Brands Create Customers

In its usual level-headed style The Economist analyzes the basic issues involved in managing risk and brand reputation, especially for global corporations. They address the subject as part of a special report on Corporate Social Responsibility (CSR).

This special report will look in detail at how companies are implementing CSR. It will conclude that, done badly, it is often just a figleaf and can be positively harmful. Done well, though, it is not some separate activity that companies do on the side, a corner of corporate life reserved for virtue: it is just good business.

Three layers of CSR

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

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

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

Beyond an antiquated notion of brands

I totally agree with the Economist’s integrated approach to CSR, where it shrugs off superficial feelgood communications and focuses on CSR operations embedded in the business. However, The Economist seems to have an antiquated notion of brands, as if we’re still living in the 1950′s, when brands were static “assets” to be kept polished and squeaky clean lest any “bad press” diminish their value. This defensive and reactive concept of brands prevents the special report from addressing proactive brand strategies that may dramatically raise the bar for both social responsibility and profits.

Brands and social responsibility

“Brands and social responsibility” is an important subject that deserves its own in-depth report. CSR requires new attention to the supply chain, and to the brand chain. It also requires new brand models, and new brand approaches. That’s more than I can manage in this post, so I’ll end with some general comments.

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

Photo: Jamison — Flickr

The short answer to this question is yes—absolutely. In our information age, a company’s brand acts as a vault of security for customer privacy. It’s a first line of customer trust. Strong brands protect customer privacy. Weak brands leak. Or worse, they’re information sieves, and can’t be trusted.

Protecting privacy builds customer trust

Yes, customer privacy is a brand issue, and a critical one. Simply stated, safeguarding customer privacy is a key part of a company’s strategy for building brand trust in the digital era. Customer privacy and brand trust are deeply intertwined. As products, brand programs and customers increasingly interconnect, interact and share information, customer privacy issues will increasingly determine which brands emerge with customers on their side.

Protecting privacy confers strategic advantage

The digital age has raised the bar on brands, and protecting customer privacy is becoming a new form of brand value, with strategic implications. Brand platforms can gain strategic advantage as they become strong privacy platforms. This is especially true as brands grow through customer initiative and innovation. Brands that actively team with customers on a platform of trust can develop more traction than brands that treat customers as a demographic resource to attract advertisers.

Facebook’s privacy faceplant

To witness how important privacy has become to the world of brands, we need look no further than Facebook’s recent faceplant over its widely criticized Beacon advertising program. Facebook’s experience illustrates how poorly conceived and/or poorly implemented privacy policies can threaten to undermine a brand.

The Beacon program tracks what Facebook users do on partner websites and sends that data back to Facebook. There, it is combined with user data (anonymously) and made available to advertisers for better ad targeting. It is also passed along to one’s Facebook friends as shared data, letting them know what you’ve been doing on those other sites.

Privacy issues raise questions about the brand

Facebook pitched Beacon to users as an easy way to share activities and information with friends. But as users realized that their private purchases and activities at other sites could now be revealed on Facebook, and also fed to advertisers, resistance set in. Was Facebook a brand of user enablement and expression, or a brand of information harvesting? And whose side was Facebook on? It wasn’t entirely clear how much control users had over their own data. And to make matters worse, opting out of the Beacon process was not easy.

Facebook clarifies its brand intent—to a point

After several weeks of mounting criticism (see here, here and here) Facebook’s CEO issued a public apology, and began steps to make Beacon elective for Facebook users through a more direct opt in process. This was a major step in clarifying what the Facebook brand stands for, although some critics argue that Facebook still needs to do more.

Ed Felten has a balanced overview of Facebook’s privacy issues and implementation, from which he derives operational lessons for all companies. To Ed’s list, we might add the following brand considerations:

To “monetize” customers is to erode the brand

A major brand challenge facing Facebook and similar social sites is how to balance their revenue needs with their strategies for social growth. Such sites are under pressure from investors to build profitable revenue streams, typically through advertising. The sites feel compelled to capture as much user information as possible, in order to make themselves attractive vehicles for highly targeted ads. But if the sites “monetize” their users by exploiting them as information resources, they risk driving their brands in a commodity direction—because they’re essentially treating their users as (information) commodities.

A social site that “monetizes” its customers often does so at the expense of the brand. To monetize means to make money the first principle of customer relations, whereas for brands the first principle is customer growth. (Brand-wise, monetizing is the opposite of value creation and innovation.)

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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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As brand builders, we do everything we can to create “timeless” brands. In the heat of this effort, though, it’s easy to forget that the first step to becoming a timeless brand is to make time for customers. To begin this process, a brand must recognize that its customers are not external “targets” to be aimed at. Customers are part of the brand essence, just as much as the company and its products.

Factor your customers into your brand

You make time for your customers when you include their interests in key decisions you make affecting company policies, innovation, product performance, quality and trust. The time you spend factoring your customers into your brand is time well spent. Your unique brand emerges when your customers are part of you—and vice versa. In this bond, there’s no room for competitors.

A case in point: modern watches

When it comes to making time for your customers, modern watches (some pun intended) are a case in point. I’ve come across an excellent example that I’ll detail below.

Brands function on customer time

Consider the above wristwatch. With four dials, it’s a work of engineering and watchmaking art. This particular model doesn’t need batteries, nor does it need to be wound. It’s solar powered, and can run for months once it’s been charged by light. It’s a precise chronograph, yet can also operate 300 ft. below the surface of the ocean. Similar models feature perpetual calendars, alarms, and multiple time zones. As power-packed timekeeping machines such watches work all sorts of miracles—once you figure out how to set them properly.

The set-up is the rub

Alas, the set-up is the rub. Brands function on customer time. A brand of powerful watches that doesn’t embrace customers as part of its brand essence is effectively taking its product off its customers’ wrists. From a brand perspective, the greatest feature of any watch is the customer who wears it. That person sells the brand ten times over by showing everyone what a great piece of gear it is.

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The new Adobe AIR platform (Beta) promises to be a boon for brands. If AIR delivers on its potential, brands may soon burst forth with new drama—and relevance—in new digital dimensions.

You can think of Adobe AIR as a feature-rich way to connect your brand with customers via computers and digital devices. AIR has been developed to combine the immediacy of the Web with the power and graphics of desktop applications. Potentially, it’s a “best of both worlds” platform that brand builders can use to extend their brands into new contexts, and to create many new levels of customer experience and interaction.

(AIR is Adobe’s new brand name for its updated rich Internet platform previously code-named Apollo. I’ve written about Apollo and brands here and here.)

Realizing the dream of “rich” brand applications

Adobe AIR represents another step toward realizing the brand-builder’s dream of “rich” personal brand applications that can act as a “second skin” to customers. AIR may enable your brand to act as a digital sidekick, personalized to the customer, always on, timely, deep, trustworthy, engaging, interactive and portable.

Potentially, AIR’s multimedia and functional capabilities open up vibrant new avenues of brand/customer interaction.

A new world for brands

From my perspective, it’s not an exaggeration to say that AIR opens a new world for brands. If your brand has primarily existed as a name or a symbol, AIR can make it come alive in new (digital) customer context. In effect, AIR lets you transform your brand into a customer-focused application to do something fundamentally useful, or something astonishingly cool. This can be anything that connects you and your customers around a shared passion. It’s a way to bundle the customer to the protean meme that’s you. You may not think of your business or brand as a meme, but AIR may well change the game in this direction.

Proof of concept applications

You can check out the first blush of AIR applications at the Adobe AIR showcase gallery. Many of these are in the “proof of concept” stage, but observe how Anthropologie uses AIR in an online retail setting. There are some nifty features here, but they only scratch the surface of AIR’s creative brand potential.

For instance, your brand might use AIR to create a free soft phone for customers. Let them call each other during a prime-time event, such as the Super Bowl or March Madness. Add whatever features you want to the phone to make their interactions with each other, and with you, more compelling.

Another potential brand application using AIR

I can imagine visiting an art exhibit with AIR on a digital device, and downloading an exhibit guide on entering via Wi-Fi. Now the guide is on my device, along with a map of the museum. It provides me with audio, music and visual analyses of the art on display, plus layers of background detail. If I want, I can add notes as I meander through the artwork. I can shift back and forth between artists, and even compare works on the screen. Or I might select the different works I want to see and have the guide plot a course for me through the halls. One part of the guide is a retail shop, so as I’m traipsing around I can order prints, which will be waiting for me at the museum shop at the end of my tour. Later, I’ll transfer the guide to my laptop, where it will be a detailed memento of my visit, possibly with a live link to the museum for news on upcoming exhibits and events.

The museum may provide this guide in support of its own brand, or it may be co-sponsored by a brand that shares common ground with exhibit visitors. With AIR, what starts with an event may become a long-term connection.

Widgets

AIR is tailor made for widgets, and AIR widgets may eventually rule the widget and gadget class. They can include so much more of the customer than other current widget/gadget approaches.

Our brand needs a lift: let’s AIR it

AIR is scheduled for formal release later this year. The AIR platform holds such promise for digital brand connections that brand teams may soon be discussing which new brand applications deserve the rich features of an AIR treatment. “Let’s AIR it” may become a brand mantra in 2008 and beyond.

Photos: Wikimedia Commons

Jeff Jarvis has the story over at BuzzMachine.

The “iPod moment”

As Jeff sees it, an historic “iPod moment” occurs in the media biz when customers routinely use the iPod to access a particular form of media, instead of using the traditional branded format. Unless traditional brands can leap ahead of the customer and welcome them to new digital domains—and the freedoms they provide—the old brands don’t have a chance.

Music labels were the first domino to fall.

“Reading the news”—redefined

From Jeff’s perspective, an iPod moment is now taking shape as the new iPod iTouch, with its glorious screen, emerges as a default reader for all things news, via the iTouch’s Wi-Fi connection. This will deliver immediate, unlimited news, will save a zillion trees in the process, and will push traditional newspaper brands, with all their brand heritage, authenticity and tradition, further toward the pulp pile.

It’s a case of what can happen to legacy brands when what they deliver is now done (better) by someone else.

Changing the game by changing the customer

The iPod (and the Web in general) have redefined newspaper brands by advancing news reading citizens beyond the reach of traditional newspapers themselves. They put more news value in the hands of customers, 24/7, in ways that customers can use. The old brands are still there, but they matter less, because they have less customer in them.

Simply stated, new digital technologies like the iPod have changed the game by changing the customer.

Questions for newspapers to answer

Jeff lists the critical questions that newspapers must answer:

How do we use this wonderful device to give people the news and links whenever, wherever, and however they want it? How do we do that with incredible efficiency? How do we make it local and relevant? How do we take advantage of the two-way relationship we now have, enabling people with these gadgets to share what they know? And – here’s what everyone really means when they talk about iPod moments – how do we make money doing it?

Re-creating the news customer

In other words, newspapers have to re-create their customers. This is a brand strategy task, driven by the dynamics of growing customer capabilities instead of perpetuating the legacy constraints of paper and ink. For newspapers, trying to contain customers, or to hold them back from the Web’s promise, is the wrong brand agenda. It’s a losing battle from the get-go.

The brand challenge for news organizations

For news organizations, the key brand challenge is to differentiate their customers from ignorance, not from each other. Do that, and your customers will follow.

One way to proceed is for newspapers to identify and model the well-informed and well-connected citizen that tomorrow’s world will need. That new model is the basis for the future newspaper brand platform, one that can advance customers—and their communities—irrespective of media formats.

Beyond “commodity” news

While some aspects of the Web may have made “news” a commodity, the proliferation of available information has made insight and intelligence, and context and meaning, all the more valuable. News organizations may want to build their fresh brands around that.

Photo: mlcastle — Flickr

When a business launches with an iconic product, it may discover, sometime down the road, that the product is on the verge of icon wear-out. Business growth slows. It’s in these situations that the brand must come to the rescue. That’s because the brand (when properly conceived) includes the customer in the icon. This is a critical step, because customers are infinitely protean, proactive and (self) sustainable. They never wear out.

When your iconic product falters, it’s time to tap into your iconic customer—the one created by your brand.

The Crocs brand in transition

We can see elements of this brand transition taking shape in Crocs, the highly successful, breakout brand of colorful foam clogs. Crocs has the daunting challenge of building (and sustaining) the Crocs brand beyond its original comfy beachwear cachet. As pointed out by the Wall Street Journal, Crocs is rapidly diversifying, and none too soon. The brand is under particular pressure from short sellers who are betting that Crocs is a fad—and not a sustainable brand.

Short sellers vs. the brand

Short sellers currently hold about 20% of CROX shares. According to the Journal, holders of short positions believe that Crocs is a one-trick pony, a fashion craze that will soon crash as customers lose interest and move on. In the short seller view, Crocs are Krispy Kreme for the feet.

In essence, short sellers believe that a company’s share price has overshot its brand. They profit when a stock price falls. A typical short-seller assessment is here. (Investors with short positions can lose their shirts when a stock price rises, so short seller assessments have a vested interest in being negative.)

And Crocs imitators everywhere

The Crocs brand challenge is even more difficult because there are scads of Crocs clog imitators in the market, selling at one-third the price—around $10 in the SF Bay Area. They may lack the segment-leading Crocs design and engineering, but their ubiquity testifies to a market for inexpensive foam-clog “fun shoes.” (Crocs has aggressively protected its brand in court.)

Where does a brand go for its second act?

So, what does a company do when 20% of its shares are visibly being bet against the brand, and low-price icon-imitators are everywhere? Where does a brand go for its second act?

It usually has two choices:

1. Reach back into its marketing bag of tricks to keep its head above water.
2. Reach out to customers to change the game, and get back on dry land—in a space it can own.

Call in the Ansoff Matrix

A first marketing step is usually to fill the whiteboards with some version of the Ansoff Matrix, so a company can systematically probe opportunities in Market Penetration, Market Development, Product Development and Diversification.

Crocs seems to be doing just that.

As the WSJ article notes, Crocs is diversifying into apparel, with Crocs branded shirts, pants and jackets. (The immediate brand connection is apparently that croslite, the plastic resin from which Crocs footwear is made, will somehow be incorporated into the apparel. From the Crocs site it’s not yet clear how this will be done, or how it will add new value.)

Crocs is also doing sponsorships (Pro Beach Volleyball), folk/rock campus tours, segment licensing deals (Disney, NBA, MLB, NFL, NHL), moving ahead with customized shoe add-ons via an acquisition, and developing new footwear lines, including mammoth, a fleecy Crocs made for cold climes. There is also CroxRx for pediatric purposes, Crocs work shoes (potential markets for nurses, waiters and other service personnel), a substantial kid’s line, and new leather and canvas shoes (with croslite soles).

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Google uses video clips sent in by users to create a short, spiffy video showing how Gmail messages “actually” move around the world. It’s very inventive, and lots of fun—edited down from 1,100 videos from 65 countries.

It contains some important brand lessons, too.

Brands as an engine for discovery

The Gmail video shows what can happen when your brand is a proactive part of peoples’ lives. You want your brand to be an engine for discovery, for play, for breaking free from dull routine and repetition. After all, a brand is a joint venture—running on customer feet.

Your brand should help customers discover themselves. In this process they add value back to the brand, moving the venture forward. (Google’s You Tube is also a major beneficiary in this particular case.)

Fresh brands are plastic

Fresh brands are plastic, too, made to be shaped and molded and bent to new uses, so they can run with customers into new markets. Brands locked away in a showcase, or barricaded behind walls of lawyers, grow pale in a hurry.

Photo: cristina mingot — Flickr