Schwass and Smit: Leverage family branding for competitive advantage

Family business brands are racing into the top ranks of the best global brands. According to the Interbrand Global Brands 2009, 26 of the top 100 were family businesses, of which 20 had moved up in the rankings from the previous year. Four (Toyota, BMW, Louis Vuitton Moet Hennessey and Samsung) were in the top 20.

When it comes to branding a family business, however, an interesting paradox has emerged. On the one hand, it can be very advantageous to advertise a company's family heritage because its long-term orientation is at the root of its valuable and difficult-to-copy competitive advantage. On the other hand, only very few companies actively promote this unique differentiating aspect to the outside world of external stakeholders.

But in order to really benefit from the corporate brand premium that family firms hold, they should first be recognised as family businesses. So, to measure the public's awareness of the family DNA in corporate brands, we designed a knowledge test. Our family business brand test asked individuals to classify 20 companies from five different industries based on whether or not they are family businesses.

We categorised all firms in a simple two-by-two matrix. On the horizontal axis, we separate companies that are a family business from those that are not. On the vertical axis, firms that are perceived as a family business are split from those that are not. By bringing these two dimensions together, we have four categories.

For each of the five industries (food, retail, luxury, automotive and consumer electronics) we took two well-known family businesses and two publicly listed, non-family firms. This survey enabled us to classify corporate brands into four categories. The first category includes the true positives, which are real family businesses and viewed as such by the general public. The second includes the false negatives or the "lost sons," which are the family firms that are not recognised as family owned by the majority. The third group includes the true negatives, which are the non-family businesses that are correctly perceived as non-family. Finally, the false positives are like "step cousins," the ones that are regarded as family businesses but in reality are not.

Mixed results

The survey, which was completed by 200 managers (of whom 47% work for a family business), was posted on www.imd.ch in September 2009. The outcome showed a mixture of opinions as to whether those perceived as family brands were in fact family businesses. In only 50% of cases were their brands recognised as family businesses.

The brands that had particularly strong recognition as family businesses included Italian pasta-maker Barilla, French luxury brand Hermès, Italian fashion and leather goods label Gucci and German carmaker Porsche. They are considered true family business brands.

The relatively low 50% recognition rate shows that the other half of the firms included in our sample are not identified as family businesses. These "lost sons" are Peugeot, Danone, Carrefour, LG and Samsung. This can be explained by the fact that in several cases the family behind the company has decided to minimise its involvement.

The Halley family is still the largest shareholder in Carrefour, but in recent years, it has made moves to pull out of active involvement. Danone is run by the second generation of the founding Riboud family (who bought up the existing Danone and merged it with other businesses), but they now own less than 2% due to rapid growth, which forced them to raise capital in the stock market.

In Peugeot's case, however, the family still holds 30.27% of the shares, representing 45.4 % of the voting rights. The family has repeatedly emphasised the importance of its involvement in the company as a long-term investor. At least the same level of commitment is true for Samsung's family of Lee Kun-hee and LG's family Koo. The two South-Korean families control all the companies involved in their conglomerates.

Consistency for non-family business brands

Interestingly, almost all 10 non-family firms are correctly classified as "unrelated" or non-family. The notable exception is Bang & Olufsen, which is incorrectly classified as a family business brand.

More than half of the respondents were certain that B&O is a family business. That was once true, but it is no longer the case. The Danish manufacturer of high-end design audio products, television sets and telephones was a family business until the early 1990s, when difficult economic times forced the family heirs to give up their control and influence.

The misclassification is rather understandable since the corporate brand name clearly refers to the founders' names, and B&O was always conscious of communicating its brand image and family background. On its website, it still celebrates the founders' guiding principle, which was laid down by Peter Bang and Svend Olufsen in the late 1920s: "Enterprising is needed – a never-failing will to create only the best – to persistently find new ways of improvement."

A wake-up call for family businesses

The mixed results of this DNA test for family business brands should serve as a wake-up call for corporate communication executives and marketing managers at family firms. The low accuracy score of 50% for family firms should serve as a catalyst for family businesses to rethink how they position their corporate brands and communicate the values that are so important to their success.