16 Oct «Corporate Purposes»: A multi-guide, but not a cure-all
Why Swiss brands need to accelerate when formulating their corporate purpose and what needs to be considered for “Purpose” discussions.
A key characteristic of mature markets is that a competitors’ products are comparable in terms of performance and scope. The “what” of a product – i.e. its functionality and the materials used – loses its differentiation potential. Manufacturers are increasingly abandoning product-related claims and placing more emphasis on their corporate purpose.
They no longer solely explain the functional benefits of their products but also attempt to engage their target audience on an emotional level that sets themselves apart from the competition and builds relationships with their (potential) customers. With this in mind, the corporate purpose is frequently hyped up as a cure-all for brand positioning.
Our study “No Purpose, No Brand” has investigated the official brand claims of more than 230 leading companies from Switzerland, Germany, the USA, China and Brazil to determine whether and how they position themselves in terms of a higher corporate purpose. The model developed for this analysis also guides brand managers in their decision on whether it makes sense to connect their positioning with a higher corporate purpose.
Surprisingly the study has revealed that so far only 6 per cent of Swiss brands have oriented their values towards a higher corporate purpose. This is less than half of the companies from comparative markets, where every seventh company is already positioned based on a higher corporate purpose. A closer look indicates that the issue with Swiss brands is not the emotionality of their own positioning but their target group definition. Approximately 55 per cent of the surveyed Swiss companies already position themselves from an emotional standpoint, however, among these are 23 per cent who only talk about their own company and 26 per cent who are narrowing their focus to individual customers.
Consequently, in more than nine out of ten cases, companies fail to place their reason for existence in a meaningful context for a larger target audience. These companies refrain from using their positioning strategy to shape a brand also attractive for younger target groups, such as the Millennials who are increasingly seeking brand identification on an emotional level.
The official positioning statements were analysed using a two-dimensional model. Herein the “Brand Benefit Ladder” embodies the vertical dimension, encompassing the value proposition of a brand (or a product) as well as the functional, rational, and high-end benefits. This value axis focuses on the superior customer advantages that help create an emotional appeal. The horizontal dimension serves as an indication for the addressed audience ranging from the company’s self-thematization to individual and to larger, socially relevant target groups. The combination of both dimensions results in nine key areas that allow for a more accurate interpretation and evaluation of brand claims. Positionings based on a higher corporate purpose typically fulfill two characteristics: they appeal to the emotions, and they address a larger target audience. In short: the larger the addressed group and the more emotional the positioning, the higher the purpose of the company. In an extreme case, the claim could be: “For a better world, a better future, a higher goal”.
This extreme case points to one of four major issues often overlooked in the ongoing discussions about corporate purposes and helps to clarify that this positioning concept is indeed a multi-faceted guidebook, but certainly not a cure-all.
Four issues often overlooked when it comes to purposes
The first issue touches upon the problem with differentiation: The more companies position themselves based on a corporate purpose within a certain industry, the more specific it must be. If every company in an industry “only” wants to improve the world, its positioning concept will soon have lost the initial differentiation potential. Hence, a thorough competitor analysis depicts an essential prerequisite for the development of the right positioning based on a higher corporate purpose.
Secondly, a higher corporate purpose must be economically relevant: starting with the compatibility of the business model. If there is no harmony between the brand’s business model and the chosen purpose, the positioning loses its credibility. Those who, for example, position themselves in the luxury segment with high-end watches or premium cars address an exclusive group and not the largest possible or even socially relevant audience.
Thirdly, the corporate purpose should fit the image of its industry. Those, for example, whose products are coal or weapons will find it difficult to explain that they are mainly focusing on people and their health. However, this is exactly the mechanism of these positioning strategies, i.e. to shift the focus from a company’s products to the people and their environments.
And finally, there is the danger of a pitfall with ambitious purposes. This happens, if the purpose is set unrealistically high. Industries especially susceptible to this are the ones who are closely monitored by regulatory authorities or NGOs, such as the oil industry. Principally, the number of industry-specific NGOs can be taken here as a gauge for a critical public that would create tensions for the company by stressing the inconsistency between brand positioning and the industry image. Overall, we can conclude that the positioning strategies of brands are increasingly gearing towards fascinating target groups on an emotional level. Markets in industrially developed countries have especially indicated trends towards positioning by means of a higher corporate purpose. From this point of view, Swiss companies indeed have some catching up to do – nevertheless, a positioning based on a higher purpose can still not be equated with a cure-all.
This article was published first in German in the Schweizer Werbewoche 15 (September 21, 2018).