Tuesday, May 23, 2006

Good Parenting

Earlier this month, I had the opportunity to attend the Business Marketing Association’s annual meeting in San Jose. The conference was tremendous: great speakers, loads of serious B to B marketing practitioners, and a chance to be part of a re-energized organization that’s reasserting its relevancy in the marketing world.

One of the keynotes was James Richardson, Cisco Systems’ senior vice president for its Commercial Business segment. During Q&A, Richardson spoke to the dilemma many B to B enterprises face: build equity for standalone product brands, or introduce new products under the banner of the parent company?

In the commercial segment—which easily accounts for the majority of Cisco’s revenue—all products bear the Cisco name. On the consumer side, the company has established its Linksys brand, explicitly tagged as “A division of Cisco Systems, Inc.” You can’t miss the fact that when you’re buying Linksys, you’re buying a Cisco product.

This “branded house” strategy is definitely a departure from the “house of brands” approach of a company like Procter & Gamble. As you know, P&G has created scores of standalone product brands that aren’t explicitly linked to their parent company.

Richardson was asked to share his thoughts on the difference, and on Cisco’s decision to build a branded house.

Richardson's answer? The company is the brand. Maintaining standalone, differentiated product line brands is expensive and complex. Few have the money, time or talents of P&G to pull it off.

Instead, Cisco sought to build equity for the parent, knowing the rest would follow. For most B to B enterprises, that’s great advice.

More often than not in B to B, companies produce the biggest returns by building powerful, valued, clearly differentiated company brands.

Among other things, leading with a strong company brand softens the beaches at the product level. People accept new products more quickly when said products are connected to a parent company they already know and trust. Over time, customers’ satisfaction with a product creates additional good will and equity for the parent company.

This is increasingly important given mounting evidence that links company brands to enterprise value (privately held) and market cap (publicly traded).

Of course, companies need to beware of the dangers of overextending their brands to offer or endorse product and service categories that will erode the brand (a la Ries and Trout in their seminal work on positioning in the 80s and 90s).

Short of the appearance of Cisco-branded knockwurst or beachwear, though, most B to B enterprises would be wise to follow Cisco’s and Richardson’s lead.

Meaning that "brand the company" should be the default setting for any consideration of whether to lead with company or product in the quest for bigger brand equity.

No comments: