Well positioned for tomorrow. A strong Brand as a success factor for SMEs.

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1 ICE E SME ERVICE M SERVIC CE SERV ICE Well positioned for tomorrow. A strong Brand as a success factor for SMEs. MetaDesign Unit 2601, Zhongyu Plaza A6 Gongti North Road Beijing Brand management isn t solely a concern of large companies. All SME executives have to grapple with how they can use their Brand as a key driver to success. By Dr. Alexander Haldemann and Patricia Meyer Leibnizstrasse Berlin Grafenberger Allee Düsseldorf , rue du Gothard 1225 Chêne-Bourg Battery Street San Francisco, CA Small and medium-sized enterprises (SMEs) are the backbone of the Swiss economy. They account for 99.7 per cent of Swiss companies and employ two-thirds of all workers. They are not only in competition with their peers, but compete against large corporations with much larger marketing budgets and high-profile homegrown Brands. SMEs often ask themselves: how can they withstand the pressure on prices from low-cost European countries or Asia? How can they communicate their offerings efficiently? How can they recruit the right specialists? And how can they cope with the task of finding a successor for a company s prominent patron who represents the business like no other? This is where the Brand comes into play. A Brand differentiates a company from the competition, creates trust amongst customers and motivation among employees. At the same time a strong Brand raises the profile of a company and ensures that it communicates its strengths efficiently. Klausstrasse Zürich

2 A strong Brand brings competitive advantages A strong Brand shows target groups what the company stands for in a clear and concise manner. It differentiates a company from the competition, makes a company attractive to its audiences and provides the flexibility to respond to short-term trends. At the same time, strong Brands are intangible corporate assets that may have a significant impact on a company s valuation. That is why it is advisable to implement the Brand vision consistently in order to achieve the highest possible Brand value. This requires a distinctive Brand positioning underscored by a unique and inspiring Brand profile and consistently communicating the Brand across all channels. SMEs have many trump cards over large companies: flat decisionmaking structures, high levels of personal responsibility amongst employees, speed and straightforward communication channels i.e. everything you need to communicate a Brand in a targeted and efficient fashion. Nevertheless, not all SMEs have fully recognised the power of the Brand: they have not sufficiently grasped the extent to which they provide customers certainty and guidance when making purchasing decisions. When considering the Brand, customers will remember its image and the reasons for selecting it. This is particularly true for SMEs who often plan and act on long-term prospects spanning generations. In this way, taking control of their reputation is a management task of the highest priority. 27% of SMEs in Germany, Austria and Switzerland consider Brand strength to be a key competitive advantage for their companies. PwC (2011): Solid as a rock? Study on family businesses 2010/11 M A Brand offers guidance within assumingly comparable offers

3 Legal structure Legal and fiscal requirements Management structure Organisational requirements Brand architecture Market requirements Group Brand Branch 1 Branch 2 Branch 3 Brand Architecture: depicting market requirements rather than organisational structures For reputation control, the following issues are relevant for SMEs: Development of a future-oriented vision Concentration of resources Internal Brand identity Recruiting professionals Ensuring marketing effectiveness Succession planning Developing a future-oriented vision Having limited resources means top management is often required to perform operational tasks in SMEs. Management is usually then directly involved in issues such as R&D, customer service or sales. It is crucial for management to define a higher-level vision that is stable over time and is not linked to particular individuals. It should be strong enough to provide all employees with a common basis for orientation and motivation. Concentration of resources SMEs must increasingly consider how they want to present their products and services to the outside world with as much transparency as possible. Complexity of offers, service homogenisation and high service shares may be the buzzwords of the day, but they also stand for something. Companies pursuing a clear Brand strategy and product range segmentation and which tailor their Brand portfolio to the needs of their customers can develop the strength necessary to compete with large corporations. An efficiently designed Brand portfolio defines which Brands will be used to target the market and which customer categories and price segments a Brand can serve. Doing so makes it possible to avoid classic traps such as: the desire to represent a company s organisational structures using Brands, targeting the market with too many Brands, thereby driving up budgets and costs, and end up confusing customers. Internal Brand identity For a Brand to appear strong, it is important for the Brand to be firmly anchored internally. Brands can generate a feeling of belonging, motivate employees to work toward the same objectives and create a unique corporate culture. Only when corporate values are truly lived and experienced, employees become more credible when approaching customers and make the Brand come to life with their behaviour. Even the style of leadership, internal communication policy and selecting the right people, are part of these values and thus the Brand. Short chains of command and decision-making procedures give SMEs an advantage over corporations. Thanks to this flexibility, management is able to address employees more easily and in a more personalised fashion. Motivating staff, giving them a say in operations and exemplifying the Brand values, is much easier to do in an SME than in a global conglomerate.

4 Recruiting professionals Finding the right professionals is one of the hardest tasks an SME must perform. In practice and science there is a consensus that attracting and retaining employees is a key task and challenge companies face. The competition for securing the best employees is generally more intense than the competition for acquiring customers, as SMEs have to compete with companies from other industries to recruit them. A mechanical engineering company faces competition for the best engineers not only in its own industry, but it also competes with attractive employers in other industries, such as Google or UBS. Here it is important to define what makes the company attractive as an employer and which measures can be implemented to retain the professionals already working there. It is crucial to point out the advantages a company offers potential employees and to communicate them effectively in the market. A shortage of skilled workers causes a potential accumulated decline in turnover for all Swiss SMEs totalling CHF 4.2 billion. Neue Zürcher Zeitung (2011) : SMEs lament on a high level Ensuring marketing effectiveness Marketing effectiveness is crucial to success for SMEs in domestic and global competition. They can hold their own against large corporations if they use their limited resources effectively. To ensure marketing effectiveness, the exact target groups, the specific messages and communication channels must be defined in advance. SMEs are well able to gain a competitive advantage by utilising innovative communication channels such as social media. Unlike the traditional media channels (print, moving image), social media carries no distribution costs and levels the playing field for all companies. Moreover, with social media SMEs can detect trends or crises early, offer a better service, enhance their reputation and address customers. This enables SMEs to turn customers into Brand ambassadors. Succession planning According to the publication Finanz und Wirtschaft, one in four SMEs will experience difficulties in succession planning, resulting in a drop in sales and market shares or the need to shed workers. What can appear to be a strength the association of the Brand with the founder or owner turns out to be a cluster risk when the founder or owner leaves the company. «In the next five years, 80,000 companies in Switzerland must face succession issues.» FINANZ und WIRTSCHAFT (2011) : Succession planning is a pressing issue in 80,000 SMEs A strong Brand will manage to separate the company s image from one individual before it s too late. Another approach is to establish early on the differentiating elements that can help carrying the Brand besides the personality of the company s founder. SMEs that boost their Brand early on independent of figureheads are making a crucial investment in their future. References: Credit Suisse (2011) : Megatrends - Opportunities and Risks for SMEs, focus in 2011: Innovation Federal Department of Economic Affairs, Education and Research EAER (2011), Finanz und Wirtschaft (2011) : Succession planning is a pressing issue in 80,000 SMEs NZZ (2011) : SMEs lament on a high level PwC (2011) : Solid as a rock? Study on family businesses 2010/11 TNS (2012) : The Impact of Digital on Growth Strategies CMO Imperatives for 2012

5 Des Communication Trade shows Print media Interest Networks File Sharing Communities Image Identity Design Identification Blogs and Microblogs Website Corporate Communities Behaviour Advertising Social Communities Social media enables clients to participate at brand management level We decided to invest in the Brand because in our industry budgets for communications and advertising are very tight. Dr. Karin Lenzlinger Diedenhofen, CEO Lenzlinger Söhne AG

6 Ten success factors for SMEs Brand over advertising SMEs cannot compete with the advertising budgets of large companies. A clear positioning of the Brand with a distinctive profile is therefore the primary focus. Mobilisation with vision Only when all employees from administration to research and development and sales act together, will a sense of belonging emerge that mobilises the Brand. Less is more SMEs have limited resources to manage a Brand. It is advisable to concentrate resources in building a strong Brand in order to create a strong Brand despite this limitation. No figureheads Many SMEs often tie the Brand unintentionally to the founder or owner. If a Brand is to be strong in the long term, it must go beyond an individual. Unleash the power of social media A smart social media strategy will enable an SME to reach a large audience with little effort. Here SMEs can play on a level playing field with large companies. Use of smart tools Simple Brand management systems can help to keep the cost of Brand development under control. The wheel does not need to be reinvented each time. Stand out by being consistent SMEs cannot afford to have a diluted Brand image. They must be consistent with visuals and language to ensure Brand recognition on the market. The Brand for the employee The Brand needs to appeal to existing and future employees in an authentic and attractive way. It is a key tool in the competition for skilled workers. Investors as a target group A well-established Brand creates intangible assets that are essential for the company s valuation, especially in business transactions. Employees as Brand ambassadors Employees should be motivated and given the tools they need to promote their company. They are often the most important contact point for the Brand.