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Introduction

In a world of constant flux and ever-increasing pressures, all accelerated by the Covid-19 pandemic, the need for businesses to invest in their brands is more critical than ever before. With risk factors ranging from shifts in consumer buying patterns and growing demand for sustainability to the rising trend for premiumization and inflation-driven price rises, today’s market landscape is highly complex and difficult to navigate.

GfK’s research shows that the recent economic growth and recovery, with 2021 forecasted to reach $1,414bn in global sales for Tech & Durables alone1, is slowing down, with early indications that volume demand is declining. IHS Markit’s projections for global economic growth across all sectors have recently been reduced by 0.3% to 5.4% in 2021 (previously 5.5%) and 4.3% in 2022 (previously 4.5%)2. These figures could be further tempered by the rise of the Covid-19 Omicron variant – making the outlook even more uncertain.

Yet there are still opportunities for the most agile and well-informed businesses to grow sales and increase their market share in the coming quarters.

 


The strongest brands will flourish

In a world rocked by an ongoing global pandemic and heavy disruption, strong customer-centric brands have proved they can help businesses not just recover from economic downturn, but navigate this complicated landscape and come back more robust than ever. Whether a business is aiming to secure customer loyalty or drive premium, it is brand strength that holds the key to success.

Whatever the company’s objectives, understanding their target audience and why they buy is clearly an essential first step towards creating a laser-focused brand growth strategy. Brands with informed, data-driven insights into what their consumers truly want will rise above those relying on instinct, enabling the creation of a tight, compelling brand proposition that communicates product benefits and brand values effectively.

Madalina Carstea, Head of Global Sales, Brand and Marketing Intelligence at GfK, explains: "Today’s great brands are those that differentiate themselves from the competition by creating unforgettable customer experiences. These businesses build their brand growth strategies around the understanding that consumer buying decisions are triggered by emotion, attachment and purpose – which empowers brands to influence these decisions and drive loyalty. This is the power of the brand, and why brands account for 30% of total business value on average.

"Great brands don’t need to rely on a strong economy or market fluctuations to succeed. Take Apple. It has a 55% market share in the UK mobile phone market. And yet, its brand is so powerful that it can charge 63% more for its phones than its closest competitor3.

Companies like Apple that focus on building a strong brand will win market share and increase sales volumes, drive premium pricing, and in some cases achieve both.”

What are these successful brands doing differently and how can you become one of them?

 

Invest in brand stories that matter

All brands need to adopt a strategy that enables them to become known for the right things. That means focusing on what’s relevant to their audience and creating authentic, compelling brand stories that resonate. Some consumers care about sustainability or premium, others don’t. Many people shop online, but some audience segments can’t or won’t. The stories told by a brand must reflect these preferences.

In the unpredictable world we live in, businesses must therefore do their research to find out what their customers stand for, and then create powerful messages that call out to them.

Madalina Carstea agrees. “My advice is to stay close to your customers, stay relevant and invest in your brand accordingly. For those looking to drive premium, effective brand communication and positioning will be pivotal to justifying higher price points in a volatile market beset by inflationary pressures. To increase sales volumes, brands should seek to create empathy with the consumer, reflecting their personal values whilst meeting the core needs of their category.”

 

Strategy + action = a winning combination

A ‘one-size-fits-all’ approach to brand management is no longer sophisticated enough to compete in today’s world. The same old brand metrics won’t give the full picture as they don’t tie the brand back to market performance. And, most importantly, they don’t guide businesses to take action on what really matters.

Instead, brands need to leverage the right customer insights, sales data and brand perception metrics to outperform their competitors. GfK combines data with leading-edge analytics to measure how consumer perceptions drive brand strength, but more importantly, how businesses can influence consumer decisions to drive higher sales volumes and/or a higher premium.

This approach enables GfK to quantify the true strength of a brand, bridging the gap between the consumer and the brand’s contribution to sales, so businesses can tie their brand’s impact on the bottom line. Not only that, but GfK’s Brand Architect framework also identifies the key value levers for the brand and its consumer perceptions, empowering companies to take the right actions to drive future sales.

 

Brand Choice and Brand Premium – two key success drivers

A brand’s strength is determined by two fundamental factors: Brand Choice, or how likely people are to buy the brand, and Brand Premium, or how much more people will pay for one brand over another.

Brand Drivers - Brand Strength

 

Brand Drivers - PremiumBrand Drivers - Choice

Madalina Carstea elaborates: “Not all companies will take the same approach. A brand’s strategy will depend on where it’s currently positioned in the market, and where it wants to be positioned in the future. Some brands will want to drive sales volumes, some will look to prioritize a higher premium, and others will choose to focus on both.”

In all cases, businesses need to understand that the factors driving Brand Premium are different from those that drive Brand Choice. There might be some common ground, but the individual value levers used will be defined by the business and its objectives.

 

Driving Brand Premium

Premium brands have seen the fastest growth globally in recent years, with the pandemic speeding up a pre-existing trend. The bigger premium brands have taken the largest share of recovering markets, with new companies constantly joining the segment. For example, FMCG has seen a 21% increase in premium brands over the last 10 years4. Digitalization has lowered the entry barrier for new brands, so the competition in the premium segment is ever-increasing.

To take advantage of this trend, businesses must identify and implement the right strategies to strengthen their brands in order to maximize sales and carve out market share in the premium marketplace. This won’t be easy, though. The brands that succeed will be those that understand how to access and use data to predict, adapt and react quickly to changes in consumer values, preferences and behaviors, and meet their audiences where they are right now. But what does a robust premiumization strategy look like?

“Claiming brand premium isn’t just about redesigning a product to look higher-end, or launching upscale versions of existing ranges,” says Gonzalo Garcia Villaneuva, GfK’s Chief Marketing Officer. “The key to driving premiumization lies in gaining a deeper understanding of consumers and market forces. Consumers have been, and many still are, starved of ‘normal’ experiences due to Covid-19. With less money spent on travel and leisure activities, people have more disposable income and they’re willing to make a conscious effort to save their funds to invest in premium brands.

“These circumstances are providing impetus for the growing popularity of products and services that don’t just meet basic needs, but truly delight the customer at every touchpoint. Products that are well-crafted and designed, beautifully packaged, or that simply spark joy, will be the winners. The challenge for brands is to find out what motivates their customers to spend more and pinpoint what really matters to them in terms of values, aspirations and personal identity.”

Brands that successfully drive premium can completely transform a category. Dyson is a great example. The company spotted opportunities in several new markets to launch a premium vacuum cleaner – and Dyson products now account for an impressive 40% of vacuum cleaner brand revenues in these markets.

Which levers must brands focus on to achieve and maintain this kind of status in an increasingly competitive environment? To begin with, high quality products that delight the customer with superior quality and functionality are essential. To claim a premium, brands need to deliver true excellence through design, innovation or outstanding customer experience. Their products should be market leaders and seen as ‘best-in-class’ within their own category.

As Madalina Carstea says: “It’s absolutely essential that the product or service delivers the best quality. Consumers are smart and they will see through any gaps in your brand offer. However, where they can clearly see the excellence of your products and services, they’ll pay a premium. This can only be achieved through a dual ‘brand and product’ or product innovation strategy.”

Brands should also seek to exceed consumer expectations whilst promoting their uniqueness by differentiating themselves from competitor brands at every touchpoint – from the finer details of key messaging and packaging design, to multi-channel marketing campaigns and personalized communications.

Brand differentiation is inextricably linked to emotional benefits, so every customer interaction should clearly reflect and showcase the brand’s persona, purpose and values to resonate successfully with the target audience.

Madalina Carstea explains: “Brand purpose and brand values – as in supporting the right causes – do matter to consumers, or more accurately, they are starting to matter. But the importance consumers place on brand purpose really depends on how involved customers are with a category, and their spending power.”

 

Brand Choice drivers

For brands looking to grow sales volumes, a distinctive brand image is less important, with frills and add-ons taking second place to the nuts and bolts of functionality.

Whilst meeting basic needs is key, brands should still consider how they can differentiate and add value by creating products and services that are a joy to use and make consumers feel rewarded. However, to drive Brand Choice effectively, companies must first make sure their products are accessible, affordable and easy to use. The supermarkets Aldi and Lidl are good examples of this approach.

Building trust is equally vital for success, as consumers want a product or service they can rely on. Brands that let them down will lose both sales and reputation. Businesses must therefore provide consistency of product quality and user experience at every stage of the customer journey.

Creating an authentic brand image is equally central to building trust. A recent survey shows that 86% of consumers say authenticity is important when deciding what brands they like and support. And consumers quickly see-through inauthenticity, with 57% of consumers thinking that less than half of brands create content that resonates as authentic5. This topic is becoming increasingly important, with Forrester predicting that in EMEA in 2021 inauthentic brands will fail contradictory consumers, with at least 10 brands losing billions in brand equity by misunderstanding their customers6.

Brand purpose and brand values are critical considerations here. To select the right values, a brand needs to carefully understand its internal corporate culture as well as its target customers. And it needs to resonate with both, as selecting values that are obviously too far off from your actual culture can create a disconnect and look inauthentic. Selecting ones that don’t matter at all to your customers will turn them off.

Once you have defined the right values for your business and target audience, your company needs to communicate the message and translate the values and purpose through every action and every touchpoint in a credible, authentic way. Your brand values should become a mantra for your entire business, forming the underlying basis for all key decisions and impacting every business function, from HR and who you hire to your brand positioning and outreach.

When it comes to communications channels, social media and other digital platforms continue to play a major role in our lives, influencing consumer buying patterns and accounting for a significant portion of marketing spend.

Brand Drivers - Consumer Life Study

Alignment with the right experts and celebrities on social media is a powerful tool for creating credibility, trust and desirability. However, care should be taken to ensure campaigns are genuine, salient and relevant in order to build brand values and differentiation successfully.

 

In Conclusion

The extent to which today’s brands meet key consumer perceptions is illustrated in the graphic below, where the figures speak for themselves.

Brand Drivers - General

Our conclusion is that many brands do a great job when it comes to delivering good products and meeting the core needs of consumers, as well as creating trust, and a good proportion of consumers associate them with these important facets. On the other hand, building differentiation and communicating brand purpose and values are highly difficult to achieve, and many businesses are struggling.

This points to a window of opportunity or white space, especially in the area of brand purpose and values, that forward-thinking brands will actively seek to fill.

Ultimately, however, a winning strategy is one that will futureproof the brand by attracting and retaining more customers. This can only be achieved by leveraging the right insights to develop the right strategies for the right people. These insights must be tied back to the bottom line and, crucially, lead to value-driven actions that keep the business moving forward.

“Growth and success can only come from understanding,” concludes Madalina Carstea. “Great brands know their customers and their own businesses inside out. This gives them the tools to create amazing brand experiences that drive Brand Premium, Brand Choice or both, in line with the company’s individual objectives and priorities.”

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References

  1. GfK Retails Insights T&D, 2021
  2. IHS Markit. “Supply imbalances bring higher inflation and lower global economic growth.” October 2021
  3. Europanel
  4. GfK Market Insights & GfK Brand Architect. 2021.
  5. Stackla. “The Consumer Content Report: Influence in the Digital Age.” 2021
  6. Forrester. European Predictions 2021. 2021
  7. GfK Consumer Life Study, 2020

Author

Madalina Carstea - Profile
Madalina Carstea
Head of Global Sales, Brand and Marketing Intelligence