Negative Brand Equity burning a whole lot of corporate profits

Does the Marketing Director of Westpac really believe telling us that Westpac 'cares and is a friend' will work?

Is James Hardy a brand that motivates people to buy and trust?

Does Phillip Morris inspire positive feelings that inspire buyers to prefer their products?

Each of these companies possesses negative brand equity, spawned by weak marketing management in the light of diminishing brand loyalty.

Understanding and implementing the use of Cowan's Law of Brand Decay will help companies improve ROE on shareholders' funds and make better long-term strategic decisions.

Hear Cowan's Law candidly discussed, click here!

Cowan’s Rule of Brand Decay is the missing, fundamental, cornerstone building block that joins all branding theory together and converts the discipline of marketing from a black art into a pure science

Cowan’s Rule allows strategic marketers to better understand and predict their industry, company and brand life cycle curve.

Cowan’s Rule sets concrete guidelines and when and if it is time to re-brand a product, a category or even an industry.

Cowan’s Rule tells you when to start, to stop, to milk or to re-invest in a brand.

It is possibly the most pertinent and applicable academically developed tool to be bestowed upon commercial marketing strategic management since the Boston Matrix.

Cowan's Law of Brand Decay ©1997

Negative brand equity and brand decay analysis and assessment: Cowan's Law of Brand Decay states... "If customer expectations exceed the organisation's ability to deliver, then the brand must decline to where no amount of marketing effort can reverse its decay". [more...]

While developing turn-around corporate planning of a billion-dollar division of a multinational, Leigh Cowan developed a branding model that has universal applications and forms the lynch-pin of modern commercial and academic understanding: The Law of Brand Decay.

The Law of Brand Decay explains accepted life cycle theory perfectly, inclusive of the marketing gap and product extension strategies.

It translates the theories of Porter, Best, BCG and others into a practical and usable tool that empowers management and allows clarity of strategic thinking never previously known.

The Law of Brand Decay

Properly used this law can protect companies from making disastrous long term decisions, reveal the critical issues in brand equity building and explain the fall of firm, industry and even political systems.

The Rule of Diminishing Brand Loyalty

Suggested Life Cycle of an Exception Reported Service Organisation

The service organisation that is only appraised upon exceptions to perfect performance must have a diminishing level of loyalty over time unless it can maintain perfect levels of service.

Ultimately. the business providing the service, regardless of it’s true competitiveness in the market place, will lose sufficient brand loyalty to lose the custom of its client.

Further, the perceptual barriers to re-establishment of a business relationship will be inversely proportional to the operational loyalty of the organisation with whom the businesses was originally servicing.

In other words, the longer you keep the client, the harder it is to get that client back once you have lost the business.

Predictions of Cowan's Law of Brand Decay

Unless they radically change their marketing management....

• Qantas will see an accelerating decay of brand loyalty until it gets bought or stops operating altogether
• Optus will experience continual reduction is return on investment for its promotional dollar until SingTel ultimately withdraw from the Australian market
• Woolworths has hit its incompetence ceiling and will follow Coles into bureaucratic inefficiencies of scale allowing opportunities of small market challengers to build sufficient momentum to challenge... and a fragmentation of the retail food industry will see their unravelling and ultimate demise of the WW/Coles duopoly.
• Profit taking by fuel companies will accelerate the development of alternative fuel cars that will reverse the world's reliance upon oil.
• The market will so violently rise up against banks that a new medium of borrowing and lending will arise in such a way that Australian banks will fall.
• Political parties will find they need to perform and deliver to maintain governmental position.
• Coca Cola will maintain branded sales & prosper UNLESS is fragments the market too much in its efforts to expand beyond its achievable capabilities.

Diminishing Brand Loyalty Explained – How to recognise brand decay, manage diminishing brand loyalty and even prosper by controlling, or even planning, brand erosion.

We all know the traditional life cycle curve: Introduction, Growth, Maturity, Saturation and decline.

Marketing professionals who are classically trained know the mandatory strategies that apply for each stage of the life cycle. Analysts evaluate investment decisions based upon life cycle.

Research companies boldly assess companies based in this model (although they seem to have forgotten that there are 8 alternative lifecycle models that could apply).

But what causes change in life cycle, and more importantly, how can this be used for commercial gain?

The Birth of the Law of Brand Decay: The Comet and Kwikasair Divisions of TNT Australia

History: Comet and Kwikasair, along with McPhees, Ansett Air Express, and Riteways, were separate divisions of TNT Australia.

For many years they had all been competing independently and against each other but, in 1994, fresh management identified the wasteful duplication of effort and mutual cannibalisation of each others’ franchise and merged Comet and Kwikasair's activities logistically, with common dispatch depots, senior management, pick up and delivery services.

The result was a successful turnaround, rationalisation and improvement in bottom line but at the cost of some understandable market confusion, and unprofitable market share adjustments.

However, the Board of Management of TNT believed that the names Comet and Kwikasair were valuable ‘brand’ names which should not be lost.

Product Research: Information honed from a market survey undertaken in 1994 showed that market perceptions of service were not met on any level, sometimes being as much as 30% or more below expectation.

This created a high market disposition to modify purchase and was borne out by a low 50-65% retention of customers over a 1 year period.

Market Problem: As TNT’s companies aged, they seemed to become less attractive to the total population of potential clients because, in transport, reputation worked "negatively" - with customers only noticing errors. Summarily, the client expectations were beyond reality.

Recognising this, a Market Opportunity was born: If customers were growing 'tired' of all existing brands, they would be attracted to a great white hope... a miracle new ingredient in transport.

Implications that led to Cowan's Law of Brand Decay.

Something New?

It was likely that despite excellent brand awareness, there was negative brand disposition, and low brand preference for Comet and Kwikasair.

This would created the industry characteristic of exception complaining - only noticing the things that go wrong.

The market called out for a new choice, one that hadn’t offended them in the past, or made familiar ‘hollow’ promises, one that might credibly claim to be a better alternative.

Cowan's Strategy of  Planned Brand Obsolescence

Once you have identified that customer expectations exceed the firm's capacity to meet those expectations, the strategy is clear.

You must plan for brand decay, brand obsolescence and short life span.

For example, ANZ has not been able to fulfill customer expectations as to service. It is already uneconomical for the bank to continue to promote service as a point of differentiation. Strategically, it should re-launch itself under a new brand name, with new promises that the customer will allow into their latitude of acceptance.

The new entity could then make the promises, and 'get away with it'. However, the existing entity cannot.

Hence, growth would be possible from launching a new entity, NOT from 'flogging a dead horse;'.

The Cycle of Business - Why Imperfect business strategies reign

Cycle One

In the beginning, a business is born as a result of the vision and determination of one or a few gifted people.

Without these special people, a business cannot begin.

At the first day of trading, a business owes its existence to its original Personnel. These are passionate crusaders, sales person/people who are responsible for the survival and propagation of the business.

Existence and growth are their forte, the business owes its life to its founders and sales executives.

Cycle Two:

After reaching ‘critical mass’ a company needs dedicated operational people with an eye for detail and customer focus. They lack the vision and creativity of teh first cycle of management, but they do have their 'feet on the ground'.

Cycle Three:

After reaching ‘critical mass’ a company needs clever lawyers and accountants to sophisticate, streamline and protect the business from inefficiency.

Crash or Crash Through

In an ideal world, all three forces, in balance, maintain a healthy corporation. Sadly, the 8th 'P' of Marketing comes into play: Politics. Egos, agendas, personalities, perspectives, all detract from the 'pure' objectives of the firm. Management decisions are made by the 'informal' power groups.

Cycle Four:

Often, the pursuit of career advancement in an established business sees 'yes-men' appointed to senior management. Decisions are made without the understanding of the role of the disciplines of Human Resource and Marketing Management... “What do we need them for?”

If not in balance, the trend is for a Corporation to find itself with growing inefficiencies of scale, losses or diminishing returns on investment, low employee morale, high overheads, and led by cost cutting instead of profit making as the Corporate culture.