Brands Create Customers

We encounter the term “brand strategy” in just about every brand discussion these days, but what does “brand strategy” actually mean? How does it fit into that dynamic matrix that includes a company, its products, its brands and its customers? And what makes it “strategic”?

Brand strategy defined

As I see it, a company’s brand strategy describes how the brand intends to create customers. Specifically, it sets forth the creative, social and moral steps that the brand will take to create the customers that will drive the business forward.

“Creating customers” is a strategic act

“Creating customers” is a strategic act in itself. It is one reason why the “creating customers” approach to brands is so powerful. It is inherently strategic. It aligns company and customers in a shared context from the get-go.

The process by which a brand creates customers is outlined here and here.

What a brand strategy must include

To be effective, a brand strategy must include these qualities:

1. It is value-based. It aims to deliver new forms of value that advance customers beyond the status quo, and beyond the reach of competitors.
2. It innovates. It aims to deliver a new customer context, a new vision of what customers can be, and do—exclusively through the brand.
3. It is structured as a platform. It’s goal is to make the brand a platform of new customer opportunities, a springboard for personal customer growth.
4. It collaborates with customers. Brand strategy is a joint effort to free customers from current markets, illusions or fears that hold customers back. Customer energy magnifies brand energy.
5. It’s an overt act of culture creation. A brand strategy aims to create a new culture of growth, initiative and discovery that raises customers to a new level. This is a new level that leads to profitable new markets for the company.

A brand strategy takes its direction from the brand mission. It includes the capability of brand vision, which is the ability to see your future through your customers’ eyes.

Many brands don’t have strategies

While there are a great many brands in the world, not all brands have brand strategies. Many brands are constructed as intense identities to be flogged by advertising campaigns, in which the “brand” operates as a stylized sales stimulant. Such brands are synthetic creatures of marketing and sales. They’re part of a persuasion package, and persuasion is not a strategy.

Companies can employ negative brand strategies

Certain companies may employ negative brand strategies that aim to limit and contain customers. Their goal is to use customers rather than to create them as proactive brand partners. Often, these strategies result in brands of illusion that go medieval on their customers. They follow a brand agenda to keep customers weak, because they lack a strategy for dealing with proactive cultures—including those of their own employees.

Photo: Inky Bob — Flickr

As a brand platform expands, stress cracks can appear between the brand core (perhaps over-controlled by the company) and the active brand edge (a more freewheeling terrain energized by partners and customers). The brand and its innovation ecosystem may be moving in the same general direction, but they don’t always move as one. And they can move at different rates.

Brand stress cracks have to be fixed

Brand stress cracks have to be fixed. If allowed to propagate, they can seriously weaken the platform, and the brand. The issue is rarely one of “brand essence.” It’s typically an issue of process, or of brand value delivered.

A stress crack in the iPhone brand platform

Apple is currently dealing with a stress crack in its emerging iPhone platform. The issue is how Apple approves third-party applications for the iPhone, and then makes them available for sale in its online App Store. Apple hasn’t published guidance on the approval criteria it uses in the App Store, leaving developers in the difficult position of writing software that meets iPhone technical specs but may be rejected for other reasons. The fear of arbitrary rejection has dampened developer enthusiasm for the platform.

A recently rejected iPhone application has become a cause celebre.

The importance of the App Store

Apple’s App Store is the location of this particular stress crack. The App Store is as important to Apple developers as it is to Apple and the iPhone brand. It’s the sanctioned gateway to selling third-party iPhone apps, and it’s crucial to the commercial success of an independent iPhone app developer. Selling iPhone apps outside the App Store conduit is very difficult.

In many respects, the App Store is the engine of the iPhone platform. It may represent a billion dollar market. It’s so vital that Kleiner Perkins has created a $100 million fund to help startups develop apps for the iPhone platform.

Third-party iPhone developers are a part of the brand

Apple needs motivated (and successful) third-party developers if the iPhone is to reach its potential as a broad-based mobile platform. Apple’s third-party developers form a critical part of the brand. Their initiative, imagination and innovation equal that of Apple’s in-house engineers, and they can spot iPhone apps in nooks, crannies and niches that Apple itself could never address. These niches can become selling points and growth avenues as the platform evolves.

The app approval process is a brand process

What’s at issue isn’t Apple’s right to exercise control over new iPhone apps. That’s a given. The issue is the transparency of Apple’s review and approval process. The App Store’s approval process is a brand process, a subset of Apple’s approach to its brand ecosystem and how it works with and nurtures its third-party developers. It’s a bit ironic that Apple should have this problem, because Apple knows this process. It was Apple who first sent out “software evangelists” to bring developers into the Apple brand 30 years ago.

The brand cannot be a bottleneck

One of the first rules of brand innovation is that the brand cannot be a bottleneck. Too much control at the top chokes off initiative and innovation, and eventually chokes the brand itself. Brand value is really a confluence of many streams, from the company, its partners and customers.

Brands that are “curated” as precious objets d’art in a temple tended by brand priests always run the risk of being bottlenecks. They’re too far from rough and tumble markets where active brands discover new forms of value.

Structuring the brand as a shared brand journey

Structuring the brand as a shared brand journey is often a step in the right direction.

A brand solution

The extent of developer angst over the iPhone app approval process indicates that a brand solution is needed. For sure, the iPhone app approval task inside Apple is challenging. There are thousands of iPhone apps that need to be vetted and tested, with a host of legal, technical, strategic and brand reasons why they must be carefully scrutinized. That said, there is a (brand) logical solution out there. Apple didn’t get this far without successfully resolving similar problems in the past.

One developer has proposed a six part solution, which begins:

Publish clear and unambiguous rules for what will be accepted and what will not. I don’t even care if this is a long and detailed document, but it needs to be The Rulebook from which both sides play.

Sometimes the brand ecosystem can lead in bringing problems to a close.

I’ve written about the iPhone brand platform challenge previously.

UPDATE: Here is one third-party developer’s step-by-step experience in getting an iPhone application approved by the App Store.  A total of 22 steps. Not a quick process, but not unreasonable given that Apple found at least one bug in the software. (Hat Tip: Daring Fireball).

Apple’s breakout success with its iPhone exemplifies how an elite company can, in rare and exceptional cases, “bet the brand” on a new product introduction and gain significant market advantage.

Betting the brand is for a select few

Most companies should never even consider “betting the brand.” They have too much to lose, and they’re generally not brand capable for such a high-stakes strategic action. For a small number of companies, however, betting the brand need not be a reckless toss of the dice. It can be a measured risk that favors the prepared brand—with the prospect of market-changing payback. It comes into play when such a company has no other choice but to leverage its brand to seize a compelling market opportunity. It either bets the brand or cedes strategic advantage to competitors.

What is “betting the brand?”

A company “bets the brand” when it risks substantial brand equity in a strategic move to unlock new customer value. In betting the brand a company believes that it can create a new kind of customer by introducing a new brand/customer context beyond the reach of incumbents. The risk in betting the brand is that a failure to achieve brand objectives may cause brand-wide collateral damage.

When a company “bets the brand” it is betting its proposed brand context against the reigning brand context of incumbents. It attempts to raise customers—dramatically—to a higher plane ofexperience. In this process it uses the “chips” of its brand equity. These “chips” are much more than “brand assets,” however, as we’ll see below.

A “bet the brand” scenario may involve changing the brand game.

Don’t bet a weak hand brand

First off, we should reiterate that it’s extremely difficult for a company with an average brand to bet the brand and win. It most likely won’t have the cards. Generally, it shouldn’t even try. Let safer strategies prevail, as discussed here and here.

This caveat would also apply to brands modeled as communications. While these may be rich in stories and images, they typically lack the platform depth (and the will) to raise customers to the next level.

How brands can stack the odds in their favor

If a brand-capable company desires to seize an opportunity with a high-stakes brand initiative, its first priority is to stack the odds in its favor. It will need to insure that its brand has definitive control of both its present context, and of the new context it intends to introduce. This means (at least notionally) that the brand evokes a superior customer model in both areas.

Fundamental steps to improve such a company’s odds include:

1. Architect the brand to create customers
2. Structure the brand as integrated platforms to advance customers in the direction you’re headed. (You want customers already on the way to your new promised land.)
3. Build the brand as an enabler for customer innovation, rather than an “asset” or static icon.
4. Adopt an extensible customer model so that the seeds of “the next big thing” are present in the customer of today.

The Key Posts section in the right column may have some useful links.

A fresh look at “brand equity”

To understand the process of betting the brand we need to extend the concept of “brand equity.” I define brand equity as a company’s strategic ability to create customers. This is an activist concept of brand equity. It is quite different from an accountant’s view, where brand equity mirrors share value, or the conventional concept that brand equity consists of a company’s many “brand assets.” In my view, these conventional concepts are too static. They often exclude customer initiative, and they can constrain brand innovation by ignoring the creative and qualitative elements that can make customers come alive (which is the purpose of brands in the first place).

I prefer to consider brand equity as a force, not an asset. It is the strategic firepower of a brand. And it is primarily composed of brand platforms for changing markets.

As I see it, a billion dollar brand may have multiple portfolios of brand assets, but if those assets are not configured into platforms for creating customers—and changing markets— their strategic value is limited.

Brand platforms power brand bets

A brand is vertically integrated value. When property constructed, a brand is a customer-creating machine made up of platforms of integrated brand elements, all geared to advance the customer through a singular brand vision. (Apple is a good example here, BTW).

Brand platforms give a company the greatest possible leverage in the event it makes a strategic brand bet. In this regard, the best brand platforms are customer platforms. They enable customers to advance themselves, and to add value back to the brand in the process. Proactive customers create more brand equity than passive ones, a crucial advantage when the chips are down. (Note how the iPod brand increases Apple’s market leverage, while Microsoft’s Zune brand, with a retrograde customer model, does nothing for Microsoft.)

The iPhone example

The weblog counternotions does a nice job of enumerating the major challenges that Apple faced in bringing the iPhone to market. (It lists 15 high-stakes issues.)

For Apple, bringing the iPhone to market was one gutsy move: a bold stroke to carve out a strong, sustainable position in a mature market controlled by powerful handset makers and entrenched (dominant) carriers known for their choke-hold on the industry. Apple’s only real option was a blockbuster product that could change the mobile paradigm—with a new brand context of the user.

Apple’s brand bet with the iPhone

It’s fair to say that Apple was betting the brand with the iPhone. An Apple mobile phone was widely expected, with speculation rampant. Anything less than a breakthrough innovation would be grounds for disappointment. Because the iPhone occupies a prominent plank in the strategic customer platform developed by Apple (integrated hardware, software, OS, user interface, applications, services and a new model of digital user), an iPhone failure would be far more profound than that of a single device that simply didn’t pan out. It would have serious repercussions for Apple’s ability to create new customers in the direction it’s heading.

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What should companies do with brands that still retain valuable equity, but no longer generate expected sales? A growing market for brand builders is to develop strategic revival programs for such brands. A case in point is Booz & Company, which has announced a new service to help companies regain “new life for tired brands.” It’s “a rigorous, data-driven approach to brands” that helps companies decide whether to retire a dormant brand, or try to revive it.

(I have to admit that I did a double-take at the phrase, “tired brands.” It echoes the famous “tired blood” campaigns for Geritol®, the iconic tonic of old folks. Geritol® is now kind of a dormant brand itself, but it did have its frisky moments 50 years ago.)

It’s not the brands that are tired

Of course, it’s not the brands that are tired. It’s customers who are tired. They are tired of mediocre, do-nothing brands. That’s why they ignore them. The real brand challenge is to provide new life for tired customers.

A balance of analytics and emotion

In reviving a “dormant brand” one must balance analytics (on the marketing side) with the emotional and qualitative elements on the brand/customer side—as the Booz approach recognizes. To revive a brand means to revive a customer, and that calls for a fresh look at where customers want to go, and how the company can take them there. A piecemeal “brand refresh” does little. The goal is a strategic revival with new pathways where the brand can create and grow customers. Or better yet, change the brand game.

Choosing the right brand model

In any brand renewal effort, it’s also important to select the right brand model. An inappropriate model may fail to recognize (or capture) potential brand opportunities. For example, a traditionalist (i.e., old-fashioned) approach might position the brand as a stylized sales stimulant. That’s a messaging model typically geared to produce conventional media campaigns for a passive “audience” of customers—who may soon tire of it. A more productive model would be to make the brand a customer enabler, powered by interactive and collaborative brand programs that engage customers in new dimensions.

The brand as a tool to revive customers

If you think of the brand as a tool to revive customers, and to help them get where they’re headed, you may find that customers themselves become proactive players in the revival effort—a very good sign indeed.

Photo: wallyg — 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.

The AP reports that General Motors is now mulling the sale of struggling car brands Saturn, Saab and Buick in addition to its plans to unload the Hummer brand. A while back I noted the Hummer’s brand strategy problems. The other three brands are in a similar predicament: too much company, too little customer.

A Saturn brand that went nowhere

Of all these brands, Saturn is the most painful failure. It was launched with great fanfare in the early ’90’s as a Japanese import killer, a high-quality, high-value brand aimed directly at Toyota and Honda. The Hal Riney ad campaign that got it off the ground was a classic. Yet, after a few years GM neutered the brand. It’s been an afterthought ever since—while Toyota and Honda are stronger than ever.

A hefty dose of kaizen in the Saturn brand might have made a difference.

We don’t often think of brands as “incubators,” but incubating customers turns out to be a critical part of the brand mission. As a matter of fact, it’s strategically vital.

The logic of incubating customers

Let’s begin by observing, first and foremost, that brands are creative partnerships between companies and their customers. They’re a team effort, bottom-up as much as top-down. As such, brands have a vested interest in incubating as many energetic, diverse and free-thinking customers as possible. These are customers who can push the product envelope and the brand envelope into new forms, formats and markets. In so doing, they add value back to the brand from a dozen different directions, and help drive the business forward.

Strategic incubation

As warm and fuzzy as “incubation” might sound, brands incubate customers for reasons that are strictly strategic. The payback from incubating customers is competitive advantage. Your goal in incubating customers is twofold. You want customers who can:

1. Augment your R&D
2. Carry your business into new markets where competitors can’t follow.

The customers that your brand incubates today may drive your strategic platforms of tomorrow. By incubating customers your brand becomes a means of innovation, organically developing new contexts of product and service value.

The incubator model: an innovation platform

There’s a very specific brand vision behind the incubation process. That vision understands that customers are much more than mere “buyers” of products. They’re potential innovation partners who can pay bottom-line dividends far into the future. Thus, we employ an incubator model that’s much more than heat lamps and a comfy nest. In brands we incubate innovation, and we design the brand as an innovation platform for customers. (Brands belong in the innovation department far more than they belong in the marketing department.)

Brands as innovation tools

Brands are, of course, the premier tools to create (and incubate) customers. Brands enjoy this special status because they encompass creative, social, personal, emotional and moral dimensions. These are all potential innovation levers. This special scope grants brands a transcendent power to transform customer lives—in the right directions if the brand is morally and socially grounded.

A reference model: Y Combinator

One reference model for brand builders is that of startup incubators, the boutique companies who help fledgling entrepreneurs turn raw ideas into business. Treat your customers as brand entrepreneurs, because that’s what they want to be, and that’s you need them to be. A useful model to examine in this regard is the successful business incubator Y Combinator. Brands would do well to learn from their vision and focus.

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“No one wants a relationship with their mustard.”

Kara Swisher uses this quote (from an ad agency exec) to begin her post, Social ads not cutting the mustard? She examines why widgets and other forms of “social advertising” haven’t (yet) lived up to their billing.

She continues:

This odd but spot-on observation was about why big packaged-goods advertisers–who are the really big spenders of the ad business–might be less than interested in leveraging social-media advertising and its promise of deep engagement with consumers.

No one wants to interact over mustard or mayo or ketchup or most products that pay the rent up and down Madison Avenue.

Brands and the big picture

In a narrow sense Kara is quite correct: we don’t need to chat with our jar of Grey Poupon, or have it update our Google calendar, or follow us around on Twitter. But no one really expects that, either. Such a focus on the jar or the tin is myopic. In the big picture of things—where brands play—relationships with products like mustard are very important indeed. They’re the essence of brands. What counts is the context of the relationship, and the ability of the brand itself to make that context sustainably engaging.

In brands, context is king

From a brand perspective, the blanket statement that, “No one wants a relationship with their mustard” is self-limiting. It precludes brand opportunities. Consumers can be open to such relationships—if they’re meaningful. Using mustard as an example, mustard brands have been designed to be very rich in relationships for decades. They certainly want relationships with their customers, beginning with brand trust and brand loyalty. And they certainly want their customers to have relationships with them—beginning with the brand experience of a consistently tasty product. These relationships are money in the bank.

Building the brand enthusiast

Customers who use a particular mustard will often swear by it, testifying to their relationship. If they also use it for marinades, sauces and dressings, the mustard will play a significant role in their recipe repertoire and cooking lifestyle. This places the mustard in the brand Nirvana of the enthusiast, and believe me, in that space will be a relationship. Weber understands this quite well, for example. And would Weber ever think, even for a second, that people don’t want a relationship with their grill?

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From today’s WSJ:

In retrospect, Microsoft’s unsolicited approach appears to have badly backfired. Instead of winning Yahoo’s huge audience and online search capabilities, Microsoft has driven its quarry into the arms of its arch enemy — Google.

Like brands merge because they can see themselves on a common platform with uncommon opportunities. But when one brand is ill-suited, stunted or malformed, the platform will be full of holes, and pitfalls. Players inside both companies can see this coming. They avoid it like the plague.

For a bit of perspective, see here and here.

Photo: zoer — Flickr

Often, a major hurdle to brand success is the actual brand model that a company employs. For example, a brand model that reduces a brand to part of the sales pitch, and sales package, can actually handcuff the brand’s ability to create customers. That’s because brands tied to the “influence model” become elements of a persuasion package, and little more. Their value to customers is limited, and their platform potential is nil.

The confluence model

A more strategic approach is that of brand confluence, where your brand enables you to join with customers in a stronger forward flow. In the photo above, imagine that the river on the right represents the customer. Your brand becomes the river on the left. You join the customer in a major confluence of forces, mixing and becoming one, stronger together than when apart. (And indivisible, too.)

In this approach the brand model is that of “value creator,” not “persuader.”

Join the customer flow

The confluence model is one of joining and teaming, rather than one of influencing.

Once your brand is “in the customer flow” many previous barriers to acceptance and adoption suddenly disappear. Instead of squaring off as “seller” and “buyer” you emerge as teammates and partners. Your brand now works from within, instead of banging on the door from without. You now have the opportunity to merge your value stream and your strategic direction with that of your customer, enabling the two of you to go where competitors can’t follow.

Confluence creates customers

How can brand confluence create customers? You’ll find a starting point here.

Image: Google Earth