Technology or marketing?

Last week, I was on a discussion panel at the British Computer Society’s evening meeting and it was really interesting to hear the non-marketing thoughts shared. One professional mentioned that out of the top 100 brands globally, seven of the most valuable entities were technology driven. It made wonder if technology is more important that marketing.  

Consumer led

If we really think about what we do at work, we see that our focus is not on the discipline but on the consumer. We use technology in terms of its absolute necessity to come out with innovative solutions but end of the day, if the consumer does not pick up on it, the innovation fails along the way. On the other hand, even if we take technological platforms like Facebook, Myspace, Twitter or YouTube, the essence is that we use these technologies to reach out to consumers about products and services, and in its absolute nakedness, it does not warrant value.  

Elephant House brand

A case in point is the Elephant House brand. Its history leads back to 1866 and its origins commence with the Colombo Ice Company. Due to a strong consumer focus, it has progressed from being a government entity to an organisation owned by a blue chip company today and is a top of the mind brand in the Sri Lankan household. Even though the company is over 100 years old, the company has made it a modern and relevant brand by using a combination of technology and marketing as a discipline. It is a classic case in point of how a brand can become strong due to consumer focus.  

Customer based equity model

Taking the customer based equity model, let me try to articulate what a ruthless focus the organisation has demonstrated to build a strong brand. Let me acknowledge the research done by Colombo University MBA graduates on this study.

Brand salience:  Breadth and depth of awareness

Brand awareness links the identification of brand elements to the product. Here, with Elephant    House, they always had theme of ‘fun and young’ linked to the ‘freshness and goodness’ of their product. They use the colours green and white in their brand as which indicates nature and a restful refreshing colour with white goodness.

Brand performance

There are five important components which relate to the brand performance:

1.Primary characteristics and supplementary features

Here, a consumer looks for the primary characteristics of the product. When it comes to the Elephant House brand, we have noticed that they have products that come with different taste, shapes, flavours, colours and many varieties to select from.

2.Product reliability, durability and serviceability

Here, reliability means consistency of the performance from the first purchase to the next. When it comes to the Elephant House brand, most of the customers are reliant on the Elephant House brand over the years from generation to generation.

Consumers mostly rely on the taste, quality and the quantity of the Elephant House products. Any event in the life of Sri Lankan people used to feature Elephant House brands. That is why ‘Cream Soda’, Elephant House’s flagship brand, has won the gold award for the people’s most popular beverage for six consecutive years since 2006.

3.Service effectiveness, efficiency and empathy

Service effectiveness refers to how completely the brand satisfies customers’ service requirements. Service efficiency refers to the manner in which these services are delivered in an efficient manner. Empathy refers to the service providers’ responsiveness towards the customers.

Service effectiveness and efficiency were symbolised by the Elephant House brand with the introduction of post-mix vending machines which reflected the company’s investment in linking machinery with consumers’ impulses.

4.Style and design

Consumers may have associations with a product that carries an attractive look. Therefore, it is very important to have a different style of packaging or design for the product that they produce. Elephant House did not change their beverage packaging until it faced high competition from other brands. Now they use different stylish handy packages for their beverages and ice cream.

5.  Price

Pricing is a more important aspect than the others. Most of the customers may rethink their purchase depending on the price that they are paying for the product. Elephant House brand gives more affordable price to the consumers with best quality products. Consumers may categorise the price of the brands into low, medium and high. The producer must fix the price based on the above categorisation.

Brand imagery

Brand imagery deals with the extrinsic properties of the product or service, including the ways in which the brand attempts to meet customers’ physical and social needs. Here, the brand imagery refers to the more intangible aspects of the brand. We can highlight four categories of different kinds of intangibles that are related to the brand.

User profile

Based on the users’ profile, others may also consume the brand. This may depend on the demographic and psychological factors. Gender, age, race and income level can be considered as the demographical factors.

Psychological factors may include attitudes towards life, careers, possessions and social issues or political institutions. When it comes to the Elephant House brand, we have seen that the brand is more focused on the younger generation. But still, the Elephant House brand is in the minds of people of all ages.

Purchase and usage situations

This will be based on different considerations such as type of channel through which the goods are freely available to purchase. Further, it considers the specific places at which they are available and the rewards associated with the product. The Elephant House brand is freely available in the market and they have introduced reward schemes from time to time.

Personality and values

Consumers may imitate personality traits and values. Because of that, brand personality is important to the products. The Elephant House brand has a very strong brand personality and it has obtained the ‘AA’ rating in the food and beverage sector. They highly value freshness and goodness and this is denoted through their new brand logo.

Impact on the market

It is very clear that the impact the brand has made is remarkable. In 2009, the brand was valued at just Rs. 896 million whilst today the brand is worth Rs. 1.8 billion. That shows the power of brand marketing that has come to the fore over the last few years.

2009-2010 net revenue increased when compared to 2008’s financial year. This is totally through increases in volume since there were no price increases. During this period, the company invested in their brand and capacity. Production of bottled drinking water under the brand name ‘Blue Fountain’ commenced in 2009-2010 and in November 2009, the company re-launched the energy drink ‘Wild Elephant’ and it also contributed towards the increase in sales in the next year.

In the frozen confectionery segment, the ice cream company introduced aggressive promotional activities with special price offers and new products were offered during the Christmas season. That is how company increased their revenue by almost 16% in 2010-2011.

During 2011-2012, the company was able to leverage their capacity and brand to grow their volumes in every category of products by double digits and this led to 22% growth when compared to 2010-2011. The ice cream segment performed exceptionally well and achieved a turnover growth of 32% with a significant volume increase of 20% in this year. Investment made in 2010 on the impulse range enabled the business to enjoy additional sales value in new products.

The overall  increase in net revenue was mainly due to the out of home consumption increase led by the large events organised in different parts of Sri Lanka, and the increase of domestic travel over weekends and holidays. In selling and distribution, the company invested in expansion in 2009-2010 and made their presence felt in the north and east of the country. Also as we can see through the graph, there have been no major changes but they still maintain a balance each year.

In 2010-2011, company level selling and distribution costs increased by 30% due to a corporate revitalisation campaign and the mega launch of ‘Kik Cola’. This expenditure was incurred for positioning the brand, brand recall and further for consumer promotional activities (billboards, hoardings and name boards to the retailers).

In 2011-2012, the company incurred a major part of sales and distribution costs on the enhancement of retail networks in the north and east and the enhancement of mobile sales for ice cream.

Overall, in 2010 the company invested a significant amount on rebranding, distribution and capacity enhancement. The company obtained the harvest of the investment in 2012 through the 22% increase of their net revenue.

Profit after tax vs. brand value

It was noted that after 2010, there was a significant increase in the brand value, an increase of 38%. This is due to the successful completion of the brand revitalisation. We can see in the graph that there is a small downturn from 2009-2010 to 2010-2011. The main reason behind this decrease in profit is due to the massive investment they made on the rebranding and launch of Kik Cola.

The company recorded profit after tax of 1.12 million excluding the gain from the increase in fair value of the investment property in Colombo which reflects the 342% increase in the profit over the year.

Conclusion

The above is a real life case study of the power of an organisation in embracing key concepts to practice consumer orientation. Hence, the debate is not about technology or marketing but is about adding value to the consumer and thereby enterprise value development. Let me acknowledge the research done by Colombo University MBA graduates on the above study.

The thoughts are strictly his personal views and not the views of the organisations he serves in Sri Lanka or globally