Archive for April, 2006

How the Apple brand conquers retail space

Friday, April 28th, 2006

When you walk into an Apple store you feel your spirits lift, your senses sharpen. That’s a function of a retail space shaped by the Apple brand. And it’s no accident.

If you’ve ever wanted a detailed account of how Apple manages its brand in its retail stores, the ifoAppleStore blog is the place to go.

It’s all here: store basics, design, layout, brand identity, customer experience, architectures of participation and architectures of purchase, and the constant tweaks and adjustments to make it all work.

You can even learn all about those fabulous glass stairs.

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Starbucks gossip

Friday, April 28th, 2006

Waaay too much caffeine: Starbucks Gossip.

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Mini-Microsoft, many Microsofts, and brands

Friday, April 28th, 2006

Microsoft critic Mini-Microsoft wants Microsoft restructured into a “lean, mean, efficient, customer-pleasing profit making machine,” reminiscent of its glory days. Wall Street guru Barry Ritholtz joins those who think the answer is to break the Redmond giant into “many Microsofts,” where each new business has to swim on its own.

Ritholtz offers this bleak perspective:

I have never been a big fan of the Mister Softee. From a tech standpoint, their products are kludgy and unimpressive. Their strong suit is not Innovation — it is relentless, incremental improvement, eventually leading to a decent if underwhelming product. What they end up producing are the lowest common denominator bloatware that can be easily managed by a corporate IT staff.

It is a great cash flow machine.

From an investment perspective, there are 2 key issues to observe: first, they are a mature company whose fast growth days are well behind them. They are too big to be responsive, too expensive to be a value stock, too slow growing to be a growth stock. In short, they are in the process of morphing from the software PC leadership company to nice, quiet, money machine. I would expect a good entry purchase (i.e., from lower levels) could throw off gains of 10-15% a year, including their dividend.

The second thing to observe — and all too many investors overlook this — is that the money is in the monopoly products. Except for Windows and Office, pretty much everything else is 3rd rate money-loser, with SQL as the exception. They have a few products that have slowly began to move up the scale, and their hardware products aren’t bad, but note where the lion’s share of their revenue, and nearly all of their profits come from: the Monopoly.

Read the whole post, including the comments. In my view he’s overly harsh, and doesn’t factor in the immense level of talent in Redmond and other MS offices.

The brand challenge
Between Mini-Microsoft and “many Microsofts,” no one wants Microsoft to “stay the course.” Google paranoia is rampant. The rise of Ray Ozzie portends a huge internal refocusing on web-based applications.

This is also a defining brand challenge for Microsoft. As I see it, Microsoft has to reach to its roots and find ways to decouple its brand from the inertia of its entrenched markets. In other words, it needs to create customers who are agents of change. This is a tall order, because most of its core business is focused on locking customers into the Windows platform, where change is limited by Microsoft.

Microsoft’s biggest threat from Google is not over search technology, or Web 2.0 apps, or even ad revenues. It is over which brand owns the keys to change things for the better. That includes helping customers raise themselves to new levels in the process.

Creating new customers to fit an old mold is definitely not the answer.

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Brands and “dynamic peer clusters”

Thursday, April 27th, 2006

Brands are finally beginning to realize that their future lies in semantic and semiotic networks, where they stand to reap large benefits from the dynamics of network effects and peer-to-peer relationships.

Thus, my eyes lit up when Tom Evslin at Fractals of Change noted the growing importance of “dynamic peer clusters” as a form of social recommendation engine for purchases of music, books and related goods.

When I saw the phrase “dynamic peer clusters” my mind said: that’s exactly what brand programs should create. As our home page states (quoting this for the nth time):

Brands of the future will not be top-down monoliths. They will be a thousand agile initiatives, loosely coupled, rich in customer texture, often sparked by customers themselves.

Tom defines dynamic peer clusters as “groups of people who like the same books or movies or music or whatever as you do.” These can become “a perfect source for recommendations of new books or movies or music or whatever.”

Last.fm and Netflix are two examples of how dynamic peer clusters can help subscribers discover more items of interest and enjoyment. They provide a network effect of shared taste that gains insight and authenticity the larger it grows.

Why brands need peer clusters
In their present state most brands generate poorly formed dynamic peer clusters. As a result, they leave billions of dollars in value on the table. That value is locked away in the archaic and closed “build it, brand it, sell it” paradigm, and in traditional top-down brand campaigns. Not only could this brand value be out there “working” among customers, it could be engaging customers to create more value on their own, which could be added back to the brand.

Creating customers and creating clusters
The purpose of a brand is to create the customers that will carry the company forward. For the brand, this means engaging customers and delivering new forms of value that customers can use. Specifically, these are forms of value that free customers from a tyranny of routine, cost, diminished opportunity, or impeded growth.

The customers that your brand creates (however imperfectly) become a default peer cluster. They can be a weak cluster–no more than an uninspired, quasi-connected aggregation of “buyers”– or they can become a highly-charged nucleus that autonomically connects with other peers. A recommendation network may be one form, but an customer-driven engine to discover new forms of brand context is much more valuable. Context makes markets. If your customers actively connect one another to richer states of being, and richer states of meaning, your brand can begin to realize its potential.

Grow the customer, grow the brand, grow the business
Thus, when a company like BMW (for example) shapes its brand, it would have a fairly precise idea of the customer it intends to create, and the tenor of the dynamic peer clusters needed to grow the customer, and the brand. To design a brand/customer that does not leverage peer clusters would be a disservice to the brand, and the business.

Photo op: a peer-to-peer brand cluster.

Peer clusters and brand design
Given the importance of dynamic peer clusters to brand growth, the brand design process should be modified accordingly. It should now address these questions:

  1. What kind of networked customer do we want to design?
  2. How do we create this customer across the brand platform?
  3. What type of dynamic peer cluster should we create with our brand?
  4. How will this cluster enable our customers to grow our brand by growing themselves?

How a brand answers these questions will play a large role in how deeply it engages its customer base.

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Photo source: Clearly Ambiguous, Flickr

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Let your customers build your brand: Yahoo

Thursday, April 27th, 2006

Yahoo now enables video mashups with a spiffy prototype online remix tool. If this becomes fully baked, video mashups will be emailed back and forth, networked, and mashed anew, creating a neverending stream of chain letters as endless, iterative flicks. Yahoo Research was the developer.

Little tools like these are the happy feet of larger platforms.

When you dramatically reduce a barrier to entry into a compelling activity, and free people to grow new capabilities, you can dramatically increase the customer value of your brand.

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Jane Jacobs — 1916-2006

Wednesday, April 26th, 2006

A great individual in so many ways, Jane Jacobs understood that cities are civic brands that grow their residents (and visitors) with an energy, imagination and richness found nowhere else.

She may not have invented the term, “architecture of participation,” but she taught the world that a city is indeed an architecture of participation, writ large.

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When the brand ecosystem speaks . . .

Tuesday, April 25th, 2006

Paul Thurrott, a leader in the Microsoft brand ecosystem, laments the broken promises, delays and performance shortfalls of Microsoft’s upcoming Vista operating system.

His concerns raise questions about the viability of the Vista brand itself:

  1. After so many missteps, does it have the integrity of vision to lead Microsoft customers?
  2. Is it “different enough” from Windows XP to warrant an upgrade?
  3. Can Vista generate a brand platform that raises computing to the next level in productivity and user experience, and thereby raise the Microsoft brand ecosystem with it?
  4. Can the Vista brand create and grow new customers, given that Apple OS X ships now with a competitive feature set, and Vista isn’t due until 2007?

Why the brand ecosystem matters
A company’s brand ecosystem consists of those parties outside the company who nurture and grow the brand. They are the positive (charged) layer of the brand’s public sphere. They include customers, potential customers, lead users, partners, complementors, fans, and media influencers (print and online).

Often, the brand ecosystem has a better perspective on the brand than the company itself. The ecosystem depends on the value that the brand delivers. It sees the brand in the hard light of reality.

When the brand ecosystem speaks, companies that value their brands listen.

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How MySpace creates customers

Monday, April 24th, 2006

How does MySpace do it? Microsoft, AOL and Yahoo are green with envy at the skyrocketing membership numbers MySpace is putting up. Last I looked it was 67,000,000 and counting, zooming along at 250,000 new members a day. Even if these growth numbers include a healthy dose of puff, they’re figures any online business would die for.

And MySpace is only three years old.

Question: How does MySpace create all those customers?
What’s the secret?

Answer: They don’t use conventional stoke ‘n smoke marketing. They let customers create themselves. It’s as simple as that. MySpace gives members the tools to express their individuality and to connect with friends, and then gets out of the way.

MySpace is a prime example of less is more: less marketing presence means more room for customers to grow—and more customers. Given the right tools and freedoms, customers are far more creative than any marketing plan.

When customers are the product, the product itself becomes endlessly inventive across an infinite array of value domains.

A brand from the bottom up
MySpace does much more than simply unleash the inner customer (although that in itself is an achievement). It sets a standard for “brands from the bottom up.” It doesn’t impose a top-down brand uniformity (like Gap), control customers without their knowledge (like Sony), or lend customers a tethered toy (like GM). It simply fuels the dynamic passions of its customers, and hops on for the ride.

As we’ve noted elsewhere: “Brands of the future will not be top-down monoliths. They will be a thousand agile initiatives, loosely coupled, rich in customer texture, often sparked by customers themselves.”

Ergo, MySpace.

When you read Danah Boyd’s now classic report on the attractions of MySpace, you can see why this particular site has developed so rapidly. It doesn’t try to mesmerize customers as an all-powerful brand icon. Its design cachet is far from world class, being that of a dizzy teenager’s bedroom. It doesn’t need to waste resources on these elements because it is close to the bone.

That’s where every brand belongs.

Can MySpace endure?
Two issues seem paramount: 1) the internal MySpace dynamics as a hangout for fickle teens and twenty-somethings, and 2) how MySpace management tries to leverage more revenue from the brand. There are no hard answers at this time. MySpace is traveling in unexplored territory.

Danah Boyd addresses the first question in a follow-up piece, where she contrasts a fast-growing MySpace with the now-declining Friendster. She seems guardedly optimistic, and gives the advantage to MySpace.

An NYT report (sub required) examines how MySpace’s new corporate owners plan to generate more revenue from the site, and integrate it into a broader media package. The danger here is that MySpace is not your typical “media property.” Any ham-handed attempts to “monetize” MySpace customers would backfire. In the MySpace world, overt marketing is worse than lame. It sucks.

Since the site cannot be simply “reprogrammed” for the benefit of traditional advertising, new and more inventive means of facilitating transactions must be found, consistent with the brand. (Brands and ads approach the customer from totally different directions: ads motivate, while brands animate from within.)

Whether MySpace survives as is, or morphs into something (or things) different, it has the inherent brand advantage of being customer driven. That gives it a foothold in reality that’s hard to displace.

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