Today on a container of Cetaphil I read these words: “The makers of CETAPHIL do not manufacture store brands.”
I had never seen this type of statement on product packaging before. It’s information that may be good to know.
By now we’ve all heard how subprime mortgage loans fueled the current real estate bust and financial crisis. One of the most startling results of this disaster is the sight of new homeowners “walking away” from their homes as their house values decline and jumbo mortgage payments approach.
There is broken trust all over the place. If we consider brands at the macro level, “walking away” is a brand problem.
How can anyone walk away from their dream home—and their obligation to pay it off? That’s like walking away from the American dream, our cultural DNA and work ethic.
While the great majority of these new homeowners aren’t walking away (at least not yet), those that do must feel deeply betrayed by their lenders and by the home-buying process. To me, this widespread breakdown in trust signals a deep-seated brand failure. Walking away is a sign that an brand culture has collapsed, and that is a serious failure indeed.
When customers willingly abandon your product, and put themselves and you at financial risk, you’ve got a brand problem. The ties that bind are broken. Approximately $2.5 trillion in subprime loans have been issued, and a significant number of these loans are now working against the homeowners who have them.
Subprime mortgages are high-cost home loans intended for people with weak or blemished credit histories. Higher interest rates make sense for higher-risk loans to a point, but the subprime market has been rife with problems that are rare in the mainstream prime market: excessive fees, high penalties for refinancing, refinances that provide no real benefit to homeowners, and steering families into more expensive loans when they qualify for a better rate.
In recent years, subprime lenders and brokers flooded the growing subprime market with dangerous mortgages that come with “exploding” adjustable interest rates. The result is a massive epidemic of foreclosures that is harming families, entire residential communities, not to mention the availability of credit at home and abroad.
What went wrong, brand-wise? We could point to a number of things, but what stands out to me is a new sales-driven mortgage ethos undermining an established (aggregate) mortgage brand culture with mutual protections.
When a brand creates customers it also creates a brand culture. The brand culture is the context of value creation produced by a company and its customers as they work together going forward. It consists of values and relationships that sustain the customer in the new freedoms and opportunities that the brand provides. The brand culture is a collaboration—in context, in identity and in value, core and edge, interactive and reciprocal, kept as dynamic as possible to foster initiative and innovation.
In the home-buying business, the classic brand culture is the iconic culture of banks and banking. This brand culture works as a collaboration between buyers and lenders to create value through the new home, over time. Traditionally, it’s a deliberate, disciplined and measured process, because of the responsibilities and the monies involved. Roles and relationships are very carefully defined. You don’t rush a 30-year relationship.
Elements of the traditional banking and lending brand culture include:
This brand culture is one reason why bank brands have traditionally been among the world’s strongest, vault-like in their integrity, and earning deep customer trust.
A company in trouble may sometimes reach a critical state where only its brand can save it. Customers still trust the brand, but don’t really connect with the business. What’s required in these situations is a radical new way for the company to interact with its customers, across new value platforms, so that brand trust is converted into business growth. Companies may even revise their business models to give more traction to the brand.
Newsday columnist Ellis Henican watched the great Sears brand slump toward irrelevance, drifting without purpose amid eroding financials and profit warnings. He asked innovation consultant Fahrenheit 212 in New York for ideas on how Sears might escape the retail death spiral—and still be “Sears.”
The result: a solution of “lifetime ownership.”
For a monthly fee priced like an insurance policy, customers will get a lifetime’s worth of home appliances or lawn-care equipment or auto repairs – delivered, maintained, upgraded and replaced by Sears.
Yes, it’s retail as a service. Of course, it’s an idea, not a plan. And we all know that executing on business reality is far more difficult than coming up with clever concepts. But as clever concepts go, this one has legs. First, it provides new value platforms for customers, with lots of room for brand innovation, and brand interaction. Second, it opens up new avenues of value creation for Sears. The result could be a unique win/win.
Plus, it integrates brand, business and customers. That’s always a good sign. The holistic brand context of “Sears” emerges even stronger.
This idea to save Sears parallels our core definition of brand: “Brands are avenues of value innovation in a creative engagement between companies and their customers.” There’s certainly value innovation in the idea, new avenues, and the possibility of many levels of creative engagement between Sears and its customers. Enough, maybe, for a “lifetime.”
For those who may not like this idea, there are other options.
At the recent International Herald Tribune Conference on Luxury there was renewed attention directed to the creation of “eco-luxury” and “ethical-luxury” brands. These terms might seem like a stretch (or even oxymorons) to some, but luxury brands, which currently base their appeal on exclusivity, status and celebrity, can’t afford to ignore well-informed, well-off customers who demand higher standards of environmental and ethical responsibility. These customers are fast becoming vital markets.
For today’s luxury brands, it will take some real work to fit “luxury” onto the same value platform as “ecology” and “ethical.” That’s because ecology and ethics are radically different avenues of value creation than glitz and glamor. Thus, the industry needs a revised brand approach to take this next step. The good news is that iconic luxury brands themselves hold the key to a successful transition.
What’s clear to me is that the luxury industry must take this transition seriously. If it can’t forge a deeper connection with the values that underpin environmental and social responsibility, luxury brands face a real threat of being disrupted from below—by a new form of luxury that uses ethics and ecology to make “traditional” luxury brands irrelevant.
The luxury industry has been totally transformed once, from small, family-owned workshops into a global marketing machine. There’s no law that says it can’t be transformed again.
One thing is certain: luxury brands are on the clock. They don’t have the luxury of time to slowly and opaquely evolve their commitments to ethics and ecology. They are now being held accountable for their actions, just like the Gap’s, Nike’s and Levis’ of the world have been for decades. The world is waiting to see how passionate and creative luxury brands can be when the human condition and the environment are at stake.
Shortly before the IHT conference a unit of the World Wildlife Fund published an in-depth social responsibility scorecard on the top ten publicly traded luxury firms, ranking them on 50 criteria in four categories: environment, human rights, corporate governance and stakeholder relations. The results were not pretty. The highest corporate grade was a C+ (received by three firms), while two firms received F’s. The full survey is worth reading. For a summary, see the Financial Times account.
The bottom line is that luxury firms, paragons of product quality and taste, must now become paragons of social responsibility. From brands of world-class excellence, one would expect no less.
Granted, it will take definite brand innovation for brands traditionally associated with self-indulgent elites to become brands of ecology and ethics. For luxury brands to gain credibility in these areas, their commitments (and actions) must be the real deal, not a masquerade. This would rule out commitments richer in words than deeds. If luxury brands appear to be faking their new commitments, they may be viewed as counterfeit, potentially falling to the same level as the shameless replicas that haunt their own business.
Let’s now see what the IHT conference produced.
From the IHT report:
The luxury industry, a booming business for the last 20 years, is positioned well for continuing spectacular growth – Bernard Arnault, chairman of LVMH, predicted a doubling in the next five years to €300 billion – but needs to heed the growing ethical concerns, particularly of younger consumers in Western markets, industry leaders said Wednesday.
Arnault and the next speaker, the designer Tom Ford, also gave strong emphasis to what is being called “ethical luxury” – the products that define their owners or wearers as people with human and ecological consciences.
Arnault said the trend was increasingly noticeable among the younger customers in the more saturated markets of the West, who, he said, seek discretion, while consumers in emerging economies still favor the pursuit of the ostentatious.
I especially liked this quote from Tom Ford:
Ford summed it up starkly: “Luxury is not going out of style. It needs to change its style.” He added, “We need to replace hollow with deep.”
A brand that intends to demonstrate deeper commitments to social and environmental issues will be expected to adopt specific program measures to define and achieve its goals. These would answer the question: As a brand, how can we lead in the effort to advance ecological and social responsibility?
At a minimum, typical measures would include:
These can’t be produced overnight, of course, but they’re needed to make ecological and ethical commitments a core component of the brand—so the brand can make a (legitimate) stand.
The quotations cited above indicate that the luxury industry—as represented by those quoted—may initially intend to “go deep” by a succession of fairly shallow steps. The emphasis seems to be more on appearance than substance.
For example, it appears that “ecology” and “ethics” are being framed as style attributes to the brands themselves, rather than practices deserving real commitments for the companies behind the brands. It’s as if the products would be tweaked to represent ecology and ethics—using design, naming, creative promotions and associated campaigns—while the industry itself carries on with business as usual.
These are three bits from a presentation I’m preparing on different approaches to brands. They’re metaphoric illustrations, each one describing a certain type of brand model. (I now have ten comparative approaches and need to whittle them down to five.)
While I compare and contrast these in my presentation as if they were exclusive approaches, in the real world most brands tend to be a blend of several.
The metaphor of illumination seems to find its way into all of the approaches, in one form or another. How it is used depends to some extent on whether the brand approach assumes a passive customer, to be captured and contained, or a proactive customer to be teamed with and freed from old constraints. Much of this depends on how the brand agenda is structured.
Keep customers in the dark and feed them ads. Sell them brands as flashlights.
Illuminate yourself. Draw customers to your beam. Sell them concrete shoes so they can’t wander off.
Erase darkness with the brand. Teach customers to see. Sell them tools to journey forth.
Admittedly, I’m partial to the last approach. It elevates brands from company sales pitch to customer enabler, and (to my mind) opens doors to many market opportunities that the other brand approaches ignore. It certainly prepares a brand to benefit from customer initiative and innovation.
Although I make frequent sacrifices at the altar of our beloved patron saint, I reserve a top spot in the Brand Pantheon for Prometheus, too. Brand builders are light-givers. Channel him, and you won’t go wrong.
In its usual level-headed style The Economist analyzes the basic issues involved in managing risk and brand reputation, especially for global corporations. They address the subject as part of a special report on Corporate Social Responsibility (CSR).
This special report will look in detail at how companies are implementing CSR. It will conclude that, done badly, it is often just a figleaf and can be positively harmful. Done well, though, it is not some separate activity that companies do on the side, a corner of corporate life reserved for virtue: it is just good business.
The Economist identifies three layers of CSR as it’s currently practiced in large corporations:
Where do brands come in? In level three, of course. Brands and CSR are a perfect strategic fit.
I totally agree with the Economist’s integrated approach to CSR, where it shrugs off superficial feelgood communications and focuses on CSR operations embedded in the business. However, The Economist seems to have an antiquated notion of brands, as if we’re still living in the 1950′s, when brands were static “assets” to be kept polished and squeaky clean lest any “bad press” diminish their value. This defensive and reactive concept of brands prevents the special report from addressing proactive brand strategies that may dramatically raise the bar for both social responsibility and profits.
“Brands and social responsibility” is an important subject that deserves its own in-depth report. CSR requires new attention to the supply chain, and to the brand chain. It also requires new brand models, and new brand approaches. That’s more than I can manage in this post, so I’ll end with some general comments.
There’s currently a serious recycling scandal in Japan involving major paper companies who grossly overstated the amount of recycled paper in their products. Paper products that claimed to contain 50% recycled material actually had between 5-10%. The Guardian has the story here.
Brand trust, reputation and credibility are taking major hits in the companies affected.
The reputation of Japan’s paper industry lay in tatters today after the market leader, Oji Paper, admitted it had lied for more than a decade about the volume of recycled paper used in some of its products.
The revelation comes days after the country’s second-biggest paper company, Nippon Paper Group, admitted it had made similarly false claims.
One company president apologized for “mislabeling” his products. Another took responsibility personally, and said he would resign.
Paper brands (those that exist merely as labels or packaging) are probably the worst kind of brands. They delude a company into believing that it really has a brand, when all it really has is a shell—and perhaps a very thin one.
Jeff Jarvis recounts the ebb of cable customer brand experience in All cable companies must die.
I never cease to be amazed anew at how cable companies think it is their job to make their customers’ lives difficult.
I challenge any cable executive to publicly go through the experience of being a customer at their own companies and tell me straight-faced that it’s pleasant and efficient and worth the money and effort.
He’s not alone. For an ongoing exploration of cable brand shortfalls, one may also visit Comcast must die.
Cable companies seem destined to repeat the utter brand failure of the recorded music industry. Brand failure precedes business failure. Music lovers switched from CD’s to digital downloads, and then flocked to Apple’s iPod and iTunes. Apple now reigns as the preeminent music brand. The major music labels continue their plunge.
What new company will rescue terminally frustrated cable customers?
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