About the Author

Geoffrey Moore

Managing Director, TCG Advisors Venture Partner, Mohr Davidow Ventures

Geoffrey Moore is a best-selling author, a Managing Director at TCG Advisors and a venture partner at MDV.  More...

November 2008

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Brand: Unclear on the Concept

God love BusinessWeek and Interbrand for their Top 100 Brands survey.  It is absolutely critical that brand be valued as a strategic asset, and the Interbrand approach, while subject to debate, is as good a place to tart as any.

But….

Both organizations seem to be unaware of a fundamental truth about brand value—namely that while it is has extraordinary relevance to B2C volume operations enterprises, it has virtually no relevance to B2B complex systems enterprises.  To prove this point we need go no further than to examine the results of their own survey.

Of the 100 companies listed, fully 70 percent are pure consumer branding plays.  Another 22 percent are mixtures of B2B and B2C lines of business.   Only eight companies are more or less pure-play B2B complex systems companies:  IBM, GE, Cisco, Oracle, SAP, Seimens, Accenture, and Caterpillar are great companies, but it is highly misleading to think of them as great brands.  Here’s why.

In a volume operations business, customer intimacy is achieved by brand identification.  Brand values intermingle with the consumer’s personal values such that the consumer identifies with the product or company and thereby gives it preference during buying decisions.  This drives up both revenues and margins.  Thus brand power is key to sustainable competitive advantage and is thus reasonably framed as a prime determinant of market cap.

By contrast, in a complex systems enterprise the mechanisms are completely different.  Customer intimacy is achieved by face-to-face interactions between representatives of both companies, and buying decisions are made and reviewed by an array of people.  By virtue of these differences the impact of brand is dramatically muted.  Arguably it might still be said to have a role to play ("Nobody ever got fired for buying..."), but only marginally, and it is highly misleading to suggest such brands are a primary contributor to market cap.  Indeed, it is far more likely to be the other way around: high market cap creates the effect that we are calling corporate brand.  In reality it is far better to think of such a brand as a placeholder for a strong corporate reputation and leave it at that.

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Comments

saul kaplan

Perhaps we need to expand the way we think of brand value applying the concept beyond products, services, and corporate image to also include branded capabilities and business models.

In today's networked world where the half-life of any business model is decreasing quickly it is imperative to experiment with new ways to configure and reconfigure capabilities in order to introduce new business models.

Branding the platform may be just as important as branding the products and services they enable and may have as much to do with consumer choice and market cap as traditional definitions of brand value.

Walmart's corporate image is perpetually under attack but everyone knows that it's capabilities and business model makes the cliche' best practice seem inadequate. Maybe they should figure out how to brand their business model!

I suspect it will take a while for those doing top 100 lists to catch on.

stephen

oh dear...

independent of your blog, I was just thinking this morning that you are the most clear headed thinker (ever) that I know about concerning marketing. but you seem to be missing a few synapses when it comes to brands and branding--and I have always felt this to be true, since I discovered your books in the bubble.

since your lack of understanding of brands and branding seems to be occuring at the genetic level (witness the evolving name of your consultancy: TCG Advisors? Come on...try re-reading the 22 immutable laws of branding for a start, and then contemplate how Steve Jobs has flouted and synthesized those rules. I don't mean to lecture you, I'm just some schmuck. But it's a shame to see your otherwise inspired analyses degraded by these persistent misapprehensions you have about branding), I'll limit the scope of this comment to your examples, and use terms from your first three books.

> By contrast, in a complex systems enterprise
> the mechanisms are completely different.

The core of your argument seems to be that in a b2b relationship, the "b2b complex systems enterprise" customer does not base its buying decision on brand, because, #1:

> Customer intimacy is achieved by face-to-face
> interactions between representatives of both
> companies

and #2:

> buying decisions are made and reviewed by an
> array of people.

Thus, the reason why branding is less important to a b2b "complex systems enterprise" customer is because that customer a) conducts business w/the vendor face-to-face and b) brands are less important to groups than individuals.

Without getting into the patent, profound absurdities of your claim that branding is unmuted in a b2c interaction but muted in a b2b interaction (a customer is turned off by an unpleasant McDonald's salesperson, a customer is turned off by an unpleasant Oracle salesperson), and without getting into the contradictory elements of how groups might be less influenced by brands than individuals (your "Value Chain" diagrams from Living on the Fault Line clearly show how a "whole solution"/horizontal product *must* be marketed to groups), I will allow that you at least manage to state the actual prevailing argument to your insane/absurd thesis:

> [Branding] might still be said to have a role
> to play ("Nobody ever got fired for buying
> ___")...In reality it is far better to think
> of such a brand as a placeholder for a strong
> corporate reputation and leave it at that.

Here are the facts:

The companies discussed in the list are all companies who have "crossed the chasm" (let it be pointed out here that the Businessweek list is a list of companies, and not products--products being, such as they are, children brands to a corporate parent's brand). I'm sure you'll agree.

The eight companies/brands which you identify as being out of place on the "top brand" list (IBM, GE, Cisco, Oracle, SAP, Seimens, Accenture, and Caterpillar) are all companies who have "crossed the chasm". I'm sure you'll agree. In crossing the chasm, these B2B companies developed "whole solutions" which they marketed to "horizontal markets". Follow me so far?

Here's your missing synapse, Geoff: whether it's a high tech company or not, a strong brand is simply an indicator that a company's product/service has gone horizontal. It's as simple as that. Per the 22 Immutable Laws of Branding, a brand is only created by publicity--in a way that corresponds exactly to how a company can only properly cross the chasm by successfully executing a bowling alley strategy: burning a brand into the collective imagination of a customer base is done by providing a solution for a problem to aggregate groups of customers.

PS, You and I were briefly in correspondance for an application server startup I was seeking funding for in 2000; you met an associate of mine at a conference put on by Divine Interventures.

Ray Baird

Geoffrey,

I appreciate your comments about some of the challenges with Interbrand’s brand valuation model. But please don’t confuse “brand value”—a dollar amount attributed to a brand—with the *value of branding.* Branding, by which I mean defining a believable, defendable, and relevant brand position, is just as important for B2B companies, if not more so. I’ve written a response to your post on The B2B Brand Debate, where you’ll find a number of articles about B2B branding written by premier consultants from around the world. I’d be interested to hear your comments in response to these posts. http://www.b2bbranddebate.com/?p=40

denis riney

A more profound question:

Does a great company help build a great brand, or does a great brand help build a great company?

In other words, is a great brand simply the result or residual effect of lots of smart business actions over time; irrespective of how good the ads are or how many positive PR mentions are out there?

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