Which Matters More:  Improving the Product/Service or Building Up the Brand, Part 1

Ask any Chief Marketing Officer and they will argue vehemently that for a business to maximize profits and retain customers, it must build a brand that resonates with the targeted consumers.  But ask any Chief Operations Officer and they will vow that a business delivering a truly top-notch product or service needn’t worry about branding, advertising or promotions.  The product or service will sell itself through word of mouth, referrals and repeat business generated by raving fans.  Both arguments are compelling.  But they can’t both be right.  While it can be argued that both quality product/service and compelling brand matter, they aren’t equally important.  One matters more.  Which one?

The age-old question in the business world of what holds more weight — an exceptional product or a carefully crafted brand – has divided business leaders for generations.  But this debate has never been more important than now as companies compete in the digital sphere where few (if any) geographical and physical market boundaries remain.  In this debate, two distinct camps have emerged: Camp One champions the product or service itself, believing a best-in-class offering will naturally attract customers, rendering brand building unnecessary. Conversely, Camp Two prioritizes building a strong brand, arguing that even the most exceptional product needs a compelling narrative to truly thrive.  Let’s delve into the arguments of each side, examining actual data and successful companies to see who holds the upper hand.

Camp One: The Product or Service is King (and Queen)

Advocates for product-centricity believe the quality and functionality of a product speak for themselves. They cite the power of word-of-mouth marketing, where satisfied customers become brand ambassadors, spreading the gospel of a great product organically. Here are some key reasons for supporting their position:

1. Focus on Innovation – A relentless focus on product development ensures customers have access to the latest and greatest solutions to their problems. Companies, such as Sony, are known for pushing boundaries with their electronics, consistently innovating and exceeding customer expectations.
2. Customer Loyalty Through Performance – When a product consistently delivers on its promises, it fosters a sense of trust and loyalty. Patagonia, a leader in outdoor apparel, prioritizes functionality and environmental responsibility, building a loyal customer base who swear by the performance and ethics of their products.  Even though it might seem that they prioritize brand, they actually prioritize product and let their raving fans elevate their brand for them.
3. Reduced Marketing Costs – Product-centric companies believe successful products generate their own buzz, minimizing the need for expensive marketing campaigns. Dollar Shave Club disrupted the razor industry with its high-quality, low-cost blades, relying primarily on social media and word-of-mouth to reach customers.

Data Supporting “Product Quality” Focus

It appears that data supports the premise that product or service quality is the lynchpin to business success.  In “The Evolution of Quality,” a report by global consulting firm McKinsey & Company, researchers indicated that a focus on product quality is a key differentiator for high-performing companies.  According to McKinsey researchers Alvaro Carpintero, Eveniya Makarova, Alessandro Faure Ragani, and Paul Rutten, “Fundamentally, quality is about meeting or exceeding customer expectations: every day, every shipment, in each product, year after year. That’s where the true value is, measured not only in higher revenues from greater customer satisfaction but also in higher operational efficiency and effectiveness due to increases in productivity and innovation—and even employee engagement.” 

To summarize, they indicate that product quality is what drives reputation.  They indicate, “At the very earliest stage of quality awareness, organizations start to hear the voice of the customer more clearly while stabilizing their operating systems and promoting greater transparency about quality problems. As these practices take hold, the next stage of maturity centers on strengthening cross-functional accountability and collaboration for quality—such as with new performance standards so that quality standards inform the design of products and the management of supply contracts.  At the third stage, quality informs much of the organization’s decision making, embedding itself so deeply that it becomes a part of the culture and essential to the company’s value proposition.

But McKinsey’s researchers go a step further in saying that, “Finally, among a small group of the very highest performers, quality becomes the basis for their reputation. These exceptional organizations expand their perspective on quality to address customer problems in ways that push their businesses into new areas, building on behavioral research and process analytics to develop deeper solutions and customer relationships.”

Examples of Product-Centric Success

We don’t have to search very long to validate McKinsey’s findings in real-world businesses.  Here are three prime examples. 

1. Tesla – Elon Musk’s vision for Tesla’s electric vehicles has revolutionized the industry. Tesla’s focus on innovation and performance has generated a cult-like following, solidifying their position as a leader in the electric car market.  But we don’t have to focus on new, high-tech, innovative products like an electric car to see that quality matters most at all types of companies. 
2. LEGO – The iconic Danish toy company prioritizes imaginative and well-designed building sets, consistently exceeding expectations for quality and creativity. Their focus on the product has built a loyal fan base across generations.  (More about LEGO later.) 
3. Clorox – Even companies manufacturing a commodity focus on quality as their primary driver.  Clorox, the cleaning products powerhouse, is a testament to the power of consistent product quality. Through decades of innovation and reliable performance, Clorox has become a household name, synonymous with cleanliness and efficiency.

It is hard to argue with data and examples that make the case for focusing primarily on product/service quality first and foremost.  However, there is a case to be made about the power of brand building as well.

Camp Two: Building a Brand to Build a Business

Those in the Brand camp emphasize the need to establish and grow the brand in order to grow the company.  That, they feel, is most important. They argue that a strong brand goes beyond just a logo or tagline; it’s the story, values, and emotions a company evokes in its audience. A compelling brand creates a connection that attracts customers, fosters loyalty, and allows a company to charge premium prices. 

Team Brand also has three key reasons for supporting their position.  Here is their reasoning:

1. Emotional Connection – A strong brand taps into the customer’s emotional needs and values. Apple, for example, positions itself as a company that empowers creativity and innovation, resonating with a specific customer segment.  While Apple certainly focuses on quality products and product innovation, Steve Jobs always understood the power of brand to connect with customers.  The Apple brand does not just have raving fans but fans with cult-like loyalty and devotion to the Apple brand, its products and even its stock.
2. Differentiation in a Crowded Market – Consumers are bombarded with choices. A strong brand helps companies stand out, making it easier for customers to remember and identify with them.  Let’s not look at brand powerhouses like Nike in the sneaker space, Cartier in the jewelry space and Louis Vuitton in the luxury luggage and fashion space.  Instead, let’s consider Starbucks in the beverage sector.  Their brand represents a sense of community and premium coffee-house experience, distinguishing them from the countless coffee shops on every corner all over the world.  Only Starbucks could manage to get people to understand that “Grande” (the Spanish/Italian word for Big) actually means their medium-sized cup but “Venti” is their largest cup.  Shifting how people use basic terminology is an example of how Starbucks differentiated themselves in the marketplace and carved a niche for themselves that challengers have failed to beat even with much better quality coffee beans.
3. Premium Pricing – A loyal brand following allows companies to charge premium prices for their products or services. The most powerful brands are able to get people to pay more – often a lot more — for their products… pricing that far exceeds any connection to quality.  Luxury fashion brands like Chanel can command exorbitant prices because of the brand’s history, heritage, and the image they project.  Yes, their products are excellent, but so are the products of thousands of other perfume, clothing, and accessory makers.  Yet Chanel perseveres despite an ocean of challengers.  That is the power of brand.

Data Supporting the Power of Brand

So, what does the data say about brand being what matters most for company growth and success?  As it turns out, there is a lot of data to support that position. 

A study published in the Journal of Marketing Research found that strong brands generate a 3% price premium.  The article indicated that “brand is widely considered to be one of the most important assets of a business.  Besides increasing pricing, it can also help a business stand out from its competitors, build trust with customers, and increase market share. A strong brand can also improve company value, encourage consumers to buy, support marketing and advertising initiatives, make employees feel proud which helps with recruitment and retention, helps a business get recognized more often, and helps create an effective campaign.” 

In fact, according to The Economist, “brands can account for more than 30% of the stock market value of companies in the S&P 500 index.”  A survey by the World Economic Forum and FleishmanHillard found that three-fifths of chief executives believe corporate brand and reputation represents more than 40% of their company’s market capitalization.  So global business leaders themselves are often part of Camp Two.

Examples of Brand-Centric Success

It would be easy to list a dozen companies that clearly prioritize brand over everything.  Here are three examples:

1. Nike – The iconic swoosh is a testament to the power of branding. Nike is more than sportswear; it represents athletic excellence, self-improvement, and a “just do it” mentality. This brand identity has propelled them to the forefront of the athletic apparel industry.
2. The Walt Disney Company – Disney has built a global empire through its storytelling and brand experience.  Surely a company that sells its theme park as “the happiest place on earth” understands the power of brand.  From theme parks to merchandise, everything Disney does reinforces the brand.
3. LEGO – While we listed LEGO as a company that prioritizes quality over everything, the toy manufacturer also has an uncanny ability to prioritize brand as well.  The fact that they have 11 Legoland parks currently in operation and 4 more planned parks on the horizon indicates the power of the LEGO brand.  So does their foray into motion pictures.  Thus far, the LEGO movie franchise includes:
4. The Lego Movie (2014)
5. The Lego Batman Movie (2017)
6. The Lego Ninjago Movie (2017)
7. The Lego Movie 2: The Second Part (2019)

This is a company that clearly understands the power of brand and knows how to leverage it skillfully. 

Perhaps, there is a different way of looking at this priority push-pull that happens between quality and brand.  Let’s explore that next week as we look at Quality vs. Brand from a timing perspective.  Stay tuned.

Quote of the Week

“A brand is a voice, and a product is a souvenir.” Lisa Gansky

© 2024, Keren Peters-Atkinson. All rights reserved.

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