Guest Post by Jacky Tai, principal consultant of StrategiCom, a leading B2B brand strategy consulting company with offices across the globe.
If you want to build a strong brand, you need to be focused. And being focused means you have to take a stand. When you stand for something, you cannot stand for other things. Being focused means that you have to sacrifice certain segments of the market, forgo certain attributes that you would like to have and give up trying to be all things to all people. Many brands fail not because they make bad products but because they are not focused.
Mitsubishi has the dubious distinction of being the only Japanese car company to lose money in 2004. In fact, on a sales turnover of US$23.8 billion, Mitsubishi Motors Corporation lost a whopping US$2 billion!
|Brand||2004 Sales ($M)||2004 Profit/Loss ($M)|
Source: Hoover’s, 23 July 2005
Does Mitsubishi make bad cars? No. Mitsubishi is, in fact, quite an innovative car company. It pioneered the Lancaster balancer shafts that quell vibration in 4-cylinder engines. Take a drive in a Honda Accord 2.4 and you can feel the effects of this Mitsubishi innovation. It also pioneered direct injection petrol engines that produce 20% better fuel consumption compared to normal petrol engines. But Mitsubishi is a highly unfocused brand. That is why it doesn’t have a strong hold on the mind.
Toyota seems like an unfocused company as they make all kinds of cars and trucks but Toyota’s focus is actually on reliability. Toyota stands for reliability. That focus made the brand powerful.
Nissan is starting to find a focus. It is starting to make distinctive-looking cars.
Honda has always been focused on engines. Honda is widely acclaimed as one of the top 2 engine makers in the world. The other being BMW.
Mazda is focused on sporty cars.
Suzuki is focused on quirky SUVs.
Daihatsu is focused on small cars.
What is a Mitsubishi? It’s a refrigerator, an air-conditioner, a bank, a car, a computer chip, among other things. So, Mitsubishi has a weak brand. It stands for so many things that it stands for nothing. It has no hold on your mind whereas a brand like Toyota will immediately conjure up highly reliable cars that will never break down.
Diversification, line-extension and brand stretching strategies will ultimately damage the brand. Of course, in the short term, you will see an increase in sales because you have more products to sell but over time, a line-extended brand loses its power because it stands for so many things that it no longer stands for anything.
Focused Brands Make More Money
The table below shows you the total revenue and net profit/loss for focused versus unfocused brands over the past 10 years. You will find that focused brands tend to be a lot more profitable even though they have smaller sales.
|Brand||Core Business||10 yr revenue||Net P/L||Net Margin|
|Sony||Video game players, TVs, DVDs, MP3 players, cameras, camcorders, phones, laptops, etc.||556||4.8||0.9%|
|Nintendo||Video game players||43||5.9||13.9%|
|Samsung||Microchips, DVDs, TVs, LCD panels, cameras, computers, color monitors, DRAM, SRAM, etc.||910||35||3.8%|
|Hitachi||Semiconductors, PCs, elevators, TVs, robots, power plant equipment, metals, wire, cable, etc.||719||(1.7)||(0.2%)|
US$ Billion, Source: Hoover’s, February 2005
So, Why Do Companies Refuse To Focus?
Most companies refuse to focus because they think it is too risky. What if the category becomes obsolete? What if the category does not take off?
Andy Grove, founder of Intel, has this to say, “Put all your eggs in one basket and watch that basket carefully.” If you refuse to focus out of the fear that you may fail, then you will find it hard to build a strong brand. Intel was focused on making memory chips when they first started. Intel became the No. 1 memory chip maker but competition from the Koreans, Japanese, and Taiwanese made the memory chip a commodity. That should have killed Intel because it is so focused on memory chips and couldn’t match the Asians on cost.
But Intel refocused the company on microprocessors in 1985. It gave up the memory chip market completely. But this time around, Intel built a brand around its microprocessors. You remember the famous “Intel Inside” campaign? Intel is less susceptible to price competition now because it has built a strong, focused brand around its microprocessors. Intel, in effect, built a brand out of what is basically a commodity.
How Do You Find A Focus?
You have to make a judgment call. Let’s say you are an unfocused company with multiple products or services. You need to decide which one has the most potential and focus on developing that into a category leader. For example, you have a portfolio of all these products and services under your brand:
You are highly unfocused. What do you do? You need to be ruthless. You cannot have it all. Don’t be greedy. Which of these has the most potential? Which one of these do you want to dominate? Once you have decided, then sell off or close down all the other divisions to focus on that one category that you have decided on.
When you focus, two things happen. One, you actually become very good at what you do. Second, people perceive you to be very good at what you do since that is the only thing you do.
Jacky Tai is a Principal Consultant of StrategiCom (www.strategicom.com), a B2B branding specialist headquartered in Singapore with offices in 12 cities. As Principal Consultant of StrategiCom, Jacky works with a crack team of talented consultants and researchers to help B2B companies across various industries gain an unfair advantage over competitors by effectively differentiating, dramatising and communicating the brand. Jacky is the author of 5 highly-acclaimed branding books – the latest one being B2B – 10 Rules To Transform Your Business Into A Brand.