Brand equity & branding strategy

Brand strategy for brands with diminishing or decaying brand equity

Strategic Marketing Issues in Branding and Brand Management resulting from changes in Brand Equity in Branding

Sometimes referred to as "Cowan's Law of Brand Decay" after Leigh Cowan, who developed the theory in the mid 1990's, the Law of Diminishing Brand Loyalty states:

"Regardless of brand marketing or corporate branding issues, if customer expectations exceed the organisation's ability to meet those expectations, the brand must ultimately develop negative experiences within the market causing decay in brand loyalty."

Brand image, Negative brand equity & brand decay

In the event of Negative brand equity, brand decay sets in. Analysis and assessment of this process led to Cowan's Law of Brand Decay which 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".

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.

The Law of Brand Decay 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.

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.

Implications of the Law 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 brand 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 brand relationship will be inversely proportional to the operational loyalty of the organisation with whom the brand 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 brand.

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 Law of Diminishing Brand Loyalty Implications:

Sometimes called, "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.

Proof the Law of Diminishing Brand Loyalty (the Law of Brand Decay) is relevant to Corporate Branding

Latest Evidence:

The NAB "break-up" advertising Campaign (2011)

NAB (wrongfully) believed it could undo decades of profit gouging by simply telling its market that 'they've changed".

However, learning is a complex psychological process that can't be universally undone with trite 30-second ads.

NAB have negative brand equity in many segments... a case of, "too little, too late". Having scoured and scraped super-normal profits from harsh and unconscionable fees, to turn around and say, "but now we are nice" is like the psychopathic school bully, saying "Come here, I won't hurt you."

The problem is encapsulated by the Law of Brand Decay, which says, "when brand decay passes a certain point, it is uneconomical to try and fix the brand".

Had NAB any credibility is key segments, its promises SHOULD have cause a landslide movement from other banks. It hasn't caused this because the credibility of the message is ruined by the negative brand equity in the brand.

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.

Strategic Solution: Despite excellent brand awareness, there was negative brand disposition, and low brand preference for Comet and Kwikasair as a result of  the industry characteristic of exception complaining - only noticing the things that go wrong.

In a significantly large enough majority of the total market, "customer expectations exceeded the organisation's ability to meet those expectations".

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.

The brands offered no competitive advantage to TNT.

FOOTNOTE: It was reported that the recommendation was approved, albeit after a political battle, and the TNT group improved profitability by $250M as a result.

Predictions resulting from Cowan's Rule of Brand Decay

Each of the following cases, however sever, are can be turned in to marketing opportunities but, unless they radically change their marketing management, ....

• Qantas will see an accelerating decay of brand loyalty until it is taken over or stops operating altogether
• If Telstra metamorphosizes its branding, Optus will experience continual reduction in return on investment for its promotional dollar until SingTel ultimately sell out & withdraw from the Australian market. However, Telstra's brand carries significant negative brand equity in some segments that will allow opportunity for smaller Telco's to secure market share.
• 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.
• Fitness First will crash & burn the moment a decent market challenge is mounted.
• 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 it fragments the market too much in its efforts to expand beyond its achievable capabilities.

Free to air TV management is the perfect example of forcing customers into disloyalty. The end is nigh: Check out TV from around the world on your computer! Free to air TV has forced customers away: Too late to compete or change now you can get #TV from around the world on your computer at http://bit.ly/globalTV