Arnold is primarily a North American agency, with offices in New York,
Boston and DC, and our other markets include the UK, a few offices in
Europe and Australia, as well as China and Brazil. The fact is the markets
we operate in cover approximately 2/3rd's of the world's advertising spend,
so (at least in the mind of our CEO) we're in the important places and
when we're not, we get help from our Havas sister agency, Euro, with 233
offices in 75 countries. And at Arnold we have multi-national responsibility
on some of the world's Top 100 brands, including Jack Daniels, the GlaxoSmithKline
consumer portfolio, as well as having a major hand in others like McDonald's
and some key Pfizer projects.
There is one important credential Arnold has for giving this presentation:
our work. Arnold is among the world's most respected creative advertising
agencies on a global scale, we work hard to be a smart and modern company.
For those of you who don't know us, I thought we'd get things started
this afternoon with some of our work:
|Click image to view Arnold reel
The way that we work is this: we believe that at the core of every
great brand there lies a
fundamental 'truth' that links that brand in a unique and relevant way
to its consumer. Our process is ground in the fundamentals - understanding
the client's vision, the competitive and consumer realities, and then
developing a lens that will be the filter for all our work - the mindset.
Volkswagen spoke to 'Drivers', Royal Caribbean to 'Explorers', Take 5
to 'Arm-Chair Thrill Seekers'. That mindset links to the brand truth,
which is fundamentally at the core of everything - all our communications,
all our promotions, where we plan and place the media - we do for that
I start by telling you this only in part to introduce Arnold, but also
because the idea behind 'brand truth' is - and this is my theory for
today's presentation - is also at the core of the more solid and vibrant
global brands. There exists today a universal language of brands that
speaks to consumers at a level transcending cultural, social, political,
economic and geographic borders. First world, third
world, capitalism, socialism - there are brands that defy all of these
and somehow speak at a higher level. How else would one explain the fact
that among the children of the world the most recognizable figure next
to Santa Claus is Ronald McDonald? Or that the most recognized phrase
on the planet next to "OK" is "Coca-Cola"?
My purpose today is to address the best practice and rewards of global
branding - as well as the perils of not getting it right. And I'll summarize
by addressing how getting the global brand message (and the marketing
and agency organization around it) right can help you attain your goal
of profitable revenue growth outside of the U.S.
One of the fun parts of doing a presentation like this is you get a
chance to see some interesting work and have a few laughs while you
do so; you'll also see that in building brand truths, the best advertising
also connects with some human truths, things deeply engrained as part
of how we as human beings behave as a species. Let me show you some
work, the first from Thailand and the second two from France, that are
testimony to how 'truth travels'.
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Now this is a dry part of the presentation, but I think it's necessary,
so stick with me. Twenty-three years ago, in the Harvard Business Review,
Theodore Levitt wrote a piece called 'Globalization of the Markets'.
As many of you are no doubt aware, in it Levitt argued for corporations
to exploit the 'economics of simplicity' and grow by selling standardized
products all over the world. At a time when the world seemed to be getting
smaller - and when the modern definition of productivity (lowering cost/increasing
effectiveness) was beginning to take hold, this model made a lot of
sense. And soon, the Cold War was over (and with it new markets like
Russia, the Eastern Bloc and China were opening); Europe was heading
toward a "Union" in 1992 with a bigger consumer base than
the US - and many global marketers were asking themselves 'how can you
not subscribe to this theory of global simplicity and harmony?'
But there were issues: this 'least common denominator' way of thinking
was resulting in generic products and dull advertising that left a hallow
impression on consumers' minds. Global marketing leadership therefore
rushed to a hybrid strategy: keep the global efficiencies of scale on
technology, production and the organization of the company but customize
product features, distribution and local market selling techniques (including,
in some cases, the advertising) in order to address local needs and
tastes. "Glocal" was born.
However, 'Glocal' may be exported; I'm going to show you now two McDonald's
spots produced last year - the first in Brazil, the second in the U.K.
- that were never intended to be run outside of their home markets -
but when you see the work I think you'll understand why they were.
|Click image to view
In the most recent 8 - 10 years, three new and major factors have influenced
how global brands are managed:
club in Seoul or Pusan last spring, you would have heard her singing a
song called "Any Motion". But this popular song was different
- it was actually an ad for a $600 Samsung cell phone, and it got so popular
it rose to the top of their charts and in a country of approximately 50
million people, the ring tone of the song was downloaded more than three
million times. Content on new media - with, again, the consumer in charge
- is on us here and now. Virtually all of the major US networks are in
deals to sell content on mobile phones, and some are even introducing
their own mobile brand - like our client Mobile ESPN.
#1: The 2,000+ year war between producer and consumer, dating back to
the days of the bazaar, is over: the consumer won. The internet, among
other things, gives the consumer the edge to develop brands as they
like, access to brands as never before possible, and the ability to
build a relationship with a brand unimaginable even ten years ago.
#2: Media convergence: this is Lee Hyori. She's a Korean pop singer
who, if you were in a
#3: The inability to hold real innovation as a point of difference for
very long. The gap between when you have real technological innovation
and when your competitors can match keeps getting shorter than shorter.
I had another client tell me last week that patents don't seem to matter
anymore, especially in the Far East.
So these three things:
- The consumer in charge
- Media convergence
- Ownable innovation evaporates
makes one conclusion very clear and apparent: the need to establish
real value behind your brand has never been greater. And the stakes
placed on having a strong, solid brand that is relevant, repeatable
and leverage-able across geographies are more important than ever. And
to us, we believe that establishing this through identifying a mindset
and a truth about your brands is at the core of the really successful
global players. But this truth has to be fluid enough to work on a large,
What I want to spend some time on now are some of the most important
practices for getting global branding right. There is a guy named Pankaj
Ghemewat who teaches at the Harvard Business School and he wrote a piece
four years ago which struck me because he said then while much had been
made in recent years about "the death of distance" (because
of the internet, global communication, shared popular culture, etc.)
it would be incorrect to assume our shrinking world is becoming a small
and homogenous place (this was the error of Levitt's idea 18 years earlier).
This guy called for a 'clear-eyed evaluation' of the many dimensions
of distance, and identified four that marketers need to have in mind
when managing a global brand.
His four were:
- Cultural distance
- Administrative or political distance
- Geographic distance
- Economic distance
He pointed out a case in Mexico with Yum Brands - KFC/Pizza Hut/Taco
Bell - I'm not going to dwell on this in great detail, but basically
they shifted from a 'single best practice' approach and revised their
plans to address these 'distance factors' which had not really been
a part of how Yum was shaping its global expansion plans, and as a result
Yum grew its total QSR share in Mexico to 38%, putting it well ahead
of McDonald's in that country.
Now Coca-Cola is another company that has understood the 'distance-thing',
and they've forever said that "Coke is a local brand repeated many
times over". In fact, when I was living in Japan and working on
that business a Coke client from Australia proudly told me that some
consumers in his home country considered Coke to be a local Aussie beverage
that was "shipped all 'round the world". And, you know, Coke
has been at the center of this global brand thing for years - because
of its ubiquity, I guess - but over time the pendulum has shifted from
local to centralized, then getting global campaigns that weren't relevant
and vice versa. And I saw Coke's new CMO, Mary Minnick, speak at a conference
in December in which she declared the following: "Global is a bit
of a misnomer". Her point was for Coke, the 'new order' was that
brands are no longer global - and they're no longer local - they're
both. And she was very clear in stating that for the flagship red can
brand, getting into the local cultures meant that that brand needs to
be multi-layered: multi-targeted, multi-media relevant. Here's a terrific
example of what Mary was talking about; it's from Argentina.
|Click image to view
Now it's no accident that Mary's point-of-view comes out of her experience
of running the Coke operation in Japan (from which Coca-Cola draws approximately
20% of its global profit) or, for that matter, from her next job when
she ran all the Asian operations for the company (with its incredible
distances - not just geographically but economically, politically, culturally,
you name it). But her POV isn't that different from other strong multi-national
leaders - Jeff Immelt of GE claims the network of regional headquarters
he moved into that company's rather lean, product-division structure
has been key to the company's success since he assumed the CEO reigns
from Neutron Jack. John Menzer, CEO of Wal-Mart, tells his people that
success is about playing "3-D chess on the global, regional and
local levels". And Fujio Cho, Vice Chairman of Toyota, said that
his company "intends to continue moving forward with globalization
by further enhancing the localization and independence of our operations
in each region".
So maybe all really is one. It's a mix.
Not global, not local, but both. And a big part of being able to do
that - understanding the global strategy and the local agenda - is coming
to a place where we also get the shared values
of our consumers on a local or regional basis and then make our brands
relevant to the lifestyles and preferences of the sub-groups. On a lifestyle
basis, McDonald's - for instance - derives a huge part of its business
from kids. And we work hard to capture the lifestyle and emotion that
cement that kids connection, reinforce it and keep it current, and spread
the best work around. Here's a brand new spot from Spain that does just
|Click image to view
On the product side, you know better than me that marketers have to
be sensitive and tailor to local tastes; the smart ones do. This is
why Nestlé, as an example, produces 200 varieties of Nescafé.
It's why they make Kit Kat for Japan in flavors like lemon cheesecake.
It's why Coke, in 2005, launched 1,095 new products around the world
(331 being proper line extensions with significant ingredient changes;
twenty being entirely new trademarks; and the rest probably being flavor
extensions). And it's why one of our other clients, McDonald's, moved
its country and regional heads out of Oak Brook and into their business
Let's talk about McDonald's for a minute. Ray Kroc, the Milton Hershey
of McDonald's, used to say he didn't know what McDonald's would sell
in the future, except that the company would sell the most of whatever
it was. Today, McDonald's is - among other things - the world's biggest
seller of salads. But when you drill down to a regional basis, there
is even more interesting innovation going on: Rice burgers - tested
last year in Taiwan (it's crispy chicken or beef with cabbage and lettuce
between two toasted and flavored rice patties) are being launched as
we speak in Hong Kong, Singapore, the Philippines and Malaysia, and
the product will be rolled out into China this fall. Pork teriyaki burgers
have been on the menu in Japan for years. But this innovation is just
one part of being relevant to shared values. There are values that McDonald's
markets to based on mindset (children, young adults, mothers) and also
by depart (breakfast/lunch/snack/dinner/late night).
I want to play three more kids spots produced for local or regional
needs but now in global circulation.
|Click image to view
Relevancy also means being able to address all of your constituencies.
In this country, something like 5% of the population has worked at a
McDonald's at some point in their lives - and so getting quality people
behind the counter is really important in the burger business. Here's
a spot, produced with the intention of running in global markets, with
that in mind.
|Click image to view
well, as one of the shared values that affects brand selection is the
demand that consumers have for products made for them, their emotional
and physical need states. We're all faced with confronting the demand
for greater choice and variety. I spoke about the Coke new product numbers
before, but here's a different way to look at the Coke dilemma: in 1994,
83% of Coke's US sales came from products carrying the core trademark;
ten years later, that number is 60%. This same story is even more pronounced
on the Pepsi side: 91% of sales from products carrying the core trademark
in 1994 to 54% today. And the real scary part is when you consider the
predictions of how things will look from a bottler perspective: in 1990
a bottler was asked to carry 150 SKU's, and in 15 years that number doubled
to 300; according to Morgan Stanley, that number of SKU's will more than
triple in the next five years.
Perhaps ironically, shared values is something that has unleashed a
torrent of line extensions as
The need to be more locally relevant also means there's a need to break
through - by getting into your consumers' lifestyle. Steve Heyer, the
CEO of Starwood, has been trying to instill this lifestyle element into
his hotel brands, and he's been doing pretty good job of it. They try
to make it very clear what each of the Starwood brands aims to be -
and then to make certain that the brand resonates with its consumer,
Starwood is striking deals with media companies, telecoms, apparel lines
and other businesses to help each of its nine hotel brands be distinctive.
And Heyer is doing it through a different type of convergence.
Westin is about renewal. Sheraton is for guests who want to belong.
And W is a 'flirty escape' for hip insiders. So, W is doing a partnership
with Victoria Secrets to give guests a discount on merchandise and the
opportunity to access on-site fashion shows. Time Warner will use W
rooms for Entertainment Weekly interviews and photo shoots, with
video clips then streamed on AOL. We recently talked to Panasonic about
getting some of its plasma flat screens installed in all the W rooms
Of course, the greatest lifestyle marketer is Nike.
They are, in my opinion, the "undisputed champions of relevancy".
Their formula is pretty simple: leverage current 'in-the-news' athletes
- think of those athletes as brands - to make their product more relevant
and breakthrough. One of my favorite Nike examples is this U.K. spot
for tennis, which has run in other markets including the U.S. (you may
have seen it on the Open last year).
|Click image to view
Finally, one of the biggest opportunities facing global brands today
is trying to create an equity that can hold a core 'truth', but can
re-tell and - in a sense - reinvent its story to change as consumer
ideology crumbles and gets reinvented. In a sense the brands that do
this well, over time, become
more than brands - they become icons. It sounds like a big task, and it
is, but to become a meaningful global player a brand needs to aim high
and try to operate at this level. Nike, Harley-Davidson, Apple, VW and
Hershey (in this country) are revered because they are so true to themselves
but also have reinvented and re-told their story to be relevant to the
consumer ideology that surrounds them; in fact, as someone who worked
on and followed the Hershey brand in an earlier life, I felt that a primary
reason why the Hershey Bar suffered for quite a while was because despite
all the ad campaigns, at its core it never really reinvented itself.
One brand that I'm keeping my eye on, because it's starting to get
its act together, is Adidas. In my opinion, the work is still a little
close to Nike, but there is something happening with Adidas that I believe
may be the beginnings of 'out-relevance-ing' the master. Let me show
|Click image to view
And it's hard work for a leader to keep staying relevant; in this country
Levi's, Cadillac and recently Budweiser are brands that have slid into
deep funks because the consumer changed and they didn't.
I want to close on this thought: Lou Gerstner defined four types of
people in his book Who Says Elephants Can't Dance? and those types could
be applied to the way marketers manage global brands today.
The four types were these:
- Those who make things happen
- Those to whom things happen
- Those who watch things happen
- Those who don't even know things are happening
Gerstner added he often wished he was in the last group, because wouldn't
life just be simpler, wouldn't you sleep better - but in the global
branding game, any of the last three spells trouble. The successful
brands will be run by the hungry guys who get out there and make things
happen - and of course it's not simple or easy, but tenacity has a way
of making everything possible. I can't pass up this opportunity to tell
you three simple truths that I found to be 'best practice' for managing
and driving a global brand:
1. Listen, continuously, through every means possible. Your success
will be in direct correlation to how well you listen.
2. Create owners. The days of a headquarters dictating the programs
are over; it's also really dumb business in the global arena. In my
old job, on brands like Neutrogena, we gave the important markets
ownership - not just in what was happening regionally, but globally
as well. They became co-authors and co-directors of those brands.
3. When you find something that works, spread it around. Don't let
others tell you why it won't work in their market, challenge them
to find a way to adjust and redefine the positioning or program to
make it relevant to their consumers.
4. Finally, as the client, set the rules of the game. Don't avoid
confrontation internally or procrastinate, pushing the problems on
to the agencies when you hit a log jam between global/regional/local
strategy and execution. You'd be surprised how many leading global
marketers try to use this back-door approach, and you'd be even more
surprised at how deeply this can hurt the strength and value of a
At the end of Gerstner's book, he talked about the characteristics
of the next generation of leaders in business. But we believe this definition
could apply - verbatim - to the next generation of leading global brands.
The next generation of global brands will be:
- Much more able to deal with relentless, continuous change.
- Global in outlook and practice.
- Much more able to strike a balance between the instinct for cultural
preservation and the promise of regional or global cooperation.
- Much more able to embrace the fact that the world's model will be
openness and integration, not isolation.
I've been showing you some work from the Cannes festival - 'because
I Cannes' - but in thinking about these four principles I was reminded
of a spot from Honda in the U.K. that won the Grand Prix last year.
It's fun, and I think you'll sense some of the principles lurking in
the background of the thinking behind this spot. Let's have a look:
|Click image to view
Thank you again for your time, and for including us in this session.
Ned Russell, Arnold Worldwide
Copyright © 2006. All rights reserved.