FusionBrand

HBR: Building the Customer-Centric Organization

According to an article in the April Harvard Business Review, the two most important elements in establishing a customer-centric organization are an enterprise database and a workforce that can both willingly share information and make a willing commitment to customers, rather than to products or organizational fiefdoms. It is a long, hard slog to become -- and maintain -- a customer-centric organization, but the result is a much more profitable brand.

Based on a two year study of Continental Airlines, Royal Bank of Canada (RBC), telecommunications giant SBC, casino Harrah's and 13 other firms, "The Quest for Customer Focus," by Ranjay Gulati and James B. Oldroyd, outlines four steps necessary to become a customer-centric organization. One key conclusion: it is the organization, and not the marketing department, that shapes and drives the brand: "Getting close to customers is not so much a problem the IT or marketing department needs to solve as a journey that the whole organization needs to make," the authors wrote.

The case studies are remarkable. RBC, Canada's largest financial institution, first made the all-too-common mistake of "positioning" itself as the leader in convenience. Its "position" even led it to build expensive new branches and
introduce products that were unprofitable. "But, to the company's surprise, a survey of more than 2,000 customers revealed that people didn't choose a bank on the basis of how convenient it was," the article noted. "Instead, what customers wanted was a bank that demonstrably cared about them, valued their business, and recognized them as the same individuals no matter what part of the bank they did business with."

The survey nine years ago was a wake-up call. RBC then dedicated itself to moving from a product-oriented organization toward one focused on customer (not brand) equity. "The results are telling. Dividends swelled from 68 cents per share in 1996 to $1.72 per share in 2003, driven by a 20% increase in high-value customers and a 13% rise in average customer profitability between 1997 and 2001. Between 2000 and 2004, the percentage of customers that purchased the bank's high-margin packages of bundled products and services doubled, from 35% to 70%, and the success rate of sales leads driven from promotion events rose to 45%," said the authors.

Other successes were just as noteworthy. Because it understands the flying behavior of its most profitable customers, Continental now focuses on maximizing the profitability of its entire network rather than each segment. SBC reduced defection rates among profitable DSL customers, without significant marketing expense. Harrah's is able to identify profitable characteristics in seemingly less-profitable customers, and so now focuses its marketing on increasing those profitable behaviors.

The difficult journey to a customer-centric organization consists of four steps:

1. Communal coordination: A central, enterprisewide database is key. This is a two-part process. The first involves retrieving and standardizing information from all customer touchpoints. It sounds easy and logical, but the technical and cultural challenges are immense. It took Continental four years of dedicated work to achieve this goal; almost a year was spent on data standardization alone. Harrah's took six years.
2. Serial coordination: Essentially, this step consists of creating business analytical capabilities that leverage the customer information repository. The business analysts then pass the analyses to the appropriate unit. Sounds easy on paper, but the authors point out that "serial coordination is not spontaneous and is fraught with obstacles. Traditional roles and structures create natural barriers to spreading information and lessons learned.  Some changes to a company's social and organizational structure will be required to overcome them."
3. Symbiotic coordination: Now the task grows even harder - from analyzing past customer data to predicting future customer behavior. This requires a two-way flow of information among the analysts and multiple business units. They collaboratively participate in four activities: "creating models to predict customer behavior; experimenting with various interventions designed to alter customer behavior; measuring the results of these interventions; and using feedback from the front line to improve the models and subsequent campaigns."
4. Integral coordination: In this stage, the organization can use customer information in daily interactions with customers, aided by employees who do more than pay lip service to customer service. One example: a flight attendant apologized to a customer for a flight delay he had experienced earlier that day. Continuous training is key. SBC conducts almost continuous training programs while Harrah's is putting more money into an enterprisewide marketing training program. Changing incentive programs helps. Harrah's spent $40 million in 2004 rewarding employees who demonstrated a customer focus, while SBC changed its compensation structure to encourage cross-unit cooperation.

Undoubtedly, it is difficult to make the organization the brand and center activities around profitable customers. It takes 
much more than incorporating a few buzzwords into a mission statement or even buying a CRM system. As 
RBC, Continental and other leading companies illustrate, "the customer focus journey takes years, not months,
but there are rewards all along the way, and for those organizations that have gone the distance, the payoff is remarkable." 

Brand vs. Customer Architecture: Which is More Effective?

Which are more valuable – your brands or your customers?

The choice represents an important strategic issue. If you answered brands, then you’ll no doubt devote attention to increasing the value of your brands. You’ll pay homage to such concepts as “brand equity,” “brand image” and other buzzwords. You may even pay consultants who promise to refurbish your “brand architecture,” defined by David Aaker as "that which organizes and structures a brand portfolio by specifying brand roles and the nature of relationships between them and their markets."

Unfortunately, that answer is wrong.

The answer can only be customers. Your salary, profit, equipment and even budgets for advertising and PR come from customers. Without customers, there can be no profitability, and without profitability, there is no business. By contrast, brands can have little relationship to the success or profitability of companies. Consider “Sock Puppet,” Commodore, Skytrain and other brands or brand images that have died, not for lack of great branding, but for the lack of customers. GM recently announced that Buick and Pontiac may follow Oldsmobile to the brand graveyard, discovering that all the “brand equity” in the world cannot pay a single healthcare or other bill.

So it is time to re-evaluate the conventional wisdom that characterizes so much brand babble today. Instead of “brand equity” and “brand architecture,” companies must now focus on customer equity and customer architecture(sm).

Customer equity represents the lifetime value of customers. It is an invaluable tool for determining the 20% of customers who generate 80% of profits, and for identifying the 15% of customers who, on average, are unprofitable. Customer architecture represents a structured methodology for identifying and delivering economic, experiential and emotional value to customers. Just as important, it is an invaluable tool for extracting value from customers, either through improved pricing or more cost-effective resource allocation.

Customer architecture is based on proven, well-defined strategies, goals, objectives and tactics. The strategy revolves around customer segmentation. Ideally, that segmentation is based on customer equity, but it can also be based on behavioral, geographic or even channel segments.

Once customers have been segmented in “gold,” “silver,” “bronze” or other categories, then the goal becomes differentiation. Products, services, pricing and operations must be differentiated according to the customer value to the brand. Special emphasis is given to the golden 20% who generate the bulk of profits.

Goals fall into six maximization categories: campaign, profitability, resource, knowledge, operational and results. 

Campaign maximization involves various tactics to improve acquisition branding. Most campaigns today measure success by how many leads, prospects or customers are generated, without any consideration to the potential profitability of those customers. Why would you want to acquire an unprofitable customer, or one who might defect at the first opportunity? Based on the segmentation strategy and differentiation goals, campaigns are generally structured and executed to attract prospects who share the same characteristics of existing profitable customers.

Profitability maximization is based on brand penetration, an umbrella term for  customer, account and product penetration. Customer penetration represents share of total customer spending in your category, while account penetration is the number of persons or units at a customer who are purchasing from you. Product penetration represents the range of offerings purchased.

Resource maximization results from customer planning, a two-step process. The first step is forecasting customer profitability growth, based on existing brand penetration and customer input. The second phase is matching resources, which range from sales force time to trade show party invitations, to increase the profitability of existing customers. Obviously, golden, or high-potential customers, will get the lion’s share of marketing and sales resources.

The constant need to know customer wants, needs and, most important, how they hold you accountable, drives knowledge maximization. Knowledge maximization results from Six Sigma’s “VOTC” (voice of the customer), customer councils and visits, product and other collaboration, interactive communications, etc.

The goal of operational maximization is customer-centricity. Customer-centricity involves more than segmented customer service. It also involves leadership and change management, R&D/product development and pricing. One overlooked area is compensation and pricing. Unless the organization, and especially the sales force, is compensated based on retention and customer profitability, they will continue to concentrate on acquisition, inevitably resulting in the 20% (or greater) customer churn that steals profitability.

Results maximization depends on measurement, measurement, measurement. By using surveys/audits, financial analysis, and operational and other reporting, companies must measure customer equity growth, retention, lead conversion, sales cycle length, responsiveness and other areas.

Do customers ever think about or care about your brand architecture? Does your “brand architecture” make a measurable – underscore measurable – contribution to profitability? Do customers really care that you have, in Aaker's words, "organized and structured a brand portfolio by specifying brand roles and the nature of relationships between them and their markets."

Not likely.

So all this means that you might as well play with Lego blocks as develop a “brand architecture,”  If you truly believe that customers represent the strategic foundation of your business, then invest in a customer architecture today. After all, without customers, even the most organized and structured “brand architecture” will collapse like a house of cards.

JWT: Still Dumb-Ass Branding?

I wrote a post a month ago about how the venerable agency J. Walter Thompson changed its name to JWT to reflect new advertising and branding realities. The post essentially said the name change was a dumb idea, although others disagreed. Since then, I've learned a few other details about the name change. JWT started with some really great insights: "The world now looks at us differently. We need a news way to look at ourselves," "People don't have time for advertising," and, one I especially like, "The audience is our new client." Other insights include "time is the new currency" and "we're not selling products, we're buying people's time."

Based on the concept that JWT must now focus on ensuring that audiences spend more time with client brands and "the better the idea, the more time people will spend with it," JWT developed an interesting way to rank ads:

1: DAMAGING: This work is a waste of time. It is damaging to both the client and us. You'd be better off staying at home.

2: WASTEFUL: This work is a waste of time. People will actively avoid it. You have wasted both the client's time and your own resources.

3. BORING: Both the idea and execution are ordinary. The customer will tune it out before it's finished.

4. PREDICTABLE: This is soundly executed, but bland. People have seen it all before and will get to the end of the message before you do.

5. COMPETENT: The idea is told in an interesting way or it is well executed. People will give you time to complete your message.

6. REWARDING: This work will get noticed. People will feel rewarded having spent time with it. Its impact will linger longer than the duration of the message.

7. INNOVATIVE: This is innovative work and the best example of this category. Its refreshing message and execution will ensure that people will want to see it again.

8. MARKET LEADING: This is the best work in this category in the world. It leads the market and people will take the time to rethink their perception of the brand and the category.

9. WORLD CLASS: This competes with the very best ideas in the world. People are talking about in in their own time. It will make the brand, client and network (agency) famous.

10. WORLD BEATING: This sets a new standard in the world of communications. It is an entirely new idea that is entirely involving. The audience will spend time exploring and playing with the idea. It is being talked about worldwide.

While I especially like the idea of defining marketing efforts in terms of time, and appreciate the ideas and effort to come up with a 1-10 scale to judge advertising, I still think JWT has missed the boat. Have customers, profitability, measurement or accountability been mentioned as a way to judge the impact of advertising?

Review: "What I Learned from Sam Walton: How to Compete & Thrive in a Wal-Mart World"

       The key to Wal-Mart’s success may be a 7:00 a.m. meeting each Saturday. While competitors are rubbing the sleep from their eyes, 500 top managers gather at headquarters in Bentonville, Arkansas. They discuss current performance and future goals in free-wheeling discussions that may even feature visits by GE or Disney executives or even country music stars like Garth Brooks.

    Michael Bergdahl, author of What I Learned From Sam Walton: How to Compete and Thrive in a Wal-Mart World, points out the benefits of such meetings, where everyone has to pay for their own coffee and donuts at an honor bar. Every manager hears the same message in the same way.  Ideas, successes and failures are shared. Strategic execution can begin while competitors are playing golf. 

    “I believe competitors who are losing the competitive battle against Wal-Mart (or who have already lost) probably don’t even understand the significance of the Saturday morning meetings to Wal-Mart’s competitive advantage. It’s as if the company leadership has a management retreat every Saturday of the year,” writes Bergdahl. “Unless competitors are willing to go to a six-day workweek and hold meetings with all their top executives each week to plot counter strategies, I don’t know how they can even think about competing directly.”

    It’s hard to compete against Wal-Mart. Just ask Kmart as well as the myriad mom-and-pops who have gone under whenever a Wal-Mart opened nearby. How did Wal-Mart become the force of nature it is today? Bergdahl uses his experience as a director at the retail giant and at other retail chains to explain how Wal-Mart conquered common retailing and business issues through a relentless emphasis on cost-control and execution. Based on this experience, he outlines how companies can compete against Wal-Mart if it invades their town or competitive space. Each chapter concludes with a checklist of questions and actions that reflect either Wal-Mart’s best practices or a weakness ripe for potential exploitation. One example: “Run the pay week from Thursday to Wednesday so necessary labor cuts are made on the slowest retail days.” The advice is enlivened with anecdotes about Sam Walton, the firm’s founder and exceptional retailer, businessman and manager, who brought his beloved bird dogs to run around each Saturday morning’s meeting.

    The book has no stunning strategic or other insights. But that is not the point.  As Bergdahl explains at the beginning of his book, “Wal-Mart’s success strategies and tactics are easy to understand yet hard to duplicate.” In other words, Wal-Mart owes its success to in-the-trenches execution, based on the total-quality principles of continuous learning and continuous improvement. “By focusing constantly on trying to become more operationally efficient, Wal-Mart sets itself apart from its competitors,” writes Bergdahl. “Wal-Mart isn’t successful because of its strategies so much as because of its lockstep tactical execution of those strategies.”

    These operational advantages include close vendor partnerships, an awesome distribution system that can get products from a California dock into customer hands in as little as 72 hours, and an advanced IT system so integrated that even the temperature of every Wal-Mart store is centrally controlled from the Arkansas headquarters.

    If the organization is undeniably the brand, how do you communicate corporate values, provide consistent service and ensure “lockstep tactical execution,” especially in rapidly growing organizations? The challenge is even more daunting among retailers like Wal-Mart, which pay close to minimum wage, have turnover rates as high as 300% and face an insatiable demand for new employees to staff the one or more stores opening each week. 

    One Wal-Mart answer is the concept of “servant-leadership.” Essentially, that means all managers put the needs of their employees and colleagues first. Managers are required to respond to any request for help, even if it means delaying their own work. The concept stems from Sam Walton’s oft-stated belief that “if you take care of your people, your people will take care of the customer and the business will take care of itself.”

    Another key tool is the corporate story. Sam was a natural storyteller, and his anecdotes illustrating key principles would be repeated from manager to employee to employee for years. In contrast to other large firms, Wal-Mart hires for attitude and then teaches the necessary skills. To overcome the natural human tendency not to hire someone who might outshine us, Wal-Mart requires managers two levels above the open position to interview and approve all new hires. Finally, managers spend more time in the field than they do at headquarters to both communicate corporate messages and obtain firsthand market intelligence.

    Unlike too many other companies which focus on products or sales more than customers, Wal-Mart has an unremitting focus on customers. The Wal-Mart cheer, which reinforces the service culture every day, ends with the question, “Who is number one?” Every employee – or associate, in Wal-martspeak – shouts, “The customer…ALWAYS!”, sometimes even while standing on a chair. When complaints are received, associates ask, “What would you like us to do to fix the problem?” and are empowered to provide the requested solution.

    How can anyone compete against Wal-Mart? As Bergdahl explains in an early chapter, price is not the answer. Because of Wal-Mart’s efficiencies and buying power, retailers can often buy products at Wal-Mart for less than they can get it from a distributor. The key to success involves finding a niche, and providing value-added service, based on intimate customer knowledge. Wal-Mart’s only Achilles heel is its inability to address specific customer requirements, although that weakness is masked by the “10-foot rule” and similar policies. Each associate is required to help, or at least smile at customers, if they are within a 10-foot radius.

    The book has a few minor flaws. Bergdahl is clear about the stress and overwork, but only alludes to the well-publicized labor problems Wal-Mart now faces. Margins have remained at 4% for years, but what happens when advances into new areas can no longer fuel growth? Wal-Mart’s IT capabilities are a primary factor in its success, but they are only discussed in passing.   

    Although this book never mentions “positioning,” “brand vision” or any other of the immeasurable wastes of good ink, What I’ve Learned from Sam Walton is actually one of the best branding books I’ve read. It clearly spells out how companies can achieve operational excellence, upgrade their workforce and unify an organization around customer requirements, even in brutal competitive arenas. It reads well, with a nice balance between soft anecdotes and hard advice. If you believe brand success depends on “lockstep tactical execution” instead of pontification, get this book.

   



   

    

IBM-Lenovo: Today's Best Branding & Business Story

    The most interesting business story today concerns the acquisition of IBM's PC business by China's largest PC maker, Lenovo Group. The story deserves scrutiny by anyone interested in business and branding for five reasons:

• It marks yet another milestone in the emergence of Chinese brands, which one day will have as great an impact on Western consumers as Japanese brands do today.
• It symbolizes the current biggest trend in business strategy – the move away from focusing on revenue and/or sales growth toward profitability growth.
• It is a recognition that PCs are following the same path as handheld calculators – moving from valuable corporate assets to commodities to promotional giveaways.
• It represents the battleground between the corporate drive for profitability and the national interest in protecting intellectual and security assets.
• Finally, it provides a look at the rewards and risks when portions of brands are turned over to other firms.

    Last December, Lenovo Group, China’s leading PC vendor, agreed to pay about $1.8 billion in cash and equity for IBM’s PC business. Overnight, Lenovo became the world’s third-largest personal computing company, with a worldwide market share of about 8%. (The leader, Dell, has about 18%.) In addition to the funds, IBM also gets a roughly 19% stake in the fast-growing firm, started in 1984 by Beijing professors on an investment of about $24,000, and another foothold in the fast-growing Asian market.

    Lenovo is following in the footsteps of other Chinese firms who have moved from either being distributors or OEMs of Western firms to being worldwide brands themselves. Wal-Mart and Best Buy are selling branded Haier refrigerators, enabling the Chinese firm to capture about 15% of the US market in about five years. Mobile handset and TV maker TCL is now producing Alcatel handsets and selling the RCA-branded TV sets In the US. Huawei is gaining on Cisco, especially in the Middle East and eastern Europe. The Chinese acquisition has more than a touch of symbolism about it, since it was IBM who kickstarted the personal computing market - one of the top five defining transformations of the last quarter century and a sign of US technological dominance - by introducing the IBM PC in August 1981, complete with 16KB of RAM.

    The sale also marks a change in IBM’s strategy. Previously, IBM held onto the PC unit because of its 12% contribution to gross revenue. That gave IBM bragging rights and pleased Wall Street. However, profitability was minimal, at best. In the first nine months of 2004, IBM's PC business earned margins of 0.75%. Even grocery stores do better. Previously, the unit had lost almost $1 billion from 2001. With the sale, IBM is advancing further along its goal of pursuing profitability growth, not revenue or sales growth, as many firms wedded to dated corporate strategies are. It also avoids further major capital investment, including those that will have to be paid to comply with emerging environmental protection and conservation rules in the EU and other areas.

    When calculators first emerged they were so expensive that corporations reserved them for the few and locked them up at night. PCs are now commodities, but it is inevitable that they become a desktop accessory like today’s calculators. That will partly be due to declining component costs and Moore’s Law advances. A more important factor will be the rise in utility computing, when distant consolidated data centers supply processing power and applications to businesses and consumers. Only a keyboard, monitor and Internet connection – not a CPU – will be required. Who will want to be in the PC business then? Even now, Gartner is forecasting that three of the top 10 PC vendors will depart the market by 2007, forced out by profit margins as low as 2%.

    The Lenovo-IBM deal has not been finalized yet, primarily because of government concerns. As part of the deal, Lenovo managers will be located in IBM’s North Carolina site, a major R&D facility. US officials are worried about the potential loss of security and technology secrets, and have outlined potential dark scenarios if government contracts lead to Chinese PCs being used by military or intelligence organizations. The ultimate decision will clarify the murky area outlining where corporate interests end and public and/or government interests begin.

    As part of the deal, Lenovo gets exclusive access to the IBM logo for five years and permanently acquires the well-regarded "ThinkPad" brand. What happens to IBM’s reputation for service and quality in servers and software if ThinkPads and other Lenovo-produced items turn out to be lemons? Both IBM and Lenovo pooh-pooh the notion, since 10,000 IBM personnel are joining the Lenovo organization and IBM has long outsourced the manufacturing of its low-end computers. But more than one company has been burned by putting distribution, support and other key activities in the hands of others. Remember what happened to Texas Instruments laptops until it sold that division to Acer?

    Keep your eye on this story. This is going to be a casebook study in branding and other areas for a long time.

The Next Frontier in Advertising

Quick! Name the fifth largest TV network in the US. 

Surprisingly, it is not Fox, or one of the cable giants. It is the Wal-Mart TV Network.

The Wal-Mart network, which started in 1998, shows previews of upcoming movies, sport highlights and, of course, the obligatory corporate propaganda in almost all of the retail giant's 2,600 U.S. locations.  Because of  42-inch high-def LCD displays, special speakers and prime end-of-aisle locations, the average person watched the network for seven minutes per store visit, according to a study by Nielsen Media Research. That is up 44% from 2002.

Wal-Mart is currently upgrading its network with new displays and equipment.  One significant upgrade involves the ability to broadcast different programs to different departments. Instead of changing channels, you can just move from the produce to the housewares department.

As a result of the network's reach and departmental targeting, advertisers pay $137,000 to $292,000 to show a single commercial for four weeks. The ads often include directions to the aisle where corporate products are displayed.  Demand and advertising budgets have been growing at double-digit rates for the past few years. Rates will undoubtedly rise, especially after programs and ads can be segmented by department.

Sales are definitely impacted, whether advertising-related or not. In one store, a screen is above a banana display. Says the manager: "A lot of [customers] are picking up bananas without even looking at them. They're looking at the TV."

Soon train commuters will also know the distracting power of TV. The New York-based The Rail Network is installing TVs in Atlanta's subway system for free, and will give the financially strapped system a cut of the advertising.  MetroPCS, Chevrolet and Cadillac have already signed up. Similar ad-supported systems have been in schools for years, although there has been some rollback because of a backlash against the commercialization of the classroom.

Undoubtedly, this trend will grow. Advertisers, scared by the decline in TV viewership and systems that can skip ads, are obviously attracted to a vehicle that provides a captive audience among a well-defined demographic. Even a trip to the local convenience store will mean seeing specialized and localized TV advertising.

When this happens, look for upscale and other stores to promote themselves as "ad-free," just as some businesses proudly announce that they are "smoke-free" or "MSG-free."

7 Habits of Highly Effective Blog PR

      As the mass media descends into semi-irrelevance, blogging is ascending. Blogs have driven US Senator Lott from power, outed a GOP flack who was asking softball questions for Bush during press conferences and working as a gay escort at night, and caused a CNN executive to resign for remarks at an international conference. Even the journalism school at the University of California, Berkeley, now plans to offer a graduate-level course in blogs. As a result, branding executives must pay greater attention to blogs in three ways.

        First, they must distribute their story to blogs, for much the same reasons that they have sought to distribute their story to print, radio and TV media for decades. Second, they must use blogs as a corporate and crisis communications tool. Finally, they must use blogs as a periscope that can provide insights into what customers, prospects and even the disenchanted are saying about offerings.

    For those who seek to communicate a brand story through blogs, here are seven rules for highly effective blog PR:

• Never pitch, personalize: A long-standing tenet of effective PR has been to read the publication and, ideally, the reporter's work. That has been like  preaching abstinence to teen-agers: great in theory, but not very applicable to the real world. No PR person could be expected to read all publications pertaining to a company or an industry, much less of a reporter's work. But a blog has everything a blogger has written, complemented by relevant links.  There is absolutely no excuse for not knowing what  a blogger's passions and idiosyncrasies are before  you converse about - not pitch - a concept.

• Respect a blogger's time and intelligence: Start emails with an informative subject line. "Press release" is grounds for immediate deletion. Make emails short  and concise. Avoid attachments. Especially avoid PowerPoint attachments. If anyone can show me a corporate PowerPoint presentation that was worth  the bandwidth, I will personally clean your cat's litterbox for a month. Do not send HTML email, which has dangerous potential. Do not kowtow; remember it's a conversation. No more "read your great post" or other pick-up lines. Do not send an email to a blogger until your Web site is in order, with the  information and a contact easy to findä and read. 

• "A blog is not about you, it is about me:" Never, ever use the words, "I think your readers would be interested in this story." To a large extent, bloggers are more interested  in a point of view or the power of an idea than they are "readers." While the thought of a worldwide audience is certainly an ego rush, many bloggers would continue  blogging for an audience of one. Think less about what  I can do for you and more about what you can do for  me. Can you get immediate access to a top exec? Provide a customer to talk? What about metrics?

• Quality, not quantity: Here's a new rule for agencies. Never send out more than one or two communications to blogs a day. Use the remaining time to research the  industry and relevant issues, study the blogger's hot buttons and craft a finely tuned email. Make the email  seem like it's coming from a knowledgeable best friend, not a direct mail house.

• Feed the food chain: In the distant days when I had a PR agency, clients would ask, "How do I make the cover of BusinessWeek?" First step: Make the cover of their  industry publication, and inevitably coverage in better-known publications will follow. Already, almost every industry has its blogging superstars, the go-to bloggers for both insight  and buzz. Instead of stuffing their inbox, start by conversing with the bloggers who are likely being read by  the superstar. That's not hard; just read blogrolls of the superstars.

• It's no longer just about the media: Many PR professionals  focus on the prominent journalists and influencers who have blogs. That is understandable. But remember that customers, prospects, suppliers, industry associations and others who can influence your brand also have blogs. Converse intelligently with them as well.

• Keep learning: According to a blog monitoring organization, the number of blogs worth tracking has grown from 1.5 million to 7.5 million in less than six months. This emerging field is changing so fast that even these tips will have to be revised in a year. Keep up by reading at least the blogs of two experienced and thoughtful professionals: Tom Murphy and Steve Rubel.

    Blogging has become an important tool in every branding arsenal. But there are new rules for this new medium. Forget about "positioning" and "one-size-fits-all" press release blasts. Participate in intelligent conversations, not just with journalists but with everyone who helps define your brand.

Tips for Brand Crisis Planning

In 2000, Snow Brand, Japan’s premier dairy foods company, had 45% of the market. Then 15,000 people in western Japan, including children, became ill after consuming the company’s products. The company first tried to downplay the incident, expressing greater concern for its brand than for the victims. Then it hesitated to recall tainted products, even after an order from the Osaka public health centre. Finally, it tried to cover up the primary cause for the sickening. Within days, its market share had fallen to single digits, and eight factories closed. Eventually, the once proud brand had to submit to a takeover bid from Nestle.

Snow Brand, accounting giant Arthur Andersen, airline AirTran and many other companies have learned how quickly a poorly handled crises can damage a brand. Like Snow Brand, companies who do not have a crisis plan in place are especially vulnerable. Every company interested in the sustainability of their brands must have a crisis plan. A crisis is any legal dispute, theft, accident, fire or other disaster that threatens the integrity or reputation of your brand, usually accompanied by negative media attention. In India, for example, both Coca Cola and Pepsi had to defend their brands against allegations that their drinks contained toxins.

Crisis handling, like any potential high-risk situation, requires planning and preparation to minimize negative impact. A crisis plan is guided by three principles. The first is a premium on honesty and accuracy, reinforced by the need to tell all you know when you know it. Lawyers often advise ducking for cover, but this is absolutely the wrong strategy. The next is speed. Without responsiveness to the demand for immediate answers, rumours and half-truths will inevitably fill any information void. Finally, lines of authority and responsibility must be clear. Who will be in charge of fact-gathering, and who will be responsible for informing employees and other constituencies, or lining up alternative suppliers?   

Based on these principles, key elements of a brand crisis plan include:

• Lists of emergency contacts: These not only include police and other emergency services but also the names, numbers and emails of top executives and PR personnel. Supplemental lists must contain the names of media, security and government personnel as well as employees. Others that must be contacted during a crisis can include customers, suppliers, civic organizations and channel partners. Copies of these lists must be accessible inside and outside of corporate offices.

• Website, press release and other templates: Intensity and pandemonium rule during a crisis, punctuated by stakeholder demands for immediate information. When a crisis hits, you want to spend time protecting the brand, not figuring out where to start. Have an emergency website prepared that can be hosted immediately, along with a backup server. Make sure the host can handle the inevitable spikes in demand. Consider using blogs for more immediate updates. Fill-in-the-blank press releases can help get critical information out faster.

• An appointed spokesperson: Only one person should talk to the media. Comfortable in front of a TV camera and with reporters, this person should be knowledgeable about the organization and the crisis at hand. Before talking to reporters, this person must anticipate and rehearse responding to tough questions. Never talk off the record, and never let more than one person speak for the company.

A brand is built on a fragile foundation of trust. As Snow Brand and others have found out to their dismay, responding too slowly to a crisis, failing to accept responsibility  or communicating poorly with the public can destroy such trust. The tsunami tragedy taught us that disaster can strike at any time from unexpected sources. Be prepared with a crisis brand plan.

JWT: Dumb-Ass Branding, or the Perils of Rewriting Corporate DNA

J. Walter Thompson has changed its name to JWT. Was it the right choice?

J. Walter Thompson has long been the iconic Madison Avenue agency. For years - no, decades - it has done advertising for Unilever, Ford and Pfizer, defining mass market advertising. The roots of the firm were established in 1864 as "Carlton & Smith," which specialized in buying and selling space in religious journals. In 1874 J. Walter Thompson bought the New York firm and renamed it after himself. No wonder "venerable" always seemed to precede the agency name.

Last year, Bob Jeffrey was named as CEO of J. Walter. He rightly recognized that the world of mass-market branding was dead. Audiences are either too jaded or too segmented for television -- J. Walter's long-time bread-and-butter. Direct mail is no more than landfill fodder and telemarketers have all the social cachet of child pornographers. Jeffrey understands that consumers now have the power to make or break brands. Success does not lie in how brands are "positioned," as the dinosaurs Trout and Ries continue to argue 30 years after their once-novel idea, but in how customers "participate" in the brand.

In Jeffrey's words: "Time is the new currency. Our job is to ensure that more people spend more time with our clients' brands. We need to create ideas that people want to spend more time with. The better the idea the more time people will spend with it."

As a result, Jeffrey is pushing, pulling and prodding the venerable firm into the digital age. He has brought in a new creative director. He has made the firm's digital expertise -- not its TV experience -- the basis of successful new pitches. Campaigns launch first on the Web with rich media, not on TV. It has employed interactivity effectively, such as the "Design Your Own Engagement Ring" on the Web for the diamond-giant De Beers. Women can customize their engagement ring, then email a not-so-subtle hint to the men in their lives. Such innovation has deep roots. In 1930, J. Walter Thompson supported the first TV show, sending the message for Libby's out to 44 TV sets nationwide.

Jeffrey argues that just as the corporate DNA has changed, so must the name. Frankly, I'm a bit cynical such proclamations. How many times have we heard agencies say, yes, now we truly get it, and then see only updated Mr. Whipple ads or cars zooming along the same stretch of desert or California highway? But even lip service by an advertising giant to the idea that brands can no longer "position" themselves to customers but instead must embark on interactive relationships is welcome news indeed.

So what does Jeffrey do to execute this new vision and send the message that old-time "positioning" and bloated TV budgets are dead and buried along with disco and polyester pants? He changes J. Walter Thompson's name to "JWT."

What message does "JWT" communicate? While J. Walter Thompson had an enviable, upper-class ring as it rolled smoothly off the tongue, JWT communicates nothing. JWT could mean a manufacturing firm, or a shipping company, or even a start-up tow-truck company. While the need for a name change to reflect the new direction is certainly debatable, surely the creative minds at the agency could have come up with something more definitive and defining than "JWT."

Ask yourself: You are a company looking to communicate verve, excitement, innovation and an ability to connect with customers. Would you hire a firm seeking to send the same message who renamed itself "JWT?"

Still, I wish Jeffrey all the luck in the world, and applaud his insight. He has gotten off on the wrong foot with a misbegotten name-change, but the race will be won by those that can execute best in the new customer economy. Here's hoping that he can teach the old J.Walter Thompson elephant not just to dance, but to swagger as well.

Ernst & Young and Other Converts to Profitability Growth

Ernst & Young, KPMG PricewaterhouseCoopers and Deloitte & Touche are dropping clients "in droves," according to Audit Analytics, a Web-based research firm that tracks auditor changes, opinions and fees.
In 2004, the Big Four resigned from 210 public companies, compared with 152 in 2003 and 78 in 2002. Instead of dropping clients, other well-known account firms, such as BDO Seidman, are increasing fees by 40-100%.

The reason: The extra work required by the US financial disclosure law Sarbanes-Oxley makes it much harder to make a profit on smaller clients. Sarbanes-Oxley, passed in the wake of the Enron, WorldCom and other corporate scandals, requires companies to increase the transparency of their accounting and makes top executives personally liable for their accuracy. The result has been to increase the amount of oversight required.

In general, the auditors are not increasing the size of their staffs or hanging out "clients wanted" signs to increase market share. Instead, they are concentrating on maintaining and increasing profitability, even if it means fewer clients. James Turley, chairman and chief executive office of Ernst & Young, put it bluntly during Congressional testimony in last September: "Our client acceptance and reacceptance processes have been reengineered with an increased focus on determining which companies we really want as audit clients...."

The accounting firms are just joining the ranks of other firms, such as Ford and Best Buy, that are abandoning the false gods of sales ("let's increase sales by 15% next quarter") or market share ("let's be #1!") growth. These companies have realized that pursuing sales or market share growth results in the acquisition of unprofitable customers, which hurts the bottom line. They are realizing that the key to success is profitability growth. Sometimes that means turning away or turning down those who are likely to unprofitable. It's a lesson that all brands must learn.

There's another lesson here, too: If you're a mid-sized firm, start looking now for financial audit alternatives.