Brands Create Customers

It’s always been apparent to me that brands are best understood—and best developed–as vertically integrated value. At their heart brands are methods to create value, and by making that value “vertically integrated” from company to customer we greatly enhance the potential contribution that the brand can make.

Definition of “vertically integrated value”

A brand developed as vertically integrated value is one where company, products, services and brand all operate in a singular, clear and coherent context to make the customer better off. It’s the brand that integrates the “company context” with the “customer context.” And it’s the value delivered that gives the brand real traction.

Creating vertically integrated value

How does a company go about creating vertically integrated value through its brand? We can identity four basic steps.

First, it helps to understand that “the brand goes in before the brand goes on.” We produce brand value from the vision, talents and dedication of company employees. We don’t tack on a “brand” just before the product is ready to ship. The brand is a method to create value from the very core of the business. (In the big picture, the brand is company potential X customer potential.)

Second, and most critically, we structure the brand as a customer-facing application. This helps cultivate and focus the company’s creative energies into deliverables with the desired strategic impact. (We want to create customers beyond the reach of competitors—in ways where our customers can become our most powerful competitive weapon.)

Third, we employ a value-based brand model. See here and here.

Fourth, we integrate the brand mission with the company’s principles of operation.

Vertically integrated value at Amazon

Amazon provides us with a current example of the brand as vertically integrated value. In this  interview of Jeff Bezos by Steven Levy we can observe how Amazon is structuring its products and services to work closely together within a singular customer context, in a tightly focused brand operation. The charts in the article are especially revealing.

Amazon’s vertically integrated brand experience

Amazon’s brand challenge is to deliver its vertically integrated value as a seamless and satisfying brand experience while constantly reinventing itself. Amazon has grown from “online bookseller” to become an online seller of everything, a hardware manufacturer of digital readers and tablets, a publisher, a digital streaming service for music and movies, a movie studio, and a digital cloud storage and infrastructure service for startups and corporations. That’s a vast territory for a brand to cover. It could have been disjointed, inefficient and clunky, but Amazon seems to have made it click.

See also:

• The simple secret of Apple’s brand strategy
• Brands as collaborative strategies

I’ve previously critiqued Google’s brand strategy (here, here and here) for what I consider short-sighted brand approaches that limit Google’s social appeal. It now appears that Google may pay an additional price for being brand timid when it could have been bold. Amazon’s new Kindle Fire threatens the Google Android brand in tablets because Google developed Android as a recessive brand. In monumental brand irony the Kindle Fire will use Amazon’s version of Android against Google itself, as the anchor of a complete brand ecosystem, potentially taking Android app developers—and Android customers—with it. Brand-wise, Amazon is positioned to take Google’s lunch and eat it, too.

How on earth could the Google brand let this happen?

A fork in the Android brand

To answer the question above we first have to examine the provenance of Android itself. Google developed Android as open source software. Google offers it essentially free to mobile device makers to spur its adoption in as many mobile devices as possible. There’s a catch, however. Software that’s open source can be–and often is–”forked.”  While Android readily lets licensees add their UI and top end elements to the base software, developers can–if they wish–forgo the official Android license and take the open source code in a new direction entirely, “forking” or branching it from its original path. The newly independent code can’t use the Android name, or Google add-on’s like Maps, Google Voice, etc., but that may not matter. The new fork has its own agenda, and is essentially a new brand itself.

The big forker is Amazon

Enter Amazon. Amazon has cleverly taken an older version of Android and developed a proprietary Amazon tablet OS with it, tightly integrated into Amazon’s market offerings. The result is the Kindle Fire, offered at a disruptive price of $199 (seriously undercutting the price points of Android’s tablet partners). The Kindle Fire is a full-function tablet that incorporates Amazon’s app store, downloads for games, music and video, books and everything else in the vast Amazon offering. It bypasses the standard Android App Market and other Android services set up by Google as part of the original Android platform. Amazon thus steps in to potentially steal revenue from Google and its Android tablet partners. It also potentially excludes Google from the valuable user information capture that’s critical to Google’s revenue model. That information capture is what Google envisioned for Android in the first place.

Android as a recessive brand

Let’s now take a close look at the nature of a recessive brand. A recessive brand does not pass its full DNA to customers as a unique and compelling context of value or brand experience. It “does a job” but otherwise keeps to the background, deferential and dumb. It doesn’t lead; it goes along for the ride. It does not procreate brand value. It doesn’t stand tall as a brand that one can interact with, get to know, and ultimately trust.

Escape from accountability

As I see it, Android was developed as a recessive brand that happily surrenders its Google identity for the sake of fast global ubiquity. Beyond that, the passive Android taps into Google’s historic un-brand ethos of not wanting to be held accountable–for anything. In other words, Google wants Android brand ubiquity without Android brand responsibility. It doesn’t want to be on the hook for OS issues, screw-ups and associated problems where it has to deal with those messy things called people. In contrast to a proactive brand that embraces customers and stands behind its product, Android needs someone else to “front” the brand and to deal with you and me. In mobile and tablets the front men are the device makers (HTC, Samsung, et. al.) and the carriers.

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Pretty simple, really.

Pretty hard to copy, too.

Results to date

• 100 million iBooks downloaded
• 2,500 publishers on iBookstore
• 200 million iTunes accounts, each with user ID and credit card number
• $2 billion in profits paid out to app developers
• 100 million iPhones sold to date
• Nearly 15 million iPads sold in 2010–more than every tablet PC ever sold
• The 15 million iPads generated $9.5 billion in revenue
• The iPad has 90 percent share of the tablet market
• More than 350,000 apps in Apple’s App Store

More than 65,000 have been optimized for iPad

The liberal arts brand advantage

Should we consider Apple a “tech” company? It’s culture is 180º opposite that of Google, which really is a tech company. Perhaps Apple’s signal brand advantage lies in its liberal arts heritage, and orientation. It works from the user back, not from tech forward. Its innovations, no matter how spectacular, are almost always innovations in ease of use, often dramatically so.

In its chosen markets, it would seem that Apple’s embrace of liberal arts is a decided brand advantage.

Photo: Engadget

While social media sites such as Facebook and Twitter have great potential to build brand relationships, brands must carefully manage their participation on such sites to maintain brand price premiums. Recent research suggests that social media sites have the potential to erode brand pricing by cultivating a customer focus on “deals.” When you’re a brand of “deals,” your prices have only one way to go: down.

The potential danger: brands reduced to “deals”

The research data I refer to is in a recent Razorfish study: FEED: The 2009 Razorfish Digital Brand Experience Report. The Razorfish study found that the largest single driver for brand relationships on social media sites was “access to exclusive deals or offers.” It was not customer passion for the brand, brand values, or brand experience. As Razorfish puts it: “Largely, it’s about deals—pure and simple.”

In its analysis, Razorfish wasn’t too concerned with this outcome, but I think brands should be. Building a large brand following geared to shop on price can be counterproductive for a brand—unless the brand is a brand of deals and discounts to begin with.

Quoting from the FEED study:

The Language of Love for Brands? Deals.

Clearly consumers are doing more with brands today than simply “receiving messages.” Many social pundits would say that this is a new form of “dialogue” with brands. But if that’s so, the subject of that “dialogue” surprises. Based on our research, it’s not so much about some type of “shared passion” for a brand’s values. Largely, it’s about deals—pure and simple

Of those who follow a brand on Twitter, 44% say access to exclusive deals is the main reason. This is also true for those who “friended” a brand on Facebook or MySpace, where 37% cite access to exclusive deals or offers as their main reason. [My emphasis]

Creating deal-seekers instead of customers

If roughly 40% of your social media “fans,” “friends” or “followers” link to your brand because they’re interested in deals, chances are they are shopping on price. If you’re a brand of deals, discounts and promotions that’s fine, if not flat-out wonderful. But if your brand strategy is to lead your market and command price premiums through brand qualities unique to you, then a significant part of your social media following may be working against you. Instead of creating customers, your foray into social media may be creating legions of deal seekers aiming to push your prices lower.

A deal experience or a brand experience?

Are you in business to offer a deal experience, or a brand experience?

Social media sites are often touted as sales channels, and many companies use their Facebook and Twitter accounts for dedicated push marketing, pumping out a steady stream of promotions to fans and followers. They amass as many followers as possible, then let loose a fire hose of blowout deals, loss leaders, high volumes, upselling and add-ons to squeeze a profit at the end of the day. Their actions contribute to the deal-finding ethos of social media sites. They condition followers (and their friends) to look for deals.

If your brand strategy aims for higher margins based on premium pricing, you may want to distance yourself from vendors boasting super hot deals at rock-bottom prices. Their world is not your world. You offer a brand experience, not a deal experience. You wouldn’t locate your flagship store next to a used car lot, or in an outlet mall.

Using social media to support premium pricing

Even with the above caveats I would still argue that social media technology is an outstanding way to build brands and drive price premiums. All it needs is the right strategy. While the Razorfish study identified “deals” as the No. 1 social media brand driver, it also had some interesting results in other categories. Let’s look at some numbers for Twitter/Facebook (rounded up) on why people follow a brand:

– I am a current customer 24%/33%

– Entertaining or interesting content 23%/18%

– Other people I know are fans of the brand 6%/6%

– Service, support or product news 4%/5%

If these numbers are representative, there’s a huge task ahead for brands to actively engage customers on social media sites in ways that bolster premium pricing. Brands can work creative wonders with content, service and support, but these currently total less than 30%. These should be brand strengths, part of a brand’s core attributes. They need to rank much higher to support price premiums.

Brand strategy options for social media

If a key brand goal is to maintain premium pricing, how should a brand approach social media sites? It’s a given that a brand needs to listen to what its customers are saying, engage them in the spirit of the brand, provide information, quickly answer questions and squash malignant rumors. What else?

I would suggest three options:

1. Use social media to build strategic customer relationships

Determine where you are leading your customers and use social media to advance your mission. Align your social media participation with your intended brand journey. This entails a strategic view and a focus on creating customers beyond the reach of your competitors. In this effort your customers are allies, not “consumers.” And yes, this is a strategy of maintaining—if not growing—price premiums.

2. Consider moving social media inside the brand

Carefully manage your participation on social media sites like Twitter and Facebook. These are effectively co-branding sites. On their sites you merge your brand with theirs. Is this what you want? They may not add that much value to your brand, especially if their prevailing ethos is “deals.” Strategically, your brand may be better off if it brings social media elements inside the brand itself.  As an example, look at Burberry’s Art of the Trench. Burberry leveraged its Facebook presence into a Burberry social media site, where the Burberry brand calls the shots.

In other words, your Twitter or Facebook page is not a destination. It’s a portal into your brand.

3. Develop personal brand applications

A personal brand application (PBA) on a smartphone can be a far stronger brand builder for premium pricing than waltzing with the masses on social media sites. The PBA is personal, portable and persistent. And it’s all you, 24/7, as close to the customer as a second skin. Some reference links:

• Building personal brand applications
• Building your brand—there’s an app for that
• Personal brand applications: conceptual examples
• A personal brand application from Whole Foods

Bottom line: think outside the social media box

On social media sites, all brands tend to look the same, and act the same. That cannot help premium pricing. Apple, a highly profitable brand with tremendous loyalty and cachet, and $30 billion in cash, has a very limited social media presence. Ask yourself, “Why?”.

The iPhone is such a powerful platform that it’s creating new markets every day. Is the iPhone a platform for interactive storytelling for children? Absolutely. Just check out this video of the “Phone Book” from Mobile Art Lab in Japan. (Mobile Art Lab site is in Japanese.)

Simple and amazing.

Found at Everyday UX.

Hat tip: @fusion_com_au

Burberry’s Art of the Trench social media site is now live. When Burberry announced the site a few months ago, I discussed Burberry’s brand options in creating the site. Now we can examine the site close up. Initially, the site consists of hundreds of top quality fashion shots of models/people in Burberry trench coats. You click on the photos you like, register your approval, enter a comment, or share the photo with a friend. You can even submit your own Burberry trench photo for consideration—assuming it meets the very high standards of the site.

Burberry/Facebook collaboration

Art of the Trench appears to be a collaboration between Burberry and Facebook, with a Burberry front end and Facebook back end. Burberry defines the brand identity and manages the “content,” while Facebook (apparently) handles key parts of the social software side. It’s as if the Burberry brand has absorbed a large segment of Burberry’s existing Facebook page. Quite seamlessly, too.

As far as I can tell, you must be a Facebook member (and sign up with Facebook Connect) to comment or submit photos to Art of the Trench.

Burberry’s brand options

In my previous post on Art of the Trench I noted that Burberry could opt for a fan site, at the lowest level of social media, or could aim higher, toward an interactive brand platform geared toward collaboration and co-creation with Burberry customers. Fan sites are marketing and PR tools. Co-creation sites are innovation tools. With the latter approach, Burberry could explore the trench as a deeper part of culture, with an eye to creating new customers in new market spaces.

A fan site

It appears that Burberry has settled for a fan site. The site’s stated purpose is “to celebrate the Burberry trench coat” as “a living document of the trench coat and the people who wear it.” To my eye the site currently seems more of a “celebration” of Burberry rather than a discovery or exploration—where Burberry might lead its customers on a unique brand journey.

As a fan site, Art of the Trench works as a rolling ad/PR campaign, where Burberry provides photographs of attractive people in stylish Burberry trench coats. As noted above, fans can click on images they like, make comments, or share photos with others. Over time, the site may have value as a means of generating customer feedback. The highly visual layout would seem to work well with an international audience, which Burberry certainly has.

Low involvement

The Art of the Trench does not seem to encourage high levels of user interaction. I did not see the word “interactive” on the site. (I may have missed it.) Burberry states that it wants customers to be “involved,” but the level of involvement seems constrained. As a fan, one’s role is mostly to “celebrate” Burberry. Only positive clicks (“I like it”) are allowed. There doesn’t appear to be any mention that fans are part of any Burberry team.

Submit your own photo—but don’t expect too much

A key “social” feature of Art of the Trench is that users can submit their own photos. A photo must be portrait orientation, outdoor, with the submitter or a friend wearing a Burberry trench.  However, fans who submit photos should not set their hopes too high. From Burberry’s content guidelines:

We will use our absolute discretion when selecting photographs for inclusion on the Site. Please do not email us asking why your photograph has not been selected. You should expect only a very few photographs are likely to be selected. We hope you will not be disappointed if your photograph does not make it.

I’m assuming Burberry would reject unsuitable photos with a polite “thank you” note, as befits a classy company.

Burberry and the brand dilemma

Sooner or later every brand finds itself on the horns of a dilemma. It needs an iron fist to manage its brand identity, yet it also needs an open hand to join with its customers, since it has no future without them. Every brand vacillates, vibrates ping-pongs between these two poles. Some years back Burberry had its brand hijacked by Chavs, with devastating results, so it’s no surprise to see Burberry today in a mode of absolute and total control.

The questions: Is the “open hand” fan site of Art of the Trench sufficient to create and retain customers? Can Burberry get by with customers who are “involved,” but not really “interactive” with the brand?

The potential weakness of Burberry’s approach

The potential weakness of Burberry’s Art of the Trench approach is that it’s a brand stage, and not a brand platform. It can style and pose before its fans, but it cannot leverage them strategically. Burberry’s biggest threat is that a competitor will change the brand game and leverage its customers in ways that an iron-fisted Burberry cannot. The challenger doesn’t have to create a better (or more fashionable) trench coat to do this. It needs to create a different (and deeper) customer context of the trench. Social media, the open hand par excellence, may be the lever.

For brands, there’s also the possibility that sites like Art of the Trench may in fact look backward, rather than forward. The future may belong to personal brand applications, where the brand is a direct drive, with no need to be staged.

UPDATE

Burberry’s Twitter page (@Burberry) announces the Art of The Trench mission as, “A living celebration of the trench coat and the people who wear it.” That’s an all-inclusive statement that some might interpret as going beyond the Burberry brand proper. It could work wonderfully for Burberry, but I sense that the site is focused exclusively on the Burberry brand.

Apple’s relentless pace of innovation has already disrupted the music and mobile phone industries. Given the scope of Apple’s technology development, are universities next in line to be disrupted by Apple’s far-reaching digital platforms?

NOTE: See our updates here and here. The latter discusses the iPad.

A speculative disruption scenario

In this post I’ll sketch a purely speculative disruption scenario suggested by Apple’s current and projected technology innovations. It appears that Apple may soon have a seamless system of hardware, software, services and online infrastructure to become a pivotal player in higher education. As such, Apple itself may become a brand of education.

That said, I have no evidence that Apple might even desire such a role. My hypothesis is simply that such a role might be available to it.

Apple’s potentially disruptive resources

In the field of higher education, Apple’s potentially disruptive resources would include the following:

1. A method of organizing and managing huge amounts of online content and curricula
2. A convenient means of delivering educational content and curricula to students
3. Portable digital devices that students can use for digital textbooks, lectures and course materials (if some speculations are true)
4. A transaction system for collecting tuition and fees
5. An administrative system for maintaining student records.

Specific Apple resources would include Apple’s online iTunes University, Apple’s (rumored) forthcoming “iTablet” (for multimedia lectures and textbooks), its online iTunes store for transactions, and its platform of digital services for record keeping.

Apple as disruptor in music, mobile and perhaps publishing

We all know how Apple’s platform innovations disrupted the music industry with iTunes, the iTunes Store and the iPod. Apple subsequently changed the game in mobile communications with the disruptive platform of iPhone and App Store. Publishing may be next on the list if Apple’s rumored “iTablet” turns out to be a superlative e-reader, perhaps optimized for textbooks, and structured within a disruptive platform. Imagine Apple as the world’s default digital publisher, connecting readers with content producers. You may be buying your books, magazines, newspapers, music, movies and videos through iTunes, all downloaded in a few seconds to a spiffy Apple portable device with Apple’s famed ease of use.

For this to happen Apple would need a gigantic new data center—which it just happens to be building. It might suggest a mobile future for iTunes U.

Universities: tradition bound

Let’s now consider universities, those valued institutions whose basic structure and functions have been relatively unchanged for centuries. Are there equal or better ways of imparting high-level learning that don’t require the traditional four-year, classroom-based system of lecture-driven instruction? Is there an alternate means where instruction can be raised to the highest levels of interactive, multimedia learning, perhaps customized to student learning styles, and where costs can be contained, instead of spiraling upwards? And might there be a common digital platform where a university’s teaching and knowledge could be scaled worldwide, opening up massive new markets?

Apple’s foot in the collegiate door

Apple already has a foot in the collegiate door with its iTunes U on the  iTunes Store. (Yes, they’ve put a university in their store.) The iTunes U features steadily growing numbers of  (free) podcasts of complete courses from leading universities, plus many specialty lectures . Currently these are targeted to the iPod and the iPhone.

I’m a real fan of iTunes U. It has gems like this.  In its present form, though, iTunes U wouldn’t seem to have much disruptive potential. It’s mostly audio podcasts, and a lesser number of video podcasts. It’s wonderful that Apple makes it available. It’s a credit to participating universities as a means of expanding their educational outreach, as CNN notes.

Looking downstream, however, the emergence of new (and integrated) Apple technologies might position iTunes U as a potential disruptive force in higher learning.

A disruptive iTunes U scenario

Could Apple transform iTunes U into a global digital university, setting the world’s highest standards for interactive digital learning? Given Apple’s current and forthcoming technologies it may be possible to reposition higher learning from institutions of place (ye olde universities)  to an integrated system (and network) of instruction. This could be a system of online education orchestrated and operated by a central source, so that the learning modules could be of consistently high quality and be available anywhere, anytime, on convenient portable devices.

Apple’s potential partners in a distributed model of learning

How would this new digital model of learning be organized? It would need a core technology partner, and the closest company to fits that bill is probably Apple. It would need university partners, perhaps a gold list of the top 25 universities from around the world. Together they would offer premium (paid) curricula and courses downloadable via iTunes U.

Course materials (lectures, textbooks, exams, study guides, reference materials, etc.) would be optimized for the (rumored) Apple iTablet/e-reader.  Assuming that the Apple e-reader is an interactive device capable of web graphics, text, animations, movies, links, etc., these new courses would stand to be far more compelling than their classroom ancestors. They would also be much more engaging than the current podcast model.

An iTunes U disruption package

Here, then, is a hypothetical iTunes U disruption package, conceivably purchased from the iTunes U store for use on Apple’s “iTablet” (as speculated).

1. Digital textbooks (designed as multimedia/interactive books)
2. Digital lectures(designed as multimedia/interactive presentations)
3. Digital course materials (movies, music, art, etc.) outboard of online textbooks or lectures
4. Online student discussions, group exercises, team collaboration and uploads
5. Sign-ups, downloaded materials, fees and tuition paid via the iTunes U store.

As a student, you’d visit iTunes U, chose your course or courses, pay the fees, and download everything to your portable device. No lines. No waiting. No “semesters.” Order a logo sweatshirt, and you’re good to go. This may cost less, deliver more learning, and be far more convenient than attending a traditional university.

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When a brand becomes a platform its virtues radiate in a hundred directions. They spark more innovations, often in distant quarters, then fold back to raise the platform even higher.

It’s interesting amazing to watch the iPhone make mobile the complex processes that once required a computer and an office.

Here’s a demo of Autodesk’s SketchBook Mobile. It will set you back a hefty $2.99 at the App Store.