Brand Management - Don Roy, Ph.D.

Beware the Incentive Escalator

Price-based incentives are effective for attracting buyers and generating trial or enticing customers to buy again. But, using price breaks to stimulate sales comes at a cost greater than the amount of discount offered to lure buyers. All efforts to craft a desired meaning for your brand can be negated by a promotion-intensive strategy. An unintended consequence can be that consumers believe your product is not really worth full price if discounts are offered frequently. Although incremental revenue generated from price-based promotions may be realized, the distinction of “work hard vs. work smart” comes to mind. We have to work harder (i.e., sell more) to cover the expense of discounting, yet the potential damage to brand equity can still occur.

Evidence of what I call the “incentive escalator” is found in a report by Experian Marketing Services on search terms related to retailers. Percent-off deals are among the most popular searches, and consumers’ expectations of retailers’ deals seem to be increasing. In 2009, 20% was the most common discount search term; that figure shifted to 30% in 2010. Deals sought by many consumers in 2009 were not sweet enough just one year later. Where does it end? Will 35% be the top discount-related search in 2011? How high will consumers’ expectations soar about the discounts they believe retailers can offer? Similarly, an increase in searches related to free shipping indicates that online shoppers expect to continue to have access to incentives from sellers once they have been exposed to them.

Choose whatever saying you want: the cat is out of the bag; the horse is out of the barn; the toothpaste is out of the tube. Once price-based incentives become a norm associated with your brand there is no turning back. Strive to build customer relationships that are not dependent on price to reduce the chances of finding your brand riding the incentive escalator. Look to brands that you admire- chances are they have succeeded in ways other than discounting.

Marketing Daily – The New Consumer: ‘30% Off Is The New 20%’

The Question Netflix Got Wrong

An interesting email appeared in my inbox Monday morning. It was from Reed Hastings, founder and CEO of Netflix. The subject line, “An Explanation and Some Reflections” got my attention. Was he writing to say that Netflix made a mistake when it implemented separate pricing for its DVD by mail and online streaming services? When I read the first three words of his message I was convinced- “I messed up” suggested Hastings was about to tell us Netflix had a change of heart about its new pricing structure.

Not so fast- he goes on to say “I owe you an explanation.” Hastings proceeds to provide justification for the decision to change the pricing structure. On top of that, he broke the news of Netflix splitting into two businesses, Netflix for online streaming and Qwikster for DVD by mail. Hastings’ message was genuine and the tone was that of someone who realized he had erred in handling the implementation of Netflix’s new business model. But, in the end the message was more of an attempt to save face… and stem the tide of customer defections. Netflix has lost an estimated 1 million subscribers since the change. With more than 20 million customers remaining, we will not shed a tear for Netflix, but the extent of customer defections is significant.

The mistake that Netflix made was that it incorrectly answered a huge question: What would customers do? What would they do after learning that their associations with Netflix of “entertainment delivered as you want it” no longer applied? The changes benefited Netflix only, or at least that was the perception of many subscribers. And, when it comes to brands, perception is reality. I remind my students often that the true owners of a brand are its customers. While a business owns the physical and intellectual property of a brand, its meaning comes from the relationships people form with it. For many subscribers, their relationship with Netflix was shattered when their ability to get entertainment however they wished changed.

I do not fault Netflix for arriving at a decision that changes were needed in its business model to preserve the long-term profitability of the business. But, most everyone (including Netflix management) realizes they damaged brand relationships in the process. So, any change in strategy should be evaluated fully in terms of how customers will react to change? Human nature is to resist change. Marketers must be prepared for the resistance by being able to make a strong case for how change is good for the brand’s real owners.

Brand Essence: Say it in 7

One of the best reads I have experienced this year has been The Accidental Creative by Todd Henry. Anyone who works in a creative field or wants to strengthen his or her creativity should read this book. Unlike many business books, The Accidental Creative goes beyond telling you what you should do and provides guidance on how to become “prolific, brilliant, and healthy.” I have been a fan of Henry’s Accidental Creative podcast for some time; it is a treasure trove of useful ideas for creatives.

An example of actionable ideas in The Accidental Creative is the concept of a 7-word bio. The idea is simple: distill what you do and who you are into a 7-word description. I see it as a cross between mission and position. While Henry discusses a 7-word bio as a tool for individuals (ideal for developing one’s personal brand), it has applicability for organizations, too. Drilling down to 7 words forces an organization to strip away grandiose proclamations and get away from wordy mission statements. In other words, cut to the chase and define what we are as an organization. What is the payoff of having a 7-word bio? It provides grounding and focus that guides decisions on what projects you take on and how you manage relationships.

This week, I have challenged students in my marketing communications class to develop a 7-word bio for their personal brand. It is a challenge I am taking on, too. What are your 7 words?

The Past is Never Dead

I was not very productive last week. Fortunately, I know the source of the problem and can address it. But, it really was not my fault that I was distracted from my work. I was attracted to a trend that seems to be sweeping Facebook recently- group pages related to one’s hometown. For me, the page “You might be from West Point, MS if u remember…” was the lure. I noticed the page for a couple of days but did not bother to visit, but when I did I found myself watching a virtual highlight reel of my childhood.

Memories flooded my mind of people, places, and events that made up life in our small town. I eagerly anticipated reading others’ thoughts about their experiences. One of the first thoughts I had as I read posts from others in the group was wondering how long this would last. After all, West Point is a small town- will the group complete its collective historical compilation in a few days or weeks and the group page slowly die? Upon further reflection, I realized this page will not die anytime soon. I thought of the William Faulkner quote from Requiem for a Nun: “The past is never dead. It’s not even past.”

We hold onto the past- the good and sometimes even the bad, but we hold on. There are a variety of reasons for our affinity with the past: simpler times, youthfulness, relationships, and certainty, to name a few. Given the turmoil of the day, looking back for something positive as an anchor is an understandable tendency.

This longing for the past extends to the relationships we have with brands. Many comments on my hometown’s Facebook group page relayed people’s fond memories of a restaurant, store, or other business in town. Many of the businesses we reminisced about are gone today, but the impact they had on our lives remains.

The power possessed by nostalgia should not be overlooked by marketers. While so much emphasis is placed on innovation, “new and improved,” and technological advances, appealing to consumers’ feelings of nostalgia can be a powerful connector. Proven ideas, products, and campaigns often run their course or evolve, but that does not mean they have to be mothballed never to be seen again.

What do you know, do, or sell that would resonate with your customers’ associations with the past? It is a question worth exploring from time to time because “the past never is never dead- it’s not even past.”

Disassociation as a Strategy for Targeting Upscale Markets

If you were like most teenagers, the mere thought of being seen in public with your parents or siblings was a source of great angst. What if your friends saw you with these totally un-cool people- your image and reputation would be ruined! If your situation was like mine, it turns out in the end that parents and siblings were not so bad after all. But, image is everything, so we would go out of our way to disassociate our “brand” from someone or something with which we did not want to be connected.

This avoidance strategy practiced in our teen years can be brought out of retirement by marketers wishing to extend their business footprint to upscale markets. These customers expect higher product quality, personalized service, and an overall superior experience to mass market brands. Companies marketing a portfolio of brands face challenges in serving upscale marketers, including decisions about branding. Even a well known brand name is not necessarily an asset because if the aim is to reach a high-end market, those customers may reject a brand perceived as incongruent with being upscale. Auto companies recognize this dilemma, which is why Toyota created Lexus, Honda developed Acura, and Nissan sells Infiniti.

Another auto brand striving to connect with upscale customers is Ford’s Lincoln nameplate. Lincoln has gone from the top selling luxury brand in America to an also ran. Why? Product design had devolved into dressed up versions of Ford models. Ford’s solution to the problem is to commit $1 billion to an overhaul of Lincoln. In the next few years, Ford will roll out seven new or significantly redesigned Lincolns. Sales projections look for annual volume to more than double by 2015.

Ford’s strategy of a product design makeover is an important first step in energizing the Lincoln brand. But, greater transformation will be needed. A top class dealership experience is needed, both in terms of buyer-seller interaction and service after the sale. Brand communications that consistently position Lincoln as a unique luxury brand are needed. The further it can distance itself from its “average” relative Ford, the better.

Will Ford’s attempt to grow Lincoln pay off? It has the potential for success, if Lincoln can break away from perceptions that it is a Ford with more bells and whistles. Act like a teenager, Lincoln, and keep your distance from your parent… but do not forget that you need them!

Foxnews.com – “Ford’s $1 Billion Plan to Save Lincoln”

What Do You Want to be Known for?

The headline poses a deep question, one that we are asked from time to time. What do you want to be known for? People can’t remember everything about you, so what is the one salient characteristic that should resonate with them? Businesses try to articulate this reason for being in their mission statements. Unfortunately, many mission statements devolve into a literary exercise. Their value often resides in contributing to the décor of an office. The mission looks splendid in a frame, but its contribution may end there.

The problem with many mission statements is that they are too wordy and ambiguous for front-line employees to recall, much less execute. The remedy for this problem is to express your purpose in a simple, straightforward way. I saw a sign on the outside of a convenience store today that drove home this point. The sign said:

“To be known for… Making the lives of our customers easier.”

This no-nonsense statement is one that every employee can grasp- this is why we are in business! The store is Kangaroo Express, the primary brand of The Pantry, Inc. The company’s mission statement is a bit more elaborate:

“To become an indispensable part of our customers’ daily lives by always satisfying their on-the-go needs in a fast, friendly and clean environment.”

Mission statements are important pronouncements that define the existence and priorities of an organization. I am a fan of the idea to simplify the mission, as Kangaroo Express has done. The guideline for crafting a mission statement should be to make an impression, not to impress.

The Red Velvet Cake Rule of Brand Extensions

One of my favorite desserts is red velvet cake. I cannot give a particular reason, but along with cheesecake and pecan pie it is one dessert that if it is available I am likely to partake. However, two recent experiences with red velvet cake have left an unexpected impression, one that reminded me of a danger with brand extensions.

First, during a visit to a Sonic restaurant I saw a sign for a Red Velvet Cake Sonic Blast. The combination of red velvet cake with ice cream was a thought I could not shake without trying one. Unfortunately, between the product’s look, texture, and taste, my excitement was wiped out quickly. Second, on a visit to a local doughnut shop, the server suggested a red velvet cake doughnut. I was delighted! Why hadn’t I thought to look for this before? Well, after eating the doughnut I realized why it had not been brought to my attention before now: a red velvet cake doughnut does not compare very favorably to the core product. In both instances, the conclusion I reached was that I have the urge to try these products out of my system and can move on.

What do my experiences with red velvet cake have to do with brand extensions? They are reminders that a product has limits on how far it can be extended from the core product. A brand develops associations and reputation for how it delivers value. Introducing new products under the same brand creates expectations among consumers that the new brands will deliver value in a similar manner. An article by marketing expert Al Ries shares an example of the perils of brand extension. He uses unsuccessful brand extensions of Little Caesars in the 1990s of delivery and expanded menus to make a point that extensions can take a brand’s focus away from what it does best. In the case of Little Caesars, its core strength was offering carry-out pizza at a low price.

The fallout from overextending a brand is that consumers may become less confident in the brand’s capability to deliver value. Business experts have cautioned against overextending for years. Whether it is called “stick to your knitting” or Jim Collins’ call for a company to focus on the one thing at which it can be great, managing brand extensions is crucial to keeping the core brand’s meaning and value proposition intact.

As for my disappointing experiences with red velvet cake extensions, I realized that they had a surprising effect on me: I feel less enthused about having red velvet cake when an opportunity presents itself. I am likely to opt for one of my other favorite desserts. A brand that dilutes its equity by extending to products that are not as strong as the core product risks a similar fate. It can create a double whammy of negative perceptions of the extension as well as unfavorable associations with the core brand. So much for growing a brand!

Brand Passion: Quality over Quantity

Social media not only gives consumers a voice, but it also gives marketers a channel to listen to what customers and others have to say about their brands. And, methodologies have been developed to analyze social media conversations that can give insight into consumer sentiment toward brands. One example of monitoring online buzz is Netbase’s Brand Passion Index, which measures the volume of conversations and the favorability of consumers’ sentiment.

The most recent installment of the Brand Passion Index examined social media conversations about e-readers. The results are interesting given that the category is in its infancy, but in some ways the findings are hardly new. Apple iPad dominated the chatter about e-readers, coming up in more than 90% of conversations examined. Despite heavy volume of mentions, the iPad drew mixed feelings about its functionality and performance as an e-reader. In contrast, Amazon Kindle was mentioned in far fewer conversations but the affinity expressed for the brand reflected passion for the brand. Of all conversations about Kindle, 87% had positive comments about the brand. Among the favorable sentiments for Kindle were its singular functionality, performance, and ease of use.

Results of the Brand Passion Index provides a lay of the land as to consumers’ beliefs and attitudes toward e-reader brands, but a more fundamental tenet of branding surfaces, too. Why do Kindle users like the brand? It is not because of hype or glitz; they love the simplicity of the product. It has one function: an e-reader. The single focus on an exceptional reading experience is not a weakness compared to the multi-function iPad but an advantage. Kindle represents a simple brand promise and delivers in the eyes of a vast majority of Kindle users.

Simplicity is not a liability for a brand. When a strong and relevant point of difference is possessed, consumers are likely to see the value and, as in the case of Kindle, sing the praises of the brand’s value to others. In the case of e-readers, quality of brand capability trumps quantity of capabilities. Focus on the quality of brand benefits delivered; that is what customers want and that is what they enthusiastically share with others.

Marketing Daily – “Index: IPads Generate Chatter, Kindles Love”

Who Owns Your Brand?

Who does own your brand? A strange question, you may be thinking. Or, perhaps you suspect I am lobbing a trick question your way. My response on both counts is “no.” It is neither a strange question nor a trick question. I would say it is a question with a very straightforward answer. Who owns your brand? Not you!

Brands are perceptions, associations, and images held by customers and others. Thus, they are the true owners of a brand. As a marketer, you are merely a caretaker, a steward charged with protecting the value it holds with stakeholders.

Do you need proof? Take the story of Gap. The clothing retailer unveiled a new logo last week only to announce four days later that it would keep its iconic blue logo. The change of heart followed immense public backlash against the new logo.

I read with amusement different opinions from designers and other experts about why the Gap’s new logo was an epic fail. Some experts said the Helvetica font was horribly outdated and unworthy of a trendy apparel retailer. Others said the blue square that protruded above the “p” had no relevance or meaning.

These critiques of the Gap’s new logo miss the most obvious point: the Gap’s logo does not belong to Gap. OK, the tangible qualities of the logo belong to Gap. Ownership is protected by a trademark. But in reality, Gap’s customers own the logo and the brand. Those brand elements connect the company with persons who care about it. Making swift, drastic changes to this piece of the relationship with customers is a prime reason why the uproar was so ferocious.

Manage your brand; build your brand; do what you can to control your brand. In the end, it is not yours, so commit to engaging your stakeholders so that you are partners in its development. Don’t go it alone, or you may experience the same “gap” in stakeholder relationships as Gap is experiencing now.

Creativity – “What the Gap Did Wrong”

Movin’ on Up? Hyundai’s Luxury Brand Aspriations

One of the most impressive brands during the recession was Hyundai. The auto brand would have had every reason to wallow in the misery of American consumers and blame poor sales on a bad economy. Instead, the company saw its market share rise in 2009 on the heels of a bold program called Hyundai Assurance, which gave buyers the option to return a new car to Hyundai during the first year if they could not make payments. Hyundai was recognized by Advertising Age as Marketer of the Year for 2009 because of its proactive response to the recession.

I have been admirer of Hyundai for some time. In addition to the innovative Hyundai Assurance program, the company’s “Think about It” campaign was a creative way to attempt to reshape consumers’ image of Hyundai as an entry level economy car. The message that Hyundai is a quality brand was an attempt to bring Hyundai on par with Toyota, Honda, and other imports that enjoy quality associations with consumers. Hyundai’s boldest move yet is to take the brand upscale- the question is will consumers accept it? Hyundai introduced the Genesis sedan at a price point in the area of $40,000 in 2008, and it is about to debut Equus that will sell for $55,000 range.

Will consumers buy into the idea that the Hyundai name should be equated with upscale automobiles? Will Genesis and Equus be high selling models for Hyundai? Does Hyundai even care how many of these cars it sells? What was that? Of course Hyundai would care how many units of Genesis and Equus it sells… unless there is another motive behind the move toward the upscale segment of the auto industry. The motive seems to be to persuade buyers of cars at moderate price points to rethink their perceptions about the quality of the Hyundai brand. If Hyundai is marketing high priced cars, then a high level of quality must be present, too. This reasoning could change consumers’ perceptions about Hyundai’s quality across all of its models.

Hyundai faces a huge challenge if it intends to convince buyers of upscale cars to include Hyundai among the brands they consider worthy of purchase. It is very difficult to extend a brand into upscale segments when it is known as a moderately priced brand. Other auto companies went upscale by creating brands separate from their core offering (Toyota > Lexus, Nissan > Infiniti, Honda > Acura). Hyundai’s decision to forgo this approach to branding suggests it seeks to impact quality perceptions of its core brand by offering high end products. It seems to be another form of “Think about It”; surprising consumers by showing how Hyundai is capable of creating a luxury car experience.

The Wall Street Journal – “Can Hyundai Sell Pragmatic Prestige?”