"Companies are Throwing Money at Social Media"

rohit deshpande

Rohit Deshpandé is Sebastian S. Kresge Professor of Marketing at Harvard Business School, where he currently teaches in the Owner/President Management Program and in other executive education offerings. He has also taught global branding, international marketing. In this interview he talks to Forbes India on various aspects of branding.

I came across an interesting an interesting article that you wrote for the Forbestitled Branding Yoga: Good Business or Blasphemy?” Please tell us something about.
I wrote a case study called Branding Yoga. So my comments relate to that project. The first learning objective of the case is to ask the question can anything be branded?. The majority of the students say yes, anything can be branded. But the follow up question is, should everything be branded? And all of a sudden ethical issues and moral issues come up, in debating that question. It is a much more difficult question to answer.
Can you get into a little more detail?
The discussion broadens into this controversy over branding yoga. The particular controversy that got me interested into doing this case is something that I read about in The New York Times. There was a group of Indian Americans who had protested the commercialization of yoga and they said that it amounted to the commercialization of Hinduism. So they drew a parallel between commercialization of yoga and the commercialization of religion.
And how did that they do that?
In order, to make that argument they said that yoga is essentially Hindu and it would not exist if it were not were for Hinduism. This sparked a tremendous controversy that had to do with the history of Hinduism, the history of yoga, which preceded which one, can you teach Yoga without teaching Hinduism or is yoga all about exercise? That is really what fuels the case discussion. So, that is one set of issues that we deal with.
And what is the other set?
The other set of issues that we deal with is that there are two different branding models. One branding model is from Tara Stiles, who is a very successful Yoga teacher in New York. She is American. She is young. She used to be a model and a dancer and did Yoga herself as a way of keeping fit and started teaching her friends. They said there will be other people who will be interested. She made some free YouTube videos on this and they went viral. And then she started a yoga studio. Somewhere along the line, she became the yoga teacher of Deepak Chopra. He took lessons from her. He is a great fan of her brand of yoga and they have a joint venture . They made an iPad app, which has been very successful and even a DVD.
Which is the other model?
The other branding model is from somebody called Bikram Choudhury of Bikram Yoga. Now look at the contrast. Bikram is an American now but he was born in India. He was traditionally schooled and his brand of yoga focusses on the domain called hot yoga. It is extremely regimented and you have to be physically in a great shape to do that. And he has franchises. He has training programmes. He is much more of a yoga teacher training as a way of expanding the franchise, even though both are marketers. She is a much more of a social media type of thing. And both of them are successful. Both have attracted controversy, Bikram probably much more so, despite the fact that he is Indian and more authentic than she is.
What is the point you are trying to make?
Yoga has been very successfully branded, with different branding approaches and what makes it interesting is that in America the majority of yoga teachers don’t make very much money.
They have small studios. They are making a living. But they are not millionaires. Both Stiles and Choudhury have achieved a lot.
The ones who are not making haven’t branded yoga?
They haven’t thought about the branding aspects of yoga at all. I don’t know how it is in India, but this idea of the business of yoga, a lot of people look at it as an oxymoron.
You just talked social media. These days social media marketing is a huge thing. Does it work?
Of course it works. If done well, it works really well. There are a number of case examples of a number of companies that are doing a very good job. But it doesn’t work for everybody. Companies are spending a lot of money on social media. But a lot of it is experimental i.e. they are throwing money at something, and they are really not sure of what works and what does not work. We are at a nascent experimental stage where we are trying to figure this out.
Can you elaborate on that?
There are lots of examples of social media where the companies themselves are not sure whether the money is worth the spent. I am not sure I can isolate a social media disaster as much as companies not knowing whether they spent their money well. I would say 90% of the companies are in that group of not knowing whether they spent the money well.
Can you explain through an example?
It has to do with the appropriate success metric. How do you judge whether your social media campaign work has worked? One of the most popular metrics is the number of likes that you get. I have some colleagues who have done some research on this and they have found that likes do not translate into sales. When you think about it cognitively it doesn’t take a lot of effort to like but it takes a lot of effort, and not to mention money, to buy. Hence, click-throughs and getting sales, that is much much harder to measure.
So what is being done about this?
The companies are trying to figure out whether by spending more money they can get click-through , that is, translate likes into sales. But there are all kinds of other factors that might explain sales and how do you isolate it and so on.
Can you give us an example of a company which has used social media well?
I am developing a case on Dell. And they are considered to be a best practice example of using social media in the business to business space. What works for them is that they have a business model which is direct to consumer rather than going through retail. So they have open channel historically with their customers. They don’t get information on their customers from some sales partners, which means that when something goes wrong, they also find out very very quickly. And they have traditionally done that through their telephone lines. People call on their toll free lines when they have a problem. With the advent of social media, some irritated customers started blogging that they were upset at Dell, there is a problem that happened and so on.
And what did Dell do about it?
Michael Dell, who is the founder, is himself very active in the blog space and when he discovered this he told a team of his people that we should just reach out directly to these customers and fix these issues. When they reached out to fix these issues, the bloggers put blogs saying that here is what the company has done. Effectively, their bloggers were doing their job for them. As you know there is a lot of research that shows that restitution actually gets you a lot more business and than actually the initial sale does. And when the restitution story is being told by a customer it carries even more credibility. That is the story of how Dell got into this space. Now they have a command centre and they keep monitoring what is going on. It has to do with the complaint hotline or the repair hotline or whatever you call it, which is the history of the company. They have now translated this into the social media. They estimate that it has saved them a lot of money and a lot of loss, because of people who would have complained and gone away and scared other people from buying Dell.
Given your experience in the field of marketing and branding, which is the most frequent branding mistake that companies make?
The most frequent branding mistake is to assume that your brand is a logo rather than the personality of your product and company. To assume that its a simply a trademark and therefore it should be managed out of your communications department and maybe your legal department, rather than becoming a part of the overall strategy of the firm. In the research I have done this tends to be particularly true for technology intensive companies where the product is everything and the quality is everything. It is almost like a Dilbert cartoon which stereotypes marketing and says that marketing does not add any value and therefore branding is not very essential and it is all about the quality of the product. Companies in emerging markets are not comfortable with thinking about a brand as anything more than what their marketing people do. It is not seen as a part of the strategy of the firm. A brand is not seen as a relationship with a customer, it is seen as a trademark.
Can you give us an example which doesn’t hold true for whatever you have just said?
I wrote a case on Infosys and they have done an incredible job of making the Infosys brand mean something. Narayana Murthy in some ways represented the brand. The confidence that people had in buying from Infosys came from people who ran the company. The brand stood for more than just IT. The brand stood for the people and since 90% their sales comes from outside India, they actually had to brand India before they could brand Infosys. So there is a whole big story there of how India Inc came to be and what role Infosys played in it.
When brands become successful, the tendency is to extend it. Do line extensions work?
Line extensions do work but they don’t work in all cases. The Kingfisher story is an example of a line extension strategy that did not really work. Yamaha is an example of a line extension strategy that has worked very well. But I think the question is why the line extension? If the reason for the line extension is that you have built a powerful brand and want to milk it, then there is a chance that it won’t work. But if the purpose of the line extension is that it is something that the consumers want, then there is much more likelihood that it will work.
Any other point that should be kept in mind?
Another key part is that what does the brand mean? And does that meaning extend? The question for the Kingfisher management should have been what does the Kingfisher brand mean and how does that meaning translate from beer to airline? There are some brands that transcend the product category, in which case the brand might go across a whole variety of things. There are other brands where their meaning is very rooted in the product category, which is almost like the paradox of success. The brand is successful because people see it as Kingfisher means beer and it can’t mean anything else.
Do celebrity endorsements work?
The research on that is in this area called brand personality. Where the personality of the celebrity is consistent with the personality of the brand, it works. When there is a mismatch, then consumers are cynical and they believe that the only reason this person is speaking is because she or he is being paid for it, and they probably don’t use the brand themselves. I think that is the real issue.
Can you give us an example?
The bad example is the [James] Bond franchise. The BMW introduced a product called z3 through a Bond movie. It was for them a relatively inexpensive convertible car. This made a lot of news because James Bond was a British secret agent who used to drive a British Aston Martin and was now driving a German car. This made for good media. This was a very successful product placement. When that happened, not only BMW but a whole bunch of product companies decided that they would flood the next Bond film with product placements. There was a huge consumer backlash. Consumers were frustrated to the point that it was hurting the Bond movie franchise. People were saying that there is no way that the endorser is personally committed to all these different things but he is using it because he is being paid.
And a good example?
There are several examples of where the brand personality fits. An example of that is the basketball player Michael Jackson advertising Gatorade, which is a sports drink. And it went on for a very very long time.

The interview originally appeared in the Forbes India magazine dated July 10, 2014

Extending Your Brand May Dilute its Identity

laura visual hammer
Vivek Kaul
 
Vijay Mallya, the liquor king, who wanted to run an airline, recently told the staff at Kingfisher Airlines that he had no money to clear their salary dues. Mallya, like many businessmen before him, also became a victim of the line extension trap. “The line-extension trap is using the same brand name on two different categories of products. Kingfisher beer and Kingfisher Airlines. We have studied hundreds of categories and thousands of companies and we find that line extension generally doesn’t work, although there are some exceptions,” says marketing guru Laura Ries, who has most recently authored Visual Hammer.
Along with her father, the legendary marketing guru Al Ries, she has also authored, several other bestsellers like The Origin of BrandsThe Fall of Advertising & the Rise of PR and the War in the Boardroom.
But does such a rigid line against line extensions make sense in this day and age, when it is very expensive to build a brand. “We have never said that a company should not line extend a brand. What we have said is that line extension “weakens” a brand,” says Ries. And there are always exceptions to the rule she concedes. “Sometimes, a brand is so strong it can easily withstand some weakening. Early on, for example, the Microsoft brand was exceptionally strong so the company could use it on other software products and services.”
There is also the recent case of Tide, the leading detergent in America, opening a line of dry-cleaning establishments using the Tide brand name. And it might just work, feels Ries. As she explains “Because there are no strong brands or national chains in the category, this can possibly work, although we believe Procter & Gamble, the owners of Tide, would be better off with a new brand name.”
These exceptions notwithstanding there are way too many examples of companies which haven’t fallen for the line extension mistake and are doing very well in the process. Toyota is one such example. And one of the reasons for its success is the launch of three new brands in addition to Toyota. Scion, a brand for younger drivers. Prius, a hybrid brand. And Lexus, a luxury brand.
“Initially, Prius was a sub-brand of Toyota, but the company recently decided to create a totally separate brand. Prius has some 50 percent of the hybrid market in America and is a phenomenal success. The separate brand name will assure its success for decades to come,” says Ries.
What about Apple we ask her? How does she view the brand, everyone loves to love? Hasn’t it also made the line extension mistake by launching the Apple iPod, the Apple iPhone and the Apple iPad? “Apple is not a product brand. Apple is a company brand. Nobody says, I bought an Apple unless they have just visited a grocery store. They say I bought an iPod or an iPhone or an iPad, three brands that made Apple one of the most-profitable companies in the world,” explains Ries.
So in that sense Apple did not really make a line extension mistake. For every new product it created a new brand. And the success of this strategy reflects in the numbers. Apple’s competitors, Hewlett-Packard and Dell, line extended their brands into many of the same products. Both are in trouble. Last year, Apple made $41.7 billion in net profits. Dell made $2.4 billion. And Hewlett-Packard lost $12.7 billion.
But what about Samsung, which has been giving Apple a really tough time in almost all product categories that they compete in. “Currently, Samsung is an exception to the principle that line extension can weaken a brand. But that’s only in the short term. We predict that sometime in the future Samsung will suffer for its marketing mistake,” states Ries. “What keeps Samsung profitable is the principle that in every category there’s always room for a No.2 brand. Coca-Cola and Pepsi-Cola, for example,” she adds.
And Samsung is clearly not as profitable as Apple. Last year, Apple made almost twice as much in net profits as Samsung even though Apple’s revenues were smaller. Apple’s net profit margin was 26.7 percent compared to Samsung’s 11.5 percent.
The other two big companies in the mobile phone market have been Nokia and Blackberry. Nokia recently launched a smartphone under the new ‘Lumia’ brand name. On the face of it this is exactly what Ries would have recommended. The company launched a Lumia smartphone, and did not fall for the line extension trap. Given this, why is Nokia losing out in the smartphone business, we ask Ries.
“What’s a brand name? What’s a model name? What’s a sub-brand name?” she asks. “Many companies like Nokia think they can decide what is a brand name and what is a model or a sub-brand name. So Nokia considers “Lumia” to be its smartphone brand name. Not so. It’s consumers that make that decision. Consumers use iPhone as a brand name and not Apple. Consumers also use Nokia as the brand name and not Lumia. To consumers, Lumia is a model or sub-brand name.”
And there several reasons behind consumers not considering Lumia to be a brandname. “Look at a Lumia smartphone and you’ll see the word “Nokia” in big type. Look at an iPhone and you won’t see the word “Apple.” You’ll see the word “iPhone” in big type and just an Apple trademark,” says Ries.
And on top of that Lumia doesn’t even have a website of its own (
www.lumia.com is a website of a British IT company). “Lumia” doesn’t sound like a brand name and it doesn’t even have a website. That makes it very difficult to create the impression that Lumia is a brand. This isn’t the first line-extension mistake Nokia has made. Nokia was its brand name for a line of inexpensive cellphones. And today, Nokia is also using the Nokia name for its expensive smartphone products,” says Ries.
The Blackberry story goes along similar line. On the face of it, the company doesn’t seem to have made a line extension mistake. But Ries clearly does not buy that. “What’s a BlackBerry? Is it a smartphone with a physical keyboard? Or a smartphone with a touchscreen? It’s both, of course, and that’s exactly why BlackBerry has fallen into the line extension trap. To compete with the touchscreen iPhone, the BlackBerry company (formerly called Research In Motion) needed to introduce a new brand of touchscreen smartphone. It’s very difficult to build a brand that it has lost its identity.”
And given the lost focus its very difficult for these companies to go back to the days when they were immensely successful. As Ries puts it “It depends upon whether either company (i.e. Nokia and Blackberry) can do two things: (1) Develop an innovative new idea for smartphones, and (2) Introduce that innovative new idea with a new brand name. It’s hard for us to tell whether it’s possible to come up with a new idea for a smartphone. It could be too late.”
And this could work in favour of Samsung, feels Ries. “Every category ultimately has a leader brand and a strong No.2 brand. Since all three smartphone brands (Samsung, Nokia and BlackBerry) are line extensions, one line extension has to win the battle to become the No.2 brand to the iPhone. Samsung made massive investments in product design and development plus massive marketing investments,” says Ries.
So it’s logical that Samsung would become a strong No.2 brand. Furthermore, they priced their smartphones as less expensive than iPhones, another strategy that increased its market share although not its profitability. This has worked particularly well in Asia, feels Ries.
This success of Apple over Samsung comes with a caveat. As Ries explains it “Long-term, every category has two major brands. But they are normally quite different. Long-term, we see Apple as the leader in the high-end smartphone category and Samsung the leader in the “basic” smartphone category. Apple would make a mistake in introducing less-expensive smartphones. That would undermine its position at the high end.” And that is mistake that Apple needs to avoid.
Another massively successful company that has fallen prey to the line extension trap has been Google. The company has introduced a number of products under the Google brand name, but none of them have been massive money spinners like the Google search engine.
As Ries puts it “Currently, I can’t think of any Google product that is very successful. Google +, the company’s social media competitor, is nowhere near as big or as profitable as Facebook. Google’s most successful introduction has been Android, which now is being use by 75 percent of all smartphones.” Google bought the Android company, one of the reasons it probably didn’t use the Google name on the software.
What all the examples given above tell us is that line extensions have had a sketchy track record. So why do companies fall for it, over and over again? Ries has an answer for it. “As one CEO told us, We have a great company and great products. Why can’t we use our great company name on our great products?,” she points out. “Most chief executives believe that the only thing that really matters is the quality of their products and services their prices. Deep down inside, they don’t believe that the name or the marketing makes much of a difference.”
Then there is the pressure to keep increasing earnings. Chief executives are under pressure to increase sales and profits and they see product expansion (including line extensions) as the best way to achieve these goals. “The more important strategic decision is the question of “focus.” It’s our opinion that the best way into the mind is with a narrow focus. That’s not, however, the majority opinion, at least among top management people. Most companies are moving in exactly the opposite direction. They are line extending their brands,” says Ries.
Given this, CEOs don’t believe a new brand is worth the cost and effort required. It’s true, too, that many management people equate new brands with expensive advertising programs, feels Ries.
But that again is a perception that they have. Most big brands in the last ten years were not built because they advertised left, right and centre. Ries questions the assertion that it’s expensive to create a new brand. “It’s only expensive if a company uses advertising to launch the new brand. In our book, 
The Fall of Advertising & the Rise of PR, we recommend launching new brands with no advertising at all. Just PR or public relations. Advertising doesn’t have the credibility you need to launch a new brand.”
This is because when a consumer sees an advertisement for a new brand, his or her first reaction is, this can’t be very important because I’ve never heard of the brand. And that’s why some of the biggest brands in recent years like Amazon, Twitter and Google, used almost no advertising. They did, however, benefit from extensive media coverage, feels Ries.
In order to succeed in the years to come, companies will have to create multiple brands. “The future belongs to multiple-brand companies. But with one reservation. A company needs to be successful with its first brand before launching a second brand. You can’t build a successful company with two losing brands,” concludes Ries.

 
The article originally appeared in Forbes India edition dated July 12, 2013
 
(Vivek Kaul is a writer. He tweets @kaul_vivek)