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Deutsche Post DHL—Decision Support for Local Brand Investments
Deutsche Post DHL is the result of the consideration, brand usage, choice of main
acquisition of DHL, a courier company that provider, and choice of sole provider. This
originated in California and expanded into theoretical model is based on a hierarchical
extensive international operations, by Deutsche approach to decision making; for example, a
Post, the heir of the government‐run postal customer must first be aware of a brand or
operator in Germany. As a result of this and a product in order to judge it. To evaluate the
series of major acquisitions between 2000 and strengths and weaknesses of the DHL brand
2005, the Deutsche Post DHL group found itself across these different stages, large random
as the umbrella organization owning a complex samples of customers in each country were
portfolio of several regional and specialist interviewed, answering questions about DHL as
brands. As the company focused more and more it compares to the other major providers (e.g.,
on the international logistics business, creating a FedEx, UPS, TNT, or any major local brand).
strong and unique global brand became an These data were collected worldwide in two
important aspect of that transition. As many of waves in 2004 and 2006, with a new wave
its customers also operate on a global scale, the planned every five years or so for updating
development of a strong DHL brand was key. In purposes.
2002, DHL began an ambitious brand‐building
The analysis of these data, which ultimately
effort that would ultimately transform the entire
led tobuilding a tool to support local managers in
organization.
allocating theirmarketing resources, proceeded
Many marketers consider brand in five stages. First, the sequential choice model
management to be more art than science. outlined above was overimposed on the data to
Indeed, creativity figures prominently in brand better understand in which of the five
management courses and articles. Although it is purchasing stages the DHL brand was particularly
certainly important, there is also room for more strong and in which it was not. The overall
fact‐based approaches that can shed some light objective of the entire project, of course, is to
on the kind of questions faced by DHL. move as many customers as possible to the last
Convinced of this, Dr. Klaus Zumwinkel, then stage: DHL as their “choice of sole provider.” This
chief executive officer of Deutsche Post DHL, first analysis also compared DHL to a benchmark
initiated a project under the auspices of the competitor with the most market share in the
department of corporate brand management particular market under examination. The
that brought together market research, results were very revealing. In the U.K. market,
academic experts, and consultants to answer for example, DHL had an advantage over TNT in
those questions and develop a tool to help the percentage of customers who both knew the
implement the answers across DHL’s worldwide brand and considered it part of the relevant set
operations. of alternative service providers—a 10 percent
advantage. By the time customers reached the
The brand‐building effort took place in
“main provider” stage, the tables had turned and
stages spanning years of work and research.
the 10 percent advantage become a 7 percent
Underlying the entire project is the notion that
disadvantage compared to TNT.
customers progress through a series of steps in
the purchasing process that represent different These results were fed into the second stage
stages of consumer development. For the of the process to understand how much of that
particular case of DHL, those stages were gap could be closed by improving the brand. In
identified as brand awareness, brand this step, specific brand attributes of both DHL
O’Brien and Marakas, Introduction to Information Systems, Sixteenth Edition, New York: Mc Graw Hill, 2013 - Chapter 10 1
Case Study – Week 08 / Management Information Systems
and TNT were compared across stages of the under a budget constraint. Using previous
customer choice process to understand in which results, the researchers derived an elasticity for
attributes and stages the differences in branding each brand attribute, which represents the
efforts could be responsible for the problems expected increase in revenue which comes from
observed in the customer conversion process. an increase in perceptions of a particular brand
This analysis identifies which specific attributes attribute. Then, brand attributes should be
may need to be targeted, and what could be the targeted based on their effectiveness, which will
increases in revenue derived from those vary for each particular country or market.
efforts—on the assumption that if the most Underlying all this is the optimization of a
relevant attributes at each stage were improved constrained‐profit‐maximization problem, but
beyond those of TNT (or any other competitor), the support tool itself can be easily implemented
increased sales would follow. The key in this step in a spreadsheet. The results were quite
of the process is that not all brand attributes dramatic: In the U.K. market, for example, all
appear to be equally valuable. Stages three and attributes were given relatively similar weights
four further refined these results by employing when allocating marketing dollars (pounds
mathematical models and optimization actually) to them. The new tool, on the other
algorithms to derive optimal weights for each hand, recommended allocating 54 percent of
specific combination of brand attribute and resources to two specific attributes, 38 percent
stage. Using a simple visualization tool based on to three other attributes, and spreading out the
the relevance for purchase of each attribute and resulting 8 percent. This new allocation scheme
how well DHL fared against its competitors, a is expected to result in a net increase of 4.8
matrix mapping all these for both DHL and TNT percent in sales over the existing approach.
along these two axes highlighted where DHL
The global brand‐building effort resulted in
should focus in the future.
an improved perception of DHL as a global
All the previously discussed results were partner for several customers. Bernie
used as input into the final step of the process, Ecclestone, president and chief executive officer
the development of a tool that would support of Formula One Management, attested to the
the optimal allocation of local marketing success of DHL’s brand strategy: “We are
resources across media and activities. When you obviously very proud and very happy to be
think about it, there are a number of choices as partners with a very successful brand.” Pascal
to what marketers may do with their budget. Eymery, vice president of Supply Chain and
They may launch an advertising campaign in Logistics at Airbus, highlighted trust as a core
television and print media, or focus on targeted perception of the brand, resulting in joint
direct mailing, use online media, or sponsor advertising campaigns: “DHL has earned our
sport events, just to name a few. It can also be trust because they are committed to very good
used to revamp the stores, and train employees performance standards in terms of quality,
in ways that enhance the interaction of the face service, and costs.” The collection of data and
of DHL with its customers. The choice of medium their subsequent analysis for each individual
and activity should be largely determined by the country helped highlight that each market is
brand attributes that are being targeted. For somewhat unique in what needs to be done in
example, changing perceptions about how order to strengthen the global brand. It also
“environmentally conscious” DHL is as a helped communicate that both brand strategy
company will most likely require a very different and fact‐based decision making were here to
approach from communicating that it offers stay—indeed, brand strategy discussions are
“great service at low prices.” now a permanent item in global board meetings.
However, because financial resources are On the financial side, the impacts of the
always limited, these choices must be made project and the resulting tool have also greatly
O’Brien and Marakas, Introduction to Information Systems, Sixteenth Edition, New York: Mc Graw Hill, 2013 - Chapter 10 2
Case Study – Week 08 / Management Information Systems
exceeded all expectations. While the “value” of brand was internally valued at $8.22 billion. This
a brand is notoriously difficult to quantify, compares well with an independent valuation of
conservative estimates indicate that the value of $9.72 billion by an external report, which noted
the DHL global brand increased from $4.19 that “Sometimes it looks like an overnight
billion in 2003 to $5.51 billion in 2008, or 5.6 success. But it rarely is. The brand achieved its
percent per annum. Using the cost of capital of position due to hard work over many years,
DHL, obtaining such an improvement should developing and communicating clear and
have cost $265 million in brand expenditures, sustainable benefits.” It is indisputable that its
whereas actual brand expenditures over the brand is now a key DHL asset.
same period were lower at $200 million—a Source: Fischer, M., Giehl, W. and Freundt, T. “Managing
return on investment of 38 percent for the Global Brand Investments at DHL,” Interfaces , 2008, and
project. Not controlling for the effects of brand www.dp‐dhl.com, accessed June 7, 2011..
acquisition, at the end of 2008, the global DHL
QUESTIONS
Discuss in a group about these questions below:
1. What are some of the assumptions on which the new allocation tool was built? How likely are those
assumptions to stay the same in the future? In other words, how enduring would this tool be?
2. What are some of the challenges Deutsche Post DHL may face as it seeks to implement the new tool
worldwide? How do these challenges change the job of the local marketing managers?
O’Brien and Marakas, Introduction to Information Systems, Sixteenth Edition, New York: Mc Graw Hill, 2013 - Chapter 10 3