Successful companies create value by building strong brands. This is crucial in growing sales, widening the customer base, reinforcing customer loyalty and improving business performance. It can also create barriers of entry to potential competitors and strengthen a company’s position in its industry.
In Singapore, more and more small and medium enterprises (SMEs) are realising the importance of having a strong brand and how it can be their strategic asset.
However, while many understand that it is important to build trusted and reliable brands to stay competitive and relevant, SMEs are still having trouble understanding and executing successful branding initiatives.
Good branding is more than just the costs associated with marketing and public relations efforts. It goes beyond short term goals such as driving sales. It also helps provide the foundation for strong, sustainable business growth.
Rather, branding should go to the heart of what an enterprise stands for. It is its promise to its customers, in terms of their product attributes or service, and how the objective of delivering these products or services gives the enterprise its purpose of existence.
Behind the brand must stand the value creation process. After all, the products or services an enterprise delivers to its customers are their economic value.
Value creation must therefore permeate all notions of building a brand. In turn, the brand associated with an enterprise becomes the economic value that it brings to its customers, above and beyond what its competitors can deliver.
This concept of value creation as the driver for an enterprise’s branding therefore has a far reaching impact on how an enterprise is run, set up, and ultimately how it seeks to deliver better and more innovative products and services to its customers.
Importance of value creation
Effective branding and value creation must therefore be an integral part of every successful enterprise.
However, it seems that many local SMEs often undervalue the importance of branding to create value.
They do not appear to appreciate how the brand development process can in itself play a critical role in how their enterprises pursue more familiar business goals such as expanding market share, facilitating innovation or even enhancing productivity.
This suggests that many local enterprises are not adequately leveraging how they can use the value creation process to drive demand for their company’s products, services and in turn improve their longer term competitiveness.
Branding needs strategy
Having a strong and consistent brand image is essential to stay ahead of the competition in an increasingly competitive marketplace.
At the same time, competitive advantage can also come from an enterprise’s investments in value creation measures such as research and development (R&D) and other innovation driven activities, to support the enterprise’s sustainable and long term business performance.
Unfortunately, there are only a handful of SMEs who know how to create and sustain brand equity. One key stumbling block for SMEs is the lack of commitment and understanding of how to grow and manage brands.
Most SMEs also have a misconception that branding is only for big corporations and multinational companies who have the big budget and resources to pull it off. However, these constraints can be minimised with careful planning and a clear understanding of what branding entails for the company.
It is essential that business owners differentiate their product and service from that of their competitor by creating a lasting impression in consumers’ mind. This can result in consumers becoming more loyal to a brand, resulting in a stable demand for a company’s product.
Strong brands are built by creating awareness, perceived value and loyalty. These also include effective marketing strategies.
It is also important that SMEs communicate their internal brand to their employees. Involving staff helps them to understand the position and direction of your company, and to know exactly the target market and what the business’ core message is.
Singapore’s enterprises are however, not without help. There are in fact many government incentives out there to support the growth of local brands. These would help encourage the purchase and promotion of made-in-Singapore products and services.
For example, BrandPact, launched in 2005 and administered by SPRING Singapore and IE Singapore, provides funding support of up to 70 percent to eligible local enterprises. There are also offer one-to-one brand clinics and online resources to inform and equip enterprises on their branding journey. These were initiated with the objective to help businesses develop and embark on their branding strategies so that they will be more competitive in their niche.
The Intellectual Property Management Programme, administered by SPRING Singapore and the Intellectual Property Office of Singapore (IPOS), provides Singapore-based enterprises with consultancy advice and funding support to develop, protect and make full use of their intellectual property.
Another example is the Productivity and Innovation Credit (PIC) Scheme, which has been rolled out to support and subsidise enterprises that invest in intellectual property creation activities, such as R&D, design and the purchase of intellectual property rights (like brands, patents, trademarks and tradenames).
Indeed, almost 40 percent of participants polled at a KPMG forum in late October 2012 hoped to see more subsidies on costs related to brand development.
At least 31 percent felt that less prescriptive productivity and innovation incentives would help them understand and participate in the schemes.
Even with existing schemes to support branding activity, enterprises themselves must play a more active role in sustained brand management, especially promoting innovation. However, in terms of innovation efficiency and producing creative results, Singapore was placed only 83rd in global rankings according to the Global Innovation Index 2012. This category takes into account the number of creative goods and services, trademark registrations and online activity.
What this suggests is that while the government has invested significantly to create a conducive environment for innovation, the output of these efforts are below expectation.
Clearly, a two-pronged approach involving not just government incentives but also individual initiative is required.
Incentives drive behaviour. On the one hand, government incentives encouraging innovation should be simplified to make them more accessible to local enterprises. For example, some of the conditions required under the PIC scheme, like the R&D definition, are not easily understood by local enterprises, especially the smaller ones.
More creative approaches could be employed to encourage Singapore enterprises to embrace value creation.
We should reward value creation in addition to encouraging spending to improve productivity and innovation. For example, the existing tax regime could be tweaked to acknowledge the value of locally grown brands. This could be done by allowing companies to claim writing down allowances or tax amortisation on the value of their brands.
On their part, business owners must also understand that cultivating branding into their business does not reap immediate good returns. A successful enterprise which occupies a niche for itself within an industry does not guarantee its pole position. They need to adapt with the times, and introduce innovations to enhance their product or service offerings.
However, this is not a one-stop process. What is niche, novel or innovative in the past may not stay unique and relevant forever, given rapidly changing lifestyles and consumer demands.
Past downturns also demonstrate how successful enterprises survive, because they continue to invest in innovation, even in bad times.
SMEs have been and will continue to be the backbone and driving force for the Singapore economy. It is time for Singapore enterprises to display their entrepreneurial and innovative spirit by integrating an effective brand strategy into their business.
This article is contributed by Chiu Wu Hong, Tax Partner, KPMG in Singapore. The views expressed are his own.