FusionBrand

Best branding advice from shapers of Obama brand

There was an article in the April issue of Fast Company about one of the key players -- Chris Hughes -- in Obama's campaign for the presidency. Not only did Hughes help Obama, he was also closely involved in the startup of Facebook. It's a long but interesting read (note to Fast Company -- shorten your articles). There is a great quote in there that should apply to any company and brand:

"Instead of reciting a list of why we wanted people to vote for Barack, like we did for Kerry," she says, "we were told to ask what was important to people and listen to them." They fed back what they learned via MyBO and used that knowledge to create local service projects that continue to this day.

Too many companies provide lists of reasons why prospects should buy. Worse, they provide chest-beating reasons -- "the leading," "established since 1985," "pace-setting," etc. They should follow the lead of the Obama campaign, and listen to what's important to prospects and customers. Then they should then create products and services that meet those requirements for value over time.

One reason why online branding help win an election

Number of Facebook friends in November:

Obama = 2,155,244
McCain = 578,651
George W. Bush = 0

Why agencies can't brand

Agencies constantly pitch themselves as being able to brand your offering. The pitch is so seductive: "We'll use your money to increase your sales and make you as beloved as Nike, Apple and Coca-Cola." Who wouldn't fall for this siren call?

The truth is that no agency can brand your product. One one level, this is demonstrated by the musical chairs that companies and agencies play. Agencies pitch their "creativity" and "positioning," companies stroke their collective chins and make poor agencies jump through more hoops, and then select a "winner," and everyone chimes into the chorus of creating a great brand. Then in one, two or three years, the process begins again.

Why?

The selection process is rigorous, agencies have talented people, budgets are available, and companies are committed to branding. So why are the pages of marketing publications filled weekly with news of new agency pitches or selections?

The primary reason is that agencies cannot brand. That's mainly because agencies are not in charge of the fundamentals of branding -- service, innovation, engagement, and execution. Agencies can make a brand promise, but, ultimately, they cannot fulfill it.

The second reason is because agencies are, in the end, nothing more than an organization, and subject to the strengths and weaknesses of any organization. And sometime, organizations fail to deliver, no matter how strong the historical record is or how committed the leadership is.

The best example of this is in an amazing email from TB Song, the chairman of TB Song. He wrote an email on December 31, 2008, outlining why the agency was not fulfilling objectives, either its own or its clients'.

The email is well worth reading:

http://media.blog.brandrepublic.asia/davidtiltman/ogilvy-chinas-collective-failure/

The point of this post is not to point a finger at Ogilvy. Indeed, Ogilvy is one of the world's premier agencies, and Mr. Song deserves great credit for accurately identifying the issues involved. In fact, if I believed in the agency model, Ogilvy would immediately make my short list. The first step to solving a problem is to identify it, and Mr. Song has nailed it.

Here are some relevant excerpts:

"We, including planners, account service and creative professionals, must be more active and engaged in our clients’ businesses. This means doing a better job of understanding their operations, strategies and market positions. We must stand alongside our clients in facing business challenges and changing market conditions. We must infuse our creativity – our core competency – into our clients’ businesses. Our creative people can’t simply sit at home, receive the brief, and then 'do creative.' Our advertising must be more than just TVCs or print ads, as our creativity should blaze new paths of communication which aims to help our client’s business. The best ideas are still undiscovered. If Ogilvy’s creative people think only about the awards, TVCs and print ads, or even scam ads, I will encourage them to leave. Our creative people should be forbidden from working on scam ads. I’m not against awards, but the focus must always be on our clients’ businesses, and let the chips fall where they may."

"The focus must be on our clients' business, and let the chips fall where they may." Too many agencies sell their "creativity" and highlight their "awards." But creativity is meaningless unless it results in profitable sales, and "awards" are nothing more than industry veterans recognizing their industry peers. The only award that matters is one that customers give you.

Another excerpt:

"We must work to deeply understand the client’s business model, especially their financial systems/cycles and the up/downstream structure of their industry. These factors will impact the client’s short-term marketing and communications strategy. We should incorporate these considerations in the advice we give clients and adjust our service accordingly."

Too much attention is paid to "creativity," or worse, "positioning," instead of understanding pricing, distribution, supply chain relationships, competition and other relevant business issues. Until you understand these, it's difficult to solve client business problems.

"Ogilvy China remains in the leadership position in Greater China, and irrespective of the downturn, Ogilvy is still regarded as the best option in the eyes of many clients. However, we must be also aware that we have already become too lazy and proud and have been resting on our laurels and enjoying our good reputation. We considered ourselves infallible and even arrogantly believed that we could engage consumers without actually understanding them. This has destroyed the Ogilvy brand and David Ogilvy’s vision: 'We sell or else!”' 'Remember?'

"We arrogantly believe that we could engage consumers without actually understanding them." This applies to every agency and company that attempts to brand without doing prospect, customer and lost customer research. You cannot brand without ongoing brand audits.

"We need to remember that we are 'Brand Stewards.' And branding is a long-term project. In 2009, clients will be looking for quick solutions to their sales problems. Ogilvy should be focused on being 'effective in a short amount of time, but also beneficial to long-term branding.' That’s the key to sustained success in hard times."

That advice is not only applicable to agencies, but also to companies seeking short-term fixes or branding silver bullets.

Ultimately, agencies are only partners in branding. Only companies that are focused on execution, measurement and, most importantly, customer engagement can brand.

Kudos to Mr. Song.

25 random things to improve your brand

Taking note of the Facebook fad....

1. Talk to an unhappy customer. Find out why they are unhappy. Better yet, talk to lots of unhappy customers about delivering better value.

2. Measure your retention rate. Work to increase it in 2009.

3. Ask employees to write down the value your brand delivers to customers. Then unite the vasrious responses and communicate a unified vision of your brand.

4. Make an instructional video about how to use your products and upload them to video-sharing sites.

5. Make a list of customers who have not bought anything for a year. Contact them with a promotion which encourages them to buy again.

6. Spend a day working on the customer service desk to find out what customers are saying.

7. Use a competitive product, and ask yourself: "why do people buy this product instead of mine?"

8. Write thank-you letters to your largest and best customers.

9. Stop using any tactic that is not measurable, such as "positioning."

10. Write a case study about a customer.

11. Bundle or unbundle features, and develop "good-better-best" pricing.

12. Make your product or other instructional guides clear and easy to understand.

13. Translate your website into multiple languages.

14. Train your sales force to improve their listening skills.

15. Find out why a customer left the competition for you, and find out why a customer of yours left the competition.

16. Develop a PR crisis plan.

17. Develop a corporate profile on Facebook.

18. Visit a customer. Talk to everyone who connects with your brand, from top executives to actual users.

19. Start a referral program.

20. Respond to a positive or negative comment in a blog.

21. Trust customers more than agencies.

22. Start a group based on your brand on Linkedin and other social networking sites.

23. Make your packaging easier to open.

24. Mystery shop your sales and customer service operations.

25. Write your own list of 25 to-dos to build your brand. Ask others to contribute.

Random jottings from ad:tech Singapore

I just got back from speaking at and attending the ad:tech conference in Singapore last Thursday and Friday. Ad:tech is a digital marketing conference that attracts interactive agencies, clients, brand specialists and media planners. This is the 11th year of ad:tech conferences

Here are some random notes that were either sufficiently disturbing or interesting enough to merit being jotted down on the back of my speaker's badge. Also included are some hit-or-miss inspirations that occured to me during the event:

• Vast wasteland?: 10 hours of video are uploaded to YouTube each hour.

• Is there any room left?: Within 2 years, business cards will list social networks just like the list email addresses and mobile phone numbers today.

• Time to learn a new skill: Before long, 40-60% of all traffic on the internet will be video.

• Life lesson #258: There were technical glitches with my presentation on social networks and self-segmentation.  Always check your presentation before showtime.

• New business idea?: PR, digital marketing, media planners, advertising agencies and other partners are generating lots of measurements to enable accountability. However, clients are having a difficult time both integrating that data and correlating it to their brand or corporate KPIs. There is an increasing need for a centralized "dashboard agency," which would provide the necessary integration among multiple sets of numbers and linkages to corporate goals.

• Not sleep?:18-25 year olds were asked what they would do with an extra 15 minutes a day. A healthy percentage said they would spend it on social networks.

• Harbinger title of the future: One of the keynote speakers was Brad Garlinghouse of Yahoo!. His title: Vice President of Communications and Communities.

• What's tired:

• "Positioning:" Amazingly, I did not hear this relic from the 1970s mentioned once.

• 360-degree marketing: The audience laughed when this term was heard.

• 1:1 marketing: Experts agreed that failures with 1:1 marketing were making it difficult to sell segmentation today.

• Viral marketing: Usually referred to in the sense of a prehistoric ancestor to social networking

What's wired:

• Engagment: Every speaker mentioned it at least five times. However, some speakers only mentioned in the sense that "we want customers to engage with us." Engagement must be a two-way street.

• Measurement: Once measurement was a dirty word among creative-driven executives and agencies. Now the entire marketing world seeks to be data-driven.

• Entertainment: The primary tool for engaging with consumers on the Internet.

• Mobile marketing: After a decade of hype, everyone kept promising that yes, really, I swear, this is the year that mobile marketing takes off.

• iPhone: Finally, a mobile on-ramp to the Internet and all it has to offer.

• Integration: Every offline campaign must have an online component.

• A lot of pokes: There are 530 million users on social networks worldwide.

• So that's why you need 15 minutes extra a day: 20% of all Internet users have visited a social network within the last 30 days.

• Three types of media: Owned (internal), bought (advertising, etc) and earned (WOM, etc.)

• Emperor-has-no-clothes speaker insight: Why do we have campaigns with a beginning and an end? It just requires so much energy and money to start a new campaign. With social networks, promotion never ends.

• New buzzword to learn: ROPO (Research Online, Purchase Offline).

• Best quote heard: "A lot of companies think social networking means, 'We want you the consumer to tell us how great our products are.' -- Josh Sklar, Global Chief Creative Agency, BLUE

• Best case history: Coke Zero in Australia. Coke tried to pave the way for a product introduction by mimicking an "underground" slackster/hipster movement. Of course, it was outed. Lesson: Always be authentic.

• Most overused case history: The UGM effort to promote Tahoe. It backfired when environmentalists used the UGM effort to blast the Chevy gas-guzzler. However, Chevrolet won brownie points by letting the critical videos remain online.

• Sign of times: Nestle in Philippines upped its digital marketing budget from 9% to 25% this year.

• Note to conference organizers: When interviewing keynote speakers, ensure that the questions are not longer than the answers. Attendees want to hear the keynoter,  not the organizer.

• New boy toy: After the conference I bought the Creative Labs version of the hot-hot-hot Flip video camera. The New York Times called it "one of the most significant electronics products of the year." If this takes off like the iPod, pretty soon 80% of the traffic on the Internet will be video.

Speaking at ad:tech Singapore

Want to learn about the newest digital trends in Asia? Then make plans to attend ad:tech Singapore on June 26 and 27 in Singapore at the Suntec International & Convention Centre.

Here's the panel I'm moderating. We'll be discussing how to keep brands strong when even your worst critic can have a platform via an Internet blog:

• Blogging Universe - Building Brand Awareness or Losing Control
  Thursday, June 26, 2008 02:00 PM - 02:55 PM

Segmentation is key to targeting -- but what should you do when customers segment themselves via social marketing groups? I'll tell you during this session

• Segmenting for Effective Online Campaigns
  Friday, June 27, 2008 11:30 AM - 12:30 PM

Hope to see you there!!  Be sure to say hello.

When Rebranding Goes Wrong

Companies usually seek to "re-brand" when poor customer service, lack of quality, dated offerings or other issue cause customers to defect.

The re-branding initiative should look at the causes of customer defection. Why do customers feel like they are no longer receiving economic, experiential or emotional value from the company? What can the company do to better deliver value? How can customer service or quality be reformed to meet customer standards?

But instead of attacking the reasons for customer loss, companies too often turn to a silver-bullet of re-branding, complete with a new logo. They must believe, as one graphic designer claims, "In the past it has been found that many under performing companies had started performing exceedingly well after they went through a logo makeover."  Landor Associates is infamous for dreaming up a new logo and calling it "branding."

Rebranding failures are legion. British Steel changed its name to Corus, complete with new logo, but that didn't stop its sale to the Indian group Tata. Xerox introduced a new logo in January, but that didn't keep the company's stock from falling almost 15% since then. The British Royal Mail spent £500,000 on branding consultants  who recommended rebranding to company to Consignia. The new name was so poorly received that Royal Mail  had to revive their old name.

Or how about this. Four years ago, Cingular bought AT&T Wireless. AT&T had become synonomous with pull-your-hair-out poor service, so Cingular dropped the AT&T name. But now, for reasons only the so-called brand consultant advising Cingular can explain, Cingular Wireless is now being rebranded as  AT&T Wireless. No doubt customers would have preferred more money being put into operations instead of being wasted on rebranding. Of the six largest cell-phone carriers, AT&T Wireless generated the most complaints overall and the most complaints per subscriber last year, according to the FCC.

Logo redesigns for the sake of rebranding can also lead to unintended consequences, such as this £14,000 logo produced for the Office of Government Commerce in UK, which has made it the butt of Internet sexual jokes.

Sometimes, name changes, along with new logos, become necessary when companies are purchased or when changing technologies make names obsolete. (The Carphone Warehouse is a strong candidate here). But, in general, spend your rebranding budget where it really counts – providing value to your customers – and let your competitors waste money with the snakeoil logo salesmen. 

What is Branding?

A marketing publication emailed me an excellent set of questions about branding prior to a speaking engagement in Croatia. Here are the interesting questions about everything from profitability to social engagement and my responses:

A lot of authors who are researching brands seem to think that brand is not a physical category, that it is not a product, but something that goes beyond the product in sense that a brand is actually a metaphysical category in a way. Do you share that thought, and what is a brand to you and how would you explain it to someone who knows nothing about branding?

The first issue is to define a brand: “A brand is a long-term profitable bond between an offering and a customer. This relationship is based on economic, emotional and/or experiential value, backed by everyday operational excellence & consistently measured for accountability, usually by customer profitability.”

This definition has several key concepts. One is profitability. For businesses, the only purpose to branding is to increase profitability. It is not to generate great creative or catchy taglines or win awards.  If any branding tactic does not contribute to greater profitability, don't do it.

Brands require a relationship. Anyone can sell a product once. But what is required for profitability is repeat sales. It is only after those repeat sales that a brand relationship is formed.

The next key component of value. Value can be related to price, an experience or a feeling, but no one buys anything unless value is seen.

Everyday operational excellence is the ability to consistently fulfill a brand promise.  Without the ability to ship on time, ensure quality and provide service, no brand can succeed. In many ways, the "organization is the brand."

Finally, measurement is key. Measurement enables benchmarks, which in turn ensures accountability. Measurement let you know what is working in terms of ROI, and what isn't. Measurement ensures better decision-making. Without data, you are just guessing.

You are also, among other things, a brand metrics expert. How do you “measure” a brand? That is, how can we measure things like the awareness of the brand, loyalty, experience, emotions, reputation etc.?

The most important measurement of a brand is profitability. If it is not making money, any brand will fade away. The second measurement is customer profitability. Everyone knows that 20% of customers generate 80% of the profits. But what a lot don't know is that 15% of customers are unprofitable – they cost more in service and other demands than they generate. The final key measurements are operational – on-time deliveries, customer service responsiveness, quality (mean time between failures, etc.) etc.

In your book, FusionBranding, you claim that the idea that  brands can dictate the consumers behaviour is absolute rubbish. You also claim that if it would be that simple, the companies would not make mistakes, and you are corroborating your claim with the information that 90% of new products don’t succeed to become a strong brand while they are, on the other side, spending billions of dollars on advertising. If brands are not affecting the behaviour of the consumers, what does?

Well, what I said was that companies cannot dictate consumer behaviour. They may make consumers aware of the brand, but ultimately it is the consumer who makes the decision to buy or not. Two factors drive consumer choice: word-of-mouth and operational excellence. Every research study underscores the point that word-of-mouth is by far the most powerful force in driving or discouraging sales. If your best friend says a particular brand is always in the repair shop, are you going to buy it, no matter what the company says about it?  Operational excellence is absolutely critical, especially for those selling to other businesses. It makes no difference, for example, how cheap or pretty or how well advertised an offering is, if the product is not delivered when you need it. Even for consumers, operational excellence is key. How do you feel when you go into a retail store and can't find a service clerk?

Your most recent book “Profitbrand: How to Increase the Profitability, Accountability and Sustainability of Brands” was endorsed by brand gurus Don Schultz, Philip Kotler, George Stalk… and other leading authorities from business and branding fields of work. Could you give us a short resume of the book?

A lot of branding books are based on the theories of a faded, mass-economy era – "brand personality," "brand equity," and "positioning." Worst of all, many fail to mention the word "profit," which is the whole point of branding. This book outlines the specific, actionable and measurable steps to achieve a profitable brand in an era of peer-to-peer branding. This is why it was named as a "Best Business Book" – not marketing book – by the international consultancy Booz Allen.

Which kinds of digital branding do you consider to have a crucial relevance in the year 2008? Do you think it will be social networking, podcast, RSS Feded or something else?

The first is Web 2.0 tools that are applied to specific industries.  While Web 2.0 mainly deals with technical issues, in 2008 we will be moving to "Retail 2.0," "Manufacturing 2.0," "Tourism 2.0." Looking ahead, companies will start establishing "XYZ 2.0," "Croatia 2.0," which will be based on the communities of interest – not segments – that are important to XYZ Company or Croatia.

In which direction will branding develop in the future?

The first trend, which is already in place, is the demand for accountability, which requires measurement. Marketing measurement has long been notoriously difficult, but great strides in quantification have been made over the past few years. Targeting and segmentation will continue to be important, but will evolve to incorporate communities of interest. The difference between segments and communities of interest is that companies define segments – "all women over 40," "golfers who play three times a month," etc. Communities of interest are consumers defining themselves in terms of their interest and passions – divers, bargain-hunters, eBay enthusiasts, etc.

What role in it do consumers have, and what is your view on integrating brand management and customer management, that is, how should the companies integrate those two views on business in order to have satisfied consumers through strong and big brands?

Without customers, you have no brand. As a result, I discourage companies from focusing too heavily on brand management because it generally revolves around products and issues important to the company, which may not necessarily be important to customers. If it is not important to customers, or provide them value, why do you want to do it? Customer management incorporates a lot of issues, but the most important is profitability. As noted above, 15% of customers are unprofitable. Why do you want to sell to an unprofitable customer? With customer management, you look at ways to decrease costs or increase the profitability of customers or customer segments. If they continue to be unprofitable, you recommend the competition to them.

What is the significance of executing brand strategies and creating of a consistent brand communication through all communication channels with consumers?

Two words sum up all branding tactics: consistency and engagement. Every media release or ad needs to have the same messages. Every communications material needs to have the same look-and-feel. 

What do you think of the emotional branding concept and do you think that a company should be more focused on creating emotional connection between its brands and the consumers or on achieving maximal ROI on its brands?

This question assumes that all customers are created equal. They are not. Some customers are loyal and buy a lot over time. Others buy just on price and will desert you in a second for a lower price down the street. Obviously, the way to maximize ROI on brands is to focus on the profitable customers and deliver economic, experiential AND emotional value.

Recently, the social networks phenomenon became really relevant. A lot of administrators are creating only platforms that offer the consumers (usually for free) a space to fill with their own content. The notable fact about those social networks is that they lack firm economic models. How do you predict further development of user generated media?

They may lack an economic model for Web sites that interconnect surfers, but they are a branding tool much more powerful than, say, mass-media advertising (which, in the vast majority of cases, only returns about 71 cents of every dollar spent, which means that it too lacks an economic model!). For example, one study estimated that 80% of the users on Facebook discussed a particular brand. What companies need to do is to use the communities of interest that make up social network, and provide the tools and links for user generated media. Worried about negative commentary? Always a risk, but what better incentive to provide economic, emotional and experiential value to customers?

Names, signs, symbols and association are adjusting themselves to specific cultural features and values. What are, according to you, the advantages and disadvantages of global brands?

The globalization vs. localization of brands debate has been going on for quite some time. The pendulum swings from one to another because both have advantages and disadvantages. However, most companies today are moving toward localization. Localization makes it easier to establish a relationship with customers, plus gain a deeper understanding of local supply chains, media markets, etc. We may all think we are global citizens because we listen to the same music and go to the same Hollywood blockbusters, but deep down we are still Croatians or French or Russians.

European Commission recently developed an initiative to loosen the legal regulation regarding the oblique advertising in the media, and it should be (for now) restricted to movies and sport. But where is the limit? The problem of oblique advertising is present in Croatian media too and there are intensive discussions about it. How to preserve journalism from marketing interference if todays media are living on selling advertisements, and not on the number of sold copies?

In a distant, faraway time, I was a journalist, so this is a subject near and dear to my heart. The issue of advertising influenced content is also tied up with the issue of education vs. entertainment. How far do you go in educating people about, for example, government inefficiency when the public really wants to be entertained with stories about Paris Hilton? The public also likes to read about marketing-related issues – just look at all the articles discussing make-up in women's magazines. Definitely no easy answers, but some key steps include establishing strong walls between advertising and editorial, ensuring editorial fact-checking, and working to ensure that journalists have ethics. 

Recently Croatia held parliamentary elections. What is your view on political parties in context of their “branding war” for the votes?

People get emotional about two things: Sports and politics. Sports teams like Manchester United have done a masterful job of connecting with their supporters worldwide (what other English product from a small town has done that?) through amazingly good marketing, merchandising and ensuring that their teams reflect their audience. You'll see politicians moving to this "Manchester United" model to connect with their audiences more effectively. What I find a much more interesting issue regarding politics is when do governments start using the Internet effectively? Governments were the first to use radio and television, but as yet have not really started leveraging the Internet other than for information delivery.

Great number of brands are directly associating with the manufacturer's country, building the image of that country on it. What is the way for Croatia, as a small country, to brand itself on the global market? Or, what is the first thing you think of when Croatia is mentioned?

Another timely issue, since I am in the middle of a three-year branding initiative for Malaysia, a country of about 25 million in southeast Asia.  The hardest part of this initiative is that everyone is looking for a single image, word or tagline to brand the country overnight. Unfortunately, there is no such silver bullet. On average, it takes 20 years to brand a country, and it involves activities in public diplomacy, trade, education, culture and other areas. No ad campaign is going to brand a country. Another important area is how Croatians act overseas, because 70% of brand perception is formed by personal interaction.  So, my advice for branding Croatia is to think long-term, strongly encourage tourism among segments who are most likely to be "influentials," (golfers, yachting, etc.), and work especially hard to ensure that Croatian businesses become valued supply chain partners.  This will be my first trip to Croatia, and right now my dominant image is lots of beaches and islands, and a good place to take a summer holiday. Undoubtedly, however, there is a lot more to Croatia, and I'm looking forward to learning more about the country.

Link: .

7 Branding Trends for 2008 You Won't See Anywhere Else

What are the seven branding trends that will affect you most in 2008?

ProfitBrand Trend #1. Next era of online advertising rises

"Have you ever clicked your mouse right here? … You will."

That was the world's first banner ad  (as well as one of the most prophetic), which kicked off the first era of online advertising. The AT&T ad ran on October 25, 1994, on the HotWired site.

This long-lasting era of online advertising has been substantially enhanced through the years to counter the slow glazing of consumer eyes, and now offers a variety of sizes, animation and tracking. Such banner or display ads account for about one-third of online advertising revenues, despite the fact that the click-through rates have declined dramatically from the early years. However, video advertising (which includes video search and mobile TV) is breathing new life into this genre, and will certainly capture many more dollars next year.

While the first era will be with us for a long time, the second era – symbolized by pop-ups and pop-unders -- is hopefully on its last legs. Surely, camera company X10  and the travel site Orbitz  deserve places in Advertising's Hall of Shame for their Internet carpet-bombing. (However, beware of "pop-up audio," an emerging format that forces visitors to hear an entire ad without being able to turn it off).  Revenue figures are hard to come by, but one estimate claims 20% of the $9.5 billion spent on casino and porn advertising goes to pop-ups and pop-unders.

The third era is sucking the lifeblood from newspapers. Online classified advertising, best symbolized by Craigslist  and also-rans like eBay's kijiji , captures at least $50 million annually of high-profit advertising that used to go newspapers. It is also a dagger poised at the heart of MLS, the real estate monopoly for brokers and agents. Classified ads account for about 17% of total online advertising, which various research firms estimate dto total $17-$20 billion in 2007.

The next era is, of course, search advertising, with more than 40% of the Internet advertising pie. The value of search advertising comes both from the ability to target someone interested in an offering and pay for performance. As a result, the average cost of a sale for paid search is $26.75 per order, compared to $71.89 for a banner ad. No wonder US advertisers spent $8.3 billion on online advertising in 2007, up from $7 billion in 2006.

This era will explode if Google, which controls an estimated 70-85% of the paid-search advertising market, completes its acquisition of DoubleClick. Imagine what marketers will do with the offspring of the marriage of the largest search query database with the world's largest online behavioural database.

The latest era, now just out of the blocks, is social advertising, where advertisers will be able to piggyback on the social interactions of online users.  Already, movies, books and companies have been putting up profile pages on MySpace, and then accepting "friend requests" for advance or "insider" information. Facebook users can treat brands as their "friends," and each online interaction with the brand can be communicated to their own circle of friends. USAToday achieved an amazing 380% increase in new reader registrations when it added social media services such as discussion forums, story recommendations, reviews and more. A companion trend is social shopping, which involves sharing shopping wish lists, experiences and purchase tracking.

ProfitBrand Trend #2: Google's OpenSocial

The Internet is becoming too much like the real world. Everybody is part of a different community, with very little interaction among the Facebook, MySpace, LinkedIn, Orkut, Ryze and almost every other online community of interest. For corporations, manufacturer employees find it hard to link with suppliers, and everyone feels six degrees away from customers. This both makes it harder for communities to attract new members, complicates our desire to enjoy the best of each community and puts barriers between customer and supply chain relationships.

Google has launched a potential solution to this Babel called OpenSocial. This Rosetta Stone for all online communities will expand business and personal networks, enhance peer-to-peer branding and give companies greater insights into customers. In technical terms, OpenSocial is a set of web APIs for building social applications. (Facebook and LinkedIn have also developed  social networking APIs.) The most immediate effect will be to build bridges across the various social Internet communities so that, for example, popular Facebook applications can run on other sites. 

But, much more important, OpenSocial will help brands build and expand bridges to customers. That is one reason Salesforce and Oracle have submitted citizenship papers. One branding application will be expanding the capability for customers to help customers. This is often the best form of customer support, as Cisco has long demonstrated. Think about getting an answer from someone who has faced the same problem as you rather than a script poorly read by a drone in a distant land. Customer co-creation, especially in the area of design, is improved because customers can build on the comments or even work of others.  Unplanned product usage – like the way electricians used tape to cover scrapes before band-aids were invented -- that opens up new markets can be identified earlier. With appropriate permissions (and this is an uncharted brand frontier), companies could share customers with complementary needs, such as a universities and textbook companies.

Today, brands strive to break into markets.  If OpenSocial gets widely adopted, brands will instead seek to break into communities.

ProfitBrand Trend #3: The handphone opens up

The handphone is the Swiss army knife of your life. It can connect your life via voice, text messaging (SMS), and email. It can track your life by storing contacts, calendars and calls. It can even track you, thanks to GPS.

But in the US, the handphone is more like those tiny Swiss army knives that attaches to your key ring. Handphones in the US are a generation behind those In Europe and in Asia, with useful features like call timing crippled by carriers. Switching carriers can be more painful than divorce even when your carrier is the partner from hell. Roaming fees can bankrupt Bill Gates.

Compare this to the rest of the world. In many countries in Europe and Asia, a wave of the handset can pay for subways, coffee and newspapers. (Technically, that's because of a very interesting development called NFC, or "near-field communications.)  Carriers can be switched by just inserting a SIM card. In Europe, roaming fees are capped at 0.49 euros (about $0.73).

But just as the closed worlds of CompuServe and AOL gave way to the Internet, MCIMail got buried by email, MCI broke the AT&T monopoly, and the open sourceFirefox is eating proprietary Internet Explorer's lunch, Americans are finally starting to strip off  telecommunications straightjackets. Hackers quickly learned how to break the iPhone. Google has announced plans for a phone platform called "Android" that will facilitate social networking, video and faster, cheaper applications. And before long, the US government will hopefully be auctioning off spectrum that will enable entrepreneurs to build specialty, open networks without current carrier constraints and failings.

Android and the new spectrum have the serious potential to transform handphones into advanced work and personal tools in the same way that broadband and the browser transformed the World Wide Web. The opportunities for branding are immense. High-speed video on larger screens. Easier content sharing among networks (think YouTube meets chat). Barcodes on ads to enable immediate information access. User reviews on restaurants you are walking past.  Multiplayer games. And that's without even thinking hard….

And what about privacy? The howls of outrage will disappear the same way that one-time concerns about advertising on the Internet faded away. Fears about keeping personal matters personal fade with every FaceBook entry and cookie dropped on a hard drive. In the digital age, when privacy rights and property (data and intellectual) rights conflict, privacy will lose every time.

ProfitBrand Trend #4: Crowd sourcing and open source branding

One of the first examples of crowd sourcing – using the public to solve a problem – was in 1714 when the British Government offered a huge bounty of up to £20,000 to anyone that could accurately determine longitude. Today, crowd sourcing is becoming an integral part of open source branding, which provides the strategic framework for viral marketing, word-of-mouth and reputation management. Consisting of asking customers or other broad audience to solve a problem carry out a task, crowd sourcing represents the ultimate form of brand engagement.

Examples of crowd sourcing and brand building abound. Threadless is an Internet-based clothing retailer that sells T-shirts designed and rated by consumers.  Google depends on user-generated links to determine site popularity. The popularity of the Firefox brand owes much of its success to its continual improvements by users, and its ability to incorporate freelance extensions that extend functionality. L'Oreal, Sony and Toyota have used crowdsourcing to create their best ads. Soft drink company Mountain Dew has "Dewmocracy," which invites soft drink lovers to "shape the flavor, color, name, logo, and design of the next Mountain Dew." American Express is asking card members to identify and rank projects that will receive corporate funding.

Advantages of crowd sourcing are numerous. It lowers the risk of product introductions, since potential buyers have a stake in the outcome. Messaging stands a greater chance of being relevant, dynamic and authentic. And what better way to engage customers in a brand than to give them a hand in its creation?

ProfitBrand Trend #5: Widgetization of the Web

Need a knife? Or do you need chef's knife, carving knife, paring knife, serrated knife, utility knife, boning knife, filet knife, cleaver knife, santo ku knife, steak knife, mincing knife, oyster knife, de vein knife, clam knife, grapefruit knife, cheese knife, chestnut knife, tourne knife, peeling knife or one of dozens of other knives?

In many ways, widgets are like specialty knives. They do but one thing, but do it really, really well. Widgets generally provide specialized information, like package tracking or a traffic updates. Widgets can do everything from hormonal tracking to providing assistance with saying the rosary. (Widget catalogues are available at Widgetgallery, Snipperoo, Widgetbox and other sites.) Widgets are bolstering social media applications like MySpace and TypePad, and YouTube, Slide and other sites receive much of their traffic from widgets. For example, a YouTube video becomes a widget when it is added to a non-YouTube page. In many cases, widgets drive more traffic to sites than search engines do. Ultimately, widgets may write the obituary for portals.

Widgets come in three categories:

• Content: Provide information, such as news, weather or stock tracking
• Utility: Provide functionality, such as search, maps and chat
• Personalization:  Enable customization, such as countdown clocks, music, photos, etc.

Widgets can exist on a desktop, Web site, aggregation site like Pageflakes or Netvibes, or even be incorporated into an ad. Widgets enable both engagement and affiliation. For example, Purina has a widget that shows the latest pet-related news. With a widget from Adidas, consumers can share inspirational stories based on its "What Impossible Is" campaign, as well as shop for sneakers. Google has widget-based advertising called Gadget Ads, plus a home page that can be customized with widgets called iGoogle. Widgets can link customers to companies more closely. Widgets can communicate price changes, deliveries, new products and other information that must be frequently updated.

Like other aspects of digital branding, measurement is possible with download tracking, RSS feed volume and widget-tracking services from comScore. Site views are an additional metric; HotOrNot's Facebook widget doubled traffic at the people-rating site. In fact, look for "widget branding" to become the marketing buzzword of 2008, and "blidgets" – widget versions of blogs that can help broadly disseminate blog content– to become Blogs 2.0.

ProfitBrand Trend #6: Out-of-home advertising

The oldest form of advertising is getting a facelift.

The first ad was a primitive billboard scratched on a rock – "home-cooked brontosaurus" or its equivalent. For decades, outdoor, or "out-of-home" advertising didn't offer much more than that first billboard. But new visual, technological and measurement technologies, combined with advances in creative engagement, will make out-of-home advertising the rising star of 2008.

The outdoor advertising industry boasts about its reach and low-cost. "More people can view one particular billboard than the Super Bowl!" says the Outdoor Advertising Association of America. Media Dynamics says the cost of a TV impression is $15.20, while a billboard impression is $2.15.  But the claim of superb reach and low cost has been undercut by outdoor advertising's lack of measurement. Traditional traffic counts or diaries suffer numerous weaknesses. As a result, in most countries, outdoor advertising accounts for less than 5% of total ad spend.

But that is changing. The out-of-home advertising marketing expanded at a 10.6% clip in 2006, compared to overall advertising industry expansion of 6.4%, according to PQ Media. Global Industry Analysts projects that the world market for out-of-home advertising will reach $30.4 billon by 2010. Such growth will be fueled by four changes:

• New places: White spaces will be increasingly replaced by ad spaces. Already,  ads are appearing on airline tray tables and overhead bins. Arenas and malls  sport ads on escalator handrails and steps.  But the biggest new place may be inside your head. Soft drink machines, billboards and entertainment complexes are already using "hypersonic advertising." Walk by the billboard, and hear an ad no one else can hear, such as the gentle fizz of a soft drink being poured over ice. Essentially, hypersonic ads used a concentrated beam of sound that essentially "vibrates" your skull, giving you the illusion that you are hearing the message in your mind. Unlike other advertising, it is not something you can turn off or tune out. Inevitably, this will be combined with "passive analysis," which analyzes video feeds in real-time to determine the age and gender of passers-by, to deliver tailored audio advertising. The famous scene in "Minority Report" definitely wasn't science fiction.
  

• Instant ads: Also expect to see the spread of digital billboards, or LCD screens that can change ads instantly. That's a big advance over classic billboards, which take weeks or even months to change. Digital billboards are naturally captivating, plus consumers can't change the channel or hit the off switch. Digital billboards are part of the ads-everywhere explosion aimed at captive markets, such as retail TV, digital in-store merchandising, and "employee TV" (the latest tool of internal branding).

• Custom ads: Auto manufacturer Mini Cooper is experimenting with giving Mini drivers an RFID keyfob, which can then be programmed with a custom message. When the driver approaches an RFID-activated billboard, the custom message lights up. Who isn't going to look at a billboard with their name up in lights?

• Better measurement: Another advance is GPS technology, the guide-in-the-sky that is making maps obsolete. With traditional out-of-home advertising, calculating the value of those seeing the ads was dependent on methodologies with as much validity as "positioning." But travel and viewing patterns can now be tracked with GPS technology. For example, Nielsen Media Research claims its pager-sized GPS devices  in South Africa, Chicago, Los Angeles and Singapore can deliver "a reliable, people-based measurement system that delivers true reach, frequency and ratings data, complete with audience numbers and demographic breaks." GPS also helps track the progress of truck- or bus-side advertising through various neighborhoods. The digital advertising can automatically change messages depending on location. The GPS tracking information is later correlated with sales to help determine effectiveness.

ProfitBrand Trend #7: Rise of Islamic brands

Two recent headlines: The investment arm of the UAE government has taken an 8% stake in chip manufacturer AMD. Dubai Aerospace purchased 200 planes worth US$27.2 billion. And this is on top of other business news from the Middle East. At 555 meters, the Burj Dubai is the world's tallest skyscraper (and it's not even finished yet!). Dubai Internet City is one of the world's largest technological centers. About 25% of the world's construction cranes are in Dubai, completing $200 billion in projects. And on it goes…

Although Muslims make up approximately 20% of the world's population, and are as well known as the Japanese for their affinity for luxury brands, there are no Islamic brands on Interbrand's list of international brands. But backed by the increasing economic clout of the Middle East and Muslims worldwide, plus increasing marketing sophistication, Islamic brands will inevitably emerge, especially in the areas of food, finance, transportation and telecommunications. Potential candidates include Emaar, Genting, Mobile Telecommunications Company, Vestel, Saad Group and, of course, the rising star of the airline world, Emirates. Additionally, look for Western brands to start incorporating Sharia compliance into their branding, and looking at their advertising and messaging with a more culturally sensitive eye. This is especially true for banks, since Islamic finance is the fastest-growing area of banking.

Agree? Disagree? Are there other branding trends? Comments, please!

ProfitBrand Out In Paperback!

ProfitBrand: How to Increase the Profitability, Accountability and Sustainability of Brands is out in paperback!  That is very satisfying, because it means hardcover sales were solid enough to justify the publisher's investment.

In many ways, "ProfitBrand" was a groundbreaking book in its call for marketing accountability. That's one reason strategy+business named it as the "Best Business Book of 2005." Today, it seems like almost every marketing book now includes a call for brand and customer metrics.  While one part of me hates the increased competition, another is pleased that others recognize that marketing must move away from the fuzzy-wuzzy clichés of the past, like "brand personality," and toward accountability that can cost-justify branding expenditures to CEOs and CFOs.

If you haven't picked up your hardcover copy of ProfitBrand, buy your paperback copy today! And let me know what you think.

SMR: The Next Generation of Press Releases?

Is the press release, the 100-year-old workhorse of public relations, on the verge of being put out to pasture? Will corporate PR join the chant of "Die! Press release! Die! Die! Die!"?

The age of wikification, where brands are defined by customers and not "positioned" by companies, has spread to public relations. Instead of sending out traditional press releases, which have well-known flaws (a favorite: "it is difficult to extract news and information from press releases"),  forward-looking agencies and companies are looking at social media releases (SMR).

Essentially, SMRs incorporate Web 2.0 and other elements that give journalists and other recipients the visual, informational and other tools to create and understand a story from their own perspective. Key elements of a SMR can include contact information (including Skype and IM details), RSS feeds, a custom del.icio.us page, and various  multimedia resources, including video and podcasts. These can be accompanied by third-party quotes/endorsements and other background material, available online or via PDF downloads.

The classic – if such a word can be used for a concept that just emerged in late 2006 – SMR model is available from Shift Communications. Edelman, which enjoys a love-hate relationship with the rest of the PR industry, is pushing SMR with its "StoryCrafter," which, in Edelmanspeak, is "designed to offer pushbutton, fill-in-the-blank ease." (Full disclosure: I just did a podcast with Edelman on nationbranding.) Brian Solis, who is an active proponent of SMR, has written a good guide for putting together SMRs.

SMRs have numerous advantages. They extend the functionality and impact of the news release with multimedia. They provide tools  to tailor information, which makes them particularly effective at reaching bloggers. They make it easier for the resource-short media to report, which increases the likelihood of pickup. And, for the time being, they provide a way to stand out from the swarm of releases crowding editorial inboxes.

Any innovation has glitches. A great case study  illustrates how effective SMR can be, but also shows distribution can be a problem. Another case study underscored the need for careful proofing and testing. A missing letter in a link can send recipients into the black hole of a 404 error. Other media recipients have complained about the use of bullets instead of copy, which makes it harder to cut-and-paste

Despite the fact that at least four journalism schools are teaching SMR, the debate has been vigorous. Proponents like PRWeek claim SMR is "PR 3.0." Those with less hyperbole in their keyboards see it as old practices wrapped in new technologies, similar to the unfortunate habit of emailing bloggers with standardized pitches and offers to "talk to the CEO." The jury is still out ("I had hoped we would be talking more about what [the SMR] would do and how it would do it, but instead found a never-ending supply of cynical PR Pros and pessimists who would rather invest their time defending the status quo instead of finding a better way forward."), but it is refreshing to see the industry moving beyond century-old habits and hackneyed "positioning" ("the leading provider of XXXX solutions"). This is one of the most interesting issues to emerge from the PR industry in quite some time, which spends too much time moaning about why they don't get the respect they deserve from executives and the media.

Some tentative observations gleaned from the debate:

• Prepare for more work: The traditional press release model is so well understood that the youngest PR hire can quickly churn out the latest announcement.  Despite this facility, press releases can take weeks to emerge. It is amazing how corporate executives, lawyers and other wannabe players can spend more time on a release than on corporate strategy. Yet SMR will potentially reference a vast amount of material, ranging from videos to blogs to an array of Web sites. All that material has to be produced and/or researched. Can an SMR be sent out during times when a news event demands immediate distribution? And how long will it be before the lawyers start insist on reviewing every link in an SMR for even more delays than with today's releases?

• Provide context and substantiation: One reason journalists have a love-hate relationship with press releases is because they often make unverifiable claims. "Leading," "unique," "thought-leader (gag!)," "ground-breaking," etc. Through links and other resources, companies can not only verify such claims, but also provide the market and industry data that enrich a story and improve play.

• Think outside the media box: One of the most under-utilized tool for customer and prospect communications is the press release. It is amazing that companies will send a press release to uninterested media, often for immediate trashing, yet neglect to send the same information to their most important stakeholders – customers. SMR represents a tremendous advance in communications to a disparate customer base.
  

• Tagging is the new targeting: For decades, PR professionals have been told, "target your releases." Despite such nagging, they rarely are.  In many ways, tagging is like Google for the rest of us. While Google uses secret, ever-changing algorithms to categorize data, tags enable recipients to target themselves. If there is a weakness to the Shift Communications model, it doesn't emphasize tagging enough. Tag your SMR (and web site!) so they can be retrieved by StumbleUpon, del.cio.us, Reddit, Furl, Digg and other bookmarking sites. 

• Don't give up the traditional release: As much as they complain about press releases, journalists still depend on them. Some even prefer them over a format that puts them at the mercy of a broadband connection, or requires them to assemble multiple elements. Just as you now ask whether recipients prefer to receive communications via text or HTML, ask about preferences in receiving releases. Survey your media list about whether they prefer traditional or social media releases. Repeat the survey every 12-18 months.
  

• Beware of manipulation:  In an age where resumes are routinely embellished, it is inevitable that some witless agency will concoct a SMR ecosystem where every link and reference is a fake. Even Coca-Cola, which should be above such two-bit shenanigans, created a fake blog to support Coke Zero. In the awkward but understandable age of YouTube-ification, where every word, action and misdeed is prone to be promoted for worldwide posterity, the blowback from such stupidity will be immense.   

The marketing industry prides itself on "creativity" and "pushing the envelope." Actually, it is quite conservative. The world has changed dramatically in the last 30 years, but the concepts of today would be familiar to anyone from the 1970s. Press releases. 30-second ads. Direct mail. "Positioning."  That is why SMRs are a brilliant idea, but must fight against the staid inertia and standardized practices of most PR agencies. Still, the future is here in bits and pieces, and so you should start experimenting with SMR now. The venerable press release may have lasted a century, but with the pace of change today it may not last another decade. 

Resources & background:

Social Media Release group on Google

History of the SMR (if slightly biased)

SMR in holoistic context

Web 2.0 PR tools

SMR & metrics

How To Write A Terrible Tagline

So you want a tagline to go along with your corporate colors and logo? Good for you! How can any company make it big without a tagline tagging along?

In many ways, a good tagline is a bit like porn: hard to define, but easily recognizable. Yet despite the wealth of good examples out there – “Just Do It,” “You’re In Good Hands,” “Every Little Helps”– many taglines fail the primary test of a good one – succinctly communicate the value of a benefit or experience.

Sometimes, knowing what not to do is more important than knowing what to do. So here are some suggestions for writing terrible taglines:

• Don’t differentiate between product and corporate taglines: Product and corporate taglines are as different, as Mark Twain might have said, as lightning and a lightning bug. Product taglines encapsulate the USP (unique sales proposition). As a result, they may change as products and/or the USP changes, or even fade into the corporate sunset. Corporate taglines reflect the foundation for long-term customer relationships. The easiest way to write a bad corporate tagline is to confuse it with a product tagline.

• Use a committee: If two heads are better than one, then 10 are best. Make sure that your tagline represents a consensus among individuals with different agendas. The surest way to make sure that your tagline says nothing wrong is to make sure that your tagline says nothing at all.

• Make it long: Many memorable taglines are 6-8 words, and some are even shorter. So be sure to describe all your many capabilities in the tagline. Surely, the more it says, the more that people will remember you.

• Ask a question: “What can brown do for you?” (UPS) “Where do you want to go today?” (Microsoft)  “Where else?” (Sears) This is a particularly good way to solicit answers don’t want (“none of your business,” “I don’t know, and I don’t care.”). Using a question also works if you are unwilling to make a statement about your brand, and you want your brand to be defined by all the varied answers that can be given. There is only one exception – when your tagline can only be answered by “yes” or “no.” “Got milk?” is one of the most successful taglines of the past decade.

• Use “we:” According to an ADSlogans Unlimited Database survey, 19.09% of taglines begin with “you” or “your.” This approach looks at the offering through customer eyes, which is the heart of all good branding. By contrast, taglines incorporating “we” is in third place, at 6.03% of total taglines surveyed. “We” taglines essentially elevate the firm over the customer, plus contributes to a company-specific narcissism. Proof: “We’re Exxon.”

• Follow hot trends: One- or two-word taglines are fashionable now.  “Drive.” (Nissan) “Invent.” (HP) “Belleve.” (Yahoo Personals). While such taglines can pack a punch, they also have the ephemeral quality of a talk-show trend. Inevitably, someone will start asking questions like, “how can we give people a reason to drive our cars, and not just any car, in our tagline?”

• Use the tagline the CEO likes best: If the tagline committee deadlocks or runs into a roadblock, just use the CEO’s favorite. Don’t bother to test it, especially among customers.

• Let employees pick their own tagline: One trend is to develop a variety of taglines, then let employees pick the one they believe is most suitable for their business cards. Do this especially if you are interested in developing an inconsistent brand or confusing customers (“I understand why you have different titles, but why do you have different taglines for the same company?”)

• Don’t test international translations:  The surest laugh in any Marketing 101 class are examples of how some English taglines and slogans have been translated. Look at how "finger licking good" “came out in Chinese: "Eat your fingers off." Don’t waste money on testing, and your tagline too can be added to that Marketing 101 list. Actually, many argue that taglines should never be translated because of cultural or linguistic minefields.

• Use a bland label: To demonstrate a complete lack of understanding about what you can provide customers, use a label: "A company called TRW" or “BASF: The chemical company.”

• Use “delivering,” “solutions,” “quality” or “value:”  Cliches,  overdone to the point of appearing on pizza parlor menus, have little appeal: “Quality in everything we do.” (Ernst & Young)

And the worst mistake of all:

• Consider a tagline to be your brand: It isn’t. It is a tiny facet of your brand, which is defined by customers based on your promises, services and delivery.

Blogging & Corporate Relations

I'm speaking on Friday, May 24, on a panel in Kuala Lumpur on "The Blogging Explosion and the Impact on Corporate Reputation." The panel, sponsored by the IABC in Malaysia, will address whether "blog relations" is as important to corporate communications as media relations, investor relations, government relations and customer relations. Other members of the panel include Ahirudin Atan, president of the National Alliance of Bloggers, and well-known Malaysian blogger Jeff Ooi. The fourth member of the panel is the principal communications counsel for the mobile wireless provider DiGi. The event begins at 3 pm at the Hilton Kuala Lumpur.

I will be discussing the methodology behind a global monitoring effort to examine how Malaysia is perceived in CGM (consumer-generated media). We looked at 16 million blogs over a two-month period to determine what visitors to Malaysia thought of their experiences here.

Review: "How to Sell at Margins Higher Than Your Competitors"

Cutting prices to boost sales is a classic strategy, but it more often is the first step on the road to ruin instead of riches. Price cutting not only sabotages profitability, but, paradoxically, it creates more work for the sales force. Worse, any customer gained on the basis of price alone will run toward anyone else offering a lower price.

But rare is the sales person who doesn’t wilt in the face of a prospect insistent on driving a bargain. Listen to the little white lies that accompany discounted orders: “We’ll make it up on volume.” “We got our foot in the door.” “He was just about to sign with a competitor.”

“How to Sell at Margins Higher Than Your Competitors: Winning every sale at full price, rate or fee” by Lawrence L. Steinmetz and William T. Brooks put the backbone back into your sales force. The book lays out strong arguments for maintaining price discipline, pointing out that the sales force often wants to cut price for either the wrong reasons, or because they are too lazy to truly sell. Top executives can also learn that price discipline is much easier to maintain when pursuing profitability growth instead of the false gods of sales and market share growth. As the book stresses again and again, “Business is a game of margins, not volume.”

The strongest argument against price-cutting centers on the mathematical implications of any reduction. Some put their faith in price-cutting because they believe that a 10% price cut will lead to a 10% increase (or even more) in sales, ultimately allowing the company to make the same amount of money – “we’ll make it up on volume.”  But the authors show, using easy, back-of-envelope calculations that “when we cut our price by 10% on a 35% gross margin, we actually cut our gross margin in excess of 20%.”  In practice, that means that sales volume in dollars must increase by 80% -- repeat, 80%! -- to make the same amount of money that was made with a 35% margin. Even more daunting, the quantity of product that must be sold to recoup previous margins has to double.

The implications are clear. A sales force is going to have to work twice as hard to make the same amount of money. The bar gets even higher if competitors match the price cut. Even if sales can double the volume, manufacturing, support and other operations will be put under pressure, potentially affecting quality and customer relationships.

Compare that unhappy possibility with a 10% increase in price. Gross margins will expand by 17%. Yes, sales will be lost with a price increase, but companies with a 35% gross margin “can lose a little more than a third of all the sales they’ve been making and still make the same amount of money!” Additionally, higher prices bolster brand credibility. How else can Rolex sell manual watches for $8,000 that don’t keep as good time as $40 electronic Casio watches?  No wonder the authors advise, “if you ever make a pricing error, you should make it on the high side.”

If the consequences of a price cut are so great, especially compared to a price hike, why do companies let customers steal from their bottom line so easily? A major reason is that companies mistakenly believe that customers buy mainly on price. Numerous studies have pointed out that price is rarely the primary factor driving a sale.  Few consumers, for example, are wearing the cheapest clothes they could find. Businesses seek reliability, service and, most important, on-time delivery. When things go wrong in a business, no one ever thinks, “Well, at least I got the cheapest price.”

Rather than selling on price, companies should follow the time-honored – but oft-ignored – wisdom to sell on value. Such value can be timely delivery, guidance on complex purchases, service, reliability, knowledge of customer operations, breadth of product offerings, service and more.  Selling on value instead of price takes executive commitment, customer knowledge and true sales skills. That’s hard, so sales forces often take the easy way out by waving the pricing white flag immediately after the greeting. One way sales people often invite discounting demands is by using such wording as “our usual price is…,” “the quoted price is” or “how do you feel about $200?” Sales forces also surrender by “cracking” at the first sign of customer resistance: “Now, you know I want to work with you on this.”

A sales force that isn’t trained in true selling, or a management team that is willing to sacrifice profitability for a sale, is easy prey for skilled purchasing agents. They’ll lie – “a competitor is offering it to us for less” – and be unscrupulous enough to generate fake quotes.  They will throw tantrums. They will run down your product. They ask for volume discounts for low-quantity orders. They pretend to be busy, saying, “just give me your best price now.” They ask for throw-ins, such as favorable credit terms or free delivery, when their pen is poised over the contract.

The book offers solid advice on dealing with price resistance. Key tips include:

• When customers tell you that price is more important than delivery or quality, tell them “great, we’ll ship it to you in four years.”

• When customers say that they can get it cheaper from a competitor, point out that the cheaper price comes with lower quality, lack of inventory, no guarantee, etc.

• When customers say, “I can’t pay more” or “it’s not in the budget,” ask “why not?” The answer will help determine who the true decision-maker is.

• When customers ask for “your best price now,” get out your pen and ask them to sign a purchase order that reflects a price good for only two minutes.

• When customers misrepresent their purchase volume to get a lower price today, get payment upfront and give them a rebate when future orders are actually received.

“How to Sell at Margins Higher” provides good tips on how to tell when your prices are too low, or too high.

Most pricing books descend into a jungle of arcane formulas while many sales books sound like Oprah on steroids, pushing a panacea of motivation, confidence and persistence. Although the book is a bit repetitious in places, Steinmetz and Brooks present a balance between both extremes, giving both sales forces and management the wisdom – and the courage – to support pricing that matches the value delivered to customers. 

Teach Your Customers Well

"Oh-hi-yo-go-za-imas."

If you are flying from Los Angeles to Tokyo, you can learn how to say "how are you" in Japanese. The lesson is provided as part of the JAL in-flight entertainment in four language categories: numbers, dates, words and dialogue. Other airlines also offer interactive audiovisual language programs, including Virgin Atlantic, Air France and Singapore Airlines.

It's all part of the trend toward brand engagement, one of the two great trends reshaping branding today and tossing such tired, 30-year-old theories like "positioning" to the dustbin of marketing history. (The other related trend is wikification, which says that brands are defined by customers – not companies – based on their own and others' interactions). Engagement, a broad term encompassing everything from sampling to product placement to personal service, is the process of forming an emotional or rational attachment to a brand by using it or viewing it in a personally relevant context.

Most brand engagement activities today revolve around enhancing experience. Companies race to make their online experience compelling. Apple and Sony make experiences, not products, the centerpiece of their stores. Lexus doesn't sell cars; it sells the experience of being a Lexus customer.

But as JAL and other airlines understand, another important aspect of engagement is brand education. Brand education takes two forms: education about the offering and its usage; or contextual education relevant to the brand. Companies are generally doing a terrible job at brand usage education, and are getting better at contextual education. But there is a new element of brand engagement just emerging will force companies to take a new look at brand education.

No brand experience can be positive if a feature is misunderstood or information can't be found, or worse, read. Yet companies do a terrible job with their manuals, product design and Web sites. How many times have you sought information in a manual, only to find the needed info missing, poorly explained or illustrated by a micron-sized illustration? Or spent time looking for an inaccessible feature? Or tried to decipher a Web site with 10 pt. grey type on a white background?

Companies are getting much better at providing contextual education. Look at the ski lodges offering free lessons on bunny slopes, or Home Depot's famed Saturday morning classes in everything from birdhouse building to bathroom tiling. Even in-flight language lessons are part of context-based education.

Reinier Evers, the perceptive founder of trendwatching.com, calls such context-based education "status skills." "In economies that increasingly depend on (and thus value) creative thinking and acting, well-known status symbols tied to owning and consuming goods and services will find worthy competition from 'STATUS SKILLS': those skills that consumers are mastering to make the most of those same goods and services, bringing them status by being good at something, and the story telling that comes with it."

The term "status skills" – especially when inflated with self-important capital letters – is a poor choice because it implies we learn to impress others instead of to improve our lives or careers. (What do you think of people who show off what they know?) But it does underscore the fact that knowledge about an offering either makes a customer more loyal or raises switching costs, and increases the potential for word-of-mouth. In fact, one study claimed that 20% of consumers who learn a skill based on a product will buy that product, 65% will buy that brand again, and a mouth-opening, eyebrow-raising 96% will tell a friend about the experience.

Examples of usage or contextual education range from the corner store that offers cut-rate computer classes, racing lessons from luxury automobile firms, wine-tasting on cruise ships, make-up clinics in department stores and many more. Some lessons and advice from these brands:

• Get the basics right: Can your sales force answer questions about compatibility? Is your manual easy for a non-MIT grad to understand? Does it have all relevant information about features and usage? Does your Web site comply with basic communications design principles, including navigation and content? And, most important, is your offering iPod-easy to use?

• More education, less promotion: Remember that a classroom is not a captive audience for advertising or other corporate propaganda. Product functionality must only be taught in relation to helping student customers achieve a personal or business goal. In other words, PhotoShop's airbrush feature is not about pixel diffusion or even ease-of-use; it's about removing age spots from a picture of your parents on their 30th wedding anniversary.

• Bite-size is better than mouth-size: Learning is hard work. Make sure that educational branding occurs in small, easy-to-absorb lessons. Include as much hands-on involvement as possible. And, wherever possible, offer ongoing learning programs, not just classes.

• Develop an virtual brand university: Go beyond product tutorials to offer online courses in material relevant to your brand. Proctor & Gamble has a "virtual university" for consumers. Sony offers online classes in digital photography and scrapbooking. Atkins has offered classes in nutrition and exercise. Financial services companies regularly offer e-courses on investing and retirement planning.

But the biggest trend in brand education – and one that is closely linked to wikification – is customer-generated lessons. Just as YouTube and blogs have transformed everything from branding to reporting, sites like WikiHow – "the how-to manual that anyone can write or edit," VideoJug – "life explained, on film," SuTree – "an online index and library for free video-based lessons, tutorials, lectures and how-to's" and Viewdo– "know-how-on-the-go" – open an entire new frontier in branding, offering both opportunities and threats. No one is better qualified, or has more credibility, than a knowledgeable customer demonstrating how to use a product. But what if the information outlines a shortcoming, or demonstrates an unsafe, unwise or even illegal product use? Does anyone remember how cocaine users favored McDonald's coffee stirrers?

So teach your customers well. Remember that knowledge leads to action. Give them the gift of useful and relevant knowledge, and in return they will give you brand loyalty and word-of-mouth.

Advertising Awards Hurt Advertising

A speaker at a recent advertising event boasted about the 400 – yes, 400! -- creative awards he had won. Not long before that, a copy writer promoting a seminar said his credentials included more than 700 awards – and he was under 35.  A large agency ends its emails with a sig claiming it has won more awards than anyone else.  A new creative director profiled in an advertising magazine wants to put his agency on the map “by winning more awards.”

So many awards are given out like candy at a children’s birthday party that the  advertising industry threatens to become a parody of itself. Worse, however, the plethora of awards is dragging the industry into irrelevance in the eyes of the business community, which is especially disheartening at a time when marketing is trying to win a long-sought seat in executive boardrooms.

Awards do have a place.  Every industry has its feel-good events. Awards represent a  psychic payoff in an industry renowned for low pay and long, hard hours. It looks good on resumes as long as the number of awards is confined to double-digits. And it can put a smile of the face of clients who don’t know any better.

But the award-giving – and the excessive importance agencies attach to winning yet another plaque or piece of plastic – has clearly gotten out of hand.  Not only does the number of awards make any individual award practically meaningless, but the deceitful practice of “scam ads” – crafting an ad just to enter in award shows – is an open secret. For example, Lintas & Partners Worldwide’s Australian agency had to return two Bronze Lions won at the International Advertising Festival when it was discovered that neither ad had won.

Agencies must understand that winning awards has little to do with winning the respect of the business community. In order for agencies to achieve the long-sought goal of being seen as strategic partners instead of glorified art schools., they must judge advertising by the same standards that business uses to judge itself.

Look at the criteria for most advertising shows – “impact,” “creative,” visionary,”  “boldness,” “awesome,” “stunning” and other pretty words. These fluffy award standards are usually applied by judges from the advertising world, which is a bit like having fathers and mothers referee their childrens’ football games.  Fun yes, credible no.

For awards to be credible, judges must come from the business world. Additionally, criteria must be based on business standards and measurements. One of the world’s most prestigious awards already recognizes this. Since 1980, the IPA Advertising Effectiveness Awards Competition has given out awards every two years based on a close analysis of advertising effectiveness and “a clear demonstration that advertising can be proven to work, against measurable criteria.” Most of the judges are business experts with no links to agencies.

Travelocity.co.uk, an online travel booking site, won a “Gold” IPA award after demonstrating a 123% increase in visits, a sales boost of 135% and a 44% growth in market share. The ROI was estimated at of £5.60 for every £1 spent. Virgin Mobile won an award from the Advertising Federation of Australia with a campaign that delivered $37.9 million in incremental profit and a return on investment of $4.36 for every $1 spent.

The best practices for marketing accountability, recently released by the Association of National Advertisers, make excellent criteria for future awards that seek business relevance.  These practices include “metrics that reflect management expectations; a rigorous, end-to-end measurement process; and responsibility for proving short-term ROI of marketing expenditures.” Awards groups must also look at using respected business consultancies like Booz Allen & Hamilton or PwC  instead of creative directors and similar ilk to judge competitions.

Some in the industry argue that a rigorous focus on metrics will dampen creativity. Absolutely not.  “Cog,” the award-winning, Internet-popular ad for Honda produced by Wieden + Kennedy UK, was responsible for a 28% increase in sales and £388 million more revenue.

David Ogilvy, the godfather of advertising, said it best in 1994:  "Nowadays, you know, the creative departments and agencies are dominated by specialists in television. Their ambition is to win awards at festivals. They don't give a damn whether their commercials will sell, provided they entertain and win awards.  They won't have anything to do with research if they can help it.  These creative entertainers have done the advertising business appalling damage."

Agencies are always on the hunt for new business.  They should remember that businesses that focus on financial and other numbers are not going to be interested in agencies that focus on the number of awards.  400 – yes, 400! – awards indeed. What does that have to do with ROI?

Catch the Korea Wave

The Korea Wave has been going on for so long that a backlash is emerging. But the reasons for the Wave, and how it was promoted and sustained, provide interesting lessons for branding in both Asian and Western countries.

The Korea Wave, referred to as “hallyu,” is shorthand for the flood of Korean TV shows, movies, comic books, fashion and video games that has been sweeping across Asia since 1999. The Korean drama “Jewel in the Palace,” a historical drama about a cook in Korea’s ancient royal court, was at one time the most popular program in China, Hong Kong and Taiwan. As many as 20% of Japanese TV viewers tuned into the Korean drama, “Winter Sonata,” which has megastar Bae Young Jun standing by his first love through 10 years of car accidents and amnesia. Scroll through the MP3 of any Asian teen, and see more songs from Korean “K-pop” artists than American music stars.

Other countries have not been immune. The Korea Wave is the latest trend sweeping the Middle East. Korean dramas are among the most popular in Mexico, whose own soap operas are among the most watched in the world. The Korean movie, “The Host,” is an international blockbuster. Even in the US, the Korean pop star Rain sold out Madison Square Garden twice. Daniel Dae Kim from the hit show “Lost” was one of People magazine’s “Sexiest Men Alive.”

The benefits to Korea have been substantial. Tourism to Korea has soared, reaching a record 6.15 million in 2006 – not bad for a country still technically at war with a nuclear-armed neighbor just over the horizon. Exports of film and TV programs is approaching $2.5 billion. Even the sale of comic books has grown from a miniscule $240,000 in 1999 to $3.26 million in 2006. Korean movies are winning top awards at Cannes and other film festivals. Thousands are taking Korean language and cooking classes worldwide, and the Korean native dress (hanbok) was the highlight of a Paris fashion show.  About 150,000 attended a Hallyu Expo. Matchmaking services promise to find Korean husbands, and many have plastic surgery to look “more Korean.”

Reasons for the popularity of Korean culture vary. Some say that Korea filters cultural messages from the West, making them more palatable for Asian tastes. Others say that the common themes of Korean drama – the struggle between filial piety and emotional love, the arrival of rich and kindly Prince Charmings, and the importance of family-centered Confucian values – appeal to Asian tastes more than the sex and violence associated with Hollywood. Women also have stronger roles in Korean dramas than they do in other Asian shows. Inroads by Korean manufacturers like Samsung and Hyundai have created a beachhead for Korean cultural exports.  High-IQ pundits claim that the Korea Wave represents the first move toward a Pan-Asian culture that will unite Asian countries around common values.

More cynical observers point to the well-planned efforts of the aptly named “Ministry of Culture and Tourism.” For example, the ministry has set up public relations offices overseas called “Korea Plaza” to strengthen the country's image through hallyu. Korean President Roh frequently stresses, “A powerful cultural nation will become an economically strong nation.” Korean delegations regularly visit Asian countries not to talk about trade but to promote Korean cultural exports.  And the packagers of pop stars like Rain are as slick and as disciplined as those that put together New Kids on the Block and Backstreet Boys.

Like any trend, there has been a backlash. The Vietnamese government is threatening to ban Korean TV shows. In Japan, anti-Korea wave blogs abound, and a comic book called “Hating the Korean Wave” became popular.  In China, there have been calls for boycotts of Korean movies and shows.

Debate continues on whether the Korea Wave is a passing fad or continuing trend? One sign: Movie exports have plunged by 68% in 2006 compared to the previous year, and every Korean movie flopped in Japan in 2006. But Hollywood has had bad years too, and its influence continues.

So what are the potential brand implications of the Korea Wave?

• Culture is brand: Almost all of Korea’s many cultural treasures were destroyed during the Japanese occupation and Korean war. As an alternative, Korea leveraged its living heritage to encourage tourism, promoting everything from movie sites to homes of the stars. The government has also devoted considerable resources to promoting its culture, language and food abroad. It is a smart move; cultural tourism is estimated to total $1.5 trillion worldwide.

• Korean values sell: Don’t be fooled by the spiky orange hair in Tokyo and facial tattoos in Taiwan – Asia is fundamentally much more conservative than the west. Family responsibilities, duty, honor, “face,” personal and group identity and similar issues resonate much more strongly here.  As a result, even the most modern, youth-oriented messages must echo eternal values or risk rejection.

• Korean stars boost sales: The main effect the sexy ad Paris Hilton did for hamburger chain Carl’s Jr. was to crash its web site with requests for downloads. But Korean stars can drive sales of everything from hair gel in Malaysia to jeans in China. When a Korean refrigerator manufacturer hired a Korean TV as its spokesman in Vietnam, market share went from nothing to 34% in less than five years. But don’t expect this talent to come cheap. Korean movie stars get $5-10 million per picture.

• Use Korean stars to penetrate Western markets: Companies are devoting a lot of attention to penetrating the Hispanic market. But the Asian market is potentially even more lucrative.  Leverage the eagerness of Korean stars to penetrate the US market to promote your brands to the Asian community.

The US is often called a celebrity-driven culture, but fan devotion rarely reaches the levels of fanaticism seen in Asia. Only in Asia would people pay to look at a plastic model of a favorite pop star sitting on a white leather sofa. If you want to brand quickly in Asia, ride the coattails of an emerging Korean star.

Wither Singapore Girl?

The Singapore Girl, symbol of Singapore Airlines, is one of the longest-running brand icons. But the poor girl's head is now on the chopping block, thanks to a decision by Singapore Airlines to change agencies after more than 20 years. Whenever a new agency is chosen, the chances are high that previous taglines, images, icons, messaging and strategies will be replaced by ones that the new agency can take full credit for. Will the new agency keep the Singapore Girl, or gradually sideline her like an aging wife?  Stay tuned....

This article, by David Fullbrook, provides an excellent look at the evolution of the Singapore Girl, and provides some hints about what might happen next.

How to Defeat Brand Insurgents

The video of the Comcast technician asleep while on hold to his company’s technical support. The numerous online forums about Dell’s shoddy customer service. The broken screens on Apple’s Nano and poor battery life on early generations of iPod. The tax return errors of H&R Block. Wal-Mart’s labor policies.

What do these PR disasters have in common? Brand insurgents. Like the U.S. military, traditional brands are unmatched in a classic Coke-vs.-Pepsi war. The reams of market research, “shock-and-awe” advertising, distribution control and economies-of-scale give traditional brands the scale to ignore unhappy customers. How many complaint letters have been written in vain? How many articles on customer service sound as if they have been cut-and-pasted?

But just as US forces have been bedeviled by Iraqi and Afghan hit-and-run fighters, many large brands have been hit by media-savvy, driven and passionate insurgents willing to engage in no-holds-barred attacks. These brand insurgents combine digital media and an understanding of what drives news to escalate a single complaint into a worldwide firestorm. A fascinating article in The New Yorker that examines the new military thinking on insurgency quotes an expert on the new battlefield realities: “This ain’t your granddaddy’s counterinsurgency.” Just as the military is coming out with new ideas to fight insurgents, brand guardians must develop new strategies to fight their own insurgents. Stale tactics like “positioning” from your granddaddy’s marketing battles just can’t cut it in this new environment.

The new ideas are encapsulated in an updated CounterInsurgency (aka COIN) manual produced by the US Army and Marine Corps. (Unbelievably, this manual had not been updated in more than 20 years – or about the time that “positioning” first emerged as a theory.) The introduction to the COIN manual sums up the current challenge to brands well: “Effective insurgents rapidly adapt to changing circumstances. They cleverly use the tools of the global information revolution to magnify the effects of their actions...” This manual, and the strategic thinking behind it it, offers guidance to those brands which also face insurgents.

The most fascinating insight – and the one that applies most to branding – is that insurgencies are based less on ideology and more on social networks. People are largely driven to fight a greater power not because of a fundamental belief but because of their family, friends and associates. One study of 172 alienated Muslims who became radicals found that the common element among all them was not poverty or religious belief but the activities and beliefs of their peers.

Interestingly, these networks are held together by what may be called “anti-brand stories.” The power of stories in branding is well-known. The classic anti-brand story concerns Procter & Gamble, whose logo supposedly symbolizes the “mark of the beast” in Revelations and who supposedly uses its profits to support the Church of Satan. 

The other interesting insight emerging from the new approach to insurgency is that, despite relationships among insurgents and a common story, insurgents are not a monolithic force. For example, Iraq’s insurgents range from hard-core criminals to Sunnis to Shiites to nationalists to anarchists, united only by a common enemy. Likewise, many who attack brands also share little in common except their tactics.

The new brand environment is no place for old tactics:  “The side that learns faster and adapts more rapidly – the better learning organization – usually wins,” says the new COIN manual. So what lessons does the military’s COIN strategy, and the way it’s being implemented in Iraq and Afghanistan, hold for  brands facing their own insurgents?

• Speed is of the essence: First impressions make the strongest perceptions. When Iraqi insurgents blow up a military vehicle, they videotape the attack from multiple angles, edit a high-impact video, add a sound track with hypnotic chants or songs of victory, and post it on the Internet within hours, complete with a button soliciting donations. By contrast, the military is still gathering information to send out a written press release that needs multiple approvals. Not only does the video reach more people, it also has greater impact on perceptions because it makes its case first. If your brand is attacked, don’t ponder, debate and wait for the lawyers to get back to you. Have a strike force that responds immediately.

• Make friends before you need them: The strike force must leverage an existing network of information allies. One reason the US prevailed in the Cold War was because it had numerous cultural, educational and economic outreach programs, such as USIA libraries and Radio Free Europe, to citizens behind the Iron Curtain. This built a community who helped promote Western values, and counterbalanced Soviet propaganda. Find out now who your friends are in the media and blogosphere, and line up customers and experts who can credibly support your case.

• Deliver on promises: In Afghanistan, many US military leaders sit down with tribal leaders over bread and tea before military operations. “If you help us, how can we help you?” The answers can range from Korans to generators. The military gathers the supplies, then hand them over to the tribes within hours after the battle ends. The result is both credibility and goodwill. Listen well to customers and other stakeholders, and make sure you quickly deliver what you have promised.

• Segment the enemy: Unfortunately, the struggle against violent extremism has fallen into a stupid, self-defeating dichotomy: “you are either with us or against us.” But the new counterinsurgency stresses that differing insurgent groups are likely to have differing agendas, even if they are united in battle. The first step in fighting brand insurgent is to understand each group. The new COIN manual stresses the importance of “insight into cultures, perceptions, values, beliefs, interests and decision-making processes of individuals and groups.” Then, just like customers, insurgents must be segmented, with separate information and other strategies to address their issues. Or, as Pentagonspeak puts it: insurgents must be “disaggregated.” The blogger complaining about customer service must be treated differently than the one questioning corporate environmental policies.

• Don’t treat customers like the enemy: Customers can’t get through to a live operator? Technician doesn’t show up as promised? Interest rates or other details are changed in fine-print notices? Offers are made to new customers that aren’t made to existing ones? No wonder customers can feel like an enemy that is “targeted,” “captured” or kept at bay. The COIN manual stresses understanding the local environment so much mainly because winning the hearts and minds of the people is vital to counterinsurgency. If you treat customers with distrust and suspicion, then expect them to defect to your true enemy – competitors.

• Hire brand anthropologists: One reason for the success of the occupations of Germany and Japan after WWII is that the military listened to – even partnered with – anthropologists who understood the local cultures. The US is belatedly sending anthropologists to Iraq and Afghanistan in the spring. Leading design and other firms are moving away from traditional market research to direct observations in the home and workplace. The insights over time are much more valid than those that emerge from a 10-minute survey or two-hour focus group. Either hire such brand anthropologists, or become one yourself by spending as much time with customers as possible.

Branding in the YouTube age is a lot harder than in the days of Big Media, where limited outlets simplified the task of affecting perceptions. But now digital media and other forces give customers – and insurgents – the ability to drive your brand. Slowly, painfully, the US military is learning how to fight back against insurgency. Take their hard-won lessons to heart for your brand.

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You're Fired! Wal-Mart vs. Julie Roehm

Cards on table: I avoid shopping at Wal-Mart. I also think Wal-Mart shafted Julie Roehm. But I also believe Roehm should not be hired for any marketing position again.

Roehm, you may remember, was the senior vice-president of marketing who was fired by Wal-Mart in December. The story has been more National Enquirer than Fortune. The advertising agency gets fired weeks after being selected. Wal-Mart alleges acceptance of improper gifts from agencies and even sexual dalliances with subordinates. Wal-Mart even takes away her discount card.

Roehm's side of the story is outlined in a BusinessWeek story. It is the first time she has given a major interview to the media. For someone telling her side of the story, she does not come out looking good.

Everyone in branding is familiar with the backstory. For a variety of marketing and other reasons, Wal-Mart is no longer the growth engine it once was. It was searching for a new marketing strategy as part of a turnaround. That new strategy would move away from the "everyday low pricing" that primarily appealed to the less-affluent, and attract a wider audience among the middle class. To execute that strategy, Wal-Mart  even came out with its own designer labels like "George."

To help with the turnaround, Wal-Mart hired Roehm, 36,  with a base salary of $325,000 and a signing bonus of $250,000. Roehm had been director of marketing communications at Chrysler Group. She had made her mark with edgy advertising, including the infamous "Lingerie Bowl" ad that was scheduled to show during the Super Bowl. Chrysler canceled the showing, scared off by the reaction from those offended by Janet Jackson's famous "wardrobe malfunction." Part of Roehm's mission was to be a "change agent" at the company's headquarters in the small town of Bentonville, Arkansas.

But 10 months after she was hired and shortly after hiring DraftFCB as its agency, Roehm was fired. She has since filed a $1.5 million lawsuit against Wal-Mart.

A jury will sort out the rights and wrongs. Oddly, after such a debacle, BusinessWeek calls her a "marketing whiz." But here's why Roehm would be wrong for any position in marketing:

• She didn't do her research:  A library of books have been written about Wal-Mart, including many by former executives. All point out the overwhelming focus on cutting costs. Some executives even use doors on supports as desks to avoid buying office furniture. Offices are windowless; walls, gray. But one of the first things Roehm did was to "paint her office chartreuse with chocolate-brown trim," according to BusinessWeek. This obviously angered Wal-Mart. In its response to Roehm's suit, Wal-Mart says Roehm "is free to collect 'a step ladder and paint supplies."

• She lost focus on who pays the bills: Following a tradition set by founder Sam Walton, Bentonville executives spend a lot of time visiting stores and talking to customers. But that was not Roehm's focus. Says BusinessWeek:  "For much of the summer, Roehm jetted around the country visiting the 30 or so ad agencies that were bidding to win the $580 million Wal-Mart account." Remember, too, how cost-conscious Wal-Mart is.

• She didn't understand marketing: Culture is fundamental to marketing, as everyone who tries to sell to the Hispanic, international or other segment understands. It is also fundamental to organizations. How many trees have been killed to print books and newspaper articles about cultures within businesses? So what is Roehm's takeaway from her painful experience: "The importance of culture. It can't be underestimated." She should have learned that LONG before she reached her position of responsibility.

• She got sucked in by the 'Dark Side': The Dark Side that appealed to Darth Vader was power. The Dark Side that appeals to marketing is creativity. Like power, creativity can be a force for good as well as evil. As the Lingerie Bowl shows, Roehm was looked for "edginess" in her advertising. The chief  spokesman at Chrysler, her former employer, says, "We're probably the edgiest automaker in terms of the things we try. And the times Roehm went over the edge have been well documented." Part of Roehm's problem -- although not her fault -- resulted from her winning ad agency placing an ad in an industry publication showing a lion mounting its mate. The headline read: "It's good to be on top."  Remember, the purpose of marketing is not "to go over the edge" but to get people to buy -- not once but again and again.

• She didn't understand how to execute: Branding execution depends on two factors: Internal buy-in and external support from supply chain and other partners. Without internal buy-in for your project, it is doomed. How did Wal-Mart  ultimately beat KMart in the retail sumo ring? One factor was Wal-Mart's famous weekly meetings, which kept managers up to date and focused on common goals. BusinessWeek: "Roehm, on the road and unaware of how important it was to attend these meetings, missed several in a row. "'Had I known,' Roehm says, 'I never would have been gone on Friday.'" Had you known??!! Did you not research your company? Did you not talk to your peer executives?

Wal-Mart has mud on its face, too. It hired someone who obviously would not fit in their culture. Some of Roehm's problems stemmed from Wal-Mart's organizational weaknesses. For example, the consumer research and marketing strategy department reported to Roehm's boss instead of her. To make matters worse, the manager of this department tried to shut her out, according to Roehm. Research is so important to branding that it needs to be integrated within marketing, not separated. Wal-Mart's accusations of sexual impropriety on Roehm's part are both irrelevant and unseemly. Merchandising was the most powerful force in the organization, which led to an over-emphasis on in-store signage to drive sales. Wal-Mart didn't commit to a new strategy long enough to see whether it would work. As soon as same-store sales began to slide, Wal-Mart returned to its "everyday low prices" USP.

But Roehm still made too many rookie mistakes. Would you want her to head your marketing program now? Julie, save your signing bonus, and I sincerely hope you'll win your lawsuit, because I don't think you will ever work in branding again.

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Dumb-Ass Branding: Ford and the Taurus Revival

What do you do after making a massive branding mistake? According to Ford, you compound the error by making a bigger mistake.

Last fall, Ford killed off the Taurus brand. Despite the fact that the car had saved Ford financially in the ‘80s and outsold the Camry and Accord for five years running, Ford failed to give the car any branding support. While the first Taurus design “scared” Ford’s then-CEO, the follow-up design in 1996 was as boring as a windshield wiper. It stopped advertising the car for two years, and gave the car the automotive kiss of death with bulk sales to rental car fleets. No one ever washes a rental car, nor does anyone buy one. (Earlier blog on Taurus.)

Instead of letting memories of a bad decision fade into history, Ford rips the stitches from the wound and – I am not making this up – renames the current Five Hundred as the Taurus. If that wasn’t bad enough, Ford is also renaming the Mercury Montego as the Mercury Sable. There is no truth to the rumour that Ford is also naming its Focus as the Pinto, although that might be expected.

It makes no sense to take the name of one failed brand and apply it to a failing one. The Five Hundred sedan, criticized for its bland styling, has failed to meet sales targets since its introduction in 2004. In 2006, sales fell 22 percent to 84,218 vehicles. In January, Ford sold fewer than half the number of Five Hundreds than a year earlier.

Everyone recognizes abandoning the Taurus brand was a mistake. "We never should have walked away from the equity we had built up in the Taurus and Sable nameplate," Mark Fields, president of Ford's Americas unit, said.

Fields is absolutely correct, but the rationale for resurrecting the Taurus name from the grave is misplaced. "Taurus has been an icon for Ford's family sedan for more than two decades, and it's time to return this powerful name to where it belongs," said Fields. "Consumer awareness of the Taurus name is double the Five Hundred that it's replacing, and awareness of Sable is triple that of Montego.”

This “awareness” argument has two flaws. The first is that the “awareness” was for a completely different vehicle. Worse, the “awareness” is for a discredited brand. Remember, reviving a brand risks picking up its baggage as well as its strengths. Second, and much more important, “awareness” has little place as a brand criterion. Just because consumers are “aware” of an offering doesn’t mean they will buy it.

Ford would have been smarter to wait five to ten years, and then re-apply the Taurus brand to a blockbuster car. That would enable it to take advantage of the nostalgia factor as well as avoid tainting the new car with memories of a failed brand.

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The Personal Brand Champion of the World

He could stop traffic in Moscow, Tokyo, Nairobi, Shanghai and Mumbai. Kings, presidents and prime ministers worldwide would take his call. He outshines Madonna, Mick Jagger and Meryl Streep.

Despite the fact it has been more than 25 years since he occupied center stage, he is the world’s greatest personal brand. He is the incomparable Mohammad Ali.

He is a colossus astride sports history. Sports Illustrated named him “Athlete of the Century.” His fights with Sonny Liston, Joe Frazier and George Foreman are called boxing’s greatest ever. He was the first boxer to win the heavyweight title three times. He was a gold medal winner at the 1960 Olympics. One fight was seen by an out-of-work actor called Sylvester Stallone, and became the inspiration for “Rocky.”

Ali’s boxing record is the stuff of legend, and boxing has never been the same since he retired. But just as interesting are the lessons his life holds for developing your own personal brand:

• Think international: At a time when most Americans could not find Canada on a map, Ali had fights in Toronto, London, Zurich, London, Jakarta, Kinshasa, Munich, Kuala Lumpur, Dublin, Manila and other cities. Whatever you are doing now, think about doing it internationally, especially since globalization makes it not only easier but also crucial.

• Live your principles: At a time the powers-that-be were saying we had to fight the enemy abroad so we wouldn’t have to fight them at home, Ali said, “I got nothin’ against them Vietcong.” Because of his beliefs, he was indicted for refusing induction into the Army during Vietnam, and lost his heavyweight title for almost four years. That was when he was at his peak as a fighter, and meant the loss of millions of dollars. After winning a gold medal for his country he came back to his hometown of Louisville, Kentucky. After being refused service in a restaurant because of his color, he went outside and threw his gold medal into the Ohio River. Contrast that with Tiger Woods, who did not boycott the Masters because of its gender- and race-based exclusion, and Michael Jordan, who did not support the black opponent to segregationist Jesse Helms because "Republicans buy sneakers too."

• Live your faith: Ali gave up his “slave name” of Cassius Clay after converting to Islam, eventually becoming a Sunni Muslim. He refused the draft because of his faith. He was called a black racist because he argued against interracial marriage. All this created a strong backlash, but Ali never recanted.

• Feed the media: The best PR strategy boils down to this: “Feed the media.” Ali actively courted reporters, symbolized by his long-time friendship with Howard Cosell. He knew the value of promotion. He once locked up his gloves in a Malaysian jail before a bout, and wore T-shirts that said, “Manila guerrilla.” He gave copy that wrote stories by themselves.  “It will be a killer, and a chiller, and a thriller, when I get the gorilla in Manila."  “Float like a butterfly, sting like a bee.” “Joe Frazier is so ugly that when he cries, the tears turn around and go down the back of his head.” “I'm so fast that last night I turned off the light switch in my hotel room and was in bed before the room was dark.”

• Train hard for your moment in the sun: Click on the picture below, taken after Ali took down then-champion Sonny Liston minutes into the first round. Marvel at the forearms and feel the power in his torso. That comes only after days and weeks and months of lonely training in the gym. George Foreman had won 37 of his previous 40 fights by knockout, almost all with three rounds. So Ali came up with his rope-a-dope strategy, training his body to take the worst punishment Foreman could throw. By the seventh round, Foreman was exhausted, and Ali took him out. To toughen his stomach for the bout, Ali did a thousand sit-ups a day even though he “hated every minute” of training. 

• Do good: Ali has delivered food and medical supplies to children in Cote D'Ivoire, Indonesia, Mexico, Morocco and many other countries. His web site claims Ali has helped provide more than 232 million meals to feed the hungry. He has helped free US hostages from Iraq, and delivered food and medicine to Cuba, Afghanistan and North Korea. He is the chief fundraiser for the Muhammad Ali Parkinson Research Center in Phoenix, Arizona.

• Rise above your difficulties: Ali has Parkinson’s syndrom, a dehabilitating disease that likely resulted from fighting long after he should have stopped. But he just celebrated his 65th birthday, and still travels more than 200 days a year in support of the causes he believes in. 

I highly recommend “King of the World: Mohammad Ali and the Rise of an American Hero” by David Remnick, which looks at Ali’s life till he retired from boxing as well as the state of black-white relations through the 1970s. Remnick said it all: Ali is an “American myth who has come to mean many things to many people: a symbol of faith, a symbol of conviction and defiance, a symbol of beauty and skill and courage, a symbol of racial pride, of wit and love.''

Go to a Sports Illustrated photo tribute to Ali's career.

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How To Kill Your Brand

The Ford Taurus was a brand success of the 1990s. Its jellybean shape helped pioneer aerodynamic and dramatic styling when it was introduced in 1985, a time when most Japanese and American vehicles were little more than square boxes with round wheels. It had a powerful but fuel-efficient V6 engine. The moderately priced car made middle-class buyers feel like they were standing out without sticking out.

The Taurus revived a Ford that was on the financial ropes. Ford sold 263,000 units the first year. In 1986, Motor Trend magazine named the Taurus "Car of the Year." A year later it was Ford’s best-selling car. By 1992, it had surpassed the Honda Accord as the best-selling passenger car in the US. It kept that title for five straight years, outselling both the Accord and the Toyota Camry. Eventually, Ford sold about 7 million Tauruses and 2 million Mercury Sables (essentially the same car). But at the end of 2006, the last Ford Taurus rolled off the line at an assembly plant in an Atlanta suburb.

Says Peter DeLorenzo, publisher of auto-extremist.com, an automotive website: "Ford is the only auto manufacturer in history to take a number-one-selling car and systematically destroy the franchise through a fatal combination of ineptness, incompetence and flat-out neglect."

The death of the Taurus is a contributing reason why Ford reported a $5.8 billion loss last October, the worst in 14 years, announced the closing of 14 plants (including the plant that produced the Taurus), and now wants to borrow $18 billion to help revive the company.

How did this king of automotive brands get beheaded? Ford provides a textbook case in how to destroy a brand. Key lessons include:

• Ignore your target customer segment: The Taurus was most popular among 50+ consumers, the group with the most disposable income. But Ford was entranced by the 18-35 group, and redesigned the car twice to appeal to this segment. The redesigns turned off the Taurus’ customer base while failing to turn on younger buyers. Listen to the customers who actually buy your product, not the ones you want to buy your product.

• Stop promotion: Unbelievably, Ford stopped advertising one of its best-selling cars for two years. That’s one reason Taurus sales dropped from a high of 410,000 in 1992 to 145,000 last year. Remember that advertising and promotion is not just for new products. It is also for established products.

• Undercut the value: When sales started declining, Ford took the quick and easy route of expanding sales to rental companies as well as taxi and corporate fleets. It also substantially boosted dealer and other discounts. While these have the temporary effect of juicing sales, they also harm profits for companies and resale value for customers. Never do anything that hurts your brand among existing customers.

• Focus on new, and not loyal, customers: Remember the Contour, Windstar, Escort, Galaxy and many other Ford brands? Automotive companies are infamous for spending millions to develop and promote brands, then inexplicably orphaning them years later to devote resources to newer models. Abandon a product only when it is truly at the end of its life-cycle, not because something sexier comes out of product development.

• Cannibalize your product unnecessarily: Fixed costs are high in the automotive industry, which means that profitability depends on volume. Ford cannibalized sales of Taurus by introducing the slightly bigger Five Hundred, and the slightly smaller Fusion. The Fusion, which came out in late 2004, has been a hit, but sales of the Five Hundred have not met expectations. Would Ford have been better off devoting the resources dedicated to Fusion and Five Hundred to the revitalization of Taurus? Who knows?  However, while it is important to be receptive to new segments, gains must be measured against the losses to established products.

Ford is not the only company to recently destroy a brand. Wonder Bread and Twinkies are such iconic brands that they have even been immortalized by Andy Warhol. Yet the manufacturer of those brands, the $3.5 billion Interstate Bakeries, filed for bankruptcy last September. Mistakes made by Interstate include focusing on low-profit, mass-produced products like Wonder Bread at a time when customers were turning to tastier alternatives like fresh-baked supermarket offerings. They rested on their Twinkies’ laurels at a time when mothers everywhere were worried about childhood obesity.

BTW: This represents yet another strong argument against the relevance of brand equity as a marketing measurement. Few products have the awareness of Taurus, Wonder Bread and Twinkies, but such “brand equity” did little to rescue their companies from unprofitability.

What other brands are on the road to failure? Two strong candidates are Gap and Time magazine. At one time, Gap set the fashion benchmark for both boomers and yuppies. Who hasn’t owned a pair of Gap khakis?  But same store sales have declined year-over-year for 23 of the past 24 months. In UK, Gap’s share of the clothing market has dropped by 25% over the past three years.  Its recent advertising featuring Audry Hepburn has done little but make “worst ad” lists.

What happened? Gap committed the ultimate branding sins – a lack of focus and knowledge of what its customers valued. Robert Buchanan, a retail analyst at the stockbroker AG Edwards, says: "In their heyday, they were really good at taking care of the baby boomer .... They stopped targeting them and started aiming for the children of the boomers - but not having done much research, they blew it. Then they took a democratic approach and tried to be all things to all men. If there's one thing that doesn't work in retailing, it's a lack of focus."

If there is a better example of trying to be all things to all people, it’s Time’s recent choice for “Person of the Year.” For more than 70 years, Time has selected a person who has had the most impact – for good or bad – on world events. Agree or disagree, Time’s choice always made you think. But this year, they put a cheesy reflective Mylar strip on the cover and said, “the Person of the Year is … You!” If you believe that a brand must drive its stake into the ground and say proudly, “this is what we stand for, and these are the customers we want” then Time’s “we-love-everybody” pandering is a reason to cringe. This follows other missteps, like putting radical Ann Coulter, who advocates terrorism against American institutions and believes that all Muslims ought to be forcibily converted to Christianity, on the cover, and recently adding Bill Kristol, who forcefully advocated the invasion of Iraq to bring peace and democracy to the Middle East, as one of its star columnists. (Full disclosure: I used to work for Time-Life.) Talk about alienating middle class customers, the bread-and-butter of a mass-circulation magazine.

A lot has been written about how to build a brand. But valuable lessons can also be learned from dead and dying brands. Undoubtedly, the most important lesson is not to let a disconnect grow between you and customer. When was the last time you talked to customers about what they valued, and how well you were doing to deliver that value?

(Got candidates for dead and dying brands? Send them to me.  And check out amazon.com for my latest book, “ProfitBrand: How to Increase the Profitability, Accountability and Sustainability of Brands.”)

 

Back for 2007

How long has it been since my last commentary?

I don't want to know.

But I do have some great excuses.

For eight months duriing 2006, I was consumed by a massive, 12-country destination brand research project that was one of the most comprehensive ever completed. It involved focus groups, online surveys, print communications audit, digital communications audit, internal brand audit, external brand audit, media audit, online monitoring of 16 million blogs, mystery shopping, and more. The final report was more than 300,000 words, and Malaysia now has the most complete, in-depth picture of its brand of any destination anywhere. Lots of lessons were learned, including those regarding CGM (Consumer Generated Media), and I hope to be sharing those in the months ahead. When the project was completed, I was frankly too mentally drained to face a blank screen. As Mark Twain says, when the well runs dry, you have to wait until it fills up again.

Well, the well is full again. And I have lots of ideas for new commentary -- brand death; brand insurgency and much much more.

So watch this space. And, as always, check out Amazon.com for my book, "ProfitBrand: How to Increase the Profitability, Accountability and Sustainability of Brands," named as one of the Best Business Books of 2005 by strategy+business.

And, as always, I'm glad to hear from you. Email me!

George W. Bush, Branding Guru?

    Think brand guru, and what names come to mind? Theodore Levitt. David Ogilvy. Phil Kotler. Regis McKenna. But one brand guru is widely unrecognized -- George W. Bush.

    Bush as brand guru? Bush occupies the White House. His historic role will be long be debated for initiating the war in Iraq, slashing taxes for the rich and changing long-standing US policies for multilateralism, energy independence and the environment. Whether these actions are seen as positive or negative, it is unmistakable that none of these or his other initiatives could have been accomplished without superlative branding skills.

    From the beginning, Bush and his advisors understood that he could have never been elected as an ordinary candidate. He had run three businesses into the ground, and was associated with shady stock deals such as Harkin Energy. He slipped into the “champagne unit” of the Texas Air National Guard at a time when his peers were being drafted and dying in Vietnam, then failed to fulfill his sworn six-year commitment. He was governor of a state that was at the bottom of the rankings in education, healthcare and literacy. His verbal mistakes were – and are -- legendary.

    So Karl Rove, one of the most brilliant political operatives ever, re-packaged Bush as a brand. Instead of a Yale graduate who was scion of a blue-blood Connecticut family, Bush was presented as a straight-shooting Texan. Instead of showing off his 10,000 square-foot house on an estate that is larger than the Kennedy and Kerry compounds combined, Bush told everyone he lived on a ranch. Instead of defending his being the only presidential candidate ever convicted of a felony (drunk driving), Bush shifted the debate to President Clinton’s adultery. While hobnobbing with Enron CEO Ken Lay, indicted Tom DeLay and influence-peddler Jack Abramoff, who has pled guilty to bribery of top government officials, Bush adroitly “positioned” himself as a drugstore, truck-driving man.

    What lessons can be drawn from Bush as brand guru?

• Visuals are more important than text: Bush carefully stage manages his backdrop. If he’s not standing in front of military service members, he is in front of a signage imprinted with positive slogan. For example, more than 33 months after invading Iraq, Bush recently stood before a backdrop at the US Naval Academy with the words “A Plan for Victory” repetitively stamped.

• PR is the most powerful branding tool: According to the General Accounting Office (GAO), Bush spends more than four times on PR than any of his predecessors. His PR department has twice as many employees as the Clinton administration. Public relations agency Ketchum was paid more than $1 million in taxpayer funds to produce video PR releases designed to look like news reports. The Bush administration used $240,000 of taxpayer money to pay conservative commentator Armstrong Williams to promote Bush’s education policies. Bush’s exceptional PR skills helped him generate positive stories about his tax, environmental and, most spectacularly, assertions about weapons of mass destruction in Iraq.

• Consistency is key: In the 2000 election, Bush was famous for giving the same speech again and again with the same enthusiasm. Bush, as well as every member of his team, loyally repeat the same message again and again. Saddam Hussein was involved in the 9/11 attacks. Tax cuts for the rich do not affect the deficit or the US fiscal future. Problems only develop when messages become inconsistent. For example, Bush tells reporters in Panama “we do not torture” while vice president Dick Cheney asks Congress for an exemption to an anti-torture bill under consideration.

• Naming is important: Corporations spend millions on the “right” name to connote positive imagery and smooth sales effforts. Think “Brawny” for Georgia-Pacific’s line of thick paper towels.  A rollback on President Nixon’s Clean Air Act, widely credited with substantially reducing air pollution during the past 30 years, is called the “Healthy Skies Initiative.” The plan to increase commercial logging in US national forests is called the “Healthy Forests Initiative.”

• Brand to your base: Brands fail when they try to be all things to all people. Recognizing this, Bush has consistently promoted policies that appease his hard-core political contributors. These include energy policies that support drilling in pristine environments instead of conservation, medical programs that forbid the US government from negotiating with drug companies for lower consumer prices and a dramatic pullback in efforts to free citizens from tobacco addiction. As a result, Bush’s approval ratings have remained in the 80-90th percentile among Republicans, but in the low teens for other Americans.

• Enlist brand allies: One reason Intel is such a powerful brand is that it pays Dell and other partners to promote “Intel Inside.” In much the same way, Bush has a network of partners to promote his brand, including Fox News, Sinclair Broadcast Group, Clear Channel Communications, Pat Robertson, Rush Limbaugh, Bill O’Reilly and many more. Other organizations echoing the same talking points include Cato Institute, Heritage Foundation and the American Enterprise Institute.

    A common branding mistake is to see branding as a short-term issue involving communications, image or “position.” But ultimately, the survival of a brand ultimately depends not on what it promises, but on the value it delivers. After looking at the Iraq war, Katrina debacle, the gaps in Medicare drug coverage and the fast-rising flood of fiscal red ink, the performance of the Bush brand is open to debate. After six years, 52% of Americans says Bush’s term has been a failure, 62% are dissatisfied with the direction of American, and 64% believe things have gotten worse in the past five years, according a CNN/USA Today/Gallop poll released January 27. The recent news that Bush has illegally wiretapped Americans will undoubtedly further erode his remaining “brand equity.”

    As Bush illustrates so well, branding can craft political as well as economic powerhouses. But sometimes short-term tactical effectiveness comes at the expense of long-term success. Ultimately, the survival of a brand depends on the value it delivers, not on what it promises. Edsel remains a well-remembered brand today, not for its sales longevity but for its inability to deliver what Americans wanted.

We Will Miss You, Peter Drucker

    How do you know if someone is really a branding expert?

    They have copies of one or more books by Peter Drucker on their bookshelves.

    Drucker, who died in November at age 95, is often called the father of management for his work on leading and managing the modern corporation. That reputation is based on 38 books published over a half century and translated into 37 languages. His most famous book is “The Practice of Management,” published in 1954. That book memorably asked the three questions that every company seeking to establish a brand must ask itself: “What is our business?” “Who is our customer?” And by far the most important for branding: “What does our customer consider valuable?”

    His reputation is also based on the influence, freely acknowledged, that he has had on such gurus as Tom Peters, Jim Collins and even Newt Gingrich. He has also impacted business leaders like Jack Welch, Andrew Grove and A.G. Lafley. Said Welch: “The world knows he was the greatest management thinker of the last century.”

    Drucker made three significant contributions. The first was acknowledging the role of the worker in corporate success. He coined the term “knowledge worker,” and many of his works deal with the difficulty and importance of managing assets that walk out the door each night. Much of his later work dealt with churches and other non-profits, who often must motivate and organize workers in pursuit of a common goal without the usual management tools of position, perks and pay. The answer, said Drucker, was to manage a human community based on trust and respect.

    Drucker also helped pioneer the concept of servant-leader, where leaders ask “what must be done?” instead of “what can I do.” A leader leads by getting finding agreement with employees on goals and direction, and then getting the hell out of the way during implementation. Even in 1984, he thought that CEO pay was out of control, and believed that CEO compensation must be limited to 20 times the pay of rank and file. What would Drucker say today about US Airways, which guaranteed departing CEO David Siegal and his family medical coverage for life while eliminating health coverage for 28,000 employees and 18,800 retirees?

    Drucker understood that marketing was not about advertising or “positioning,” convincing targets about “value propositions,”  “brand equity” or any other buzzword du jour. Rather, marketing should have just one concern – the customer. Consider this: “The purpose of business is not to make a sale, but to make and keep a customer.” Or: “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” Best of all: "Marketing is the whole business seen from the customer's point of view."

    Drucker also recognized that the organization is the brand. “Marketing is not only much broader than selling; it is not a specialized activity at all. It encompasses the entire business. It is the whole business seen from the point of view of the final result, that is, from the customer's point of view. Concern and responsibility for marketing must therefore permeate all areas of the enterprise,” he wrote.

    Barbara Bund, a senior lecturer at the MIT Sloan School of Management, sums up his position well. "Drucker made crystal clear in ‘The Practice of Management’ that business success and even the very definition of a business are determined by customers.” The same holds true for branding.

    It is astounding how often this simple and fundamental concept is forgotten. Branding definitions fail to include the concept of a customer. Long articles on branding are written without mentioning the word “customer.” Products are developed without talking to customers. Customer calls are put on hold. Customers defect, and no one notices. Few companies even bother to calculate the value of a customer.

    Despite his emphasis on employee empowerment and the need for everyone to contribute to the lives of others, he was not a touchy-feely consultant.  Drucker was a strong believer in measurement and accountability; much that has been written about “management by objective” can be traced to him. 

    Unlike so many management gurus, he did not have all the answers. He only had smart questions. Shortly after Welch became CEO of GE in 1981, he invited Drucker for a meeting. Drucker asked two questions. “If you weren’t already in a business, would you enter it today? And if the answer is no, what are you going to do about it?” Welch answered those questions by determining that if GE could not be #1 or #2 in a particular market, it would exit that market. Over the next 25 years, GE became one of the most successful companies in the world.

    Too many in branding have read pop marketing books about “immutable laws” that date from the 1970s or claim that brands are really based on how they smell or feel. Unfortunately, not enough have read and absorbed Drucker, which is one reason why so many brands fail to connect with customers.

    Unlike many branding authors, Drucker is a genuine pleasure to read. He is quoted so often because so many of his sentences read like epigrams. His sentences march in logical order toward a sensible conclusion, perhaps reflecting his Austrian heritage. When you finish any of his books, you make a vow to yourself to read it again.

    But Drucker is not just for would-be brand gurus. The   magazine headlined its Drucker obituary by calling him “the one management thinker every educated person should read.”

    That is absolutely true, and yet another reason why it is so sad he has passed away. We will miss you, Peter Drucker.

Find out why strategy+business magazine called ProfitBrand: How to Increase the Profitability, Accountability & Sustainability of Brands the "best business book of 2005." Order yours at Amazon today.

"The Customer Is Always Right"

H Gordon Selfridge, the founder of Selfridges, one of the best-known department stores in UK, first penned the well-known slogan, "the customer is always right."

However, Selfridge died both insane and penniless.

There is a lesson there. Remember, not all customers are created equal. Some are more "right" than others, depending on their profitability.

Dumb-Ass Branding: AT&T

    On New Year’s Eve, AT&T kicked off its 23rd branding campaign since 1981.This campaign, which included TV commercials, billboards, airport signs and even a theme song by the group Oasis, represents an effort to revitalize the AT&T brand after the once venerable company was acquired by SBC Communications. The campaign will cost an estimated $800 million to $1 billion, according to the Wall Street Journal.

    What a huge waste of money. What a premier example of dumb-ass branding.

    AT&T used to have a premier world-class brand, thanks to its long heritage of supplying rock-solid phone service and cutting-edge R&D that included the development of the transistor. But the “Ma Bell” brand began to self-destruct in the early 1980s when it sought to block competition from MCI and other telecommunications upstarts. At one point it was even claiming that using modems could cause equipment in its central offices to fail.

    After the break-up of AT&T in 1984, which led to the regional Baby Bells, AT&T floundered badly. According to USA Today’s Kevin Maney, it “bought computer companies, split up again, spun off wireless, bought cable companies, bought wireless, spun off cable companies, [and] re-spun off wireless” until it was eventually bought by one of the companies it originally spun off in 1984. It launched re-branding campaign after re-branding campaign in desperate attempts to regain its cachet. Almost all were awful. Its “Carrot Top” campaign ranks right up there with Burger King’s “Herb the Nerd” as some of the worst advertising ever.

    AT&T spent money on everything but operations and customer service.  According to the U.S. FCC (Federal Communications Commission), AT&T Wireless generated the most complaints per subscriber. J.D Power & Associates rated its customer care as below average. The Florida Attorney General wrote to AT&T demanding immediate changes to an automated “customer service” system that “prevents callers from speaking with live customer service representatives and obstructs consumers from receiving refunds for improper long-distance charges.” The FCC sought to fine AT&T $780,000 for violating the federal do-not-call law.  But that’s peanuts compared to the $500 million fine it was considering because AT&T wasn’t paying fees for connecting intrastate calls or paying into the universal service fund, which subsidizes phone service for farmers and other rural residents.

    The individual customer stories are horrifying. Just google AT&T and service, and get inundated with links about AT&T slamming (connecting customers to its service without permission) and other customer abuse.

    Inevitably, customers voted with their feet. Revenues fell from nearly $50 billion in 1999 to $30.5 billion in 2004. The number of residential customers dropped 60 million to about 24 million. The customer loss rate was expected to continue at a phenomenal rate of 10% a quarter. Once, AT&T bonds were known for their “widows-and-orphans” solidity; not long ago multiple rating agencies downgraded its debt to junk-bond status.

    AT&T is a brand that deserves to die an unloved, ignomious death. Its only value is as a case study on how mistreating customers will kill even the most dominant brand.  So why is an estimated $1 billion being spent? “This campaign is expecting to introduce the new AT&T to a whole new generation of customers,” says Karen Jennings, AT&T’s senior executive vice president for human resources and communications.

    Translation: We are looking for more people, first to sucker, then to anger. 

What a stupid strategy: "Exceeding expectations"

So many companies boast they "exceed expectations" or "go beyond expectations." This is short-sighted for three reasons. First, customers are looking for companies to deliver exactly what they promise, not more, not less.  Second, it sets up even greater grounds for dissatisfaction when companies fail to meet whatever promises they make.  Finally, it is an unprofitable strategy.  Customers vary in terms of profitability.  Providing service above and beyond what a customer is worth in terms of profit does nothing but hurt the bottom line.

Now, there is another reason why it is a stupid strategy.  In almost all cases, it is not true from the customer's perspective.  Harvard Management Update recently reported on a Bain & Company survey that found 80% of businesses feel they deliver a "superior experience" to customers. 

The same survey found that customers feel that only 8% of companies deliver a superior experience.

Quite a disconnect, isn't it?

ProfitBrand selected as a best business book of 2005

strategy+business, published by the leading global management and technology firm Booz Allen Hamilton, has selected ProfitBrand: How to Increase the Profitability, Accountability & Sustainability of Brands by Nick Wreden as the best business book of 2005 in the marketing category.

In a world where top executives increasingly question branding investments, ProfitBrand offers a metrics-based approach to branding based on segmentation, differentiation and customer retention. Using numerous case studies, ProfitBrand demonstrates how to link branding to customer profitability, illustrates multiple measurements that provides accountability for marketing tactics and ensures sustainability by demonstrating how to get customers to buy not once, but again and again and again.

Read the complete strategy+business review of ProfitBrand.

Other leading business books selected by the editors at Strategy + Business in various categories include The World Is Flat: A Brief History of the Twenty-First Century by Thomas L. Friedman  (Category: The Future);  Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim and Renee Mauborgne (Category:  Strategy); The End of Poverty: Economic Possibilities for Our Time by Jeffrey D. Sachs (Category: Globalization); Creating the Good Life: Applying Aristotle's Wisdom to Find Meaning and Happiness by James O'Toole (Category: Work & Life); Conspiracy of Fools: A True Story by Kurt Eichenwald (Category: Management); Hard News: The Scandals at The New York Times and Their Meaning for American Media by Seth Mnookin (Category: Media); and A Life in Leadership: From D-Day to Ground Zero: An Autobiography by John C. Whitehead (Category: Leadership).

strategy+business media publishes a quarterly magazine, a Web site,  books, and ancillary publications. Its mission is to provide executives with commentary, research, and practical ideas that bridge the gap between theory and practice in contemporary global business. strategy+business (s+b), a thought-leadership business magazine for senior business executives and the people who influence them, reaches more than 100,000 readers worldwide.

ProfitBrand: How to Increase the Profitability, Accountability & Sustainability of Brands by Nick Wreden, published by Kogan Page, is available at leader book retailers, Amazon.com and Barnes & Noble (bn.com).  The retail price is $29.95.

PR Measurement Is A Waste of Time & Money

    Let’s stop trying to measure PR.

    Although PR measurement is almost always an exercise in either futility or smoke-and-mirrors, it is important to note that PR has substantial value.  Even in an age where customers define brands based on their economic, experiential or emotional value, PR plays a critically important role in shaping attitudes and driving sales.  PR has much greater impact on a brand than advertising, and plays a vital role in internal branding. As a result, the smartest branding tactic for almost all companies is to immediately increase their PR budget.

    Every PR professional knows and understands this. CEOs who have squirmed under the harsh light of media scrutiny also know this.  But everyone else feels the urge to place PR in the same category as, say, pencils and computers and force PR departments to justify or validate expenditures.

    As a result of this unthinking pressure, PR departments and agencies have spent substantial sums to “measure” PR results. The effort started with clip counting (“PR by the pound”) and moved toward AVE (advertising value equivalency). AVE links the value of exposure to advertising rates, with some multipler ranging from 1.1 to 8 thrown in because the mentions have more credibility than advertising.

    AVE has become the industry’s favorite whipping boy for three reasons. First, there is no research documenting a reliable “credibility multiplier.” Another is because appearance does not translate into action or even absorption by the target audience. Finally, results can be easily manipulated, with “credit” for an article with just a mention. With AVE, every agency can “prove” big-bang results from sending out a press release.

    Despite these problems, a TEXTALL/Excel random sample of 4,200 PR professionals found that about one-third still use AVE to justify results. Sometimes, the rationalization for using AVE is almost laughable. “It’s just easier to go with a straight number,” says the co-founder of excom  Communications in Los Angeles. Even more telling was the headline in a report about AVE: “Like it or not, PR pros use ad value equivalency to appease dollars-and-executives.” Appease?! That's a driver behind PR measurements?!

    Another favorite PR measurement is before-and-after surveys. Sears Roebuck & Co. landed a positive story on The Oprah Winfrey Show about donating $20,000 worth of goods to needy families for Christmas. An article about the effort said, “The respondents who said they agreed with the statement ‘Sears is a quality company’ increased from 58% to 65%.”

    Kudos to Sears for its generosity, and no doubt there are brand benefits from having 7% more people think that you are a “quality company.”  But hard questions remain. What was the actual, measurable impact on sales and profitability? If Sears cannot answer that question, how can it determine the ROI from its $20,000 investment?

    The current hot metric is “share of voice/discussion.” This metric is essentially based on the premise that the more the media is discussing your company, or raising an issue your company has a stake in, the more that target markets will buy your offering or believe your side. That’s a reasonable – although unproven – hypothesis, but measurement of share-of-voice is closer to voodoo than science.  Take a large handful of corporate and competitive mentions, tag them with a positive, negative or neutral value, calculate a “net favorable media value” before eventually emerging – voila! – with a final “share of discussion.”

    Again, with no link to profitability and sales, nothing is proved from these common methods other than you got your name in the paper. Additionally, with the growth of blogs and other online media, it has become even harder to prove a link between PR outputs and sales outcomes.

     So how can PR justify its expenditures? The best way is to include PR as part of a comprehensive lead management system. Lead management systems can track leads from source to sale. This allows companies to not only determine the best sources of leads but also ensure that leads do not fall between the cracks.

    According to Yankee Group, as many as 80% of all leads languish without follow-up or remarketing. Following up on these lost leads could increase sales by 10-20%, based on a survey by the CMO Council and the BPM Forum.

    McGraw-Hill has even scarier data: These statistics, provided by McGraw Hill, are alarming: 18% of inquiries receive no information; 43% receive the information too late; 59% receive the wrong information; and 90% of all leads are never followed up. 

    Part of the problem is due to the eternal he-said, she-said battle between sales and marketing over lead handling and qualification.  Clarifying this tiresome turf battle represents a major step from lead bungling to lead handling.  Another issue is a lack of automated lead management systems, along with compensation or other incentives to ensure that lead management systems are maintained and used.  Lead management systems can be quite expensive, but workable ones can be developed with a spreadsheet and a contact management system.

    Other tips include:

•    Define the lead management process: When a lead comes in, who get it? Who is responsible for qualification? What are the timetables for follow-up? What happens to leads that need to be followed up on in, say, six months?

• Get the source of every lead: Train everyone in the company, from the president to receptionist, to ask, “how did you hear about us?” If they don’t know, prompt with a source. An article? An ad? A friend? Record this information for future analysis.

• Distribute – and act on – leads quickly: Leads go cold after 48 hours. Additionally, numerous studies indicate that the first to contact a lead usually winds up with the business – regardless of price.

• Nurture your leads: Unfortunately, few buy after a single phone call or contact. Practice consultative selling. Learn their issues and objections, and be able to match your offering to their requirements.

    A good lead management system that can evaluate, track and manage leads is the key to determining the effectiveness of your PR program. So stop throwing money at so-called PR “measurement” system. You might as well figure out how many angels can dance on the head of a pin. Instead, put those resources into a lead management system, and link that system to sales and profitability.

"Brand Metrics: What Is Your Scorecard?

How are you measuring the return on your marketing investments?  Please take a moment and complete a short, 10-minute survey on your primary goals and obstacles when it comes to measuring branding ROI.  If you leave your email address (optional), I'll send you a copy of the results from other marketing executives worldwide, which could help you evaluate your own brand investment priorities.

Here's the link:.

http://www.surveymonkey.com/s.asp?u=26041331404

Thank you so much for your time and input. 

WOM: Only An Amplifier

When I reviewed business and marketing plans a decade ago, the same statement occurred again and again: “We will find dealers and/or distributors who will sell our product for us.”

Today, many business and marketing plans have the statement: “We will use word-of-mouth marketing to help promote sales.”

The appeal of both statements is understandable. If others sell our products, we can free ourselves from expensive advertising. e can increase profitability and devote greater resources to product development or expansion.

But both statements reveal a fundamental strategic error. Companies seek external resources as dealers and word-of-mouth as a crutch to drive sales. But no one else will work to increase your sales unless you first make the necessary investments. These investments include not only advertising – still a critical tool if well-targeted -- but also operational investments such as customer service, on-time shipping, quality control, returns handling and more.

As a result, the correct way to see word-of-mouth is as an advertising amplifier, not as a primary marketing tool. In many cases, word-of-mouth will often take care of itself if your operational house is in order. Consistently ship on time, and others will know. Answer the phone and respond to inquiries, and others will know. Add value to offerings, and every product goes out with its own built-in ad.

Of course, spreading such good news via word-of-mouth requires encouragement. Ask for testimonials, whose credibility makes it the most powerful foundation for advertising. Encourage forwarding of marketing messages. While this is a standard line in many emails, extend it to other marketing material as well.

The most cost-effective promotion in my decades in marketing came from a simple postcard. My client, a technology company, wanted to unveil a product at a trade show. We printed a two-color postcard with all the specs and diagrams that only an engineer could love. The postcard was sent postage-paid to all customers, prospects and prospective trade show attendees. The promotion cost less than $500, but was credited with more than $100,000 in sales.

To me, the most interesting aspect of word-of-mouth is not its growth as an advertising amplifier, but rather how it symbolizes a transformation of branding that too few have come to grips with.

I still see advertising agency sites talking about “positioning.” If you understand nothing else, understand this: “positioning” is dead. In fact, word-of-mouth has been one of the nails in the coffin of the 30-year-old theory, first developed in a world when advertising on one of three channels could establish a brand. Today, word-of-mouth underscores the fact that today it is customers, not companies, who define brands. This definition is not based on corporate-driven “positioning,” or even by advertising, but rather by the emotional, experiential and economic value that brands deliver.

Nick Wreden
CEO, FusionBrand
Author, ProfitBrand: How to Increase the Profitability, Accountability & Sustainability of Brands

Asian Brand Drama: Who Needs Desperate Housewives?

This started out to be an East vs. West branding story. Could a dominant, successful US brand compete against a fast-growing, successful Chinese brand on its own turf?

Then the story really got interesting in the battle to win the hearts, minds and wallets of an estimated 200 million Chinese Internet users by 2007.

In 1999, former schoolteacher Jack Ma launched Alibaba.com from an apartment in Hangzhou, China. Alibaba.com has since grown into three online marketplaces serving the B2B (alibaba.com), B2C (china.alibaba.com) and C2C (taobao.com) marketplaces. Essentially, Alibaba.com serves as an e-commerce aggregator, bringing together buyers and sellers. Forbes magazine has named the firm one of the “Best of the Web” for five years running.

Alibaba.com has succeeded because it filled a void. There was a dearth of printed catalogues and other tools to help buyers and sellers find one another. It sits in the middle of the world’s manufacturing belt, with hundreds of thousands of factories and suppliers nearby. And the home-grown company understands Chinese culture and business practices well.

However, its business model could have never passed muster with US venture capitalists. Alibaba.com allows buyers and sellers to contact each other directly (a big eBay no-no), and the sites are largely free of charge. Revenue primarily comes from charging for premium content/positioning and from a secured payment service like PayPal.

Alibaba lorded over the Chinese market until 2003, when San Jose, Calif.-based eBay purchased EachNet, another Chinese e-commerce site, for $180 million. The stage was then set for a battle of the titans. eBay is one of the world’s premier brands, with 2004 revenues of $3.27 billion. CEO Meg Whitman told analysts that China was a “must win” and “likely to be the defining measure of business success.”  It has promised to spend $100 million this year in China promoting its site, an overwhelming number considering that Alibaba’s gross revenues totaled only $68 million in 2004.

Who would come out on top?  eBay is a classic customer-economy brand, having grown with minimal advertising and lots of word of mouth from passionate advocates. It has also attracted a lot of negative press by raising fees, placing the burden of fraud detection on its buyers and sellers, and abysmal customer support that amounted to little more than automated emails.

eBay has initially come on strong in China, capturing an estimated 61 million Chinese users and about 55%-65% of the market. But the ultimate outcome is still in doubt, despite Whitman’s hope that China becomes eBay’s biggest market in 5-10 years.  Internationally, eBay failed so miserably in Japan it was forced to exit the market in 2002. (Its track record is much better in other international markets.) Another weakness in China is the need to adhere to eBay’s global platform, which hinders customization. Finally, it lacks a Chinese online payment platform like PayPal.

But this is no longer a local David vs. international Goliath story. Now there are two compelling brand stories. In mid-August, Yahoo! paid $1 billion in cash for a 40% stake in Alibaba.com, raising the spectre of 1999 dotcom madness. And the stage is set for a Yahoo! vs. eBay story while Google is stealthily moving into the markets of both. To make the story even more interesting, the new Yahoo!-Alibaba combination  includes 3721.com, a Chinese-language search engine that Yahoo! acquired last year for $120 million. 3721.com competes with Baidu.com (yes, the one that went up 350% on its first day of trading on US markets), which is partly owned by Google.

Experts are split on who the ultimate online winner will be in China.  Standard & Poor’s downgraded eBay because of the threat, while the Economist magazine criticized Yahoo!’s long-term strategy.  Yahoo! China's president even quit because he didn't think the Alibaba transaction would work.

Initially, both will do well in a market expected to grow 80% annually for the next three years. However, as much as I admire Meg Whitman and her savvy executive team, I’m putting my long-term money on Yahoo!, despite the fact it overpaid for Alibaba.com.  Yahoo!’s corporate DNA is based on personal skills and relationships (Yahoo! started with human editors indexing the Internet), which will resonate in China much more than eBay’s blind faith in computer technology and an efficient marketplace. Yahoo!’s combined capabilities will make it easier to find and buy products, a vital skill as China moves from communist to consumerist. PR in Asia is generally abysmal, but Jack Ma understands how to use the press better than any other Asian executive I’ve seen. Listen to this soundbite at the press conference announcing the link with Yahoo!: “We're going after Baidu.com for the No. 1 spot in China. Google is history as far as I'm concerned.”

Yahoo!, eBay and Google battling over what will be the world’s largest online market:  Who needs Desperate Housewives with drama like this?

Women & Branding: Time for Some Changes

Women make 70% of all consumer purchases. Look inside any purchasing department, and you’ll see they are responsible for a substantial amount of corporate purchases as well. Look at the top 10 TV programs, and in almost all cases the majority of viewers are women.

Yet go to many advertising or related events. Inevitably, you will see the stage dominated by men, even if the audience may be predominantly women. Peer into the power suites of larger agencies, and you’ll see more ties than skirts. Talk to women inside marketing departments about their corporate brands, and they’ll tell you that the decision will have to be made by a male superior. Such disparity extends to paychecks as well.

The situation is not unique to the branding industry. In the US, for example, women have more than 45% of all jobs and account for more than half of master's degrees being awarded. Yet 95% of senior managers were men, and female managers earn, on average, about 72% of what their male counterparts take home. Fewer than 1% of the top CEOs are women, and more than 90 companies of the Fortune 500 don’t have any female corporate officers.

It’s the same sad story in Europe. In France, fewer than 5% of top executives are women. There are only 17 female executive directors of the FTSE100, compared to about 400 men. Out of all publicly listed companies, 65% have no women on the board at all. No woman has yet headed a big British company, although 44% of the UK workforce is female.

This glass ceiling has unfortunate repercussions. A study by the University of Bath of female workers between 1992 and 2003 showed a 6% decline in job satisfaction among female workers between 1992 and 2003, while men’s job satisfaction increased during the same period. One out of every three women with an MBA in the US, a remarkable loss of potential talent.  Among men, the figure is one in 20.

Specific examples are painful. Procter & Gamble, the manufacturer of Pampers nappies, Max Factor make-up and Tampax, only has two women on its 16-person board. Only three of its top 45 corporate officers are women. Out of the world’s major agencies, only Ogilvy & Mather is headed by a woman, the very savvy Shelly Lazarus.

The usual suspects emerge as reasons. Unforgiving workloads and hours. Career interruptions for children. Travel demands that complicate family-work balance. Exclusion from old-boy networks. But as the accounting, legal and consulting professions have shown, those issues can be dealt with. Recognizing the impact on businesses and even profitability, these profession have taken substantial steps to advance the career track of women include job-sharing, relaxed “up-or-out” standards, flextime and other policies.

Fairness or even diversity are important. But they are not the issues here. It is a question of branding and business effectiveness. Researchers have known for decades that mixed groups are more creative and better at solving problems.  Catalyst, a US organization that studies the role of women in business, found a strong correlation between strong financial performance and the number of women in top positions among Fortune 500 companies between 1996 and 2000.  And men can’t really justify their continued dominance of the branding profession, since it is estimated that up to 90% of all products fail to become brands.

So it is time to start handing the branding reins over to more women, especially since the bulk of purchasing power is in the hands of women. Women are better at collaboration and team-building, a skills that are perfectly suited for the requirements of the customer economy, when brands get their power from customers. Let women develop and tell your brand story. Women excel at telling stories about relationships, which, ultimately, is what branding is all about.

Start by beginning a mentoring program at your agency that focuses on showing younger women the ropes. Give greater responsibilities to the women in your organization. The industry as a whole needs to promote successful female executives as role models.  Finally, companies must implement female-friendly work and personnel policies that take into account how many women do the heavy lifting when it comes to taking care of families and homes. 

First Review: ProfitBrand

Yes, I know this reeks of shameless self-promotion,  but I'm damn pleased about it, especially considered the book is compared to giants like Seth Godin.

Download sb_book_review.doc

.

The book has just been released in the UK. It will be released at the end of September in US.  Pre-order at amazon.com.

Wikification: More case histories

    The forces of wikification continue to gather steam. In addition to the case histories discussed in an earlier entry, two more examples have crossed my desk.

    The first is similar to Fedex, which bowed to the reality of customers defining its brand when it changed its name from Federal Express.

    From the August 11, 2005 issue of the New York Times (subscription required):

In 1997, the New School for Social Research became New School University to reflect its growth into a collection of eight colleges, offering a list of majors that includes psychology, music, urban studies and management. But New Yorkers continued to call it the New School.

Now, after spending an undisclosed sum on an online survey and a marketing consultant's creation of "naming structures," "brand architecture" and "identity systems," the university has come up with a new name: the New School. Beginning Monday, it will phase in new logos, stationery, banners, business cards and even new names for the individual colleges, all to include the words "the New School."

"My view is that you never argue with the customer about your name," said Bob Kerrey, the university's president.

The second example involves a new Public Radio International program called "Open Source from PRI." Open Source uses its blog to generate ideas for its programming. Suggestions come from listeners as well as the show's producers.

An interesting brand metric is emerging.  According to the article, "because of the program's interactive component, [the producer] said its benchmark of success might be less the number of stations that ultimately carry the program and more the online presence Open Source establishes."

And this line from the article may be an indicator light for how customers interact with brands in the near future: "[An employee] is working on technology that will collect listener voice mail, convert it to an MP3 and load it to the blog's comment threat as the messages are left. The sound bites will also be played on the air."

Notice that no 80s-style "master-of-the-universe" decreed how the brands would be "positioned."

Review: "Managing Customers As Investments"

    Customer equity (or lifetime value) calculations can get quite complex, complicated by the difficulty in finding some required data. But Sunil Gupta and Donald Lehmann simplify the task considerably by showing that “for typical situations, the lifetime value of a customer is simply 1 to 4.5 times the annual dollar margin (profit) that is generated from this customer.” Such much-needed simplification should go a long way toward focusing companies away from sales and market share growth toward profitability growth via retention branding.

    Gupta and Lehmann are the authors of Managing Customers as Investments: The Strategic Value of Customers in the Long Run. The book not only looks at the issue of calculating customer equity but also examines the greatest contributors to customer equity. More important, Managing Customers shows how focusing on customer value helps companies move away from the all-too-common current focus on products to greater customer-centricity. To improve readability, general discussion about principles and key formulas are backed up with detailed calculations in appendices.

    Customer equity calculations offer numerous advantages. They help financial analysts determine if a firm is under- or over-valued, especially for high-potential firms that are currently losing money. (It’s hard to calculate a P/E ration for companies with any “E.”) They can also determine whether companies are paying too much for acquisitions. AT&T effectively paid $4,200 to acquire each customer from MediaOne and TCI, a primary reason the acquisitions failed. Even more outrageously, Deutsche Telekom paid more than $21,000 per customer to buy VoiceStream.

    To calculate customer value, companies must capture three pieces of related data. First, they need to track the financial and other interactions with specific customers or customer cohorts (those who become customers at about the same time).  Next, companies must understand how profitability (margins) may vary over a customer lifetime. Generally, customers become more profitable over time. Finally, they must track defection rates. That’s harder than it sounds, especially for retail and other customers in non-contractual relationships.

    What is the best way to improve customer profitability – reduce customer acquisition costs, improve customer margins or increase retention? No contest, say the authors:

On average, a 1% improvement in acquisition cost improves customer value by only 0.1%. Improving margins by 1%, for example, by cross-selling, improves customer value by about 1%. This result is similar across firms and is consistent with the margin elasticity discussed in [an appendix]. Improving customer retention by 1% improves customer value by almost 5%. In addition, retention shows a virtuous cycle – the higher the current retention rate (e.g., Ameritrade’s 95% versus Amazon 70%), the higher the impact of improving retention.

    The case for retention is reinforced with tables showing varying levels of margin multiple (the greater the margin multiple, the greater the lifetime value). For example, the margin multiple for a company with a 60% retention rate and a discount rate of 10% is only 1.2, meaning that the lifetime value of a customer that generates profits of $100 annually is only $120. But increase the retention rate to 90% (with the same discount rate) and the multiple skyrockets to 4.5, translating into a lifetime value of $450. The effect on corporate profitability will be even greater, since the greater number of retained customers will collectively contribute even more to the bottom line.

    Gupta and Lehmann add important caveats about retention that also apply to those who seek to improve customer satisfaction. The financial argument for increasing retention does not factor in the costs of improvement.  Investments in customer retention also show diminishing return. Improving retention rates from 90% to 95% will cost exponentially more than, say, improving retention from 65% to 70%.

    Because customer equity is so vital to profitability, and even stock market value, Gupta and Lehmann logically suggest that companies start moving toward customer-based accounting and a customer-based organization. Fine in theory, extremely difficult in practice. Only a few financial service firms have even attempted to move toward customer-based accounting. The concept of customer-based organization was set back when the new CEO of HP, Mark Hurd, abandoned the customer-oriented sales organization initiated not long ago by his predecessor Carly Fiorina.

    Gupta and Lehmann are on much more solid ground with this advice to CEOs:

The CEO needs to develop metrics that reflect the value of customers and tie incentives to them. This means numbers such as customer satisfaction, churn, loyalty, same customer sales/revenue, new customer acquisitions, and acquisition, expansion, and retention costs need to be consistently and frequently assessed and displayed. Further, the CEO needs to pay attention to and publicly discuss these determinants of long-run profitability as much as or more than monthly revenue reports and fixed assets.  Put simply, these metrics need to be as important a part of the company’s scorecard as current period profit and stock price.

    There are some quibbles with the book. After stressing the importance of quantification and customer value, they slip into the usual non-measureable, product-centric babble about “awareness” and “brand equity.” Too much space in this thin volume is devoted to discrediting the calculations used to value dot-com firms, a point that has been widely made and is widely understood. Elements of a key formula are transposed in a summary. And they attach too much importance to “satisfaction,” even though Gallup and many other organizations have pointed out its measurement and other inadequacies as a management goal.

    Still, in an era when marketing is losing legitimacy within organizations because of a dated focus on “personality,” “position” or other immeasureable attributes, Managing Customers represents a metrics-based beacon back to a seat in executive suites.  By using the formulas and tools outlined in Managing Customers as Investments, executives can show the bottom-line financial benefits of marketing spending, and better calculate the difficult trade-offs involved in various acquisition branding tactics.

     Undoubtedly, a worthwhile read.       

Is Feed Branding The Next Wave?

    In the fall of 2004, GM used a podcast to help introduce its 2005 vehicle line-up. Microsoft soon followed suit, and now dozens of companies are using podcasts as part of their branding mix. 

    Such podcasts represent the first wave of an emerging trend called feed branding, which also includes RSS feeds, ring tones and digital radio. Podcasts are “radio” programs or other broadcasts uploaded to Apple’s iPod and other MP3 players. Subscription-based RSS feeds relay updated content from news sites or blogs. About 10-15% of such feeds now carry advertising, but that percentage will increase rapidly. Ringtones are customizable sounds on mobile phones. And digital radio uses satellites to transmit content-specific ads or even images to accompany  DJs or songs.

    Podcasting is the proverbial Next Big Thing, thanks to the 12 million iPods Apple has sold. Podcasts can be easily created with the GarageBand software that comes with every Mac, which means that they are often as niche as a blog. But more sophisticated companies are developing broadcast-quality programs on specialized topics, while others are sponsoring programs with wide appeal, much like the soap opera sponsorships during radio’s heyday and the earliest days of TV. A few even have advertising, comparable to 30-second radio commercials, usually at the beginning and end of the podcast.

    Currently, almost all podcasts are free, although Steve Jobs has broadly hinted at requiring payment, either through subscriptions or advertising revenues, once adoption spreads. However, that will probably face the same stonewalls that popular bloggers have faced trying to monetize their content.

    Unlike Internet advertising, which requires consumers to be tethered to a PC, podcasts have the advantage of being time-shifted as easily as a TiVo. Consumers can listen to podcasts at their convenience, which reduces distractions and increases receptivity. One disadvantage, however, is a lack of measurement.  Because the podcasts are listened to away from the computer, real-time tracking is impossible. As a result, some podcast advertisers are testing the use of 800-numbers or other direct response vehicles.

    Podcasts have other branding applications as well. Since audiences can be away from a TV, PC or other equipment, podcasts will be utilized more frequently – and be more effective -- than videocassettes and their descendents. Business applications include supplying sales forces and prospects with product, usage or other information, establishing corporate communication networks for dispersed locations, facilitating knowledge capture, allowing meetings to be recorded and shared, and even providing guidance for new employees. These applications are also much cheaper and require less skill than other information-sharing techniques such as, say, Flash demos.

    RSS feeds, available through numerous aggregators or advanced browsers like Firefox, eliminate the need to cruise favorite Web sites or blogs for updated information. Summaries or even actual clippings are automatically delivered to inboxes.

    Small firms who have experimented with RSS advertising have reported results that are 20-30% greater than with email ads, with CTRs hitting an impressive 10%. It’s easy to understand why, beyond the novelty factor. RSS is 100% opt-in, has a 100% delivery rate, and boasts a 100% open rate (when delivered to two-pane aggregators). RSS advertising got a big boost when Google unveiled it as part of its contextual Adsense program.

       Despite the howls of purists, podcast and RSS advertising is inevitable, if for no other reason than to pay for the bandwidth-intensive technologies. But there has been debate over the shape of RSS ads. Beginning of feed? End of feed? Optimum length? A major fear is that medium gets subsumed by the advertising, just as online advertising got infected by pop-ups and emails got submerged by spam.

    Ring/ringback tones, also known as audio or sonic branding, can also be considered part of feed branding. The Crazy Frogs ringtones have already swept the UK, and are a fast-emerging fad in the US, providing a meteroric boost to Jamster’s subscription-based services. In Japan, subscribers have paid for the “Rockmelon” ringtone, which promises to increase the listener’s bust size. Expect other firms to jump on this downloadable bandwagon. Yankee Group estimates that ringtone sales will hit $1 billion in US by 2008, while Ovum predicts $6.5 billion in worldwide sales by 2008. Despite such standouts as Intel’s bum-bum and Nike’s swoosh sound, audio is often overlooked in branding. But anyone who doubts its effectiveness should just ask Tony the Tiger or Twilight Zone’s Rod Serling about the power of an iconic sound.

    Ringback tones, where callers hear custom audio tracks instead of ringing, are not available everywhere, but will soon be ubiquitous. Ringback tones can play corporate messages, promote new products or announce promotions. Such tones are customizable by number dialed, meaning that each department can play separate messages or sounds.

    Finally, digital radio is also threatening to re-write some branding rules. In addition to offering cable-like access to hundreds of channels, digital radio lets listeners pause, rewind and time-record high-quality broadcasts. Additionally, relevant information such as artist and album information can be transmitted.

     This means a dramatic change in portable entertainment. Digital radios will be able to transmit scrolling news, traffic reports or ads to the radio’s screen. As screens get larger, traffic maps can accompany traffic reports, or logos or other visuals can be displayed on the screen during ads. Channels, sub-channels and even sub-sub-channels  will allow advertisers to target segments more precisely. Some are even talking about coordinating digital radio with the GPS system to deliver ads specific to the listener’s location.

    In 1994, AT&T put up the first paid Web ad, sparking a new era in branding. Now feed branding puts us on the verge of another era that will allow us to communicate with customers and prospects in ways never before possible.

Note: There are now even sites devoted to podcast hosting.   

Wikification and Social Networking

    Still think wikification isn’t the most powerful force in branding today? MySpace.com, owned by Intermix Media, does no advertising and has spent almost nothing on content. Yet its music-based appeal and potential is so great News Corp., the worldwide media powerhouse, just purchased Intermix for $580 million.

    Less than two years old, MySpace.com has more than 16 million monthly users who visit the home pages of more than 200,000 music groups. It ranks five among all Web sites in terms of page views, according to ComScore Media Metrix. Visitors spend hours downloading music and checking out personal ads, blogs, video games and chat rooms. Its reach is so great that such groups as Black Eyed Peas, REM and Nine Inch Nails have introduced their latest releases on the site. "They were the biggest debuts in each band's history," says Courtney Holt, director for new media. Advertisers include Procter & Gamble, Sony Pictures and NBC.

    MySpace.com is considered to be a premier example of social networking, where those who share common interests or experiences join together in virtual communities (with an occasional offline component). Wikipedia estimates that there are more than 200 social networks, such as Friendster, Tribe.net and LinkedIn. However, that number seems low.

    In many ways, brands are much like social networks since they unite those with common interests or requirements. Often these interactions occur online. But brand aficionados can also get together elsewhere. Tupperware and Harley-Davidson confabs are just two of many examples. It is within these social networks that much of a brand’s reputation is formed, or “wikified.” How the brand is “positioned” is almost always irrelevant; people will always believe a fellow consumer much more than the corporate party line.

    The social networking aspect of wikification also represents new brand-building power. For decades, up-and-coming bands have pursued record companies for deals and that one-in-a-million shot at stardom. But MySpace.com has let bands wikify themselves into brands. For example, the UK firm Engineer Records tracked down and signed a deal with The Moirai because of their popularity and cult fandom. By the same token, Knopf picked up on Christopher Paolini’s best-seller fantasy Eregon based on its popularity after being self-published.

    In some ways, MySpace.com represents a moral for brands in the customer economy. At one time, Friendster was the leader in social networking applications. But it has faded to fewer than 1 millions views monthly, mainly because it sought to control member online experiences in order to ensure safety and trust. By contrast, MySpace.com is controlled by members, thanks to a laissez-faire spirit and multiple advanced tools that allow members to customize their Web sites and blogs.

Case Studies: Wikification in Action

    In the ‘80s and early ‘90s, Federal Express Inc. spent millions promoting its brand. Its slogan – “when it absolutely, positively has to be there overnight” – is one of the best ever.  Its television commercials with the motor-mouth managers still serve as a creative benchmark.

    Yet despite the spending, impact and increasing usage, no one referred to Federal Express by name. Customers just called the firm “Fedex,” no matter how insistently corporate managers “positioned” the firm as Federal Express. So in 1994 Federal Express bowed to reality, and changed its name.

    That was probably the first example of wikification, especially since FedEx announced its first Web site at the same time. Wikification – or the process by which customers define brands based on the economic, experiential or emotional value they receive – represents the biggest force in branding today. Wikification is occurring on Intelliseek, Epinions and other feedback sites, message boards, viral emails and SMSs, water-cooler chat, and other peer-to-peer conversations.

    These networked “conversations” are powerful. One Nike-related site has received more than 3.5 million – yes, million – posts about sneakers. A  Forrester/Intelliseek study found that such postings are much more credible than any type of marketing.

    The power of such interactions will expand exponentially when Yahoo rolls out “My Web 2.0,” a social search engine that will allow Web resources that one person has found useful to be instantly accessible to their personal and professional networks. It will also have annotation capabilities that will, for example, allow individuals to add notes about a personal experience with a company.

    As a result, companies like McDonald's are abandoning failed theories like “positioning” and are now putting customers in the driver’s seat for content, new product and other activities. Wikification represents a successful strategy. According to Harvard Business Review, "over 80% of successful new products are from customer suggestions." By contrast, New Product News estimates that 80% of all products introduced in 2005 will fail.

    Customers are taking charge of almost every aspect of a brand, even to the extent of product development. ''A growing body of empirical work shows that users are the first to develop many, and perhaps most, new industrial and consumer products,'' notes Eric von Hippel, head of the Innovation and Entrepreneurship Group at the Sloan School of Management at the Massachusetts Institute of Technology.

    Turning your brand over to customers can produce pays off. In a study at 3M, von Hippel found that product ideas from customers generated $146 million in revenue. By contrast, sales from internal ideas only generated $18 million.

    Symbolically, journalism is taking the lead in wikification. For generations, editors have “positioned” the news, using a variety of placement and other tools to tell readers “this is important!” In the 1960s about 80% of Americans read a paper every day. Today, only half do. The World Association of Newspapers reports that circulation fell by 5% in America, 3% in Europe and 2% in Japan during 1995-2003. From 1969 to 2004, viewership of the Big Three newscasts declined 59%. The drop is even steeper among 18-34 year olds. If the trend continues, the book The Vanishing Newspaper estimates, the last newspaper will be read in April 2040.

    With their backs against wall, the media is turning to wikification, although they call it participatory or civic journalism. The Los Angeles Times is experimenting with “wikitorials.” The Rocky Mountain News is creating 39 news oriented sites, with most of the material to come from readers. The Greensboro News & Record is working on Web-based initiatives involving reader contributions to become “an online town square.” Newspapers have to move fast to wikify themselves. The South Korean online newspaper relies on 26,000 'reporters' for 80% of its content, and the Web site Wikinews has scooped CNN on the London bombing with its reader-contributed offerings. Forbes has experimented with letting readers pick covers. (Interestingly, they are not the ones the editors pick.)

    Examples abound of companies turning to customers to define their brands. Message-board feedback led Continental Airlines to create a customer service help desk exclusively for its top customers. It also changed the format of its frequent-flier statements and tweaked its Website. More than 120,000 people worldwide joined a “World Design Team,” an online forum that collected ideas and feedback while Boeing developed its new plane. Craigslist, which is the fourth biggest portal with sites in 25 countries despite having only 18 employees and no marketing budget, asked its visitors about the wisdom of proposed strategic changes.

    Customers are also becoming an advertising resource. Coors Light and Mercedes Benz have invited customers to develop future advertising campaigns. A customer suggestion formed the basis of a popular advertising campaign for Coca-Cola in Malaysia. Canadian icon Tim Hortons has hundreds of ideas from customer for its “true stories” series of commercials.

    Seattle-based Jones Soda represents big-gulp wikification. Labels are based on customer photographs and odd quotations. Customers also can post ideas for new drinks on the Web site, and the winning ideas become new offerings.  Similarly, T-shirt company Threadless.com solicits artwork from customers, which is then rated by other customers. The highest rated designs are printed on T-shirts and sold. Designer John Fluevog asks customers to submit shoe designs for voting. In Brazil, Kaiser Beer asked customers for their taste preferences before creating a new beer. Burger King asked Web visitors to design both a burger and a marketing campaign for it. And it was two Deadhead fans who named Cherry Garcia, Ben & Jerry’s most famous ice cream flavor.

    In a similar vein, a division of Nestle USA develops ''tool kits'' of preprocessed food ingredients. These kits, which are identical to those actually used in the factory, are distributed to customers to develop new recipes. Product development time is cut from 26 weeks to only three, and the new recipes become new Nestle offerings.

    The gaming industry is a hotbed of wikification. A year before release, Lucas Arts solicited participation in the design process for a new Star Wars game. Additional feedback was captured as programming continued, with heated debates about such topics as whether any player could become a Jedi Knight. Doom, Quake and other games have also benefited from user-created “mods” that can even change story lines.

    Even cultural icons are being wikified. New York’s MoMA is asking patrons to “hack the gallery experience” by creating podcasts about exhibits. The Tate Museum in London posts captions from visitors next to its greatest works of art.

    Despite the benefits of wikification, most companies are still mired in the past. For example, a survey by the CRM consultancy Peppers and Rogers found that only one in ten companies even asked their customers what they wanted before they built their web site.

    In the mass economy, companies looked at customers as “users” or even as a free source of labor (aka “self-serve”). Later, smart companies realized that customers were a resource, turning to them for beta testing, user groups, customer councils and in-depth research. Now, customers actually shape brands through through their usage, feedback and peer-to-peer communications.

    No matter whether it is called “bottom-up marketing,” “open source branding,” “customer co-creation” or other name, wikification represents the most powerful force in branding today.  Are you going to stand in front of this force with your exquisitely crafted “position,” or are you going use wikification to power your brand to closer customer relationships and deeper brand penetration?

    Note: This is the third and final analysis of the emerging branding phenomenon called wikification. The first analysis was The Death of "Positioning" & The Birth of Brand Wikification and the next was How to Wikify Your Brand. Other blogposts have also covered various aspects of wikification.

    Got more examples of wikification?  Post your examples below.

Why Do You Want to Acquire an Unprofitable Customer?

    Sanyo Electric announced today that it would cut 14,000 jobs, or 15% of its workforce, in a bid to return to profitability.  The move followed an announcement on March 31 about a record net loss of Y171.5 billion (about US$160 million).

    What's more interesting than the layoffs is the change in strategic direction.

According to the International Herald Tribune:The company said that in a break with tradition, it would put profit before market share.
    "We will no long conduct operations that don't produce profits," said Toshimas Iue, president.

Sanyo, like many other companies, has painfully awakened to the one corporate strategy almost guaranteed to lead to failure -- the quest for market share.  How many business plans expect to be the market share leader?

Seeking to be a market share leader has numerous failings.  It leads to lower pricing, which hurts profitability. It leads to acquisition branding that attracts unprofitable customers. And it leads to price-sensitive customers who are likely to be disloyal.

Other companies have also learned that seeking market share as a strategic goal hurts profitability. GM is probably the best known example.

Acquisition branding that is based on the need to "be number 1" in our market or expand market share inevitably leads to the acquisition of unprofitable customers. On average, 15% of customers are already unprofitable.  Why would anyone want to acquire another unprofitable customer?

Remember the famous words of an Australian entrepreneur who downsized his company to expand profitability:  "Volume is vanity; profit is sanity."

Too bad Sanyo didn't heed his words earlier.

Dumb-Ass Branding: The 22 Immutable Laws of Branding

   The dumbest branding title I've ever seen has to be "The 22 Immutable Laws of Branding" by Al Ries and his daughter Laura. Immutable??!!  Immutable??   According to the wikipedia and other definitions, immutable means "not subject or susceptible to change."

    In this age of empowered consumers, rapid technological change, increasing global competition,  and  new business imperatives, who can believe that their branding practices "not susceptible or subject to change."

    The only way for any brand to survive and thrive in a dynamic environment is to adapt to changing conditions, adapt to new values and conditions and keep pace with changing customer requirements. No wonder many marketing personnel don't get any respect in the boardroom.  While CEOs are struggling to adapt to changing customer and competitive requirements, their marketing personnel are reading books about laws "not subsceptible or subject to change."

    So if you're my competitor, please, please buy this book.  While you are fossilizing your marketing from the last century based on "laws" not subject to change, I'll be changing based on listening to my customers, meeting their requirements and growing my profitability. 

Wikification vs. Positioning: Jack Trout's View

When I sent out my email commentary on the death of "positioning" and the birth of wikification, one subscriber sent me this interview with Jack Trout, the theorist behind "positioning" and a co-author of the landmark book, first published in 1979. He defends many of the common complaints about "positioning," except for the most important -- the lack of measureability. He also has some eyebrow-raising comments in there, such as his attack on McDonald's abandonment of "positioning" and his suggestion that Sri Lanka abandon its current identity to return to "Ceylon," which was its name as a colony of Britain. That undoubtedly went down well with a people who struggled so long for independence.

Jack Trout interview:
Download jack_trout_interview.doc

Wikitorials, and the lessons for brand wikification

In a well-publicized and innovative step, the LA Times decided to produce what it called a “wikitorial.” Here’s how the New York Times described the effort:

On Friday, the paper introduced an online feature it called a wikitorial, asking Web site readers to improve a 1,000-word editorial, "War and Consequences," on the Iraq war.

Readers were invited to insert information, make changes or come to different conclusions. The model was based on Wikipedia, the online encyclopedia where anyone can add facts or update information.

"It sounds nutty," said an introduction to the wikitorial in Friday's paper. "Plenty of skeptics are predicting embarrassment; like an arthritic old lady who takes to the dance floor, they say, The Los Angeles Times is more likely to break a hip than be hip. Nevertheless, we proceed. We're calling this a 'public beta,' which is a fancy way of saying we're making something available even though we haven't completely figured it out."

What they had not planned for was hard-core pornography, which the paper's software could not ward off. Its open-source wikitorial software allowed readers to post without vetting from editors, who could take down posts only after they appeared. Any contributor who persisted in bad behavior could be blocked.

    The posting of the pornography caused the LA Times to take down its effort. The paper is hinting at trying again, once controls are in place to avoid a similar catastrophe.

    Instead of applauding the effort, some have used the unfortunate outcome as a launch pad for attacks on the media. In one post, Jeff Jarvis  said the LA Times made three mistakes:

The LA Times didn't understand what it was doing and made three critical mistakes:

1. Collaboration vs. argument -- I said this from the start: They didn't get that wikis are a collaborative medium where, even when people disagree, they try to find common ground, knowing there can be only one outcome, or else the wiki will, by its very nature, fail. This is why I suggested having two wikis, instead -- one pro, one con and let the best wiki win -- and Jimbo Wales was starting to do that... but the trolls took over the forest first.

2. Care and feeding -- All communities need attention. The Times should have gone to Jimbo and, he said today, he would have had a few good Wikipedians watch over their foray. You don't build a town without cops. You don't build a community site -- a town online -- without a clean-up crew, either. He also would have explained how to use wikis, since he knows. But the paper thought they knew best and this leads to be biggest mistake:

3. Newspaper ego -- Here is the Times' worst mistake and its most predictable: They think everything is about them. I've sat in meetings with newspaper editors who earnestly think that the best use of internet interactivity is to let the people talk about what they have written, to discuss them, to keep them in the spotlight they built for themselves. There is no bigger institutional ego than a newspaper's. Presidents and popes get humbled more often than editors. Well, at least they used to.

I agree with point 2, but not with his first and last points. It’s not a case of “letting the best wiki win.” How could you ever determine “winning?” By who is morally correct? Gets the most votes? Is vindicated by history?  A better case can be made for following USA Today’s example of stating a position, and then inviting a countervailing view from a community of believers.

And, yes, newspapers do try to set agendas, but this is actually good. Communities need agendas as a basis for discussion and debate.  Like it or not, newspapers are community institutions. They provide links between merchants and readers. They are involved in every community event, from bake sales to tax issues. They support dozens if not thousands of workers who live in the community. For good or for bad, they interact regularly with other community leaders.  If this doesn’t give them standing to set an agenda and open it up to debate, then what does?

In another post, Joe Gandelan essentially argued that blogs are really editorials for the masses. helping to make newspaper editorials a quaint hangover from the mass economy, when essentially only those with presses could broadcast an opinion.:

So the editorial page still exists...but it doesn't have a monopoly anymore.

It's likely it will continue to exist — but be less influential overall and also assume the extra role of providing the raw material for others (bloggers) to use for THEIR editorial pages (blogs).

In many ways, both analyses miss the bigger picture.  What does it really mean when a great newspaper like the LA Times decides to place its voice – really, its brand -- in the hands of the community?

The first lesson is that the LA Times is merely formalizing what is happening everywhere.  Brands are becoming equivalents of wikis, with their values, “personality” and strengths and weaknesses driven by the interactions that prospects and customers have with the brand. A successful brand does not depend on how much money is spent on advertising and it absolutely doesn’t depend on how a chosen few in the marketing department seek to “position” it. Rather, it depends on how successful – from the customer or prospect’s point of view – those interactions are.

The second lesson must be the recognition that brands must have limits. They cannot be all things to all people.  Instead, they must be differentiated so that they provide value to a specific segment. The LA Times threw its editorial open to everyone that registered at the site. A better idea would have been to confine it to a specific segment that reflected a relationship with the paper. Candidates include actual print subscribers or, better yet, those who had written letters to the editor within the last six months.

Finally, the experience underscores once shows how important the Internet is becoming in shaping brands.  Think of the LA Times, and you think of a stack of newsprint dropped on doorsteps. But as this experiment – and the fallout -- shows that the LA Times brand has a strong Internet component, which is true of almost every other brand. The result is that brands are being shaped today by those who would have never had contact with the brand before, which is a major force in wikification.

Congratulations to the LA Times for taking this step, and I look forward to seeing how its brand continues to wikify with the next permutation of its wikitorials.   

McKinsey Trends & Branding Implications

The consultancy McKinsey & Co. recently released its Global Survey of Business Executives. The survey polled 9,300 executives in more than 130 countries on the most important trends over the next five years. The 10 trends noted, along with the percentage of executives voting for it as a top trend,  have important implications for strategic brand planning:

1. Increasing affluence of emerging economies (81%):  Still just selling to the US market? Don't have any offices or distributors overseas? Haven't customized your offering for international markets yet?  The increasing affluence of nations like China, India, Czech Republic, Costa Rica and other countries means expanding markets for your offerings.  If you are not devoting significant resources to selling overseas, then you are handicapping yourself for the long term.
2. Faster pace of technological innovation (81%): Get your technological house in order  to cope with the change.  Centralize your databases, especially those with customer information.  Integrate with your supply chain allies.  Make sure all employees are technologically astute.  And always be on the lookout for innovation that can establish closer linkages with customers.
3. Growth of low-cost manufacturing in emerging economies (77%): Start shifting your brand to services and other value-add.  Even then be prepared for low-cost competition from abroad. Accounting, medical services and marketing are being outsourced to low-cost providers in Asia and India, and other services will inevitably follow.
4. Aging population in developed world (74%): This has numerous implications. Instead of just focusing on 18-35 year olds, seek out older consumers, who also have the advantage of greater disposable income. Reshape products and communications around this older audience.  Enlarge type on Web sites and communications material, and simplify instructions and interfaces.
5. Economic liberalization (63%): Again, it is getting easier to make more money in more markets. So why are you still stuck in your home market?
6. Disruption in supply of natural resources (58%): The most overlooked skill in branding is supply chain management (SCM).  The advertising or PR or even the prettiest logo is going to mean little if you cannot deliver your offering as promised. Start building collaborative linkages and orchestrating supply chain allies to minimize these inevitable disruptions.
7. Geopolitical instability (57%): The world of tomorrow offers branding threats as well as opportunities. Be agile.
8. Greater capital mobility (50%): Barriers are falling to international brands. It also means greater competition in your home market.
9. Greater labor mobility (45%): Talent will migrate to opportunity. That means employee loyalty will become almost as great a competitive advantage as customer loyalty. What are you doing to ensure employee loyalty?
10. Growing environmental hazards (45%): Make your brand as "green" as possible now. Look at the success Toyota is having, thanks in part to its hybrid vehicles, while GM suffers from its over-reliance on oversize SUVs.   

How To Wikify Your Brand

    Top executives have locked marketing out of many boardrooms because of its insistence on using unmeasurable, dated tactics from the mass economy. But brand wikification, based on the customer-driven imperatives of today’s world, will once again give marketing the power seat in executive suites.

    The last commentary discussed the death of “positioning” and the rise of wikification (See “The Death of "Positioning" & The Birth of Brand Wikification” in the FusionBrand blog, http://fusionbrand.blogs.com/fusionbrand/2005/05/the_death_of_po.html “Positioning” died because its DNA lacked a vital component prized in boardrooms – measurement.  By elevating “mind share” over “market share” in their marketing classic “Positioning,” first published in 1979, theorists Jack Trout and Al Ries ensured that the success of “positioning” would always be unable to be quantified in a spreadsheet.

    “Positioning” had other flaws as well. By making mind share the primary goal, “positioning” unfortunately uncoupled marketing from sales. All the mind share in the world doesn’t mean much if sales don’t result. Just ask failed brands like Oldsmobile. Finally, the emphasis on “positioning” isolated marketing from the rest of the organization. Manufacturing, R&D, logistics and especially finance well understand such measurements as delivery times, MTBF (mean time between failures), order-to-cash cycles and more, but are perplexed by any “positioning” discussion.

    “Positioning” thrived for two decades because it provided a tool for leveraging mass markets and mass media. But as the Economist magazine and many others have pointed out, the growth of the Internet, rise of the empowered customer and market fragmentation have made “positioning” a relic.  Because of the changes that have transformed business and customer relationships, attempting to use “positioning” as a branding strategy is like trying to circumvent the globe with one of those quaint 17th century world maps.

    As “positioning” fades, especially for any manager under 35, brand wikification is taking its place. Wikification, which takes its name from wikis, the companion phenomenon to blogs, is based on the fact that brands are now defined by customers. How companies “position” brands is irrelevant to the only force that matters – the experiences of prospects and customers. Brands today are collectively defined by customers, based on the economic, experiential and/or emotional value received. This means that companies focused on branding must devote resources to defining, delivering, measuring and sustaining value that customers seek.
   
    Wikification represents good news and even better news for marketers. The good news is that it incorporates two elements that no boardroom can ignore – measurement and knowledge of what customers value. The even better news is that wikification forces everyone in marketing to value metrics more than “mind share,” “creativity” or any other eye-of-the-beholder concept. It also leads to greater marketing involvement in databases and operational issues that deliver customer value.

    Admittedly, wikification is not as easy as “positioning” yourself as “a leading provider of…” (a term that must be retired immediately because it describes a company in terms of goods sold, not according the customer value received). But hard work is needed to avoid marketing being eliminated as a separate department, a reorganization now under consideration by multiple firms, according to Forrester.

    So how can companies wikify a brand?   

• Incorporate Six Sigma’s VOC/VOTC (voice of the customer) program: Why did manufacturing -- not marketing! – come up with a metrics-driven approach to incorporate customer input? Six Sigma, of course, seeks to eliminate variability in products and processes. This improves quality, reduces cycle times, and increases throughput, which leads to lower costs and higher profitability. Six Sigma has been widely adopted by manufacturers and is spreading into other areas, such as HR and finance.

The lack of customer input can be costly. More than 80% of products fail to become brands, according to major consultancies. By contrast, 80% of products based on customer suggestions succeed, according to New Product News.) The National Institute of Standards and Technology estimates that not incorporating customer requirements costs U.S. corporations nearly $100 billion a year in failed projects.

    To ensure that products reflect customer priorities, the Six Sigma VOC process includes collecting customer input, primarily through customer surveys. The process not only identifies problem areas but also their costs and revenue implications. For wikification, customer input must be used to increase customer loyalty and  profitability. Additionally, marketing can expand the repertoire of VOC-collection tools, including customer councils, help desks, etc.

• Become the organization’s data central: The power of marketing departments is directly proportional to the amount of customer data owned. Today, most marketing departments own little more than unqualified leads. Marketing will start ruling the corporate roost when it controls a centralized and consolidated database that incorporates all customer information, including sales data and acquisition and contact history. Other vital data includes warranty information, returns, complaints, retention rates and referral rates.

• Live with your customers: When was the last time you met with a customer? More important, when was the last time your purchasing, HR or other manager met with a customer? If it hasn’t been recently, then you are losing touch with the most powerful force involved in your branding.

    The Wall Street Journal recently wrote about A.G. Lafley, the chief executive of Procter & Gamble. The reporter accompanied Lafley as he climbed the steep stairs of a small Venezuelan apartment with peeling yellow paint to listen to Maria Yolanda Rios describe how often she washes her hair. The one-on-one session symbolizes a new approach at P&G that has doubled the stock price and increased earnings 17% since Lafley took over five years ago. “P&G used to develop products in its labs and market them based on the products best technical feature. These days, employees spend hours with women, watching them do laundry, clean the floor, apply makeup and diaper their children. They look for nuisances that a new product might solve. Then, they return to the labs determined to address the feature women care about the most,” the reporter wrote. Other successful companies also demand that employees live with customers. At Cisco, for example, top executives must be in customer offices at least 50% of the time.

• Listen to the Internet: Your brand is being shaped less by advertising than by the thousands and even millions of discussions occurring in blogs and newsgroups and emails and chatrooms and other peer-to-peer communications.  An emerging class of tools and services allow you to both track and analyze these communications. But finding out what customers and prospects are saying about your brand is easy. The hard part is listening to them.

    So what companies are using these tips to wikify their brands? Stay tuned till a future blog for some case histories.

How To Make A Great Agency Hire

    Few tasks are harder – or more important than making a good hire.  A good hire can take your agency to the next level. A bad one can wreck it.

    Most hires are made amid crisis. There’s a new client, and an immediate need to meet new demands. Or a key person has deserted ship, and new blood is needed to fill the hole. But while filling a slot because “anybody is better than nobody” may solve a temporary crisis, it can create larger problems down the road – and may even lead to the loss of a client.

    So here are a few hard-won tips to making the best possible hire:

• Put the portfolio in context: Everyone loves to show – and look at – portfolios.  But there are inevitably a lot of fingers in every creative and strategic pie, and rarely does a finished product reflect a single person’s work.  Additionally, portfolios can only show you what a person has done for someone else.  It is much more important to know what they can do for you.  A better test is to show them work in progress and ask them to critique it.  Do they start by asking smart questions, like what is the strategy, who is the target market, and what results is the client trying to achieve? Listen carefully to their analysis. Do they focus on the copy, design or the strategy?  That will tell you a lot about how they will approach future problems.

• Look beyond “impact:” The hiring process, like many other activities in agencies, is infected with buzzwords – “passion,” “impact,” “driven,” etc. Unfortunately, these attributes can also be the force behind a boss from hell or a disruptive co-worker. Instead, look for three skills that will increase the productivity of your office and make clients happier.  These skills are diplomacy, or the ability to manage relationships between teams or individuals; responsibility management, or the ability to ensure that problems are not passed to someone else; and idea triage – knowing when to say “yes” to ideas and, more importantly, when to let ideas die.

• Provoke a reaction: The agency business is like rugby, a full-contact sport. You don’t want someone who can’t dodge or bounce back after a hit. During the initial interview, find a mistake in the resume, criticize an offering in the portfolio, pick apart their skills. See how they respond. Do they get defensive or even angry? Or do they take it as an opportunity for improvement?

• Focus on the hire, not the fire: Most interviews are focused on finding reasons not to hire someone. Instead, look for reasons to hire someone. What are the unique skills or experiences that you can leverage to go after new clients? How well do they complement an agency strength? If you only come out of an interview finding faults with the prospect, you are not thinking about how to grow your organization.

• Shut up: Executives will spend the bulk of interview time talking about their agency, clients, campaigns, blah, blah, blah. A good candidate will know much of that already. The candidate should do 80% of the talking. Just ask smart questions – and listen hard. A good candidate will also ask you smart questions. Be suspicious of anyone who just wants to know about vacations and benefits.

• Don’t let managers hire direct reports: If the goal is to upgrade organizational skills, don’t let managers hire those that they will be directly supervising. There is a natural human tendency not to hire anyone who might represent a future threat. Instead, let the manager’s manager make the final decision.

   “How to make a great hire” is one of the skills that they don’t teach in schools, unfortunately. While a bad campaign will quickly disappear beneath the waves, a bad hire will sabotage an agency for months or even years. So take your time and do it right. Hire in haste, repent in leisure.

The Death of "Positioning" & The Birth of Brand Wikification

    "Positioning" is dead, and McDonald's has just put up the tombstone. But what is really interesting for branding is what is taking its place.

    The signs of "positioning's" demise are everywhere. The number of branding failures, many based on "positioning," exceeds 90%, according to the consultancies Ernst & Young and McKinsey & Co. McDonald's, the premier mass market branding giant, announced that it has abandoned positioning. Says Larry Light, McDonald's chief global marketing officer: "Identifying one brand position, communicating it in a repetitive manner is old-fashioned, out of date, out of touch." Even more bluntly, Light highlights "the end of brand positioning as we know it," calling it "marketing suicide." Even a top executive at advertising giant Leo Burnett is willing to stand before his CEO peers and admit, "the old ways of marketing are not working any more."

     The best epitaph for the death of positioning was written in the April 2 issue of the Economist. The cover story, entitled "Power at Last," illustrated how consumers now buy based on research and personal value, not how on companies seek to "position" their products. "I am constantly amazed at the confidence level and sophistication of the average consumer," says Mike George, Dell's chief marketing officer.

    From the beginning, "positioning" had a fatal flaw in its DNA that made its death inevitable. That fatal flaw? A lack of measurement. In their landmark book Positioning, Jack Trout and Al Ries even turned marketing away from the benchmarks that drive the rest of business by stating "mind share is more important than market share." Market share is generally measurable; mind share, nfortunately, isn't.

    For a long time, this inability to incorporate measurements did not matter. In 1979, when Positioning was first published, the mass economy ruled. Armed with the monolithic power of the mass media, companies could "position" mass-produced products to mass markets. Any measurement besides total sales was too hard, too rudimentary or too late.

    But now, measurement is critical, whether it takes the form of customer equity, ROMI (return-on-marketing-investment), ROMO (return-on-marketing- objective), cash-to-order cycles, retention rates or any other spreadsheet-driven metric. Despite its importance, fewer than 20% of companies surveyed have developed meaningful metrics for their marketing organizations, according to the technology-based CMO Council. Over 80% of the companies surveyed expressed dissatisfaction with their ability to benchmark their marketing programs' business impact and value.

    The result of focusing on "positioning" instead of measurability has had an unfortunate impact. The research consultancy Forrester recently reported that companies are looking at disbanding marketing departments and distributing its function among sales, customer service, etc. While that is definitely eyebrow-raising, it's a logical outcome for a function that represents the second biggest outlay for most companies, yet cannot generate the metrics to justify those expenditures. "Awareness and "position" just don't cut it anymore in executive suites.

    "Positioning" has other defects as well. The exercise is a company-driven process that reflects how companies wish to sell ("the leading provider of ...") instead of determining what - and how - customers seek to buy. Such posturing worked well in the mass economy, but the tactic is doomed to failure in, as the Economist pointed out, a customer-driven world.

    Another weakness is "positioning's" commandment to seek the #1 or #2 space in a category. If those spaces are occupied by competitors, then "positioning" advises creating a category where you can play top dog. In addition to the fact that it now extremely difficult to establish a meaningful category in a highly competitive world, it also means that your branding strategy is being driven by your competitors. Branding must be driven by your customer demands for value, not by the market timing of competitors.

    So if "positioning" has faded into mass-economy history, what has taken its place? McDonald's advocates "brand journalism," or tailoring products and messages to both targets and media. "Positioning" advocates are apoplectic at such apostasy. "The notion that McDonald's should abandon the positioning philosophy and instead adopt a brand journalism approach is lunacy," says Laura Reiss, who is still echoing the precepts in her father's 25-year-old book. Lunacy? The abandonment of "positioning" and adoption of brand journalism has played a large part in the burger giant's remarkable turnaround recently.

    By recognizing that it is better served by adapting itself to customer requirements instead of preaching a "position," McDonald's is definitely on the right track with "brand journalism." but the term is awkward for several reasons. A better term for this customer-driven strategy that reflects today's branding realities is "brand wikfication."

    Born from the Internet's ability to link an archipelago of people and information, wikis are the mirror-image of blogs. While blogs reflect one person's worldview, wikis, written collaboratively by contributors from all over the world, reflect a common judgment on an issue. Definitions depend not on what Funk or Wagnall or Webster say they should be, but on what thousands or even millions of people agree on what they are.

    In much the same way, brands today are collectively defined by their customers. Based on personal or business requirements for economic, emotional or experiential value, this wiki-based definition derives from personal experiences, word-of-mouth, research and multiple marketing tactics. Companies can "position" themselves as anything, but unless there is essentially a customer-driven consensus on the brand"s wiki, then the "positioning" is no more than corporate posturing. Instead of seeking to unilaterally "position" their products, companies focused on branding today must devote resources to defining, delivering, measuring and sustaining the value that customers feel they receive.

     Brand wikification has numerous advantages over "positioning." First, it is a customer-driven, not a corporate-driven, strategy, ideal in a highly-fragmented, highly competitive world where deeper relationships ultimately mean greater profits. Second, wikification forces companies to respond to customer requirements, or risk their brand. Companies can "position" themselves as customer-centric or leading providers or whatever, but the "position" means nothing if callers are put on hold for eternities. Finally, and most important, wikification is measurable by a variety of metrics. If you know what customers value (or how they hold you accountable), then you can measure how you are delivering against those benchmarks for accountability. 

    So how can companies adapt to the realities of the customer economy and wikificate their brands? Stay tuned to an upcoming commentary.