Building a Successful Brand

As a CEO, you’ll need to make the right decisions to build a great brand for the long term. We’ve taken some pointers from a Bloomberg Businessweek interview with the President of watchmaker Patek Philippe, Thierry Stern.?

Don’t kill your brand!?

Building a brand that is successful in the long term requires sacrifices along the way. Great brands are killed all the time by owners who sacrifice long-term value for short-term returns.?

Think about brand names which were once meaningful – Lincoln Continental? in automobiles, Wang? in office automation and Tandy? in personal computers. Lincoln put their brand name on products where it didn’t fit (i.e. “lower priced” Lincolns). Wang did not invest in becoming a computer company, even though their customers asked for more than word processing. Tandy went out of the computer business because they wanted customers to shop only at Radio Shack. As we can see, greed took a toll.?

Investing in brand building: how to do it and when not to?

First off, early stage CEOs need to decide whether or not building a brand will actually be key to the long-term success of their companies. Before you decide to invest in brand building, consider a few factors:?

For example, if the likely buyer of your company sells branded products, they will want to buy a brand from you.?

Next, if your technology will find its way into someone else’s product, investing in brand building may not be a good use of capital.?

If you decide that your target buyers are brand buyers, then you have to begin making decisions now that will drive brand value ten years or more out. Be prepared to make significant sacrifices along the way – the benefits will accrue in the decades ahead.?

Let’s take a look at some of the tough decisions Patek Philippe has made to build its brand in the long term. Watches are consumer products, but the key decisions made by Thierry Stern have very little to do with brand marketing. They’re actually mostly about product manufacturing and distribution:

Hold production at current levels, rather than produce more to sell into a very strong market. Stern knew that they didn’t have the capacity to overproduce, and that their customers wouldn’t want that from them.?

Scale back distribution to only what you can support, instead of adding retailers. Stern decided to reduce the whole network of retailers by 30% because they couldn’t increase the production.?

Sell only perfect products. Rather than pumping a steady stream of new models, Patek launches new product lines every five or ten years – they will not be rushed.?

Be careful about who you sell to. Patek looks to keep “flippers” out of the market. When they see relatively new products in the online market, they know one of their dealers has sold the piece to the wrong person. Stern stated that when he sees this, he buys the piece back, checks the number and asks the store manager who they sold the watch to. In doing so, Patek signals that it wants dealers to qualify their buyers and limit sales only to people who want the watch for themselves or their family.?

Resist the temptation to go direct, to make more money by going online, thus cutting out distributors and retailers. Patek believes that selling their watches requires a personal relationship between seller and buyer. Retailers are taught not just to sell a watch, but a relationship with the watchmaker.?

Don’t compete with yourself. In the case of Patek, reselling “certified pre-owned watches.” This business view is consistent with the intergenerational nature of their product. They don’t sell watches; they sell a lifetime relationship with the owner – and the owner’s descendants.?

We hope this is helpful.

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