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Employer Branding

Companies have long divided consumers into segments. They should do the same with potential -- and current -- workers.

Ask most people about "branding," and they'll usually start talking about products and services.

But in recent years, companies have begun branding themselves as employers, too, betting that if they can convey to the world why their workplace is appealing and unique, they will have an easier time attracting good workers.

The Journal Report

In fact, for many companies, employer branding has become a critical management tool, as the emergence of China, India and Brazil as economic powers and aging work forces in the U.S., European Union and Japan have increased the competition for skilled workers. More recently, the current economic slowdown -- and the pressure to cut costs and increase productivity -- has made the need to get the best people in the right jobs even more crucial.

But how should a company brand itself as an employer? The key is to align the brand with the company's business plan, meaning the brand is designed to attract and retain the kinds of workers the company needs most -- those who can help it increase sales, profits and market share. And the key to doing that is to borrow a tool from the product-marketing toolbox.

Marketers have long divided consumers into groups based on things like their demographics, buying behavior and lifestyle, and then tailored product offerings and advertising messages specifically for them in the belief that it is more profitable to treat certain groups of people differently than to treat them all the same. A movie studio puts out some movies for kids, some for teens, some for women, and so on. Each product has its own marketing and advertising message. This is known as segmentation, and it lies at the heart of brand marketing.

We argue the same principle applies in employer branding -- that it is more profitable to treat certain groups of current and potential employees differently than to treat them all the same. Employers who use segmentation to pinpoint who they need to attract and what they need to do to attract them will have an advantage over those who don't.

Beyond Entry Level

When a company undertakes employer branding, the "product" it is selling is the employment experience it offers, and the "customers" of this product are current and prospective staff. Benefits, which may include tangibles such as pay and intangibles such as status and a sense of collegiality, are what back up the employer's brand in the marketplace.

Of course, segmentation is being used in employer branding to some degree already, in that many companies focus the bulk of their branding efforts on attracting entry-level staff. They target recent college graduates based on things like age, university, grade-point average and location, and then bombard them with multimedia campaigns promising exciting careers, promotion, travel and exceptional pay.

The problem with focusing too much on the entry-level end of hiring, however, is that it doesn't take the big picture into account. It is based on a mistaken belief that a good proportion of entry-level employees will start at the bottom of an organization and work their way to the top, and that the skills, knowledge and experience they gather along the way will be exactly what the company needs to expand its business in the future.

In reality, most companies at some point will have to hire new talent to cope with the changing nature of their business. To create a more well-rounded brand, one with multiple messages for multiple audiences, companies have to dig a little deeper.

Janusz Kapusta
Differences Matter

Previous research has suggested that there are five major ways to think about differences among consumers, and that marketers who take those consumer differences into account will enjoy higher sales and profits. The differences center on the profitability consumers bring to a company, the product features they prize, the reference groups they turn to for advice and approval, the ability of consumers to negotiate attractive prices, and the barriers that may prevent them from making purchases.

We believe those five segmentation approaches also apply in the context of the employee-employer relationship and can be used as a basis for employer branding. Here's a closer look:

Potential Profitability

In consumer marketing, profitability segmentation takes into account that buyers differ from each other in terms of the actual or potential profitability they bring to a company. Consumers who make repeat purchases and buy in big quantities, for example, are more profitable than those who buy in small amounts only once or twice a year. Knowing who the high-profit clients are allows marketers to channel more effort and resources toward winning their business.

The same goes for employees. Those who have the skills, experience or knowledge that are critical to the areas of a business that are driving growth are strategically important. Identifying these employee groups through segmentation allows employers to devote more resources toward hiring and retaining them.

There is little point in a California company putting a lot of effort into attracting domestic engineers, for example, if the bulk of its future earnings are to come from on-site engineering projects in China and India. Likewise, a focus on family-friendly benefits may make an employer look nice, but it is a misallocation of resources if an all-expenses-paid executive education at Harvard Business School is what the profit-driving employees really want.

Product-Feature Preferences

Grouping buyers according to the product features they desire is a well-understood and much-used approach to segmentation in consumer marketing. Some consumers prefer extra-strength pain relievers; others want milder versions. Some prefer pills; others buy only capsules. Creating market segments based on these preferences allows marketers to tailor product offerings and advertising messages that appeal to them.

Branding Done Right

  • Growing Trend: Firms are branding themselves as employers in a bid to attract desirable workers, but not all are using branding to its full potential.
  • The Goal: At its best, an employer brand will attract the best people to the most critical jobs, helping the organization achieve its business goals.
  • Getting There: Employers can improve on branding outcomes by dividing workers into market segments and tailoring benefits packages and branding messages accordingly.

In much the same way, employees can be grouped according to the career benefits they value. Some employees want educational assistance and training, while others value opportunities for travel; some are looking for flexible working hours, while others seek on-site child care. Much of what employees want depends on where they are in their lives and careers.

Once a company has identified the groups it needs to attract using profitability segmentation, it can then use product-feature segmentation to gain a better understanding of the benefit bundles those groups of employees prize.

A pharmaceutical company we studied used product-feature segmentation to help attract and retain a high-quality sales force that remained engaged, motivated and effective despite working in an industry known for high turnover.

The process began when one sales representative returned to work after having children and wanted a part-time position that also offered a reasonable salary and a challenge commensurate with her skills and experience. By offering benefits like job sharing, child-care assistance, unpaid leave, flexible hours and minimal overnight travel, the pharmaceutical company earned a reputation as being "family friendly" within its industry, and that image allowed it to create a talent pool of potential staff with appropriate knowledge and skills plus great industry experience and contacts.

Reference Groups

Marketers understand that consumers don't make buying decisions in a vacuum, which is why some use segmentation to identify the groups to whom buyers turn for advice and approval when making a purchase. People often ask pharmacists and other health-care professionals to recommend pain relievers, for example, so it benefits marketers to ensure that those groups have a good impression of their product, too.

For Further Reading

See these related articles from MIT Sloan Management Review.

  • Using Corporate Social Responsibility to Win the War for Talent

By C.B. Bhattacharya, Sankar Sen and Daniel Korschun (Winter 2008)
New research indicates that there are five steps that can help business leaders increase CSR's effectiveness as a lever for talent management.

  • The Hidden Leverage of Human Capital

By Jeffrey A. Oxman (Summer 2002)
Focus on strengthening key relationships, capitalizing on underutilized staff, clarifying strategic roles and forging stronger links between compensation and results.

  • Building Competitive Advantage Through People

By Christopher A. Bartlett and Sumantra Ghoshal (Winter 2002)
Human, not financial, capital must be the starting point and foundation of a successful strategy.

  • Don't Confuse Reputation With Brand

By Richard Ettenson and Jonathan Knowles (Winter 2008)

  • How to Retain Talent in India

By Elaine Appleton Grant (Fall 2008)
Providing support, training and opportunities from day one is critical.

This same goes for employers. People want to work for companies with great reputations, and they often turn to family members, friends or colleagues for advice and approval when choosing between employment offers, or even where to apply for work in the first place. That is why it is crucial for the employer brand to be viewed favorably by the group the potential employee most often turns to for advice and approval.

Employers can reach out to these references groups in various ways. For example, they can tout themselves as award-winning employers, responsible entities and good corporate citizens through advertising and public-relations campaigns. They can provide specific, detailed information about the unique workplace experience they offer on job-search sites, in the employment sections of newspapers and to recruiters. They also can encourage existing employees to spread the word by rewarding them for candidate referrals.

Bargaining Power

Grouping consumers according to their ability to negotiate attractive prices or terms and conditions help marketers determine the types of rates and prices they need to offer to win their business. Consumers with excellent credit scores, for example, have more loan options than those with spotty credit histories, meaning banks may have to offer more competitive rates to win them over.

In employer branding, bargaining power refers to the power that certain employee groups have in negotiating the terms of their employment because of the rarity of their skills, level of seniority, relevant experience and qualifications. The higher the demand for these attributes within the company, or indeed, within the broader employment market, the greater the bargaining power these employees can exert.

Richer benefits packages may be required to attract employees with greater bargaining power. Given that companies have limited resources to remunerate their staffs, understanding bargaining power helps them better prioritize where they spend their money.

Choice Barriers

A variety of factors can prevent consumers from buying products and services they normally would find desirable. Sometimes consumers aren't aware the products and services exist, or they lack the information they need to properly appraise them. Using segmentation to identify and understand these barriers makes it easier for marketers to knock them down. But sometimes marketers use choice barriers to their own advantage, to lock in customers they value highly. Airlines and hotels, for example, offer rewards to their best customers to discourage them from using rival services.

In employer branding, choice barriers are the hiring and pay policies set up by employers to prevent people from entering or leaving a firm. Companies often segment employees according to education, experience and visa or residency status in order to rule out candidates for certain job roles. On the flip side, things like delayed bonuses and lucrative retirement or retrenchment packages serve as "golden handcuffs," tying employees into a company when they might otherwise be tempted to seek new opportunities elsewhere.

Choice barriers, in particular, are in the control of the company and can be used to counter the bargaining power of desirable employees.

Taken together, these five segmentation approaches get the right employees to join and stay, without breaking the bank, turning employer branding from a recruitment cost to a strategic driver of profit.

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