Family Business Branding

BR-ND White chocolate paper Insights and ideas from BR-ND the brand appeal company

Family business branding unlocking branding potential within family businesses

Jeroen Timmers

Family business branding Family businesses provide stability in times of insecurity.

Profiting from their long-term outlook they have demonstrated an ability to outperform their counterparts.

This phenomenon has been observed by newspapers and business publications worldwide as they pay increasing attention to the success of family-run companies.

Banks are tailoring their services to fulfil the financial needs of the family business.

Meanwhile, forefront universities have turned this area of business into an academic practice and are offering executive programs that meet the specific needs of the (board-) members of family businesses.

The vast majority of this emerging literature and research studies the behavioural dynamics, succession strategies, governance and organizational structures of family businesses.

BR-ND white chocolate paper family business branding

But what about their brands However, one very important aspect of family businesses remains unexplored; the family business brand as a means of strengthening its’ business position.

This paper depicts the first results of an ongoing research into family businesses and their brands and answers the following questions;

1 What makes family businesses unique?

2 How can family businesses align their business with brand strategy?

3 What are the branding options that owners and marketing executives of family businesses can decide upon?

The family business family Various definitions of family business worldwide exist.

Below you’ll find the three main flavours and their main characteristics.

Family Businesses • 50% ownership by one family • Family has a decisive influence in business strategy and ownership • Firm must draw multiple members of its workforce from the family • The majority, or at least two members of mgmt board must come from the family • Firm must not be stock listed

FIGURE 1

The family business family

Family Businesses

hybrid Family Businesses

BR-ND white chocolate paper family business branding

Hybrid family businesses

Family influenced companies

• 50% ownership by one family (or 25% of the voting rights in listed companies)

• 10% stock-ownership by one family • Firm is stock listed

• Family has a decisive influence in business strategy • At least one family member on board of directors • Firm can be stock-listed

Family Influenced Companies (As used by the Credit Suisse Family Index)

Driving worldwide economies Until a couple of decades ago, family firms were barely visible. They were considered by investors, academics and journalists to be uninteresting and unimportant.

FIGURE 2

However, as the significance of their economic impact has become more apparent, so has the level of knowledge and discussion surrounding family businesses.

The indications are that worldwide, family businesses represent between 60%-80% of all companies. Their contribution to a country’s GDP is typically around 30-60%. Moreover, in terms of employment, these businesses add huge value to the global economy by generating between 35%-70% of new jobs worldwide (Gils, et.al. 2008). Acknowledging the economic importance of family businesses, governments worldwide now provide attractive tax regulations to stimulate their existence and development.

Number of family businesses and GDP contribution

Number of family businesses as a total of all businesses

Source: International Family Enterprise Research Academy (IFERA) 2006

Gross domestic product

100 90

72%

80

70%

70

70% 55%

60

60%

55%

52%

60%

60% 60%

50 40 30 20 10

Belguim

Germany

The Netherlands

Portugal

France

UK

BR-ND white chocolate paper family business branding

Moreover, it is a misconception to think that family businesses are ‘mom and pop’ stores.

Family businesses cover a wide spectrum ranging from relatively small businesses to large corporations. In fact, 37% percent of Fortune 500 companies are family companies!

100

95% 65%

90

80%

75%

80

65%

70 60

50% 40%

32%

50 40 30 20 10 0

Spain

Finland

USA

The long view drives stability and growth Family businesses appear to have some advantages over ‘normal’ companies. Indeed, there is significant evidence to suggest that they outperform their counterparts.

This is generally ascribed to their ability to think and plan long term, their deep pockets, and their ability to respond quickly to changes in the environment.

Cargill, a world-leading supplier food and agricultural products, and 100% family-owned, perfectly encapsulates this in their long-term strategy: ‘What’s important isn’t the here and now but tomorrow and beyond’ (Broehl, 1992).

The owner of Metzler, a Frankfurt-based bank founded 334 years ago, put the credit crunch nicely in perspective by remarking; “Financial Crisis? Well, we had our times under Napoleon” Milne & Schafer, 2008

BR-ND white chocolate paper family business branding

Creating opportunities in times of crises This advantage means that family companies do not have to respond to the quarterly demands of Wall Street analysts. Hence, family businesses have the ability to think countercyclically, creating the opportunity to act quickly and takeover other companies at times when such companies (and the wider economy) are in trouble. In fact, family businesses are increasingly adopting the tactics of private equity groups.

These organisational capabilities have enabled many family firms to rapidly emerge as successful world leaders.

Another very important virtue of family companies is that the interests of the owner and management are better aligned, minimising the risk of mismanagement.

‘Family businesses are increasingly adopting the tactics of private equity groups’

Competitive superiority through identity It is not only what family businesses do that strategically enables them to perform better.

Family businesses also derive competitive strength through their identity.

As the family members hold dominant positions within the firm, their beliefs, values and motivation are important cultural drivers. Of course, these beliefs vary across families but some beliefs seem to be common across family businesses. Entrepreneurial spirit and the firm belief in long-term relationships are habitually valued in family businesses and are seen as an important driver for business growth.

Influence of the founder’s mentality These category values often stem from the founder’s mentality, as such virtues are crucial in the company’s start-up phase.

The founder’s role is often claimed to be most important in defining ‘who family businesses are’. (Kelly et. al., 2000; Denison et. al. 2004).

This is often seen: Levi Strauss, for example, formed the culture of innovation and corporate citizenship at Levis Strauss & Co. J.C. Hall instituted the concept of caring for each other in business, which still is leading in the culture and product development at Hallmark.

Of course, examples can be found in nonfamily companies as well (take the example of Steve Jobs’ influence on the culture of Apple), but these are exceptions to the rule rather than standard practice.

BR-ND white chocolate paper family business branding

Driving motivation and loyalty

Taking up their social responsibility

This powerful influence of the family identity on the organisational culture creates high levels of employee engagement, thereby improving the company’s performance.

Another very important asset of family companies is their involvement with their environment. Family businesses around the world seem to be more closely involved with their environment than their counterparts.

People employed at family companies identify more strongly with their company, and display higher loyalty and work satisfaction than those employed at similar, non-family-owned companies (Beehr, et.al., 1997; Vallejo, 2008).

Characterised by highly motivated employees, family companies are often referred to as a breeding ground for entrepreneurial talent.

Tata Group, one of worlds’ largest family companies, nurtures their heritage of returning wealth to society and has created national institutions of technology, medical research and healthcare.

The inherent reflection of the family beliefs, values and motivation in the company can provide a cultural uniqueness which, if properly understood and nurtured, is able to drive performance and provide serious competitive advantage.

‘Characterised by highly motivated employees, family companies are often referred to as a breeding ground for entrepreneurial talent’

Positive perceptions among stakeholders Awareness of family businesses among the general public is low. People simply can’t distinguish a family company from a ‘normal’ company, unless of course these businesses actively promote their family status.

Many family companies fail to do this, when the evidence suggests that they should.

Research among managers and entrepreneurs in the Netherlands shows that family businesses are perceived more positively when compared to their counterparts (Nyenrode University/FD, 2008).

They perceive family businesses to be more successful, entrepreneurial and profitable.

Moreover, they also consider family companies to be more innovative, dynamic, transparent and creative. These characteristics prove family businesses to be an interesting employer or business partner.

Family Business awareness test!

Awareness of family businesses among the general public is low.

Most people do not know which businesses actually are family-owned.

Do you know which of these brands are family businesses?

1

5

2

6

3

7

4

8

family-owned businesses 2,3,4,5,6

BR-ND white chocolate paper family business branding

Positive influence on buying behaviour Propagating a family based brand-identity can have a significant impact on the firm’s performance (Craig, Dibrell and Davis, 2007).

According to them, the long-term strategic horizon, strong community involvement and reputational capital attributed to the family name translates into a greater perceived value to customers. As such, the family-based brand identity has proven to positively influence buying behaviour.

Evidently, the fact that a business is familyowned is considered to be an advantage by external stakeholder groups.

Despite this, a vast amount of family businesses possess considerable branding potential which is yet to be unlocked.

This is caused by the phenomenon of stakeholder identification with the company, a cognitive state that influences behaviour. Some literature claims that this positive identification is driven by the perception that families who run the business are subject to the same tragedies and triumphs in life, and the knowledge that they are not dealing with a faceless entity.

Evidence

1

Promoting a family-based brand identity has proven to positively influence buying behaviour’

2

Family companies are perceived to be more innovative, dynamic, transparent and creative

Towards an appealing family business brand How do we achieve a scenario in which the beliefs, values and advantages of the family business are conveyed to and embraced by all stakeholders?

This is where the brand comes in.

Branding: the basics A brand is an associative network of associations in the mind of people. Branding is about aligning all organisational activities to create preferred stakeholder mind position, leading to the desired behavioural change.

This behavioural change might, for example, include a change in the managerial behaviour of employees, or an improvement in the buying behaviour of customers.

Creating this valuable mind position is subject to four criteria;

Uniqueness Being different from competitors to increase awareness.

BR-ND white chocolate paper family business branding

Relevance Fulfilling the needs of your stakeholders over time.

Credibility Delivering what you promise and meeting expectations.

Emotional appeal Touching the heart, providing a source of guidance and a motivation to act.

Creating an effective brand framework Creating this position includes ‘hard’ elements such as (re)defining the category in which the company operates through market development and product/service innovation, and ‘soft’ elements such as identity and personality traits (purpose, heritage, beliefs, values, ambition and visual identity).

These elements add up to a coherent framework upon which organisational activities like HR, Marketing, Product Design & Development and Communications are constructed. Companies who create an effective brand framework consistently demonstrate better performance*. *Brand Guided companies, companies which align brand activites for external as well as internal purpose, prove better financial performance than non-brand-guided-companies (9% EBITDA vs. 17% EBITDA; Gromak, Asvik, Melin, 2005)

‘Companies who create an effective brand framework consistently demonstrate better performance ’

Leveraging the family advantage Marketing executives of family businesses have the opportunity to seize advantages that others simply can’t.

They are able to draw upon a rich and unique identity that is defined by the family element and intrinsic organisational characteristics to effectively steer stakeholder behaviour.

Leveraging the family advantage starts out by acknowledging that family businesses have different structures and characteristics.

Organisational identity and family identity therefore can be more or less closely related.

This relationship can be depicted on a continuum as shown in figure hree.

Figure 3 In this situation both identities are separated Brand names and communication do not emphasize the link between the family and organisational identity. This scenario is often the case for family influenced companies (as defined by Credit Suisse), with a low level of FIGURE 3

Separate Identities, no relation

Organisational Identity

Famliy Identity

BR-ND white chocolate paper family business branding

stock-ownership and family involvement in management.

Figure 4 Figure four defines a scenario in which family and organisational identity are intertwined.

Here, family is more closely involved in management and operations, consistently putting its stamp on the ‘way things are done’.

This situation forms the starting point for marketing executives to build their family business brand.

FIGURE 4

High level of integration of identities

Organisational Identity = Family identity

Leveraging the family advantage

FIGURE 5

1 Instrumental: Promoting the family business fact

2 Benefits: Promoting the family business attributes

Frankly, this is about telling stakeholders that your business is family-owned. For example, S.C. Johnson decided to use a descriptor in their logo (‘a family company’) as they were convinced by the increasing amount of empirical evidence showing the advantages of communicating the family business brand identity. Warburton, second-largest consumer brand in Britain according to Nielsen, takes it a step further and incorporates “family bakers” in their logo and initiates all kinds of activities to “welcome clients to join their family”.

Applying this level of family branding will positively influence the way your company is perceived.

The second level of family business branding conveys the inherent strengths and advantages of the family business. Leveraging a specific aspect, this can prove to be an even stronger message.

The family business branding cascade

William Grant, an award winning familyowned distiller integrated “independent family distillers” in their corporate logo. Independence is inherently linked to family businesses, often giving stakeholders a sense of stability, strengthening this specific benefit of dealing with family businesses. Moreover, it can be a source of pride that drive employees to secure and ensure this independence.

BR-ND white chocolate paper family business branding

3 Emotional appeal: Promoting family values The third level actively incorporates family beliefs and values into the brand. It is about finding unique and inspirational beliefs, motivations and vision from the company owners.

“Cargill intends to be the global leader in nourishing people, and its employees will do it by being trustworthy, creative and enterprising - as they have done for over 135 years”.

Take the example of Cargill. Its family heritage is about being trustworthy, creative and entrepreneurial (Broehl, 1992). In 1865 Cargill modelled its business to the phrase “our word is our bond”. It still forms the ethical standard by which Cargill conducts business:

Promoting Family values

Promoting the Family business attributes & benefits Promoting the Family business fact

A multi-level perspective some examples The three levels in the family business branding cascade are not mutually exclusive. In fact, combining the three levels can add up to a coherent branding framework.

GO-TAN A couple of years ago Go-Tan, a family owned Dutch company that manufactures Asian food products, incorporated “a very food loving family” in their logo to underpin its family owned status (Level 1&2). They also translated their family values of authenticity, time for each other, accessibility, creativity and quality into their brand-identity (level 3).

Moreover, they invite their customers to join the “Go-Tan family” and receive personal recipes and tips from Han Go, one of the two brothers in the board of directors. In itself, this initiative is not especially new or innovative.

However, inviting customers to join the family from a family business perspective surely adds depth from a loyalty perspective and illustrates the involvement of family businesses with their stakeholders.

BR-ND white chocolate paper family business branding

Han Go: “It is special to see that consumers create preference for our brand just because of that (promoting the family business brand)”.

It seems that the strategic move to building the family business brand has paid off for the Go-Tan family.

HALLMARK Hallmark prominently propagates the fact that they are privately owned and led by the third generation of the Hall Family (Level 1). Moreover, they emphasize their community involvement, an inherent attribute of family businesses (Level 2). Ultimately, they have integrated their family beliefs and values into their mission (“a passion to create and a mission to enrich lives”) and brand values: Quality, Innovation & Caring (Level 3). As such, Hallmark builds their family business brand from a multi-level perspective.

As these examples show, the three levels allow marketing executives of family companies to create a coherent brand framework that leverages unique aspects and captures competitive edge.

Building the family brand How does one go about building the family business brand?

Here are five key insights that marketing executives of family companies should consider taking into account.

Five key insights that marketing executives of family companies should consider taking into account.

1 Assess the degree of family-involvement As ownership structures vary to a large extent among family business, so do the branding choices you’ll have to make. Ask yourself the following questions before engaging in the brand building process. What type of family business are you dealing with? Does the family have a high level of ownership in the business?

Is the strategic intent to keep the business within the family? Is the family involved in day-to-day management? And is the family prepared to play a prominent role in the outside world? An assessment of the current and desired degree of family-involvement is the crucial first step.

2 Start with identity Family companies have strong organisational and cultural characteristics that provide a rich source of inspiration and uniqueness with which to build the brand from within.

Start out with a thorough investigation of the organisational identity and family beliefs and values before deciding which aspects to leverage.

BR-ND white chocolate paper family business branding

3 Be relevant and unique Family companies often promote their entrepreneurial spirit. Although a significant virtue, from a brand perspective it is unlikely to act as differentiator in many industries. Ask yourself the following questions. Looking at the competitive field, does it provide uniqueness?

Does it fulfil a need from either internal or external stakeholders? Choose a unique combination of benefits and values that translate to a relevant and appealing story for your stakeholders.

4 Embrace change, but cherish legacy The initial success of family businesses often stems from the founder’s vision of how to grow business. A firm belief in how things are done.

As time goes by, company growth and changing contexts can render some business models and beliefs less relevant. Relying on old-fashioned beliefs might strangle a company to death. The brand therefore should allow for future change but capture the family legacy.

5 Be aware of the level of brand-orientation The level of brand orientation is the extent to which the people in the organisation understand and embrace the role of the brand in business.

Most family businesses have been built upon a strong and entrepreneurial sales drive. The brand perspective does not come naturally.

Educating your stakeholders about the potential role of the brand in business might be necessary as a low level of brand-orientation could form a barrier to the creation and implementation of your brand strategy.

about BR-ND + Jeroen Timmers Branding within Family Businesses is relatively unexplored territory. Acknowledging this, BR-ND pioneered and started an ongoing research into family business branding at the end of 2008. After an extensive literature study, hypotheses were formulated and tested among a wide variety of (international) family businesses. This paper depicts the first results of the study.

For more information, please contact Jeroen Timmers brand consultant at BR-ND timmers@br-nd.com

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