The Dangers of Brands Swimming Downstream

A harsh reality about brands is that there is no brand in existence that is for everyone. Some people think your prices are too high. Others think your quality is unacceptable. Yet others believe your brand is aligned with interests incongruent with their own. You get the picture- even the most popular brands do not appeal to all buyers. Segmenting markets is the typical response to this dilemma, targeting different groups of buyers with distinct offerings. Instead of seeing segmentation as a strategy of last resort, recognize it as a default strategy- you are going to have to segment in order to pinpoint the customers you are best equipped to serve.

Two recent brand extension announcement by prominent retailers reflect a desire to broaden appeal to a wider customer base, specifically “trading down” to serve more price conscious buyers. The companies differed in the strategy employed to compete at lower price points, and the decisions may not only affect the success of their value-based ventures but impact long-term brand health, too.

Whole Foods Market’s Downward Move

Whole Foods Market has established itself as a force as an upscale supermarket, even earning the nickname “whole paycheck” for garnering price premiums paid by shoppers wanting better-for-you food products. However, Whole Foods Market’s brand positioning has a downside: It essentially paints the brand into a corner from which it cannot escape. You could say Whole Foods did too good of a job with brand positioning. It is so entrenched as a premium brand that there is no way to attract buyers more concerned with price.

365_WFMStore_Logo_COLOR

The solution to Whole Foods Market’s positioning quandary was introduction of a new brand concept, 365 by Whole Foods Market. The stores will be smaller and although selling products at lower prices than Whole Foods Market stores they will be driven by the same values and commitment to brand execution that has set the parent brand apart. More importantly, branding of the new concept strikes a balance between attracting customers that may believe the Whole Foods Market brand is beyond their reach and leveraging equity of the Whole Foods Market brand by using it in an endorser role. The 365 brand name takes center stage as the platform to move down in the grocery category.

J.Crew Moves Downward, Too

Last week, clothing retailer J. Crew announced the launch of a new retail concept aimed at luring price conscious shoppers. The J. Crew Mercantile brand will widen the company’s reach by offering lower priced products in addition to an existing its J. Crew Factory stores. Retail analysts see the move as a form of diversification. J. Crew seems to be taking a page from Gap’s playbook as that company’s lower priced Old Navy brand has thrived even as Gap stores have been challenged to attract shoppers.

J. Crew Mercantile Logo

The move downward to compete in the lower priced segment of the clothing retail category is understandable, but the branding approach taken by J. Crew is risky. Will shoppers make distinctions between the name J. Crew Mercantile and existing brands J. Crew and J. Crew Factory? The name of the new concept may have the unintended effect of confusing consumers and creating unfavorable associations with the J. Crew brand. More distance is needed between the J. Crew brand and the Mercantile store concept.

Share or Split?

The underlying branding question faced by Whole Foods Market and J. Crew is whether their downstream brand extensions (as well as their core brands) would be better served by sharing associations with each other or splitting to create their own identities. Both companies have solid brand associations among upscale shoppers. Extensions that drag the core brand downstream run the risk of harming existing equity and confusing buyers about the value proposition of the core brand as well as the extension. The endorser brand approach taken by Whole Foods Market for its 365 concept is an acceptable middle ground. Associating the Whole Foods Market brand via an endorser role gives instant credibility to the upstart 365 brand, and it protects the core brand from dilution in ways that J. Crew is not protected with the J. Crew Mercantile branding strategy.

Can McDonald’s be Saved?

mcdonalds

What does a sports team do when performance fails to meet expectations? Often, the coach is replaced in an effort to energize the team and provide new direction. You cannot get rid of the entire team at once, and since the coach is the figurehead leader of the organization it is usually the most prudent course of action to stimulate change. This sports analogy plays out in business, too. A CEO or other leaders in the C-suite tend to take the fall for disappointing performance.

The latest example of a business leader paying the price for unmet expectations is Don Thompson, the CEO of McDonald’s. Thompson is a 25-year veteran of the company and only 51 years old, but he will be “retiring” March 1 after a two-year stint as CEO. McDonald’s has experienced a precipitous slide under Thompson that includes 14 consecutive months of declining store sales and five straight quarters of declining profits. Just as it is easier to for a sports team to fire the coach and not all of its players, the Board of Directors at McDonald’s can at least demonstrate it is making an effort to reverse the company’s fortunes by making a change in leadership. Unfortunately, the problems faced by McDonald’s go far beyond the person sitting in the CEO chair.

“It’s not You, It’s Me”

The problem faced by McDonald’s is not who is in the role of CEO, CMO, or any other individual. McDonald’s has been a mainstay in American culture because it resonated with families. However, many people that were McDonald’s fans as children and adolescents find when they become adults that the value proposition of McDonald’s does not fit their lifestyle. Whether it is young parents wanting to have their children adopt healthy lifestyle practices early on or young adults who have tired of the menu offerings of McDonald’s, many customers have grown apart from the brand. It is not as much about McDonald’s doing something to alienate these consumers as it is changes in life cycle stage and lifestyle have led to them drifting away from the brand.

A Matter of Relevance

Changing tastes certainly play a role in the woes McDonald’s is facing, but it is not the only problem faced. The brand has lost relevance among many consumers. Fast casual brands like Chipotle and Panera Bread give diners an alternative to quick-service burgers. And, the experience of eating at McDonald’s can be more like going to the DMV than enjoying a relaxing meal at a restaurant. To McDonald’s credit, it has invested heavily in updating its stores to be more like a Starbucks than a McDonald’s. Unfortunately, it has looked more like trying to put a square peg into a round hole. The physical environment might be improved, but the menu is largely still the same fare that customers have drifted away from eating. McDonald’s still excels at offering price-based value, but it may have painted itself into a corner that it cannot escape. Is it destined to be perceived only as the value-priced restaurant brand?

Read the Signs

McDonald’s has been a fixture in America’s popular culture for decades, and its foray into foreign markets is a slice of Americana that can be found around the world. As it struggles to find its identity among today’s consumers, McDonald’s may have hit on a sweet spot that resonates with consumers in its “Signs” commercial. The spot shows signs from local McDonald’s displaying a variety of messages of support, sympathy, and encouragement inspired by events in their local communities or major events like 9/11 or the Boston Marathon bombing.

McDonald’s can tinker with its menu all it wants, but the long-term success of the brand will depend less on what new sandwiches are on the menu and more on the impact McDonald’s stores have in the neighborhoods where they operate. “Signs” is a powerful message that there are people behind the McDonald’s brand, people who care about what is going on in the lives of customers and the good of the community.

 

To be or not to be Gangsta, That is the Question

Urban Dictionary  gangsta

This week, I came across a Facebook post with personal branding implications that sparked a lively debate. A well-known copywriting and marketing expert, Bob Bly, lamented in a post on his Facebook page that a young marketing expert congratulated himself on a presentation he had given, referring to himself as “gangsta.” This proclamation led the veteran marketer to question why many people use social media to stroke their egos. And, he suggested that self-promotion on social media was more prevalent among Millennials. His post elicited more than 100 comments, including several exchanges between Bly and his audience. Not surprisingly, some Millennials in his community disagreed with how he characterized their generation. This post is not about whether Bob Bly was right or wrong but rather a reflection on the impact of social media self-promotion on brands.

Stand for Something

This issue is about brand positioning. By definition, positioning is articulating a real point of difference that is relevant to your target market or community. The “young turk” (using Bly’s words) may have insight that tells him his tribe of followers would find his description of gangsta appealing and his product (marketing expertise) interesting. In essence, the young expert appears to have positioned himself as cool and edgy. Such perceptions will likely resonate within a significant part of his community. The worst scenario this marketer (or any brand- product or personal) could face is being irrelevant due to a perception of not standing for something.

Positioning ≠ Popularity

Brand positioning is one of the most important strategic decisions a brand owner faces. Why? The harsh reality is that not everyone likes you or your offering. A whole host of reasons could be cited- price is too high, quality is questionable, you are perceived as too brash because you refer to yourself as gangsta- I’ll cut off the list here or else I would have to go on and on. But, you get the point; marketing is not a popularity contest. Your brand will appeal to a certain audience, and it will not matter to other audiences. You can live with that as long as you are in tune with the audience that cares about you and perceives you care about them. Thus, brand positioning is so important because it guides decisions about who you seek to engage with your brand and how you go about doing so.

Is It OK to be Gangsta?

If you take a bold positioning approach for your personal brand such as the gangsta persona in this example, know that you will turn off some people. The question is whether your position will be relevant to enough people that the value you offer will be rewarded. Also, brand positions often evolve as customers’ needs and market preferences shift. So, the young “gangsta marketer” of 2014 will likely position himself differently at some point in the future. And, positioning, like marketing in general, is about the benefit of your offering to your community. Position your brand to answer “what’s in it for me” that your audience is constantly asking. Understanding how to answer that question will ultimately shape your brand identity.

 

For CVS Caremark, It’s Positioning over Profits

no smoking

Would you walk away from $2 billion a year in revenue that your business has already acquired? The question is unusual- most of the time marketers expend their energy in a quest to amass revenue. If you are going to forego significant revenue, you had better have good reason… right?

A Clear Decision

One company confronted this very question and concluded that the best interests of its business was served by answering “yes” and exiting a product category worth $2 billion in annual sales. The company is CVS Caremark, and it recently announced that it would discontinue sales of tobacco products in its 7,600 CVS stores by October of this year. The decision translates into $2 billion in revenue, or about 3% of the company’s total sales. Despite the magnitude of revenue CVS Caremark stands to lose, discontinuing tobacco sales was a clear decision to make. Why? Company management knew that in order to be true to the brand promises CVS Caremark makes as an advocate for wellness and a healthy lifestyle, its merchandise strategy has to be congruent with the overarching mission of the business.

Two Questions to Ask

Brand positioning is one of the most important marketing decisions you will make. Why? It draws a line in the sand as to how a brand is unique, different, or superior to competition. Without a clearly defined brand position, you are doomed to mediocrity, if not failure. It sounds like a dire prediction but think about it- when a brand lacks clarity in its meaning and does not articulate a point of difference, it can be perceived as a commodity that is easily interchangeable with other products. A brand is vulnerable to being rendered irrelevant when it lacks a clear point of difference that conveys its value proposition to the market.

The decision to position is easy; the approach taken to position a brand is not so clear cut. The good news about brand positioning is that a marketer has many options from which to choose to create a positioning basis. The bad news is… well, the bad news is the same as the good news- the number of possibilities for positioning a brand can be overwhelming. How do you decide what differentiation point is most viable as a positioning basis? You need to ask two questions when evaluating a potential brand position:

  1. Is the point of difference real? A brand position has to be a legitimate proof point that exists- not a puffery claim or slogan. For CVS Caremark, positioning as a brand associated with a healthy lifestyle would be harder to achieve if it continued to sell tobacco products in its stores.
  2. Is the point of difference relevant? Possessing a point of difference is one thing; possessing one that matters to your customers is something quite different. Judging from feedback posted on CVS’s Facebook page about the decision to end tobacco sales, many customers and non-customers alike believe it was the right thing for the company to do. It elevates the credibility of CVS Caremark as a lifestyle brand.

Be True, not Popular

While many consumers and health professionals have lauded CVS Caremark for its decision to discontinue tobacco sales, the decision was not embraced universally. Many CVS customers that buy tobacco now say they will take their business elsewhere. Other people have chided CVS Caremark for not removing other products with questionable effects on health such as beer, wine, soda, and snacks (such complaints do not appear to be an apples-to-apples comparison with cigarettes, but I will leave that debate for other people in other forums). These examples of negative feedback is a reminder that you will always have detractors- “haters gonna hate.”

In the end, it is more important to be true to your brand values than making decisions you believe will be popular. CVS Caremark has taken a bold stand to be consistent with its brand promises. While some people might see it as an expensive stand to take, it is one that CVS Caremark believed it could not afford not to take.

Can Kroger Clip Coupon Value without Harming Customer Relationships?

Photo by sdc2027/Flickr
(under Creative Commons License)

Perhaps this story should be filed under the category “All Good Things Must Come to an End.” Kroger appears to be phasing out the doubling of manufacturers’ coupons. The practice gave coupon users an incentive to shop Kroger as the retailer would match a manufacturer’s coupon value, usually up to coupons with 50-cent face value. This week, Kroger’s Central Division announced it would no longer double coupons in its 136 stores, located mostly in Indiana and Illinois. It joins the Houston and Cincinnati divisions in honoring manufacturers’ coupons at face value only. Kroger officials said the reason for the change was that fewer shoppers are using manufacturers’ coupons as they get more offers online.

Not a Popular Move
As you might expect, some Kroger customers are unhappy that their purchasing power has been blunted with coupons no longer being doubled. Social media reactions to the ending of doubling coupons indicate that some customers are sad, some are mad, and some believe Kroger is making a big mistake. Kroger’s counterpoint to complaints about the end of coupon doubling is that it affects only a small percentage of their customers (about 7%). And, in place of forgoing revenue via coupon doubling the company will lower prices on “thousands of everyday grocery items.” Thus, all customers stand to benefit from Kroger’s policy shift, not just the 7% who were enjoying benefits of coupon doubling… at least that is the Kroger company line.

Overcoming Resistance to Change
A key to overcoming customer skepticism will be transparency. Kroger must make shoppers aware not only of the new lower prices, but the items with prices lowered must be communicated. One of the complaints from some shoppers in the markets in which coupon doubling has ended already in favor of lowering everyday prices is that they cannot see the impact of the new program. Perhaps most of the items with lower prices are not items these shoppers buy, but regardless Kroger must proactively show that they have permanently lowered prices on many items.

What Will Be the New Different?
Now that Kroger has decided to phase out coupon doubling in a third region and customers adjust to the new reality of no coupon doubling, what will the company focus on to differentiate itself in an increasingly competitive grocery market? Walmart and Target are aiming to take customers away from traditional supermarkets with low prices and a one-stop shopping experience. Publix has captured a position of best-in-class customer service. Kroger’s point of difference? Well, it is big and getting bigger. Kroger announced this week it is buying the Harris Teeter chain. Unfortunately, being the biggest company in any category is not a very meaningful position to those who matter most: Customers. It’s your move, Kroger. Show us the new different- how will you be remarkable?

IndyStar.com- Kroger to Quit Double Coupons

How to Achieve Brand Relevance

Have you ever caught yourself teaching or advocating what you believe is an important point only to realize you aren’t exactly sure yourself what it means? I’m not talking about speaking on points on which you are not knowledgeable, but a subject that you understand yet may not truly grasp how an idea or theory really works. It happened to me recently when I was reading an article by Tom Denari, CEO of Young & Laramore, an Indianapolis advertising agency. The title of the article was provocative- “Nobody Really Cares about Your Brand”– of course I had to read on. As I did, it dawned on me that an important point I try to convey to my students could be sharpened with perspective gained from reading Denari’s article.

Your Brand Should be Relevant-What Does that Mean?
One of the most important tenets of marketing strategy I emphasize to students is the need to achieve brand differentiation. A brand succeeds in intensely competitive markets by standing out, not merely by being different but by creating value for customers that makes the brand different in a relevant way. A strong case can be made for pursuing brand relevance. Without a distinctive position to differentiate a brand, it is destined to be mired in mediocrity as a “me too” brand. But, what does it really mean to achieve brand relevance? Who defines what is relevant? As the article of Tom Denari’s article suggests, customers are not nearly as interested in brands as the brand owners are. They are not too wrapped up in comparing features and benefits among competing brands; they simply want products and services that add value by making their lives easier, more productive, enjoyable, or whatever the desired benefit might be. This reality about customers has huge implications for defining your brand’s relevance.

How to Achieve Brand Relevance
Fortunately, Tom Denari does not leave us in despair after pointing out that people really do not care about brands. He offers a straightforward solution to achieving brand relevance: be culturally relevant. Denari cites Nike, Apple, and Starbucks as three brands that went beyond developing great products and attained cultural relevance. Nike (aligning with world class athletes), Apple (transforming the user experience of consuming music and mobile computing) and Starbucks (created consumption experiences around coffee) became culturally relevant by focusing on how they could not only serve customers’ needs but have meaning in their daily lives, too. Although these brands are exemplary for creating relevance, the scope of impact need not be groundbreaking. Denari cites the Old Spice advertising and social media campaign from a few years ago as creating cultural relevance for a brand typically thought of as “my grandfather’s after shave.”

Fortunately, you do not need to have the resources of Nike, Apple, or Starbucks to create a relevant brand. What is needed is a way in which you connect with customers that matters to them. The local car dealership that is a sponsor of high school sports teams can be culturally relevant in the community. The independent drug store differentiates itself from its deep-pocketed chain competitors by giving personalized service and creating a shopping environment that reminds customers of the “good old days.” And of course, brands can build relevance by aligning with social issues or causes that matter to their customers. John Maxwell says “people don’t care how much you know until they know how much you care.” Businesses of all sizes can use social responsibility as an organization-wide mindset for showing how much they care.

The goal is to create relevance, but never lose sight of who defines relevance. Your brand matters only if it matters to your customers.

Caring as a Brand Differentiator

Positioning a brand is one of the most important strategies a marketer must devise. Communicating a brand’s real, relevant difference compared to competition can be the difference between being a “me too” brand and a category leader. This point is touched on in the book Brand Against The Machine by John Morgan. One particular differentiation strategy is recommended that is so simple yet often not practiced: Demonstrate that you care.

Can caring really be utilized as a positioning strategy? Of course businesses care about their customers, or they will not be in business for long! But, as you and I know there are often breakdowns in execution of customer-focused marketing plans and strategies. Great customer service programs are little more than empty promises to customers who experience poor service quality.

A few months ago, we replaced a heater/air conditioner in our home. The company we called, Hiller Plumbing, has a great reputation for customer service. In fact, it won recognition from the Nashville Business Journal as a Best in Business firm in 2011. My wife talked with the manager about the company winning the award. His response was that for a company in that industry to be recognized for its performance is significant because the reputation of the category as a whole is not very positive. Winning recognition in a competition with businesses from a wide range of product and service categories was an even greater testament to Hiller’s differentiation as customer oriented. The key to Hiller’s success is that employees from top management to front-line service personnel show genuine concern for customers.

Many aspects of marketing are hard, but caring should not be one of them! One of the most frequent comments I hear from students who have been in my classes is that they appreciate that I show concern for them. It is surprising to me that they do not experience caring from all faculty members, but like customer service in general, knowing to do the right thing does not translate into actually doing things right.

Be different- care. Reflect on what you can do to demonstrate more concern for customers; then empower employees to deliver. They will be heroes, and your brand will stand out.

The Facebook Flaw

A year ago, the future of the location-based social network Foursquare was uncertain. It was not due to any missteps on its part. Rather, it was the announcement that Facebook was launching a location-based feature known as Facebook Places. The dominant player in social networking was moving into the check-in space? With a miniscule number of users compared to Facebook, the question that loomed was how could Foursquare possibly compete?

Fast forward one year- Foursquare appears to have survived the Facebook threat. Facebook announced this week that Places will no longer be a stand-alone feature on mobile devices. Places never got traction among users. My personal experience was that it rarely worked on my smartphone. Technical glitches notwithstanding, my inclination to check-in is to use Foursquare instead of Facebook. Although my network is significantly larger on Facebook, in my mind Foursquare is the brand for location-based social networking.

Why did Facebook Places not crush Foursquare? And, why is Facebook Deals, a social coupon service, not causing executives at Groupon to lose sleep? The answer to both questions is that while Facebook is ubiquitous and a valuable tool for keeping us connected with other people it cannot be all things to all people. It is another example of a classic branding mistake that experts like Al Ries often lament. As a brand grows, it is natural to seek growth opportunities. But, as brand extensions inch further away from the core offering consumers are not as accepting of the brand’s capabilities. Google has experienced a similar fate as many of its brand extensions have met with less than resounding success.

The Facebook Flaw is not unique; it is same song, another verse of the perils of brand extension. Define what is great about your brand and be the absolute best- differentiate and dominate. But, avoid the temptation to think that your greatness will transfer to products that may be beyond the core of what attracts customers to you in the first place.

Have a great weekend! I’m off to a full day of meetings, but first I am going to check-in… on Foursquare, of course.

MoBlog – “Facebook Kills Places – Is Deals Next?”

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”

Another Tale of ‘Differentiate or Die’

My favorite marketing mantra is the title of the Jack Trout book Differentiate or Die. It is at the same time straightforward, provocative, and applicable in many situations. In a world in which we have a great deal of choice for most of the products and services we buy, standing out from competition is a must. To be clear, it is not about standing out in a dye-your-hair-pink way; it is defining what you or your business does better or uniquely that distinguishes your brand from similar offerings. Without differentiation, it is very difficult to make a persuasive case that your brand offers sufficient value to justify product purchase. In the extreme case, failure to differentiate can result in business death.

Today’s installment of Differentiate or Die is brought to you by the Atlanta Thrashers. The NHL franchise is being sold to an ownership group that will relocate the team to Winnipeg. The Thrashers were the second coming of the NHL in Atlanta, which lost its first team in 1980 to Calgary. The second life of the NHL in Atlanta lasted 12 seasons but met the same fate as the Atlanta Flames 21 years earlier. Why?

There are many reasons, too many to discuss here. Perhaps the greatest challenge is the stiff competition for the sports entertainment dollar in the market. The Braves, Falcons, Hawks, Georgia Tech, and University of Georgia are formidable obstacles. And, that is only sports entertainment competitors. When other entertainment, leisure, and cultural opportunities are considered, the Thrashers faced immense competition in a nontraditional hockey market.

Competition was a significant issue for the Atlanta Thrashers, but in the end it would be too easy to blame the team’s troubles on the other sports properties in the area. The demise of the Atlanta Thrashers is due in part to what it did not do: differentiate itself from other sports entertainment brands in Atlanta. It was part of the sports landscape, but being a big league team is not a sufficiently compelling reason to become a fan, sponsor, or ticket buyer. It does not matter if you sell hockey or hot dogs, or whether you are a major league sports property or a local mom and pop business, differentiation is essential. Can you answer the question “How am I better, unique, or different?” I hope so.