Deutsche Post DHL: Managing Global Brand Investments at DHL
The Problem
Following a political initiative to deregulate monopolies in the European Union, the state-owned German postal service, Deutsche Post, was transformed into a private corporation in the early 1990s. Top management decided to build a global logistics business to complement the traditional domestic mail services business. Part of this vision was to acquire DHL, the worldwide Express company founded in America in 1969. Because international logistics is a global business by definition, management quickly discovered that it needed to establish a truly global brand to unify and migrate other national brands that had been acquired over time to provide the answer to the challenges of globalized trade in the 21st century.
Building a global brand almost from scratch requires huge brand investments and determining the optimal investment level by country. The challenge to operational brand management is to identify the target brand elements and activities. They need to be consistent with the global brand positioning and concept, but also adaptable to the specific requirements of the local market. In the past, brand management has been more of an art than a business. The chief executive officer, however, felt that a fact-based approach that combines modern analytics, statistical methods, marketing concepts, and in-depth customer insights from market research would help build the brand on a long-term basis. He initiated a top-management project under the leadership of the DHL Global Branding Unit with support from academia and McKinsey & Company. As a result of this project, a new, innovative approach of global brand assessment and development was implemented on a global scale.
The Analytics Solution
Conceptually, this approach is based on modeling the hierarchical customer development process and its brand-related drivers. The fundamental assumption is that customers pass through a stylized hierarchical purchase process that represents different stages of customer development and value to the firm. In the DHL business, these stages are brand awareness, brand consideration, brand usage, choice of main provider, and choice of sole provider.
Customers generate different returns depending on the stage, with sole-provider customers contributing the largest share to sales and profits. Technically, the process can be specified as a sequence of conditional probabilities at the individual customer level. The impact of brand and marketing efforts on customer behavior along this funnel comes from estimating discrete choice models. A constrained profit-maximization approach produces recommendations for allocating marketing resources across different brand investment categories.
The Value
The impact of the global brand assessment tool on DHL was significant. Within less than 10 years, DHL developed into a truly global brand that shares common core brand features among customers across the continents. The global success story is reflected in the substantial increase in brand asset value. DHL did not make it in the top 100 global brands list of Millward Brown until 2009, when it was valued at US$9.7 billion.
Apart from bringing financial success, the tool had a strong impact on strategy and the organization. New insights led DHL to refine and sharpen its global brand positioning, updating attributes and customer benefits under the core brand values of “local strength worldwide,” “personal commitment,” and “proactive solutions.” DHL developed guidelines at a global and country level to strengthen specific pillars and to ensure operational brand delivery across thousands of customer touch points based on results of the brand assessment tool. The tool helped establish the relevance and strategic importance of brand strategy throughout the organization, eventually transforming the global organization by making brand management transparent and tangible.
