Efficiency, effectiveness & experience: Building business branding

Dr B K Mukhopadhyay

(The author is a Professor of Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)

Dr. Boidurjo Rick Mukhopadhyay

(The author, international award-winning development and management economist, formerly a Gold Medalist in Economics at Gauhati University)

The 3Es of Business Branding are efficiency, effectiveness and experience. It can be argued that although a business needs all three of them in order to sustain a successful brand, but increasingly it is the 'experience' component that differentiates one brand from the other. It is not always about what makes you different but more importantly what differentiates you from others. It's increasingly difficult to have an efficiency advantage or even an effectiveness advantage. Some examples would help to understand this better. Take for example, Sonu Nigam – performing a list of selected classical numbers Mukesh, Manna De and Md Rafi and going live in a Symphony Hall. The auditorium is packed with 2,000 people and even the cheap seats went for about 5000 INR per seat. And at the end of the performance, the whole auditorium erupts into applause.

Later on, Sonu Nigam ran a social experiment (as he often does) to test what would happen if he took the same 'product' and put it into a different context. So, he decides to go into a subway station (which has great acoustics), and he dresses up as a busker posing like a random musician on the street trying to earn some money. He's singing the same hit pieces and this is in the morning during the week. There is security around, nonetheless. And you can imagine what happened. A crowd gathered and everybody was hushed and mesmerized, it all ended with a big applause at the end.

It didn't go that way. Only a few people stopped, a few people gave money and a thousand people simply passed by without paying much attention to a busker playing some hit classical numbers. So, what was different in this situation? Well everything really - maybe it wasn't the right audience.

It was not the right time. They weren't in the right state of mind. They weren't expecting, they didn't desire to hear this music. And they couldn't judge it without the branding, without the context, the stage, the auditorium, the advertising and maybe the ticket prices they paid in the first place also lead them to appreciate the pieces more. It was not the same experience.

From 1900-1950s, the whole idea about business was efficiency. It was about having access to the supply. It was controlling supply. Demand was far in excess of supply at that time. And if you think about some of the products from that time, the Ford Model T. The famous car which showed up in one colour and it was black. The big invention of the time was the assembly line. And the Assembly line was all about the efficiency aspect. Their objective was to try and get a certain level of output with less and less input. And managers then were all about the ergonomics trying toreduce waste in that sense. The goal was to reduce waste, by maintaining the same or reducing input with time, and increase the output – finally, increase the value at the end of the day.

Efficiency is alive and well today. PWC interviewed a handful of CEOs, and asked them what were some of the major projects they're launching. 70% of them said they were launching a major cost cutting Initiative. And this is in the midst or on the back of a global recession as they were busy doing the same the year before. Therefore, there is still a strong focus. Now, efficiency experts are also amazing branding experts!

Does cost cutting actually work? There's a recent report in the Harvard Business Review that looked at companies within their sector with below average costs, versus those who had above average costs. It shows that very few of the companies with below average costs had above average profits. Those with above average costs had above average profits i.e. if one did have above average profits, it was typically because one also invested in higher costs. So, when it comes to cost cutting, it's okay to cut the bad costs (and not cut the good costs).

Next is concept of effectiveness, at the industry level whether a firm is into making automobiles or maintaining a green supply chain, the focus is largely towards value creation. As mentioned earlier, efficiency was all about having a certain level of output with less input - but value chain is quite different. The concept asks - how do you get more out of limited inputs? E.g., if you think about the people side of things, for example, one is about, can I do the same with fewer people? Would basically firing people be a good option? Or from a value perspective effectiveness, can you train them?

This idea of effectiveness at the product level, we can look at something like a razor. Think of the original safety razor by Gillette. It was a single blade and the idea was that you wouldn't cut yourself. The next big innovation was the second blade. The first blade gently lifts the hair out of the follicle. The second one swoops in and cuts it off -you have a baby smooth face! Next innovation was the MACH3, three blades – so, what's the third blade for? Maybe, it exfoliates your skin, because within six months, the competition came in with four blades. A few years later, Gillette came out with the Fusion which has five blades. And today, we are aware of MACH14 with 14 blades. This idea of effectiveness - a race in terms of performance. But all of these races kind of have diminishing returns. The second blade add a lot over the first blade, the third just a little bit less, and so forth. If they add more and more blades, maybe you even have diminishing returns!

Whether it's computers or smartphones, companies are competing on functional benefits less and less. Most people don't even know what the RAM is on their PCs anymore. E.g. Apple. Do we choose ourmac or iPhone largely based on its quality? Do we really get a better battery life, higher screen resolution? If we did, we might have chosen an HTC or a Samsung. Therefore, the value chain missed out on a critical component, and that is the consumer of that value chain. Consumers, paying good money for what the companies have created, but they're not part of the value creation process in anyway.

We think about values created within the value chain. That's where the real focus is on - Experience. The argument is no value, it is created outside of the customer experience, outside of the consumer experience.

To conclude – questions to ask if you are working on your brand development. How much effort and attention is the top management paying to each of these three E's? Do they actually have efficiency advantages? If they do, are they actually trading on a lower price? Is that their only differential advantage? Or are they similar to the competitors on the functional and utility benefits? And maybe whether the firm knows it or not, the experience is actually what is differentiating them in terms of the competition. So, to really think about the questions are - if it really is about experience, how do you design and deliver experiences? How is that a different capacity, a different capability from designing products and services? There has to be a real and radical change in the way a firm needs to design and deliver value to their consumers – local, global or glocal.