Brands Create Customers

The practice of brands stands apart in the business world because brands have a strong moral dimension. Superficial brands ignore this dimension, but strong brands embrace it, and build it into competitive advantage.

For insight into the proactive dimension of the concept of “good” in business, I can think of no better place to begin than a recent essay by Paul Graham called Be Good.

Whether you’re working with for-profit or non-profit brands, this essay will help you envision a moral platform for your brand, inside and outside the company.

In an editorial, today’s New York Times takes issue with political forces attempting to change the American brand from one of freedom and opportunity to a brand of fear.

A nation of immigrants is holding another nation of immigrants in bondage, exploiting its labor while ignoring its suffering, condemning its lawlessness while sealing off a path to living lawfully. The evidence is all around that something pragmatic and welcoming at the American core has been eclipsed, or is slipping away.

An escalating campaign of raids in homes and workplaces has spread indiscriminate terror among millions of people who pose no threat. . . .

The politics of identity

There is a real brand identity issue here, too: the possibility that “America” is being subdivided into opposing nations of “Us” and “Them:”

The restrictionist message is brutally simple — that illegal immigrants deserve no rights, mercy or hope. It refuses to recognize that illegality is not an identity; it is a status that can be mended by making reparations and resuming a lawful life. Unless the nation contains its enforcement compulsion, illegal immigrants will remain forever Them and never Us, subject to whatever abusive regimes the powers of the moment may devise.

In recent years we’ve seen how politicians can create and exploit public fears to fracture a national identity for narrow political gain. The results are often devastating to the public and the brand.

“Pragmatic and welcoming”

In many ways the US Constitution defines the American brand. To use a phrase from the Times editorial, that brand is “pragmatic and welcoming.” The Constitution creates a platform of freedoms and rights that enables citizens to make the most of their opportunities, using their initiative and creativity. In many respects, that’s the American Way that sets the US apart. We’re a platform for achievement in a world where too many national brands are little more than ginned up identities used for public control.

Brands as collaborations

It seems to me that the strongest “country brands” are collaborations, where people are on the same page because they’re writing it together. These are places of vibrant culture and adaptation, where tradition becomes a platform for the new. Some elements are frozen in time and kept as static “icons” (often for the tourist trade), but the national brand itself floats upon a living, breathing culture, one that’s encouraged to grow.

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.

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For strategic purposes, strong brands plan out the customers they’ll be creating three and five years ahead. These days, brands are thinking about those customers in a radically different context: after peak oil.

Most brands were birthed in an age of cheap oil

It’s easy to forget that most current brands were birthed in an age of cheap oil. In fact, many brands are predicated on cheap oil. These would include brands of motor vehicles, airlines, travel, hotels, destinations, and fast food, not to mention credit cards and insurance. They also include a whole slew of less obvious retail brands built around car-based shopping—especially in the far-flung suburbs, the American cheap oil nirvana.

The brand ride on cheap oil is over

There’s mounting evidence that we’re now reaching the point of “peak oil,” after which easily recoverable oil is on the decline. Some say we have passed it. With oil currently around $100 a barrel, and the US price of gasoline over $3 a gallon, the brand ride on cheap oil looks to be over. Even if oil prices stabilize, they won’t return to the balmy days of the 426 Hemi and midnight runs to the IHOP.

For brands, this probably means, among other things:

1. Cars become more of a “cost”—and a different lifestyle lever
2. Micro trumps mega
3. “Excess” is decay
4. Brands should take a hard look at their energy assumptions

A brand vacuum waiting to be filled

So, what should brands do? They can’t ignore high energy prices, or look the other way as customers wince at the cost of a fill-up at the pump. Customer wallets are hurting, and many customer lifestyles will soon be riding on fumes. Their world is shrinking—somewhat—and they need new brand contexts to bring it together.

Yes, peak oil doesn’t have to mean “peak brands.” Peak oil is a brand opportunity. It’s a brand vacuum waiting to be filled. To provide customers with new forms of meaningful living, a brand might develop new contexts of energy and lifestyle as part of its competitive strategy, with the brand as a new customer ally going forward.

Every brand needs an energy strategy

Brands that ignore the rising cost of oil do so at their own risk. In other words, every brand now needs an energy strategy. At a minimum, every brand will eventually become a brand of energy conservation and energy efficiency, in some unique context, with appropriate brand programs. Brands that lead decisively in this new context will fare better than those who stubbornly cling to yesterday’s assumptions.

Brands as energy producers

There’s much more to it than that, however. After peak oil the nature of brands will change. Brands will have to create customers who can prosper in a universe of less oil. Better yet, brands will need to become energy producers.

Yes, that’s correct. Brands will need to become energy producers.

Observe the electric meter to the left. Imagine that meter attached to your customer. The dials and wheels spin to indicate energy usage. The mission of your brand will be to add energy into the customer so that the meter moves in the opposite direction, meaning that the customer gains energy from the brand. This will be a creative, cultural energy that offsets the rising price of oil and oil-based products.

Brand energy is customer energy

So, how does a company produce such brand energy? It’s a creative process that taps into multiple customer needs across multiple dimensions. Brand energy is customer energy. Use your imagination to find the context that’s best for your business, and your customers.

Some potential avenues:

1. Your brand 1) creates customers, and 2) creates the customer energy to help customers lead uniquely rich, fulfilling lives. Your brand makes up the shortfall in fuel with an abundance of carefully-crafted cultural steps.
2. Redefine energy. It’s not what a customer “burns,” but what a customer creates.
3. A brand’s energy strategy is not “doing more with less.” It is a different kind of “more.”
4. A rising cost of oil need not impede a rising level of living. The brand maps out new riches, and helps the customer change gears.
5. Make oil (largely) irrelevant.
6. Create high performance customers who achieve more for themselves via the creative auspices of the brand. Change your customer metaphor from “consumer” to “creator.”
7. Through your brand, enable customers to “forge independence,” not just “save energy.”

Post-carbon brands for post-carbon cities

Professor Gregory Clark has outlined a quality of life scenario in the post-peak oil era. Today’s energy rich societies won’t necessarily be any poorer. They’ll just have to rearrange their priorities so they can be wealthy and prosperous while using far less energy.

Along the same lines, Denmark has taken the lead in developing post-carbon cities, workplaces and environments. Post-carbon brands are sure to follow.

Denmark does seem to be a happy place.

Photo: CoreBurn — Flickr

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.

Walking away: when brand culture fails

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.

A $2.5 trillion brand problem

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.

A snapshot of the issue:

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.

Creating a brand culture

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.

The brand culture of banking and lending

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 banking and lending brand culture

Elements of the traditional banking and lending brand culture include:

1. Full disclosure and transparency among all parties
2. Procedures to qualify buyers, and to weed out unsuitable candidates to preserve the integrity of the process
3. A process to conform expectations to financial realities
4. A “long-term” perspective (30 years, fixed)
5. Multi-stage lender/buyer interactions, to minimize errors
6. A partnership in incremental value creation grounded in the community (traditionally via “the bank” not far from one’s house).
7. A relationship of reciprocity, opening up future lines of credit and service

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.

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