Does Branding Kill Your Profit?

I just finished reading Geoffrey James point of view in his latest blog post.

Here's a quick excerpt for Geoffrey's "How Branding Can Kill Your Profit":

"I also believe that developing “Awareness, Interest, and Desire” (aka “Branding”) inside B2B firms is mostly just an excuse to spend money.

In fact, branding is overrated in B2C firms, too. Marketeers frequently cite examples, like Coke, where corporate branding appears to command customer preference and a premium price.

But Coke’s “brand equity” is the result of a century of providing a higher quality product combined with an efficient distribution methodology with extraordinary reach. Those are far more responsible for the popularity of the Coke “brand” than the marketing, which has frankly been cookie-cutter SPAM just like every other consumer product."

Nice polarizing post.

I might agree that a lot of 'branding' campaigns are more about waiving a company’s own flag than closing sales. But that's the fault of THAT company, not ‘branding’.

There are examples that come to mind where either branded product placement (E.T. and Reese’s Pieces), non-sales messaging (i.e. Community sponsorships on a hyper local level), and simple consistent messaging on why Brand X = need fulfillment, that have shown the benefits of 'brand' messaging.

The statement that nobody would by an LG over a lower priced Samsung may be accurate (because it’s an LG) - but pose the same questions with Samsung vs Sony. Harley-Davidson vs Yamaha. Or Whopper (world's best tasting burger - with less market share) over McDonald's.

The answers rarely lie in a consumer being logical in their choice (every sales person knows this, and marketers should to). Yes - the product must be good, priced right and distributed properly -but with all things being equal our emotions and experience often override logical choice. If all you need is 'well made, well priced, and easily accessible' then 8 of 10 new products wouldn't fail within the first 3 months.

Branding, when done properly, leverages company history, logo, color, design, fragrance, consumer memory, consumer experience, and sales impact to override logical thought and increase the chance that in that 2.5 seconds a consumer is forced to pick a jar of peanut butter in the supermarket their choice comes easy.

Hat-Tip to Martin Lindstrom. He explores the emotional brand connection much more in-depth in his latest book Buyology...and Randy Ansems for sending me Geoffrey's post.

What does it take to change

We're almost done the first month of 2009. This is the point where most people give up on their resolutions (or accidentally slip-up). There has been a lot of buzz around real change - economically, politically, socially, and globally.

In a season ripe with predictions, I think this video exemplifies our need to think bigger, to challenge what we are told and to push the limits of the status quo - even when we might look foolish or stupid. Just think, this video could be you in 18 years.

You could think bigger and push for change, or you could talk about the wonders of reading the news on your television.

Find a better strategy

Maybe you run a company. Maybe you work for a company. Maybe you you do both. Whatever the case may be you are constantly dealing with ways to make money. Your year-over-year sales reports, your value engineering on that new plant your building, whatever. Companies, no matter what size, look for ways to decrease costs and increase revenues. It's simple.

The key to this business problem - actually the key to every business problem - leads back to the same thing: The Customer Experience.

Think about it.

Do you want to reduce costs, increase productivity, improve customer service, do what you do best, increase revenues, or spread word of mouth?

Then start focusing on the people who pay your salary. Happy customers cost less, spend more, share more, and respect your workforce. This has a resounding affect on all aspects (and problems in your business)

Easy to understand. Hard to execute.

It requires an entire shift in corporate culture. A real change. Shatter the status quo. Want help? Chances are that local store that has survived the last 15 years of box store low-prices has something to offer. Or check out WestJet (versus Air Canada), the Four Seasons Hotels (versus that motel off the highway with a revolving ownership) or Blackberry (versus Palm). It's not just marketing, it's doing. They don't always get it right - but everything they do focuses on getting it right.

This IS your competitive advantage

I came across an interesting article from Michael Cayley. He's been working on a measurement tool for Social Capital. The goal is to quantify the social media impact on an organization so that investors can access value based on a companies social capital- similar to brand valuation tools that are now prominently used.

I'm not sure if this methodology is where we should be heading (that's a different blog post), but Michael brings up a great point about the true comparative advantage that many companies ignore in today's market...

"People are the best source of comparative advantage"

As most of the companies we rely on for products and services are only marginally different from their competitor the value each that these companies provide in comparison to their competitor continues to shrink (think telecommunications, grocery stores, car manufacturers, food franchises, box stores, accounting companies, computer companies, this list could go on for ever.). Technology, processes and service delivery are all very 'open source' in our information rich society. Most companies continue to try and differentiate value based on old school thinking:

• We have better technology (for now)
• We are first to market (but forgive us for the lack of support)
  
• We are cheap
  
• We offer out-of-the-box value (whatever your definition of value is - we got it).
• Our brand is clean, our employees are people too (but you can't talk to them and they can't talk to you) so please be our friend.
  

Companies can no longer afford to ignore their single largest source of growth - their employee base. Their own people are their best competitive advantage. You can't duplicate an individual and a healthy social corporate culture only increases a brands strength.

You may need to change the way you hire or the way you manage. There may be no story for your company to tell - which is probably the biggest reason your organization struggles to share its value proposition.

Build a story then let your employees share and manage it. Let go a little - soon you'll have a fan base, engaged customers, and something worth talking about.

I don't GET this social media stuff

I hear that phrase all the time. From clients with decades of marketing experience and peers who are struggling with where these tools fit in the advertising mix and the marketing budget. I've said before how social media is not the answer to a marketers problems, but a tool to assist them. But that doesn't really help those who don't get it, does it? So let's think of this social media thing in a different way.

Put yourself in these shoes...

You have a consumer base who is increasingly skeptical. They don't really trust corporations, although they consume their products. You're trying to reach this consumer base and cut through the clutter of the thousands of ad impressions that these folks are bombarded with daily. You've read all the books about being genuine and 'making connections'. You've even tried this Social Media stuff - your new product has a Group on Facebook, and you've hired an agency to keep a pulse on your Social Media impact. Exciting stuff.

But you feel nothing. You're Facebook page looks cool and it's comforting to know that 1200 people would consider themselves 'a fan' (but maybe that has something to do with the iPod's your giving away as an incentive?). In contrast when you spend six figures on a television ad, you feel something. Your sales increase. The phone rings. Your CEO is happy.

Why Social Media?

I'd like to change that question to why word of mouth? Social Media - or any new media - works best when it is thought of as a tool to help word of mouth. In this context, the question is less abstract, less technical, and familiar. You may not know why your Facebook group was bottomless, or why your customer blog wasted away in only a few months. But you do know that word of mouth is the single greatest influencer in product purchases (here's some pre-social media era research). It's the reason you employ people to interact with your customer base, and the reason you started that gift certificate program six years ago. So stop using social media as a support for your television and radio ads. Start using them as a support for your word of mouth marketing.

You continue to build a better product, provide better service and hire better employees so that you have better customers. Customers who love you and spread the gospel of your brand. So, now you have more tools to assist this word of mouth. And the best part: You don't have to know anything about the online world. The less you know the better. In contrast - the more you know about how to influence your customers to be your fans, the better this new set of 'social media' tools will work.

There. It's that easy. Don't be a social media specialist - be a consumer specialist.

You know that your customers talk about you when there is something interesting or rewarding to talk about. You now know that there are tools that can reach these customers and assist them in spreading this message. Now you can take another look at this social media stuff and see where it fits in your marketing strategies.

Update: Saw this quote over at John Bells blog “Online social network users were three times more likely to trust their peers’ opinions over advertising when making purchase decisions.” (“Social Networking Sites: Defining Advertising Opportunities in a Competitive Landscape,” JupiterResearch, March 2007)

Throw your ladder in the trash

"On one of the window ledges of the Church of the Holy Sepulchre in Jerusalem sits a wooden ladder that's been there since at least 1835. The purpose of the ladder is unclear but its placement there is due to the Status Quo. When the wood rots, it's replaced. And like many other aspects of the church's ownership arrangement, the continued existence of the ladder is taken very seriously." (from Jason)

How many things does your company do because they have done them since 1835?

How many times have you written your yearly projections, delivered a presentation, launched a product, engaged an ad agency, or delivered a consumer experience, based on what your company/industry has always done?

The act of change is simple. The reasons we tell ourselves we can't are complicated. You may have a customer service problem. You may have intense competition. You may be struggling to differentiate your brand. You can spend millions of dollars to advertise and manage all these perceptions, but if your company doesn’t change you’re money is well wasted. You can’t just replace the rotten ladder, you have to get rid of it.

Sound Advice

Sometimes a visual just says it. As people (especially marketers) we often try to complicate simple problems.

We over analyze. We look at what has been done before. We control each step. Each one of our peers (not to be confused with expert) needs to add their input. We beat interesting and provoking thought to a square-vanilla-safety-vest of an idea.

Why? As a brand you want to manage the public perception. As an employee of a brand, you want to impart you knowledge of your brand onto your ad agency and coincidentally onto the consumer. As an advertiser you want to deliver the best result for the consumer and please your client (not the same thing).

Anyways, enough of my comments...these two slides say it all.



Great slide by Paul Isakson. His answer to "How Should We Leverage Social Media". If it's interesting, people will make it a part of their day/life.


Finally, another great observation by Hugh McLeod. I like to hope that not all advertising would provoke this reaction...but I think you get the point.

Marketing During a Recession

The auto industry is a mess. The world is diving into a recession. Consumer sentiment is weary as people continue to cut spending. In this context would you change your marketing strategy? Would you innovate or cut costs?

For a quick lesson on Marketing During a Recession let's compare two companies from one of the guilty industries in this mess - the auto industry.

Situation 1:

The Local Name: Your the local market player. You've been around for years and you employ 8 million local people. This recession is starting to impact your ability to cope with the boat load of debt that has been accumulating over the last 10 years.

The Strategy: You need financial assistance - so you go look for handouts. In the meantime, you continue to advertise cheap financing. Consumers love cheap financing. It sells cars. Also, let's not forget about low, low, low prices. Consumers do love low prices. Other than that, you might put out a television ad promoting a tough truck that growls and climbs mountains (don't forget low financing).

The Result: For decades you've been losing market share. For decades you've made excuses on the reason why. Your consumer strategy hasn't changed. If you continue to market the same thing, in the same way, to the same people, why would you expect a different result? This is the simplest response, for a problem that plagues the majority of companies with history. Probably even yours.

Situation 2

The Import: Your a foreign player. Unlike the other 'foreign models' in the market, you're not considered a leader in luxury or quality. Your like the Nissan of the 1970's. Some people don't trust you but you're growing very fast.

Strategy: You know that in this tough economic time, people need to feel assured. Consumers want to know that the brands they deal with really represent people who have their best interest in mind - not an anonymous shareholder. So you talk to your consumer. You reassure them that your business is built on their loyalty. You improve the quality of your product, and even increase the pricing to match the value. Then you make that first gesture that says "we want your trust" (notice it doesn't say "sale").

The Result: You'd be Hyundai. You'd have just launched the Hyundai Assurance campaign - promising U.S consumers that you are there for them, even in these uncertain times. If they give you their trust and buy your car and suddenly find themselves without a job - you'll let them return it. While your competitors are blaming their problems on the people, you are building a generation of fans.

Gaining trust, speaking to your fan base and moving quickly to reassure all consumers is just good marketing. It just looks better in a recession because most companies cut costs and point fingers.

Google Search Google

What happens when the relationship you have with your consumer is so solidly built that there is enough trust in your consumer to let them choose. You recognize when they need the space and support the opportunity to browse the competition.

To have this kind of relationship you would probably always deliver on the promises that you've made. You probably try to communicate to these consumers with a glimpse of what's to come. You're more than passionate about your business, you represent the industry. And you just do it better.

I was reminded of this when I happened to search "search" in Google. No Google ad spend for keyword "search". By the look of the rankings, Google doesn't get searched too often (It's 6th) It doesn't have to. It has a remarkable relationship with its base. Maybe not the kind of relationship you would want. Some people still think Google is a trend. Google has currently proven them wrong.

In this context we can compare this relationship to that of the local shoe retailer. Once unable to find the shoe they were looking for, a customer asked the sales associate where else one could purchase shoes in the city? The sales associate responded absently "I don't know of another place to buy shoes".

No trust. Probably no repeat opportunity to sell to this customer again. A sales associate (brand experience) that doesn't project helpful, genuine, or relationship worthy.

I'm sure I heard that analogy from Seth, but I can't find the post. In the meantime, here's one of his archived posts that explores this customer relationship further...a different take on my post, but something to think about.

10 Reasons To Use New Media

Here's a quick list for those of you looking to use new media. In this context I'm talking about blogs, SEO, micro-blogging (twitter), social networks, social media - that all have the goal of generating a consumer connection.

When to use new media:

1. You have something to say that people actually care about – in their current context. This would be something that they are interested in before they even hear your message. ***New price doesn't count. Neither does "Our company is on twitter". Remember – its not the tools that we have, but how we use them.
2. You can identify a group of people who would personally benefit from sharing your message. Not a short-term benefit like winning a contest...
   
3. You can identify an emotion or activity that would personally tie your customer to your product.
   
4. Your product is scarce and relevant.Your message is simple and self-explanatory. Your story is truly different.
5. Your product works best the more people who have it. (LinkedIn is useless with 1 user)
   
6. You care about micro-measurement (in the case of online ads and direct response)
7. You’re in it for the long haul (in the case of social media, blogs, consumer community, and brand leadership)
8. You care more about keeping customers than getting customers
9. Your company is built to keep customers (happy - sounds like a no brainer, but look around and see who actually cares about keeping you as a customer)
10. If the product, service and related brands don't "live" in the real world, no amount of Facebook Fan Pages is going to help" - Mitch Joel (see original post)

Any thoughts? Add your own here...

Secrets to branding - 20% off.

I just spent 90% of my marketing budget telling you that our relationship is built on good customer service and customized solutions, rather than the bargain basement pricing of my competitors. Then I spent 10% of my budget to advertise a discounted price. Did I just waste 90% of my budget?

Or how about...

If I ask my customer to pay a premium for a best-in-class product (lets say $100), and then discount the same product a month later and sell it to a customer who would only pay $80 - which customer do I really want in the long run?

Which one feels I have more value?

Which one would be easier to convince in the future that my time is worth $100? or even $150?

Which one is less likely to jump ship for the next $80 deal?

Regardless of our economic time, a great brand competes by building its price to reflect the promise, story and experience it will provide. Every other brand competes by offering its reputation to the lowest bidder at a discounted price.

Who wants to be friends with Palmolive?

There have been a lot of conversations recently about the relevance of brands connecting to customers online. Some are saying "Who really wants to be "friends" with Proctor and Gamble on facebook?" and "What good does a viral video do when it potentially deceives the consumer?" On the otherside, we have a wave of other marketers, twitter fans and bloggers who encourage the brands they interact with to use the social tools available. Regardless of what side of the debate you're on, Peter Kim has made your life a bit easier. You can easily scan through the best (and worst) branded social media examples on his Wiki of Social Media Marketing Examples. It started out from a master list he was researching to analyize the relevance of social media. In just a few months the list has over 218 crowd-sourced entries - all of brands who are using the social media space to connect or promote to consumers. Some of my favorite examples:

• Ikea's Online Community - not for the community, but for the attempt to help thousands of people connect to assist each other in assembling furniture.
• Rubbermaids Flickr account - is it just me or is this a bit of a stretch. Apparently those who love Rubbermaid, really love it.
  
• Popeyes Chicken - on twitter. I can actually see that working. A brand in front of the consumer at a possible point of relevance/pain.
• This isn't on their but Sony just launched a relevant blog - just in time for CES 2009. This is scalable and has legs.
• One more nod to Verizon. It may not be the best company for customer service, but someone had their friendly hat on when they launched their Policy Blog. Unfortunately, we usually see this from companies as a tactic to lower the costs of customer complaints...
  

The results of viewing a list like this really exemplifies the infancy of this marketing tactic and how little is known about the triggers that will connect a brand to a consumer.

This isn't Cinderella's slipper.

What would you do when faced with this scenario?

1. There are millions of people who wear shoes.
2. There are millions of people who want to make a difference in the world (a growing trend).
3. There are millions of people who need shoes.

Sell shoes? Buy stocks in shoes? Probably not. Maybe you would support a cuase that gave people shoes. But sell them? The industry is dominated by the big players right? Plus, there are an endless lineup of stores and online retailers where shoes are the order of the day - like the Long Tail superstar Zappos that carries 1,196 Brands and over 3 million products.

So why shoes? There's no point.

Unless...you look at the situation differently. Unless...you have the experience and insight that tells you otherwise. Your response would be different. When you can look at business differently - not by how others do business, but by why people connect to a product - you can deliver a different result.

The result in this case: TOMS Shoes.

After traveling to Argentina, Blake Mykoskie noted that the large population of people living in poverty tended to have two types of footwear. Traditional footwear called alpargatas, or nothing at all. The latter was even more prevalent among children. Upon his return to the U.S. Blake thought the low cost alpargatas may have appeal to a wider audience, as was seen with the soaring popularity of other traditional simply styled footwear.

But remodeling the alpargatas was never really the point. Blake regonized that millions of people, like those in Argentina, needed shoes. He also knew that the internet has been a driving force behind the rise of social responsibility and that connecting to people who want to make a difference has never been easier. Finally, Blake recognized that when it comes to any brand, the story sells the product. Connect all these factors together and the spark has been lit for a phenomonon.

For every pair of TOMS shoes that are purchased, TOMS sends a pair to Argentina or Africa. In two years TOMS has gone from a shoe company with a story, to a brand leading a movement around the globe. To date TOMS has delivered over 200,000 shoes to children in Argentina, Africa, and other countries in need. The story of the shoes has been written dozens of times (here and here are great examples) and the community of loyal and excited TOMS fans tell the story for their brand.

When you purchase a TOMS shoe you help another human being. It's an easy concept. It's genuine. And it's just another example of how world of consumer connection is changing business.

Say the same thing - but differently.

I've been catching up on my reading and came across this post by Mark Earls. I've written about him once before as he explores one of my greatest interests - consumer behavior.

Mark brings up another article that supports the notion that people migrate towards their perception of normal or ideal when faced with decision making. Although this sounds like a simple concept, it reaches far deeper into the reality of what influences our decisions versus what we believe influences our decisions.

This strikes me on a few levels - maybe because the holidays just finished and I was trying to buy another original gift, or maybe because I'm back to work trying to re-frame the decisions I will make in 2009. Anyone who is trying to convince somebody to support their opinion (product sales, PR, social marketing, politics, etc) is impacted by the findings of the UK governments study: a person makes a decision based on what they believe other people do.

We've seen this in smoking research (something like youth who smoke think the majority of people smoke, versus youth who don't smoke think few people smoke), obesity, internet trends (who doesn't love Google), and every other trend that has ever surfaced in the history of humankind.

So why don't we take notice?

Why do we continue to market a different story?

Why do we scare and bait people into listening to our story/opinion/brand?

The research is showing us that people can be persuaded in an easier way. I'm not saying its the only way, but it's worth exploring further in 2009.


Excerpt from Mark's blog and the Guardian article...

"Mockery is an oblique way of enforcing social norms, but it can be done more directly. American social psychologists have done experiments in hotel rooms where they have alternated signs asking guests to reuse towels for the good of the environment, with others simply pointing out that most visitors reuse their towels. The second, observational, notices were 26% more effective."

And again, it underlines the relative importance of the gestural/behavioural rather than informational in shaping change:

"Rather than make injunctions, public service announcements can be more effective if they play on our herd instincts. This is a kind of normative judo, using the human desire to fit in for good. Cigarette packets could swap the signs about how smoking kills for ones that point out that three out of four people do not smoke at all. It is time public officials added peer pressure to their portfolio of persuasions. The private sector has found it helpful enough. What was that about eight out of 10 cats ... ?"

'Tis the season

Happy New Year. I've been shoveling snow for two days. I've also been enjoying this time with friends and family. I hope you have been as well [not the snow shoveling].

2009 promises to be tremendous year. Three things I'm hoping for:

1. To learn a lot
2. To be better
3. To continue with the things I enjoy - like this blog.

Let me know what's on your list. Or let me know how much snow you've been shoveling.

Happy Holidays.