Business Strategy = Brand Strategy, or Verizon redux

A colleague challenged me on the recent post about Verizon’s business being strong but not their brand.  “How can you have a strong business but not a strong brand?  Doesn’t that contradict the theory that business strategy = brand strategy?”

Excellent question.  I was not clear enough on that point.

So here it goes:

If you business strategy is to operate in a category where there is limited or no competition, then your brand strategy is to downplay branding.

Branding has relatively little benefit if you are in a business that is highly regulated, a monopoly, a commodity or a utility.  Of course it does matter when dealing with the regulators, employees, prospective employees and business partners.  But those are still very small audiences.  Verizon is in a category with very limited competition.  It is a category that is capital intensive, with no single technical standard, so there are very big barriers to new competitors.  And it remains highly regulated.  

The wireless business is slightly more competitive than wireline.  But it still has a limited number of competitors and is capital intensive . Most importantly, the category is growing.  Only a business in poor shape would decline in a growing category.  

Compare this with many countries in Europe where there is a more competitive market.  There is a single standard across the countries, so networks are not a competitive advantage.  There we see some truly outstanding brands such as Orange and O2.  

Now compare this to mobile handsets.  That is a category where branding is tremendously important.  Samsung, Apple, Nokia, Motorola, Sony Ericsson, Blackberry — even LG and HTC.  Those companies really understand the importance of branding and try hard to get it right.  Samsung is getting it right, Motorola has lost its way.  And who can doubt that Apple is getting it right?

In fact, it is the Apple brand that is attracting people to AT&T.  And the problem is made worse by the bad feelings people have about the Verizon brand.  Arguably the Verizon brand is pushing people away.  The AT&T brand has a residual good will from its long relationship with people.  Verizon has size.  AT&T has stature.

Here’s an example of where brand strategy drives business strategy.  The example comes from Larry Light and Joan Kiddon in their new book, Six Rules for Brand Revitalization.  McDonald’s lost faith in their brand’s ability to reach beyond a limited audience, limiting their growth potential.  Growth meant reaching teens and young adults, so the company decided to invest in many other brands such as Chipotle, Pret and Boston Market. That is where the “brand positioning” theory led them.  Brand strategy of one brand to one segment led to a business strategy of buying other brands. 

But it wasn’t working because the core McDonald’s brand continued to decline.  In a reversal of their branding strategy, they adopted a multi-segment approach to branding marketing.  In other words, a single brand appealing to multiple target audiences (but still not absolutely everyone).  The new branding approach (brand journalism) worked, driving organic growth in the McDonald’s franchise.  Eventually the company sold off those other brands and investments.   Brand strategy of one branding to multiple segments led to a business strategy of selling off other brands.

Organic growth?  One of only 2 companies in the Dow Jones Industrial Average to rise last year?  Hey, I’m lovin’ it!

Perhaps illustrates the important relationship between business strategy and brand strategy.  If not, let me know and I’ll try to give other examples or ways to look at the issue.

2 Responses to “Business Strategy = Brand Strategy, or Verizon redux”

  1. 1 Stephanie Lepp October 5, 2013 at 5:10 pm

    Thanks for this post. I’d love any more explicit elaboration you have on the relationship between brand and business. Does this mean that brand agencies should not consult for clients in categories with limited or no competition? Or more broadly, that brand strategy should come ‘before’ business strategy in competitive categories, while business strategy comes ‘before’ brand strategy in non-competitive categories?

  2. 2 Randall Ringer October 25, 2013 at 10:12 pm

    Excellent question! So, a couple of observations.

    One is that brand is important in all categories, though relatively more important in some categories than others. In our research for B2B high tech companies such as high-tech manufacturing, semiconductors and software we have seen that brand plays a very important in opening doors, getting invited to compete for RFPs, attracting stronger business partners and recruiting exceptional talent. However, there are also technical specifications that the companies must meet in order to close the deal. In wine and other categories where people have fewer objective ways to evaluate the “quality” of the product, brand becomes more important.

    A second observation is understanding the role of the brand. Even a corporation with few or no competitors may still have a great need for branding. There was a time when Microsoft had dominated many segments of the software category through windows, Word, PowerPoint, Excel and so forth. Suddenly they found themselves as a target for government regulators to investigate and sue. The company was seen, rightly or wrongly, as arrogant and bullying, trying to stifle competitors and innovators. Branding has a role in building — or rebuilding — trust for such companies. The role of the brand is foster engagement in a public dialogue with government officials, regulators, influencers, NGO’s, investment community. And also attracting and retaining the best talent as employees. They may not have been competing with Google on operating systems (at least not at that time) but by 2004 they were in a fierce competition with Google, Samsung, Lockheed Martin, GE, IBM and others to hire top engineering students from top engineering programs.

    A third is that business strategy really does lead the way. When the work with the brand is truly insightful, it can help the business strategists to see their opportunities in different ways. It can help to reframe the strategic questions that the company is facing and, in that way, point in new directions.

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