Brands Create Customers

After noting Rudy van der Blom’s slick tool for aligning elements of a business model (see here) I’d be remiss if I didn’t point brand builders to the more ambitious BMDESIGNER tool now in early beta. BMDESIGNER is affiliated with Alex Osterwalder’s Business Model Generation process.

You can sign up for BMDESIGNER and see some sample business models already created, or do some creating yourself.

Brand models and business models

Why should brand builders concern themselves with business models? The answer is simple: every business model contains a brand model, either implicit or explicit. If the brand model is weak, or flawed, the business will be weak, and/or the processes for creating customers will be flawed. This means that brand builders must be part of the business model team. Otherwise, there’s a good chance that the resulting business model will run into structural customer problems downstream.

What the brand model does

The brand model connects the business model with the customer model, ensuring that business growth will be strategic. The key philosophy behind this process is, “Grow the customer, grow the brand, grow the business.”

The brand model/business model connection—as I see it—is one of value co-creation and collaboration between the business and its customers, where the brand becomes a core tool of innovation.

But, all this is getting waaay ahead of myself. These are all full topics for coming posts.

Image source: BMDESIGNER

The October, 2009 issue of Costco Connection (Costco’s membership pub) outlines key principles behind Costco’s own “Kirkland Signature” brand. It provides detailed examples of Costco’s brand approach in foods, OTC medicines, linens, laundry soaps and other categories. (Yes, it is a house pub, and subject to a bit of puffery, but the data seems fairly solid to me.)

Why the Kirkland Signature brand is important

Costco’s Kirkland Signature brand is important for two reasons: 1) it’s a brand that operates as an agent of Costco members (customers), rather than as a tool of persuasion; and 2) it’s a retail brand model for disrupting manufacturer “name brands” that have dominated markets for decades. In select categories, the Kirkland Signature brand aims to be as good—and cheaper—than leading manufacturer brands, delivering greater brand value to Costco members.

Currently, around 10% of Costco warehouse products bear the Kirkland Signature label.

The retailer pushes the brand envelope

The Kirkland Signature brand is a case of a retailer pushing the brand envelope for products, instead of defaulting to manufacturers. Costco does this by specifying higher-value products from suppliers. Costco’s approach is not completely unique, but it’s execution is generally first rate, across the vast scale of a leading warehouse chain. You can see their focus on brand quality in how they procure Kirkland Signature tuna and Kirkland Signature shrimp. And stories persist that Kirkland Signature vodka is the spirit equivalent of Grey Goose–at greatly reduced cost.

The Kirkland Signature brand approach

The  Kirkland Signature brand approach focuses on quality and value. Here is how Costco describes it:

Why invest in our own line of private label products? There are several reasons, explains Jim Sinegal, Costco president and chief executive officer. With Kirkland Signature, Costco can:

• Develop popular items with wide appeal to expand sales volume
• Control the quality of the product
• Drive down prices on national brands
• Control the packaging
• Achieve pallet efficiencies

“Pallet efficiencies” are key factors in the warehouse world because they help cut costs and save energy in shipping and warehouse operations. And packaging control helps across many operational dimensions (delivering very low shrinkage rates.)

The working rule for the Kirkland Signature brand

At Costco, the working rule for Kirkland Signature brands is that they must be “equal to or better than national brands.” That sets a high bar. A corollary is continuous product improvement, where Costco “buyers” (the rough equivalent of product managers) revisit key quality and price parameters for Kirkland Signature products every 12 to 24 months.

Product testing and quality assurance

As shown in the above links, Costco puts candidate Kirkland Signature products through an extensive regime of product testing. Kirkland Signature standards may be higher than industry norms. For example, some major meat brands have not sold ground beef to Costco because of Costco’s rigorous testing for E. coli bacteria. See this New York Times report and a followup story.

Kirkland Signature: the brand as customer agent

With its focus on high standards the Kirkland Signature brand acts as an agent of Costco members, cruising the world of manufacturers to find (or demand) the best combination of quality and value. This model differs from the traditional brand approach of using the brand as a stylized sales stimulant and/or tool of persuasion. In the Kirkland Signature model, the brand serves a customer agenda, providing a level of brand confidence previously found only in the top-tier of name-brand products.

This approach helps build the brand trust that keeps Costco growing and Costco members paying their annual membership dues. When combined with Costco’s legendary return policy it delivers a brand experience with few peers.

Image: Kirkland Signature logo

Yes, indeed. There’s every chance that brands going forward will be more like a mixed-up mutt than a pedigreed poodle. The days when the brand was paraded as a elite breed with champion bloodlines, showcased every step of the way and groomed to perfection, are drawing to a close.  Adaptable, affable companion brands that are a mix themselves, and made to mix anew, are in. We’re entering an age of sidekick brands in which a resourceful brand mutt is the best pal any customer could want.

As newspapers fold, news mashups unfold

This revelation came to me as I was reading Steven Berlin Johnson’s SXSW speech on the future of news in the Internet era. While newspapers may be on the way out, Steven sees news itself as expanding online at local and grass-roots levels. (He provides local examples from Brooklyn, NY.) These new brands of news are like street-savvy mutts, blends of blogs, tweets, diaries, mashups, feeds and links that add meaning and context to local lives. Their forte is nap-of-the-earth immediacy, and a being-there credibility.

Brand applications: personal, portable and persistent

I see this model extending to other brands in the Internet era. I’ve written previously about a new class of brands called personal brand applications. These down-to-earth enabling brands live on digital devices as brand sidekicks: personal, portable and persistent. They go where you and I go. What they do defines who they are. Their provenance matters less than the loyal support they deliver. They may have the DNA of a dozen widgets.

Yes, brands will be judged by how loyal they are to you–as they should be.

Photo: ANDI2WHIPLASHEDAWAY — Flickr

An article that every brand builder should read is Branding Youth in the Totalitarian State in Design Observer. The article is based on Steven Heller’s new book: Iron Fists: Branding the Totalitarian State.

The article raises all sorts of interesting questions about the relationships between propaganda and brands, and on the “totalitarian” nature of brands themselves.

1. Are brands a form of propaganda?
2. How are brands different from propaganda?
3. Are the best brands “totalitarian” in concept and in execution?
4. Is every brand builder a closet fascist, inventing a new world order for customers?
5. What are the strategy downsides of brands conceived and executed as propaganda? What other brand models could disrupt them?

I’ll tackle these questions bit by bit in coming posts.

Two brand models: containment vs liberation

As part of this discussion maybe we can assess different models of brands, among them a persuasion or propaganda model, and a contrasting liberation model. A persuasion or propaganda model would try to shape customer thoughts and feelings so as to contain customers, to keep them in place so they continue to be “loyal” to the brand and purchase the product.

In contrast, a liberation model of brands might aim to free customers to be more proactive for themselves, on the premise that greater sales will flow from a more proactive culture, where customers are active players in product development rather than a passive audience. (This model assumes a company can lead by innovation into a proactive culture, and that can be a very risky assumption.)

Two previous posts along these lines:

• Managing the brand agenda for customer growth
• Some brands go medieval on their customers

Totalitarian brands—and brand builders

To a certain extent, every brand builder has a totalitarian mindset. (Yes, admit it.) We conceive of a “total” unified and integrated brand experience where the brand identity is carefully composed and actively expressed. We make sure that every symbol, slogan, color, theme, touchpoint, etc. is set forth to maximize the brand effect. Behind every logo is a torchlight parade.

Personally, I tend to be a super-totalitarian in this regard, but I always have to ask myself: does this approach leave sufficient room for the customer? Since we’re trying to build the brand through the customer, shouldn’t we also focus on building customers themselves so their freedoms can create new markets for us?

Limits of a totalitarian brand strategy

Some questions: Can a brand be too totalitarian? Does a totalitarian approach create passive customers who are a dead end strategically? Can we build a totalitarian brand from the bottom up? Does a totalitarian brand just hold customers back? Or can it set them free?

More to come.

NOTE: See also the Youth under fascism site, which is the source of the poster above.

Contain the customer, or liberate the customer: it all comes down to the brand agenda that a company follows.

This nifty design is from a T-shirt available online at Uneetee.com for $12. Why wrestle with a brand dilemma when you can just wear it?

The brand interpretation is mine, of course. The image was just too good to pass up.

Image courtesy of Uneetee.com. Designer: Loy.

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.

Brands light the way

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.

The Mushroom Theory of Brands

Keep customers in the dark and feed them ads. Sell them brands as flashlights.

The Beacon Theory of Brands

Illuminate yourself. Draw customers to your beam. Sell them concrete shoes so they can’t wander off.

The Enlightened Theory of Brands

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.

Photo credits: Mushrooms: inkblotstew — Flickr; Lighthouse: MumbleyJoe — Flickr; Prometheus: Heinrich Fueger — Wikimedia Commons

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.

Three layers of CSR

The Economist identifies three layers of CSR as it’s currently practiced in large corporations:

1. Philanthropy — beginning with “checks for charities”
2. Risk management — to ensure that screwups (or disasters) don’t occur
3. Strategic opportunities — to use CSR for competitive advantage

Where do brands come in? In level three, of course. Brands and CSR are a perfect strategic fit.

Beyond an antiquated notion of brands

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

“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.

1. A brand is company potential X customer potential. When brands are understood in this context, the arena of “social responsibility” becomes a strategic brand opportunity, rather than a nagging and/or awkward problem.
2. Brands managed as “assets” are dead ends. The purpose of brands is to create customers. This is in itself a socially responsible act.
3. When brands are reduced to perceptions (”how the company is perceived”) they become little more than PR exercises, with a dash of design. This completely ignores a brand’s game-changing potential to create customer value.
4. The brand mission is to grow the customers that will grow the business. In general, the more socially responsible the brand, the more opportunities it creates for customer growth.
5. A brand platform is a social platform. The more socially responsible the brand, the more power it can generate through (and from) its customers.
6. “Asset brands” sit on the shelf, or hide in the vault. They’re eventually bypassed by proactive, socially responsible brands that can run (and grow) with customers.
7. The best way to be “socially responsible” is to embrace those strategies that advance customers, rather than merely aim to empty their wallets.
8. In general, a brand cannot do any more for its customers than it does for its employees. Social responsibility begins at home.
9. Brands stripped of social responsibility are low-performing brands. At the very least, they will be leaving money on the table.
10. The best way for a brand to manage its reputation is to lead customers to higher levels of value. Brands that don’t lead get stuck in the muck.

Photo: Jamison — Flickr

Here we are in the year 2007, yet when we analyze current brand practice it appears that some brands behave as if we’re still in the Middle Ages, way back in the year 1007. In effect, they go medieval on their customers, treating them as a passive flock whose fate is to be told what to believe—and then to believe it heart and soul.

Medieval messaging

The medieval model of brands assumes a static, stratified society with brands on top and customers below. It puts the company on a throne, or in a pulpit, high above customers, dispensing brand doctrine to (hoped for) awestruck believers. It’s very much a one-way show of medieval messaging. And these days, it’s also a risky one.

Times have changed

It’s risky because times have indeed changed. The year 2007 is not the year 1007. When it comes to brands, the medieval approach now stands out as a potential brand weakness, for three reasons: 1) the medieval style places artificial barriers between companies and their customers; 2 it positions customers as a passive audience, who can’t add value back to the brand; and 3) it relies on closed brand doctrine, minimizing brand innovation and shared discovery.

A containment agenda

The medieval style of brands follows a containment agenda. It wants to freeze time, and to freeze customers in place—in 2007!—when customers have more to offer brands than ever before. In the medieval model, a brand that might become a joint (customer) venture with a live edge is reduced to a steady stream of preachments from on high, into a confined, compressed 2-D space without perspective or horizons—with no place for customers to grow.

Elements of the medieval model

The medieval model for brands typically sustains itself by using indoctrination techniques to instill desired beliefs and emotions in customers. It does this instead of innovating to create new brand value. Its brands are designed as messages, rather than as avenues of innovation.
The medieval model includes:

1. A belief system (doctrine) based on glorifying the company and the brand
2. A top-down process of inculcation (”messaging”)
3. A static universe untouched by innovation and change
4. Use of music, images, symbols, signs and icons to foster and fortify belief
5. Rituals and rites of passage
6. Myths and stories to make the brand appear larger than life, and/or magical
7. A passive, dependent role for the customer

Medieval style brands invite disruption

As the world transitions to a digital age, leaving much of traditional mass media behind, brands that embrace the medieval style become increasingly vulnerable to brand innovation from competitors, and to brand disruption from below, where customers chart a new course for themselves. By confining customers and holding them back, the medieval model works against itself. It helps make its customers ripe for the taking.

What shape will that customer liberation take? It will be participative, decentralized, proactive and bottom-up, just like the advent of printing, the growth of cities and private enterprise and popular movements helped sweep Europe out of the Middle Ages into a much more vigorous and productive era.

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