18 May 2019

How to Grow Your Brand Prudently

Nearly every company starts small. Some will remain small, but many will grow—into new markets, new territories, and new products. As they do so, they face challenges, including how to manage and protect their brands and other IP assets.

In today’s world, startups can emerge and blossom in a matter of months, and technology is constantly driving new business models. This means that growing companies have to respond and adapt faster than ever before.

While no two businesses face exactly the same challenges, there are some common experiences that all brand owners can learn from. These can be grouped under five broad headings: Defense, Data, Decisions, Disputes, and Diversification.

Defend Your Rights

Intellectual property (IP) practitioners do not need to be reminded that the most important step after creating a brand is to protect it, but emerging companies, which may not be familiar with the nuances of IP law, often find it hard to evaluate the available options. Registering IP rights, including trademarks, designs, and copyright if relevant, is one way to secure protection.

"It is easy for companies to underestimate the perils of not spending the extra cash at the outset." Verena von Bomhard

Companies also need to think about domain names and social media titles on Twitter, Instagram, Facebook, and other platforms.

The options may seem overwhelming, but exploring them can mitigate issues down the road. Looking just at trademarks, there are many questions for growing companies to address early or else risk future disputes and even losing rights over their brands.

These include: Which classes should we seek trademark protection in? Which jurisdictions should we file in? Should we use regional systems such as the EU trademark or international registrations through the Madrid System? Are there nontraditional elements of the marks (such as shapes, colors, and sounds) that we should protect?

Rafa Gutierrez, Director, Intellectual Property at Uber (USA), founded in 2009, has watched the company enjoy what he calls “explosive” growth since he joined in 2016 as its first in-house trademark attorney. The company is now present in more than 700 cities in some 65 countries, and has expanded way beyond a rideshare app.

“Growth brings more work. The challenge is how to streamline and prioritize that work given the resources we have. One of the most useful things I did was adapt a system that was being used elsewhere in the company to create our trademark search submission portal,” Mr. Gutierrez explains. “We found it probably saved us five times the amount of work in just the first six months.”

"You can put your logo everywhere but that is not brand management." Samir Dixit

Young companies face two big challenges in building their brands. The first is a lack of resources for IP protection, as trademarks may not be the top priority when a startup is struggling to roll out new products, raise finance, and hire staff.

“There’s a fine line between managing your budget, on one hand, and being prepared for the future, on the other. It is easy for companies to underestimate the perils of not spending the extra cash at the outset,” says Verena von Bomhard, Founding Partner of Bomhard IP (Spain).

The second challenge concerns vision, and the difficulty of knowing where your business is going to be in several years’ time. Ms. Von Bomhard says it is vital at an early stage to think about geographical growth.

"The main decisions to make are whether and how to change your brand, and how best to develop it." Elena Galletti

“If you have the slightest intention of international expansion, you need to plan for protection in the major jurisdictions. For most companies, they are the United States, the European Union, and China,” she explains.

“Some young companies don’t appreciate that trademark systems can vary in different parts of the world. For example, in Europe it is not easy to block a registration based on prior use, but in the United States, many European companies face objections about lack of use, so you shouldn’t file there unless you have plans to use the mark at least in the medium term.”

In addition to new geographical markets, it is important to consider possible future product launches, says Samir Dixit, Managing Director of Brand Finance Asia Pacific (Singapore), a branded business valuation and strategy consultancy. Too narrow a protection strategy (covering too few markets or classes of goods) may limit growth options.

However, according to Ms. Von Bomhard, that does not mean filing in every class. “We see a lot of applications that cover many classes. Do you really need protection in multiple classes? Not only can it be an extra expense but it can also attract heaps of oppositions.”

Mr. Dixit suggests that problems often arise because many young companies think about their brand too narrowly. “Branding and brand management are not the same. You can put your logo everywhere but that is not brand management.

“It involves a lot more focus, measurements and key performance indicators,” he says—and that’s where data comes in.

Driven by Data

Data is the fuel that will drive your brand growth—and yet, says Brian M. Daniel, Valuation and Damages Specialist with Charles River Associates (USA), many growing companies do not fill up.

“Robust data is helpful for conducting market and economic analyses, tax reporting, and supporting damages calculations. Large companies generally have more data than we need, but smaller companies are typically not on the same level,” he says.

There are broadly two types of data that are essential for brand growth: internal and external. Internal data comprises information on customers, sales, transactions, markets, and profits. External data covers everything from macroeconomic and demographic trends to category growth and new product launches.

One without the other may be misleading. For example, a company may be pleased that a brand’s sales are growing by 10 percent, but it may be problematic if the overall market for that product category is growing by 15 percent.

Putting in place systems to track the relevant data does not need to be as burdensome as some companies fear.

“The more data you have, the more defensible your appraisals will be. It’s important to build an architecture to accommodate growth. With the right software, you can keep your options open for the future,” says Mr. Daniel.

Internal data is relatively easy to compile, but many companies fall down on building external data, so you need to identify where you can find it—including from government or other official sources, trade associations, or professional data compilers.

“It’s important to make better-informed choices early on about whether you can exploit or leverage brands in the future,” he adds.

Difficult Decisions

Once you have data, the next challenge is how to use it to make the right decisions to grow your brand. Mr. Dixit says the key here is to have “a business vision.”

“You can have a beautiful logo, brand guidelines, and a vision statement, but it could be a colossal waste of money,” he says. A business vision sets out how the company is going to grow the brand over 10 years or more, which regions and products it will expand into, and how the brand will evolve (if at all).

It’s important to keep an open mind, says Elena Galletti, Vice President for Marketing at Brandstock Services AG (Germany), an IP services provider. The main decisions to make are whether and how to change your brand, and how best to develop it.

If you have a strong brand it may be best to focus on developing that, but sometimes you need to take a step back and consider a rebrand.

Decisions about how best to grow a brand depend on the company’s circumstances, but options include licensing, franchising, joint ventures, and using IP assets to raise finance. The benefits can be enormous: for example, according to its initial public offering filing in 2015, Ferrari made nearly $500 million from royalties and sponsorship.

Securitization (a financial instrument where different assets are pooled and used to back the issuance of new securities) can be another option. The financial markets may be daunting for smaller companies, particularly given the uncertainties of the past decade, but the opportunities offered by technology such as blockchain could make securitization of IP assets simpler and more attractive in future.

Disputes and How to Avoid Them

One big downside of growth is that your brand is more vulnerable to counterfeiting.

“Once you become famous, you’re a target,” says Ms. Galletti. Brands can prepare for this, she explains, by documenting information about the brand, such as sales figures, launch dates, and proof of use, all of which may be invaluable in future opposition proceedings or litigation.

Mr. Gutierrez agrees that fame can come at a price. “We track infringements and have seen a steady climb. Uber features widely in the media, in TV shows, and even songs; and popularity unfortunately makes you a target for infringements and scams,” he says.

“We have to decide: what kind of enforcement profile do we want to have and how do we prioritize the growing number of infringements?”

Expansion into new areas also brings the risk of disputes, says Mr. Daniel. “As markets develop, having a strong brand to provide initial awareness to consumers is very valuable. Also, as markets develop there may be increased risk and costs associated with getting into disputes,” he says.

Litigation raises questions, not least about the costs, the risks of losing, management distraction, and reputational damage. “For example, if you are in a dispute in the United States, you need to be aware of discovery: you may be required to reveal your data to the other side,” says Mr. Daniel. “Some companies may be reluctant to produce information and would prefer to forgo damages. That is a decision you may need to make.”

Diversification and Decentralization

However revolutionary and successful a company’s initial product is, most companies find they need to develop new products to maintain momentum. It’s possible to do this while building the value of the core brand, says Mr. Dixit.

“If an existing brand can be used, that’s the best way to grow a brand. There are a lot of advantages and cost benefits to using the primary brand with add-on elements,” he says.

Examples of this strategy include Amazon (USA), with its AMAZON PRIME and AMAZON FRESH services, and Grab (Singapore), which has expanded beyond taxi services with brands such as GRABBIKE, GRABPAY, and GRABPET.

Other companies launch entirely new brands as they grow—particularly when the brands are for different products or target different markets, as is often the case in the pharmaceuticals and fast-moving consumer goods sectors. However, a large portfolio of brands and possibly different brands for the same product in different markets can complicate things.

“I am seeing more rationalization projects by brand owners as they take stock of the IP rights they have and look at where cuts can be made,” Ms. Galletti says.

“A typical exercise is to sketch a map, showing all the trademarks, classes covered, and countries registered. You can immediately see the gaps in protection and where you need to invest more, or cut back.”

Ms. Von Bomhard agrees that, as a company grows, it is easy to lose track of rights. “We’ve seen cases where there are four different filings, for slightly different specifications for the same mark, filed by four different attorneys in the same country. Coordination is key for getting best value for your money.”

Mr. Daniel says: “Big, decentralized companies often find it hard to maintain an inventory of IP. One advantage smaller companies have is that you are less likely to lose track of important information. As the company grows geographically and with more departments, it is important to have a strategy to coordinate between IT, legal, and marketing.”

The journey from new brand to established company is not always easy, but careful thought, planning, and preparation can make it a lot smoother, and ensure that the benefits of innovation are not lost when the company becomes bigger and more complex.

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