With the phenomenal growth of China over the past three decades and its adoption of capitalism and private enterprise, albeit with Chinese characteristics, we have to question many of our assumptions about capitalism, communism, free market economies and state control. Not only are some Chinese companies beginning to enjoy high market shares and market valuations, they are also being recognized for their innovation. It is not surprising to see a Chinese company or two these days in the top 5 or 10 of the 50 most innovative companies by many business publications, including Fast Company.
Whether we can consider them to be brands yet, in the right sense of the word is debatable, but I would have to say that many are growing into one. Not just because they are strong in their home market, which they are likely to be, like Alibaba, China Mobile, TenCent, Huawei, Lenovo and Xiaomi, but because many have grown in international markets.
In fact, I would argue that it is because they have ventured into international markets that they have gradually started building their brands. Am I therefore saying that to succeed as a brand, one must be international or global? Not exactly, although it certainly helps.
What I am stating here is that brands need a certain environment in which to grow and thrive. Brands are about relationships between companies/their products and consumers and other stakeholders and therefore the context or environment is equally important. Besides, brands are almost always about consumer preference for your brand over others, which necessarily means the consumer is exercising a choice.
The world currently has several political and economic systems at work across several countries. And not all of them support the active decision-making, relationship-building, choice-enhancing capabilities and powers of the citizen, on a day-to-day basis. Thankfully most are democracies, but not all are fully functional democracies in every sense of the word. Further, not all are democracies in the same way. While most qualify by simply allowing elections, many go further to protect their citizens by law, and still others allow citizens a more active say in policy-making.
Taken at its most dynamic, it is direct democracy, the kind enjoyed in California in the United States and in Switzerland, where most significant policies are put to a referendum and it is really citizens then who decide. It is the highest validation of exercising your choice. Of course, this is not something every country can have since it depends on so many factors, most importantly education levels of citizens, their knowledge and understanding of various issues and therefore their ability to make informed and well-considered decisions for the rest of society.
There are studies like the Earned Brand Study 2018 by Edelman that argue the opposite. That consumers expect brands to deliver democracy and think that they actually do so. While this would be music to the ears of most marketers, it also puts too much pressure on companies and brands. I beg to seriously differ. The study arrives at conclusions on the basis of research that is highly dubious: respondents shown campaigns based on product features vs campaigns based on brand values. Those who have been in the advertising and marketing industries long enough would know that nobody builds a brand based on product features; it is always a consumer benefit and the right brand values that together, persuade.
My position is that consumers decide whether you are a brand or not, because you have to create a preference for your brand in their hearts and minds. More importantly, brands take several years to build and require substantial investments in sustained communication and product experience. In this article, therefore, I argue that brands grow better and thrive in democracies because they require certain conditions – found mostly in democratic societies – in order to sustain themselves and flourish.
What does democracy really have to do with brands? Well, for consumers to be able to exercise their choices freely and on a continuous basis, it requires certain basic conditions. Likewise, for brands. Brands need to communicate consistently and on a sustained basis for long periods of time, in order to build relationships and become brands in the first place. Therefore, brands require an independent, wide-ranging, active, and thriving media environment in which to grow. That also means consumers and citizens participate in creating and consuming that media environment in an active and organic way.
Next, brands are about certain quality assurances and legal protections that they both offer consumers and also themselves require in order to justify their existence. In other words, brands require the rule of law in order to grow and thrive. By assuring consumers that they have access to a justice system, brands strengthen and validate their relationships with consumers and with society at large.
Third, brands require market competition. They perform best under a competitive environment, with little state intervention. Because that is when consumers are truly exercising their choices in a variety of ways. The more players, the better.
Fourth, brands fulfil a role in people’s lives. If people are not free or are constrained in any manner, it is bound to reflect on a brand’s performance. The more strictly regulated or regimented a society is, the more brands will be constrained and will not be able to fully realise their role in society.
Fifth, it follows that the more unequal a society, the less brands play a part in people’s lives. Although brands are relevant to specific segments of consumers, based on demographics and psychographics, their appeal to the wider community gets limited in economies with high levels of inequality. Indeed, in many ways, brands could even exacerbate the inequality that already exists.
Since brands are also companies, not merely products we consume, their role as corporate citizens depends on the political and economic system as well. The role they play as investors, builders of capacity and wealth in an economy, as employers and builders of human capital and new technologies all depends on the environment. Here, other stakeholders come into the picture and their choices, decisions and opinions also matter.
Too often we have seen governments collude with businesses to entrench themselves and their power through crony capitalism. When that situation continues for too long, I think businesses tend to lose their brand value or cachet in the eyes of consumers and often even in media, while investors might still be happy to play along for a while because they are focused only on the financial returns. On the other hand, you might have the state controlling business or large parts of it. Here, the control exercised by the state tends to work against brands, and so brands in the private sector part of the economy will always tend to do better than the state-owned ones.
There are exceptions, of course, as in monopolies. If China Mobile is the biggest monopoly, it will necessarily be the biggest brand. Introduce competition and you’ll see how differently consumers and other stakeholders exercise their choices and how dynamic the market becomes. Singapore Airlines is an exception as well, but with a difference. Even as a state-owned airline, it manages to compete with international airlines and hold its own, thereby building its brand.
Google too is an exception; it manages to be a monopoly in a free-market economy! As the world’s largest and only search engine it has grown to become a huge brand, playing a huge role in our lives. It also enjoys sky-high market valuations. However, its real brand value too will only become clear when it has competition, and we all wait for that day!
All this leads me to believe that democracies are the best places for brands to thrive. Democracies are where consumers and other stakeholders exercise their choice freely and decisively. We need only look at the world’s biggest brands and see how most of them come from America, the UK, France and Germany. It is not a coincidence that the best known or most valuable brands are from the West. After all, those societies are not just democracies but also capitalist economies, encouraging competition, rule of law, democratic freedoms and civil liberties. UK, France and Germany still have elements of social democracy in different measures, which helps us see the role that governments too play in building brands. Think of the role that the French government played in the Renault-Nissan fiasco following Carlos Ghosn’s ouster.
The country to come closest to these, in the context of brands, is Japan. However, Japanese, Korean and Taiwanese brands, as well as the Chinese, need to make a much stronger effort in their communications. And these countries need to do much more by way of ensuring free competition, rule of law and easing regulations. Speaking of brands and democracy, there is a non-partisan, not-for-profit organisation called Rock The Vote in the US that has been championing the cause of democracy by getting the young out to vote. And it has quite a few companies and brands supporting its efforts through an initiative called Brands For Democracy.
I wouldn’t set too much store by theories that brands can either deliver democracy or that they can strengthen a democracy. Instead, I prefer to see democracy as a necessary (but not sufficient) condition for brands to thrive. And I look forward to testing this hypothesis of mine by strategizing and building a brand across several markets with varying characteristics through sustained communication across a reasonable length of time, say 5 to 10 years and then see how much of a difference freedom of choice actually makes.
In the meantime, here’s hoping for more open societies and greater freedom across the world. I realise that at a time of increasing authoritarianism and right-wing governments around the world, and growing protectionism during a pandemic, that might seem naïve and even wishful thinking, but one always hopes that better sense and calmer minds will prevail.
The featured image at the start of this post is by Harry Cunningham on Unsplash