Brands Create Customers

Recent articles in Computerworld and InfoWorld examine the future of Microsoft Windows from a customer perspective, and they don’t find that future especially bright. What they describe is a growing gap between Microsoft’s self interests and the needs of customers, at both the enterprise and personal level. One indicator of this gap is slow or grudging customer migration to new Microsoft offerings. Another indicator is the growing consideration of alternative platforms, such as Apple. These are signs of a deepening brand disconnect at Microsoft, or of no brand presence at all.

At stake: Microsoft brand trust and brand leadership

What’s at stake is trust in the Microsoft brand, and the brand’s ability to lead. A key issue is Vista, Microsoft’s much-maligned new operating system. A detailed customer survey indicates that for many users, Vista threatens to make Windows computing worse, not better, at least when compared to the stability and efficiency of the current Windows XP.

Microsoft has loads of fence sitters or hold outs to worry about. Thirty-seven percent of all businesses—48 percent for those with 10-999 employees—do not plan to “implement” Windows Vista within two years. Thirty-four percent—40 percent for businesses with 1,000 or more employees—are unsure.

In the words of an AP report, many Windows XP users “dread” switching to Vista.

When customers dread your latest innovation, your brand trust is broken. When customers pay specialists to physically remove your latest innovations from their computers, your brand is your own worst enemy.

Consequences of Microsoft’s approach

As I’ve noted previously, delivering brand value has not been a high priority at Microsoft. Rather than deliver the best brand experience to customers, Microsoft decided years ago that it was easier (for them) to make Microsoft the only brand in town. This encouraged Microsoft to treat its customers by the rules of market power, not brands. The result was a brand agenda of maximum customer containment and minimum innovation.

Microsoft can play this card (and keep control of its customers) only as long as it retains dominant market power. Microsoft is betting that almost all PC customers will eventually migrate to Vista, whether they wish to or not, since 95% of all new computers ship with Vista, and Windows XP is being taken off the market.

The downside of this approach is that it conditions Microsoft to think about innovation as a means of customer control, rather than new ways to deliver brand value, or to grow customers into new markets. The more Microsoft “locks in” customers, the more it “locks out” market-changing innovation. If you’re a Microsoft customer, the future might appear as one of infinite gloom.

Microsoft’s approach opens doors for competitors

Another downside of Microsoft’s “non-brand” approach is that it opens doors for competitors: Google, Apple and new entrants whose strength is a digital cloud that frees customers from current constraints. Microsoft is, of course, one of those constraints. To a certain degree, Microsoft now competes against the whole innovative sector of Web 2.0 and social computing.

Cloud computing is brand computing

Indeed, in the coming era of “cloud computing” many software functions will migrate from the desktop to the ubiquitous Internet “cloud,” a happy place of fleecy white puffs where users can do more with less and be “always on.” But cloud computing is a major challenge for Microsoft, because cloud computing is brand computing. It will be predicated on brand trust. Lose that trust and customers can turn elsewhere, since there are few “legacy” clouds in the Internet sky.

Those ominous clouds over Microsoft may send customers toward more inviting clouds, and to the brands behind them.

Photo: alexdecarvalho — Flickr

Troubled movie rental chain Blockbuster announced today that it has offered up to $1.3 billion to buy troubled electronics retailer Circuit City. While the announcement of this shotgun sandwich led to a lot of head scratching on Wall Street, Blockbuster said the deal would deliver new customer value in electronics and digital media. The company was a bit short on specifics, but did mention a new combined business based (very loosely) on “digital convergence” and Apple Stores.

Little brand logic behind the deal

Frankly, it’s hard to see any compelling brand logic behind this move. Based on their recent poor performance, the two companies haven’t figured how to sustain deep connections with customers in their respective markets. At best, joining up might deliver some rather “iffy” value streams, like Circuit City upselling movie subscriptions with sales of DVD players. It’s hard to see what new kind of customer this unlikely combo could create. The comparison to Apple Stores is far too stretched to be credible.

Synergies questioned

Indeed, many Wall Street analysts wondered what real “synergies” the deal would produce, and whether these two companies could produce any such synergies.

From Reuters:

‘It’s not quite clear to me what (Blockbuster’s) intentions are, how they would finance it, what’s the strategic rationale for the deal,’ said Dennis Bryan, a partner and portfolio manager with First Pacific Advisors, a Circuit City shareholder.

‘The world is littered with remnants of bankrupt retailers,’ said Michael Pachter, an analyst with Wedbush Morgan. ‘It’s a bad idea.’ . . . ‘Blockbuster has not yet completed its own turnaround. . . . . Circuit City has serious problems and I’m not sure if Blockbuster management has demonstrated it has the skills to turn those around.’

Failure meets fiasco?

Columnist John Paczkowski labeled this proposed buy-out, “failure meets fiasco.”

Like what, exactly, are the synergies between a foundering movie rental chain and a foundering electronics retailer—aside from the fact that they’re both, you know, foundering? If it’s Blockbuster rental kiosks in Circuit City stores, the alliance would seem doomed to failure. Wait. It is Blockbuster rental kiosks in Circuit City stores.

When brands are reduced to “assets”

There’s a large amount of deal making behind the proposed buyout, involving agendas of activist and dissident shareholders on both sides, as the Wall Street Journal notes. In this context, brands play no proactive role in either business. They’re reduced to “assets,” just as customers are reduced to “sales.”

The problem with the asset approach to brands is that if often kills innovation. Brands become part of valuation packages. They no longer create value themselves. Perhaps that’s one reason why both companies are in such trouble to begin with.

Photo: jslander — Flickr

Brand builders are generally very familiar with the concept of “whitespace” used by designers. In design, whitespace is usually defined as the space between elements in a composition. This is not “empty” space but an organizing force in its own right, one that can add considerable power and emotion to a design or layout.

A related kind of whitespace plays an important role in brands. What I call “brand whitespace” is conceptually akin to the whitespace of designers, but in brands it’s a behavioral space for customers rather than a graphic one for layouts. Brand whitespace is the new maneuvering room that a brand creates for its customers. It can make a dramatic difference in how customers perceive a brand, and interact with it.

Brand whitespace is engagement space

Brand whitespace flows from the brand context that we create for, and around, customers. It forms the “engagement space” of the brand, where customer potential meets brand potential. The larger the brand whitespace, the more freedom the customer has to interact with the brand, to do something proactive with it, and to extend it. With this customer freedom, brand whitespace helps us create customers who can add value back to the brand.

Breathing room

You can think of brand whitespace as the breathing room of a brand. Creative brands offer lots of whitespace because they want the customer to be creative, too. Brand whitespace is that blast of fresh, bracing air that customers inhale in the presence of your brand programs. The more nourishing that atmosphere the more sustaining the brand engagement, and the more new life customers can breathe back into the brand.

Why brand whitespace matters

Brands suffer when they fail to create sufficient whitespace for customers. This can occur when a brand tries to impose a belief system from above, using campaigns of messaging, theatrics and special effects. Such an approach can choke the customer out of the brand. Without whitespace the brand becomes a series of pronouncements about itself: one-dimensional, top-heavy, closed, cloistered and stale. With no space of their own, customers can’t freely interact with the brand or with each other. With a diminished air supply they become passive and dull. The brand itself eventually withers to doctrine and drill, kept alive only by inertia.

Brand whitespace is interaction space

Brand whitespace is brand interaction space. It is where the brand and the customer join to advance their mutual agenda. Brands, of course, are a two-way street. An airy brand whitespace can transform that street from a cramped, one-way alley into a bustling two-way thoroughfare, opening the gates to ideas, insights, innovations and emotions. The more freedom that the whitespace affords the customer, the more the customer can interact with the company, the brand, and other customers to generate new forms of brand value.

Brand whitespace is collaboration space

We design brand whitespace as a context of collaboration and joint discovery. It’s an open work space where the customer and the brand join forces. This is a space of partners, and of equals. The more stimulating the brand whitespace that you provide, the more your customers are free to grow in new directions, taking your brands with them into potential new markets.

Brand whitespace is innovation space

We need brand whitespace so our brands can fully benefit from the initiative and innovation of the customers we create. In this context, brand whitespace is the customer’s opportunity space, mediated by the brand. I like to think of it as a virtual sandbox, where the brand and the customer are free to experiment, explore, prototype and iterate.

Brand whitespace helps advance the customer

Brand whitespace is customer growth space. It helps advance your customers beyond the reach of competitors. In the process it helps transform customers from lowly marketing “targets” to a living brand resources with value-adding potential. By giving customers the freedom to maneuver in the context of the brand, the brand can elevate customers from passive “consumers” to active brand participants and partners.

The brand goal here is twofold: 1) leverage customer insight and initiative to create new forms of value that competitors can’t match; 2) let customers take the brand into new markets where competitors can’t follow.

From a brand perspective, your customers are your greatest competitive weapon. Creating a stimulating whitespace is one way to build out your competitive arsenal.

The measure of brand whitespace

The measure of brand whitespace lies in the degrees of freedom that the brand makes available to customers, within the brand context. These can stem from the company, the product, the brand and the customer. On an axis, the low end of whitespace would be propaganda, and the high end would be partnership.

How to create brand whitespace

How do we create the brand whitespace that both brands and customers need? The answer will differ with every brand, but here are some general guidelines:

1. Understand that your brand is a method for creating customer value. Brand whitespace is one of your premier tools. It’s a new context of freedom that you deliver.
2. Your brand whitespace will determine how freely your customers interact and interoperate with your brand. The greater the freedom your brand confers, the greater your potential brand drive from below.
3. Conceive your brand as a shared innovation platform with customers. Brand whitespace forms an innovation sandbox where you and customers can tinker.
4. Build your brand as a means, rather than an essence. A brand that enables customers to shape new forms of self and to do new things will have plenty of whitespace where customers can re-create themselves through the brand.
5. Design your brand to deliver freedoms that competitors can’t match. Use your whitespace as a competitive weapon to win customers to your side.
6. Brands designed as messaging campaigns usually offer very little whitespace for customers. They clutter the customer’s world, and are vulnerable to brands that take a whitespace approach.
7. Brand whitespace is customer headroom. It’s a sign that you respect your customers.
8. Create a brand context larger than the company. Share this context with customers. Ask them to help shape it, and to move it forward.
9. Use your brand whitespace to open avenues of collaboration, initiative and innovation between customers and the brand, and between customers themselves.
10. How you present your brand can prefigure the brand whitespace you make available to customers.

In future posts I’ll identity specific cases of brand whitespace and how they help build strategic advantage for the brands involved.

Recent surveys by M:Metrics and Rubicon offer further evidence that the iPhone is shaping up as a premier platform for building brands. Third-party applications are booming, and iPhone users are increasingly going online. Google Maps, Flickr and YouTube are popular on the iPhone, as are online news and social applications such as Facebook.

For brands, the question increasingly becomes: How can our brand leverage the iPhone? How can we make it our platform, too?

Choosing the optimum iPhone approach

A brand can take a passive approach toward the iPhone, or a proactive one. A passive approach will pretend that the iPhone is a TV and be content to advertise, using traditional media methods. In a proactive approach, the brand develops a unique iPhone application that co-creates value with customers, in ways that competitors can’t match. Brands with this approach aim to become an iPhone player in their own right—and a big one.

The iPhone opportunity for your brand

Would people want an iPhone because it runs a super-cool application backed by your brand? Or will the application come from a competitor?

There will be killer iPhone apps for every profession and every customer passion. Apple can’t develop all of these. And that leaves room for you.

The brands that will gain the most from the iPhone platform will be those that raise themselves to the level of platform player. Through their applications they can advance the iPhone platform itself, making it more effective (and more desirable) as a means of personal expression and engagement.

The iPhone as lifestyle platform

If the iPhone is setting the standard for mobile devices of the future (and it’s hard to assume otherwise), then it’s likely that the iPhone will become the lifestyle platform of a valuable, growing demographic whose lives are geared online. This is a demographic that doesn’t “consume” media. It embraces and engages it, often in the form of interactive applications that users customize to their liking, or invent themselves in mashups.

Brands on the iPhone: portable, personal, persistent

In many ways the iPhone represents the future of brands: portable, personal, persistent. For brand builders, the challenge is to create a brand experience on the iPhone that leverages the iPhone platform in these three dimensions. The more value that your brand can deliver using the iPhone, the more power you’ll have to form enduring customer relationships. iPhone users may be immediate customers of Apple and the carrier, but strategically, their your customers, too.

The iPhone lets your customers take your brand with them—if you give them a reason.

Brands have three choices for an iPhone strategy

In general, brands have three choices in how they might utilize the iPhone platform in a brand-building strategy. From weakest to strongest, these are:

1. Advertise on the iPhone (via the Web browser)
2. Create tag-along, mini-applications in the form of widgets
3. Create personal brand applications that add so much value that they enhance the iPhone itself, making it more vital to customer lifestyles. This is the domain of the brand-driven killer app.

On the iPhone, apps trump ads

Do you want the iPhone to be a channel for your ads, or to be a springboard for your unique brand value? The more you leverage the platform, the more the platform can leverage you.

Brands that want a unique and definitive presence on the iPhone will think of brand applications rather than ads. These apps will leverage the synergies between the digital platform and the brand, recombining them in a new helix of customer value and customer opportunities.

Brand-driven applications on the iPhone may be of any size. They can be web-based (like Facebook, Flickr, Google, etc.) or native apps written with Apple’s new iPhone SDK. Whatever their type, they’ll open up a whole new realm of brands as direct personal applications, where every use has the potential for rich brand interaction.

Brands as co-creators of the iPhone experience

Don’t tell Apple, but brands have the power to become co-creators of the iPhone experience, adding new customer dimensions, applications and platform effects. The iPhone is now the rage because it’s a huge leap beyond competing smartphones. In a few years, however, when owning one is common, it’s the deeply personal apps and a wide open Web that will carry the day.

Photo: Christopher Chan — Flickr

The monumental baggage problems at Heathrow airport’s new Terminal 5 highlight the importance of what I call brand failure points. Brand failure points are critical company operations that can potentially break the brand if they fail to perform. If they do fail, it’s the brand that pays the price, and the price can be heavy. Full recovery may take years.

Brand failure points often hide behind the scenes, far from the brand limelight. A classic brand failure point for a high-flying airline is, of course, lowly baggage. To an airline, it’s a back room job. To passengers, however, it’s front and center.

Brand failure points: off the brand grid

Brand failure points are especially dangerous because they’re typically off the brand grid. They often inhabit the least glamorous parts of a business, far from the glitz and the glamor. They’re usually not addressed in a typical brand program, especially one that lives large on symbols and fanfare. They’re often outside the direct control of the brand team, tucked away in black boxes and back rooms. Potentially, they are silent brand killers, churning and chugging away in the bowels of the business until they suddenly snap—and take the brand with them.

Failure points and points therein

In this post I’ll first discuss the nature of brand failure points, using Heathrow Terminal 5 as an example. Then I’ll suggest basic steps the brand team can take in identifying potential brand failure points, and in failure point management. The latter requires that the brand team assume a much higher profile in company operations.

Let’s begin with a review of what happened at Heathrow Terminal 5.

The potential for lasting damage

Terminal 5 is a gleaming new wing of Heathrow built at a cost of $8.6 billion on the promise to eliminate airport delays and congestion. It is run by airport company BAA and British Airways (BA) as a prime gateway to BA flights. Terminal 5 puts BA’s brand squarely on the line. Unfortunately, the seriously flawed opening is widely viewed as a brand meltdown for BA, with hundreds of canceled flights and thousands of irate fliers. As a grand opening, it was something of a faceplant.

One report called the inauspicious beginning “an absolute national embarrassment.”

From Bloomberg:

British Airways Plc canceled 54 flights today as the chaos at London Heathrow airport’s new Terminal 5 stretched into a third day.

. . .

“This will clearly go on for days,” said Howard Wheeldon, an analyst at BGC Partners LP in London. “The potential for lasting damage to British Airways is far greater than anything that has gone before.”

“A calamitous debut” according to the Los Angeles Times.

A passenger quoted in the Financial Times:

“What a disaster. I was always told that with the arrival of T5 everything would be better. RUBBISH! I was delayed for 1½ hours on a flight that only takes 90 minutes. I still don’t have my bag.”

Perhaps the Financial Times said it best: it will be a “long haul to restore BA’s reputation.”

What went wrong at Heathrow Terminal 5

These are some of the things that went terribly wrong at Terminal 5 as part of its grand opening:

1. Inadequate employee parking caused employees to be late to work as they searched for spaces in employee lots; slow shuttles from alternate lots caused more delays.
2. Once at the Terminal, employees could not get to their stations because not enough security personnel were deployed to screen employees before entry.
3. Baggage handlers underestimated the time it took to get bags from one part of the (huge) Terminal to another.
4. Baggage conveyor belts (10 miles of them) backed up; one belt broke down.
5. At one point, 15,000 bags were stuck in the Terminal baggage system.
6. The first seven flights of day one left Heathrow without checked baggage.
7. In all, 430 flights were canceled.

In addition, as reported by the Independent, BA misinformed affected customers on compensation for delays, and refused to provide hotel rooms for delayed passengers per ticketing agreements.

(more…)

In a turbulent world, brand challenges may come from unexpected quarters.

Bloomberg reports:

Chiquita Brands International, Inc., owner of the namesake banana label, may be forced to pay more than $780 million, or $18.20 a share, if found complicit in the murders of five American missionaries by Marxist rebels a decade ago in Colombia.

From an earlier New York Times report:

Ed Loyd, a spokesman for Chiquita, which is based in Cincinnati, said payments to FARC [rebels] were made during the 1990s to ensure the safety of Chiquita employees working on banana plantations near the Panamanian border, a former stronghold of the leftist guerrillas.

Later, after FARC was forced out of the region by the right-wing paramilitary force known as the United Self-Defense Forces of Colombia, Chiquita continued the practice of paying for protection.

“We always acted to protect the lives of our employees, and the threat was very real,” Mr. Loyd said.

Both the FARC and the United Self-Defense Forces of Colombia have been designated as terrorist organizations by the United States and Columbia.

The US State Department listing of terrorist organizations.

Some legal perspectives at the WSJ Law Blog.

Photo: jek in the box — Flickr

I ended a previous post, How to define the brand mission, by stating that I would compare the brand missions of Google and Microsoft as examples of my approach. This post fulfills that commitment. As a bonus it tosses in Yahoo, since Yahoo is now contemplating an unwelcome buyout bid from Microsoft itself.

What we see in this comparison is one company with a productive brand mission, one company that denies brand value altogether, and one company whose brand mission is so lacking in purpose that it never takes off.

Comparison framework

Please keep in mind that my focus is entirely on the brand mission. As I define it, a company’s brand mission is to create the customers that will drive the business forward. “Creating a customer” is a strategic act that entails a joint venture between company and customer. Each feeds off the initiative and innovation of the other.

Brand Mission Criteria

In comparing and assessing brand missions, these are some of the criteria I consider:

1. What new value does the brand intend to deliver?
2. What kind of customer does the brand aim to create?
3. How will that customer add value back to the brand?
4. How does the brand mission help create a platform for new customer opportunities?
5. Where is the brand leading its customers?
6. How does the brand mission add value over and above the business mission?

Applying the “brand of” test

One way to analyze a company’s brand mission is to ask: What is Company X a “brand of” in the first place? This helps reveal the effective, real world brand mission, not a brand mission that’s tossed up for PR purposes. In my analysis, here’s how these three brands stack up:

1. Google is a brand of Internet opportunity—especially for customers
2. Microsoft is a brand of market power, where the customer is tightly contained
3. Yahoo is a brand of place, where many great things happen—for no particular purpose

Microsoft: business mission trumps brand mission

Microsoft seems to be one of those companies where business mission trumps brand mission. If we define “brand” as a collaboration in value and culture between a company and its customers, it’s reasonable to argue that there is little brand mission at Microsoft. At Microsoft, the customer is targeted for capture and harvest; advancing the customer is not part of the plan. The result is a Microsoft brand that’s frequently viewed with suspicion and distrust.

Microsoft: a brand of market power

To the extent that Microsoft is a “brand of” something, it is a brand of market power. The Microsoft brand mission seems to reduce the marketplace to a Microsoft company town, anchored by a Microsoft company store, where customers are limited to Microsoft’s integrated offerings on Microsoft’s terms and conditions. Is this “bad?” Yes, if you want to stay fresh and grow. This model will eventually grow stale and collapse upon itself.

Microsoft’s goal: make brands irrelevant

Microsoft seems to feel extremely uncomfortable with the concept of brand itself, perhaps because brand responsibilities might interfere with Microsoft’s market power objectives . If Microsoft can force customers into a Microsoft company town where other brands can’t compete, then Microsoft wins “the brand game” by making brands irrelevant. In the absence of effective competition, their “non-brand” wins, no matter what they say or do.

Create customer dependencies, not customers

It appears that Microsoft’s strategy is to create customer dependencies instead of creating customers. Those dependencies translate into market power. The downside is that this strategy typically locks out innovation, and over time alienates customers. In the long run, this strategy is counterproductive. One “payoff” of this strategy is the notable lack of enthusiasm for Microsoft’s most heralded product in years, Microsoft Vista.

Google: a brand mission to unlock Internet value

We’re all familiar with Google’s “Don’t be evil” mantra, but that’s not Google’s brand mission. No, Google’s brand mission is far more disruptive, and revolutionary. It is to unlock the value of the Internet using customers as the key, and as the beneficiaries. That’s pretty Schumpeterian right there. If I were to condense the Google brand mission into one line, it would be this:

Google’s brand mission is to translate Internet capability into customer productivity.

(more…)