in a high-volume communications environment?
  • Is your category fast-moving, with apparent parity among competitive products?
  • Do you rely on broadcast marketing and advertising as a major tool for connecting with customers?

FINAL THOUGHTS

A well-considered, well-articulated tagline can be an efficient and high-performing asset to your communications strategy, particularly if your brand falls into one of these four categories. But remember, if you do decide to introduce a tagline, make sure that it’s informed by customer insights, supported by a holistic communication strategy, and most of all, made real in your products, services and experiences.

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How Trader Joe’s Drives Fierce Customer Loyalty

From its Fearless Flyer to Hawaiian shirts to seasonal pumpkin Joe-Joe’s, this store knows what inspires us.

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.”


FINAL THOUGHTS

Better Than Your Average Joe

Consumers in the BRI ranked Trader Joe’s highly for having better products, services and experiences than competitors. From their Fearless Flyer that introduces new seasonal products and recipes to their two-buck-chuck $2.99 wine, Trader Joe’s offers unique services and products.

The products in-store feature house-labeled branding rather than big-name brands. These Trader Joe’s branded items are highly curated, and since often purchased in bulk and direct from suppliers, the prices can be lower than competitors.

It turns out my mom’s letters must have been persuasive because, in 2006, Trader Joe’s opened a store in Roswell, Georgia. There are now seven stores in Georgia, ensuring that my mom and fellow Trader Joe’s super fans won’t have to transport groceries cross-country ever again.

Looking for more information on the most relevant brands? We surveyed 50,000 consumers to determine which unique brands they cannot live without. Get the full Prophet Brand Relevance Index™ here. 

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What Brands Have Earned Trust?

Band-Aid, Tide and Crest earn the most trust. And consumers love their dependability.

Trust is considered by many as the bedrock of a brand underlying all perceptions. You need trust for people to believe you will live up to your brand promise. Without trust, your assertions about your brand will ring hollow. And creating and maintaining trust is especially difficult given the fact that trust in brands globally has been eroding for the last two decades. Yet there are brands that have achieved a high level of trust. Who are those brands and how have they done it?

“Without trust, your assertions about your brand will ring hollow.”

Answers to these questions come in part from the new 2017 brand relevance survey conducted by Prophet of the strength of 275 top brands from over 25 categories using U.S. respondents that were active in the category and familiar with the brand. The survey used 16 measures that were combined to create a measure of attachment to the brand that is termed its Brand Relevance Index™ (BRI). One of the 16 measures in the survey was “a brand I trust.”

Top 25 Most Trusted Brands

In looking at the top 25 brands on the trust scale, four groupings seem to emerge. The first are heritage packaged-goods brands, brands that have earned a reputation for reliability over generations. The second are “star” brands that are strong on all of the 16 dimensions and have top BRI scores. The remaining two include a pair of specialty retailers and two package delivery brands.

All the top trust brands are perceived to deliver to their brand promise over time consistently and reliably. There can be a slip-up if it is convincingly corrected so that it is judged an abnormality, the exception that proves the rule. It nearly all the top truest brands, the performance is visible, the brand can be counted on because these respondents have had first-hand experience with the brand or know someone who has. However, the perception of trust is almost always based on more than brand experience.

Reliable Consumer Brands

The first trust grouping, the heritage consumer brands, have earned a reputation for reliability over generations. They dominate the trust dimension and include three of the top five brands (Band-Aid, Tide and Crest), 6 of the top 10 (add Cheerios, Clorox and Kleenex) and 13 of the top 25 (add Dove, Johnson & Johnson, Hershey’s, Windex, Pillsbury, Betty Cocker, and Ziploc).

These brands have certainly earned trust for reasons that go beyond their demonstrated reliability. They have associations of mom, grandmother, family, traditions, support you can count on, warmth, security, and permanence. They are part of a person’s history and values and create feelings that affect judgments. This array of associations creates trust in the brand, a perception that is likely more important in making a trust evaluation that any brand experience.

Those packaged-goods brands sharing the same categories that are much lower on trust are usually new brands like Kashi, Chobani, or Method or brands that have a heritage that is weak or unhelpful in supporting trust perceptions, brands like Pop-Tarts, Axe, or Red Bull.

Star Brands

The second grouping of high trust brands, the star brands, are that have the highest BRI scores. Of the 8 brands in this star category, three are among the top five BRI brands (Apple, Amazon and Netflix) and all eight are in the top 25 (add Pandora, KitchenAid, PayPal, Fitbit, Bose). By comparison, none of the 13-heritage packaged-goods brands were in the top 25 in the BRI overall score, the highest was Dove at 27.

These brands had two other characteristics. First, they occupied meaningful parts of a person’s life and lifestyle. Second, they achieve high levels of performance in a very visible way. A person knows when there has been a mess up.

Strong Brands are Trusted Brands

The power of a strong brand will for sure influence perceptions of trust. It will support a trust judgment because it provides a set of proof points as shown by their scores on the other 15 dimensions. Additionally, there is a halo effect. A brand that is strong on 15 dimensions will be assumed to be strong on the 16th in the absence of some information that is inconsistent. So again, we see perceptions of trust based on a broad array of brand image elements in addition to brand reliability.

The other four brands in the top 25 on the trust question come from more specialized categories and benefit from the trust engendered by their high performance within those categories. The North Face and Trader Joe’s are specialty retailers and were at the top of the trust measure of a 33-brand set of retailers with brands like Neiman Marcus, 7-Eleven and J. Crew. The final two brands in the top 25 were FedEx and UPS both of which are positioned around reliability and have created the infrastructure and computer system to deliver.


FINAL THOUGHTS

Managers of those brands that aspire to have customers believe they should be trusted should learn from brands that have climbed that mountain. Knowing what has been the driver of trust should help them chart their path and analyze the feasibility of attaining their goal.

Looking for more information on the most relevant brands? We surveyed 50,000 consumers to determine which unique brands they cannot live without. Get the full Prophet Brand Relevance Index™ here. 

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5 Key Benefits of Higher Purpose Programs

Companies can no longer pretend investors are all that matter. There are many other stakeholders to consider.

Milton Friedman famously said that the “social responsibility of business is to increase profits.” To many observers that is the accepted paradigm. However, a remarkably high number of businesses have a social/environmental higher purpose alongside creating and marketing a functional offering and increasing sales and profits.

5 Key Benefits of Higher Purpose Programs

There are five benefits that motivate these firms and should motivate yours:

1. Employee Alignment

Employees nowadays, especially millennials, seek out a higher purpose. They want to feel that their work means more than the bottom line or a paycheck. A higher purpose that they can support, rally behind or be a part of, can address those needs, and lead to more productive, committed and engaged employees.

2. Customer Connection

A growing segment of customers will build relationships with brands and firms who have a higher purpose that aligns with their own interests or concerns (or avoid brands that don’t). Even if that group is relatively small, it could be influential and contribute to financial success. For example, Prius drivers are extremely loyal to and supportive of the brand due to its unique design and efforts to combat global warming.

3. Bottom-Line Benefits

Consumers aren’t the only drivers of profit from social and/or environmental programs. Organizations can see a positive impact on the bottom-line from:

  • Energy savings: In 2005, Walmart decided to undertake its ambitious environmental program; affecting the stores, the products carried, logistics and much more. A surprise early finding was that do-gooder energy programs reduced spend and enhanced profits.
  • Expanding markets: Unilever noticed that increasing the health and economic status of third-world families created meaningful markets for their products. A business with insights into local conditions, assets and the ability to quickly implement and manage programs has enormous advantages over government-led solutions.
  • Create brand energy and visibility: Social and environmental programs can create energy and visibility that may otherwise be difficult for brands to achieve. Consider Always’ #likeagirl video campaign – designed to encourage self-esteem for those transitioning into womanhood. With over 80 million views, it achieved a rare feat for a product advertising campaign.
  • Intrinsic benefits: A reduction of catastrophic damage to the environmental, social and economic framework in which we live would objectively be a plus for long-term business profitability.

4. Stock Market Investor Support

The stock market rewards social or environmental programs. Per the Global Sustainability Investment Alliance’s 2016 review, $8.7 trillion had been invested in sustainability and social impact in the U.S. (up 33 percent from only two years prior). That number represents 22 percent of all investment assets in U.S. professional management. So it is not clear that there is a need to turn against the stock market to have a social or environmental higher purpose.

5. Doing the “Right” Thing

For a large number of firms, social and environmental programs are pursued because it is simply right from a moral and ethical perspective. Salesforce’s Marc Benioff says, “All businesses can and should help make the world a better place.” While Unilever’s CEO Paul Polman notes that the Unilever business model is focused on finding solutions to ensure that the needs of communities carry the same weight as the demands of shareholders.

“All businesses can and should help make the world a better place.”

Marc Benioff, Salesforce

The ethical rationale usually comes from having empathy with people that, because of your business, you get to see up close. If you see the devastation caused by global warming, children dying before reaching 5 or kids with inadequate education resources – and your firm can do something about it within your business model – why would you not act?

Consider the Dove programs to raise the self-esteem of girls and women and Lifebuoy’s program to get one billion people to change their handwashing habits to reduce infant deaths throughout the world (they are halfway toward the goal).

In the face of this logic and firm behavior, we saw the specter of the Brazilian private equity group, 3G Capital, who own Kraft Heinz and InBev and whose strategy was summarized by Fortune as “Buy Squeeze Repeat,” rebuffed in their effort to buy Unilever. Unilever is a shining light with its umbrella USLP (Unilever Sustainable Living Plan), launched in 2010, and its many social programs. Can you imagine what 3G would do to Unilever?


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Successful Business Growth Strategies: 5 Key Components

Long-term thinking builds relevance and improves experience.

Growing a business is easier said than done. Companies of every size face challenges that suppress their growth. A company might have a great product or service but no business growth strategy to help it define, articulate and communicate where it is going.

A growth strategy is different from an annual plan and can be difficult to develop if you’re unfamiliar with what it is, why you need it and how to create it. Below we examine how to develop a business growth strategy that is dynamic and effective.

What is a Business Growth Strategy & Why is it Important?

Instead, a growth strategy addresses how your company is going to evolve to meet the challenges of today and in the future. A growth strategy gives your company purpose, and it answers questions about your long-term plans.

Growth strategies usually starts by identifying and accessing opportunities within your market. They go beyond your business and marketing plans, which detail how you’re going to meet specific business targets. Growth strategies are important because they keep your company working towards goals that go beyond what’s happening in the market today. They keep both leaders and employees focused and aligned, and they compel you to think long-term. Bad decisions often happen when you make decisions based on today, instead of an emerging tomorrow.

Components for Developing a Successful Business Growth Strategy

Developing a growth strategy demands coordination among a cross-functional group of stakeholders; it can’t be just a few people in a room with a whiteboard. Everyone involved should understand what they’re working towards and why, as well as what they’re expected to bring to the process.

To be successful in your strategy, you need to consider what will significantly impact business growth. Let’s take a look at a few:

1. Value Propositions and Business Growth Steps

For a company to expand, it needs to increase its reach with existing target customers and acquire new ones. To do this, the company must design a value proposition that clearly states what it does and why customers need it. Then it must create a growth strategy that provides the steps (i.e. growth moves) the company is going to make to take new things to market.

When T-Mobile U.S. came to us because there was dissatisfaction among its customers, we knew they needed a powerful new value proposition and go-to-market strategy. Through extensive market research, we identified a the opportunity for a wireless carrier who didn’t act like one – the “Un-carrier.”

2. Brand Relevance and Customer Experience

Even the most recognized brands in the world started from scratch at some point. So how did they become some of the biggest names in the market? By building relevance with customers and delivering a distinctive and integrated customer experience. Building a brand is much more than a logo and a color palette (although those things are important for brand recognition). Your brand should be recognized by its values and by how customers experience you – both of which should be highlighted in your growth strategy.

Olive Garden was already an industry leader when they came to us looking for a new way to achieve relevance with both their current customers and new ones. What was the key? Breadsticks and family.

The development of Breadstick Nation saw the brand’s success surge as it launched new breadstick products and experiences. And with a strategic focus on family, a new customer experience for children was created both in the restaurant and online.

3. Thinking Long Term Business Growth

Being focused solely on the present and making snap decisions about the future is never a good idea. Your organization needs to invest time and energy in thinking about where the world is going and what it means for your customers, partners, employees, etc. Your growth strategy will help you make good decisions for the future of your business, even though it might seem uncomfortable to place bets when even the present seems uncertain.

4. Expanding into the New – Markets, Categories, Customer Segments…

Your company’s core business needs to be solid before you make big expansion moves. However, outlining longer-term goals will help you to determine the steps you need to take and measure your progress along the way. Think of it like a road map. Quick wins and small successes can be mile markers guiding you toward the long-term goal of expanding into other markets, categories and/or segments.

Furrion is a brand that was a leader in the manufacture of audiovisual equipment, appliances and power solutions for specialty vehicles, luxury RVs, yachts and consumer industries.

With this strength behind them, they were focused on entering the home appliance market. Prophet worked with Furrion to identify the brand purpose principles that would capture growth in this new market, including a new visual identity, which was unveiled with great success.

5. Growing at a Pace You Can Handle

We’ve all seen it before, and we’ll see it again – companies that grow too fast and then fail because they can’t keep up. A growth strategy will help you develop at the right pace for organization. The last thing you want to do is overextend yourself to secure short-term gains that will eventually put too much strain on your business and your people. It can be hard to make trade-offs, sometimes sacrificing the exciting for the sensible, but it is sometimes necessary for the overall health of your company. This doesn’t mean you shouldn’t take risks, but the risks you do take need to make sense in context of the big picture.

How to Overcome the Challenges of Developing a Business Growth Strategy

Developing a growth strategy is demanding and time-consuming because it is a bespoke process. That said, some of the most common challenges in developing a growth strategy are:

  • Opportunity and impact
    • Defining your target customer segment(s), their needs and their pain points
    • Evaluating the projected impact of the strategic growth moves you want to make
    • Understanding the feasibility of the business growth moves (i.e. time, capabilities, resources)
  • Alignment and prioritization
    • Aligning leadership around a narrow set of well-defined goals
    • Involving the right people and managing stakeholder expectations
    • Setting priorities and sequencing growth moves in a timeframe that makes sense
    • Not approaching it as a one-time task, instead of a continuous journey
  • And most importantly…
    • Not thinking big enough about what business you want to be in

Before you embark on creating your business growth strategy you should consider how you’re going to tackle these challenges.


FINAL THOUGHTS

A dynamic growth strategy guides you and your team towards the future of your company. When you know what you want and have a way to get there, you’ll avoid the pitfalls of making hasty decisions that cost you in the long run. If you’re thinking about how to create or refine your growth strategy, Prophet can help.

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If You’re Not Working on Customer Experience, You’re Working on the Wrong Thing

CX needs to stem from tech-enabled intelligence, offering surprise, delight and empathy.

Consumer expectations are constantly being reset. And, with digital technologies and new data-driven value propositions disrupting markets seemingly on a daily basis, it can be hard to determine what is working for successful businesses today. But, when we take a hard look at what is helping companies achieve sustainable growth, we see one common characteristic: a focus on delivering a better customer experience.

“Companies that offer exceptional customer experiences are the fastest-growing, healthiest businesses.”

Prophet’s Brand Relevance IndexTM (BRI) confirms that companies that offer exceptional customer experiences are the fastest-growing, healthiest businesses. People don’t just admire these high-experience brands; they find them indispensable in their lives. And they are drawn to these companies not for the promises they make, but for the experiences they create.

Customer Experience Drives Relevance

Improving your existing customer experience and creating new, engaging ways to interact with customers should be your number one priority. And while there are countless ways to enrich an experience, we’ve found the changes that make the most impact can be categorized in two simple ways:

1. Make It Easy

Make using your product or service easy by streamlining the experience with simple processes, fewer steps and clear functionality. Changes should be intuitive and promote seamlessness and speed. Amazon, one of the most highly ranked brands in our BRI, is perhaps the best example, churning out ordering, payment and device innovations that have redefined what it means to shop.

2. Make It More Engaging

Enhance your connection with customers by adding new moments, personalization and content. Richer experiences intensify the relationship between people and products, and new ideas encourage discovery, loyalty and even advocacy. Netflix, another highly relevant brand from our Brand Relevance Index, achieves its off-the-chart levels of engagement with its exclusive, binge-worthy programming.

Doing at least one of these–and preferably some aspects of both–demonstrates that you understand what truly matters in people’s busy lives and that you’re able to provide products and services that keep pace as their needs and interests change.

Beyond Insights to Understanding

To create customer experiences that fuel growth, it’s important to have a holistic vision, one that helps you understand what matters in peoples’ lives beyond just their path to purchase. Creating a great customer experience is not just about removing the pain points along the customer journey (though that matters too!).

Rather, it is about seeing the big picture of what is important to consumers in their daily lives: how they interact with other people (and other brands), use technology, and spend their time, money and attention beyond their interactions with your product or service.

While what happens at any given touchpoint with your brand matters, a bigger picture emerges from a combination of those encounters:

  • Where are your consumers coming from?
  • What they are trying to accomplish?
  • What is really interesting to them?

Awareness and understanding of this context should shape the interactions consumers have with your products, services, people or messages, which in turn will shape perceptions and feelings about your brand–it allows you to form a relationship with the customer beyond the transaction.

The right research can help uncover what is most valuable to customers–in their daily lives and in their experience with you. New tools, such as social media mining, purchase history data, and search, web and mobile analytics, allow you to get beyond surveys and ethnographies in order to see what is really driving consumer behavior.

Armed with this deeper understanding of the customer, businesses can start looking for ways to do more than make incremental improvements to the customer experience. There is an opportunity to transform the experience, creating a greater business–and brand–impact.

Transformational Customer Experiences

Our engagements with hundreds of companies have taught us what is important when creating the kinds of experiences that establish relevance and drive business growth. How you address these key considerations, however, is constantly evolving as new competitors, technologies and techniques emerge.

5 Questions to Consider About Your Customer Experiences

It is important to ask these five key questions as you evaluate existing customer experiences or contemplate creating new, more engaging ones:

  1. Are we bringing rigor to our customer experience? Ideas should be grounded in consumer insights and business realities, and ensure improvements are linked to the business metrics that matter most.
  2. Does the experience show empathy for customers? This requires looking past what is happening in the moment. It goes beyond the path to purchase, technology and pain points to see the human side of the customer experience, both for customers and employees. Great experiences are the enabler of great relationships.
  3. Does it take into account the role brand plays in shaping the customer experience and vice versa? In this age of technological disruption, brands are now built by the experiences they create. It’s a virtuous cycle: As brand characteristics inform the experiences, experiences increasingly define the brand.
  4. Do your innovations surprise and delight? The currency of keeping customers engaged in an experience is keeping it new. But newness alone is not enough—changes also have to be useful in order to build relevance.
  5. Does it leverage tech-enabled intelligence? We believe the best experiences are not static solutions but something that are living and dynamic. This is why we help companies embrace the power of AI, advanced analytics, and big data to build experiences that are more contextual, adaptive, and personalized — to powerfully engage customers, again and again.

Operationalizing these dimensions will help you create brand experiences that matter. Interactions that are easier, more responsive, richer and more personalized drive relevance and sustainable growth.

Is Your Organization Ready?

An ambition to create great customer experiences will be unfulfilled if your organization is not prepared to develop and deliver them. And beyond technological readiness, what is needed is a customer experience strategy that pulls in operational expertise and customer insights from different parts of an organization that are often forgotten and not connected or coordinated in how they interact with customers, the market or each other.

My colleague, Charlene Li, Principal Analyst at our research company, Altimeter has just published a research report on the topic of “A Next Generation Customer Experience Strategy” for “next generation customers.” In it she describes the necessary inputs for developing compelling experiences that drive deep relationships with customers and the required organizational involvement from across the enterprise. She has also developed a maturity model that companies can use to assess their organizational readiness for adopting a more customer experience-centric approach to their business.


FINAL THOUGHTS

It is vital that organizational capabilities and operational implications are top of mind from the inception of a customer experience strategy, through concept development and deployment. Technological capabilities must be paired with organizational commitment and preparedness in order to effect relevance-driving experiences.

It is time for organizations that espouse customer-centricity to embrace the development of customer experiences as the primary means of realizing that goal.

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How Sponsorships Can Work for Chinese Brands

Events like the Olympics or World Cup offer plenty of visibility. To pay off, the right metrics are essential.

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.”)


FINAL THOUGHTS

In short, to best leverage sponsorships to strengthen brand relevance in new global markets, Chinese brands need to set clear and achievable goals, focus on opportunities they can credibly associate with their brand, and activate in an integrated way that taps into the passion of their target customers.

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How to Build a Successful M&A Strategy

Marketing, branding and corporate culture are more important to success than many deal-makers acknowledge.

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.


FINAL THOUGHTS

Bottom line: making M&A potential a reality requires smart moves upfront which, unfortunately for investors, are often missed by leadership amid the complexities of mega-deals. For more information on capturing greater value in the M&A, please get in touch.

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