What the Fired CEOs Have in Common - Compaq CEO Eckhard Pfeiffer and Miller Brewing CEO John MacDonough failed to develop successful product brands

Kevin J. Clancy is chairman and CEO of Copernicus, a Newton, Mass-based marketing strategy firm whose clients include Bristol-Myers Squibb, Clorox, Hewlett-Packard, IBM, Michelin, Novartis, Pepsi and Pfizer.

Recently ousted CEOs Eckhard Pfeiffer of Compaq and Miller Brewing's John MacDonough have a lot in common: ailing company performance, disappointing sales and market share growth, questionable return on huge advertising campaigns and, ultimately, highly publicized dismissals.

Critics say that Pfeiffer's biggest failures were not creating a successful Internet channel strategy like rival Dell Computer and not effectively integrating the Digital, Tandem and Compaq organizations. MacDonough was faulted for a series of off-the-mark advertising campaigns, including "Dick," the "creative superstar" of Miller Lite advertising. Those factors are partly to blame, but they're not the root of the problem. The root of the problem is, Pfeiffer and MacDonough never built brands. What comes to mind when you hear "Compaq" or "Miller"? You're not alone if you say "not much of anything."

That's because Compaq sells boxes and Miller moves cases. Though both companies market high quality products, they've created little brand equity. Indeed, Copernicus research shows that fewer than 10% of consumers in the beer and personal computer markets associate anything with the leading brands in these categories that you could begin to call positioning.

For a while, consistent product quality, distribution, promotions and discounting helped these companies achieve sales greater than their brand equity. Brand equity, however, will eventually align with market share. That's when the bottom falls out of companies with poorly positioned brands. It's also the reason why companies with strong brand equity, such as IBM and Coors, can survive through rocky business and industry changes. The majority of executives, Pfeiffer and MacDonough included, don't understand this business fundamental.

Pfeiffer never developed a brand for Compaq the company. Rather, Compaq's strategy has been to promote lots of superb products, matching their competitors' prices. Just over two months ago, Compaq announced its new brand strategy and a $300 million global advertising program, a 50% increase over what it had been spending. Andrew Salzman, Compaq vice president of advertising and worldwide brand strategy, told advertising industry publications that Compaq's branding and advertising goal is to promote the PC maker's "bigness" and the depth of its product offerings. "We want Compaq to be known as a computing partner of the Internet age, a pacesetter with a can-do-spirit," he said.

"Compaq. Who knew?" is the theme of the advertising that began in February. After seeing the campaign, my reaction was, "Compaq. Who cares?" Bigness and great products, many of which buyers perceive as commodities, do not give buyers a compelling reason to choose Compaq over Dell, IBM, Hewlett-Packard and other PC makers, which are also big and sell great products.

Miller, too, has been spending heavily on advertising campaigns as part of its branding strategy, but with disappointing results. Recent beer industry reports show that Miller Lite's growth rate lags behind its low-calorie rivals, and Genuine Draft continues to languish.

One new Miller Genuine Draft campaign never even saw the light of day; it was shelved after being panned by wholesalers. Even worse was the recent Miller Lite campaign targeting 20-something beer drinkers that did air: there was no mention of the brand in the advertising campaign. That's right. A multi-million dollar campaign with no mention of the brand. Simply ludicrous.

MacDonough and Pfeiffer failed to realize Miller's Dick and Compaq's "Who knew?" are not brand-positioning strategies. (Nor, by the way are Budweiser's frogs.)

While these ousted CEOs have blundered with their brands, Compaq and Miller still have strong products on which to rebuild their businesses. Our advice to Ben Rosen and Phillip Morris: turn these businesses around by creating new brand equity performance measures for your incoming CEOs.

Make the CEO's primary role that of brand guardian, not product developer, distribution guru, operations general or financier extraordinaire. Require them to quickly develop brand strategies that give buyers a compelling reason to buy, in this case, Compaq computers and Miller beer.

Make sure they are stewards of communications programs that clearly and consistently communicate this "reason to buy" brand message. Hold them accountable for advertising that conveys the brand message, not just advertising that creates attention. Too often buyers watch ads and say, "Whoa. What's that all about? What are they trying to say?" If buyers don't understand the message, the CEO, as brand guardian, has failed.

Lastly and most importantly, compensate your CEOs not just on short-term sales and profitability, but on increases in brand equity. In the long run, companies with the strongest reputations and brand equity are the companies that will leave a legacy of performance that outlasts current management.

COPYRIGHT 1999 BPI Communications, Inc.
COPYRIGHT 2000 Gale Group