Branding vs. “demand generation”

Our (Lenovo’s) new CMO, Mike Sievert, has shared his marketing principles in this post.  Well worth a look.

Two outtakes I endorse strongly:

Let’s stop the debate, happening in companies everywhere, over whether the priority should be on “brand-building” or “demand generation”. It is a false trade-off. Good marketing does both.

Customers should be segmented according to what they value when they make their purchases. As such, the “target audience” for your product is all of the customers who want what you are selling. It may sound backwards, but it’s not.

I would like to add a point on branding vs. demand generation (marketing tactics focused on immediate purchase conversion). While the debate Mike references (wherein people assume you either turn branding on or fully off) is indeed fallacious, the balance of brand desire vs. price/offer incentives is relevant and important.

Most people, including non-marketers, will readily agree to the principle that every marketing tactic should contribute to brand building.  But to what degree?  In practice, many people will insist on price/offer focused approaches (with a little brand essence sprinkled in), especially when times are tough.  This is because the measurable response rate to such tactics is always higher.  It is tempting in high volume, low differentiation categories (like personal computers) to promote on price when you need revenue.  But it is best to resist temptation.

I had the opportunity to participate in a discussion with Stanford professor Baba Shiv.  He shared compelling research that shows that a company generates higher returns (growth and profit) if it presents its products primarily based on brand benefits, vs. price.  Price oriented value propositions essentially train the customer to buy when the price is low, and reinforce associations of lower inherent value in the product.  Poor margins result, and lack of competitive sustainability for all but the cost leader.

Tech hardware companies in “commoditized” markets have a tough time with this.  Sales increases from price promotion are immediate, while profit growth from brand investment takes time.  And right now, companies understandably don’t feel they have time.  But, at a cost.  With low margins prevalent in device markets, a price premium is needed for attractive returns, and that requires brand investment.  I know, companies don’t have the budget room right now.  But there are creative (cost effective) ways to build a brand.  More on that later…

Now let me offer some practical suggestions.  If you elect to promote with price, protect your brand by offering your discounts via third parties.  For instance, pay resellers to offer discounts or incentives to customers, associating the discount with the reseller instead of with your brand.  This is what the higher end car companies do.  Create clever associations between product differentiators and buying incentives, or make the incentives themselves “on brand” (buy a Blu-Ray player and win a cameo in the next Star Trek film).  Mostly, ensure that your brand intent is never undermined in your marketing (e.g., Best Quality and Cheapest are not credible together), and that brand image has substantial weight in your tactics.

And keep your quality and service levels up, so your customers endorse your brand to others, and the next products you sell won’t require discounting. Tags: ,,

1 Response to “Branding vs. “demand generation””

  1. 1 david shaw March 29, 2009 at 10:43 pm

    Bravo, Craig!
    Too many people who should know better
    mortgage the future when they pull the price lever
    with their trigger-happy finger.
    Try pulling yourself back up that slippery slope
    when things turn around.

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