How To Build Global Brands

with
Jan-Benedict Steenkamp

You can also watch this interview on my YouTube channel

Table of Contents

  1. What is a global brand?
  2. Global Brand Building
  3. Structures and Processes
  4. Global Brand Performance

*PS. Below you will find an auto-generated transcript of this episode.

Intro

Arek Dvornechuck:
What's up branding experts? Arek here at Ebaqdesign and welcome to On Branding Podcast. And today my guest is Jan-Benedict Steenkamp. Jan is one of the world's leading thinkers on global strategy and branding. He's also a marketing professor and book author. Jan also co-founded AiMark, which is a global center studying key marketing strategy issues. Jan wrote quite a few best-selling books on branding. And one of them is this book "Global Brand Strategy" And this is the book we are going to talk about today. Hello, Jan Benedict—thanks for taking the time to join us today.

Jan-Benedict Steenkamp:
Arek. My pleasure. Happy to be on your show.

Arek Dvornechuck:
Thank you. So, in your book, you basically examine how global brands have emerged in the global scenario, right? And you drove some conclusions and as to their characteristics and you observed some of the trends and ways to go global. And this is the on, based on your own research over the past 25 years, right? And based on many interviews that you've done with your colleagues and with these companies or their marketing experts. And so in your book, you show us a lot of examples, which is great. I, I love those because we can all relate. And then you also explain on the strategy behind, but also we give us a set of tools and techniques, so we can use them to expand our brands and to go global. So on today's podcast, I just wanted to talk a bit about those examples and the tools and techniques. But first I just wanted to start with a simple question. So we are on the same page with our listeners. So could you explain to our listeners, how do you define a global brand and maybe give us some examples?

1. What is a global brand?

Jan-Benedict Steenkamp:
Yeah. A global brand is a brand that is sold in large parts of the world, um, with a largely consistent marketing strategy in terms of brand name, in terms of brand position, in terms of the marketing mix that is largely consistent. There is sometimes gonna be some variation, even in the brand name because the brand name otherwise may not be pronounceable, but there have to be exceptions. These are essentially brands that when you travel around the world, you recognize in the, I mean the stereotypical one would be say Coca-Cola, which is, uh, available in about 200 countries, but you also have Facebook, for example, you have Amazon, you have, uh, Toyota, you have ups, um, you have pillar in B2B, of course you have banks like UBS and so on. So essentially these are brands that you travel the world and you'll encounter them in many countries.

Arek Dvornechuck:
Right. Um, so that's how you define the global brand. Okay. So I have a few notes and takeaways for our listeners. So in general, consumer are everywhere in the world and they determine which products or services to choose, right? So a global brand is a brand that uses the same name and the same logo and is recognized and available and accepted in multiple regions in the world. Right? So it shows the same basic principles, value, strategic position and marketing thing through the world. So it's not like everyone reinvents the wheel, we change the name or we change the logo or we change the product. Yes. There might be, as you explaining in your book, there might be some changes in the approach, but basically it is brand that uses the same logo and is recognizable worldwide, right? Yes. So as you said, probably number one example would be Coca-Cola as you just mentioned, right? Because it's one of the most popular brands in the world. Everybody knows is everywhere, basically. So the name and the logo and the packaging everywhere in the world is the same, but there might be some things that vary to meet local needs. And you explain that in the books. So for example, you explain how is that a Coca-Cola is much sweeter in middle east than in the us. Yeah. And this is because of those cultural differences, people in middle east, they are used to using a lot of sugar, right? Yeah. Um, so they love sweeter things. So, and second example would be Heineken. It's also a global brand and it looks the same everywhere. And it has a premium positioning everywhere in the world, but not in the home market, you know, in the home market is more of a middle range, beer, not a premium beer due to a strong competition. Right. Um, yeah, I think that would sum up our first question. So these are two examples. So in the first part of your bucket of about key activities in brand building, right? Yeah. Uh, and here you introduce us to your common framework. So each letter stands for each concept or tool. So it's customer preference, organizational benefit, marketing benefit, economics of scale and transition innovation, right. So I just wanted you to perhaps, you know, explain to our audience, what is this acronym, how you came up with this, and maybe you can talk a little bit about those five different ways in which we can, you know, create global brands and create value for global brands. So can you talk to us a bit about your framework?

2. Global Brand Building

Jan-Benedict Steenkamp:
So the background is that marketers naturally come to thinking about global brands from the point of view, that consumers also business to business customers, by the way, they have a certain preference for global brands and because of associations with quality or country of origin or linked to global consumer culture, that is for example, something that you will find with brands like Coca-Cola and other brands like Hyundai are toing the fact that the assault around the world as an indicator of quality and, and my own research has shown that it absolutely does matter. However, that does not explain the fact as I've worked with companies. And I thought about it a lot more, is that in many cases, either the consumer does not know or does not care that the brand is global. Let's give a very simple example, which your listeners will all be familiar with PAMs diapers, many consumers around the world have either do not know that Pampers is a global brand, or they actually really don't care. They have never thought about it just doesn't care. I mean, why do I care about it sold in other countries as well? Now, still those brands are very valuable. So why is it that there are also many brands that are very valuable, where there is no basis in the comment framework, in the first letter, the see for customer preference and that, so that made me think about this more and strategy this in, in more detail. And I identified four other factors that do create value to the company by the virtue of the brand being global that have not necessarily a whole lot to do with customer preference. And so next to the sea, when we go along the line of comment, then with the O has to do with organizational benefits briefly, because there is a lot to be said about it. It is a lot easier to manage a brand that is the same across countries than to have country specific brands. I've worked with some companies where actually they had 20 specific brands and we spent 90% of the time talking about, okay, what is the difference between these brands? Because these brands were all under pressure from the lives of private labels in these different countries, but it proved to be very difficult to get something set up across in this case, European countries, because people didn't really understand of each other. So it is organizational efficiency. It is also, so if you have the same brand, it is much easier and it is much faster to introduce new profits, for example. So these are important organizational benefits. They don't have a lot to do with customer problem, but they translate into real money advantages for company. Then, right? We've come the third and about marketing advantages. There are really important marketing advantage to having a global brand, for example, that you can pull your marketing resources and you make one really good global ad, as opposed to a lot of local ads. Some of them may be pretty good. Some of them are really prey or you leverage a creative idea across the world. And there are examples of it in the book given time, I will not go into those, but, but let's say MasterCards with this priceless campaign, you know, yeah. Some experiences are priceless, like the love of a father and a child, other things MasterCards. Now, then the fourth one come the E has to do with economies of skill and scope. That actually is probably among the, the most important ones. More important than customer preference. In many case is simply speaking. If you have tell everything under the global brand name, the naturality of that is that you have a relatively standardized product. It can be variation, but a lot of standardization in the product. Apple is a great example of that. Um, 10 is a good example of that. Apple is more standardized than Samsung by the way. So what you have there is that you get very significant economies of scale and scope that allow you to essentially generate higher profits, right? And the final aspect, the T stands for transnational innovation that is that you do not reinvent the wheel in each country in terms of, of R and D, which has become incredibly expensive, but that you can pull R and D across countries just to build better products and also to leverage local R and D for global innovation that is companies like L'Oreal are doing that very successfully. And simply speaking, if you do not have a global brand under which to introduce those innovations, a few addition to say it can still happen. And yes, that is a theory. It is true. I've seen very few companies in which it really happens. That is just the nature of organization. So that is what my comment framework is about. And I do think that in today's age, you know, 20, 22, where definitely I will think compared to five to 10 years ago, globalization is under some pressure. It's not a way, but it is certainly under some pressure, which means that customer preference for global brands may be in my perception may be among quite some people less than it might have been five or 10 years ago, but these other factors, he may very powerful, enforce. So global brands continue to be very valuable and continue to rise in value as an Interbrand brand Z kind of at least clearly show. But a lot of that value comes from these other factors in the comment framework.

Arek Dvornechuck:
Right. I see. That's a good point. So just look a summary for our listeners. I have some my key takeaway. So just to sum it up comment framework, the C stands for customer preference. So obviously some customers may prefer global brands versus local brands, because for example, they perceive better quality, right? And you give us a lot of great examples and they like this figures here, you illustrate the whole com framework and you do give us really a lot of examples that we can relate and understand, because we all know this brand so we can understand the concept behind that. Right? So for example, an I idea customers can prefer, I idea over some local brands because they perceive it to be better quality since it's a global brand, right? And there are different aspects of that. It could be that they want to belong a global brand from the customer's perspective, you know, uh, they may value global brands versus, uh, local brands, right. And because of the country of origin, that's another thing, right? Like for example, we associate with Germany engineering, right? Like Porsche, BMW, other example would be to leveraging country of origin, L'Oreal Paris, which you already mentioned in context of different part of the framework, but so all stands for organizational benefits. So global brands can be more innovative because they can make competitive moves, right? They can use cash from one country to be more aggressive in another country. And for example, Toyota and Samsung, they can create this corporate identity to allow employees and create a sense of, of belonging in the organization, right? The M stands for marketing benefits, as you mentioned, you know, global brands can benefit from exposure to media in different countries, right? And they can also leverage celebrities here, like Nike, with Cristiano Ronaldo, or H&M with Beyonce, for example. And the E in the framework stands for economics of scale. So global brands can benefit from cutting cost of set production inventory and so on. And the T stands for transitional innovations. So a global brand can benefit from pulling finances and human resources from other right to speed up innovation, source, new product ideas, and other things. And here on, in this part, we also talk about customer proposition and marketing mix, which, you know, I really recommend you guys, if you wanna check out more examples, cause the book is very comprehensive. We won't have time to talk about everything on this podcast. We just wanna give you guys like a high level overview of what to expect if you wanna dive in and learn more. But I just wanted to quickly, if you can talk about the second part where you examine the key structures and processes for building global brands, right? So here you get down to the nitty gritty actually, and you talk about how to actually do this. So in the first part, you kind of explain your framework. You give us a lot of examples and here you actually talk about your structures and processes. So can you talk to us a bit about that, about some of those organizational models and how to develop and execute on the strategy? Maybe you can give us some examples like P&G.

3. Structures and Processes

Jan-Benedict Steenkamp:
Yeah. So here we have all these different, um, activities in terms of brand building, uh, digital strategy, the marketing makes product pricing, et cetera. And that second section of the book is essentially okay, how to make that happen. And the are two important aspects are a skeleton and the muscle that is the skeleton, that is the organizational structure and the muscles are the management processes. So in terms of the skeleton is that I look at different organizational models and certain organizational are just much more conducive for implementing a global plan strategy than other ones. I talk about the geographical model, which is actually quite common that companies are organizing their activities country by country. Now that makes it quite difficult to get to a global strategy because the real power resides in the country buses. And ultimately what you have to look at this is where does the power in the organization reside that determines a lot, what the organization can do. And if the power resides in the country, bear, um, who have invested in Paris to show that their country is different from another country, because if it is not the case, why the heck do we need a separate country organization that works against a global strategy? I'm not saying it is impossible in principle. You know, you just make it very difficult for yourself. I talk about a functional organize, which is much more organized by function, like, like marketing or production at a global level or at a regional level. Sometimes you have a little bit of variation because the function may be say about Europe, the middle east Africa, Asia, the Americas, or so just to make it also manageable, but that functional organization in which the real power decides in the VP of that function, the VP marketing, uh, the VP production, et cetera, makes it a lot easier. And I won't talking about other here, the matrix organization, um, you see also companies moving from one organization structure to the other, and I'm so much skeptical about this simply speaking. And I've talked to a number of people that have done through the zillion organizational structure. And actually last week I talked with somebody that had just retired of a very large oil company. He said, I have had something like 10 reorgs in my life. And essentially, you know, we have moved nowhere. We have moved in a circle, you know, so because that's not as conducive, but still ultimately the structure is one thing. But as we all know, a body does not move without muscles. So an organization, a global strategy does not move without management processes. And one of the key factors is there. I talk about more, but I'm just gonna highlight. One thing is to what extent are, say the performance criteria for individual managers, to what extent do they help or hurt support for global initiatives? So for example, if you largely get your bonuses based on say, market share in your own country, fine, but that actually trusts not only a mindset, but also of behavior are, let's say tweaking things. And actually even not doing things, which would be good from a global perspective in my own country, because in my country, the successes would be the potential would be less in my country than in another country. And I actually another idea which can help me build market share. But the thing is that if you, to, for an effective global strategy, individual managers have to have a stake in global success, which means that they have part of their performance, evaluation and ability have to be based on the global success of the brands, rather than only focusing on the local success. Now I'm also, I'm talking about that a little bit more, another very important aspect is that what you have in many companies, it is a little less than before, but in many companies they say we are truly a global organization, which is great. But when you look at the top management, they're nearly all from the home country. So the thing is, it is not easy to build really a global strategy and to implement a global strategy, unless in your top management theme, you do have people from different countries. So the diversity of which there is rightfully a lot of attention recently, and understandably so, but that is not only diversity say within the United States towards having more women towards having more underrepresented minorities at higher levels. Yeah. That, but there another type of diversity, which is also crucial for global organizations and that is diversity in terms of nationality to have a global organization. And with nearly all of the people are from America is not truly, is not really a diverse organization at the global level. You people also from other parts of the world. And that is something where actually American companies are significantly lagging forces say companies in countries like the UK, uh, the Netherlands, uh, Switzerland, for example. And of course these are smaller countries, but actually the point is the doesn't matter. A number of these companies are as big as American companies. And so America's doing a better job than say Japan or China. Okay. That is good, but they can still make a tremendous progress in terms of nationality diversity. And that is one of the things that I also point out that it does help to better strategies. If you have greater diversity in your team's nationality and not only at lower level teams at the top level teams as well.

Arek Dvornechuck:
Right. Leadership, diversity in the leadership. That's a great point. So that would sum up your second part of the book. And then in the third part, you talk about some of the metrics, right? So you about the performance global brand performance. So here we talk about things like brand equity and how to measure that. And also how does brand building efforts contribute to shareholder value? Right. So can you explain to our audience a bit for those who don't know what is brand equity, and maybe you can talk to us it about some of this, you know, performance part, how to measure brand performance.

4. Global Brand Performance

Jan-Benedict Steenkamp:
Yeah. So why do I give a certificate attention to dentist and say my minor in my, uh, master studies also finance and I have always believed in the fact that at the end of the day, the things that you are doing have to be measured in terms of dollars you do. And that is you can do many great things which are highly respect, but even doesn't show up at the end of the day, in terms in the higher dollar value, then honestly it is difficult to argue that all these investments are, have been really useful. Now, a brand equity is essentially is the dollar value that you can put on a brand, um, to, to put it simply. It is the value. If you look at the product without a brand name, throws the product with a brand name on there, say when you think about Coca-Cola, you see a glass of brown bubbly liquid first, you see a glass of brown bubbly liquid, which has the name Coca-Cola on. And by the way, you would see a tremendous difference in consumer appreciation. And in terms of when I look at brand equity, first thing is you have to look at how much do consumers appreciate that in terms of awareness, in terms of attitudes, in terms of action, purchasing behavior, that is the consumer level that you have to drill at some of it in the minds of the consumers and looking at what you're doing. A second component is looking at sales based and equity. Can I sell more higher volume? Can I sell at a higher price? You see that is from the consumer to the market. And then finally to the financial markets, to the CFO. And that is what is the effect on profits, profit growth, own return, return on capital. And right. So that is the world really that the CFO understands the best. And that was one time consulting with a large company in the consumer space that has an extremely strong grant. And I was working with them to fight, you know, copycats that are essentially providing many of the same benefits, but that are significantly lower price and how to deal with it. And then at the end of one of the days, I had an offsite talk say with the CFO for some time. And he said to me, your BEIC, you know, do you have a moment? You know, can we talk? He said, and he asked me actually a very simple question. He was positive. He was not at all negative, anything like that, but he said, you know, can you explain to me because the marketing people tell me that strong brands is really very important to the company. I said, I hear that. And I am not denying it, but I don't really understand it. How does that show up in the company? And then I said, well, because that guy, he has been trained in finance in the capital asset pricing model. And in the things that you see on the balance sheet, and he does not understand things like mindset, metrics, you know, attitudes, trust, and brands, et cetera. I said, you know what? It really comes down to. So I was not talking about the financial side of the brands. It really comes down to the following that if you have a strong brand, you cash flows are going to be less volatile over time because higher consumer loyalty means that consumers will less quickly switch from your brand to another brand. And they will be less vulnerable to competitive action. That means that the financial markets will understand that the projected cash flows into the future are going to be more stable. And that then means that the discount rate that the financial markets will apply to your future cash flow will be lower. As we all know, the financial markets do not like risk. I said, so even if you don't sell more, because more stable cash flows with a lower dish loan account rate produce a higher net present failure. And that's the value of your brand. You to me now, our first time actually gets what the brand is, why your brand is valuable, just because you were talking about the language of finance. So what we'll do in this chapter, I'm talking about that. And then I am in debt, ultimately will translate into a dollar amount that you can put on a brand. And that some of that is public. You know, you've seen some Interbrand is, is well known, brand Z is another one. So there you can actually track over time how much value your brand is worth. And then in the final thing is then I'd say, okay, how does this brand value the dollar value of the brand? How much Pam is worth, how much is it's Coca as words, how does that translate into shareholder value? Cause that is ultimately the metric for which financial markets they like brand value, but ultimately that is because it should contribute to shareholder value. And there, what I document is that significant effect. And I will going to details here, but a document that is a very strong evidence, that higher brand value, higher brand equity. So the dollar value, the brand translates into higher shareholder value. Essentially $1 extra brand equity translates into point 25. So 30 cents more shareholder value. And then you have made a link between the mark actions in part one and two in the book. Yeah. And the financial markets wall street in the shareholder value part. And that kind of gives the whole picture. And that also gives, and that's what I also teach my students is that it's very important that you quantify whatever you do, because ultimately the c-suite will want to see some evidence that it will an effective share of them.

Outro

Arek Dvornechuck:
Yeah. The measure is scheme measuring the performance in any work. Right. And especially when it comes to brand building, that's great. So gracefully and clearly explain that to our audience. So that's awesome. If you guys wanna learn more, I'm gonna include the link into the book in the description box below. So obviously I'm gonna link to your book, but please let us know how we can find more about you. So for people who wanna either work with you or learn more from you, uh, maybe your website or social media.

Jan-Benedict Steenkamp:
Yes. I have a website www.jbsteenkamp.com.

Arek Dvornechuck:
Okay. So we can include that link. Yeah.

Jan-Benedict Steenkamp:
And I also am on LinkedIn. So if you wish to connect with me, I post annually things on LinkedIn, my thoughts on brands and on leadership. So just send me an invite on LinkedIn and I'm very happy to connect with you and we can learn from each other.

Arek Dvornechuck:
Sure. That's awesome. So visit Benedict's website and connect with him on LinkedIn. I'm going to include those links in the description box. So thank you Jan Benedict for coming on the show. I really appreciate that and have a great day.

Jan-Benedict Steenkamp:
Thank you very much. Thank you for having me. You have a great day as well. Stay safe.

Arek Dvornechuck:
You too, and happy new year.

Jan-Benedict Steenkamp:
Happy new year to you as well. Bye.

Arek Dvornechuck:
Thank you. Bye.

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