Brands Create Customers

It’s way too early to predict whose products will define the emerging “home media center,” but at its big “Showtime” extravaganza this week Apple ran across the room and boldly jumped on the sofa. It can’t claim to own the sofa—far from it—but it certainly acts like it belongs there, with its Front Row remote in hand, new full-length movie downloads from iTunes and its sleek “iTV” device streaming Pirates of the Caribbean to our widescreen TV’s in early 2007. “I think it completes the story, and shows you where we’re going,” said Steve Jobs.

Microsoft, which has powerful technology of its own in this market, doesn’t seem to be inhabiting the same room as Apple. It’s standing uncomfortably back by the door, as if still wondering how to fit its classic market control strategies into this new high-touch, high-design world of mom, dad and the kids.

Apple’s brand advantage

What we’re seeing in Apple’s initiative is how a customer-centric brand strategy can undermine the market dominance of a far stronger player. Microsoft owns most of the cards, but it’s Apple who’s picking the game, and it’s Apple who’s dealing. It can do so because:

1. It leads with its brand
2. It has structured its brand as a holistic expression of the customer
3. Apple has integrated innovation into its brand, creating clear customer pathways to higher levels of value.

These three elements contrast with Microsoft’s historic strategy to control customer choice, a strategy that puts internal limits on Microsoft innovation. While Apple is just as hard-nosed as Microsoft in its business dealings, it understands that by making Apple a brand of innovation it can create market opportunities in areas Microsoft can’t easily reach. Case in point: Apple’s five-year head start between the first iPod in 2001 and Microsoft’s Zune in 2006.

Some observations:

The power of customer-centric brands

Brands can be “about the company” or “about the customer.” Apple’s brand is the latter. Its brand has a supple, sensory texture that helps customers feel more alive. Through its customer-centric brand strategy Apple appears to be your personal agent in bringing about everything you’d want in the promised land of digital innovation and digital media: convenience, performance and completeness. Apple exudes a focus on “you” with such easy, holistic confidence that you want to jump on the sofa beside them. (That, of course, is the plan.)

Brands as “the customer inside the product”

One way to think about brands is to consider brand to be “the customer inside the product.” A brand built this way will radiate a strong customer presence. It does so because your brand strategy has integrated the customer’s forward path into the product. When the customer is “inside the product” you complete the customer as you complete the product, creating a powerful brand advantage. (A contrast to note: Apple works on completing its customers; Microsoft works on completing its controls.)

Apple’s “brand path” effect

I’ve previously described the concept of “brand space” and how a company can use a brand space strategy to gather strength in new markets before its products are ready for launch. There’s a corollary to this concept that we might call the “brand path” effect. Think of the brand path as a vectored brand space infused with your brand vision and brand qualities. It’s a customer pathway paved by the brand, in the direction you are taking your customers, even though your full suite of products hasn’t been delivered. They can see it, and feel it. Apple may well have the reigning brand path in the home media center space.

Brand path is somewhat related to the “halo effect.” For the last five years marketers have debated whether an iPod halo effect would boost sales of the Apple Mac line. Well, it turns out that was the wrong place to look. The real halo effect of the iPod will be in the home media center, thanks to the brand path Apple is constructing. Apple’s brand path is the iPod scaled up to the entire house.

The real “video iPod”

In other words, in the brand scheme of things the home media center will not be a “computer.” It will have nothing to do with computers. It will be an extension of people, as laid back and as comfy as the sofa. It will be a holistic, brand-enabled media experience, the purest experience possible. It will have the simplicity and ease of use of the best consumer devices, as typified by the iPod. In more ways than one, the home media center will be the real “video iPod.”

Photo: re-ality, Flickr

Note to brand builders: Consider yourselves descendants of that fellow on the left. Leonardo lived in far different times, and he worked for popes and princes instead of global corporations, but like us he was often challenged to grasp what mattered and make it timeless.

We may not remotely approach his inventive genius, or the depth of his art, but we are, fundamentally, walking the same path. He used his gifts to grow new worlds of meaning. So do we. He was no friend of arid dictates, half-truths, doctrines, dogma and the closing of minds. And neither are we. He observed with passion, looking for revelation in life itself. That’s also where great brands begin.

Man is the measure of things—and of brands

To Leonardo, man was the measure of things. Life was a vast platform for man to enjoy, to explore, expand, engage. Five hundred years later, the same is true for brands. Man is the measure of brands. Brands are “the customer inside the product.” They add a vibrant human dimension to artifacts that would otherwise drone on, never reaching their potential—and depriving customers of theirs.

The power of perspective

Brand builders and Leonardo share another strength: an infinite regard for perspective. Leonardo helped discover and develop the power of perspective in Renaissance art. It was a revolutionary new way to articulate reality, to render three-dimensional scenes on flat, two-dimensional surfaces. Thanks to perspective, landscapes could breathe, prosaic tableaus blossomed into wondrous glory, and paintings became a deep visual and emotional experience.

Brand perspective: human depth and dimension

Brands do for business what Leonardo did for art. They articulate a new customer reality that opens things up. Business needs brand perspective because companies usually conceive products in only two dimensions: cost and quality. The resulting products are often culturally thin. They can easily fall flat.

Brands change this equation because they provide a third, human dimension that adds depth to the company, to the product and to customers themselves.

Products are 2D. Brands are 3D.

You can think of it this way: perspective opens the eye; brand perspective opens the customer. Products are 2D. Brands are 3D. A 2D world only takes you so far. Move up to 3D and you and your customers have the world at your feet.

Sometimes brand problems hit you like a sneaker wave, completely unseen until you’re locked in their grasp.

This brand problem begins when the M/V Cougar Ace, a 650 ft. car carrier loaded with 4,700 new Mazda vehicles, almost capsizes in the North Pacific on a voyage from Japan to Vancouver. While re-ballasting the ship at sea the crew pumped too much ballast water to port, and the ship heeled over. Within minutes it’s at 60 degrees, then 80 degrees. The crew abandons ship. World news covers the ship’s dire condition. For three weeks the Cougar Ace lies precariously on its side as salvage teams carefully board it, then slowly tow it 400 miles to safety in the Aleutians. There it’s finally righted, and made ready to be towed to Portland, Oregon where it can finally unload its cargo.

The cars survived—now rescue the brand

Initial inspections reveal that—miraculously—the cars on the Cougar Ace’s 14 decks are not totalled. They were individually secured to lash points on the deck, and didn’t pile up in a heap when the ship keeled over. Most hung from their restraining straps, defying the pull of gravity. Apparently, very few cars actually shifted. Some cars were damaged; many more appear to be perfectly fine.

So, the ship is saved, the cars are somewhat saved, and Mazda faces a daunting brand challenge. How does it rescue the brand? The accident has placed the Mazda brand in jeopardy. Every potential Mazda customer who’s seen pictures of the foundering ship, or heard about it, will be thinking: “I like Mazda’s, but I’m not sure I want one from that ship. What happens to a car when it’s been clinging to an 80 degree deck for three weeks, in an abandoned ship flat against the ocean? What kind of car would I be getting? How would I know?”

Brand trust: the cargo that counts

Brand trust is really what’s at stake here. Mazda can’t afford to lose it. Those are not just 4,700 Mazda vehicles aboard the Cougar Ace. Those are now 4,700 unknowns, and question marks corrode brands. In figuring out how to proceed, the company must weigh the commercial value of the shipment ($100+ million before the accident) against a potential loss in brand trust if customers believe that the Mazda name might be linked to vehicles of questionable integrity. Above all, what Mazda must preempt is a worst case scenario in which customers simply avoid any doubts about Mazda cars by avoiding the brand altogether.

A heading from the helm

While the captain of the Cougar Ace could justifiably abandon ship, the captain of the Mazda brand cannot. The brand needs a heading from the helm.

For starters, Mazda must acknowledge the brand issues raised by the Cougar Ace accident. Mazda can’t pretend that “nothing happened.” Their customers, many devoted to the brand, are looking to Mazda for brand leadership.

One option: keep these vehicles off the market

Mazda has greatest brand leverage if it can negotiate a full value settlement for the entire shipment from the shipper and insurers. This would enable Mazda to affirm that these vehicles were effectively “lost at sea,” and will be kept off the market to protect the customer, and the brand. The brand logic behind this strategy is that these vehicles have the taint of damaged goods. If allowed into the market they could spread doubt across the entire Mazda brand, disrupting future sales and re-sale values, even if the salvaged cars were to show no outward defects. The mere belief that random Cougar Ace vehicles are “out there” could haunt the brand for years.

Market-based scenarios

What if a full-value settlement isn’t possible? And what if Mazda’s very survival depends on revenue from these cars? Could Mazda still sell unscathed vehicles and maintain brand trust?

It could, but that would be difficult: 1) for the reasons noted above, and 2) because it would require flawless execution across a set of brand programs, many needing customer participation. The cars and the customer experience would have to be “better than new,” in a process that transformed the cars from question marks into desirable vehicles. (Significant PR campaigns would also be needed.)
A return-to-market scenario also requires a risk analysis of possible legal liabilities if any Cougar Ace vehicles are ever involved in accidents (or any other litigation-inspiring activity).

A leasing option

If Mazda takes the revenue course, it would have to inspect and re-certify the vehicles, and probably offer them with discounts and extended warranties. Leasing the cars under attractive lease and buyback terms may be the best way to sidestep any ownership qualms, and still maintain a strong brand presence. In any case, customers would need to know exactly what they were getting: where their vehicle was on ship, and what happened to it. (Map, photos, inspection report, certification sign-offs.) Every potential doubt and every potential question would have to be addressed, and answered. Mazda would also need to permanently identify the vehicles as Cougar Ace survivors, to preclude rumors about unknown “Cougar Ace specials” that could diminish the Mazda brand.

Selling the cars for parts

Selling the cars for parts may be considered as an option. It could ease the brand burden somewhat, but it couldn’t be undertaken in the spirit of sweeping dust under the rug. Unless certification and documentation steps are implemented, a shipload of questionable Mazda parts can’t work in favor of the Mazda brand.

Ordeal at sea unites company and customers

Wouldn’t the above subhead be the perfect conclusion to the Cougar Ace saga? Mazda and its brand were caught up in an ordeal at sea, as were Mazda customers awaiting pristine new models. By leading with its brand Mazda can unite with its customers, and put this ordeal to rest. In fact, Mazda should view the whole episode as a way to renew its customer foundation. The reality is that Mazda’s future will be written by customers, not cars.

UPDATES:

See updates here and here.

Photo: BYM

Jack Yan makes some very insightful observations about the progress of brand thinking on the Asian mainland, and how it’s affected by social, cultural, political, economic, and national factors. He focuses on Malaysia, but discusses how quickly developing Asian economies may be expected to adopt the long view of brands, where customer context is king. It’s a big leap from being the “factory to the world” to being “brand leader to the world.”

The technology wildcard in brands

What isn’t clear (yet) is the extent that new online technologies may actually accelerate the rise of Asian brands, as least to get them into the average brand ballpark. Theoretically, tech innovation might compress what historically took several generations into one, through the web, broadband, growing WiFi, and online innovations such as YouTube, MySpace, etc. Progress will be fastest where political freedoms and open communications thrive. Perhaps smaller Asian nations with democratic traditions can carve out brand leadership roles.

Politics can compromise brands

Progress won’t be even. As Jack notes in another post, China’s recent actions to censor the blogosphere are not only bad internally, they will also impede China’s progress toward developing customer-centric brands for the world economic stage. Unwittingly, they may be creating a “brand gap” that other nations may step in to fill.

Brand builders sometimes want to believe that brands exist “above the fray,” insulated in a comfy media zone high above the blood-and-guts battles of the marketplace.

Sorry. Brands don’t get a safe seat. The fate of brands lies in the same raw struggle for survival. Brands disrupt, or they’re disrupted. Big teeth help, but so do big brains and nimble feet.

Disruptor brands move customers forward

Brands disrupt other brands—and entire markets—when they’re agents of customer evolution. Disruptor brands move
customers forward, perhaps subtly at first, then by leaps and bounds. They may be daring or prudent, refined or vibrant, but through them customers reach new levels of being and doing. Once customers evolve to a new plane of action, they never turn back.

Disruptor brands are adaptation engines. They help customers adapt to more rewarding forms of living, leaving established brands behind. Highly evolved customers have diverse and demanding needs that can’t be served by moribund plodders. (Disruptor brands gladly help complacent brands adapt to bedrock.)

Value delivery systems, not fabricated fluff

Disruptor brands are value delivery systems, not fabricated fluff. They raise the customer bar, and the customer. They understand that the survival game doesn’t go to the brand that looms the largest. It goes to the brand that creates the fittest customers—who will carry the brand forward.

Gone are the days when the brand ideal was to crawl from the shallows, reach a sunny spot, and bask there forever. That leads to stagnant brands in backwater markets, an ecosystem on the brink.

Disruptor brands move in with muffled steps

Disruptor brands don’t announce themselves with fanfares. They move in with muffled steps. (If you’re an ad agency in the year 2000, the disruptor brand is an ugly online search thing called Google, adored by lowly interns.) Even as they set up shop, disruptor brands rarely make a fuss. They’re too busy on new platforms for new species.

Disruptor brands know that a company’s customers are its greatest competitive weapon. Grow customer, grow the brand, grow the business.

It’s as simple as evolution itself.

Photo: WikiMedia, David Monniaux

Alas.

Hard to say who suffers most here:

1. The brands reduced to signage.
2. The building reduced to signage.

An old rule of brands says: If you can’t grace a customer, grace a facade.

Facades are the easy way out, but they’re rarely built to last.

Hat tip: Chroma

Grant McCracken detects an apparent brand shortfall at HP, one that threatens to push the PC maker one step closer to the commodity basement. His assessment makes a lot of sense to me.

Grant cites a new HP ad campaign that promotes HP’s PC’s in the context of some mighty metaphors:

Your personal computer is your backup brain. It’s your life and the life of your business. It’s your astonishing strategy, staggering proposal, dazzling calculation. It’s your autobiography, written in thousands of daily words.

He logically looks for new functions or features in the HP product that would deliver on this buoyant context. Alas, he finds only a leaden “Total Care” package. His response: “That’s it? What happened to ‘Your personal computer is your backup brain…your astonishing strategy, staggering proposal, dazzling calculation, your autobiography’? Until this brand promise is built into the HP PC, the ad is really just talk.”

Yep, the campaign is mostly fluff stuff. When box gets to buyer, HP PC’s really aren’t that different after all.

Where’s the brand?
And what about the HP brand in all this?

It should be front and center, building value and creating customers. But it’s nowhere to be seen, perhaps having been shunted off to a corner cell in a junior accountant’s spreadsheet.

I would argue that HP is confronting the same brand crisis that plagues almost all PC makers. There are too many commodity inputs, and too few value outputs.

Commodity thinking yields commodity products
The crisis has its origin in the commodity provenance of the PC itself. These days PC makers source their products from sub-tier manufacturers as virtual commodities. They use standard or off-the-shelf components, outsource as much production as possible, ruthlessly shave costs, and pit vendor against vendor in cutthroat competition. Once products are ready, PC makers then need to sell these commodity-induced units (that they pay for) as value-induced glories (that you and I pay for.)

Brand kiss—or commodity kiss?
This is where brands come in—or should come in. Brands are value engines, with protean powers. (Any practice with Dionysus as its patron saint is a force to be reckoned with.) It’s up to the brand to translate the blood, sweat and gears of the commoditized production process into a bountiful brand kiss when the buyer opens the box. That’s the customer payoff.

To be kissed by a commodity is not very tasty. It’s, well, like this.

Grant hits the nail on the head when he states that HP’s brand challenge is to “Identify a higher value that [the] consumer cares about, and deliver this value with product and brand development.” Unfortunately, HP still clings to the traditional brand model—the one of top-down “branding” and ad campaigns—and that model is broken.

Needed: a focus on creating customers
It would help HP if they had a more concrete idea of the customer they were trying to create. (That’s the customer that will carry their business forward.) This is where their brand would jump into action with platforms, programs and applications to lead these customers to richer lives—through the product. (HP’s photo-related businesses certainly grasp this point.) The disconnect between the HP PC ad and what the HP product delivers—with the HP brand MIA—tells customers that HP hasn’t totally sorted things out yet.

Photo sources:

hp insignia: ehecatzin, Flickr;
keyboard: PartsnPieces, Flickr
commodity kiss: Dave-F, Flickr

BrandWeek has published an excerpt of the Brand Keys Customer Loyalty Index for 2006. The excerpt is a pdf with summary charts, and is well worth reading.

Based on the Brand Keys survey, brands are struggling to meet customer expectations. In fact, many brands are falling behind, creating a “loyalty gap.”

The average level of consumer expectation across 35 major brand categories rose by 4.5% from last year. Over the same period, the survey shows, the average ability of brands to keep up with those hopes decreased 9.2%. Put another way, while brands certainly try to meet the expectations of their loyal customers, those expectations are nonetheless growing two times faster than the brands’ ability to keep up with them.

What do these results mean?
Various experts cited in the BrandWeek article offer up a “usual suspects” range of explanations and remedies:

1. Brands have to do a better job of managing customer expectations.
2. There’s too much hype in ads. People believe it, and brands get caught trying to deliver on vapor.
3. Better brand strategies are needed. Don’t over-promise (and under-deliver).
4. Customers themselves are to blame. They demand too much. They’re unrealistic. Brands are caught in the middle.
5. Lower the bar for brands. That way, whatever you do will be appreciated.
6. Just sell commodities. That way all brand problems disappear. (Oops—my joke.)

My take
In general, I’d say these results (the survey calls them a trend) indicate a systemic breakdown weakness in traditional brand
practice. Attempts to “differentiate the brand” by “changing customer perceptions” invariably lead to campaign-driven brands, instead of customer-driven brands. The usual result is huge discontinuities between brand perception and reality. Customers and brands become “out of sync.”

The problem starts with top-down brands
The traditional top-down approach to brands is a main cause of the “loyalty gap.” That approach typically aims to create an unrealistic mind-meld of iconic brand worship, or, failing that, simply bribes customers with rewards and perks. The first sets customers up for a clash with reality; the second merely conditions customers to ask for “more.”

Top-down brands create low-performance customers. Customers conditioned by top-down brands are shocked (shocked!) when the brand veil is pulled from their eyes, or when they feel the least bit jilted in rewards. Typically, top-down brands are not designed to deliver value, and they’re not developed to create customers. That’s a big part of the problem.

Collaboration is key
If you use your brand to collaborate with customers, engaging them on mutual terms, you can create a platform of understanding and trust that avoids problems like the top-down “loyalty gap.” For instance, Southwest does not need to “lower expectations” to be a successful brand. It forges an agreement with customers on travel value: lots of reliable, cheap flights to key cities at attractive travel times. Their (high-performance) customers willingly pitch in to keep this brand proposition viable. Customers want to collaborate.

Needed: a new concept of “brand loyalty”
One problem with the “loyalty gap” meme is that it’s predicated on the traditional “loyalty to the brand” approach, and that approach itself is off base. In fact, trying to make customers “loyal to the brand” only makes matters worse.

As we note in our new definition of “brand loyalty,” brand loyalty is:

The loyalty of the brand to what it stands for. In practice, brand loyalty is a mutual loyalty of company and customer to a common cause. The customer is loyal through the brand, not to the brand.

There is no “loyalty gap” when you and your customers are on the same side.