By Jo Davies, Managing Director, VIM Group
The chemical industry is experiencing an unprecedented level of change, with mergers, acquisitions, consolidation and globalisation all disrupting the sector. These factors have also put the role of brand and digital transformation firmly under the spotlight.
More than $100bn was spent on mergers and acquisitions last year, most notably in the Dow-DuPont merger. The industry as a whole is globalising on a rapid scale and the dominance of established companies is being evened out by increasingly sophisticated companies from emerging markets. In a marketplace that has become open to foreign competition on a huge scale, chemical companies must think and act globally to remain competitive. And as demand shifts, companies must reposition their assets and product portfolios.
In response to these changes, many chemical businesses are undertaking brand investment to better reflect their organisational goals and corporate vision. Beyond a memorable logo, good branding and brand implementation can increase the value of a company and make customer acquisition easier.
However, the role of brand marketing in the sector is not straight-forward. Stringent regulations and product diversity both complicate the matter, while companies must strike a balance between regional and global markets. It is also apparent that many chemical businesses lag behind other industries in terms of the knowledge and expertise applied when investing in brand.
When working with clients across the chemical, industrial and manufacturing sectors, I have been asked a few key questions: what is the future for brand in the chemical sector? And how can brand investment provide competitive advantage?
Maximising brand value
Research at VIM Group has shown that business performance improves when brand is taken as a strategic starting point. However, only a small percentage of organisations take a brand-first approach to strategy.
In addition, PwC has reported that 75% of chemical executives view cost-cutting as their primary activity to drive profitability, while just 9% want to strengthen digital – despite its huge potential to drive profitability.
Germany’s BASF, the world’s most valuable chemical brand, is a good example of brand and business strategy working in concert. BASF’s year-on-year growth of 11% from $7.4bn to $8.3bn follows the unveiling of a new brand strategy focused on organic growth, emphasis on Asian markets, strong corporate climate action and the launch of innovative, climate friendly production methods.
In consumer sectors, we see how brands spend millions on brand awareness campaigns. Although industrial businesses have not historically given their brand the same kind of commitment, we fully expect this to change.
Digital technology holds huge potential for sales and marketing within the chemical industry as tools like connected devices, machine learning and artificial intelligence all bring new ways to meet customer needs, gain data and embrace value-added sales. But many businesses in the chemical sector have been slow to react or have failed to combine their investment in digital technology with a suitable brand strategy.
We can already see how marketing is moving away from its outdated role as sales support towards the epicentre of transformational and strategic change. As enablers of digital transformation, marketing teams have an opportunity to take ownership of client relationships, management of intangible brand assets and greater influence on corporate strategy.
However, there are challenges to navigate within digital transformation. Firstly, companies must leverage large
amounts of data to better understand their operations and customers, but the current workforce is aging and there’s a shortfall of digital expertise. Businesses must find ways to attract new talent that embraces the digital workplace in order to leverage the business value of this technology.
Secondly, larger businesses are being challenged by smaller, more dynamic competitors who have already built new digital technology into their business processes. For bigger businesses, adopting new tech to keep up can be expensive in the long run if mismanaged. Many firms have used mergers and acquisitions to remain competitive, but this presents the additional challenge of integrating multiple operating systems into a single system.
Finally, as in other sectors, the proliferation of new data streams can provide invaluable insights – but first businesses must establish practical tools to manage and analyse this data, while also developing their internal analysis capacity and identifying which data streams to prioritise.
In a marketplace where customers are ready to switch brands if they can get the chemically equivalent product at a cheaper price, companies must fight hard to develop brand equity. Delivering quality products consistently, providing customer support and tailored advice are just some of the elements that mediate equity and reputation. But strategists should be aware that these are long-term commitments requiring significant investment.
Brand architectures are also changing in response to market forces. Increasingly, we find chemical businesses transitioning to the ‘branded house’ model – a shift away from the well-established, product-first ‘house of brands’ approach. This is happening because businesses are realising just how critical synergies actually are when it comes to marketing and communications. The branded house approach enables business units and individual products to share brand building campaigns, which is particularly helpful when the sector is increasingly commoditised and price-sensitive.
The branded house model also suits how businesses are strategically orientating towards specialist areas. In this sense, the branded house provides an efficient solution whereby brand investments at both a company and product level have a symbiotic effect.
Tips to save millions
If managed inefficiently, brand investment can be costly and counterproductive, negatively impacting customer relations and internal culture. In my experience, businesses tend to underestimate the broad impact that even a small brand change can have on all branded assets, from letterheads to vehicle liveries and digital footprint.
Whether it’s a refresh of a visual identity, a post-merger overhaul or a digital transformation project, brand guardians in the chemical sector can save millions by considering a few key points before proceeding.
1. Stay true to the brand story
The strongest brands ‘promise and prove’: they make an enticing, relatable promise and prove it in every interaction with the target audience. This is as true for a high street retailer as it is for a chemical business.
It’s also important to remember that brand starts from within and requires attention from everybody within the organisation – not just the marketing team. Practical tech solutions such as employer branding strategies, e-learning and digital brand portals will make it much easier to ensure employees live and breathe the brand.
2. Re-define the brand organisation
Effective brand organisation should be a continual process of improvement and investment – a life cycle rather than a one-off.
Ten years ago, many businesses believed that the key to a strong brand was the consistent application of a corporate identity across all channels. But as the pace of change accelerates and brand touch points proliferate, it’s more about having one coherent and convincing brand promise.
That means putting an end to the ‘corporate style police’ and the silo structure of brand management, while the concept of brand ownership also needs to evolve. Teams with a stake in brand management – IT, HR, Marketing and so on – must communicate and collaborate more effectively, whereby brand managers become more like community managers who aggregate input from a range of stakeholders.
3. Make brand performance measurable
Many organisations are not clear about the exact value of their brand, how to measure its value or which analytics will best measure its performance. This must become a key consideration, not least because boardrooms require hard data to justify brand investment and will expect constant financial updates. Representing the value of the brand in financial terms will make it easier to secure that budget now and in the future.
To make the performance of brand investment measurable, a good brand dashboard that merges different data sets and provides real-time insight will be an invaluable tool.