How To Build and Protect Brand Equity

brand equity

Building brand equity should be the number one priority of any business, big or small. Positive brand equity takes a lot of time and resources to achieve, hence the need to start from day one.

Overwhelmed by daily tasks, brand owners can easily lose sight of this strategic business objective. Moreover, brand equity can be an abstract concept that is difficult to understand and quantify.

This article aims to demystify the concept of brand equity and convince brand owners of its importance.

What is Brand Equity?

When first launched, a brand is just a name tied to a product or service. Slowly (or more rapidly depending on the budget), through voluntary and involuntary actions, reactions, and behaviours, that name surrounds itself with reputation (positive or negative), and a new brand is born.

Brand equity is a fancy name for how strong a brand is, and how much it’s actually worth to the business. Brands that are highly regarded by customers enjoy positive brand equity; those that disappoint to the point of people avoiding them altogeher, have negative brand equity.

Brands can be evaluated as company assets from many angles:

Brand as a financial asset: if people shopped solely on price, there would be no need for branding; the product with the lowest price would always win.

In reality, all of us are often paying a premium for a particular brand, because of the tangible and intangible benefits we associate with that particular brand. The price premium a brand commands translates into incremental revenue for the business; brand equity is directly proportional with the revenue it generates.

A brand’s assessed value could greatly exceed the physical assets (buildings, inventory, infrastructure, logistics) of a business.  Let’s look at top five most valuable brands in 2018, published by Forbes:

  1. Apple ($170 B)
  2. Google ($102 B)
  3. Microsoft ($87 B)
  4. Facebook ($73.5 B)
  5. Coca-Cola ($56.4 B)

Looking at the list above it’s hard to believe how much equity these brands have managed to accumulate, given that two of them are less than 20 years old.

Brand as a conditional asset: it has been said that behind every successful man is a great woman. Similarly, behind every successful brand is a great product (or service). Branding is not possible without the support of a product or service.

Unfortunately, many great products never become brands.

Investing in product development, but failing to build a brand around it leads to two alternatives: others will build their brand around your product (you essentially being a product supplier), or your product will be eventually copied and launched at a lower price.

A good product is the foundation of positive brand equity; never forget to turn your product into a brand.

Brand as an influencer: we like to believe that our purchases are based on rational decisions; however, neuroscience, psychology and consumer behaviour research has shown that humans are not as rational as we think.

Our behaviours are strongly influenced by brand messages, the tone of those messages, and the interactions of those around us with the same brands. Brands have the power to influence us.

Let’s look again at the number one brand in the list above, Apple. Although the company’s products are sold at a price premium, Apple enjoys one of the most loyal consumer base. The brand has managed to influence its audience through product design, advertising, PR, and other intangibles people associate with it.

Building Brand Equity: The Journey

About 10 years ago, I was involved in launching a new brand, in a mature, highly competitive category. I still remember the presentation made to the management team, specifically their lack of reaction as I was going through the brand name suggestions.

Envisioning a brand behind a new name isn’t easy. My colleagues didn’t know how to react; the name was new, pretty generic, and unlike anything they were familiar with within the category. My strategy involved putting the name in the context, and illustrating how this new brand will be part of people’s life.

A brand’s power of influence is directly related to its assets. These assets include:

Brand awareness-the level of familiarity consumers have with your brand goes a long way to building brand equity. Brand awareness can be of two types: unaided and aided. Unaided brand awareness, that occurs when a consumer names your brand in a specific category without being offered any clues, is more valuable in building brand equity than aided brand awareness. A high level of unaided brand awareness means the brand is top-of-mind in its category.

Brand values and personality-our relationships with brands mirror the ones we have with people. We have brands we love, brands we hate, and brands that don’t mean anything to us. We have brands that express who we are, brands we avoid at all costs, and brands we deal with because we have to.

Brand personality and values are tricky to communicate and consistently deliver on. Building positive brand equity requires constant brand evaluation and reinvention; many established brands go through identity crises and have a hard time keeping their values relevant to the constantly changing audience.

Brand preference-the ultimate sign of brand strength. Brands that are preferred by consumers even if they have to pay a price premium or go through great lengths to acquire it enjoy positive brand equity.

Brand preference translates into customer loyalty, a sign the brand has moved from being known and considered to actually influencing consumer behaviour. Let’s think for a moment of some brands that enjoy strong consumer preference: Apple, Nike, Harley-Davidson, Ferrari. These brands transcend their respective product categories and have become status symbols, and a reflection of our aspirations and how we want to be perceived by our peers.

Measuring Brand Equity

Brand equity can be measured from at least two angles, namely the consumer and brand owner perspective.

The indicators that determine brand strength from the consumer perspective include the levels of brand awareness and preference, customer satisfaction, loyalty rate, brand associations, and emotional connections consumers have with the brand.

From a brand owner perspective, the most accurate assessment of brand strength is reflected in the price a potential buyer is willing to pay to acquire it. Other analytical indicators that are a reflection of brand strength include brand’s ability to generate profits, the price premium the brand is able to command versus the closest competitors, its market share, growth rate and growth potential.

Protecting Brand Equity

Building positive brand equity is only half the battle; protecting it is proving very challenging, even for established brands. The Volkswagen diesel scandal, United Airlines incident, and various harassment accusations that lead to the creation of the #MeToo movement are concrete proofs that the line that separates positive from negative brand equity is very volatile.

On the product front, competitive advantages are short lived. Successful products have to fight less expensive alternatives in a matter of months; sustained the product advantage requires constant innovation, which is time consuming and expensive. To tackle this challenge, brands have to move quickly from functional differentiation to owning space in consumer’s heart.

Which leads to the second challenge, protecting the brand message.

We live in a highly transparent society, where every move, action and behaviour by both people and brands is quickly scrutinised and labelled. Brand messaging is mostly controlled by its community, with the brand manager acting mostly as a moderator, and initiator of new conversations.

Companies must do a great job at controlling the things they can: offering a great product, providing excellent support, building an inspiring brand story and be honest and transparent with their customers, and most importantly adapting to change. The rest should follow into place.

Photo credit: Kim Unertl on Flickr

Pricing Strategies: Is Competing on (Low) Price A Sustainable Strategy?

Low-Price-Strategy-Costco

The following statement is part of “Pricing Strategies 1 on 1”: positioning your brand as the lowest priced competitor is a risky strategy. And in most cases it is, at least in theory.

The economic reality is different. With little to no meaningful differentiation between products,  operating on skinny margins is a common strategy. The low price pressure is experienced by everyone in the supply chain: manufacturers, distributors, agents, and service providers.

The “Extreme” Consumer

As a society, we’ve come to expect excellent products at rock-bottom prices, and flawless customer service. Consumers have become polarised in their spending habits: the same person can spend a lot of money on things and experiences that convey a certain status, and close to nothing on other life necessities that are not as “flashy”.

There are many reasons behind this trend:

-the job market is more precarious than ever, especially for millennials. Full time jobs that pay well, are relatively stable and offer good benefits that have been enjoyed by the baby boomers are quickly disappearing. The new jobs are often short term, part-time, and offer hardly any perks, hence the need to spend wisely.

-the gap between the rich and the poor is widening globally. More people live frugally, either by choice or necessity.

-millennials are less obsessed with owning “things” put more value on “experiences” . “Owning” has been replaced with “sharing”.

-the same person can illustrate the spending extremes, indulging in luxury purchases that convey a particular status, while rationalising drastically in non-essential categories.

The “Stuck In the Middle” Danger

The above trends illustrate a new reality brands have to face in search for identity: the mid-market segment is slowly disappearing. Being “stuck in the middle” is a serious threat for many brands.

Nowhere is this trend more noticeable than in retail. In North America, 2017 has been a brutal year for retail. Many well-established brands, that have been a staple for many generations, have either filed from bankruptcy or announced massive store closings: Sears, Toys ‘R’ Us,  Gymboree, Payless ShoeSource, RadioShack, just to name a few.

As players is the medium price point are struggling to find their value proposition, brands at the 2 extremes are prospering.

Given this reality, brands will have to make a choice to move either up or down, and re-invent themselves. Many will find it easier to move down, as turning a generic brand into a luxury one is an almost impossible task.

Is the Low-Price Strategy Viable?

As we’ve seen above many brands are forced to consider becoming a low-priced competitors, which begs the question: can you make the low-price strategy work?

The short answer is yes, if executed properly. Many businesses claim to offer “best-value” to their customers, but for most the promise is just a meaningless slogan.

When it comes to executing the “best value for money” strategy to almost to perfection, I can’t think of a better example than American retail giant Costco.

For those of you not familiar with the brand, Costco is the second largest retailer in the world after Walmart, and  the largest retailer in the world in certain categories such as wine, organic beef and rotisserie chicken.

While most  retailers struggle to attract customers via expensive marketing campaigns promoting aggressive price cuts, Costco customers have to pay an upfront annual fee for the privilege of shopping there.

Enjoying a yearly membership renewal rate around 90%, Costco plans to open another 28 locations in 2018. Costco has also built a reputation of looking after their employees, who enjoy good benefits and work conditions.

How does Costco manage to prosper, at a skinny margin (said to be between 8%-10%) in an environment where most competitors are forced to close stores or file for bankruptcy? A closer look at its business model will give us the answer.  Here is how Costco does it:

Narrow product assortment- traditional business wisdom dictates that the more products in the assortment, the higher the sales. Line extensions are the preferred growth strategy, to the point where consumers are overwhelmed by the number of choices in every category.

Costco assortment consists of 1 or 2 choices in each category, which translate into high inventory turnover, low acquisition costs, and maximised store space. Costco shoppers deal with less uncertainty as to what product to buy, the limited options forcing them to make a decision.

Smart packaging: every product manager knows that packaging costs can really add up. For some brands packaging is part of their DNA (Apple for example). For Costco, packaging has a strictly functional value. As a result most products are backed bulk, directly on pallets, with no fancy signage. In its quest for cost efficiencies, the retailer pays attention to the smallest detail, such as how the shape of the packaging influences the number of products that can be stored on a pallet.

Excellent buyers-Given the narrow product selection, Costco buyers are tasked with the major responsibility of selecting the 1 or 2 items that will make it to the store shelves. They have the understanding of the market, product knowledge, negotiating skills, and decision-making capabilities to always deliver on the brand promise: the best value for money. Costco’s success is due in part to its buyers being the best in the business.

Minimal (but great) service: A low price always comes with trade-offs, and Costco is no different. The retailer does not offer many of the services offered by traditional retail (in exchange for a between price), while over-delivering on the essential ones.

Costco does not employ sales clerks, merchandisers or store designers. Costco stores are basically giant warehouses. However, Costco is famous for its excellent service: best exchange/return policy of any retailer (including membership refund in case you are not satisfied), no risk purchases, cashback rewards, speed of service and the overall customer service.

High quality products (including a reputable private label). We often associate low price with low-quality products. This is not the case at Costco, which has built a reputation for high quality products. The retailer assortment consists of brands consumers are familiar with, eliminating the need for expensive advertising and educating the consumer. The retailer also managed to build and one of the most trusted private label brands in retail, Kirkland, which generates a quarter of its total sales.

In a nutshell, Costco turned the traditional retail model on its head, by doing the exact opposite: narrowing the assortment, rationalising packaging, investing in employees, eliminating non-essential expenses, and offering high-quality products.

Your brand might have to adopt the same bold strategy in order to succeed. That being said, simply copying the strategy above will not be enough, as many brands have already discovered. What sets the winners apart is the discipline and consistency in execution.

Photo Credit: Mike Mozart on Flickr

Indian Luxury Education: An Eye Opener

This is a guest post by Love Ranga, Chief Strategy Officer and Author, The Ghost of Luxury

September 2008

“So, what do you know about Luxury Retail?” asked the interviewer.
“Sir, in Luxury Retail we sell expensive products,” replied the candidate.
“And?” the interviewer persisted.
“Here the customer is the ‘rich’ king,” the candidate answered with a big smile.
The interviewer laughed and continued,” Can you name a few luxury brands?”
“Sure, sir. Versaake, Louiss Vuittan, Zeghna-”
“Interesting way of putting them across. How are the three different from each other?” the interviewer scratched his head.
“They are all the same. They sell high quality luxury fashion,” pat came the reply.

The Background

Such was the status of ‘so called’ potential work force when India had just opened up to structured luxury retail. To meet the high standards, the brands in the business of conspicuousness had no alternative but to poach manpower from hospitality and aviation industry.

Gradually, as has been the case elsewhere, was felt the need of absolute professionals with deeper understanding of luxury brand management. Hospitality professionals no doubt displayed sophistication, but lay flat in application of luxury strategy. For apparent reasons, most of them were restricted to front-end, selling goods at the boutique.

Indians who travelled to European institutes, specifically to become skilled at the art of luxury, gained immense favour back then in India. Seeing the gap, institutes like IIM and SDA Bocconi introduced specialised short-term executive courses in India.

It was not until 2014, the country could see its first full time post-graduate course. Pearl Academy runs a postgraduate and even an undergraduate program in luxury management.

Today, the competition grows immense with new names like Fad Academy, Instituto Marangoni, SP Jain, MBA ESG and more finding their feet in Indian Luxury Education segment.

Content Management

Courtesy legendary maharajas who revelled in brands like Rolls Royce, Chaumet, Jaeger-leCoultre, Boucheron, Vacheron Constantin, India has since long been acquainted to luxury consumption.

However, there never existed any firm connection with the contemporary concept of luxury, something Europe is famously known to practice. As a result, the first courses struggled with content generation and management.

The state of affairs in fact, has not improved much. Indian academicians approach the subject of luxury, taking cues from generic business management, marketing and retailing. The Indian Luxury professionals, on the other hand, for obvious reasons fall short on academic rigour required to deliver such niche courses.

A more serious issue is the lack of content. Either the faculty could not comprehend the available textbooks on luxury, or they could not build upon them to accommodate long-term courses. Most did not aim to do research to create relevant content of their own.

The students pursuing these courses, quite often complain of redundancy and generalisation, widely triggered by basic brand study and rigidity of teaching modality.

The Foreign Association

It was unambiguous from early stages that any luxury course in India would need a foreign association. How else can Indian students witness the true luxury destinations like Paris, Milan and Switzerland?

Every such course therefore, is either validated or run in collaboration with a foreign counterpart. This, understandably, leads to division in revenue and equity between the two institutes.

In this regard, Roberto Riccio, CEO of Instituto Marangoni has been smart enough to open a new campus in Mumbai. If it offers a full time course on luxury in future, its students will get to remain with the same school throughout their modules in India and Europe.

The other schools must learn if they have to remain competitive. Of course, their Mumbai campus is not only about Luxury courses.

A foreign tie-up also addresses the crunch of meaningful and exciting content. The experience imparted by the foreign counterpart, paired with cultural excitement becomes so overwhelming that students find the inputs of Indian institute vague and insignificant upon comparison.

The Treatment

For a moment imagine a luxury product, in concern of which its creator focused only on positioning it at a high price, but did not pay attention to detailing and artisanship. Most luxury courses in India are the result of similar ideology.

Needless to mention, they are more expensive than regular design and management programs. If not for the heavy revenue they bring in, the basic expectation of quality inputs deserves attention of the same strength.

To achieve success in terms of numbers and content quality, the treatment of luxury courses must change. Right from marketing collaterals, to counselling sessions, from assessment strategy to grooming sense of faculties, pretty much everything should undergo an overhaul to meet the standards of luxury.

Teaching Talent

The ideal faculty is the one in possession of both luxury trade experience and academic understanding.

We have briefly touched upon how the two cadres of academicians and Indian professionals fail to provide real value to luxury courses. The solution lies in hiring either, and further training them to inculcate the other missing half. Training the teachers therefore is of utmost significance.

This also means that one kind of training plan cannot suit everyone. It must be individually tailored, depending upon the kind of experience one has gathered in past.

Another, crucial aspect here is knowledge sharing between entire course team. The business of Luxury relies on strict strategic coherence. Hermès is probably the example of highest order.

The students need to learn the art of creation and maintenance of coherence before they head out in the industry. A faculty cannot preach it, without first infusing coherence within the course. The entire team must come together to align individual course deliverables towards a specific end.

A course on luxury must exhibit a character of its own, for it is in no way less than a luxury product. This goes beyond the traditional approach of Constructive Alignment.

Teaching Methodology

‘Value for money’ is an ideology deeply rooted in the Indian culture. No matter how rich, one will not buy a luxury automobile without bothering about the mileage, something that technically becomes illogical at that end of the spectrum globally.

It is not very different with Indian students when they indulge in the expensive service of luxury education. They expect wow factors in return, in addition to decent internship and placement at the end.

Which is why, one teaching medium fails to command attention. PowerPoint presentations cannot do the trick every time. Teaching modality, assessment tool, teaching strategy, all must change regularly to maintain interest.

The Showmanship

The term ‘faculty’ may have been used in this article until now for ease of understanding, otherwise faculties must assume the standard and mentality of a ‘trainer’ while dealing with Indian Luxury Education aspirants.

Showmanship, is what is the need of the hour, something mostly, the trainers are identified with. A surprising action, a shocking revelation, an unusual teaching style, a bit of entertainment is the right way of delivering such expensive courses.

The modern concept of luxury may belong to Europe, but it is only a matter time when Indian clientele and brands decipher the absolute codes of luxury. Many global luxury brands are already here, and more are eyeing entry in this market of burgeoning high net worth individuals.

The demand for learned professionals is surely going to rise in the coming years. The Indian Luxury Education segment is not even a decade old, the misses and hits are part of the learning. What matters, is the evolution. Is it not evolving at a healthy pace?

Love Ranga is a luxury business leader, educator and an avid learner. He is the originator of ‘Brand Extremity’, hailed as the most aggressive tool ever devised to facilitate indefinite coherence and extreme differentiation for luxury brands. His most recent book, ‘The Ghost of Luxury’ is widely acclaimed as an exceptional content on strategic luxury brand management.

Post his experience with brands like Versace, Corneliani and John Smedley in India, in the capacity of Chief Strategy Officer; he strategized India’s first short-term Executive Luxury Brand Management course in association with SDA Bocconi, Milan. Later, he joined a Laureate Network Institute to lead India’s first full-time programs on Management of Luxury, validated by Italian design institute, Domus Academy.

Backed by a decade of intense experience, he consults for various luxury brands and luxury education institutes across the globe. Often invited as speaker and trainer, he is described as the facilitator of innovation and creativity.

How to Use Amazon to Build Your Brand

how to build your brand on Amazon

It is a reality acknowledged by more and more marketers: a brand can no longer rely on intermediaries such as distributors, sales agents and independent retailers to convey its messages to the target audience.

A strong brand communicates directly with its end users. Their feedback is invaluable to brand owners in answering questions such as the ones below:

Does my product address the needs it’s designed to?

Why are people buying my product?

Is my product easy to use?

Are there any product defects that deter people from buying it?

What is the optimal price for my product?

Is my company able to provide a shopping experience that matches customers’ expectations?

The longer the distribution chain, the more difficult it is to find answers to these questions, meaning delays making adjustments and stay competitive.

Selling direct shortens the process and allows you to get feedback faster, but you still need to have a large enough customer base to obtain any meaningful results.

Amazon as Brand Building Platform

A strategy I personally employ and recommend to new and established brands is to use Amazon as a distribution channel.

I am not suggesting Amazon is a good fit for any business. If your product is too bulky, heavy, complicated to use, or requires installation by a third party, the online channel is probably not your best option.

Selling on Amazon is important simply because of its dominant retail presence, particularly in the United States. Consider these facts:

  • Amazon has become the go to platform for product searches, surpassing the traditional search platforms such as Google or Bing.
  • Amazon accounts for more than half of all online sales in the USA.
  • As of September 2017 close to 90 million US shoppers are Amazon Prime subscribers, spending on average $1300 USD per year.
  • Many top product search results on Google belong to Amazon product listings.
  • Amazon advertising platform delivers much better ROI than those of traditional players such as Google, Bing and Facebook.

Google Versus Amazon

Just like Google, Amazon acts as a huge search engine platform people use to research and shop for products. However, there is an important distinction between the two players when it comes to online shopping.

While Google is primarily a research and discovery platform, Amazon users are primarily shoppers who have an active need they need to fulfil.

Amazon provides these shoppers with all the tools they need to make the purchase: instant checkout without the need to visit another website, Amazon Prime benefits, product comparisons, customer reviews; all backed by Amazon’s reputation as the largest ecommerce retailer (unlike Google, perceived as a search engine).

Amazon provides brands with a huge benefit: millions of shoppers who are actively looking to buy.

For this reason, many “young” brands have used exclusively Amazon as a launch platform.

5 Reasons to Build Your Brand On Amazon

Here are some of the benefits of using Amazon to build your brand:

Building brand exposure-given the massive Amazon traffic, both new and established brands have the opportunity to gain brand exposure.

For new brands that are unknown to shoppers and struggle with initial exposure and building credibility, Amazon offers few advertising tools that are very effective in building awareness and initial sales. Even low to moderate advertising budgets can generates hundreds of sales monthly.

Once your brand is starting to sell, it will rank higher in organic searches, which leads to additional exposure and sales.

Finding optimal price for your product-one of the biggest challenges brand owners have is pricing their products for maximum profits.

In a traditional distribution model price elasticity is slow to test and measure. Intermediaries and retailers will fight against any price change, and ask for grace periods ranging from a few months to years, depending on the agreement.

The only “agreement” you need to reference when selling on Amazon is your break-even point. Amazon shoppers are used to price fluctuations, so the negative impact will be non-existent. Moreover, price adjustments can are implemented in as little as 15 minutes.

Keeping the break-even point in mind, sellers can adjust prices up and down, and watch the impact on sales. With proper tracking, brand owners will identify the optimal price that allows the best ratio of product sales to profits.

Getting honest product feedback-one of the main benefits of selling on Amazon is the honest customer feedback you will receive.

Amazon provides brands with real-life feedback; while survey sites can offer you the audience to test some of your concepts, the level of involvement is different. Survey audiences receive your product complementary, so the chances of biased feedback are high.

Amazon customers are actually paying for your product; as a result the feedback you get from them is as genuine as you can possible get. You might agree or disagree with it, but these are your brand’s perceptions in the marketplace.

This information is invaluable to brand owners, as it allows them to identify key competitive advantages, uncover new uses for their product, learn about real life experiences and applications for their products, and correct potential defects that turn customers away for purchasing it.

Another useful strategy is to monitor the feedback on competitive products, especially the negative feedback. This will prevent you from launching products with the same flaws as your competitors, which can turn into a big competitive advantage.

Growing sales (or getting initial sales)-using Amazon as a distribution channel can significantly contribute to your brand’s bottom line. There are thousands of brands that sell in the millions of dollars on Amazon, and solo entrepreneurs who make a living exclusively from sourcing and selling on the platform.

New brands cat get those much needed initial sales and revenue from Amazon, which will allow them to expand and grow.

Getting your product distributed via traditional retailers is usually very difficult for an unknown brand, with limited resources. In contrast, accessing millions of shoppers on the on the amazon platform can be done in a matter of weeks.

Improving operational performance-Amazon has built its impressive reputation on the high standards the company maintains with the employees and suppliers. As an Amazon seller you will be held accountable on a number of performance indicators, ranging from responding to customer messages within 24 hours, maintaining proper stock, shipping products within the designated time window, proper packaging and of course, compliance with the law.

While very demanding at first glance, this high level of accountability is a great chance to improve your company’s overall operational performance, which will benefit all your customers, regardless of the distribution channel.

I can argue that of all the steps needed to sell on Amazon, making sure your operational performance matches Amazon standards has to be address first.

Not All Amazon Platforms Are Created Equal

As an Amazon seller you have access to two main platforms: Amazon North America (USA, Canada, Mexico) and Amazon Europe (UK, France, Germany, Italy and Spain). All other Amazon platforms such as Amazon Japan and India are much more difficult to access as an international seller, while Amazon Australia is still in its incipience, but big plans lay ahead.

As an active seller on Amazon North America and Europe I encourage you to sell your products on as many Amazon platforms as you possibly can.

Although in terms of sales volume Amazon USA is the clear winner, selling in multiple markets will allow you to understand the various nuances of exposing your product to a local audience.

Amazon: Just One Piece of Overall Distribution Strategy

Even if your primary distribution strategy is not online, you should still consider listing your products on Amazon for the many reasons described above. That being said, do not rely exclusively on Amazon to sell your products.

In the end, Amazon is an independent distributor you have very little control of. Any change Amazon decides to implement can, at any point in time, affect your ability to sell on the platform. If Amazon is your only channel, you business will be at risk.

Moreover, as an Amazon seller, you have little to know information about who is actually buying your products. Amazon completely forbids any communication with their customers, other than related to a specific order .

As a result, your strategic goal should be to diversify your distribution channels, and invest in building a direct relationship with your customers.

Starting Your Own Business? Read This Branding Reality Check First

You feel stuck in a boring 9 to 5 job.

You know you can do more with your life.

You have the determination to build your own brand(s).

You want to leave a good legacy for your children.

All of the above are good reasons for starting your own business.

You’ve probably come across hundreds of articles that tell you how easy it is to start your business, get leads and make money, all in a short period of time. And yet 25% of new businesses fail in the first year, and 90% close within 10.

Often times, new entrepreneurs discover the harsh realities of starting a business after they’ve already invested important financial and human resources into bringing their idea to market.

For those of you planning to start on your own, here are some things you should be aware of before launching your new brand.

Every successful brand is backed by a good product. A good product does not automatically translate into a successful brand, but a bad one is a guarantee for failure.

I always stress the importance of offering a good product to the success of a new business during my discussions with new entrepreneurs.

The product is one of the tangible elements your clients come in contact with, touch, feel and use to satisfy their needs. It is the first investment people make in your new brand.

Established brands can survive occasional product failures, due to the amount of consumer trust they enjoy. Young brands don’t have this luxury. Products can build or ruin a new brand reputation, hence the need to get it right the first time.

Don’t think only of physical products, but your services as well. Word spreads quickly, and once negative perceptions start to spread it’s very hard to recover.

Do not launch a product that is not 100% ready to hit the market. In their quest for initial feedback and sales, many entrepreneurs decide to rush a product to market and tweak it as they go along.

Going back to the previous point, an “almost-ready” product might not ever get a chance to be finalised. If the initial version is negatively received, it’s almost impossible to reverse the trend.

What is a “market-ready” product, you might ask? Here are a few contributing factors.

The”market-ready” product performs as expected, with little to no failure rate and satisfies the need it’s suppose to. It does not rely on a technology or complementary product that will soon become obsolete. Finally, the product is offered at a price consumers are willing to pay and is easily available for purchase.

Building brand credibility is a slow and costly process. Creating the basic brand infrastructure (brand identity, communication materials, advertising) used to be prohibitive for new entrepreneurs on tight budgets, but not anymore. From fancy full service agency to websites such as fiverr and UpWork , it is relatively easy to find help for every budget.

Then the hard part begins.

Most of your marketing budget will be spent getting into people’s mind, letting them know your brand exists, and being on their radar when they decide to spend money. This is a slow and costly process for a few reasons:

The choice is abundant, almost intimidating, in almost every category.

Humans are reluctant to new and tend to resist change.

People are busy and always in a hurry (especially in America).

The average attention span is 8 seconds (down from 12 seconds in 2000).

Consumers tend to gravitate towards brand they are already familiar with, even after the occasional disappointment.

More and more consumers use tools to block brand advertising and unwanted email.

As you can see everything seems to work against new brands, so your patience and budget will be stretched to the maximum.

Strategies that involve tangible interactions are most effective in building brand trust and making sales. Regardless of what digital marketing experts tell you, consumers that can touch, feel and try your product have more chances of converting.

In his book “The Revenge of Analog: Real Things and Why They Matter”, author David Sax makes the case, supported by well-documented examples, that people are returning to things and habits digital experts announced obsolete: listening to vinyl, writing on paper notebooks and sticky notes and reading physical books.

In retail, brands that started out selling their products exclusively online have started to open brick and mortar stores for a more palpable, real experience.

According to Neil Blumenthal, founder of New York City eyeglasses company Warby Parker, “People were telling us ‘I want to touch and feel the glasses before buying them.”

I often get asked by people who sell services, such as real estate agents and mortgage brokers for strategies to market their business and get more customers. My advice is always the same: networking and referrals are the most powerful conversion tools; digital advertising doesn’t even come close to providing the same results.

In conclusion, your marketing plan for the new brand should include strategies that involves physically putting your products, and yourself, in front of the consumers as often as possible.

Repeat business is the fundamental sign of success. Generally speaking there are many strategies you can use to make the initial sale.

But if you want to know if your new business is succeeding, look at the number of repeat customers. Those customers have enough trust in brand to ensure its long term success.There are a number of reasons repeat customers are good for any business.

In case of a startup repeat customers mean more than lower cost of acquisition and positive word of mouth; they represent a sign that your strategy is working, and your product, service and messaging resonate with your audience.

Never rely exclusively on a distribution channel you can’t control to build your brand. There is a proliferation of third party retailers, particularly online, that will give you access to their platform to sell your brand, for a fee. You might be tempted to dedicate all your resources to servicing those channels, especially if you see positive results fast.

Starting from scratch and building traffic to your own website is a slow and costly process. Despite all your efforts, you will never come even close to matching the traffic amazon can generate for your product.

You can start selling your brand on Amazon, and benefit from all the instant traffic and demand, in a matter of weeks.

That being said, relying on Amazon to build your business is a mistake, for (at least) three reasons.

First, you don’t own the customer, Amazon does.

Moreover, Amazon may decide one day to ban your product (it happened to me) or to close your account for various reasons, in which case your entire business will simply collapse. Finally, on Amazon you are making a sale, but don’t build a brand.

This is not to say you should not sell your product through third party retailers. However this should be part of an omni-channel distribution strategy, focusing on building a distribution channel you can control 100%.

Always be aware of your financial situation. Although I don’t have any concrete evidence, I am pretty confident the lack of financial knowledge is among the top reasons new brands fail.

Most entrepreneurs don’t have a background in finance. Some of them even hate numbers. They have a great idea, and are determined to succeed bringing that idea to life, regardless of costs.

Unfortunately passion and determination are some of the ingredients needed to succeed.

The foundation of any successful business is its ability to generate profit. That’s not to say new businesses are, or should be profitable instantly. Building a new brand requires investments that will not be matched by revenue, for a period of time. That’s ok, as long as it’s planned for.

Running a business and having no idea of your expenses, revenue, break even point, taxes and other financial obligations, is like shooting in the dark. Regardless of how great and unique the idea, it will end up in failure.

If you are not confident in your financial skills get professional help. It’s the best investment in your new brand you can ever make.

The above is not meant to deter you from starting your business. Au contraire, I am a strong believer that entrepreneurship is the only way to go moving forward. I just want to infuse a dose of reality into your dreams, and prepare you for the long and sometimes challenging road ahead.

Photo credit: Alexandra Galvis on Flickr

Premium Branding: 3 Tips to Market Your Business to High-End Consumers

Millennials have been the marketing industry’s latest target as they constitute a huge consumer group with high purchasing power. In fact, according to a report by Pew Research Centre, ‘Millennials have surpassed Baby Boomers as the nation’s largest living generation.’

About 75.4 million millennials (those between ages 18 and 34 years) and 74.9 million baby boomers (aged 51 to 69 years) exist in the United States.

Moreover, according to the 2017 Affluent Perspective Global Study by YouGov, ‘Affluent U.S. households will spend 1 percent more this year (in 2017) than last, for a total of $335 billion.’

Marketers, therefore, have all the reasons to focus on understanding and securing the millennial market.

The question, therefore, is: How! How marketers and brands can win over this affluent group of people?

In this post, we discuss three tips that will help you market your business to high-end customers, these affluent millennials.

Tips to Market Your Brand to Affluent Customers

As an increasing number of mainstream brands make their way into the premium category, it has become even more challenging for premium brands to distinguish themselves and retain their cachet and mystique.

The following tips can help premium brands reach customers and keep up with their business goals:

1. Embrace Uniqueness

What sets premium items apart from other mainstream items? It is their uniqueness and one-of-a-kind nature. Premium items were once made to the customer’s specification to ensure complete satisfaction and make sure the owner could take pride in owning the unique item – thus the high price!

Modern premium brands can also cash in on this trend and appeal to their specific client base. Take for example the case of Surmesur, the Canadian online retailer that offers precisely tailored clothing to their customers. The brand has gone a step ahead to attract the digital generation.

Surmesur uses proprietary software to create customised shirts and then allows customers to view the style on a mobile device (with the garment shown in 3D representing a customer). Customers are allowed to choose from a range of 8,000 fabrics and create a style that is unique to them.

2. Create Appealing Mobile Apps

A January 2017 survey by Ipsos (involving 850 US adult internet users with household incomes of $100,000 or higher) found that the percentage of people who have a mobile wallet app installed on their mobile devices has increased since 2013.

Of course, not everyone who has a mobile wallet installed uses it. But 86 percent of the respondents accepted using their mobile wallets. PayPal and Apple Pay are among the most popular wallets being used by consumers.

It is wise to target the audience through devices that they use the most.

The above statistics indicate that mobile commerce has become more popular among the affluent class.

By building a high-quality mobile app that showcases your products and allows customers to purchase products directly, you can offer a great user experience to your target audience.

Custom mobile apps make customers feel more connected to a brand. However, there is an abundance of mobile apps, so you need to do something different to make your brand stand out.

For example, the L’Oreal mobile app allows its customers to shop by scanning products directly from the magazine ads. Other premium brands such as Net-a-Porter and Victoria’s Secret have also leveraged the scan-to-shop technology.

Premium brand Michael Kors has also found a way to entice their elite clientele through their mobile app.

To help customers buy easily from Instagram, the brand encourages them to double-click on the images tagged with ‘#InstaKors.’ An email with a direct link to the product featured in the ads or posts is then sent to the customer’s inbox.

3. Don’t Make Products Too Accessible

Products that are easily available to the masses lose their charm rather quickly, while those in limited supply are perceived as highly appealing.

This is because the fear of missing out on having a specific product leads to impulsive buying. According to a survey conducted by WhichTestWon, the sale of products with a countdown timer placed on their pages is nine percent higher compared to those without a countdown timer.

This is especially true for customers in the premium market. For instance, Prodiguer, a premium vodka brand often launches its products in limited editions. The company launched its Juliet Immaculate Vodka with the Sue Tsai edition bottles.

Such initiatives help the brand to maintain the exclusivity of its products and keep the urge for obtaining their products high among the target audience.

Similarly, Hermès, French high-fashion premium goods manufacturer created hype for the Hermès Birkin bag and the result was a customer waiting list of six years.

Brands that are looking to improve their brand awareness and sales can leverage this technique.

Conclusion

The best thing about premium brands is that they are already recognised by most people, but attracting new customers and persuading them to invest in their expensive products can be a difficult endeavour.

The above tips can help you attract the attention of the affluent millennials and persuade them to become loyal customers.

Author Bio

Pratik Dholakiya is the Co-Founder of E2M, a full service digital marketing agency and PRmention, a digital PR agency.

He regularly speaks at various conferences about SEO, Content Marketing, Growth Hacking, Entrepreneurship and Digital PR. Pratik has spoken at NextBigWhat’s UnPluggd, IIT-Bombay, SMX Israel, and other major events across Asia.

As a passionate marketer, he shares his thoughts and knowledge on publications like Search Engine Land, Entrepreneur Magazine, Fast Company, The Next Web and the Huffington Post to name a few. He has been named one of the top content marketing influencers by Onalytica three years in a row.

How to Build a Premium Brand

premium brand

Not all consumers are price sensitive.

As disposable income increases, people are willing to pay more for a quality product that will save them money in the long run. Increasingly people value quality over quantity, free time, craftsmanship, social responsibility, and local sustainability.

Premium brands are highly valuable assets for a few reasons.

The premium price usually translates into higher profit margins, as additional costs for product enhancements are more than covered by the price premium.

Premium brands are also often viewed as status symbols. Consumers take pride in owning premium brands and showing them to their friends, which in turn increases brand exposure and sales.

Finally, many premium brands appeal to people at an emotional level, offering consumers a sense of belonging to a certain social group, thus leading to increased brand loyalty.

Premium Versus Luxury: An Important Distinction

The process of building a premium brand starts with an important distinction between premium and luxury branding. Consumers use these attributes interchangeable when labelling a brand, depending on their social status and geographical boundaries.

Is BMW a premium or a luxury brand? What about Coach? The answer depends on who you ask.

However, understanding the difference between a premium and a luxury brand is important for the brand owner.

A premium brand demands a premium price because of superior attributes (design, functionality, service) that one can justify rationally. Premium brands reach the status symbol level after years of delivering on its premium promise.

In order to be profitable, premium brands, just like ordinary brands, are built on the principles of mass production, broad distribution, and immediate delivery.

A luxury brand’s high price cannot be justified rationally. While the foundation of a luxury brand is a quality product, the price tag greatly exceeds its functional value.

Luxury shoppers seek a sense of belonging to a certain social class, or very selective group of individuals.

Luxury brands are built on principles that are diametrically opposed to premium branding: limited production, selective availability, and  non-urgent delivery.

How to Build a Premium Brand

Although price is usually the first indicator of a superior product, charging a higher price than competitors does not automatically make a brand premium.

We’ve seen that investing in a premium brands is (in most cases) a rational decision. The purchase is based on a lot of research and competitive comparisons that bring justification to the price premium.

The starting point in building a premium brand is a realistic segmentation of the category you wish to compete in. The goal is uncover potential benefits consumers are willing to pay a premium for.

These benefits include:

  • lower cost of ownership
  • the easy of use
  • superior materials and ingredients
  • unique, distinctive, attractive, functional design
  • better performance
  • time savings
  • more “must-have” features
  • sustainable, ethically sourced products
  • local businesses and locally sourced products

We tend to think that premium brands exists only in “glamorous” categories such as fashion and apparel, automotive, and travel. While these categories get a lot of exposure and coverage, premium brands can be introduced in almost any category that presents such an opportunity.

AquaVial is a premium product in the rapid water testing category.

Many products in the category deliver on the basic consumer need to identify potential issues with their water supply before they become a serious risk: an easy-to-understand testing procedure, the ability to deliver results in 48 hours (versus up to 2 weeks in the case of laboratory testing), and a low cost per test.

AquaVial is based on an innovative technology that delivers at least two superior benefits: results are delivered is as little as 15 minutes (versus 2 days), and the ability to detect a wider range of harmful bacteria.

These are important benefits consumers value and are willing to pay a premium for.

Is Premium Branding Possible In Case of Commodities?

The short answer is yes; even tap water can become a status symbol.

Products that are very difficult to differentiate functionally can be bundled into a superior “overall package” and positioned as a premium offering.

The components of an overall package can vary from quantifiable benefits such as company responsiveness, better product delivery, superior warranty, and post sales service, to intangibles such as company’s “social” reputation.

All these benefits and the premium associated with each, are only relevant within the context of each category, by reference to the lower-cost brands.

The superior overall brand experience has become an even more achievable strategy in the age of product reviews, instant communication and feedback, and social media.

Price elasticity is very important when it comes to premium branding. Since premium brands are mass produced, the brand appeal has to be broad.

The premium price has to be within the reach of most people in your target audience, even if it requires small sacrifices.

If the additional features demand a price tag that is simply unaffordable, the product will not be able to be profitably mass produced and commercialised. Remember, you are building a premium, not a luxury brand.

Premium Branding: Communication Strategy

The goal of the communications strategy is to highlight the differences that justify the price premium. Some differences (such as superior design) are obvious and require little explanation. Others, especially the intangibles, require more work.

Higher price tags come with higher consumer expectations. Adequate training of staff that deals directly with consumers is a must.

The training should go beyond highlighting the superior technical features of the product, and include a “social” component. Employees’ social skills and knowledge can make the difference between a sale and a lost client.

Endorsements tend to work well for premium brands, especially for reaching the status symbol level. Influencers are typically attracted by the opportunity to associate with a premium brand, which in turn will elevate their image in the eyes of their audience.

(Premium) Branding is a Marathon, Not a Sprint

Premium brands have to be built on a sustainable competitive advantage.

An innovative new product that deliver superior benefits versus the existing alternatives should definitely be marketed at a premium price.

However, the market and consumer expectations eventually catch up. What has been perceived as innovative becomes expected.

In order to maintain the premium status a brands has to continually innovate or lower the price and join the pack of “me too” brands.

3 Branding Strategies That Will Add Value to Your Business

Branding Strategies

What do you understand by a ‘brand’? People often use it interchangeably with the company name. A ‘brand’ in real sense is a lot more than that.

A brand reflects what a company is all about and the kind of experience or products the consumer is going to buy.

For instance, Coca Cola uses the phrase ‘Have a Coke and a smile’, so whenever you think of the soft drink brand you think about happiness.

Similarly, when you think about Nike, you think about power and heroism. Again when you think about iPhone, you think about an amazing digital experience.

Therefore you need to have a strong brand strategy that will help you create a strong brand identity.

Brand identity is the way a company represents itself to the customers; whereas brand strategy is the continuous effort for development of a successful brand that will help the company achieve specific goals.

Why Having a Strong Brand Identity is Important?

Strong brands are not built in one day. A lot of hard work and thoughtfulness is required to build a brand that customers would be willing to engage with. Creating a strong brand identity benefits your company in many ways:

  • It increases the brand’s perceived equity. For example Coca Cola being a well-known brand, the company can sell its products at a higher price compared to other lesser-known soft drink brands. A strong brand translates to high-quality, so customers are willing to pay more.
  • The greatest brands connect with their customers emotionally, therefore the customers are more likely to stay loyal. Nike, for example, uses emotional branding to build customer loyalty.
  • Strong brands motivate employees. Loyal and productive employees are great assets for a company and they become enthusiastic brand advocates to spread the message around.

3 Branding Strategies to Add Value to Your Business

The brand strategy reinforces company’s position in the market. When executed successfully, it will help you create a successful brand that will help you achieve your business goals. Here are 3 branding strategies that will add value to your business:

  1. Define a Brand Promise

Brand promise is a message that speaks to your targeted audience about what to expect by using your products/services.

However, according to Allen Adamson, the chairman of the North American region of brand consulting and design firm Landor Associates, defining a brand promise is not sufficient; defining the purpose is important as well. Defining the purpose differentiates you from your competition.

For instance, IKEA promises to offer its customers with best quality furniture at affordable prices. But what differentiates IKEA from other online furniture sellers is their purpose of helping their customers ‘create a better life everyday’.

Ikea Brand Promise

Source

  1. Brand Consistency

Creating a strong brand identity that keeps you at the forefront of your targeted audience is important but maintaining it is even more important. This means you must never engage in activities that might confuse your customers.

You need to make sure all your messages – whether it is an update on your Facebook Business Page, a photo posted to your Instagram account or a video on YouTube, are consistent with your brand identity.

Target, one of the largest retail stores has been a winner when it comes to brand consistency. It has had the same logo for over 50 years.

The brand consistency stretches across all the marketing platforms that focus on the Target shopping experience – “Expect more. Pay less.” the tagline that they currently use. A consistent color scheme and their continuous effort to promote the store as high-end discount store with better quality products and exceptional customer service have paid off.

target

Source

Another company that nailed the brand consistency notion is Coca Cola. Every element of the brand’s marketing work harmoniously together and this has helped them become one of the most recognizable brands in the world.

Whether it is about promoting the company on social media or through traditional advertising, the brand has maintained its consistency seamlessly.

Coca Cola

Source

Branding’ adds a personality and attitude to the product/services and this is what people relate to. Make one mistake and all your efforts go down the drains. Hence make sure you maintain the tone of your voice, the color scheme, the logo and everything else that helps people identify your brand.

  1. Emotional Attachment

Have you ever wondered why some ads sell more than the others? It is simply because they tap into the customer’s emotions. According to Unruly, the most-shared ads of 2015 relied heavily on emotional content.

Android’s ‘Friends Furever’ was the most-shared ad of 2015. The ad contains clips of cute animals that are sure to make people emotional. In fact the top three most shared ads all feature dogs as the central characters.

But you must be very careful when using animals to tap into people’s emotions since a small mistake can disrupt feelings severely.

In another instance, MetLife Hong Kong created an ad featuring a father-daughter relationship. The cute little girl describes the things she loves about her dad and how he makes her happy. The twist comes in when she also describes the way he lies to her, just to make her happy.

Emotional Attachment

Source

Brands have tapped into a number of emotions such as happiness, sadness, fear, anger and others to build a brand identity. When done correctly you can benefit immensely by tapping into the audience’s emotions, but remember it is a tricky terrain. So you must be very careful.

Conclusion

Building a brand strategy isn’t easy, but if you can do it properly you will never have to look back. Sure there are others who may sell products or offer services similar to yours, but you can make yourself stand out by creating a strong brand.

What is your company doing to build a brand? Share with us.

Author Bio

Pratik Dholakiya is the Co-Founder of E2M, a full service digital marketing agency and PRmention, a digital PR agency. He regularly speaks at various conferences about SEO, Content Marketing, Growth Hacking, Entrepreneurship and Digital PR. Pratik has spoken at NextBigWhat’s UnPluggd, IIT-Bombay, SMX Israel, and other major events across Asia. As a passionate marketer, he shares his thoughts and knowledge on publications like Search Engine Land, Entrepreneur Magazine, Fast Company, The Next Web and the Huffington Post to name a few. He has been named one of the top content marketing influencers by Onalytica three years in a row.

Three Strategies to Expand Your Brand Online

expand online

In the past two years I have been actively involved in eCommerce, launching new brands exclusively online, or expanding established brands to take advantage of the online channel and grow sales.

I have gained enough hands-on experience managing branded online stores, as well as selling on third party retailers such as Amazon, to put together this article that explores the eCommerce channel from a strategic perspective.

Many brand owners acknowledge the need to expand online, but are unable to take action. The most common reasons are fear of channel conflict, and lack financial and human resources necessary to manage the online channel.

Selling online used to be prohibitive, especially for small businesses, but times have changed. Currently are many accessible options for expanding online, each with its advantages and disadvantages. Below are the most popular strategies, explained.

Your Own Branded Online Store

Today’s eCommerce platforms eliminate most of the barriers to selling online with easy-to-customize templates, bulk product uploads, integrated payment gateways, enhanced security and customer support.

The two eCommerce platforms I use and highly recommend are Shopify and WooCommerce. For those interested in a direct comparison and analysis of different platforms, the eCommerce Platforms blog is an excellent resource.

Advantages:

  • You have complete control of user experience, including branding, messaging, marketing activities and customer support.
  • You know who your customers are, which gives you the opportunity to develop long-term relationships and grow your brands on all channels.
  • Your margins are typically higher, as there are no intermediaries, fees and commissions to pay to third party retailers.
  • You can quickly add, remove and change products based on your strategic objectives.
  • You can build a community around your brand, with positive effects across all channels.
  • A successful eCommerce store is an important business asset.

Disadvantages:

  • While setup costs have drastically decreased, launching an eCommerce store still require a financial and human investment.
  • Building quality traffic and trust online takes considerable resources and skills.
  • You may need additional resources for shipping orders and providing customer support, in addition to marketing.

Third Party e-Retailers (excluding Amazon)

Many established retailers, such as Walmart, Sears, Best Buy, Home Depot, Staples are actively looking to expand their online assortment.

Let’s take Best Buy for example: their in-store assortment consists mainly of electronics, while their eCommerce store carries many un-related categories including furniture, baby, maternity and beauty products, sports and recreation.

Getting in-store shelf space with big retailers is often difficult. However these retailers are much more receptive to carrying your brand online, given the virtually unlimited “shelf space” available.

Advantages:

  • Your brand will benefit from the high traffic these stores already enjoy.
  • You bring credibility to your brand by associating it with an established retailer.
  • The investment in additional resources is not as high as launching and managing your own store.
  • Depending on the distribution model, the retailer can manage your order shipping and customer support.

Disadvantages:

  • Your brand will be one of many available on the online store, which makes it challenging to stand out.
  • You have limited knowledge of your buyer, as most retailers will not allow direct contact with customers.
  • Marketing tools available to influence purchase decision are usually limited, costly or both.
  • The fees paid to the retailer might put pressure on your margin.
  • The decision to keep or drop lines belongs to retailer, which increases your brand vulnerability.

Amazon

Selling on Amazon requires a multi-layered strategy and probably a dedicated article.

At the time of writing this article (April 2017) there are three ways to have your products available on the Amazon platform:

Sell TO Amazon (Amazon acting as a distributor of your products): Amazon buys your products upfront at wholesale prices, stocks them in its warehouses and sells them to customers. Amazon is in full control of retail prices, and will re-order from you based on inventory and sales algorithms, just like any other independent distributor.

In order to take advantage of this model you will have to receive an invitation and acceptance from Amazon.

The main advantage of this model is that you will receive money upfront for your products, and don’t have to wait for the sale to be made. On the negative side, Amazon does little marketing effort to push your product, at least in the case of smaller brands. You will also have no knowledge of who is actually buying your product.

Sell ON Amazon using Fulfill-by-Merchant (FBM) model: This model gives you access to the Amazon Marketplace, where you can list, market, sell and provide customer support for your products. The products are stored and shipped from your location.

This model gives you full control of the retail price for your products. Once you made a sale, you are responsible for shipping the product to the end-use customer, and cover freight costs.

Amazon will charge a Marketing and Referral fee for giving you access to the platform.

Sell ON Amazon using Fulfill-by-Amazon (FBA) model: This is the most hands-off approach to selling on Amazon using the self-managed Amazon Marketplace platform. Just like in the FBM model, you are in full control of the retail price and any price reductions.

The difference is that with FBA Amazon is responsible for warehousing your product, and order fulfillment. In other words, you ship the products you decide to sell online to the Amazon warehouse(s), and they fulfill the orders. The biggest advantage is that your order will qualify for Amazon Prime service that has at least 66 million subscribers.

All this convenience comes at a cost. Amazon charges an FBA fee based on the type of product your are selling and its retail price. This fee is naturally higher than the FBM fee, as it includes storage, order picking, packing and shipping.

I personally use all 3 models to sell on Amazon. Each model has advantages and disadvantages; here are my personal observations:

-The Sell TO Amazon model gives you the least control of your brand. While the upfront payment for stock is nice, the fact that Amazon is free to set retail prices at its discretion can drastically impact your overall pricing strategy and create channel conflict. The is also very little involvement from Amazon to push smaller, less known brands.

-The FBM model works well for businesses that have excellent fulfillment capabilities, including good shipping rates. The other benefit is that you have your customers’ contact information, which could give you an idea of who your customer is (however, trying to persuade the customer away from amazon is strictly monitored by amazon and leads to account suspension).

-The FBA model is very popular, as it requires relatively little involvement once your products are shipped to the Amazon warehouse. This model is also great for accessing international markets. As a downside the FBA can eat your margins quickly, especially if your product is retail-priced under $10 USD.

Ecommerce is a channel most brands can and should take advantage of upon careful research and planning. Brand owners must decide on what method(s) work best given their specific product, target audience and internal expertise.

If you have any concrete questions about selling your brand online, feel free to contact me directly or leave a comment below.

Photo Credit: Robbert Noordzij on Flickr

Managing Channel Conflict: How to Make Your Products More Accessible with Multi-Channel Distribution

brand distributorMarketers are among the first to witness what I call the “fragmentation” of everything: media, consumer preferences, shopping habits and distribution channels.

Brands are almost forced to diversify their presence across multiple distribution channels to avoid becoming irrelevant.

Emerging brands have usually adapted well to the new reality: they offer no exclusivity to a particular distribution channel.

For established brands that were built and have been loyal to a single distribution channel, where most of their customers (used to) shop, deciding on a multi-channel distribution strategy is increasingly a challenge.

Faced with increased consumer expectations that products be available instantly, anywhere they shop, these brands face a big dilemma: how to expand the brand distribution for more exposure and sales, without loosing the support of the existing distributors?

In short, how to avoid channel conflict?

I have some good news for those of you facing this dilemma: the channel conflict challenge is difficult, but not impossible to navigate.

What is Channel Conflict?

The potential for channel conflict exists when a brand is available through multiple distribution channels that are in direct competition for the same market and customer, with an identical product offering.

Once you make the decision to expand, it is important to have arguments in place to address these concerns during discussions which will inevitably occur. Your existing distributors will most likely complain every time your brand is available through a new channel, regardless in the new channel is a direct competitor or not.

The Accelerating Factor

The rapid growth of eCommerce has only exacerbated the need to expand brand distribution. Selling online used to be prohibitive, especially for most small business, but not any more.

A-la-carte platform such as Shopify and WooCommerce makes online expansion fast and cost effective, with all the benefits that come with it: 24/7 availability, price transparency, rapid international expansion, and so on.

Faced with the constant pressure to grow sales, it’s hard for executives to resist exploring the ecommerce channel.

Traditional bring and mortar distributors, in particular those less sophisticated, see eCommerce as a threat, and rightfully so. Expect a lot of push back if you manage a brand that was traditionally sold through independent brick and mortar stores when you decide to adopt eCommerce.

The Dangers of Channel Conflict

Strong, established brands that are demanded by consumers tend mitigate the conflict easily. However, for most up-and-coming brands hungry to expand the dangers are real. Potential negative consequences include:

  • Existing distributors will stop pushing or drop your brand. Brand owners have to assess the impact each channel has on the overall business and the probability that distributors switch brands, before making a decision.
  • Difficulty in maintaining price consistency across channels, resulting in price wars. Since your products will be available through multiple channels consumers might delay the purchase indefinitely in search for the deal.
  • Declining sales. The new channel should have the potential to offset any lost sales within the existing channel, which inevitably occur when customers are given new purchasing alternatives. Expanded distribution should only be pursued if it generates incremental sales. Otherwise the risk of sales canalization is real.
  • Bad PR. Having your own distributors bad-mouthing your brand is even worse than dropping it. Bad PR affects the brand image as a whole, regardless of the distribution channel.
  • Unhappy customers. Distributors might retaliate by refusing to offer support for your brand, even to customers who purchased your product through them.

Reasons for Expanding Your Brand Distribution

  • Flat or decreasing sales. Lack of sales growth is typically the main reason behind the decision to expand distribution, assuming existing distributors are partially to blame for it. In theory a new channel will expose the brand to new customers and  markets, thus generating sales growth.
  • Changes in purchasing habits. The way we shopped has changed dramatically, from local mom and pop shops, to big box stores, online, and everything in between. Moreover, consumers have little or no loyalty to a particular channel; we all make shopping decisions based on personal circumstances that change daily. Brands are almost forced to explore all distribution options in order to grow.
  • Increased competition. New brands are launched on the premise of non-exclusive distribution, which makes it harder for brands loyal to a particular channel to compete in exposure and reach.
  • Decrease of distributor support. Many brands are stuck with distribution channels that are becoming non-relevant to the new generation of consumers, who simply don’t shop there.

How to Avoid Channel Conflict

All of the above makes the decision to expand the brand distribution both tempting and risky. For some brands it is a question of survival, which gives them little options but to expand.For others it’s an opportunity to grow sales and expand.

Regardless of the situation, here are some tips on how to mitigate potential channel conflict:

  • Have a realistic assessment of risks and opportunities associated with your decision. Will the new channel cannibalize existing sales, or augment them? How real are the risks of loosing business with existing distributors? Will current distributors even be around in 5 years? Are existing distributors the cause for the decline in sales?
  • Be upfront with your existing distribution. Once the decision has been made, do not keep it a secret and hope the existing distributors will not notice. Present your vision and goals clearly and explain how a stronger brand will benefit all parties.
  • Be ready to accept criticism. As I mentioned earlier, distributors will probably complain, regardless if the channel conflict is real or only perceived. Have a script in place to tackle common objections, and ease their concerns.
  • Price your products fairly across all channels. Give every party involved the chance to compete while being profitable.
  • Do not favor one channel over another. Present your customers with all the options to purchase your product, and let them make the final decision.
  • Assign geographical exclusivity for your brand. Having well defined territorial boundaries for brand representation will certainly eliminate channel conflict among brick and mortar distribution. This strategy is less effective in the case of eCommerce.
  • Implement a lead attribution system that will allow the entity who obtained the lead to get the sale. If feasible, this strategy will go a long way to eliminate confusion and conflict.
  • Explore private labeling. While certainly more costly and difficult to implement, creating a private label brand for a particular channel is a safe way to grow sales without the negative effects of channel conflict. Private labels are growing in popularity among distributors and retailers so your strategy is likely to be welcome with open arms.

Before making a decision to open a new distribution channel brand owners have to assess how the decision impact your existing distribution.

The goal of opening a new distribution channel is to penetrate new markets and attract a new category of customers the brand is currently not servicing. In other words, the goal is to gain brand exposure and sales, not cannibalize the exiting ones.

Photo credit: Joel Kramer on Flickr