To change or not to change

By Kafi Kurnia

JAKARTA (JP): As a businessman, you may never think seriously about your company's identity.

At least we rarely maintain a way of thinking that is scientific, methodic, and strategic.

When we think about our company's identity or product we rarely think rationally. For instance, we sometimes give our company or product an identity based on sentimental value.

Many businessmen use the names of their children which they believe will bring luck. Others consult fortune tellers or even shamans and fortune-tellers.

Yet identity not only contains esthetic value but even more equity in terms of branding. This equity strategically affects success in marketing, competitiveness and brings financial success.

The history of identity, which is known as trademark and expands into commercial trademark, dates back as far as 2000 B.C. when the Egyptians began marking their cattle to indicate ownership.

It became so important that the Egyptians perpetuated the practice, marking the tomb walls of famous Egyptian Kings. However, it was only in 600 B.C. that trademark identity became not only known a mark of ownership, but also an quality of equity and competitiveness.

In those days, the Babylonians began using identities as their shop trademarks. Trademarks distinguished one businessman from his competitors. It was developed further when the Romans put their identities on ceramic products in 300 B.C. It was in those times that the commercial value of identity, through use of a trademark, and intellectual property was introduced.

However, identity by trademarks was more formally recognized in 1400 A.D. when the term "brand" in English was introduced. The term "brand" is derived from the word "brandoz" in Teutonic, the name for a special mark used on cattle they owned.

Legally speaking, identity was first recognized by trademark in 1872-1875, when France, Great Britain, and the USA enacted copyright law and accepted the registration of trademarks, brands and patents.

Identity and trademarks were first financially recognized in 1911 when the US Supreme Court acknowledged the evaluation of American Tobacco Company's trademark at US$45 million.

Nowadays trademarks are an asset of the new economy. Last year, in a historical event in Indonesia, Coca Cola acquired the mineral water trademark "Ades" at $19.9 million. A company's identity is now a very serious issue. It not only plays an identification role, but also influences and possesses competitiveness.

In Indonesia, brand is culturally unique in positioning. It has become a special phenomenon in middle class society. They are undeniably brand conscious. A TV commercial incessantly campaigns for the use of generic drugs against proprietary drugs, with the slogan "Brand does not cure". The slogan was once popular.

Regarding the development of Indonesian trademark practices, the role and function of trademarks have not been fully applied academically. However, instinctively we are indeed sensitive to brand mechanisms. There are many examples. One common instance can be seen on Jl. Kendal in Jakarta where there are many goat leg soup vendors. It is unknown who initiated it, but suddenly there is a phenomenon of sub-branding products "Kumis" (the Indonesian Word for moustache) to indicate authenticity.

Such phenomenon not only occurs in the goat leg soup market, but also with other merchandise. For instance, garages using magic to repair car bodies, which are widespread throughout Indonesia, all sub-brand as "Blitar", an East Java city, to indicate genuineness. "Warung Tegal", outlets selling goods traditionally associated with the Central Java city Tegal, are commonly abbreviated to "Warteg".

Bakso (meat ball soup) and bakwan (dumpling) vendors always sub brand as "Arema" (an amalgamation of two words, which is a colloquial reference to men from Malang in East Java) on their carts, to indicate that their product originates from East Java.

"Me too" business grows naturally through specific business instinct. The examples listed do not use branding techniques with modern branding management. But the phenomenon shows how our lower class community possesses a unique appreciation of branding.

Indonesia is said to have a considerable amount of unique cultural nuance. But one thing is for sure, the power of trademarks as a form of identity from the lower through to upper classes is undeniable. It frequently occurs that trademarks are so powerful they give birth to unique and funny marketing myths.

The myth of brand power definitely lingers in the automotive industry. A good example is Daimler Benz, which is so popular among the middle class that it has developed its own nicknames. For instance in the 1970s it was dubbed Mercy Tiger, in the 1980s Mercy Bulldog and in the 1990s cat's eyes. It is unique indeed. However, all car salesmen believe in the power of branding, thereby fostering associated myths as well.

An executive of a famous automotive company once explained this phenomenon to me. According to him, to be successful in marketing automobiles in Indonesia animal sub-brands such as those mentioned in the Daimler Benz example are necessary. He told me a lengthy story about the success of Toyota Kijang, Isuzu Panther and Daihatsu Zebra.

So, believe it or not, we have to sell cars with animal sub brands. He also told me about a number of good cars that would not sell in Indonesia, because they did not have an animal sub brand. It sounds ridiculous, but that is what they believe.

So in trademark development in Indonesia, imitating other brands is nothing unusual. When the mineral water product Aqua became successful other producers instinctively entered the market with new trademarks, all of them starting with "A".

This also occurred to Kratingdaeng. After using a bull as logo, competitors of similar products used other animals such as a dragon, horse and panther as their logo.

The success of Megawati in the political arena is thanks to brand phenomenon as well. The Asian Wall Street Journal in its May 21, 1999 edition wrote that Megawati had created a phenomenal political trademark, i.e. "Mega".

In the recent general election "Mega" was hot property. Stickers, T-shirts, flags, jackets, waistcoats, etc. were produced by many general election entrepreneurs, and were readily available at every street corner in the country. Distributors ranged from street vendors right through to Megawati's party offices.

Asian Wall Street Journal estimates that no less than $75 million in sales could be attributed to Mega products in the last one year. Imagine if a royalty of 10% were payable. Megawati would earn $7.5 million, or about Rp 60 billion. Enough to finance her campaign.

Leo Burnett, Fortune magazine May 10, 1999, writes that "Before you can have a share of market, you must have a share of mind."

This is the phenomenon that makes Megawati successful in becoming a phenomenal political trademark. When Megawati was blocked to become chairperson of PDI, legitimacy of "share of mind" was immediately internalized. Megawati is opposition, an opposition that people have longed for the last 30 years. Moreover, because Megawati is a motherly figure, as well as being the daughter of Sukarno, the "share of mind" booms uncontrollably.

Brand is no longer merely a company's identity. It is now the most influential business commodity. The example is McDonalds, the world's biggest franchise company with outlets spread throughout the world. The company is worth more than $26 billion. If we look at its capital however, fixed assets are only 36% of its market capitalization value while its brand is valued at nearly twice as much, or 64%.

McDonalds itself does not necessarily fully control assets of restaurants around the world, but mostly franchisees. The development of its franchise highly depends on globalizing the McDonalds brand.

Interbrand ranks brands in the world annually. In 2000, it cooperated with Citibank. The motivation is simple. Brand contribution to share value is increasingly dominant. Ability to manage it is an asset. What may be surprising is that there are now 60 international companies with brands worth above $1 billion.

Three of them are Internet providers, namely AOL (ranked 47th), Yahoo! (ranked 38th) and amazon.com (ranked 48th).

The brands of these three companies has a combined value of more than $15 billion, although amazon.com has been depreciating since its establishment.

Internet is indeed a magic. Their brands are very dominant in their share development.

Fortune, in its Sept. 27, 1999, ranked the 40 richest persons in the USA under the age of 40.

The top 15 are connected to information technology and the Internet. Michael Dell ranks number 1, with assets of $21.5 billion at just 34 year of age. Imagine.

The Dell trademark is worth more than $9 billion. Other firms influenced by the Internet are Microsoft (ranked 2nd), with a brand value of $70 billion, and Intel (ranked 4th) with brand value of more than $39 billion.

As an investment prospect, this brand does count. Many investors are now collecting famous trademarks in their portfolio. Consumer product companies such as Unilever, Nestle, and Procter & Gamble offer a bonanza of global consumer products. The highest ranked portfolio is the Procter & Gamble trademark, worth $48.35 billion, followed by Nestle at $40.25 billion and Unilever at more than $37 billion.

Branding has become increasingly strategic, due to the shift in competition over the last 20 years. "Product differentiation" has shifted to "brand differentiation". It means, consumers do not distinguish product, but brand.

The analogy is well illustrated by the Gucci empire. When I was still in college I got the impression that Gucci was a brand for an older materialistic generation, because besides being expensive it also represented a mature style. However, it changed direction in 1994 and suddenly became hot property. It became "hip" and "trendy" like MTV.

How did they do it? The success was mostly created by Tom Ford, the newest Gucci designer who graduated in interior design at New York's Parsons School. Like an angel, he blends a new spirit with precise interpretation and accurate style. Gucci has become a beautiful symbol of maturity with aristocratic lines, and no longer a boring established icon.

Another player in its success is was Gucci executive Domenico De Sole.

"We had to make the brand fly," De sole said. It was a great success. In 1995, Gucci earned a profit of $83 million from sales of only $500 million.

De Sole was very serious about making the Gucci trademark fly. In 4 years he spent $200 million to buy back the Gucci franchises and totally renovated them. He also built new Gucci outlets in Milan, Vienna, Zurich, Hong Kong and Tokyo. Gucci also survived the 1998 economic crisis that hit Asia. Its sales in the first nine month increased by 3.2% to $741 million and its profit increased by 3.5% to $127 million.

The facts above may prompt you to think strategically. Should I change the identity of my company or product? It is very simple. If the identity of your company or product is too obscure, or it does not have any uniqueness or become a well known trademark yet, it may be the time for you to think of improvement.

To develop an identity into a serious brand you need to look at Gucci. You have to clearly formulate your brand vision and mission. They are the DNA and soul of your company and product.

The identity of your company and product will be more critical if you have the vision that we are now in a new era. The era of super information. The era of a new economy. The era of globalization. Perhaps you also want to become an acknowledged global player. You may want to compete internationally, and to be aggressive in global competition.

To be successful in the global arena, a global identity is imperative, without which there is no way to communicate effectively with consumers in the global market.

In the future, you will learn that your most precious asset is not your factory or machinery, but your brand.

"Brand is the new wealth creator," as one of our credos in Interbrand states. If you are serious in thinking about your future, it may be high time for you to think that your company and product are no longer merely an identity. Your real identity becomes influential equity. A brand. Not just an ordinary trademark. Not only an acknowledged and popular brand, but also a trademark which is relevant for consumers and investors. Brand brilliance.

The writer is managing director of Interbrand Indonesia.