Go beyond Porter’s Model to understand the 8 sources of brand power

Posted on Posted in Beloved Brands Explained

When I was in business school, I learned about Michael Porter’s model as a way to understand the five forces that outline an industry attractiveness and competitive intensity. Porter’s Model a great starting point to get you to think more strategically and how you can win through power. However, I want to show you how brand leaders can go beyond Porter’s Model and start to see other sources of power, which reinforces our idea that the more loved a brand is by consumers, the more powerful and profitable that brand will be. I see brand love as a stored energy that can be used to drive further power and profitability. 

 

Brand power

How tightly connected is your consumer to your brand?

 

I first came up with the idea of a brand love curve when I ran a marketing department with 15 different consumer brands, which exhibited various degrees of success. Honestly, it was hard for me to keep track of where each brand stood. I did not want to apply a one-size-fits-all strategy to brands with dramatically different needs. I could have used some traditional matrix with market share versus category growth rates or stuck with revenue size versus margin rates. Every day on the job, I noticed brands that had created a stronger bond with their consumer outperformed brands that lacked such a close connection. I started to refer to the high-performance brands as “beloved” because I could see how emotionally engaged consumers were with the brand. 

At the other end of the scale, I referred to the inferior performance brands as “indifferent” because consumers did not care about them. They failed to stand for anything in the consumer’s mind; they were not better, different, or cheaper. I could see how these brands were unable to create any connection with their consumers – and they faced massive declines. 

Beloved brands have it easier

Everything seemed to work better and easier for beloved brands. New product launches were more impactful because the brand’s loyal consumers were automatically curious about what was new. Retailers gave these the beloved brands preferential treatment because they knew their consumers wanted them. With a beloved brand, retailers knew their consumers would switch stores before they switch brands. Everyone in my organization, from the President to the technician in the lab, cared more about these beloved brands. No one seemed to care about the indifferent brands. Internal brainstorm sessions produced inspiring ideas on beloved brands, yet people would not even show up for brainstorms on indifferent brands. 

I found that everyone wants to be part of a beloved brand

Our agencies bragged about the work they did on beloved brands. Even my people were more excited to work on these beloved brands, believing a move to the beloved brand was a big career move while being moved to an indifferent brand was a career death sentence. 

These beloved brands had better performance results and better consumer tracking scores on advertising. They saw a stronger return on marketing investment, with a better response to marketing programs, higher growth rates, and higher margins. The overall profitability fuelled further investment into beloved brands. 

It takes a strategic mind to figure out brand love

What would you rather have; a monopoly or a brand that is loved by consumers? Who has greater margins and profits; the monopoly utility company or Apple, Amazon, Netflix or Nike? 

To show the differences in how consumers feel about a brand as they move through five stages, I created the brand love curve. It defines consumers’ feelings as unknown, indifferent, like it, love it and onto the beloved brand status.

For unknown brands, the strategic focus should be to stand out so consumers will notice the brand within a crowded brand world. For indifferent brands, the strategy must establish the brand in the consumer’s mind so they can see a clear point of difference. At the like it stage, the strategy is to separate the brand from the pack, creating happy experiences that build a trusted following. At the love it stage, the focus shifts to tugging at heartstrings to tighten the bond with the most loyal brand fans. At the beloved brand stage, the strategic challenge is to create outspoken, loyal brand fans who are willing to whisper to their friends on the brand’s behalf.

The tighter the bond a brand creates with its consumers, the more powerful the brand will become with all stakeholders. Think of brand love as stored energy a brand can unleash in the form of power into the marketplace. You can use that power with consumers, competitors, new entries, employees, influencers, media, suppliers, and channel partners.

 

Porter's Model talks about how competitive rivalry can lead to power

Let’s take a spin with Porter’s Model and see how a beloved brand plays out

These beloved brands command power over the very consumers who love them, as consumers feel more and think less. These consumers pay price premiums, line up in the rain, follow the brand as soon as it enters new categories, and relentlessly defend the brand to any attackers. They cannot live without the brand.

As your brand moves to the loved and beloved stages, the power shifts from the buyers to the brand. We see that consumers start to feel more and think less. They become outspoken brand fans who can’t live without the brand. Your brand is becoming a favorite part of their life, built into their normal routines. These brand fans defend you, sell you and crave you at times.

Beloved brands have power over channel customers, who know their consumers would switch stores before they switch brands. Stores cannot stand up to the beloved brand; instead, they give the brand everything in negotiations. The beloved brand ends up with stronger store placement, better trade terms, and better promotions from retail partners. 

The competitors, whether current competitors or new entries, cannot match the emotional bond the beloved brand has created with their brand fans. The beloved brand has a monopoly on emotions, making the consumer decisions less about the actual product and more about how the experience makes consumers feel. Unless a new brand has an overwhelming technological advantage, it will be impossible to break the emotional bond the consumer has established with the beloved brand.
Suppliers serve at the mercy of the beloved brand. The high volumes drive efficiencies of scale that drive down production costs, backing the supplier into a corner before they offer up most of those savings. Plus, the supplier becomes willing to give in, so that they can use the beloved brand as a selling tool for their supplier services to other potential brands.

Going beyond Porter's Model to assess the power of a brand

The beloved brand also has power over the media whether it is paid, earned, social, or search media. With paid media, the beloved brand gets better placement, cheaper rates and they are one of the first calls for possible brand integrations. The beloved brand is considered newsworthy, so they earn more free media via mainstream media, expert reviews, and bloggers. 

Being a famous, beloved brand helps bypass the need for search engine optimization (SEO). The beloved brands become part of the conversation whether it is through social media or at the lunch table at work. Beloved brands can use their homepage website to engage their most loyal users, inform the market of upcoming changes, allow consumers to design their version of the brand, and then sell the product directly to brand lovers.

The beloved brands have power over key influencers, whether they are doctors recommending a drug, restaurant critics giving a positive review, or salespeople at electronics shops pushing the beloved brands. These influencers become fans of the beloved brand and build their own emotions into their recommendations.

Beloved brands even have power over employees, who want to be part of the brand. They are brand fans, who are proud to work on the brand. They embody the culture on day 1 and want to help the brand achieve success.

Brand love means brand profits

In the simplest of economics, a beloved brand will use their consumer desire to create more demand which drives up the volume and the price. 

When we look at accounting, a beloved brand can drive higher margins because they can command a premium price and can use their volume to drive lower costs. The beloved brand wins on volume because of the share of the market and the ability to expand that market size. That drives down the costs–both product related and marketing costs. 

The 8 ways a beloved brand drives higher profits

With all the love and power the beloved brand generates, it becomes easy to translate that stored power into sales growth, profit, and market valuation. Here are the eight ways a brand can drive profits: 

  1. Premium pricing
  2. Trading up on price
  3. Lower cost of goods
  4. Lower sales and marketing costs
  5. Stealing competitive users
  6. Getting loyal users to use more
  7. Entering new markets
  8. Finding new uses for the brand.

Beloved brands can use higher prices and lower costs to drive higher margins

Most beloved brands can use their loyal brand lovers to command a premium price, creating a relatively inelastic price. The weakened channel customers cave in during negotiations to give the brand richer margins. Satisfied and loyal consumers are willing to trade up to the next best model. A well-run beloved brand can use their high volume to drive efficiency, helping to achieve a lower cost of goods structure. 

Not only can beloved brands use their growth to drive economies of scale, but suppliers will cut their cost to be on the roster of the beloved brand. The beloved brand will operate with much more efficient marketing spend, using their power with the media to generate lower rates with plenty of free media. Plus, the higher sales volumes make the beloved brand’s spend ratios much more efficient. The consumer response to the marketing execution is much more efficient, giving the brand a higher return on investment.

Beloved brands use higher shares of a bigger market to drive higher volume

The beloved brands use their momentum to reach a tipping point of support to drive higher market shares. They can get loyal users to use more, as consumers build the beloved brand into life’s routines and daily rituals. 

It is easier for the beloved brands to enter new categories, knowing their loyal consumers will follow. Finally, there are more opportunities for the beloved brand to find more uses to increase the number of ways the beloved brand can fit into the consumer’s life.

A century ago the best stock performers were commodities and monopolies. Today the best stock performers are the beloved brands whether it’s Apple Amazon Netflix or Tesla. I would rather run to beloved brand than a monopoly. 

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