Allies adapt to the new rules of war

Alliances are becoming popular as companies realise the importance of an effective supply chain, and try either to produce total customer solutions or become part of a network of brands that collaborate effectively. Alan Mitchell investigates

Shell’s move to create a global marketing alliance with Ferrari and Lego (cover story MW September 4) is yet another sign of a sea-change sweeping through marketing thinking.

The notion of marketing alliances and partnerships is being elevated from the short-term and tactical to the long-term and strategic: it will change the ingredients of marketing success.

The idea that two heads (or budgets) are better than one and that link-ups between brands for joint promotions and ad campaigns can deliver win-win outcomes is hardly earth shattering. If you can promote two brands for the price of one, why not? But behind this obvious business logic lie some much deeper trends that could fundamentally change prevailing notions of “the brand” and, therefore, brand strategies.

First, a growing number of brand alliances and marketing partnerships signal marketers’ growing recognition that somewhere, somehow, they need to round out their consumer offer.

Despite what they like to say, what they bring to market are simply half-brands, mere ingredients. Their product (or service) does not deliver the consumer a complete solution, only a part of it.

This is the lamentable – and limiting – legacy of marketing’s roots in product branding and, in response, marketers are now trying to create combinations of products and services to add more value – what BBDO strategic planner Haim Oren calls compositioning.

In future, according to CSC consultant Stan Maklan and Cranfield professor of brand marketing Simon Knox, the ability to call upon a broad range of partners to help solve customer problems will be one of four key ingredients of what they call the unique organisation proposition – their proposed successor to the unique selling proposition.

One example of this is in digital communications. It now publicly boasts of its phalanx of alliances with the likes of Microsoft, Oracle, Computer Associates, MCI, SAP, Net-scape and Lotus. “In business, the lone wolf is a vanishing species,” it declares in a recent ad.

Likewise, BA. On the one hand it is struggling to wrap up the world market through deals with companies like American Airlines. On the other, it has been signing up all manner of companies to help it offer a complete travel solution, starting with hotels and car hire firms. BA chief executive Bob Ayling says:

“We must look at the whole travel experience – from the decision to go, to arriving back home.”

This quest for total customer solutions is one key element driving alliances. But there are others. As they grope their way beyond product branding, many businesses have been asking themselves awkward questions such as: “What business are we really in?”. As Shell marketing chief Raoul Pinnell admits, that is exactly what Shell has been doing. “We are moving from being an oil wholesaler to something else, and part of that something else is retail.” The link with Lego, which could make Shell one of the world’s biggest toy retailers, will play one, small part in reshaping consumer perceptions of what Shell stands for.

At the same time, business strategies are being overhauled as companies realise increasingly that it’s supply chains, not companies, that compete. No matter how excellent you are at what you do internally, if your suppliers are naff and your distributors are naff, then your end result will not be excellent.

To use modern management consultese, you can only deliver superior value if all supply chain partners work together to maximise overall synergies. The famous “Intel Inside” campaign both recognises and drives this understanding among consumers.

But perhaps the most important – and elusive – form of alliance is the network of brands that grow up around certain value propositions. The classic example is the web of computer hardware and component makers, software developers, channel partners and training providers that revolve around Microsoft – all of them living off, and building upon, the platform created by what McKinsey consultant John Hagel III calls the “web shaper”.

In future, Hagel predicts, another type of web shaper will emerge: the brand that owns relationships with a specific customer segment and which “mobilises other web participants interested in reaching the same customer segment”.

You could say that is exactly what another Shell initiative – its Smart loyalty scheme – is doing with partner companies such as Menzies, Victoria Wines, Dixons, Currys, The Link, RAC and Commercial Union.

For managers of brands the implications of these trends are potentially enormous. For example, traditional thinking tools such as usp (unique selling point) may need overhauling, notes Maklan. In a world of marketing partnerships, each brand pushing its own usp is a recipe for conflict.

The ability to pick the right partners becomes critical as increasingly, like friends, brands are judged by the company they keep. Once Pinnell decided on the promotional alliance route, “you can imagine the choices we were faced with”, he says. “Who you are associated with is a key question.”

Keeping partners happy is equally critical. Companies like Microsoft have deliberately created “win-win” possibilities with web participants. According to Hagel, Microsoft only garners four per cent of the revenues created by its $66bn (44bn) web (but it’s doing very nicely, thank you).

At the same time, marketers will also have to master new types of brand warfare. Traditionally, brand wars were fought exclusively within categories: Coke vs Pepsi, Ariel vs Persil. Increasingly, they’re fought between cross-category constellations of brands.

And notwithstanding cosy terminology about win-win solutions, within these constellations there’s an equally cut-throat battle for supremacy: to be the web shaper, the brand that represents the system.

M&S and Coca-Cola have it easy. They are not product brands. They are not corporate brands. Right from the start, they made sure their brand was the system brand, representing the combined efforts of legions of raw materials suppliers, manufacturers, bottlers, distributors and so on. For others, the battle for system supremacy has hardly begun.

The bottom line? A fundamentally new pecking order of brands is emerging. And like predators at the pinnacle of a food chain, only a tiny number of superbrands will make it to the top.

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