MARCH 2002

Is a brand's "intellectual capital" today more important than its features and benefits?

LAURA TELLER: Intellectual capital is extremely important at this point. Features and benefits really only take you so far, because typically features and benefits can be knocked off pretty easily. It's the other aspects of the brand that really create stickiness with the consumer, something that the consumer really wants to choose actively. People want products not only to do things for them, but also to make them feel something about themselves. Intellectual capital is one way that you can create that connection with the consumer -- far beyond what the product does or how it performs.

RICHARD COSTELLO: Intellectual capital is really the key differentiator of any organization. For an investor, the question is, does this organization have the intellectual capital to compete successfully? Does it have the ability to transfer that intellectual capital around the organization, the learning that exists, to grow? From an employee's point of view, is this a place that has the ideas, the excitement -- the intellectual stimulation -- that provides a great place to work and also the potential for continued success?

As a business provider brand, is this a company that has the intellectual capacity to provide a solution to my business problem? At that level, it's absolutely the bedrock of a company and of the perceptions of that company today, versus in the past when it was the things the company made. When you move to specific consumer products, it depends on the end-user's perspective. When you look at a can of cola, intellectual capital doesn't mean much of anything to the consumer. For an automobile, however, the added value provided by knowledge can be tremendous -- for example, the Onstar service.

"Intellectual capital is really the key differentiator of any organization." -- RICHARD COSTELLO

MIKE KEYES: I would say that benefits and features are still more important than intellectual capital. You still need to start with a brand that fulfills a consumer need. In our case, brands like Jack Daniel's have a heritage, an authenticity that you just can't buy. That, to me, is worth more than anything that you can develop. The challenge today is how to take these great brands and continue to keep them relevant. I think that's where intellectual capital becomes extremely important.

LEX de ROOI: It depends. The Philips brand has evolved over 110 years. In mature markets, where consumers know our brand as a quality brand, an honest and trustworthy brand, that is our intellectual capital. However, over time you need to evolve that capital and adjust it to get the right features and benefits. We are now in the middle of that process and it's particularly difficult for a very genuine, industrial company like Philips. We want to bring more values into our high-tech products. For example, it could even be more female values -- like design and function and appearance.

ERIC LEININGER: I'd also like to answer that question by looking at the brand through the eyes of the consumer. To me, the brand promise lives in the mind and the heart of the consumer. A consumer's experience with a brand operates on three levels. You have features and benefits -- which form the functional benefits of consumer brands. Then there are process benefits, which is how the brand makes somebody's life better.

And then, on top of that, there are emotional benefits, which are about how deeply people are connected to the brand. I've really thought a lot about "emotional intelligence," as well. Emotional intelligence is about having the capacity to have empathy and build relevance at an emotional level as well as on an intellectual level. So there's intellectual capital that has an IQ component, but also an EQ component of emotional intelligence.

RANDY QUINN: Dove is a good example of a brand with huge "emotional capital." When we test new product concepts, we get a better response when we brand the concept to Dove because Dove has developed such a strong emotional connection with consumers -- globally. The branded and unbranded products offer the same features and benefits. But for the consumer, it's the emotional connection to Dove, born out of consistent performance from a growing range of products, that makes the brand connection so powerful.

Are services generally "smarter" than products?

TELLER: Not necessarily. For instance, I'm a proud owner of a Dodge Caravan Minivan. That, to me, is a very smart product because Dodge actually thought about developing the product with drivers in mind. It's a vehicle for people who spend a lot of time in the car, with kids, doing household errands. There are a lot of features in that car that are very smart, that really show that Dodge is responsive to the consumer and has really thought things through. So, in that sense, products can be very, very, smart and have a lot of intellectual content to them.

de ROOI: If your products understand consumer needs, they can be as smart as services. But there's one difference: You can adjust a service offering much more easily and faster and you can tailor it more to the personal needs of the consumer. With products, that's far more difficult. However, modern techniques and Web-enabled research technologies are allowing industrial companies like Philips to personalize products more and more, and at greater speed.

"Benefits and features are still more important than intellectual capital. You still need to start with a brand that fulfills a consumer need." -- MIKE KEYES

QUINN: It all depends on how insightful the manufacturer or service provider is as to what the consumer wants and needs. A customized service that doesn't really speak to a consumer need isn't smart at all. When Unilever does deep consumer research, we don't just ask people what they want or what's missing. Instead, we might follow them through their daily routines to see which needs we can serve, especially looking for unexpressed, or latent, needs.

KEYES: I don't think that services are smarter than products. The challenge is how to make the brand and its attributes relevant to today's consumers. For Jack Daniel's, one way to stay relevant is to take a whole new look at database marketing. The Internet has allowed us to do some really interesting things with the folks we know are our consumers. We can directly have a two-way conversation with our consumers that previously could only have been one-way.

The second way is to make our consumer advertising more relevant to a new target audience. Traditionally, Jack Daniel's has done very copy-intensive print advertising, and it worked very, very well for us for fifty years. We've now found that we've had to shorten our copy. We use the same message, but there's less copy and we have to get our points across more succinctly, more quickly. The third would be that we've recently started looking at television, trying to introduce not only sight, but motion and sound. We've done TV advertising globally for years and years, but it's something that's new to the United States market.

LEININGER: One of the key trends is a real blurring between products and services. Increasingly, we see products coming forward that have services attached to them and we see services coming forward that have products attached to them. The smartest consumers -- or business-to-business customers -- are those who take advantage of both products and services to enjoy a better solution. For example, we have a Kraft interactive kitchen on our Web site, featuring customized recipes and meal-planning ideas. You can type in what you have in the house and receive meal suggestions, for instance. It's all about the service that enhances the consumers' value of our products. There's next to nothing being sold, per se, on the site.

COSTELLO: Any product today that has a high unit value is not going to be around if it isn't enveloped in service. In fact, the differentiators are increasingly the services around the product rather than the product itself. For example, in General Electric's medical systems area, even though we have leading-edge technology that's ahead of the competition, one of our key differentiators is the "smarts" of the service system built around it. If we put in a $2 million dollar scanner, part of the reason the hospital buys it, is that we're going to remote-diagnose that product to ensure that it is operating within the appropriate parameters. Increasingly, that kind of service is migrating to the consumer side, as well.

Are global brands the brainiest?

KEYES: I think global brands are brainier. Just by definition, a true global brand has to be pretty brainy. A global brand has to be able to cut across cultures. It has to have what we call an "attribute trunk," where we identify and promote the attributes that are relevant to different people in different cultures around the world, but without compromising our brand essence.

COSTELLO: Brands like Marlboro and Coca-Cola have enormous marketing strength behind them. They are great global brands and they've been that way for decades. But their braininess is virtually invisible.

"People want products not only to do things for them, but also to make them feel something about themselves." -- LAURA TELLER

TELLER: There is a sense that if you're all over the world you may have some sort of sophistication. But there are an awful lot of brands that are global that aren't necessarily brainy. McDonald's, for example, is not necessarily a brainy brand. They're taking a product that they've developed and they're basically replicating it in countries throughout the world. On the other hand, brands that accumulate brand equity by gathering information from all corners of the globe, synthesizing it, using it to benefit the consumer, tend to be very brainy. Citibank is a good example of that.

de ROOI: Philips is in the middle of a process that will enable everyone in our communications community to use a very sophisticated IT system. This will allow us to adjust our brands based on local market conditions worldwide. So, we are developing complex processes to make our established brands just as brainy in Asia as they are in America. We believe our products should be flexible in their values and personalities, but should keep their core values clear and visible in local markets. To make that happen you need very, very, very, advanced processes in place.

LEININGER: It's a great question. We have several categories that we look at on a global basis. Global brands do need to be very brainy to be able to manage the mix of global brand imagery with the appropriate adaptation of local needs. In addition to brains, global brands need a central nervous system -- and they need a heart. The central nervous system inside Kraft is a global marketing council that makes sure that "best ideas" and "best practices" move around the globe quickly and effectively. The heart is having the right global interpretation of the overall brand.

What is the single smartest thing your brand is doing today?

COSTELLO: From a "product" point-of-view, irrespective of which product we're selling, we're trying to envelop it in a service package. We're trying to find ways, in virtually everything we're doing, to provide increased value through services and the intelligent application of the product itself. For example, in our plastics division, which literally sells plastic pellets, we provide enormous amounts of assistance to our customers in terms of finding new applications of the product.

We're also finding out what the customers' problems are and then providing a solution that involves information technology. This also provides GE with an ongoing revenue stream. For example, Southwest Airlines announced a fifteen-year contract with us for management of their aircraft engine fleet. It's a contractual relationship, so you can almost book the dollars.

de ROOI: Philips is trying to focus on products that make life better for people. We view that in a very pragmatic way. Technology should be humanized so that it bridges the gap between technology and human behavior. We try to do that by building ergonomic, functional design into our products. We focus on creating highly intuitive products and interface systems.

"Technology should be humanized so that it bridges the gap between technology and human behavior." -- LEX DE ROOI

KEYES: Jack Daniel's is simply being true to the brand. Our message is pretty simple -- it's history, it's heritage, it's authenticity, it's Lynchburg, Tennessee.
So, the smartest thing the brand is doing is selling that message around the world, but doing it in a way that's relevant to different consumer segments, different cultures and different age groups. It may sound like the same message, but maybe the visuals, the public relations and the direct mail supporting it, are tailored to fit different consumer segments.

LEININGER: Kraft truly listens to our consumers so we can anticipate their needs of tomorrow, even while meeting their needs of today. We're implementing all kinds of new -- both high-tech and high-touch -- ways to listen. We have found that, in terms of open-ended questions, we get better, richer consumer insights on the Internet than over the phone or in mall intercept interviews.

We're also using high-touch methodologies, such as ethnographic studies, as well as in-store, in-home -- up close and personal -- contact with consumers. That's become a bigger mix of our research budget than it was a few years ago. We are also excited about the way in which we've expanded our thought process about who to listen and talk to. For example, we have a huge investment in multicultural marketing, which is expanding our view.

TELLER: The Discovery family of brands does things that help our consumers feel smart. We help consumers feel better about learning and exploring things. We took what was a fairly dry category -- the documentary category -- that had been just a lot of talking heads and pictures, and we personalized it. We bring the viewer up close, to really make them feel as though they are participants, to give them a sense of the excitement.
Even a program like the Croc Hunter on Animal Planet is imparting an awful lot of information. But consumers don't sit there and say, "Gee, I got a lot of information from that." What they feel and experience as they're watching the show is, "Wow, I really felt like I was taking part in that." So there's an experiential type of learning and a sense of, “I can't wait to go out and tell somebody else about this really fascinating fact that I just learned."

QUINN: Unilever is focusing on fewer, bigger brands, so that we can develop richer, broader relationships with our consumers. We can't afford to have many "smart" small brands because of the level of understanding that it takes to really key into consumer need and develop products that are born out of those needs. We're rigorous about developing the kind of deep consumer insight that will drive meaningful product and marketing innovation. We also reorganized ourselves to bring product development and marketing into one process. Finally, we are constantly looking for, and finding, better ways to support our key customer partnerships, which benefit everyone.

Is technology essential to your brand's competitive edge?

LEININGER: Absolutely. We have put new technology in place that touches almost all aspects of the value chain. By value chain, I mean designing the product, the service support, the food science behind it, food safety, marketplace information, the information that we use to work with our customers, to determine where the product fits in the store, how it should fit in our overall product assortment mix, and the technology and the ways in which we communicate with our consumers. Because of that, we can go through the whole value chain and say, "Wow, we've had a dramatic 'overnight' change over the last five years in terms of how Kraft Foods goes to market."

de ROOI: We are a technology company, that’s a given. Our own research lab employs a couple of thousand people, with a huge research budget. So, yes, there will always be technology and it will always be a part of the product. But increasingly that technology will be an ambient technology. In other words, it's not about buttons and dials and LEDs and all those kinds of things; it is for the consumer.

That is an extremely difficult transition for a genuinely industrial company like Philips to make. It’s no longer just about building TVs or stereos. The collection should have a place in your living room. You shouldn’t hide entertainment products in the cabinet because they look ugly; they should add to the ambiance of the environment. So there are all kinds of new consumer needs that are emerging from all kinds of different directions that are very essential.

"We have found that we get better, richer consumer insights on the Internet than over the phone or in mall intercept interviews." -- ERIC LEININGER

KEYES: Absolutely, yes. Some folks might think that technology would be at odds with a brand like Jack Daniel’s because it has been around for over a hundred years. In fact, the way we came to terms with technology here was the perspective that Mr. Jack Daniel started delivering whiskey using a horse and buggy.

Obviously, we haven’t delivered our whiskey that way for a very long time; we’re now much more sophisticated than that. We sell the same whiskey; we just do it with the tools -- the technologies -- that are available today. For example, we use technology to do competitive tracking. We’re also using technology for creative development. We can look at ads and at packaging more quickly.

TELLER: I don't think that technology is really essential to our brand's brainpower, although we certainly include a significant online component in things that we do. We do try to link much of our televised content with online activities, for example. But, in fact, when you think about television, it's a very old technology. Although we're making some advances -- and certainly making some advances with interactive TV, for example -- in fact we're using a fairly old technology. Again, it's not our technology that makes us brainy; it's the fact that our viewers are learning something that makes us brainy.

QUINN: Technology is absolutely essential to our brand’s brainpower, as long as it is coupled with consumer insights. Innovation that nobody wants isn’t worth the technology needed to create it, no matter how inventive it is. We’re much more interested in developing deep consumer insights, and then investing in technological advancements that help address those insights. In the lab, we use technology to develop product improvements. In the area of communication, we depend on new technologies to link our employees to each other, to our customers, and to consumers in two-way conversations.

COSTELLO: The first thing is your people. Without people you can't have the brains. So you've got to attract the best and brightest -- and then you've got to make sure they stay that way. You must have continuous education programs, using inside and outside resources, to make sure that your people stay on the bleeding edge of whatever they're good at.

And you need to have huge, internal exchanges of information -- best practices. The best practice may be from another division inside. There may be a best practice in one of our financial services divisions that has applications all over the company. You've got to have mechanisms to spread those best practices and encourage them to be spread. You've got to encourage people to actually knock off other people's clever ideas, and not be embarrassed about it, or take a "not invented here" attitude.

What will make your brand brainier tomorrow than it is today?

COSTELLO: The application of information technology at a more sophisticated level will make General Electric brainier. Information technology is tremendously helpful in collaboration across geographic time zones. It is incredibly helpful in terms of rapid exchange and best practices. It's incredibly helpful in terms of learning, because you can put learning online rather than dragging people to a physical location. Technology, particularly information technology, is going to be important in making General Electric -- and any other company -- smarter. Technology will accomplish that by providing faster, simpler, more transparent ways of moving information around the system.

de ROOI: Putting people in control over the products, and not making products where technology controls the consumer, is what will make Philips a brainier brand. Truly imbedded technology -- intelligent technology -- that are very easy to operate and that are harmonious to their settings will make our brand brainier. The humanizing element clearly is extremely important. We are putting our people’s brainpower into our brand.

"Technology is absolutely essential to our brand’s brainpower, as long as it is coupled with consumer insights. -- RANDY QUINN

KEYES: For Jack Daniel's, it's just the ability to look at established brands and be willing to adapt to changing lifestyles, changing interests, and a far more cluttered environment. But we do it in ways that don’t compromise the core equities of our brand -- things like preserving our customers' privacy. Everything we do is permission-oriented. That’s a very good point for a brand like Jack Daniel’s, which is a very big part of American culture and has achieved that status by being unpretentious.

LEININGER: What's going to make Kraft brainier is staying closer to the consumer, to anticipate how they're growing and changing, and making sure that our products and services are changing with them. We're very committed to knowledge management. We're very committed to early exploration of emerging technologies. Things like database marketing -- that would be, for me, underneath the headline of technology -- have emerged. And we have very significant communications commitments as we look at more one-to-one relationships, in addition to the way we’ve traditionally gone to market.

QUINN: Unilever will become brainier by reflecting an understanding of how people buy and choose our products, as well as how they use them. We will get closer to clusters of consumers in countries around the world through the way we talk and explain our brands and products to them. For example, we will develop variants that are more customized to different demographic and ethnic types of skin and hair. Older people have different skin and hair needs than younger people. African Americans have different hair needs than Caucasians. One line of variants is just not capable of meeting all these needs.

TELLER: Discovery is continually in touch with what our consumers would really like to know about. We actually try to find out things that they'd like to know about before they know that they want to know about them! People usually don't know what they don't know. But once you start to teach them things, or let them experience things, they love to learn. So we try to do things that we think are really going to be of interest.

Can a brand's "intellectual capital" be measured?

KEYES: It can be measured, in some respects, in two ways. One is through stock depletions and the ability to take price increases in a reasonable manner without affecting your volume. If you keep your volume and keep your prices up, it’s a good way to measure your relevancy. With regard to best practices and innovation -- ways that you’re getting your brand message out that you didn’t use before -- a lot of that is just gut. Does it feel right for your brand? Are you being true to the things that established your brand? For our core brand, Jack Daniel’s, are we selling the things that, fifty years ago, when our predecessors started advertising the brand, felt were important to the brand?

QUINN: There are a number of ways "intellectual capital" can be defined, and each can be measured. At Unilever, we call this "brand health," and it is measured both by the consumers' attitudes and awareness of the brand, and the consumer's resistance to competition -- loyalty to our brand and a refusal to be lured away when competition offers incentives and new products.

What we find out with the brand health check is the meaning our brands holds with consumers. How are we engaging them? What does the consumer believe and understand about our brand? Our desire is to have a rich and subtle dialog with consumers -- the more nuanced, the better.

In the classic, IT area, there are some standouts, like IBM, which is an incredibly brainy brand. -- RICHARD COSTELLO

de ROOI: In my view it’s not easy. For example, marketers often use "share of voice" as a metric, which is somewhat easy to understand. But it is much more complex than that. One of the most important factors is the perception that the consumer has of the brand, whether that perception is in line with our marketing objectives, and then how conversion rate is based on that perception.

It is also very important to understand how the brand can feed the lifetime value of the consumer, based on the perception of the brand. If a consumer says, "yes" to the brand, how many times in her or his lifetime value will he or she say, "yes" again to the brand? That is real value. Retaining consumers is an art that’s very well known to service providers in every aspect, but it's completely new territory for industrial companies like Philips. We’re not used to that.

TELLER: You have to let consumers measure it, and you do it comparatively. I don’t know if there’s an absolute "smartest" brand in the world, but consumers can very quickly tell you whether a brand is smart or not. It is also measured at the cash register. People not only want a reason to buy something, they also want a reason to keep using it again and again and again.

The notion of one-time use -- the disposable product, disposable knowledge, disposable everything -- doesn’t give the consumers enough substance, if you will. People are looking more and more for substance, quality, things that make them feel good, things that make their kids feel good, things that make them feel good about what their kids are doing.

Will the standards of brand intelligence change over the next five years?

COSTELLO: There's going to be an inexorable rise in standards of what the customer expects. There are going to be enormous expectations on the part of the consumer to make their lives simpler, faster, easier, less burdensome, less worrisome by putting intelligence either into machines, or into the systems that support the machines, to make better products.

LEININGER: We're going to have more one-to-one intelligence in terms of individual consumers versus where we were twenty years ago with mass marketing -- and versus where we were ten years ago with understanding core targets. It’s the evolution of the promise of marketing moving toward individual, in-depth relationships. Obviously, you can't have an in-depth relationship with someone unless you have some intelligence moving back and forth. It's a two-way communication.

"Altoids' presence in the minds of its consumers is so huge relative to the amount of media that you would see in any kind of a "measured media" way of looking at it." -- ERIC LEININGER

TELLER: What is going to drive brand intelligence, for many brands, will be a technology component. That is, the ability to meld technology so that things become even more personalized, like the way Amazon.com manages to be very smart about recommending books. As interactive TV becomes more entrenched and more widely available in the U.S. and throughout the world, the idea of being able to simultaneously access information when you want to know more is going to become very important.

KEYES: You look at what’s available today, versus what was available ten or five years ago, and certainly there are tools and techniques available now that weren’t available then. That’s going to continue as technology evolves at such a frenetic pace. It’s pretty much a matter of staying on the learning curve and taking advantage of new tools as they unfold.

QUINN: Consumers have a higher expectation of brand performance than they did 10 years ago -- definitely a result of the availability of information. So, the standards will continue to increase. Consumers can demand more of their brands, and expect more out of their brands, because they know more. So, smart brands managers will have to better understand what drives consumer purchases beyond an ad or a coupon. And, these managers are going to need to better understand how to reach consumers, individually, and in a meaningful way.

Which brands - other than your own - will be considered the brainiest five years from now and why?

QUINN: Brands that are able to stay consistent with their core insight and that adapt to the changing market environment will be the healthiest, the brainiest. Examples are brand equities like Target and WalMart, Volkswagen and HBO. These brands use evolving consumer insights to drive marketing and product innovation while staying true to the values that created their emotional connection to their consumers.

TELLER: CNN and MSNBC are very smart brands because they are so immediate and because they cover the world so well. They do get tremendous braininess equity from being so global and so fast on their feet. They are so nimble and so able to be there when you want to know something.

In the financial services arena, Citigroup is a brainy brand. It is very global and also integrated in a smart way so that consumers can benefit from the way that they’ve integrated financial services. Closer to home, National Geographic is a very smart brand in a very narrow category. National Geographic has the capability to really own physical exploration of things and to own wildlife and things like that.

KEYES: The brands I enjoy are those that come with a wealth of history and heritage and have been around for a long time. Some people might think that it’s easy to manage brands like that, but in fact I believe that it’s actually very challenging. How do you keep those brands relevant? How do you stay true to the brands without compromising their core equities but at the same time continue to make them relevant?

Brands like Coca Cola, Harley Davidson, Marlboro, or Budweiser Beer are really fun brands because they walk a little bit of a tight rope between the past and the future and there’s a linkage there that marketers are responsible for keeping. There are brands that are certainly higher on the radar screen just for the buzz factor, like Palm or Blackberry. Those brands will always seem really brainy just because they’re so innovative and they change the way that we do business.

de ROOI: Apple has been able, over time, to keep their initial promise and premise alive, producing computers that are easy to understand, even by computer illiterates. They still have a hard core of users. They have been able both to expand their new user base while retaining their loyal users.

"CNN and MSNBC are very smart brands because they are so immediate and because they cover the world so well." -- LAURA TELLER

Nokia always adds value to their products and does extremely clever things. For example, they take basic things like phones and turn them into fashion accessories. It fascinates me that basically an industrial company has been able to do that over a continuing period of time. Amazon is brainy because they really are interested in consumers and their behavior and they capitalize on it.

COSTELLO: In the classic, IT area, there are some standouts, like IBM, which is an incredibly brainy brand. It's brainy because essentially it's a combination of hardware wrapped in an enormous service care package with an organization built to provide solutions to the customer. And that is all about intellectual capacity and actually relatively little about the hardware itself. That's always what has differentiated IBM, certainly in the last few decades.

In the personal management area -- Palm and Blackberry, certainly are brainy brands. In the automobile area, there's General Motors’ Onstar product -- which they've migrated across several of their brands. How well they've linked it to GM versus the brands I don't know. But GM has been very smart in taking a high-end technology and trying to migrate it quickly down the product line -- that's pretty smart on their part, very impressive.

LEININGER: Brands that are able to refresh and reinvent themselves and have a huge equity and huge emotional connection built up -- Dell is a great example of that. Brands that are best at having a dialogue with consumers on the consumers' terms -- Altoids is a good example. Altoids' presence in the minds of its consumers is so huge relative to the amount of media that you would see in any kind of a "measured media" way of looking at it. That's because the communications itself and the advertising itself is so breakthrough and so just absolutely says, “this is for me” to the core target.

Another example that probably reflects my age is the Ford Thunderbird coming back out, with a beautifully updated retro look. When you see them people are honking and pointing, looking at the car. I think they've revealed that very wisely and very carefully with the way they've brought it to the marketplace.