Wednesday, December 30, 2009

Still a Disconnect Between Marketing and Social Media Branding and Reputation Management

e-Marketer has published a survey of how marketers are using social media for brand and reputation management. The results show that there still is a majority of marketers who see social media as another medium to sell a product or service. They don't understand or appreciate the relationship building aspects of social media, or they are so focused on transactional monetization that they cannot get beyond that.

More than 52% of those surveyed said that they either try to push the offensive comments appearing in social media down on the Google search pages or try to put out a positive press release or pay someone to say something positive about the product or service.

These actions are troublesome on so many fronts. There are still too many people who believe that social media is just another medium or that they can defy the changing nature of customer relationships--somehow feeling that they do not have to abide by the new rules of engagement. They do not seem to understand that social media is about relationships and community and conversation with the customer, not the company, at the center. It's a tough world for those who demand command and control. Intrusions into the community are not welcome and companies do this will lower their brand equity and reputation rather than raise it.

I am also troubled by the fact that 12% are trying to do a reverse SEO to squash negative information that appears about their companies. While nearly 40% said that they were working on improvements in product and service as a result of negative comments about their brands, there are still those who think that they can bury negative news. First, the importance of SEO has diminished as social media has risen. We used to only being able to determine the value of a brand by whether or not it came up on the first page of a Google or Yahoo search. With social media, there are conversations that are more important.

As I mentioned in a previous blog, I am not sure the analytics will work as intended to push the comments down, since so many people know how to manipulate searches these days. Also, it is a demonstration of the worst sort of management. Why not just hire the local "wise guy" to "wack" the offender? It's the same thing. We live in a transparent world. Embrace it or stay out, but don't think you can get rid of problems the way the Mafia gets rid of its problems.

Tuesday, December 29, 2009

Google vs. Apple--Battle of the Titans

The new Droid operating system by Google has raised a lot of interest in what this will mean to both Apple's I-Phone and RIM's Blackberry. Everyone keeps looking for the I-Phone "killer" the way people a decade ago looked for the Palm killer. What killed the Palm was the smartphone--a different category. The industry moved from the Palm, which was a PDA, to a smartphone, a convergence technology that combined PDA with mobile technology (phone and e-mail).

So, when people start looking for comparisons with what happened to Palm, they need to be cognizant of the fact that there was a category shift or a new category created. People stay within a category when their needs are being met. They switch only when they determine that the new offering provides greater benefits than they are receiving and the price of those benefits is worth it. In other words, there is value ("worth what's paid for").

Droid is not a new category. It is an operating system. I-Phone has its own operating system, as does Blackberry. However, we are talking about an operating system by Google, the most valuable and respected technology brand in the world--beating even Apple. We now have set up the "Battle of the Titans".

So, who is going to win and who is going to loose? My students have been asking me this since they first heard about Droid. So, here is my prediction and my rationale. I think that Droid will erode Blackberry, not I-Phone. I do not think that I-Phone users will switch, but there will likely be a significant number of Blackberry users who will. Droid is an improvement over Blackberry in many respects, although it will need to improve its e-mail functions to hurt Blackberry significantly.

Why will I-Phone continue to survive? This is no longer a matter of phone, but Apple brand. Apple has a community brand-- a "cult", similar to what we see in brands like Abercrombie and Fitch, Aeropostale, and the like. It is a reference group brand. We know that others are part of our same community because they have the same brand--it is entry into membership.

Google is loved as a search engine and one of the smartest companies around. I believe that Google will eventually use cloud technology to do to the technology space what Wal-Mart did to the retail space--many companies will become suppliers to Google. Google is becoming a brand beyond search engines the way Apple became a brand beyond computers.

Google will soon be selling its own branded mobile phones. It will create its own community. Blackberry has users; Apple and Google have community. Blackberry likely will be in trouble.

What does trouble mean? There are several things happening. First, there is what Boston Consulting Group calls the "market of three". That is, when an industry begins to mature, it devolves into three main players. Others either are squeezed out or become niche players. We also can look at this from a perceptual map and see the variables that drive mobile phone selection and map them. I think that Google and Apple will squeeze Blackberry into the middle, a dangerous place to be in any market--neither here nor there. Blackberry will remain the phone of choice for corporations, but for how long is the question. If Google is an accepted operating system, it will make inroads. To date, the CIOs in companies have resisted I-Phone, preferring Blackberry. How they react to Google and Droid will be interesting to watch. Clearly, there will be pressure coming from users to open the corporate market to another system. Younger users have wanted that to be I-Phone.

This is going to be an interesting battle between two very smart, very rich, very talented giants with incredible brand communities. I have talked with a number of people who are part of the "Apple community" who are starting to dislike Google because it threatens their beloved brand. We are likely to see battles between Google and Apple--the future Coke and Pepsi of the technology industry. Those caught in the middle, like Blackberry will be in a tougher position than ever.

Saturday, December 26, 2009

Pricing to the Attributes Perceived to have Value

There is an interesting article in Harvard Business Review with a little sidebar on how customers respond to different pricing schemes. The researchers manipulated a payment mix between products and labor for car service in a conjoint analysis. In one scenario, customers saw greater value in paying more for products than for labor. However, they rejected a scenario in which they only paid for products and all labor was free, or one in which they paid for labor and all products were free.

The authors concluded that the most important thing to assess is the perceived value of what is being charged for. If customers do not see the value in something, they will resist paying for it. In the conjoint analysis noted, customers saw greater value in paying something for products, but not exclusively for products. They saw less value in paying for labor.

Think about what the airlines have done to their brands by charging for things like bags and food. The airlines have made the value proposition all about them and their profitability rather than having a customer-centric model. So, the airlines decided that paying a large fee for a flight was not enough to make themselves profitable. So, they started charging for extras, like bags, peanuts, cokes, etc. After customer rebellion, they reinstituted beverage service, but they had shown their hand--they had demonstrated to customers that they did not understand customer perceived value. The airlines were being run by accountants and investment bankers, not by marketing managers who understood brand management.Southwest now has a value proposition based upon having bags fly free, demonstrating to customers that they are only paying for what they value--i.e., the flight itself.

We also have the craziness going on at Ryan Air, the Irish-based discounter. They are considering having customers pay to use the toilet on board. The argument from the airline is that customers can use the toilet before boarding and if they want to go in flight, they should pay for it. This is an entirely "ass-backwards" way of thinking. Ryan Air built its brand based upon a basic premise--that a flight could be cheap and that customers would pay for bags, food, etc. Their flights were really cheap--one could get a flight for as low as one British pound. The basic necessities of the flight were included in the low fee. All other things were charged on a use-basis. Customers loved it. The customer understood the value exchange--they were giving up a luxury flight for a basic one. They were not flying to major airports, but rather to secondary ones, in most cases. In exchange, they were going very inexpensively. The question is, when is using the toilet--a biological necessity--considered a luxury like bringing bags and getting food on board? This is stepping over the line and Ryan Air has gone from being an admired brand to one that is now an international joke. Ryan is showing that he is more of an accountant than a brand steward. He should call Sir Richard Branson for some advice.

Money needs to be made, but the point is to charge for things in which the customer perceives value and to discount things that the customer does not value. If something is totally free, there is no value--at least not one we can measure. Customers have to be willing to give something in exchange for something to demonstrate value. We don't want to give things away for free and assume these discounts, but the costs can be absorbed or subsumed into the prices of valued items. We need to be certain that we are pricing appropriately to the customer perceptions and not to our own accounting needs. If we provide value and charge accordingly, we will make more money.

Saturday, December 19, 2009

Deciding on the Right Brand Strategy

Brands are comprised of three components: symbols, attributes and associations. So much attention is focused on symbols--the logo, color and design. I get a bit irritated when someone tells me that their organization has a new brand and then proceeds to show me their new business cards with a new logo and colors. "Anything new about what the company believes in or any engagement with employees in a different brand promise"? I often ask. The answer is typically no, or a blank stare.

The real importance of brands is in their attributes and associations. We judge brands by whether or not the attributes meet our needs. We look at the associations brands have--whether other people "like us" are wearing or using the brand, and who the brand associates with. It is through engagement that brands become powerful, not through art and design. The symbols are there to highlight the attributes of the brand--they are not the brand.

Another mistake that companies make is that they think that the brand is differentiated with a cool name or by making bold claims of difference through marketing communications. You cannot spin a brand. It either has or does not have the desired attributes in the eyes of target customers. It is here that brands get their perceived value--why someone is willing to pay more for the brand vs. another product.

Consumer companies use what is called Unique Selling Proposition (USP) to differentiate what might otherwise be similar products. Toothpaste might all be the same, but some are whiteners, others have mouthwash, some have tarter control, etc. These subtle differences are designed to attract to the product those for whom these USP are important. They are not attracted to the ingredients, but rather to what the differentiated ingredients do for them to reduce risk of bad breath or yellow teeth. The USPs segment on the basis of psychological needs rather than functional ones.

For non-consumer products companies, differentiation can be found in what can be called Value Proposition. That is, the rationale for buying the product over another in the same competitive set. But, companies often mistake why someone buys the product. I was talking with a company that is trying to sell foam mattresses to hospitals. What's the value? They said it was weight, comfort, etc. The real value is that it eliminates bed sores, possibility of bed bugs, etc. Let's understand, though, that the marketplace of non-consumer products is very different from that of consumer products. That is, the needs of the customer are different, the competitive marketplace is different, and the sales engagement is different. Despite these differences, many non-consumer products companies follow consumer products principles in their branding activities. How can you make decisions about your brand strategies?

The best way is to look at the product from the outside-in, the way the customer sees it and to understand the needs and interests that determine the buying decision. I would suggest that there are two basic variables driving buying decisions: 1) the amount of fear, uncertainty and doubt (FUD) that the customer has in making the decision to buy; and 2) the complexity of the buying decision. Consumer products elicit little FUD and there is little complexity in the buying decision. If I want a Coke but the restaurant only sells Pepsi, there is little FUD or complexity. In contrast, if I am the CIO of a company buying 20,000 desktop computers for my company, there is a great deal of FUD and complexity. I could jeopardize or lose my job if my decision is wrong, and the decision may need the input of others who are more expert that I am. It helps for a company to draw a 2x2 matrix, with one axis being FUD and the other complexity, and to determine where their products and company value proposition lie. The more FUD and complexity, the greater the interest in corporate brand. The customer wants to know that the company behind the product is viable and strong. Consumer products have less need for corporate brand and focus on product brands. The same matrix can be used to determine the right marketing communications mix to support the branding decisions. Consumer products can be driven by advertising and marketing public relations. Non-consumer products brands need strong relationship management since they often build their brands at the point of sales.

Breaking Down Silos to Create Greater Value

Silos exist throughout the organization and they impede the organization in many ways. Organizations were historically set up along the so-called value chain. Each internal group was there to contribute to the overall value of the company. There were support functions --HR, technology, etc.-- and then there were functions that created and sold the products--inbound logistics, R&D, outbound logistics, marketing, sales. The structure of the value chain as it appears in textbooks has virtical bands--silos for each function. They were to do their thing and then hand it off.

Companies do not work this way anymore, at least not the efficient one. It is time to turn the value chain horizontally. Companies should focus on the value they are trying to create externally. They have many stakeholders--customers, employees, investors, and others. Why not ask the internal organization to come up with integrated, consistent plans and actions for each of these stakeholder groups? It would not be appropriate to have a customer program from PR, marketing, sales, etc. They would have to develop it in harmony. Similarly, there would be one organizational plan for investors, employees, government, etc.

If the organization incentivized integration and penalized silos, it would soon find that the traditional silos would begin to break down. Granted, each of these activities would need an expert steward (marketing, communications, finance, etc.), but the concept of “ownership” within an organization would begin to unravel.

What this would mean is that everyone would really need to fully understand what he/she did to add value and stop arguing over small bits of turf that may be intellectually interesting and functionally relevant, but add little value to the organization. Those who knew their stuff the best and had the best ideas would win, not just those who were appointed kings of a function.

When I was at Nortel, I headed both marketing and communications. I had a VP of Advertising who, as one would imagine, wanted to talk about advertising. I changed his title to VP, Customer Relations. His plans almost immediately changed. We gave prominence to those who headed Customer, Employee, Investor and Government activities. We asked all of the other communicators, trade events people, etc., to work with these VPs of major stakeholders to support them. The media were seen by us as being vehicles, not a key stakeholder. It was one small start to what we did throughout the company. Many in my organization argued that I was killing traditional PR; others said I was killing traditional marketing. Clearly I was. That was the intent.

In much of my work now with companies, I attempt this conversion through “Stakeholder Relations Councils”, bringing together all of the relevant functions to work together to integrate strategy with brand to engage the organization and enhance reputation.

Thursday, December 17, 2009

University Branding Becomes a Major Topic

Universities have really gotten into branding in a major way. New firms are forming that focus exclusively on the academic market. Articles are being written in various marketing and academic management journals about the importance of branding.

Why is college/university branding moving into high gear? The cost of an education in the US has become extremely expensive. At the university I teach at, which is a private institution, undergraduate students pay about $47,000 per year when all expenses are included. The MBA costs anywhere from $50,000-85,000 at our university, depending on the program selected (on-line versus full-time or executive MBA). At the same time, there are more students attending colleges and universities. So, the perceived value of the degree takes on greater importance. Companies want to know the value of potential employees have, parents begin to be concerned about where their son or daughter will receive an education that is valued in the market, and universities are concerned with their ability to attract the best and brightest students available. All of this adds up to a major reason for branding. University rankings become extremely important. They put the value of the university into context--allowing it to be assessed against others in the market.

I believe that universities should be talking about their reputations rather than their brands. Brand is focused primarily on consumers. Universities do not have consumers or customers, but rather a host of stakeholders, including, parents, alumni, corporate donors, government (for grants and ,in the case of public institutions, funding, and others). The term reputation is more acceptable to faculty. Everyone wants a good reputation for their schools; not everyone wants the university to think of itself as a brand.

It is difficult to have a university live its brand or reputation. A friend of mine once called a university a "group of anarchists sharing a common parking lot". Faculty do not like to be managed. They see themselves as independent contractors, each vying for their own position and fame. University tenure encourages this. A faculty member who plays as part of the team and serves his/her department and college well but does not publish is less valuable than the faculty member who does little in concert with others but who is a publishing "machine". So, it is difficult, if not impossible for a university to live its brand.

Far too often, universities fall into the trap of thinking that their slogan is their brand. The slogan of my business school is "Learn Here. Lead Anywhere". This is not our brand. Our brand is about attributes, namely co-op education, technology and applied research. Put those together and offer them to students and one has an environment that allows people to learn at Drexel and lead anywhere afterward. Just like in a company, the key is to link the slogan back to attributes that are real to the university.

Sunday, December 13, 2009

Reputation Trumps Brand is a Crisis

The move by Accenture and Gillette to drop Tiger Woods shows the power of reputation and the concern of boards about reputation risk. Brands are important, but they are related primarily to customers. Reputation is related to all stakeholders, and in a crisis, companies look to manage their relationships with all stakeholders and some of these concerns may trump the customer.

Years ago, DuPont had a situation with Benlate, a pesticide that was rumored to be burning cotton crops after a rain. The division argued to maintain control of the situation and keep it between the product management and the customers. By the time the board intervened, the cost had escalated to nearly $500 million. Investors were concerned about the company's insurance protection; lawsuits were pending; employees were questioning DuPont's commitment to environmental safety. The company learned a lesson. It should have made the situation a corporate issue rather than a division one.

In contrast, when Tylenol was tampered with in 1982, J&J didn't allow the crisis to be managed by McNeil, the division that makes Tylenol. They immediately made it a J&J issue. When Kidder Peabody, the investment firm that GE used to own had an scandal involving a broker who stole from his clients, Jack Welsh immediately made it a GE issue, taking responsibility away from K-P to manage it.

Accenture had to act. It is a consulting firm. Its value is entirely intangible. That is, it does not make or sell products, but rather gives advice. Its value is its credibility, its reputation. Anything that impacts that reputation is a threat to the firm's perceived value to clients. Tiger was the association they previously wanted. "Come on, be a Tiger" was the slogan. Tiger's winning, his talent, his aggressiveness, his intelligence, his personality, were the associations Accenture coveted. Tiger is now a tainted set of attributes. His association is no longer positive. He is a joke line on Letterman and Conan. Not the stuff Accenture can tolerate.

Reputations, like brands, are comprised of symbols, attributes and associations. The difference is that reputations are based upon a larger number of stakeholders. Brands are what firms decide they want to be seen as; reputation is how stakeholders see them. The reputation of other companies that Tiger endorses are all watching this. Someone has to be first--that was Gillette. I know that the calls are going on within the management teams and board rooms of AT&T, Nike, Rolex and other companies that "employ" Tiger. They are all asking the same question: "what is the impact on our reputation? Can we take the risk? Do we want to be the last company defending our association with him? What are we hearing from employees, customers, special interest groups, the media, investors and other stakeholders?

Reputation management is the process of balancing the financial interests of the company against the needs and interests of the company's many stakeholders. An endorsement is a brand association. The endorser's attributes help further enhance the performance characteristics of the brand. Tiger is "tainted goods". He may still be the greatest golfer in the world, but his personal character is under question. His attributes no longer are desirable association.

I heard one professor on TV claim that the contracts Tiger has are unbreakable. I am not sure what this fellow knows or doesn't know about the subject of contracts. Typically, companies have a clause in these contracts that allows them to be broken if the endorser does something to create risk to the company. All of the companies that have signed Tiger are intelligent companies. I can't imagine that they do not have clauses that allow them to cancel the contract without further payment.

This is a sad situation all around. But, it is an interesting learning situation showing how not to handle a crisis and also the importance of reputation.

Tiger's Death by a Thousand Cuts

So now the news is that Gillette has decided to stop its advertising with Tiger Woods. It seems that we are now seeing his death by a thousand cuts. My prediction is that others will hold on but start to back off if things continue to deteriorate. Gillette, a men's brand, spun it that they are giving him the time out of the spotlight he needs. It's the time out of the spotlight they need in association with him. You don't give a winning brand time off; that is reserved for question marks. As of this writing, Accenture just announced that they were ending the sponsorship with Woods saying that he no longer represents the type of person with whom they want to associate.

Let's keep in mind that Gillette is owned by Procter & Gamble. P&G has always been protective of its reputation and the primary focus on P&G, other than Gillette, is woman. They position themselves as a family company. It makes sense that they would back off Tiger until they better know where the "wind is blowing". The postured this as being on his side, but they are playing both sides in this one. They step aside from having Tiger associated with them, and for those who support Tiger they can say that it is done for him. Well played, sir!

Companies are very concerned with their reputations. This has not been a good year for corporate reputation, with all indicators of trust at record lows. Companies do not like controversy or to be caught in situations in which they have to defend the actions of another--they have enough problems defending their own actions. Woods now is a problem.

As I have said before, this did not have to be this way. Tiger still has not stepped in front of the cameras. He continues to speak through his website. Who the hell is giving him PR advice? Whoever it is should be ushered into the PR Hall of Shame. This is one of the worst example of handling a crisis I have seen. Tiger is allowing everyone to control this story other than himself. This is not an age when the news media take a quote from someone. This is an era of 24-hour news outlets that need to manufacture the news they cannot get otherwise to attract interest. They are sharks and Tiger is bleeding.

The first rule of a crisis is to take control of the situation, tell the truth, and take the offense rather than the defense. Admit your mistakes publicly, muster a few tears and look contrite. Do something, but stop hiding behind a manufactured, impersonal website. For those who think this is Tiger speaking to us directly through his site, let's get real. He has an entourage and they are hard at work. They are either terrible at their jobs, or he is the worst client they have ever had and refuses to listen to their advice.

While we're at it, can someone please tell David Letterman to stop with the Tiger jokes. He keeps referencing Tiger's problems and associating them with his own. He has a wife at home as well. Cool it, Dave. You came out of this looking like someone taking the high road. Don't go low road and ruin everything for a few laughs.

Thursday, December 10, 2009

Credo Mobile--a New Take on Social Marketing

I just got mail for a new phone carrier called Credo Mobile. The concept is a really interesting one, combining a product with concepts learned in social activisim and now called social networking when applied to the Internet.

This is a unique and different way to create a community and one with the power in the palm of its hand to influence policies. For some time we have been hearing about social investing. Now, we have a product that focuses on a community that cares about liberal social causes. They are out there. They came out in record numbers to help elect Barack Obama President. They are connected through social networks, just like other communities of interest. There are communities on the right as well.

The CEO is Laura Scher, a social activist from San Francisco. The slogan for the company is "More than a network, a movement". From the literature and website, it seems that Scher was upset by positions taken by AT&T, Verizon and others who decided not to back liberal social positions to avoid potential conflicts in their market. They also were upset by the political contributions from the big phone companies that go to conservative politicians who oppose abortion rights or woman's rights.

So, the idea is that one switches away from their current wireless carrier and contracts through Credo, which runs its own network. They will buy you out of your current wireless contract. A portion one pays each month to Credo goes to organizations like Greenpeace, ACLU, and others.

I'm going to assume that the network is viable and that one will not have problems making and receiving calls or dropping calls in progress. Regardless of commitment, people are not going to stay with a wireless network that does not meet fundamental, function requirements.

I find this concept really interesting because it is once again a use of technology to find and collect a community of like-minded people. While Scher lives in San Francisco where there are many people who will find Credo of interest, I am most happy for the poor liberal who finds him/herself stuck in a conservative community and feels like a complete alien. Now, they can find others to connect with. That's the beauty of technology.

Credo and other such plans serve the niche market. The web has made it possible to create what Christopher Anderson termed the "Long Tail", the ability to serve niche needs that were not economically possible in markets governed by economies of scale. I'm sure we will see others networks like Credo. I would imagine that some conservative group will hear about this on Hannity or Glenn Beck and start a phone service that gives only to those who oppose abortion rights or are against climate change legislation.

What we are seeing again is that brand is an emotional connection between product and consumer. In the past, we had to deal with the mass market, even if we did not identify with the attributes. We had few choices. Laura Scher and her team were put off by the attributes and associations of Verizon and AT&T. In the old days they would have sent letters to the editor and send out fliers to their neighbors. Today, they create a new company to collect people with similar values and beliefs who not only will talk on the telephone, but also can use it to lobby and further build the case for their causes. Very ingenious! While some will be offended by the causes Scher supports, they now have a business model they too can follow for their own community.

Maintaining an Exclusive Brand

I teach at a university. Every time I give out grades, I am reminded of the value of a brand and how it can be supported or eroded. Grades have been inflated in recent years. During the time I was working on the corporate side, grades began to rise across the board. Students now think they are flunking out of school if they receive a "C", which --to date myself used to be called a "gentleman C". It meant that one performed average in the class. Some people were better, some worse. In undergrad, I was a "B" student. There were a few "A's" sprinkled in, with mostly "B's" and even some "C's" in some courses. I was a good student at the time.

The grade of "A", which is supposed to mean excellent work, now is expected by students for good but not excellent work. Everyone has an excuse why they deserve an "A". They worked really hard, they have scholarships that need to be protected, etc. We now have a generation of students who all got trophies. They were all told they were wonderful. Heaven help the teacher who told a student that they were not excellent!

Let's turn this discussion and think about it from a brand-product perspective. What would someone say if they indicated that they needed Tylenol but because of other circumstances wanted it at generic prices? It would erode the value of the Tylenol. Why support a brand if there is no value perceived in it?

Of all the things I love about returning to teaching, the thing I hate most is grading. The value of the grade (the brand) has been ripped out. If everyone can get it, what value is it to those who truly deserve it? On a larger scale, this is what has happened to the value of a bachelor degree. If everyone can get one, where is the real value? So, that starts a hyped competition for students who want/need to get into so-called elite schools--the Prada or Guicci of universities.

This is a very US phenomena. I recall in the 1960's a discussion a British fellow had with my father who was bragging about the large percentage of American students who go to college. "What will you do when you need a B.A. to run an elevator or sell shoes?" asked the Brit. He was right. He saw that the value of the degree would be eroded. In many countries, there are exams that separate who can attend university and who cannot. This has its downside as well since many students who do not do well on large, standardized tests are excluded from universities in their home countries. The US does allow those who are "late bloomers" or creative types to find their way. It has helped US innovation. However, there has been a cost. In Canada, there has been less delineation amongst the many universities in terms of quality. All universities are government owned and all are deemed to have quality--a bit different in some cases, but quality none the less. So, a degree is a degree. Kind of generic, which also has its downside since people want differentiation when price goes up. They want to know if there is value in their purchase. Students (or their parents) do not suffer depression or stress over whether little Johnny or Joan is getting into University of Toronto vs. Brock. There even is pride in students who go to 2-year colleges because that is where one goes for the education that in the US is reserved for 4-year colleges (nursing, kindergarten teacher, graphic design, public relations, advertising).

Universities are brands. Grades are brands. People are brands. Brands are comprised of attributes and associations and symbols that have meaning. Erode the meaning and the brand begins to erode.

Wednesday, December 9, 2009

Gatorade Pulls Its Tiger Connection

Pepsi, the owner of Gatorade, has decided to drop a drink named after Tiger Woods. The timing is curious. Gatorade said it was decided before the whole "Tigergate" incident; many think the timing is more than coincidental.

The truth is likely somewhere in between. Gatorade is a product that is in trouble. It had a good market position and then, like the other Pepsi brands, was rebranded last year. Gatorade became "G", I would imagine to give it "street cred". The ads are harder-edged which supports my contention. Somehow, Pepsi decided it had to make the product more current and hip. The results have not been good. Reports have indicated that "G" has lost market share. This comes on the heels of Tropicana, another Pepsi brand, which had to reintroduce its old packaging after customers strongly objected to the new package design. The logo for the Pepsi product, which changes depending on the product, was criticized for being curiously similar to the Obama campaign logo--Pepsi said it was pure coincidence.

This has been a terrible year for Pepsi brand management. It did not have to be so. In the new world, Pepsi could have co-created the package designs with customers and gotten strong customer buy-in. Pepsi, instead, acted like it was pre-Internet days and did its branding in secret between the chief marketing officer and an outside branding agency.

Companies are not in control anymore. Brands are shared and are part of customer experience. They always have been but now customers can act on their likes and dislikes more aggressively. Pepsi needs to wake up to the new world. It claims to be the brand for a "new generation" but acts like it is managed by the old one.

Back to the question of whether or not the dropping of the Tiger brand was preplanned or is in reaction to his marital infidelities. As noted, I think the truth lies somewhere in between. Gatorade is in trouble and is looking for ways to reconnect with its original customer base which it is loosing. Tiger is an expensive endorsement and likely too expensive for a brand in trouble. The problems Tiger has had likely pushed the decision to the front burner.

Tuesday, December 8, 2009

Kudos to Comcast

I had a great luncheon discussion today with Frank Eliason, the head of social media for Comcast. I am a customer of Comcast in Philadelphia. I also am a customer of Mediacom at my beach house in southern Delaware. Comcast looks like the best customer service company in the world and the most advanced technology company in the world compared to Mediacom. The latter gives new meaning to thinking and acting like a public utility--you know the attitude: "if you don't like the electric company, live in the dark". That's a public utility mentality and it typically hits those companies that are monopolies or close to it.

Comcast has historically been a company customers have loved to hate. They had terrible customer service numbers. They were a company featured in a famous YouTube video of a service man falling asleep on a customer's couch.

The business model of Comcast has made for problems. They run cable to a home and bring the home TV. A few years ago they started bringing in computer network and now telephone. They realized that they had to change. Many companies in similar positions do not sense the market forces requiring change and stay the course--think GM, Westinghouse (remember them?), and many others.

Comcast, either due to more competition or just waking up and wanting to be better, has focused on customer service. A few years ago, they hired Frank Eliason to begin blogging, Twittering, etc. to connect with customers. He has helped Comcast listen and respond. With the technology, Comcast has responded so quickly that customers have started to notice. And, what they have started to notice is that Comcast cares more than they thought they did. This is changing opinions and helping Comcast keep its installed customer base and attract back lost customers.

It is interesting that Comcast chose to put is social media group in customer service. Typically, the group is attached to either marketing or corporate communications. All too often, marketing wants to use social media to sell and corporate communications wants to use social media to either listen or "spin" its take on an issue. By putting the social media group in customer service, Comcast put it where it could do the most good.

Social media is becoming an important part of Comcast and a key part of its ability to fulfill its brand promise. I give Comcast lots of credit for recognizing its own problems, dealing with them, and trying to become better. Its use of social media is exemplary.

Monday, December 7, 2009

It's Tough Managing a Brand in Bad Economic Times

I was moderator today of a panel discussion in Philadelphia on marketing during the economic downturn. That panelists, from companies like QVC, AstraZeneca, Siemens Healthcare, and Digitas Healthcare, were very engaging and thoughtful.

We got into the issue of brand and what has happened to brand during this recession. Every one of the panelists talked about how they have been able to manage their brands through the downturn. It has been tough. Customers are increasingly looking for price reductions and challenging the price differential of the brand.

The key is to establish the brand as either the high-end, differentiated value post or at the opposite end at the cost-savings. The difficult position is to be in the middle. This is a key illustration of what we have learned about strategy from people like Michael Porter and others. Find your point on the value frontier and manage your brand accordingly. Best of all, take a dual action to cut costs and add value in other ways, a la Southwest Airlines. But, recognize that when you respond to requests to lower price you are, in fact, undermining your brand value. If you established price at the appropriate level of value, it should hold, all things being equal. Obviously, all things are not equal, but you do not have to match a discounted price--in fact, it will destroy your value.

Think about what has happened in retail. We have Nordstrom's and Nieman-Marcus at the high-end and Wal-Mart and Target at the low end. These companies know their place and their brand promise. In the middle are companies like Macy's that has become one big sale. Macy's has taught the customer that nothing at their store is of value if it is not on sale. Nordstrom's has held to its yearly sale and has refused to discount. It has risked some market share to maintain its brand. Wal-Mart owns the low-end, discount brand in retail. Target now has been differentiating itself against Wal-Mart and gaining share. But, that share is likely not coming from Wal-Mart, but rather from companies like Macy's.

At one time, companies like Macy's were able to be a brand for all people. Sears had that status in an earlier time. Markets are becoming more segmented. Brands, by their very nature, segment markets--they meet specific needs of certain segments of the population. It is dangerous when people cannot determine what a brand stands for and who it is for--that's the middle ground where companies enter the death spire.

Brands are Alive and Well

I have read a number of articles and books in recent years suggesting that brands are dead. Don Tapscott, author of all things digital, suggested that young people do not care about brands. Even one of the people I admire most, Regis McKenna, suggested that brands were dead. Nothing can be further from the truth.

I don't really understand these arguments. The Internet has changed branding, from something owned and controlled by the company, to something co-owned and co-created with the customer, but this has not killed brands. In fact,there is evidence that brands are getting stronger. Look, for example, at Apple. The fact that people are willing to pay twice as much to get an Apple computer as a PC is ample evidence of the power of brand. Brands build perceived value and interrupt the natural tendency of markets to move to commoditization. The PC world is filled with brands battling for attention. Their brands may be eroding--the really powerful brand in the PC world is Intel, which is not the PC but which is the most powerful ingredient brand in electronics.

Same thing with the I-Phone. I talked to my students about the new Droid phone being offered by Verizon. It is supposed to be an amazing smart phone that may erode the positions of both Blackberry and I-Phone. Verizon sees it as their I-Phone offering. Most of the students were impressed with the potential of the Droid, but not willing to switch from their I-Phones. Apple has become a brand community--people feel connected to Apple--it seems to "get them". There is a true emotional connection with its customers. Powerful brand.

We can see many examples of where brands are being eroded and I can see where Tapscott and McKenna might have found evidence. AT&T long ago said that brand preference in telecom services was dying. Brands die when the value proposition no longer makes sense to consumers. If the AT&T brand was dying it meant that customers couldn't determine why they would select AT&T over Verizon or Sprint or others.

Brands are far from being dead. Where ever one finds a product or service that commands more attention than another in the same category, one can find the power of brands.

Saturday, December 5, 2009

Pharmaceutical Branding Leave Them Vulnerable to Generics

Pharmaceutical companies have historically been product focused. While the companies might talk about marketing, they are really sales organizations. Sales companies view themselves as product developers who push their products at a market. Drug companies take products from R&D and detail them to doctors. A marketing company would be more focused on customer needs and relationships and would measure themselves not by sales, but rather by customer satisfaction and retention.

Obviously, pharma companies are heavily regulated and the concept of customer attraction and retention might be a bit alien. Some would argue impossible. I would argue the opposite. Because of the way pharma companies see their value, they brand products with no connection to the parent company, which leaves them highly vulnerable when their patents expire and generic companies enter. When that happens, the market immediately becomes commoditized, i.e., dependent on price.

Pharma companies have screamed for years about the fact that they develop the drugs, investing, on average, $800 million and 12-years to bring a drug to market. Those are those that succeed through Phase III. There are many failures along the way. The heavy investments by drug companies in R&D has made the US the leader in pharmaceutical innovation.

Think about the intangible asset value of a research-based pharma company. They have the organization, the people, the resources and the ingenuity to develop life-saving drugs. It bewilders me, then, that these companies do build their corporate reputations and instead focus on product branding. Product branding is typically done because the scope of brands of the company and the number that compete with one another lend themselves to letting the product carry the value. This is a consumer products model. There is little value in the company. The value is with the product.

In more scientific companies, we typically find masterbranding or endorsed branding, where the company associates itself with the product because the customer finds value in the company behind the product. One would think that this would be the case for pharma companies. If there is significant intangible value in Merck, Novartis, Pfizer, Genentech, AstraZeneca, etc., etc., would it not be smart from a branding perspective to utilize that equity in their branding strategy?

This has not been the case in pharma. So, when the patent expires, generic companies can seize more value than they should be able to grab because the value was almost totally within the product. If there were association to the parent, it would be more difficult for the generic company to take as much value. There could be an opportunity by the original manufacturer to differentiate on value rather than price alone. Pharma companies always try to make the claim that they were the original discoverer and distributor of the drug. Why would they not invest in bringing that value to the market more forcefully? It could prove to be a turning point for many companies that creates a barrier to generics. While they would likely still loose the patent to a generic company, they would be able to maintain more of the real value in the drug for a longer period of time.

Thursday, December 3, 2009

Tiger is a Actually a Cheetah

So now we know what we all suspected. Tiger was cheating on his wife with several woman. He's human. What a shock. An attractive, rich guy traveling the world gets hit on by women and give in to temptation. Again, what a shock?

So, why are we still waiting for an appearance from Tiger? Why does he continue to believe that he can manage this through his website? Does he really believe that we believe that he is writing all of this and not having his entourage front for him? Maybe it is a shock to him to learn that he is human. He was raised by a father that developed him to be a robot and that has served him well on the golf course. Maybe he can't quite believe that he has human frailties like the rest of us mortals?

While he has helped by coming out and admitting his mistakes, he still has not done what needs to be done, which is to make an appearance and show his emotions. He has to stop trying to make us feel that the media are wrong for doing their jobs in covering this story. Once again, he is not an ordinary person. If he were, this would never have been a story. He is a brand. He has responsibilities beyond himself. As I said before, he needs to take the David Letterman approach. Admit mistakes and tell people that it is now his responsibility to rebuild his relationship with his wife. He can then ask for some privacy to do that. Spare her--she hasn't done anything wrong, nor have the children.

I am still waiting for Tiger to act like the person we all thought and hoped he was.