A client recently described to me a poignant lesson in branding. Apparently there had been an internal debate about the quality of the debit cards the client provides to their account holders. In an effort to improve the appearance of the card, they had proposed spending a little extra to have full-color, branded graphics, rather than a more generic version. The difference in cost was less than a dollar, but a senior executive was arguing to save the pennies for efficiency’s sake. The decision to go ahead with the more expensive cards was made, and was subsequently rewarded when their customers began using them more often, thus generating additional fees. The extra cents turned into a wise investment in their brand.
In fact, within the tiny universe of access cards (debit cards, credit cards, hotel key cards, etc.) savvy marketers have adapted the use of these cards into their branding. Exhibit A: Hotels. Check into a cheap hotel and they are likely to hand you a standard key card and a slip of paper with your room number written on it. At the next level up the card and paper may be branded. A higher-end hotel will hand you your key in a small folder, with your room number written inside and, of course, branding on the card, the folder and any other materials they may choose to give you.
Could the cheap hotel improve their brand (and their sales) by using a slightly more expensive card that has better branding? Perhaps. But would the high-end hotel get away with a generic key card and a slip of paper? Probably not.
These small elements are among the many subtleties of crafting a brand and they demonstrate the importance of small decisions in building a strong brand overall.
For a much broader example of being penny-wise but brand foolish, consider General Motors. At its peak in 1962, GM made more than 50 percent of the cars purchased in the U.S. But, soon after that, manufacturing strategies began to interfere with their many brands. GM started using cost-saving core assemblies for multiple car brands and, within a decade, was creating four or five different models with different brands from what was essentially the same car. There were a few different body parts which could change the look of the car, and certain options available on some brands that were not on others, but by the 1980s it was getting harder and harder to tell a Pontiac from a Chevy, or a Buick from an Oldsmobile, or even from a Cadillac.
GM’s manufacturing costs had been cut, but in doing so they were trimming away the distinctiveness of their brands and creating what were minimally different versions of the same car by slapping different brand badges on the hood. In doing so, they had ineptly opened the door for competition, much of it foreign, to enter the market with higher-quality, distinctive brands. You know the rest of the story: GM’s market share continued to drop through the 1990s and into the 2000s. In 2009, they declared bankruptcy. The Pontiac and Oldsmobile (and Hummer and Saturn) brands no longer exist. In 2012, GM’s market share stood at just a little more than 18 percent.
You could certainly argue that GM made far more mistakes than just cheapening their manufacturing process. But their homogenized approach undoubtedly chipped away at the uniqueness of their individual car brands.
Being penny-wise and brand foolish can work in other ways, as well. Walmart announced last month that it will begin increasing the minimum wages it pays its associates. Walmart has been criticized for under-compensating its workers for some time, albeit as part of broader movement advocating for higher hourly wages in many industries. Several major employers have beaten Walmart to the punch, but the retail king has apparently seen the need to provide better compensation, which can’t hurt their brand image, and may even help enhance it a bit.
Peter Drucker, the famous management guru, was quick to point out that increasing efficiency is not a true business strategy. It is simply something that every company should include as a standard operating procedure. But, when saving a few pennies means cheapening the brand experience, business managers of all types should think twice.
As published in the Central Penn Business Journal, the Reading Eagle and Lehigh Valley Business.