Upcoming Neil Wilkof Presentations in London

The members of the IP Finance blog team from time to time venture out to the speaking arena to share their thoughts. A little bird has told me that fellow IP Finance blogger, Neil Wilkof, will soon be making an (increasingly) rare visit to London, where he will be giving two public lectures. For those readers who are in the London area, the subjects to be discussed might be of interest.

The first presentation, "Changing Commercial Circumstances, IP and the Revenge of the Common Law", will take place on January 23^rd  at 18:00 at King's College (details here).

The second presentation,  "Branding and Co-Branding: How Much Do They Really Contribute to Innovation,"  will take place on January 25^th at 16:30 at UCL (details here).

The Value of the Trump Brand: “What is the Brand’s Message”

In the United States, the race for the presidency is heating up.  Donald Trump, the upstart candidate with very little to no political experience, is the front runner for the Republican Party nomination.  Trump has been well known for his real estate holdings and his appearances on the television show The Apprentice, but now is also known for his divisive views concerning immigration in the United States.  In June, Trump made numerous comments concerning immigrants from Mexico, including stating that some of them were “rapists.”  The backlash was fast and severe (rightly so).  In a July 2, 2015 article in The Atlantic, titled, “Is Running for President Donald Trump’s Worst Business Decision,” the author, David A. Graham, reviews some of the response from the business community as does the blog, The Gawker.  Univision quickly refused to show Trump’s Miss USA Pageant.  NBC Universal made the same decision and noted that Trump would not appear on its show The Apprentice.  Macy’s decided to end a line of Trump clothing.  Serta similarly decided to end a Trump branded mattress.  NASCAR, ESPN and the PGA will not hold events at Trump branded golf courses/hotels.  The League of United Latin American Citizens (LULAC) issued a press release condemning Trump and applauding Univision and NBC Universal’s actions. 

In The Atlantic article, Mr. Graham notes that Trump is supposedly worth around $9 billion—according to Trump.  According to a Slate article authored by Jordan Weissmann, about $3.3 billion of that $9 billion is supposed to be the value of the “Trump brand.”  Wow!  That is quite a valuation.  I wonder what it was based on.  Mr. Weissmann notes that some hotels will pay Trump to use the Trump name on the hotel—Trump actually doesn’t own the hotel itself.  Forbes puts the brand closer to around $125 million.  That is still quite a high valuation.  And, it is not entirely clear how Forbes arrived at that number.  (The branding deals with Serta, Macy's and hotels?)

In recent weeks, Trump has maintained his lead as the Republican front runner.  Notably, The New York Times, in Why Donald Trump Won’t Fold: Polls and People Speak, recently examined polling data and concluded:

A review of public polling, extensive interviews with a host of his supporters in two states and a new private survey that tracks voting records all point to the conclusion that Mr. Trump has built a broad, demographically and ideologically diverse coalition, constructed around personality, not substance, that bridges demographic and political divides. In doing so, he has effectively insulated himself from the consequences of startling statements that might instantly doom rival candidates.

In poll after poll of Republicans, Mr. Trump leads among women, despite having used terms like “fat pigs” and “disgusting animals” to denigrate some of them. He leads among evangelical Christians, despite saying he had never had a reason to ask God for forgiveness. He leads among moderates and college-educated voters, despite a populist and anti-immigrant message thought to resonate most with conservatives and less-affluent voters. He leads among the most frequent, likely voters, even though his appeal is greatest among those with little history of voting.  . . .

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His support is not tethered to a single issue or sentiment: immigration, economic anxiety or an anti-establishment mood. Those factors may have created conditions for his candidacy to thrive, but his personality, celebrity and boldness, not merely his populism and policy stances, have let him take advantage of them.

Tellingly, when asked to explain support for Mr. Trump in their own words, voters of varying backgrounds used much the same language, calling him “ballsy” and saying they admired that he “tells it like it is” and relished how he “isn’t politically correct.”

Trumpism, the data and interviews suggest, is an attitude, not an ideology.

I am sure that some of his comments have not helped the value of his brand as I believe corporate sponsors will likely continue to run from him.  I am not even sure what his brand will stand for after this is all over—not just opulence for sure.  However, his general popularity is growing in certain circles—how many of those folks will play golf on Trump’s courses?  For more on the “math” behind Trump’s valuation of himself, see Forbes here. 

The branding challenge when Aerosmith meets cup of joe

Entertainers, musicians and other public personalities have usually found it to be tough going when they try to promote products under their name and personality. Not everyone can enjoy the commercial success of the Olson twins, Mary-Kate and Ashley, here. More typical are the failures that have befallen most celebrities who have attempted to market themselves through consumer products. But hope springs eternal-- witness the venture being championed by Joey Kramer, here, the legendary drummer of one of the most successful musical bands of all time, Aerosmith, here. No, Kramer has not sought to launch a new line of casual wear or perfume. That would be so “not Aerosmith”. Instead, he has launched a coffee—called “Rockin’ and Roastin'”. Not any old coffee, mind you. In the words of the company website, here, “Rockin’ and Roastin’" is mean to be “some of the finest, purest kick-ass coffee on the planet comprised of organic, custom-roasted Arabica brews in three varieties sure to please the palate of any “coffee-sseur.”

In a recent broadcast on Bloomberg radio (also available as a Bloomberg podcast), Kramer described his efforts to further the “Rockin’ and Roastin’" brand coffee. As summarized by blabbermouth.net, here:

“The story of Joey Kramer's Rockin' & Roastin' organic, custom-roasted coffee blends begins in the field. Unlike "sun grown" coffee that's cheaper to produce but requires chemical fertilizers and pesticides and leads to the destruction of native rainforests, Rockin' & Roastin' coffee is lovingly cultivated using the traditional "shade grown" method, under a canopy of indigenous trees. This sustainable practice supports a wide diversity of plant and animal life, provides food and shelter to migrating birds, and helps to filter carbon dioxide from the air, reducing the danger of global warming. There is currently a trio of international blends offered: two Dark roasts, from Sumatra and Ethiopia; and, a Dark-Medium, hailing from Guatemala.”

Having regard to the summary of this interview (and listening once again to some vintage Aerosmith music as well), I could not help but ask this question: what exactly is the branding message being sent by "Rockin’ and Roastin’" coffee? For this blogger, there are at least four distinct branding messages being conveyed.

1. The “edgy” message—First and foremost, the coffee is an extension the edgy image that Aerosmith has developed over the years. Kramer has chosen not to use his own name in branding the product. Nevertheless, as can be seen from an inspection of the company’s website, Kramer is aggressively identifying himself (and by extension the band itself) with the coffee, both by name and picture. Calling coffee “kick-ass” may convey little about coffee per se, but it certainly conjures the public view of the group (not by accident were they called “the Bad Boys from Boston”). Moreover, Kramer made it clear that there would be no decaffeinated option (“you may as well drink tea”). Given all of this, calling the coffee product “Rockin' and Roastin’" seems almost pre-ordained.

2. The “quality product” message—The coffee is not just about Kramer and Aerosmith; it is about the coffee itself. Kramer went to great length in his interview to proclaim his passion for coffee and his hands-on approach to every facet of the sourcing, selection, manufacture and distribution of the product. Coffee from Sumatra, Ethiopia and Guatemala are not selected because they are “exotic” locations but rather because they are world-beating coffee beans. At the end of the day, you will drink "Rockin’ and Roastin’" coffee because it tastes better than its competition. As Kramer said:

"The problem is in order to build a brand, you've got to be pretty much hands-on and you've got to be able to do the work yourself and not be afraid of it. I'm the CEO of this company, it's my baby; I'm not just another one of those celebrities that's putting my name on something and expecting to make millions of dollars off it. I'm into the coffee in the same way my band is into the music; you know, we're into it because it's about the music and I'm into this because it's about the coffee. I'm the CEO, I cup the coffee myself, the beans are roasted to my specs, I'm hands-on all the time."

3. The “socially conscious” message—By purchasing "Rockin’ and Roastin’" coffee, you are also making a social statement. The “shade grown” method for growing the coffee beans is good for the forest, the larger ecosystem and reducing carbon dioxide emissions. Go ahead and indulge yourself, not merely for the quality of the product but also for the collateral social benefits connected with it. As such, "Rockin' and Roastin'" is a win-win situation for all concerned.

4. The coffee is “organic”-- While Kramer and Aerosmith may connote ”edgy”, the "‘Rockin’ and Roastin’" product is also presented as organic. Thus, in the interview, he made an emphatic point that, at least in some of the chain stores carrying the coffee, the product is not found in the “coffee” section, but rather in the “organic foods” section (whatever exactly that means). As such, for a customer to make a purchase, he or she must be aware that the coffee product is found in the organic section. "Rockin’ and Roastin’" is not alone in this approach and traditional food brands are struggling a bit to keep the attention of their customers against challenges such as this, here. How far this approach of positioning "Rockin' and Roastin'" as an organic coffee will take Kramer remains an open question.

When all is said and done, Kramer and his company have sought to employ multiple banding messages in marketing and promoting the "Rockin’ and Roastin’" product. Whether has Kramer and his company have succeeded in their branding message and product placement are questions that I leave for the reader to decide.

More on cup of joe here.

3D Printing: A Couple of IP Aspects You Probably Have Not Thought About

As of late, few hi-tech topics have captured as much interest as has 3D printing (aka 3D manufacturing or additive manufacturing). It is not surprising, therefore, that the IP aspects of 3D printing have attracted increased attention as well. In the main, the focus has been on copyright, design and trade mark issues with respect to the potential use of production files by end-users, and on patent rights in the 3D printing machines. However, it seems to me that there are two IP issues that have enjoyed far less coverage, despite their potential commercial importance, namely the branding of 3D printing manufacturers and IP protection of the manufacturing materials.

As for the branding issue, it is connected with the current structure of the industry. Two US-based major companies appear to dominate—3D Systems, here and Stratasys, here. Both have parlayed internal development with aggressive acquisition activity which is intended to achieve industry consolidation. Indeed, Stratasys has been particularly active of this in late, having merged with the Israeli company Objet in 2012 and in June 2013 having purchased the Brooklyn-based company MakerBot, here. There is no single technology for 3D printing, which in part explains the interest by both companies in acquiring various technologies in the field, when available and where appropriate.

But even more than that, as has been explained to me by someone close to the industry, the goal of both companies is to bring a variety of such technologies under its house brand, thereby enabling a potential customer to come to rely on the brand as indicating a one-stop shop for all of his 3D hardware manufacturing needs. As Landes and Posner argued in their oft-cited article, "Trademark Law: An Economic Perspective",Journal of Law and Economics (vol. 30, no. 2 (Oct., 1987), pp. 265-309), the major economic function of a trade mark is to reduce consumer search costs. If each of these two companies can develop a strong house brand for 3D printing products across a wide range of uses, price points, and manufacturing capabilities, customers will be more likely to eschew a detailed investigation of smaller purveyors of 3D printers in favour of simply turning to one these two companies, secure in the belief that one is likely to find whatever he is looking for.

However, it seems to be only a matter of time before one or more multinational companies (such as GE or maybe even Kodak(?)) will make concerted efforts to enter the field in a commercially meaningful way. When this happens, a particularly interesting branding struggle may well then ensue: in this corner, the entrenched market leaders in the 3D printing industry, each identified by its house brand and, in the other corner, one or more or multinationals, each of whose powerful brands covers a swathe of technology and industrial companies, but which currently have a only a limited presence in the 3D printing industry (unless, of course, a multi-national simply acquires one of the 3D printing leaders, but then allows the acquiree to continue to trade under its house mark and brands.)

The issue of IP and 3D printing materials derives from the economics of the industry. At present, the current business model of the dominant 3D manufacturers appears to be a version of the model that has characterized the 2D printing industry. Thus a 3D manufacturer can sell any given device only once but, in order for the customer to make use of the machine, he must also purchase the material that enables additive manufacture to take place. The sale of the material portion of the 3D printing process is therefore a critical source of recurring income.

As summarized in a 7 September 2013 article in The Economist ("3D printing scales up"), one of the current drags on widespread reliance on 3D printing is that the cost of the materials needed may reach a price of $80 a kilo, as compared to $2 a kilo for materials used in mass manufacturing. However, the reason for this wide disparity of price is not only the high requirements for purity and composition needed for 3D printing; it also is explained by the current way that the industry is organized. Thus, as the article explains:

"But mostly it is because 3D-printer manufacturers require users to buy materials from them and mark up the price, as with the inks for 2D inkjet manufacturers. Mr Vicari [Anthony Vicari of Lux Research] thinks this strategy is not sustainable long term as third-party suppliers enter the business. Moreover, some big manufacturers, like GE, are developing bespoke 3D-printing systems which are not dependent on a single supplier of equipment or material."

Against this backdrop, it would seem that being able to continue to reap substantial profits from 3D manufacturing materials is essential to the industry as it is currently structured. Can IP play a role here? It is my understanding that, at the moment, manufacturing materials are currently protected primarily by trade secrets. As we all know, this kind of protection is intended to prevent unauthorized disclosure, but it does nothing to prevent competitors from coming up independently with equivalent materials. If 3D printing manufacturers face waning control over sale of the materials, might not patents come to their rescue? I frankly do not know the extent to which patent protection is appropriate for 3D printing materials. But if it is, then perhaps the manufacturers might be able to prevent the possible erosion of their profit margins in the materials by being able to assert patent rights (even if merely to sign up third-party licensees). It will be interesting in this context to see if there will be enhanced acquisition of companies specializing in developing 3D printing materials and an increase in patent filings in this area.

The Branding Challenges of Groupon: A "Sticky" Situation

A colleague, a senior official at a leading governmental IP body, said it best to me several years ago during a pleasant luncheon conversation. "Forget patents and copyright", he declared, "the ultimate source of long-term IP competitive advantage is the strength of the company's brand. At the end of the day, branding is where it is at." I took these thoughts to heart when, several years ago, I considered the Groupon phenomenon. Two years to the day (June 6, 2011), in light of the rejected multi-billion dollar acquisition offer by Google and on the cusp of the Groupon IPO, we opined ("The Groupon IPO: Where does IP fit in?"), here, that Groupon faced an uncertain future, despite all of the interest in the company.

Many of you will are probably familiar with Groupon, here, whose business model rests on signing up participating merchants and service purveyors to offer their goods and services on the basis of the deal-of-the-day, in the belief that the customer will then return for more at full price. Our thinking at the time in questioning the business model was that the company faced the prospect that its marketing and advertising costs would never reach the necessary economies of scale and that low barriers to entry made the prevalence of competitors likely. As a result, the company would find it difficult to develop a "sticky" brand, whereby a critical mass of customers would develop an ongoing affinity to the brand that would translate in customer loyalty.

In other words, in the absence of any other material source of IP right that might confer a competitive advantage, the company was left with the slender reed that it could develop sufficient goodwill and reputation to enable it to stand-out in what promised to be a crowded field. Based on what we saw, we were skeptical that the goodwill and reputation of the Groupon brand would ever achieve the kind of brand stickiness that is essential to its long-term business success. We maintain this position—Groupon made be widely covered as a media item, but it has failed to achieve the hoped-for degree of customer loyalty. If "branding is where it is at", Groupon faces a daunting uphill battle.

When I wrote these words, I did not take into account that there might also be material collateral damage to the company's partners, namely those numerous entities that provide the discounted offers that serve as the foundation for the company's activities. It turns out that not only has the company found it difficult to build the "sticky" brand necessary to create the requisite customer loyalty but, as suggested in a recent podcast rebroadcast of an interview heard on Bloomberg radio, the company's lack of success in creating a "sticky" brand may also have a deleterious affect on the company's business partners. The position expressed was that the discounted offers available through Groupon do not result in increased customer loyalty with the discounting entity. Rather, the customer is inclined to cherry-pick the offers, enjoy the discount and move on. No customer "stickiness" here.

But, from the branding point of view, that is not all. The opinion expressed in the podcast is that the participating company, by being associated with the Groupon offer, does not merely fail to increase its consumer custom: its participation in the Groupon program actually impairs the value of its brand. Not only does the participating company fail to increase its customer base materially but it creates a class of one-off customers who may have formed a negative view of the participating company. In the aggregate, therefore, not only has the Groupon business model been challenged to meet the challenge of my colleague's exhortation—"branding is where it is at"—but it threatens to inflict collateral branding damage to its business partners.

This conclusion must nevertheless be tempered by the recognition that it merely reflected the opinions of a single interviewee and no empirical evidence was brought to support the position. (Perhaps there is an eager graduate marketing student out there who wishes to take on the topic.) In any event, the Groupon tale does counsel companies engaged in business models that are largely bereft of other forms of IP protection to confront the remaining threshold IP questions—can I develop requisite brand loyalty and does my business plan affect the reputation of others?  From the point of view of the potential business partner in such a novel business plan, the question becomes—"have I sufficiently considered the implications to my company's name and brand?" The ultimate competitive advantage of both companies may rest in successfully providing a solution to these questions.

How Does Design Impact on Car Branding: the Example of Kia

I have always been hesitant about commenting on matters of design. As hard as I try, I still find it difficult to articulate in an open forum the principled distinctions between registered designs, unregistered designs, petty patents, copyright, and three-dimensional marks. I suspect that the list could go on, but enough self-doubt for a single paragraph.

It is against this backdrop that I refer to an article that appeared in the May 31 issue of Bloomberg BusinessWeek. Under the by-line of Seonjin Cha, the article, "Kia Turns to Design in a Bid to Move Upmarket", discusses the policy decision by Kia Motors to improve the design quality of its vehicle mix and thereby to realize a greater price premium for its vehicles. In a word, Kia seeks to remake its image from what the summary tag line of the article describes as "long-known as a maker of low-priced utilitarian vehicles" to cars known no less for their distinctive design.

To accomplish this, Kia in 2006 hired vehicle designer Peter Schreyer, who had made a name for himself in connection with the "iconic" Audi TT sports car. Schreyer viewed Kia at that time as " 'just another Asian carmaker' without much character." Since joining the company, he has led the revamping of the product line, namely "the revamped Sorento sports-utility vehicle, the Seoul crossover, and the Forte compact", all characterized by "the tiger-nose" feature [can someone help me on what this feature is, please?]

But the current crown jewel is the introduction of the new Optima sedan (it also sports the "tiger nose" feature), which is intended to compete head-to-head with the venerable Toyota Camry and the Honda Accord sedans, but with a price that is $1,600 less than the perenially popular Camry. And so the question: what do we make of all this emphasis on vehicle design, especially against the background of Kia's results for the first four months of 2010. According to the article, Kia enjoyed a 44% increase in year-over-year retail sales. Is that impressive sales figure due to the improved design of its cars or are other factors at work? The article itself is ambivalent.

"Yes" suggests Schreyer, who describes the Optima as an "Italian suit", distinguished by its "simplistic elegance". A further "yes" comes from an automotive consultant, Eric Noble, who gushes that Schreyer has "transformed the company into an industry in design."

And yet, as the article observes in closing, other factors may be at equally, or even more, at work. Most notably, a Swedish car retailer opined that the main reason for the increase of sales of Kia cars is the seven-year warranty introduced this year, together with the seductive price. Maybe that view is unique to the Swedish market, maybe not. The article tantalizingly does not pursue the issue in other principal North American and European markets.

Branding Can Sure be Lonely Sometimes

The popular wisdom has seemed to be that the rise of the Korean car industry rests on the uber-branding of price and reliability, antipodal to the perception that negative features that seem to be hounding Toyota. Does rebranding, via an emphasis on design styling, ultimately serve the long-term interests of Kia? Rebranding on the basis of design might increase the feeling of passion for Kia vehicles, but passion has a way of both ascending and descending in rapid trajectory.

And so--maybe the answer is "yes". Spotting a potential vacuum in the more up-scale auto mark, the only way for Kia to go is to occupy that branding position, and the only way to do it is by matching or bettering their competition in styling and design as well.

But maybe the answer is "no". In entering the crowded market for the more up-scale vehicle, will Kia lose its ability to compete in emerging markets such as China, Brazil and India? Maybe the greater margins in the up-scale market will make up for a lesser position in this developing markets. Or maybe Kia will somehow manage to merge up-scale design with developing marketing, and manage to succeed in both markets. If so, that might be a world-beating branding strategy and a landmark contribution for the role of design in achieving this goal.

The Branding Wars in Smart Phones.

The media-hyped recent coverage of Steve Jobs, as he discussed the bells and whistles that adorn the 4g iPhone, stands in stark contrast to a sombre article that appeared on Bloomberg.com on 12 May. Entitled "Nokia Goes 'Back to the Future' in Attempt to Topple iPhone" and written by Diana ben-Aaron here, it discusses the appoint of Anssi Vanjoki as head of the company's smartphone unit. Vanjoki's mission: make Nokia competitive in the smartphone space. His challenge (as described by Carolina Milanesi of Gartner, Inc.): "It's a bit back to the future ... [and] he doesn't have much time, so Nokia needs to deliver."

The company's recent history in this area is grim. While the company worldwide is the largest manufacturer of handsets, it has become a laggard in the up-scale smartphone business. In a field with compressed timeframes and ferocious competition, how long ago March 2007 seems now. Then, Nokia launched the N95, the company's first handset with GPS. It reported sold more than 10 million units and enjoyed an operating profit of more than 21%. That was then, however.

In the face of the onslaught of the BlackBerry by Research in Motion, and the iPhone of Apple, not to mention Android-based devices such as those of HTC, Samsung and LG Electronics, operating margins plummeted to just over 10% in Q1 2010. There seems to have been a subsequet model N97, being a combination touchscreen and keyboard phone, but that model has not enabled Nokia to overcome the Blackberry or iPhone products.

Against this backdrop, analyst Tero Kuittnen (MKM Partners) has offered Nokia only luke-warm encouragement: "The stakes couldn't be higher. The iPhone is a luxury juggernaut that can no longer be defeated, but Nokia still have a shot at snuffing out the challenge of its Aisia midrange rivals." Another analyst, Ben Wood, of CCS Insight, was more pointed, observing that "[i]f these people don't suceed, they will be doing something different in three years."

The competition in the handset industry generally, and the smartphone
business, in particular, has been the subject of countless articles and is a favoured topic for business school case studies. I want to mention an IP-based one aspect that tends to be overlooked, namely the role of trade marks. We noted above that the N95 handset was eclipsed by the Blackberry and the iPhone and that the N97 failed to buck this trend. To counter this, Vanjoki plans to roll out a new slim touchscreen device. And what is the name for this new product? Are you ready for this ...? None other than the "N 8."

I simply don't get this branding move by Nokia. First, it is a mystery why a newer model bears a lower number than an earlier model. Weren't we all conditioned to expect that the 386 Intel chip would be an improvement on the 286 product, and that the 486 chip was in improvement on the 386. I know--Intel was unable to register these later chip models as trade marks, at least in the U.S., but that does not change the basic principle that consumers expect higher model numbers or numeric brand names to represent a more advanced product than its lower-numbered predecessor. If my assumption is correct, then the rationale for the progression from N95 to N8 remains a mystery.

Second, the very choice of the series of markets based on "N" plus a number seems odd. Compare it with the Blackberry name, which is a garden-variety (no pun intended) use of an arbitrary name that has planted deep branding roots in the consciousness of consumers. It does not really matter if the consumer knows that Research in Motion (or RIM), stands behind the product. It is enough that one asks for a Blackberry. It is a wonderfully strong arbitrary mark.

The selection of the iPhone suggests an antipodal branding strategy.

Here, Apple has built a stable of strong marks, each of which is comprised of the prefix "i" together with an arguably descirptive noun. Fear not--acquired distinctiveness has or will ensure that each of these family of marks can be protected in its own right, as well as being used together the Apple mark. Both the product name and the house mark come out as branding winners.

Now let's consider N8 (or N95 or N97). Unlike the Blackberry name, there is nothing distinctive about such an alphaneumeric combination. There is ready reason for a consumer to know (and remember) that iPhone is a telephone device and that iPad is a tablet device. The same cannot be said, in my humble opinion, for the N8 mark. This means either that Nokia will have to use N8 together with Nokia, so as least to take advantage of the strong value in Nokia, or settle for a product name that is doomed to be less effective than the names of its rivals. Either way, Nokia would seem to come out second best in the trade mark wars, and where it can ill afford to do so.

The Super Bowl and the Changing Nature of Brand Advertisements

As most Americans probably know, the most viewed sporting event in the U.S. of the year took place on Sunday. We are of course speaking of the Super Bowl, the finals of the National Football League to determine the champion for the 2009 regular season. This year the game matched the Indianapolis Colts and the New Orleans Saints. The game set a new record for viewers, with an estimated 106 million couch potatoes glued to their tv seats.

The Super Bowl is not just a football event, however. In some circles, no less important than the outcome of the football game are the advertisements that are interlaced into the game during the three-plus hour broadcast. The most expensive ad time per minute on U.S. television, these advertisements are discussed and studied long after the match is over (the initial review of this year's ads seems to be that they were "uninspiring"). Be that as it may, the power of the Super Bowl advertisement to build brands has become a marketing legend in its own right.

That said, observers have noted a marked shift in emphasis that seems to have taken place with respect to Super Bowl advertising. In particular, attention has been directed to the fact that the role of advertisements of the game has changed from brand-building as part of a long-term branding strategy to advertisements intended to achieve a quick upward bounce in sales of the goods, services or company promoted.

The classic example of the Super Bowl as a platform for brand development is the legendary 1984 advertisement that launched the Macintosh for Apple. A great description of the advertisement is set out in the following, which is taken from a paper delivered in 1997 by Ted Friedman titled: "Apple's 1984: The Introduction of the Macintosh in the Cultural History of Personal Computers", as follows:

"In the third quarter of the 1984 Super Bowl, a strange and disorienting advertisement appeared on the TV screens of the millions of viewers tuned in to the yearly ritual. The ad opens on a gray network of futuristic tubes connecting blank, ominous buildings. Inside the tubes, we see cowed subjects marching towards a cavernous auditorium, where they bow before a Big Brother figure pontificating from a giant TV screen. But one lone woman remains unbroken. Chased by storm troopers, she runs up to the screen, hurls a hammer with a heroic grunt, and shatters the TV image. As the screen explodes, bathing the stunned audience in the light of freedom, a voice-over announces, "On January 24, Apple Computer will introduce the Macintosh. And you'll see why 1984 won't be like "1984."

This commercial, designed by the advertising agency Chiat/Day to introduce Apple's Macintosh computer and directed by Ridley Scott fresh off his science fiction classic Blade Runner, has never run again since that Super Bowl spot. But few commercials have ever been more influential. Advertising Age named it the 1980s' Commercial of the Decade. You can still see its echoes today in futuristic ads for technology and telecommunications multinationals such as AT&T, MCI, and Intel.

The 1984 commercial was a critical moment in the development of the American public's conception of the proper uses and cultural implications of personal computers. PCs were introduced in the 1970s as tools - utilitarian objects designed to facilitate specific tasks. In the 1980s, they became full-fledged commodities - shiny consumer products defined not just by their use value, but by the collection of meanings, hopes, and ideals attached to them through advertising, promotion, and cultural circulation. With the 1984 ad, Apple identified the Macintosh with an ideology of "empowerment" - a vision of the PC as a tool for combating conformity and asserting individuality."

The advertisement here is credited with no less than creating the Mac as an iconic challenger to the IBM-driven desk top computer, and it set the tone for the Super Bowl as a platform by which brands could literally be created. Not every advertisement could be this successful, but over the years, companies such as General Motors and Federal Express used the Super Bowl as a vehicle for maintaining the visibility of their brands before a broadly-based U.S. viewership.

This seems, however, to no longer be the case. GM and FedEx were apparently nowhere to be found in this year's fare of Super Bowl advertisements. Instead of advertisements aimed at sustaining brands to a mass market population, more and more advertisements were apparently directed intentionally to only a sub-population of the viewers.

Perhaps the most discussed example was an advertisement featuring Tim Tebow, who just completed a successful four-year career playing football for the University of Florida. The advertisement was a veiled promotion in favor the pro-life position that stands as one of the most divisive issues in U.S. society. If Super Bowl advertisements were once viewed a bringing the viewers together around a broadly conceived brand carefully nurtured over a long period of time, the most recent Super Bow advertisements seem more and more to be directed towards segmentation and short-term gain.

This change in the nature of Super Bowl advertisements raises the larger question of how one can build and sustain a broadly-based brand in an era of hundreds of cable channels and tens of thousands thousands of websites. This is especially so when the drive is for immediate results and longer term brand development tends to be shunted to the sideline. This is another way of saying that we may never see the likes of the Mac advertisement again, with the attendant challenge of finding other ways to create and sustain a brand.

Oh--for those who prefer to focus on the game itself rather than the advertisements. The final score: New Orleans 31, Indianapolis 17.

When Branding Comes to the Rescue of J.P. Morgan Chase

There were three highlights in the financial world during the past week. One was the testimony given on Capitol Hill by the chairmen of several of America's leading financial institutions. Blame, responsibility, contrition and political gamesmanship were all wrapped into a riveting questions-and-answers extravaganza. The second was a speech given by Paul Volker, the former legendary Chairman of the Federal Reserve Bank. The third were the quarterly earnings reported on Friday by the bank J.P. Morgan Chase.

An IP angle to these three events came to me almost by accident, upon listening to a podcast broadcast interview with David Malpass, formerly the Chief Economist of Bear Stearns. During the interview, the question arose about the future of banking and the discussion turned to whether there should be a return to a two-bank structure. The first type of bank is the retail or utility bank, an institution that takes deposits and makes loans, all with presumed low risk. The second type is the investment bank, one that takes much greater risk by engaging in financial trading and the like. Such a division had been roughly mandated by the Glass-Steagall Act, a piece of US legislation crafted in the early 1930s and repealed in the late 1990s.

What does this have to with IP? The answer is found in an observation made by Malpass into question asked about whether it was feasible to conceive of a return a Glass-Steagall world. His reply, at least with respect to J.P. Morgan Chase, was fascinating. He observed that the bank was in some sense preparing for such a possible eventuality. It was doing so by branding it services. Namely, the bank branded its retail services under the "Chase" name, while it branded its investment services under the "J.P. Morgan" name.

Just to put the bank in perspective. As noted by Wikipedia,

"JPMorgan Chase & Co. is one of the oldest financial services firms in the world. It has operations in 60 countries. It is a leader in financial services with assets of $2 trillion, and the largest market capitalization and third largest deposit base U.S. banking institution behind Wells Fargo and Bank of America. The hedge fund unit of JPMorgan Chase is the second largest hedge fund in the United States with $32.893 billion in assets as of 2009. Formed in 2000, when Chase Manhattan Corporation merged with J. P. Morgan & Co, the firm serves millions of consumers in the United States and many of the world's most prominent corporate, institutional and governmental clients."

In other words, while the bank in principle maintained both retail and investment banking under one corporate roof, in effect it was using a dual branding strategy that seems to address two goals. The first is to send separate and distinct messages to two quite distinct types of banking customers. One is the retail customer, who can find comfort under the venerable Chase name, long identified with retail banking services. The other is the institutional customer seeking investment services and who feels equally at home at the bank, relying on the J.P. Morgan name that hearkens back nearly a century to its eponymous founder.

The second goal is to hedge the bank's bet against the possibility of a return to a Glass-Steagall regime. In such a situation, a bank that tries to brand both its retail and investment services under a single brand will find it quite difficult to disentangle the two services in the public eye, should it be required to do so. The beauty of the branding strategy of J.P. Morgan Chase is that it seems to address this problem head-on in a promising way, if the bank is ever required to split into two.

J.P. Morgan Chase has been widely praised for its resilience during the Great Recession and its chairman, Jamie Dimon, has been well-nigh iconized for his leadership. Add, perhaps, to the enlightened management of the bank during these troubled times the adoption of branding strategy attuned to the bank's needs.

Carrefour, Brands and the Russian Market;

I can think of no greater branding challenge than seeking to establish a transnational presence in the retail chain space. Even the 800lb gorilla --Wal-Mart--has not succeeded in establishing a dominant position in each of the national markets which it has sought to enter. The reason is not difficult to fathom. When compared with the difficulties in marketing a single branded product in a new jurisdiction, the requirements for successfully establishing a large-scale retail service brand in a new country are exponentially greater.

Thousands of products of inventory, ranging from perishable food to home furnishings, have to be purchased and made available to customers, real estate sites need to be carefully selected, pricing has to walk a tightrope between being competitive and being profitable, cultural differences have to be addressed, and managerial and on-the-floor service has to be constantly maintained. It is often a wonder that large retail chains can succeed at all across diverse regional settings.

That said, I was struck (even thunderstruck) by the announcement in mid-October that the giant French-based retailer Carrefour here was pulling out the Russian market. Just to keep the size of the company in perspective, it is the second largest retailer in the world (behind Wal-Mart) and racked up sales of nearly $36 billion dollars for Q3 2009. Nor do they shy away from adventurous markets. Nearly half a decade ago, my daughter found herself temporarily working at a Carrefour store in far Western China.

Against that backdrop, the compressed rise and apparent fall of Carrefour in Russia is noteworthy. As reported on the nytimes.com website on October 17, in an article entitled "French Retailer to Close its Russian Stores" under the by-line of Matthew Saltmarsh and Andrew Kramer, Carrefour opened its first hypermarket in Moscow in June 2009. A second store was opened on September 10, 2009, in a city called Krasnodar. The announcement of that opening, as reported on carrefour.com, was careful to add that it was being done "in line with the agreement concluded with the Administration of the Krasnodar region."

And yet, slightly more than one month later, the company announced (albeit apparently "buried ... in a trading update") that the closure was taking place because of an "absence of sufficient organic growth prospects and acquisition opportunities in the short and medium term that would have allowed Carrefour to attain a position of leadership." This is quite remarkable. We are not talking about closing a 180 square meter corner grocery, but rather two facilities, each of which was over 86,000 square feet. Moreover, we are not talking about a gradual phase-out of the facilities, but rather what appears an exodus of Biblical proportions. If there is any recent precedent for a retail pull-back of this size and alacrity from a entire national jurisdiction, I am not aware of it.

Coming and Going in Russia

Oversaturation of the Moscow market, limited growth possibilities elsewhere in the country, a difficult consumer ethos, a deteriorating economic environment, endemic red-tape and even corruption (recall the role of the Administration of the Krasnodar region in the opening of the second Carrefour megastore) all seem to have played a part. Still, these factors did not suddenly come together like a perfect storm only between June and October of this year. If these were factors contributing to the debacle, surely they must have been present, in whole or in part, before the summer 2009. If so, it sure sounds like someone was asleep at the wheel at company headquarters.

And now for the branding question: will the apparently ignominious withdrawal from Russia affect the transnational value of the Carrefour brand? I suspect that the answer is no. Mega-retailing is far more local than international. Still, this is a double-edged sword.

On the one hand, there is likely little added value to the Carrefour name per se when the company seeks to enter a new market. True, the size and recognition of the chain may ease the initial entry into a jurisdiction, but ultimate commercial success, and the resulting goodwill in the brand, must be earned. This seems quite different from the introduction of, for example, a MacDonald's chain into a new country, where the transnational goodwill preceding entry will likely be of assistance.

On the other hand, a local failure will not materially affect the overall value and goodwill of the brand. What happened in Russia will not likely cause an impairment of the Carrefour brand in France--the markets are separate and distinct . Despite globalization, digitization, and the growth of famous marks, for most brands the territoriality notion of trade marks is not merely of legal significance, but of commercial import as well.

So What Will Branding Look Like in a Small Car World?

One of the most interesting aspects of trade mark practice is to deal with the relationship between trade marks and brands. When I had the pleasure to speak last July in India on branding, I dutifully attempted to set out the differences between trade marks and branding. Characterizations of this distinction abound and we did our best to distill them down for the audience. It was all most entertaining, until--during the Q&A afterward-- a person from the trade mark department of a major multinational was asked to what extent she was involved in brand activities at the company. The answer was simple and direct: "Not at all".

Her comment reminded me how both close, yet how removed, trade mark practice is from branding. Trade mark lawyers deal with issues such as likelihood of confusion, source identification, and inherent distinctiveness of trade marks. At the end of the day, however, the trade mark profession is apparently there to serve the further interests of the brand. What the brand manager wants is the assurance that all is quiet on the trade mark front, so that the she can get on with the task of developing and sustaining value in the brand.

I was reminded of this when reading an article that appeared in September 19th issue of The Economist, entitled "Small Isn't Beautiful: The Car Industry." The article described the continuing challenges confronting the automobile industry. From my IP perspective, one particular portion of the discussion caught my attention. There, the article, citing analyst Max Warburton, explained one major set of reasons why small vehicles are less profitable for car companies than are large vehicles, by comparing the small-car Fiat 500 with the sports utility Audi Q7 as follows:

"...[T]he fixed costs are nearly identical, whereas the variable costs of making the Q7 (labour, raw materials, and so on) are only about 10,000 Euros higher for the Audi. Yet the Fiat sells for as little as little as 10,000 Euros, compared with a sticker price of at least 40,000 Euros for the Audi."

The article went on to list three factors that augur in favour of a permanent trend in favour of small vehicles:

(1) The sale of more pricey cars has been encouraged in part by the availability of cheap leasing credit. In addition, there was an anticipation of a high post-lease sales price, which is depressed if too many such high-price vehicles are leased and later put into the secondary resale market.

(2) Baby boomers will more more likely to purchase smaller cars in their later years, because they will require less seating capacity.

(3) Stronger emissions standards will favour small vehicles.

Find the Killer Brand

I have several thoughts on all of this.

1. The article emphasized in bas-relief the relationship between branding and profitability, and the branding potential to leverage variable costs several times over the ratio of variable costs to fixed costs. It is no wonder that branding at the high end of a product line is so coveted. That said, the article also revealed the difficulty of leveraging brands in an environment with a clear (at least to The Economist) trend away from a consumer preference for high-end car products.

2. If it is true that smaller cars will be increasingly preferred, and that the margin on the sale of each such car will be materially less than that earned on the sale of a branded high-end vehicle, then the challenge is how to restructure a successful branding stratgegy in such an environment. In such a situation, there will be in increasing emphasis on unit sales to make up for the loss of profits from decreased high-end brand sales.

3. From the branding point of view, the trick would seem to be to find the right branding for a lower-priced product offered by a company that had previously emphasized a higher-end product in its high end/low end product mix, and had calibrated its brand accordingly. This rebranding effort will need to compete with current brands that are perceived as identifying smaller cars of high value. How this competition of rebranding cars to emphasize smaller vehicles at the lower price range, both at the house mark and model name level, will play out may go a long way to determining the long-term viability of at least some of the companies in the auto industry.

Branding and the Demise of Mervyn's

One of the more difficult tasks in teaching IP strategy to MBA students is explaining why trademarks are lumped together with patents, copyright and trade secrets. The way I try to accomplish this is by emphasizing the relational and symbolic nature of trademarks. Trademarks are not really about protecting words per se (not even the most renowned famous mark can enjoy blanket protection for every commercial use). Instead, they seek to protect the relationship created between and among the mark, the product, and the source and the goodwill generated by this relationship.

Now I am not kidding myself. I can't push this foray into the outer reaches of IP metaphysics for too far or too long, lest I become the object of glazed-over, or disconnected, stares. But 5-15 minutes of this exposition, Coca Cola container in hand to serve as a ready example, seem to do the job. What becomes even more difficult is when the discussion moves from trademarks to brands (there are invevitably several upwardly marketing types in each class). I am aware that yesterday's trademark manager has become today's "head of corporate branding" in many companies.

But for me, the uncertainties about setting the metes and bounds of brands and branding make the class discussion among the most challenging of the entire course. Is branding about various lines of an international cosmetics company, or is about the overall value and draw of the name of multi-faceted retail chain?

On the metaphysics of branding

I was reminded of the uncertainties regarding discussions on brands in an article that appeared in the December 8th issue of Business Week, "How Private Equity Strangled Mervyn's". The focus of the article was the bankruptcy of the U.S. chain retailer, Mervyn's. At its height, Mervyn's had 257 stores and 30,000 employees, and it was a well-known retail fixure in the U.S. West Coast. The article took the slant that the ultimate demise of the company was due to the interests of its most recent owner, a consortium of private equity investors, whose financial interests were not necessarily in the best interest of the long-term prosperity of the company and its brand.

According to the article, the new owners of the chain were more interested in reaping short-term benefit from sellling off real estate and engaging in certain sleights of hand with store leases than in attending to the nuts and bolts of trying to resucitate a declining retail brand. Indeed, the account of the actions of the chain's private equity owners is notable by the fact that the things that presumably went into building the brand--merchandise, pricing, ambience, service, and customer goodwill--are virtually unmentioned. For these owners, at least, there was more (or at least different, if only for the short term) value in the physcial assets acquired and later disposed of, than in what we would typically understand as part of the chain's brand.

In fact, the decline of the Mervyn brand began much earlier, in 1978, when the family-owned business was sold to the retail conglomerate Dayton Hudson. According to the article, Dayton Hudson preferred to use the money that was being spun off by Mervyn to strengthen its flagship franchise, the well-known U.S. retainer Target. The result was that, here as well, the kinds of things that are necessary to maintain a brand in the rough and tumble of retailing were being neglected by virtue of the diversion of cash flow from the company's parent to another (and preferred) member of the corporate retailing stable.

The demise of a brand

In recounting this story, it is clear that we have drifted far afield from a conventional understanding of branding. Will the regrettable end of Mervyn's find its way into my next MBA course? Probably not, after all, it is not really about IP strategy. That said, it too is about branding, or more precisely, what happens when branding ceases to become a primary focus of the company's operations.

The role of branding in the UK economy

Last month the British Brands Group announced that it had commissioned Westminster Business School to undertake a study into the economic contribution of branding to the UK, to help build understanding of the wealth it generates and to quantify the contribution it makes to the economic health of the country. This work is seen as an essential precursor to assessing whether this contribution is being maximised. Its key findings are as follows: 

• An estimated 1 million people are employed in the UK in the creation and management of brands, equivalent to 4% of all those employed;

• The value of branding to companies is well understood. The most valuable brand domiciled in the UK is HSBC ($33,742 million), followed by Vodafone ($26,688);

• Brands are simply not being counted in the UK’s measures of economic activity. The knowledge economy is not being valued, and branding is an important element of this;

• While brands are recognised as a driver of economic growth, there remain significant gaps in the evidence base;

• Approximatetly £32.55 billion is spent on building brand equity annually, or 2.3% of GDP;

• This represents some £15.8 billion investment in the UK annually. This represents around 12% of all intangible investment and 6% of all investment in the UK;

• The creation and management of brands is becoming an increasingly important component of the UK’s overseas earnings;

• The investment in building a strong trust relationship between firm and consumer yields a number of returns to the wider economy:
- providing a surety that new products, ventures or markets are “safe” for consumers;
- the quicker adoption of new technologies and ways of living and working;
- aligning business with society, allowing firms to offset side effects of consumption;
- a means of regulating large global firms with extensive influence;
- a spur to innovation as companies strive to maintain their reputational asset;
- enhancing the reputation of British products and services abroad, supporting exports.

The BBG comments that it surprising how little work has been done so far to assess the contribution of branding to the wider UK economy, which is reflected by the significant gaps that exist in the evidence base. With branding’s potential to add value, deliver competitive  advantage, commercialise innovation, protect consumers, contribute to GDP, enhance export performance and align business to societal needs, this seems at best an anomaly and at worst a significant oversight.

A full copy of this 51-page report can be downloaded here.

What is to be of the CHRYSLER brand?

The tendency to disassociate trademarks from manufacturing and production misses the complex interrelationship between the two. Of particular interest is the move by a company from being an anonymous contract manufacturer (think of Taiwan and the semiconductor and electronics industries) to brand holder, whereby the manufacturer attempts to garner the value-added of consumer goodwill for its products.

The move from manufacturer to brand holder is not an easy one. The seemingly endless gestation of the ACER mark is testament to the difficulties that even the most successful contract manufacturer faces when it seeks to enter the brand-building and goodwill-generating arena.

An interesting twist on this phenomenon was reported recently in Business Week, under the title "A Strange Detour for Chrysler." We all know that US car manufacturers are in a dire straights, battered by gas that is too dear for many Americans, and stuck with dinosaur-sized SUVs that interest only the curator at the Smithsonian Institute. What to do with the excess manufacturing and distribution capacity? Chrysler seems to have come up with a challenging solution--turn yourself in a contract manufacturer and even a marketer of the cars of others.

The new home for SUVs?

As reported, it is not just that Chrysler is planning to put the CHRYSLER mark on a restyled Versa subcompact made by Nissan. After all, sharing platforms and the like is already old-hat in the auto industry. What is more interesting is that Chrysler is negotiating with Nissan to sell Nissan's ALTIMA brand vehicle through the Chrysler sales and distribution network. Moreover, Chrysler is also reported to be offering itself as an "assembler-for-hire" for any manufacturer that wants to sell truck and minivan products, but might want to save on the costs of manufacturer and production. (Why anyone wants to get into this business at the moment, especially since Chrysler itself has been a market leader, is another question, but both Nissan and Volkswagen seem to be interested of renting the Chrysler facilities for this purpose.)

One can be skeptical about this and ask the obvious question: If the name of the game in the US auto industry is to try and design cars that US consumers are likely to buy in an age of elevated oil prices, and if Chrysler is committed to protecting its brand, why is it selling cars for Nissan and making minivans for Volkswagen? That seems to be a sure-fire formula for brand dilution or worse. Should not Chrysler be committing 150% of its resources to designing, building and selling cars that Americans will want to buy?

According to the report, the reason for these measures can be found at the doorstep of Cerberus Capital Management, the private equity entity that forked over $7.4 billion dollars for 80% of Chrysler. Chrysler, aka Cerberus, needs to find ways to save cash and reduce costs. Better to generate an income stream for your underutilized sales and manufacturing facilities, even if they might dilute the long-term value of the marks and names.

Maybe that is the key point here. Maybe there isn't any long-term plan for preserving Chrysler as a going-concern and with it, the CHRYSLER name and brand. Save and cut costs today, and sell-off the company tomorrow. The name (in whole or in part) will go, and the sales and manufacturing capacities will change hands to someone else better able to turn them into successful product lines--but under that person's name and brand.

First you cut cookies, then you cut brands.