Saturday, August 28, 2010

From a link between Physics and Marketing to an increased likelihood that smaller firms and firms from Emerging Countries will gain market share.

We discovered the embedded video on TED. It is an 8 minutes presentation by Google Marketing Director Dan Cobley. Cobley has a background as physics student. He makes it clear that marketing people can learn a lot from the exact science of physics.

His usage of Newton's Law which says that Force = Mass x Acceleration is illustrative. We can also write this Law as:

Force / Acceleration = Mass

Now, if we read for 'Mass' the size / reputation of a specific Brand and make the switch to marketing, we can deduct that we need ever more force (be it personnel, staff, money, advice etc) to increase brand awareness further and/or to change the reputation of a bigger brand when it deteriorates.

If we add to that the fact that it is also more complicated to 'control' brand name value in the New Digital Era with so much more information readily available online, we can deduct two things:

1) We do now understand why a lot of large firms do not try to streamline brand awareness in such a way that they want to create one 'master brand' that replaces all the sub brands. In other words: the strategy of Unilever and Coca Cola that work with several in-and-of-itself good brands next to each other in a portfolio of brands is the right one. What ING Bank did in the Netherlands, killing its well-respected Postbank lable is totally wrong.

2) In the past we used to think that - especially in international markets - smaller firms were at a huge disadvantage. Both financially and in terms of brand-name reputation. In the Globalized world in which we live today, money is now flowing freely around. Financial capital is less sticky than it used to be. Whenever small firms from Emerging Markets show nice growth track records with their relatively new and unknown products, it is far more likely now that it will translate into growing numbers of shareholders of big competitors now becoming interested in buying a stake in the newcomer. And also: building the brand of that newcomer is far more easy than it is for the formerly leading big brand to revamp itself.

It is interesting to see how this presentation by Cobley does have implications that might make the likelihood of Emerging and Frontier Market firms moving up the international ladder quickly even larger than it already was. 

It does also imply that smaller firms are at an advantage within existing markets. Size matters, but not in a way that favors the big firms anymore. True, whenever times get tough the big guys do still have some advantages. Take for instance the situation in the financial world. During the Global Crisis the big banks got sufficient government support to survive whereas smaller 'less systemic and strategic' entities went bust. But on average, over a complete business cycle, 'size' will have a detrimental effect in a world in which money is not THE most critical production factor anymore.

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