Brands Create Customers

Here we are in the year 2011, 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 1011. 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 2011 is not the year 1011. 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 2011!—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 real–and magical
7. A passive and dependent role for the customer, as a credulous believer

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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Multi-threaded brands will soon be poised to succeed traditional monolithic brands, those top-down, top-heavy icons designed to radiate a company’s “essence.” Multi-threaded brands can out-perform monolithic brands because they multiply the ways that brands can connect with customers, and they greatly multiply the forms of value that a brand can deliver.

What is a multi-threaded brand?

A multi-threaded brand is a brand that’s been “microchunked”* into multiple value streams, which are then customized and delivered to strategic customer segments, with the aim of creating value networks and communities. It is a brand that’s been decentralized, distributed and democratized, becoming the context of a “value net” or a “creation net.” ** Its purpose is to grow customers from the inside out, not to hang over their heads.

Multi-threaded brands are more “social,” and less “corporate.”

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One of the great myths about brands is that they’re supposed to be timeless, static icons. In this myth brands are fixed and immutable, casting a pure, Olympian glow from high above—or at least from the shelf.

Walk through any retail environment and you’ll note that many traditional brands still embrace this model. They’re inert, and proud of it, often reducing themselves to a symbol, slogan or promise that sits and waits for customers.

And waits.

And waits.

These days, traditional brands are doing a lot of waiting. Customers are passing them by, moving too fast to notice.

Great brands are customer wheels

Brand inertia is not the future. Newer brands have wheels. Better yet, they are wheels. They’re not icons; they’re enablers. They enable customers to get things done, to move from point A, where things aren’t that great, toward point B, where things seem a whole lot better.

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Continued from Part 1

In this installment we continue our discussion of what it means to “create a customer.” We then begin the process of shaping brand strategies to create the customers that a business needs.

The business value of creating customers

When we create a customer we are doing much more than making a sale. In themselves, sales do not create customers. Sales create transactions. Simply ringing the cash register does not forge a customer connection, nor does it mean the customer will return. When companies pursue sales at the expense of creating customers, they run into big trouble.

In other words, the purpose of your brand is not to be a stylized sales stimulant. It’s purpose is to build strong customers, who will demand what only you can provide. Your brand can do this by enabling customers to develop skills, capabilities, values, sensibilities and attitudes that are good for them, and good for you. Your brand puts you and your customers on the same page—a page that you write together.

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A while back, in How to Design a Customer, I sketched some basic steps on how to design the customers that a business needs for its success. In this follow-up post I’ll discuss the steps brand builders can take to create those customers, once they’ve been designed.

“Creating customers,” of course, is what brands do best.

How this post is structured

This post will appear in several parts over the following weeks, with some related posts in-between. It will address these questions:

1. What does “create a customer” actually mean?
2. Why are brands the best mechanism for creating customers?
3. How does the “creating customers” approach differ from traditional brand approaches?
4. What methods should brands use to create customers?
5. What kinds of customers should we create?
6. What new forms of brand value, and brand/customer interactions, does “creating customers” enable?
7. What are some examples of brands that create customers—and of customers created by brands?

I’m guessing there will be three to five installments. I originally planned more, but have decided to spin off some of those segments into free-standing posts of their own. Eventually, I’ll put all the parts of this post into one document whose link can be found in the sidebar section called “Pages.”

Consider these posts to be a first draft of that eventual document. Since this is a new brand approach being explored, comments are encouraged—and appreciated.

Useful links

A key purpose of this blog is to set forth a new theory of brand as a process of strategic value creation. This entails a sharp break from many traditional brand concepts. If you’re new to this blog, here are some links to previous posts that can provide some background for what will be discussed here.

• How to Design a Customer
• Value-based brands (here and here, with more to come)
• Managing the brand agenda
• From supply chain to brand chain
• Brands at the core of business
• The end of “branding”
• Limits of traditional brand methods
• New brand models vs. old brand models

Our New Brand Glossary defines many of the terms I use. I’ve added key new terms to the brand vocabulary, and I redefine many traditional terms.

Perspective: the coming transformation of brands

First, some perspective on where I’m coming from. As I see it, brands are on the threshold of a major transformation. Brands are moving away from their traditional role as stylized sales stimulants and as communications designed to shape customer perceptions. Their future lies in becoming company-driven engines of value innovation, where they advance customers to desired outcomes—and beyond. “Beyond” means that brands have a definite leadership role to play.

Here’s my core definition of brand: Brands are avenues of value innovation in a creative engagement between companies and their customers. In subsequent installments I’ll show how this definition anchors a methodology for creating customers.

Brands: from “perceptions” to value delivered

As you can gather, what I’m describing is a major change in the nature of brands, and in brand building approach. For one thing, it means that brands will need to be developed as programs of strategic deliverables. They’re no longer a glossy wrapper or meme existing at the level of a “message,” and powered by serial campaigns. Brands of the future will be shared, two-way, live connections between company and customer—connections that create significant value for both beyond the sales transaction.

Reinvent brands to preserve brand value

In my view, this transformation in brands is necessary to preserve brand value, and to prevent the slow self-destruction of brands if traditional brand models are pursued. Brands have to find new ways to engage customers at deeper levels of value. These are the levels of delivered value where “creating customers” takes place.

Peter Drucker on “creating customers”

When we discuss “creating customers” we have to start with Peter Drucker, who said it first, and probably best: “There is only one valid definition of business purpose: to create a customer.” (in Management: Tasks, Responsibilities, Practices, p. 61 in my copy.) But what, exactly, does “create a customer” mean? Is it merely selling something? Or does it go beyond that? If so, how far? And what kind of customer do we want to create: a passive buyer one step above Pavlov’s pooch, or an active innovation partner who might help us grow new markets?

I’ll address these questions below, and in succeeding installments.

Food for thought: Companies are defined by the customers they create.

What “create a customer” means

I define “create a customer” this way: To create a customer means to connect a customer to a larger part of himself or herself through the brand. This is a connection to that person’s potential and/or passion, within the context of the customer’s expected brand outcome. Your brand helps customers to discover themselves, unfold themselves, iterate themselves, and prototype new selves that are now latent, awaiting only the wondrous “developer” that flows through your brand platforms and programs.

And since your brand is a creative engagement, you have many, many options at hand to work your wonders. What counts is the nature, content, direction and value of your brand connections.

Brands and “creating customers”

“Creating customers” is what brands are all about. It’s where brands come into their own as a process of value creation, combining strategy, imagination, innovation and customer interaction. Yep, brands are all that, which makes brands the single most expressive—and engaging—process in business. Moreover, the process of building brands is most effective when it’s openly shared with customers. That’s one reason why brand building stands head and shoulders above most other business practices. It aims to team the best and brightest of a company with the best and brightest of customers. That combination is hard to beat.

“Creating customers” and the brand mission

“Creating customers” is a central part of the brand mission. Your brand mission is to create the customers that will drive your business forward. This means that “creating customers” is a strategic process. Brands create customers as part of a focused program of strategic value creation. This puts the brand team at the heart of business strategy, where we’re in the thick of plans to create new value, and to gloriously disrupt competitors. In this regard, brand builders map out their customer creation process with two objectives:

1. Advance our customers beyond the reach of competitors.
2. By delivering new forms of value, make our competitors irrelevant.

I’ll have more to say on the brand team in a later installment.

Continued in Part 2.

Michael Urlocker deftly summarizes how the Nintendo Wii is disrupting the market-leading Sony PlayStation. The lower-priced Wii is flying off the shelves, outselling the PS3 by 60% in the U.S. Significantly, it has helped raise Nintendo earnings 43%.

Beneath the surface this is a brand story, too, but first let’s look at the six disruption lessons that Michael gleans from the Wii’s stunning success:

1. Nintendo’s market disruption is not about better technology;
2. Disruption is not about incremental improvements;
3. Disruption is about understanding where the customer experience is not good enough;
4. Disruption is about making a product more accessible;
5. Disruption is about changing the basis of competition;
6. Disruption is about a new business model.

These are all excellent points. And while it may not be obvious at first glance, most contain a strong brand element, because a key focus of brands is to put more customer in the product. Do this in the right places, and your new product can marshal the power of customers behind it—with disruptive impact.

Brands activate customers

Through brands, you’re not just selling a better-packaged product. You’re activating customers. It’s this activation that has disruptive power. The Wii raises customers off the couch and into the action sphere of the game itself, redefining game space, and redefining the very role of the player.

Brands have disruptive power

Where the above list uses “disruption” you can just as easily put “brands.” Brands have disruptive power too, if companies choose to use it. Brands can create new customers by freeing them from existing market constraints, and by then advancing customers to higher levels of experience. In this context, the strength of a company’s brand depends on how much customer the company wants to put inside the product. When you put enough new customer in, you can break the mould (and hold) of a market leader.

Choose your brand model carefully

You might call brands such as these, “disruptive brands,” but it really comes down to the brand model you employ. Brands that liberate their customers from boring, low-level experience may find they have a new market to themselves without trying to be “disruptive” at all.

With the right brand model, brands can free customers to disrupt a market for them.

Unlocking brand value

What’s especially evident is that brands can exert disruptive power without out-spending or out-shouting their competitors. Brands are able to do more with less because they can capture value from customer experience. The Wii does not have the super high tech profile (and cost) of a PS3. It simply frees customers to experience gameplay in exciting new dimensions. It creates market value by unlocking experience value—that’s been bottled up inside the customer.

Nintendo’s brand vision

I’d also say that Wii’s success is testimony to the quality of Nintendo’s brand vision. We define brand vision as a company’s ability to see its future through its customers’ eyes. That’s not always easy, but that’s what Wii seems to do rather well.

Photo: Jeronimo Palacios — Flicker

Well, to answer this question right at the start, the answer is “yes.” In fact, a lot of mainstream brands have already gone over the falls, but their demise has been shrouded in mists of mismanagement, buyouts and bankruptcy. But make no mistake about it: they were brand failures first. The other things happened when they had already let themselves drop over the edge.

The mainstream brands that are still afloat are somewhere upstream, in the middle of the flow, enjoying the serene drift. Perhaps they can’t hear the deafening thunder of their fate, but they’re surely coursing toward it.

What makes a mainstream brand?

Mainstream brands are defined by their assumptions:

1. They assume brands are all about shaping perceptions, rather than delivering value.
2. They assume the sole mission of brands is to push the product. In their view, brands are “the salesman on the package.”
3. They assume customers are only valuable as one-dimensional “consumers,” and that customers can add no value back to the brand, or to the business.
4. They assume that the only way to build their brands is through top-down media campaigns.
5. They assume that brand success means corralling and containing the customer—under lock and key if at all possible.
6. They assume that brands are a substitute for innovation. Get people to believe in “the brand” and you can stop innovating and preserve the status quo, forever.
7. They assume that brands “never rock the boat.”

And then they feel the waters quicken, and hear a distant rumble.

Saatchi gallery in London has made a splash with Stuart (short for Student Artist), a heavily trafficked online community where artists can post their portfolios and connect with other creatives. The site has become an instant magnet for young artists wanting to see and be seen. Started in May, 2006, Stuart has transformed the placid Saatchi gallery into a vibrant social place with 20,000 member artists.

Details in the New York Times article here.

Stuart is all about brand

Let’s kindly set “art” aside for a second and focus on brands. Stuart is all about brand. It represents a deep brand move by Saatchi to redefine the mission of “art gallery.” Stuart is transforming Saatchi from a conventional art gallery (and dealer) into a nexus of creativity, broadening its base, opening doors, bringing artists together, sinking deep roots into emerging artists, and tapping into the limitless energy of artists themselves to help Saatchi grow its brand in new directions.

From “gallery” to “community”

Stuart is how Saatchi is socializing its brand. Stuart is weaving the Saatchi brand presence into the social fabric of art and artists. It represents a brand transition from private gallery to social community. This is done not by “branding” Saatchi in conventional ways, but by unlocking the social context of art and providing a free, online “place” for artists to congregate under the Saatchi aegis. Through their interactions on the site, artists can support one another and jointly become a powerful indirect driver for the Saatchi brand.

The brand as “place”

Stuart means that Saatchi is designing a customer. becoming a brand platform, and using its brand as a collaboration in context. In contrast, other galleries suddenly look one-dimensional and stale. If Saatchi manages to cultivate Stuart and grow its users through increased interaction, it stands a chance of being the place for online artists to congregate and connect. This gives Saatchi a cachet and currency it could never achieve in a thousand conventional campaigns. Saatchi itself becomes the medium.

Network effects are brand effects

Of course, the technical barrier to entry for this type of brand innovation is not that high. It’s a socially-enabled website. The brand goal is to build out the network effects quickly so that your site becomes the definitive hub, a scaled-down eBay, MySpace or Facebook, but the prime segment player nonetheless. Do this right and your network effects can do double (and triple) duty as brand effects.

Through Stuart, Saatchi is building what may eventually be an insurmountable community lead in the creative arts market. One might ask: Where is the equivalent from AIGA? Where are the leading design schools? The leading design firms? Museums? If Saatchi snatches the wind from their sails, they may find it hard to catch up.

A brand lesson for all

The wider brand lesson from Stuart is that a brand can gain significant strength by enabling its base in new and different ways. Imagine your brand as a social force, not a top-down wrapper. Decouple your brand from your business silo. You can fly your brand over customer fields. Sometimes the most fertile field is not the same closed plot you and your competitors have been dutifully ploughing all these years.