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Publications

Covers of Sense Issues

Connecting Energy Company Brand Position to Brand Image

Suzanne Hogan, Senior Partner, Lippincott Mercer
Energy Branding Conference

As deregulation becomes a fact of life in the energy industry, energy companies—like airlines and phone companies before them—are staring into the face of probably the most radical restructuring process in their history.

While no one can say for sure exactly where the industry is headed, one thing is certain: the future will bring intensified competition and require a much increased focus on the customer.

Whether your company is retailing energy to the consumer or selling wholesale to manufacturers, institutions, or other energy companies, customer-focus will be at the heart of your business strategyand brand positioning and management will probably be a critical part of your efforts.

This afternoon, I'm going to address some key issues relating to branding in general and branding for the energy industry. But before doing so, I'd like to talk about someone very near and dear to all of you here today: the energy customer.

Last year, my company, Lippincott & Margulies, undertook a study of customer perceptions in the Energy Services Industry. We focused on commercial or industrial purchasers of energy for companies with annual revenue in excess of $5 billion. Our study had three objectives:

  1. Explore commercial customer perceptions of the energy services industry and the changes occurring as a result of deregulation;
  2. Identify the criteria customers use in selecting energy services providers and the characteristics they view as critical to success in a deregulated marketplace; and
  3. Assess how energy services companies can improve identity and communciations practices to better meet customer needs, both today and in the future.

Our findings were interesting, to say the least. While there are some exceptions, overall, customer perceptions of the energy services industry are not flattering. Our survey showed that the industry is seen as:

As we can already see from the survey results, as deregulation offers energy users greater choices, competition will increase and providers will not only have to change the way they operate in order to address these very clearly articulated customer needsthey will have to communicate those changes to their customer audience.

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That's where positioning, branding and brand management come into play.

Before we can talk meaningfully about positioning a brand, we need to be clear on why it is important to position a brand and exactly what a brand is.

The reason it is important to position a brand is because of the phenomenon that we at Lippincott & Margulies call "Brandwashingsm." As consumers, we are all influenced by the effects of a powerful brand positioning—"brainwashed" so-to-speak—to have preference for one versus another. However, there are so many choices for consumers today that this term has a secondary derivation—"whitewashing." That is, the brand choices are so many and the differentiation so little in terms of product functionality, that the plethora with which we're faced becomes a sea of indiscernible offerings.

Brandwashing is certain to be an issue for the energy industry. As our survey showed, customers perceive energy service providers as undifferentiated from one another. For this reason, if for no other, an energy brand must be well-positioned and uniquely differentiated.

Now that we are clear on why brand positioning is important, let's define what a brand is.

In situations like this, it is customary, if not especially original, to quote the dictionary. But in my research I found Webster's wasn't much help. When I looked up the word "brand," I saw that it carried three separate and distinct meanings. The first was, and I quote, "a trademark or distinctive name identifying a product or manufacturer." That's accurate as far as it goes. But it doesn't begin to capture either the full weight or subtle nuances of brand identity, or what it means to position a brand in the marketplace, and clearly ignores that strong emotional connection that people have with their brands.

Definition two was even further off the mark: "A sign of disgrace or notoriety." And definition three missed by a country mile: "A mark burned into the flesh of criminals." I could see I was getting nowhere fast.

Then I realized that in its own dumb, if well-meaning, way, the dictionary was trying to tell me something: namely, that defining a brand, like defining the term brand, is absolutely essential. If you fail to define your brand or define it improperly, you'll wind up with something that more closely fits definitions two and three or need I remind everyone in this room today of the demise of Pierre Cardin's ill-defined brand in the 60's or what most recently happened to the value of the Dennis Rodman "brand" in his recent incident with a cameraman.

So, in the absence of a usable dictionary entry, I took it upon myself to put together a definition as it relates to the subject at hand. And this is it: "A brand is the sum of all available information about a product, service or company." This information is conveyed in two ways.

First, through our direct experience with the product. Our experience is a combination of two factors—functional satisfaction and emotional satisfaction. From the functional standpoint—how well it removes tartar, reduces engine knock, gets out tough stains, answers my need for information or otherwise performs against the basic requirements. But brands and brand loyalty go far beyond meeting the basic promise—a brand must provide emotional satisfaction. Does the brand fully understand its target markets' needs—that I am a busy person and need prompt attention from the telephone company or the energy service provider I'm using, that I need to feel smart or hip or competitive. Does the brand speak to me in a way that fulfills my individual needs thereby bonding my relationship with it?

Second, there are the various communications drivers, such as advertising, public relations, a name, logo—or, for the energy industry, a truck, a service person's uniform or attitude—that companies use to shape our perceptions about the brand. For many brands, the channel or the environment through which they're sold can tremendously communicate different attributes about a brand. At the end of the day, direct experience combined with the sum of all these communications drivers will create an impression in the minds of key stakeholders, including customers, employees and the investment community.

Critical to the success of a brand, is that all of these factors align or otherwise "make sense" when subconsciously brought together to form the big picture of the brand. We call this impression brand image or brand reputation, and it will be either positive or negative, or somewhere in between.

There are many variables in the positioning of brands in the marketplace. But there are three components essential to developing a clear brand definition—vision, meaning and parameters of relevance.

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Let's look at each of these.

What George Bush would have called "the vision thing" encompasses both the brand's roots—why you're in business—and where your company is headed.

Many tend to associate vision with some lofty, long-term journey or goal that is difficult to define, let alone achieve without a crystal ball. However, a vision for a brand can be simple and must be sustainable.

By and large, the most successfully positioned companies and brands in terms of growth, financial performance, visibility and market share are those that have linked a powerful brand positioning to an inspiring, overarching vision:

These visions are simple, but aspirational—and for the most part, non-limiting... but more about this later.

A brand's meaning is just that—what your brand represents to the marketplace. Meaning is generally manifested in establishing desired image attributes that drive all decisions about the brand. If you, the marketer, have only a dim notion of what your brand is about, you can count on your target market to be totally in the dark, too.

As for the parameters of relevance, these are simply the limits to which you can extend your brand beyond its core meaning without compromising your credibility. It's understanding what your brand is and what it isn't. Your ability to move successfully into new areas depends on which new areas and whether they align with the vision or fly in its face.

So, which brands are well-positioned? Which have a clear vision, concise meaning and understand their parameters of relevance?

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Disney

I think few brands are better defined than Disney. This success is measured by no less than a 610 percent growth in the last decade, according to this year's annual report. And, almost half of that growth was due to new business areas—some which bear the Disney name and some which do not—a company that not only understands its vision and meaning but clearly understands its parameters of relevance. What is the Disney story? ...

Disney traces its origins back to 1923, when Walt and his brother Roy started a film studio in Hollywood. Their first Mickey Mouse cartoon came out five years later—Steamboat Willy. If Walt were alive today, he might be astonished at the diversity of the company that bears his name. But then again, he might not be surprised in the least.

Whatever else Walt Disney was, he was a visionary. And his vision for the Disney Company was not to crank out cartoons, or build theme parks, but "to make people happy." I can't imagine there is anyone in the developed nations today who isn't crystal clear on what the Disney brand stands for—imagination, wholesomeness, fun. Whether we're talking about a theme park—for children or adventure and learning vacations for the whole family (Disney Institute), a movie or a co-branding effort, the Disney promise is aligned with our expectations. Its branding decisions make sense.

As the company grew, however, management's definition was clear enough to understand when the name no longer had relevance or perhaps sent a mixed message to the marketplace. When the company saw growth opportunities in extending beyond PG-rated movies, it made sense to create a new brand, Touchstone Pictures and, after its acquisition of ABC, clearly recognized the value in retaining this established brand for its growth in distribution.

Nike

NIKE is another example of a well-defined brand: "athletic shoes for winners." It is also a company that understands the importance of defining itself early. As far back as 1972, Phil Knight, the founding and current CEO, persuaded several marathoners to wear NIKE shoes during the Olympic trials in Eugene, Oregon. When some of the runners made the cut, NIKE ran an ad campaign saying that "NIKEs were worn by four of the top seven finishers." From there, the rest is history.

Just lacing up a pair of Cross Trainers inspires you to go out and crush the competition. The key idea is that NIKE wants you to outrun the pack, hit the three-pointer at the buzzer and fulfill your personal potential in every way—on and off the athletic field. Whatever it is that you want for yourself, you can "just do it" in NIKEs.

The brand's desired attributes are reflected in everything that represents its products, whether the tone and manner of an ad or a representative of the brand. Like Carl Lewis, Michael Jordan or Tiger Woods—active, inspired, hip, intense, energized—a winner.

Like Disney, however, Nike knows its limits. Entering the casual shoe market might seem a natural fit to the Nike brand, but in reality it wasn't. In attempting to do so, NIKE forgot that its definition was more closely aligned with athletics and fitness. Occasions for wearing a casual shoe don't match the brand promise. When you think about it, there's hardly anything competitive or inspiring about running errands on a Saturday afternoon. But in the interest of growing the business, Phil Knight purchased Cole Haan brand and a line extension under a more relevant brand claimed this segment of the business.

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Microsoft

Or consider Microsoft. Here is a company that was started in a hotel room by a couple of college dropouts, lots of ideas, and a single vision: a computer on every desk and in every home. That might have seemed like a brazen idea 20 years ago. But it has guided Microsoft ever since, giving it uncontested dominance in the desktop software market and making Bill Gates a very rich man.

Microsoft today is hardly what you would call a simple company. It employs over 20,500 people and designs and sells a vast array of software programs in 60 countries; last year it netted over $2 billion in income. But as much as it has grown, it has never lost sight of its original vision. Everything about Microsoft—its products, its marketing, and, most important, its brand positioning—is still driven by the idea of "a computer on every desk and in every home."

Microsoft products are for ordinary, smart people—not technogeeks. The Microsoft brand enables people to leverage the power of computing to work better, have fun, and fulfill their aspirations. Its advertising asks users, "Where do you want to go today?" The company may be a giant, but it's a friendly giant—one that puts a high priority on being simple, contemporary, approachable, hip and even low tech as much as the "low tech" attribute may seem counter-intuitive in the context of a technology business.

Continental

I'd like to turn to some examples now that are a little closer to home. For you, as representatives of the energy industry, and for me, because these are projects that my company, Lippincott & Margulies, played a role in.

Like the energy industry today, the airline industry has undergone significant restructuring in the wake of deregulation. As that restructuring evolved, one major player in the industry, Continental Airlines, decided to completely revise its positioning and presentation in the marketplace. Lippincott & Margulies was called in to help.

Continental's goal was to achieve the status of a top-tier global carrier.

Our consulting team did some initial research and learned that not only customers, but travel agents and Continental employees as well, felt that the airline was changing, but had not yet reached the level of a top quality airline. As a result, we recommended the adoption of an image management strategy and communciations plan that would present a world-class airline that was consistent and professional in its operations and service, yet personable, dynamic and responsive.

To be effective, our plan had to reflect the positioning in every visual element of the company from aircraft exteriors and interiors to employee uniforms, facilities, signs and visual systems for product and service branding, as well as all corporate marketing and advertising materials. For Continental that meant a new logo incorporating a dramatic interpretation of a globe which would reinforce the airline's international credentials. The oranges and reds of the old logo (show slide), seen as regional and recreational, were replaced by blue, white and gold (show slide) to convey the image of a stable, dependable, first-rate operation geared toward the sophisticated requirements of the frequent business traveler.

Equally important to the visual presentation was the involvement of employees. As one Continental pilot said: "Employees have a stake in the results, they should be included at every step." So we formed an Image Advisory Group made up of pilots, ground crews, flight attendants and ticket agents. This gave our communications plan an "inside-out" approach that ensured employee understanding and support. We also worked with Continental's public relations, advertising and employee training resources to ensure a consistent and comprehensive implementation of the program.

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Signature

Closer to home for this audience is the story of Page Avjet, a company providing fueling services for private and small commercial aircraft. After acquiring its primary competitor, Butler Aviation, Page became the largest business aviation service organization in the US. Still, as the provider of an undifferentiated commodity like airplane fuel, it needed to adopt a strategy to establish a firmer and more visible market presence.

Product line extension was part of the strategy. The company broadened its scope of services to include ground transportation, meeting room facilities and catering. But Page Avjet didn't really have a brand image to support the product line extension.

If you are an energy company, how does your brand image support your sale of, say, appliance repair services? And as we shall see shortly, that's an area that some of the largest energy companies are moving into. But back to Page Avjet.

What the company needed was a value-added image that would distinguish its service offerings and justify a premium price for fuel.

Research showed that pilots wanted personal service and care, while traveling business executives wanted facilities and services on a par with quality hotels and restaurants. Giving its customer's top-tier service and refurbishing its facilities to provide a country club atmosphere could help satisfy these needs.

To establish the new brand—and support the value-added positioning—the consulting team from Lippincott and Margulies developed the name Signature Flight Support (show slide). This new name projects a brand identity that focuses on people and upscale customer service.

In a sense, the introduction of Signature Flight Support, helped Page Avjet reinvent an industry. And the results have been impressive. In the first year of the program's implementation, revenues increased 10 percent. Sales and customer ratings improved dramatically; and the company was voted number one in service in a survey of flight attendants of the 100 largest corporate fleets in the US.

Like the airline industry before it, and the energy industry today, the telecommunications industry has undergone significant upheaval in the wake of deregulation. To remain competitive in this kind of an environment, companies often have to implement changes in every area of their business, and those changes have to be projected to customers through the creation of a clearly defined positioning and brand identity.

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The Southern Company

As we shift our focus to the energy industry, you can see that many of the issues to be addressed are very similar to those in the case studies I've just presented. So let's talk about the Southern Company—one of the world's largest energy providers.

The Southern Company is a holding company with six operating affiliates throughout the south. Those affiliates operate with names like Alabama Power, Mississippi Power and Georgia Power. Although the company is the largest publicly held utility in the US—and ranked by Fortune magazine in March of this year as the #1 most admired company in the Electric & Gas Utility industry—until recently the name "Southern Company" was virtually unknown outside of the financial community.

Because of the low cost of its electricity, the company found itself extremely well-positioned to market electricity outside of its operating region.

But price alone is unlikely to be the end-all be-all of competitive advantage in the energy industry. And the Southern Company acknowledged the need to establish additional competitive levers other than price.

Clearly, building a national brand was essential and L&M; partnered with them to do just that.

One of the things our research showed was that, nationwide, Southern Company had just a 12 percent awareness. Ironically the same study showed that a fictitional "Northern Company" had a 10 percent awareness. Senior managers also expressed some concern about the message projected by "Southern" company. "I'm not sure about what 'Southern' says," one manager responded. "Some people I speak to still think of us as barefoot and backward. Others recognize the region's economic vitality and low energy costs." Ultimately, the vast majority of senior mangers believed that the parent company brand name should eventually be the single brand name for in-and out-of-region audiences.

At the regional level, that meant creating a transitional plan that would add the Southern Company's name to the names of the existing operating companies like Georgia Power and Alabama Power and slowly phasing out those regional names out over a five to eight year period. Here's an example of an existing ad for Mississippi Power (show slide of Mississippi Power). At this level, the strategy leverages the excellent reputations and strong brand equity of the regional companies.

In the meantime, however, through acquisitions and mergers, Southern Company has already become a global powerhouse and aggressively markets itself around the world through operations in Latin America, the U.K. and most recently in Germany.

While the phase-out of the regional brands moves forward, the company has undertaken a massive marketing and advertising campaign to position itself as a national and global brand.

To support this effort our design team reinterpreted the Southern Company symbol (show slide depicting logo redesign), changed the type and color palette, and extended the system across all units of the company. Southern Company also bolstered the logo with the tag line: "Energy to serve your world"—projecting the image of quality service with global reach.

Here are a few ads the company is now using in its national ad campaign. (Globe ad slide—head: What size neighborhood does your electric company serve? Copy: As the largest generator of low cost electricity in America we've taken our resources, expertise and customer service to 4 continents and 30 countries. Which translates into satisfied customers all over the world.) The message here? Low cost, strong service and know-how, global reach.

Here's another one. (Tornado ad slide—head: What kind of power can an energy company have over mother nature? Copy: Speed. And whether it's tornadoes or hurricanes, our five million customers at home and abroad know they can depend on our experience, energy and reliable service. Because we'll have the electricity flowing again faster than a bolt of lightning.) The message here: great, highly responsive service; solid experience and know-how; global reach.

These dancing cords and plugs are all part of a campaign that includes national television along with ads in all the national business publications including Fortune, Forbes, Business Week and The Wall Street Journal.

This kind of coordinated regional, national and global brand management approach is already significantly increasing awareness. In a few minutes I'll be talking about some additional strategies Southern Company is using for extending its product line and its sales volume.

The classic approach to brand extension illustrated by companies like Disney will always be with us, but as we move into the '90's and beyond, employing the classic approach alone is not enough to truly grow a brand.

So I would like to offer a more contemporary definition of line extension: "merchandising a brand to its greatest advantage in order to maximize growth."

This definition still requires marketers to use the same discipline in defining a brand described earlier—establishing a vision, meaning and parameters of relevance. This doesn't mean line extending for extension's sake, stretching a brand until its meaning is too dilute to retain customer loyalty. At the same time, the constrictive definition of brand extension as simply the addition of a new product isn't adequate any more. The world is changing so fast that marketers are continually challenged to come up with new ways to define and position brands. These trends include:

Globalization, which is leading to a universal homogenization of tastes, emerging market growth and new audiences hungry for products

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Demographic shifts, and the identification of new classes of consumers with specific needs

Technology, which has spawned whole new channels of marketing and distribution, such as the Internet and satellite TV

Industry consolidation, from insurance to airlines. This results in consumers having fewer brand choices and a greater likelihood that they will become loyal to one brand over others resulting in...

...an increasing emphasis on relationships. Consumers today want to be able to trust brands to be accountable for both their products and their promises. What they really want is the kind of lifetime relationship that existed in the days when buyers and merchants knew each other by name and products were made with care and pride.

All of these factors are not only conducive to line extensions, they necessitate them. In this regard, it's essential to understand the importance of adding real value for your customer. As Al Zeien, the CEO of Gillette, says, "Line extensions are not about just putting more blue dots in the powdered detergent and calling it new and improved."

The upshot is that today there are four "hot" ways to extend an already well-positioned brand. It is important to note that none of these marketing approaches is new per se, but may not be top of mind as an approach to extend a brand.

And the lines between a couple of them become somewhat fuzzy:

Licensing. An industry unto itself, last year's sales of licensed products exceeded $70 billion in the United States and $100 billion worldwide.

And yes, ladies and gentlemen, licensing has already hit the energy industry!

Here's a very interesting story. When we did our survey of energy purchasers, one commonly heard complaint was that energy companies don't do enough to apply information systems and new technologies to help customers manage energy usage and costs more effectively.

Then I recently read a quote from Tom Arnold, who manages energy for the Wendy's chain of fast food restaurants: "The meter as we know it now" he said, "really doesn't provide a lot more information than how much energy we use. There's an opportunity to provide the end-user with much more information about exactly how and when they use that energy."

Well, the Southern Company came up with a branded product called EnerLink™ that provides precise, detailed information on energy use and cost on a real-time basis. Using advanced metering and computer hardware and software, the system allows users for the first time to really understand not only how much energy they use, but precisely how they use it and at what cost. It's a great tool for customers with multiple locations, because all the customer's various electric rates are programmed into the Enerlink™ software. It allows customers to compare use at different locations on a one-to-one basis. And guess what? The product has been so successful that Southern Company has made it available through licensing arrangements to other utility companies around the country. It's now used by hundreds of industrial and commercial customers nationwide.

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Co-branding. Extending your brand into new markets geographic, demographic or otherwise by complementing or supplementing another brand's strengths can also contribute to growth. Recent examples include high-profile marketing alliances between Disney and McDonald's, Jeep and Orvis, The Girls Scouts and Milk, and Microsoft and NBC (MSNBC). Co-branding that teams a manufacturer with a retailer can be especially effective. In a recent survey, 98 percent of retailers predicted that co-marketing would be a standard practice within five years. But like other forms of brand extension, there has to be a "fit" between partners—a complementary or supplementary relationship that makes sense to the marketplace. How will co-branding play out for the energy industry? While some energy companies may opt for brand extensions that take them into wholly new businesses—businesses that may or may not take them beyond their parameters of relevance—others may choose to go the co-branding route. UtiliCorp United, for example, is experimenting with a broad range of value-added products including home security, carbon monoxide monitoring and appliance repair. Other energy companies may choose to co-brand those services, adding a partner's product expertise to their own marketing and distribution channels.

Sponsorships. This isn't exactly a new idea but borrowed interest from successfully linking with a headline event can strengthen your brand enormously. Some of you may be old enough to remember "The Texaco Star Theater," starring Milton Berle. In the 1950s, it was the most widely-viewed weekly TV show and helped Texaco become the leading brand of gasoline.

And, of course, Olympic sponsorships come to mind. Brands possessing attributes—or aspiring to possess attributes associated with the Olympics can experience a positive rub-off from being an Olympic sponsor—of some sort—whether you take the $40 million plunge into Worldwide sponsorship or a more modest approach. Of questionable value may be signing on to become the official cough drop or toothpaste of the Olympics. But those brands that go in with a strong commitment and purpose stand to benefit a great deal.

And now there is the whole issue of stadium sponsorship. For a few million a year, a company might gets its brand name on a major sports arena. The airlines have been very active in this game: there's now the Delta Center in Salt Lake, The United Center in Chicago, and the Continental Airlines Arena in New Jersey.

But the energy industry has not been left behind in the race to name stadiums and arenas. As I'm sure all you Reds fans know, Riverfront Stadium in Cincinnati is now known as Cinergy stadium.

Recently—and here is where the lines get fuzzy between these concepts—CBS and True Value collaborated into a mix and match of sponsorship and co-branding—or as we call it "tri-brandingSM—that was very successful." Let's begin with the new CBS brand positioning, "Welcome Home." In its quest to build programming in support of its all family positioning, one of the season's offerings was The Story of Santa Claus. While seeking sponsors for the CBS-produced holiday show, True Value believed that the values conveyed in the program accurately represented those associated with the True Value brand and requested title sponsorship. Those values were extended further when both the network and the retailer connected with Toys for Tots, setting up displays for the non-profit organization in True Value outlets—displays which successfully brought traffic into True Value and encouraged viewership of the CBS program. Talk about an elaborate way to extend three brands!

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Brand agentssm. Not to be confused with spokespeople, brand agents are living breathing embodiments of a brand. The individual represents the brand in its totality—its positioning and its brand attributes-and does not violate the parameters of relevance. One could argue that Candice Bergen serves more as a spokesperson to Sprint and Jerry Seinfeld as a spokesperson for American Express. Brand agents are not just recognized celebrities, but individuals that stir emotion that support the brand in a meaningful way. For instance, Mike Tyson has recently signed a long term contract to be the official brand agent for the nation's largest chain of ear-piercing boutiques.

Seriously though, here's a brand agent some of you might recognize (show slide of Reddy Kilowatt), he's been representing Oklahoma Gas & Electric for quite a few years now.

Nike is master of the use of the brand agent concept and few could argue that Michael Jordan and Tiger Woods serve merely as spokespeople.

As Phil Knight was quoted in The Harvard Business Review, "You can't say a lot in 60 seconds, but if you show Michael Jordan, you don't have to." Other brand agents who clearly represent this type of emotion would include Bill Cosby (wholesome family values) and Walter Cronkite (honesty, veracity, authenticity).

A few minutes ago, I mentioned Tiger Woods, the young golf prodigy who has also become an overnight marketing sensation. Crushing competition is his forte—especially when down to the wire—as he reigned victorious at the Masters Tournament earlier this spring. No one could argue that he possesses the attributes of active, inspired, hip, winner, intense and energized and will continue to be an inspiration to many in the coming year. He's a neat "fit" which is why Nike is paying him somewhere between $30-66 million over the next five years to be its brand agent.

This year, Tiger Woods is winning tournaments and he does the Nike brand proud. But Tiger Woods is fast becoming his own brand. Beyond Nike, where can his brand play? In preparation for the future, he and his agent will need to employ the same discipline that all successful marketers do—define his brand: vision, meaning and parameters of relevance. Tiger has already signed new contract's with Rolex, American Express, Golf Digest and Titleist. Are these extensions in keeping with his own vision and meaning? Will they take young Tiger beyond his parameters of relevance? only time will tell.

A final word. I began this presentation with reference to the energy customer and I'm going to end with the customer as well. Because whatever else it's about, brand positioning is first and foremost about the customer—the people who buy your product or service and keep you in business. Phil Dusenberry, who is vice chairman of BBDO as well as the man who wrote the screenplay to the movie, "The Natural," likes to talk about the importance of "celebrating the consumer." Consumer loyalty, he says "is a brand being true to itself. Consumers don't abandon brands; brands abandon consumers."

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