By Sabah Al Binali
The Abu Dhabi National Oil Company's recent efforts show how a well-devised and well-executed brand strategy can pay dividends
Adnoc has been named the UAE’s most valuable brand for a second consecutive year by Brand Finance, a brand valuation and strategy consultancy. The brand value reached $11.39bn; up a net $2.55bn. This is clearly an accomplishment but what does it mean?
A conventional definition of a brand is that it is how customers perceive a company’s product or service. This doesn’t mean much to an executive looking at how their company’s brand relates to their strategy. A more useful definition would tie the brand to a business KPI. Before I do that let’s look at what sales and marketing are, as brands are usually expressed in this context.
"Adnoc’s brand supports its global sales effort even if potential clients are not familiar with the UAE or the Middle East"
I do not believe that there is a single “right” definition, just different definitions that are useful in different contexts. In this article, I will focus on the business effects of these three areas. Sales can be defined as the activity of getting a single customer to purchase a specific product or service. It is usually seen in a salesman contacting a specific customer and pitching the product or service. Marketing can be defined as the activity of promoting a company’s product or service so that the unit cost of selling is reduced across a client demographic. Marketing can be seen in advertising.
Branding can be defined as creating a competitive advantage that allows a company to sell a product or service at a higher price for the same unit cost of sales, or to sell more of a product or service for the same unit cost of sales.
Notice that the actual cost of sales is not relevant, just that it doesn’t increase. Examples of pricing power include the Mercedes brand versus BMW and Audi, or the Apple brand versus Huawei or Samsung. Examples of volume power include McDonald’s versus Burger King, or Coke versus Pepsi in the USA and vice versa in the rest of the world.
A natural question is how brand value can help Adnoc when it is best known for selling a fungible commodity – oil? There are many good answers to this but I’d like to focus on how Adnoc’s brand power can help it innovate, introducing game changers.
Aramco, famous for its size, developed its balance sheet last year via the conventional bond and equity markets. The bond offering went extremely well, the equity offering faced some challenges. Adnoc managed its balance sheet last year through a more innovative route via a sale and leaseback of some of its assets. How did the brand come in? Adnoc was able to attract KKR and Blackrock, two global investment powerhouses, as the lead investors for this $4bn transaction. Why do I believe that Adnoc’s brand played an important role? Because American companies are known for viewing the geopolitical risk in the GCC as high, which normally puts them off, as we saw in the Aramco IPO. Something had to overcome this risk perception and the logical conclusion is Adnoc’s brand.
"Brand power reduces the risks associated with innovation as clients are more likely to adopt new products or services delivered by high brand value companies"
A more exciting development is the launch in the Abu Dhabi Global Market (ADGM) of a new exchange to host Adnoc’s Murban futures contracts. The value of a Murban futures contract to Adnoc and ADGM is clear, but how can Murban compete against the global benchmarks of WTI and Brent? Again, one of the leading assets supporting this is Adnoc’s brand. Brand power reduces the risks associated with innovation as clients are more likely to adopt new products or services delivered by high brand value companies.
A company’s brand is already conventionally seen as a strategic asset. This asset is even more valuable in emerging markets where the reputation of a company carries much more weight with global customers who might not otherwise be familiar with such a company’s home market. In other words, Adnoc’s brand supports its global sales effort even if potential clients are not familiar with the UAE or the Middle East.
Kuwait’s Alshaya brand is arguably one of the earliest examples of a Middle East brand gaining global strength.