Brands Create Customers

A strong, well-managed brand will let all of its stakeholders sleep well at night: customers, employees, shareholders, partners, the public, and Mother Nature. They can all sleep soundly when the brand does its job.

Strong brands have a unique and wondrous power to deliver value—and to mitigate risk—throughout their entire ecosystem. Let’s see how each brand stakeholder in the ecosystem benefits from the brand:

Customers

Strong brands offer superior quality, comprehensive warranties and responsive customer service. They are accountable to their customers for their products and services, and this translates into market offerings that customers can trust. Customers know that the brand has their back. And knowing this, they can drift into pleasant dreams.

Employees

Companies with strong brands are the best places to work. The brand sets clear standards, and brand principles infuse operations at every level. Everyone is accountable up and down the line. A unified vision and mission focuses the work, making everyone more productive. Fulfilling work leads to fulfilling sleep.

Shareholders

Strong brands take care of business (and shareholders) in ways that optimize operations and mitigate risk. They build equity above and beyond product offerings. The operating brand principle: “The closer you look, the better we look,” is something shareholders can take to the bank. And sleep on.

Partners

Strong brands make the partnership stronger. They can be trusted to do the right thing. It’s weak brands that cause the 3 a.m. wake-up calls.

The Public

Brands are a public trust. Strong brands earn that trust by being accountable to the public for their products, services and corporate actions. The public sleeps well knowing that the brand will stand up for what’s right as much as it stands out on its own behalf.

Mother Nature

Strong brands take care of Mother Nature. She has no money, no purchase intent, and no brand loyalty whatsoever, but her strength is brand strength. Mother Nature sleeps soundly because strong brands know that any wasteland is a dead zone for brands, too.

Photo credit:  Spring | Sweden — Flickr

In a previous post, Brand lessons from the BP oil disaster, I framed my discussion by asking: Did BP fail its brand; or did the brand fail BP? In this post I’ll explore these two failure modes in greater depth. A brand failure like BP’s might arise from using the wrong brand model, which no amount of execution can save, or by employing a correct brand model but failing to implement it properly, especially at the management level.

What caused the BP brand to go off track?

I’m looking for causal factors that might explain why the BP brand went off track, resulting in the blowout disaster and massive pollution. Future hearings, investigations and court cases should provide us with much more data than available now. This is a preliminary snapshot, nothing more. My goal is to posit some basic brand rules applicable to all brands, in whatever business or organization. I’m using BP as a provisional case study.

(And to those who might argue, “You know, you really can’t separate brand strategy, brand model and brand execution” I’d say I agree philosophically, but I’m forcing such a separation here for analysis purposes.)

How can a brand “fail the company?”

The brand itself can fail the company when it’s the wrong brand approach for the business. This is a brand model/brand strategy issue, as I see it, in which a brand can fail the company in two ways. The first is when the brand model can’t advance the company and its customers beyond the reach of competitors. The brand doesn’t create competitive advantage, and the business suffers as a result. In the second (and far more serious) case, the brand fails to optimize internal operations, and in so doing actually increases business risk. The result may be a quality breakdown, or even a business breakdown. In both the first and second cases, a company has the wrong brand model for the job.

The perils of an “image campaign”

My “sense” is that brands most often fail the company when the brand is positioned as a stylized sales stimulant, in an “image campaign” of advertising and promotion. The resulting brand isn’t part of the meat and bones of the business. When stressed the core business can founder, with notable weak points being innovation and quality.

Signs that a brand might fail the company

Here are some specific signs (as I see them) where a brand might be in danger of failing the company:

1. The “brand” is defined as a media campaign that promotes the brand identity. It exists as part of the company’s persuasion and promotion package. (E.g., “Beyond Petroleum.”)
2. The brand doesn’t state what it values, and why. (And the brand is no guide to what’s right and what’s wrong inside the company.)
3. The brand makes no commitments.
4. The brand doesn’t define a clear chain of accountability.
5. The brand is largely decoupled from day-to-day operations. As a brand, it’s mostly symbols and slogans. It is not a working brand.
6. The brand relies heavily on myths and make believe, further divorcing it from day-to-day realities. (The brand also plays little role in innovation, quality and value creation.)
7. There’s nothing visceral in the brand for employees (and customers). It has a “Wizard of Oz” feel to it. Lots of smoke and mirrors, and a very big curtain.

How can a company “fail the brand?”

Let’s now look at the other side of the question: How can a company “fail the brand?” Here we assume a brand that’s properly structured within an effective brand strategy. The brand is OK, but the company prevents it from achieving its objectives.

Signs where a company is in danger of failing its brand

Here are some specific signs (as I see them) where a company might be in danger of failing its brand:

1. Management believes that the brand’s sole purpose is to make the company look good. The brand has no internal value beyond the “image appeal” it can generate externally.
2. Management positions itself above the brand. It doesn’t exemplify brand values in its actions, nor does it lead the brand by example.
3. No one in management is accountable to the brand. (Or accountable to brand values.)
4. The brand does not fuel the corporate culture. It’s decoupled from business decisions.
5. The brand is treated as a form of communication, rather than a method of optimizing operations. It’s kept as a messaging layer.
6. The brand team (if there is one) has no authority. It’s marginalized into a feel-good adjunct of marketing and corporate PR.
7. Management treats the brand as a financial “asset.” In this accounting mode the brand loses its position as a core value-set and tool for best practices.

And in BP’s case, perhaps “both”

In my previous post on BP (link above) I suggested that, based on preliminary indications, BP’s brand failure in the Deepwater Horizon blowout was probably a combination of both failure modes: a brand that failed the company, and BP management that failed the brand. Maybe more of the first than the second,. In time more facts will help clarify what actually transpired prior to the blowout, and may reveal other brand issues as well.

Photo credit: Fibonacci Blue — Flickr

One thing fairly certain about brands is that brands that live in the past eventually stay there. Brands innovate, or die. In other words, your brand is not your legacy. Your brand is your tomorrow. It’s your brand innovation that writes your future. Backward-facing brands are kaput.

Apple’s brand story: wildfire innovation

Apple understands this principle and innovates like wildfire, advancing its customers to new realms of value: iPod, iPhone and now iPad. Each step forward explodes the limitations of legacy approaches. In their place Apple enables new ways of being and doing, in new contexts where customers are better-off. That’s what brands are supposed to do.

Microsoft: chained to a legacy brand

In contrast to Apple’s ardent innovation, Microsoft is chained to a legacy brand, its brand of market power stemming from the desktop monopoly that Microsoft forged in the 1990′s. Microsoft drags this legacy everywhere, like an anchor, in a vain hope of installing the past on the future.

Unfortunately, Microsoft can’t make its old brand form fit the new multi-platform world. The Microsoft brand, initially a liberating force in corporate America, now creeps like a pall. It’s heritage hangs likes a curse. There’s brand failure everywhere, most recently with the Microsoft Kin, a highly-touted mobile phone scrapped just two months after launch.

These failures weigh heavily on Microsoft employees, the makers of Microsoft’s future. Their comments on the Kin debacle in Mini-Microsoft describe a backward-facing brand in full dysfunction.

One of the perennial problems in business is that over-exuberant marketing claims can come back to haunt the brand. Essentially, marketing writes checks that the brand can’t cash. When product or service claims can’t be substantiated, or may be seen as misleading, it’s the brand that pays the price. Brand trust—the gold standard of customer relationships—often takes the biggest hit.

Baby Einstein creates a brand trust headache for parent Disney

The New York Times has the story of how the esteemed Disney brand is taking measures to regain brand trust after over-aggressive marketing by its Baby Einstein subsidiary began to take a toll on the Disney brand itself. Disney acquired Baby Einstein in 2001. Baby Einstein’s advertising initially claimed educational benefits from its videos and DVD’s made for infants and toddlers. The claims resulted in a citizen’s group filing a complaint to the FTC alleging deceptive advertising. The FTC eventually dismissed the suit, in part because Baby Einstein scaled back its educational claims.

Separately, a research study at the University of Washington questioned the value of such videos for infant development. Disney defended Baby Einstein from unwarranted conclusions from the study, but currently the American Academy of Pediatrics recommends no TV for infants under two years old.

Disney offers a full refund

To help restore confidence in both the Baby Einstein and Disney brands, Disney has announced a full refund for Baby Einstein videos/DVD’s purchased within the last five years. Disney calls this “The Baby Einstein™ DVD Upgrade / Moneyback Guarantee.” You can read the details in the Participation Guidelines.

The importance of brand due diligence

Any M&A activity calls for brand due diligence, an in-depth assessment of the strategic fit between brands. Brand due diligence entails a close review of brand values and brand vision, and how a brand works to create brand trust. When Disney acquired Baby Einstein in 2001, a program of brand due diligence might have uncovered potential brand risks inherent in Baby Einstein’s marketing claims. The Disney brand might have been spared subsequent public disputes with citizen groups and academic institutions—and a large refund.

Honda did it. Toyota did it. And now Hyundai is doing it: teaching US auto makers some hard lessons in brand value.

From the Wall Street Journal:

A decade ago, Hyundai acquired Kia, a victim of a mid-1990s shakeout in the Korean auto industry. It also established a new quality-control division charged with boosting reliability by emulating Toyota’s vaunted manufacturing methods. To allay lingering concerns over quality, Hyundai put warranties of 10 years or 100,000 miles on vehicles sold in America.

Their campaign began to show results, and the big breakthrough came in 2004, when Hyundai tied Honda for second place in the prestigious J.D. Power & Co. Initial Quality Survey. Also that year, Hyundai completed its first U.S. assembly plant, near Montgomery, Ala.

In 2006, Hyundai topped the J.D. Power initial quality ratings for non-luxury cars, and this year, in January, its first luxury vehicle, the Genesis, was voted car of the year by a panel of journalists at the Detroit Auto Show.

Brand value

A good measure of brand value is how far a brand advances the customer. This is a long-term process.  Customers are not quarterly. A 10-year horizon seems about right. A Hyundai built to last 10-years is no longer a “car.” It’s a partner. A friend. A member of the family. That’s where brands belong.

Everyone learns these lessons but Detroit

The forthcoming vehicles from China and India will no doubt emulate the proven success of Japanese and Korean imports. Everyone else seems to learn these lessons but Detroit. Why? Unless US automakers quickly figure out how to build customers into their brands, “Detroit” may come to mean “brand wasteland.”

One of the tenets of value-based brands is that brands can help companies co-create value with their customers. Given the right brand strategy, this will create new forms of strategic value, resulting in competitive advantage for the company, and significant advances for customers.

A productive conversation

I recently posted a comment on brands and value co-creation on Wim Rampen’s excellent blog. The particular post includes Wim’s general definition of value co-creation, as well as many excellent comments from others. Especially useful to me were links to work by Graham Hill and Chris Lawler, especially Chris’s diagram on the Eight Styles of Company-Customer Value Co-Creation. Review the diagram full-screen and you will begin to see more than a few strategic brand opportunities.

I’ve included my comments below. The only change I’ve made is to add sub-heads to separate the text into more readable sections.

===================================

Wim,

Great post and discussion —

I might suggest that we place value co-creation in the larger context of “creating customers,” in the Peter Drucker sense. The goal of any business is to create the customers who drive the business forward. Co-creating value with customers is a key ingredient in this process.

A strategic context for value co-creation

I’d be in favor of defining a strategic context for value co-creation. The goal is to co-create new forms of value that competitors can’t match, and that sustain the business going forward. This is an open-ended process based on the formula: company potential X customer potential, where companies employ a platform approach that places company and customer on the same page, writing it together. This is a shared creative context that transcends the traditional vendor/consumer relationship.

Brands and value co-creation

In my view the only discipline that can deliver these results is brands, with their programmatic power to produce outcomes ranging from the practical, to creative, to emotional to sublime. (Not traditional brands of course, but a new form of brands as modes of innovation.)

Further thoughts for brand builders

Further thoughts:

– A company’s master strategy to create customers will include its value co-creation strategies.

– Value co-creation means that the customer (in some context) re-creates himself or herself through the process.

– Properly designed, a program of value co-creation will create customers who are beyond the reach of competitors.

– Strategically, the new forms of co-created value should be the groundwork for new business models.

– A platform approach is the best way to co-create value with customers.

– In value co-creation, context is king—hence the importance of brands, as they are engines of context creation.

– To co-create optimum value with customers, a company must take the role of visionary enabler.

As an example for all the above we could use Apple + iTunes + iPod + customers. Together they “reinvented music” and disrupted the existing music industry.

Brian

@brandstrat

===================================

NOTE: I’ll be posting more about value co-creation in coming weeks.

Photo: Spiritwood Images – Flickr

Barry Ritholtz (who should be in every brand builder’s blogroll, if not speed dial) lays out a classic case of brand vs. business in the financial services industry.

In the case that Barry cites, two portfolio managers help their clients avoid huge losses in 2008 by moving most assets into cash:

Overall, the clients do very well. In a year where the markets are practically cut in half, their clients lose about 10%. The investors are ecstatic, and while the two brokers annual compensation was schmeissed — they went from over $3 million gross to under $1 million — they have happy, referral making clients to rebuild their business upon. It’s a short term income hit that should generate gains over the long term. And, they got there by doing the right thing.

For this, their employer (rhymes with Schmerrill) cuts their compensation and stuffs them in the penalty box.

Creating brand value is the best way to create customers. A company that penalizes brand value has major problems, often right down to its core.

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