Gatorade, a Pepsi brand, announced that it was discontinuing its relationship with Tiger Woods, leaving only Nike as a major sponsor. Actually, the announcement was most surprising in that most people didn't know that Tiger endorsed Gatorade. Pepsi has so mismanaged the brand that it is becoming a shadow of its former self in the category. The CEO of Pepsi, Indra Nooyi, even was on TV and said that Gatorade is for athletes so they expected a bit of a drop in their market share. Okay, so you want to further narrow the market for your already withering brand?? Surprising, but, okay, if you insist, I will not consider this is the future because you have told me it is not for me. Guess I'll go for Powerade or some other brand. You're told me the brand is not for me. Hope you make up the difference in volume with athletes. I imagine that Pepsi will be supplying lots of Gatorade to the teams it sponsors in hopes of getting a bump from their association.
PepsiCo Inc. first announced it was partnering with Tiger in October of 2007, to develop a branded drink for its Gatorade line called Gatorade Tiger. The drink, which launched in March, 2008, came in three flavors “inspired and selected by Tiger.”
Since that time, Gatorade has changed a great deal. We do not really know if Tiger has changed or has always been a "skirt-chaser". Gatorade certainly cannot claim to be hurt by Tiger's off-the-course problems. The brand, which has since rebranded itself "G" to get more street-cred with the athletic types Pepsi wants, is certainly not looked at or positioned as being pristine. Look at the ads for Gatorade. They look like they are trying to win over the street ball and skate-board crowd. They want to be edgy and urban in their appeal. Few people would believe that the athletes Gatorade touts as being associated with them are pure and simple folk. Tiger certainly is not. I believe that Gatorade dropped Tiger because he is not actively playing golf and so has no monetary value for them. It has, I believe, nothing to do with values. Gatorade said it would continue to support Tiger's foundation--probably a loop-hole in getting out of its contract or a way for Gatorade to protect itself if is consumers balk.
Nike will likely continue to support Tiger. There would not be Nike Golf if it were not for Tiger. Nike defines its brand as being for athletes, and if you have a body, you are an athlete. In other words, unlike Gatorade, Nike is for everyone who wants to be active and do better at what they do--run, play basketball, golf, etc. Their brand is defined "between the lines", so to speak. It occurs on the playing field one chooses. So Tiger's indiscretions do not impact the Nike brand quite like they have other brands that borrowed his persona to equate with their own (e.g., Accenture). Nike sponsored John McEnroe, even though at the time he was considered the "bad boy" of tennis. His on-court performances, though, were outstanding and that's what Nike cared about. Accenture, on the other hand used the phrase: "Come on, be a Tiger", suggesting that it was his total package that the firm would help one emulate. When the chuckling from clients began, Accenture was out.
Brands are about symbols, attributes and associations. The associations with Tiger's private life were too much for Accenture; the attributes are what matter for Nike. Who knows what matters to Gatorade anymore?!
Saturday, February 27, 2010
Wednesday, February 24, 2010
A Once Great Brand is Suffering a Death by a Thousand Cuts
If you have followed my blogs, you will recall that about a month ago I praised Toyota for recalling all of their cars and indicated that they were demonstrating a commitment to the customer by putting their brand and reputation ahead of short-term profits. It turns out that I may have been wrong. We are seeing inexorable damage to a once great brand and it seems to be their short-term focus that killed it.
The hearings in Washington with the CEO of Toyota USA were awful to watch. Toyota is not up to the challenge in dealing with this crisis. Their CEO seemed clueless, like a salesman trying to explain what happened at headquarters--but, that is exactly what is happening. Jim Lentz is a super salesman, a country representative, not a real CEO. Decisions at Toyota seem to be made in Toyota City, Japan. It is now becoming public that the management style of Mr. Toyoda, the CEO, was not conducive to open discussion and contradiction. He is, after all, a direct descendant of the founder and is referred to as "the Prince". We will see what type of person he is when he faces the furor of the US Congress that is both angry and grand-standing over this, egged on not only by scared and angry Toyota owners, but also I'm sure by plaintiffs attorneys, Detroit car makers, and their own reelections in 2010. It will be a circus.
It now appears that Toyota may have focused more on becoming the #1 car maker in the world than maintaining their quality and reliability. They now appear to have known about this situation far longer than they might have wanted to admit. They bragged about making a deal with the US government that saved them $100 million in recalls.
Now, this is my view of what they face from a brand perspective. Draw a perceptual map of the car industry before this crisis, one with two axes: price and quality. Toyota was in virtually everyone's upper right hand quadrant--the best perceived value for the money in terms of quality. Now, draw a second perceptual map and plot Toyota today. They are now judged as being worse than the other car makers. I'm not certain that anyone will be able to claim the quality and reliability differentiation that Toyota once could claim. Quality and reliability have no longer become differentiators, but are now points of parity. Ford has been improving on this perceptual map. I do not believe that GM has moved, but now Toyota is moving back toward them. They have taken a great brand, highly distinguished, and relegated it to the "all others" category--commodity status meaning that price will now become more of a factor than it ever was before.
Pedro, one of the followers of this blog, pointed out that Toyota resale values are already suffering. Who wants to buy a Toyota right now? Not many. How many want to get rid of their Toyota? A lot. The math is not good. When someone considers a car--new or used--they will consider alternatives. Toyota will be out of the alternatives list for at least the next cycle and it will be difficult for them to convince many buyers to consider them again. Loyal Toyota buyers are questioning their perceptions of the company and having their perceptions questioned by others.
That is how bad this is becoming. We may be witnessing the crippling of a once great brand. They may not die, but they could if they do not right the ship quickly. We may see Toyota need to pull back considerably from the US market for a while to regain its confidence and quality before it can come back. This happened to Audi when it had its acceleration problems in the 1990s. They handled the situation terribly, blaming drivers and not accepting responsibility. They virtually withdrew from the US for many years and then reentered once the "dust had settled". I was considering a Lexus next year when the lease on my current car expires. I will not longer be looking at Lexus.
Toyota has created a lot of "dust". It will take a long time for it to settle. I cannot believe how wrong I was about the company in my original assessment. It seems that the company may have "overshot its own headlights", a very dangerous situation when a company becomes so focused on success and its own hype that they keep moving quickly without refocusing the organizational capabilities that made them great and are needed to keep them great. They were a company of substance; they became a company of hype.
The hearings in Washington with the CEO of Toyota USA were awful to watch. Toyota is not up to the challenge in dealing with this crisis. Their CEO seemed clueless, like a salesman trying to explain what happened at headquarters--but, that is exactly what is happening. Jim Lentz is a super salesman, a country representative, not a real CEO. Decisions at Toyota seem to be made in Toyota City, Japan. It is now becoming public that the management style of Mr. Toyoda, the CEO, was not conducive to open discussion and contradiction. He is, after all, a direct descendant of the founder and is referred to as "the Prince". We will see what type of person he is when he faces the furor of the US Congress that is both angry and grand-standing over this, egged on not only by scared and angry Toyota owners, but also I'm sure by plaintiffs attorneys, Detroit car makers, and their own reelections in 2010. It will be a circus.
It now appears that Toyota may have focused more on becoming the #1 car maker in the world than maintaining their quality and reliability. They now appear to have known about this situation far longer than they might have wanted to admit. They bragged about making a deal with the US government that saved them $100 million in recalls.
Now, this is my view of what they face from a brand perspective. Draw a perceptual map of the car industry before this crisis, one with two axes: price and quality. Toyota was in virtually everyone's upper right hand quadrant--the best perceived value for the money in terms of quality. Now, draw a second perceptual map and plot Toyota today. They are now judged as being worse than the other car makers. I'm not certain that anyone will be able to claim the quality and reliability differentiation that Toyota once could claim. Quality and reliability have no longer become differentiators, but are now points of parity. Ford has been improving on this perceptual map. I do not believe that GM has moved, but now Toyota is moving back toward them. They have taken a great brand, highly distinguished, and relegated it to the "all others" category--commodity status meaning that price will now become more of a factor than it ever was before.
Pedro, one of the followers of this blog, pointed out that Toyota resale values are already suffering. Who wants to buy a Toyota right now? Not many. How many want to get rid of their Toyota? A lot. The math is not good. When someone considers a car--new or used--they will consider alternatives. Toyota will be out of the alternatives list for at least the next cycle and it will be difficult for them to convince many buyers to consider them again. Loyal Toyota buyers are questioning their perceptions of the company and having their perceptions questioned by others.
That is how bad this is becoming. We may be witnessing the crippling of a once great brand. They may not die, but they could if they do not right the ship quickly. We may see Toyota need to pull back considerably from the US market for a while to regain its confidence and quality before it can come back. This happened to Audi when it had its acceleration problems in the 1990s. They handled the situation terribly, blaming drivers and not accepting responsibility. They virtually withdrew from the US for many years and then reentered once the "dust had settled". I was considering a Lexus next year when the lease on my current car expires. I will not longer be looking at Lexus.
Toyota has created a lot of "dust". It will take a long time for it to settle. I cannot believe how wrong I was about the company in my original assessment. It seems that the company may have "overshot its own headlights", a very dangerous situation when a company becomes so focused on success and its own hype that they keep moving quickly without refocusing the organizational capabilities that made them great and are needed to keep them great. They were a company of substance; they became a company of hype.
Monday, February 22, 2010
Do Ethical Ranking Translate to Sales?
Do companies that are ranked high on ethics get more sales as a result. The answer is yes, but it is a bit more complicated that that. Studies have shown that companies that are ranked highly on reputation do better financially than companies with poor reputations. Ethics and reputation are quite different. Ethics means acting on a "higher order". Reputation means exceeding stakeholder expectations and being distinguished from ones peers and competitors. Reputation can be measure; ethics are much harder to measure and often depend on the perspective of the person doing the assessment.
For example, I have seen a number of so-called ethics rankings that will not include pharmaceutical companies because they engage in animal testing. This is an ideological perspective on ethics. The FDA and other health organizations globally require that drugs be tested on animals and they often specify the animal. It is far better, in my opinion, to test a drug on an animal than on a human before releasing. But, that is not the opinion of PETA and other such organizations. They have a different perspective on what is an what is not ethical.
To me, corporate ethics is the perspective that guides an organization to respect and balance the needs and interests of its multiple stakeholders. It is a facet of reputation, not the same.
Business ethics do translate into more sales, but in an indirect way. People often say that they want to do business with more ethical companies, but it usually means "all things being equal", which they rarely are. Actual behavior is much more difficult to track. Will someone actually not do business with a company that they judge to be unethical? Many people believe that the oil companies are unethical, but they continue to fill their cars with gas. There is no alternative. Some people may hate their local cable companies and think that they are unethical, but they continue to watch TV--once again, there is little choice. When choice becomes greater, we look for reasons to buy and not to buy.
While we know that reputation can translate into greater sales, lowered cost of capital, etc., ethics is a bit more difficult to track. Heinz was the first company to take a position of "dolphin free tuna", requiring that fisherman catching tuna for its Starkist brand not kill dolphins in the process. They were applauded, but there was no increase in tuna sales. Unilver's Dove brand soap created the "Campaign for Inner Beauty" to help talk to young girls whose body image was being shaped by standards of Hollywood and Madison Avenue. They were applauded but the campaign did not increase sales of Dove. The campaigns, however, spoke volumes about the philosophy of business of these brands and increased their value longer-term in the eyes of many.
Sales may be the wrong measure of what companies are looking for. The real measure is perceived value, and that will translate into higher prices, not necessarily more sales. Sales tracks volume; perceived value can move based upon an appeal to a niche market that, if it is a "bell-weather", could increase the overall value of the product or organization. We will see the results in better recruiting, greater support from outside interest groups, retention of top talent, etc.
There is a great and compelling reason for companies to act ethically and to build their reputations. Asking if this will result in direct contribution to sales is a short-term question to a longer-term process. The key, though, is to be ethical, not to brag about it. Once again, we find that if one lives their brand, they will build their reputation.
For example, I have seen a number of so-called ethics rankings that will not include pharmaceutical companies because they engage in animal testing. This is an ideological perspective on ethics. The FDA and other health organizations globally require that drugs be tested on animals and they often specify the animal. It is far better, in my opinion, to test a drug on an animal than on a human before releasing. But, that is not the opinion of PETA and other such organizations. They have a different perspective on what is an what is not ethical.
To me, corporate ethics is the perspective that guides an organization to respect and balance the needs and interests of its multiple stakeholders. It is a facet of reputation, not the same.
Business ethics do translate into more sales, but in an indirect way. People often say that they want to do business with more ethical companies, but it usually means "all things being equal", which they rarely are. Actual behavior is much more difficult to track. Will someone actually not do business with a company that they judge to be unethical? Many people believe that the oil companies are unethical, but they continue to fill their cars with gas. There is no alternative. Some people may hate their local cable companies and think that they are unethical, but they continue to watch TV--once again, there is little choice. When choice becomes greater, we look for reasons to buy and not to buy.
While we know that reputation can translate into greater sales, lowered cost of capital, etc., ethics is a bit more difficult to track. Heinz was the first company to take a position of "dolphin free tuna", requiring that fisherman catching tuna for its Starkist brand not kill dolphins in the process. They were applauded, but there was no increase in tuna sales. Unilver's Dove brand soap created the "Campaign for Inner Beauty" to help talk to young girls whose body image was being shaped by standards of Hollywood and Madison Avenue. They were applauded but the campaign did not increase sales of Dove. The campaigns, however, spoke volumes about the philosophy of business of these brands and increased their value longer-term in the eyes of many.
Sales may be the wrong measure of what companies are looking for. The real measure is perceived value, and that will translate into higher prices, not necessarily more sales. Sales tracks volume; perceived value can move based upon an appeal to a niche market that, if it is a "bell-weather", could increase the overall value of the product or organization. We will see the results in better recruiting, greater support from outside interest groups, retention of top talent, etc.
There is a great and compelling reason for companies to act ethically and to build their reputations. Asking if this will result in direct contribution to sales is a short-term question to a longer-term process. The key, though, is to be ethical, not to brag about it. Once again, we find that if one lives their brand, they will build their reputation.
Saturday, February 20, 2010
Tiger Could Have Just Run an Ad
The tightly scripted Tiger apology session was a complete farce. He could have just taken out an ad in newspapers and said the same thing. The whole thing took a page from the former Bush rallies in which only friendlies are invited. It is supposed to give the appearance of being open and honest in a supportive atmosphere.
Tiger needed to appear before the public and apologize, but he also needed to answer questions, as distasteful as that may have seemed to him. Alex Rodriquez went through the Q&A session and came out stronger for it. Without the Q&A, this seemed to contrite, too scripted. One even has to wonder is there was a script that called for Mom to go up afterward and hug him. The photo released to the wires showed three women (none being his wife--she did not choose to "stand by her man"). The three were the head of the Tiger Woods Foundation, his mother and a representative of Nike, the sponsor that has stood by him. Nike can weather this storm. Tiger made Nike Golf. Unlike Accenture, their brand will likely not be damaged. Accenture has ordered all images of Tiger taken out of all offices worldwide. "Go on, be a Tiger" is not something Accenture wants to people to be reminded of.
Tiger is taking more than a few hits from fellow golfers as well. He chose a Friday during the Accenture Match Play Championship to make his announcement, taking attention away from that tournament for a bit. It is interesting that he chose to do it to a tournament bearing the name of one of his former sponsors and elected to do it to some of his friends on the tour. Talk about selfish! Tiger apologizes for being selfish in a way that demonstrates his selfishness and claims that he was wrong to believe he could play by different rules than the rest of us using a forum that shows that he believes he does play by different rules.
It is interesting that the tables have turned a bit between men and women. Women were down on Tiger and men were continuing to support him. After his apology, woman were more quick to forgive; men seemed to find it difficult to take. This was not, as the saying goes "a stand up" performance. A "stand up" guy would have gone public, perhaps on Oprah or in front of the cameras as Mark McGuire did, and show how sorry he was and taken his "lumps". Taking hits is an important part of both the healing and forgiveness process.
What is most disturbing in all of this is that it sends a wrong message about how to handle a crisis. This flies directly in the face of all best practices. Let's just hope that the same agents advising Tiger, including Ari Fleisher, former press secretary to President Bush, are never hired to handle a real corporate crisis. What a minute, could they be working for Toyota?
Tiger needed to appear before the public and apologize, but he also needed to answer questions, as distasteful as that may have seemed to him. Alex Rodriquez went through the Q&A session and came out stronger for it. Without the Q&A, this seemed to contrite, too scripted. One even has to wonder is there was a script that called for Mom to go up afterward and hug him. The photo released to the wires showed three women (none being his wife--she did not choose to "stand by her man"). The three were the head of the Tiger Woods Foundation, his mother and a representative of Nike, the sponsor that has stood by him. Nike can weather this storm. Tiger made Nike Golf. Unlike Accenture, their brand will likely not be damaged. Accenture has ordered all images of Tiger taken out of all offices worldwide. "Go on, be a Tiger" is not something Accenture wants to people to be reminded of.
Tiger is taking more than a few hits from fellow golfers as well. He chose a Friday during the Accenture Match Play Championship to make his announcement, taking attention away from that tournament for a bit. It is interesting that he chose to do it to a tournament bearing the name of one of his former sponsors and elected to do it to some of his friends on the tour. Talk about selfish! Tiger apologizes for being selfish in a way that demonstrates his selfishness and claims that he was wrong to believe he could play by different rules than the rest of us using a forum that shows that he believes he does play by different rules.
It is interesting that the tables have turned a bit between men and women. Women were down on Tiger and men were continuing to support him. After his apology, woman were more quick to forgive; men seemed to find it difficult to take. This was not, as the saying goes "a stand up" performance. A "stand up" guy would have gone public, perhaps on Oprah or in front of the cameras as Mark McGuire did, and show how sorry he was and taken his "lumps". Taking hits is an important part of both the healing and forgiveness process.
What is most disturbing in all of this is that it sends a wrong message about how to handle a crisis. This flies directly in the face of all best practices. Let's just hope that the same agents advising Tiger, including Ari Fleisher, former press secretary to President Bush, are never hired to handle a real corporate crisis. What a minute, could they be working for Toyota?
Thursday, February 18, 2010
Philadelphia Brand is Inside-Out
Philadelphia has a new branding campaign, designed to inspire citizens and win over tourists. It's "Spread the Love". A play on Philadelphia being the so-called "City of Brotherly Love". That has never really been the city's key attribute, but it is the Latin translation of the name Philadelphia.
I have a real problem with brand campaigns of this type. Brands should be about the consumer and be built outside-in. The focus should be on the benefits to the consumer of the brand. Philadelphia's campaign, like many other cities and states, is inside-out--all about features that the city wants people to associate with the city but which have no real benefit to the visitor or developer of commerce. Maybe the campaign is designed to have the citizens of Philadelphia be nicer and more "loving" toward one another and toward visitors? Well, that hasn't quite happened. In every Travel and Leisure poll in recent years, Philadelphia has ranked near the bottom of the 25 cities rated on "kindness and friendliness". The benefit to visitors seems to be to visit the history and culture. Dealings with locals seems not to have impressed too many, if the Travel and Leisure poll is to be believed.
So, with that background, perhaps the city wanted citizens to be nicer.
"Share the Love" seems to suggest that the city has some to spare. Walk the streets of Philadelphia and one will notice that love is in short supply. The streets are not friendly or loving toward citizen or visitor alike. Trying to suggest that a city that is viewed by outsiders as snarly and tough is loving just through a campaign is wasted money.
In all seriousness, the campaign in Philadelphia is backward. It should have started with the benefits that visitors will received by visiting the city and should have been designed in that way. "I Love NY" is all about me--I can find so many ways to love NY and the campaign gives everyone an opportunity to see themselves in the ad.
Philadelphia's campaign is not much better or worse than Baltimore declaring itself "Charm City" or Cincinnati claiming to be the "Queen City" or Pittsburgh trying to reposition itself as "City of Bridges" rather than "Steel City". Philadelphia's snarly attitude and toughness could have actually been turned into a trait that people would want to see and experience--the city built its character over a long time--it is America personified. It could be positioned that it has always been the heart and soul of America. It is the toughness that gave rise to the revolution. Well, hopefully you can see where I am going with this.
Cities are behind the times in terms of branding. They continue to believe that they can spin a brand and image rather than trying to see themselves from the outside-in and sell the benefits of coming. The worst offender is Delaware, which states "It's Good Being First", as if anyone outside of Delaware knew that it refers to Delaware being the first to ratify the Constitution. Talk about insular thinking!!
It's time that cities start working with brand agencies that understand the new world of branding and begin looking at benefits. Philadelphia has one campaign that is right on the mark. It was one of the first cities to embark on a campaign to attract gay men and women as tourists. The theme: "Get Your History Straight and Your Nightlife Gay". Now that's a reason to visit Philadelphia! Great campaign. If they could only come up with something for other segments of the tourist population equally as good.
I have a real problem with brand campaigns of this type. Brands should be about the consumer and be built outside-in. The focus should be on the benefits to the consumer of the brand. Philadelphia's campaign, like many other cities and states, is inside-out--all about features that the city wants people to associate with the city but which have no real benefit to the visitor or developer of commerce. Maybe the campaign is designed to have the citizens of Philadelphia be nicer and more "loving" toward one another and toward visitors? Well, that hasn't quite happened. In every Travel and Leisure poll in recent years, Philadelphia has ranked near the bottom of the 25 cities rated on "kindness and friendliness". The benefit to visitors seems to be to visit the history and culture. Dealings with locals seems not to have impressed too many, if the Travel and Leisure poll is to be believed.
So, with that background, perhaps the city wanted citizens to be nicer.
"Share the Love" seems to suggest that the city has some to spare. Walk the streets of Philadelphia and one will notice that love is in short supply. The streets are not friendly or loving toward citizen or visitor alike. Trying to suggest that a city that is viewed by outsiders as snarly and tough is loving just through a campaign is wasted money.
In all seriousness, the campaign in Philadelphia is backward. It should have started with the benefits that visitors will received by visiting the city and should have been designed in that way. "I Love NY" is all about me--I can find so many ways to love NY and the campaign gives everyone an opportunity to see themselves in the ad.
Philadelphia's campaign is not much better or worse than Baltimore declaring itself "Charm City" or Cincinnati claiming to be the "Queen City" or Pittsburgh trying to reposition itself as "City of Bridges" rather than "Steel City". Philadelphia's snarly attitude and toughness could have actually been turned into a trait that people would want to see and experience--the city built its character over a long time--it is America personified. It could be positioned that it has always been the heart and soul of America. It is the toughness that gave rise to the revolution. Well, hopefully you can see where I am going with this.
Cities are behind the times in terms of branding. They continue to believe that they can spin a brand and image rather than trying to see themselves from the outside-in and sell the benefits of coming. The worst offender is Delaware, which states "It's Good Being First", as if anyone outside of Delaware knew that it refers to Delaware being the first to ratify the Constitution. Talk about insular thinking!!
It's time that cities start working with brand agencies that understand the new world of branding and begin looking at benefits. Philadelphia has one campaign that is right on the mark. It was one of the first cities to embark on a campaign to attract gay men and women as tourists. The theme: "Get Your History Straight and Your Nightlife Gay". Now that's a reason to visit Philadelphia! Great campaign. If they could only come up with something for other segments of the tourist population equally as good.
Tuesday, February 16, 2010
Stakeholder Value Can Multiply Exponentially
Every organization has three key stakeholders with whom they need to create value if they are to succeed-- employees, customers and investors. However, all organizations also are part of an environment with multiple stakeholders who also have needs and interests. Every stakeholder has the potential to derive, create or destroy value for the organization, particularly when we think of value in perceived value terms.
Marketers are finding that focusing only on customers is limiting. A customer increasingly turns to information in social media to make decisions of what to buy. Someone in cyber space can influence, enhance or destroy the perceived value. Employees, often the forgotten link to value creation, can destroy good marketing and PR efforts through their own lack of willingness or ability to support the company. A bad investor report can keep not only investors but also customers away and can hurt employee recruiting efforts.
The companies that excel will be those who not only manage stakeholder relations well--meaning that they exceed the expectations of stakeholders--but that they also focus on creating value with various stakeholders. The value creation with one group can influence another. Perceived value, then, can increase exponentially, not just arithmatically. Network effects take over. When this occurs, the organization is perceived as being differentiated and distinguished from its peers.
We have always looked at innovation as a key element in value creation. I believe that we will find that truly great companies will have core competencies in innovation and stakeholder engagement.
Marketers are finding that focusing only on customers is limiting. A customer increasingly turns to information in social media to make decisions of what to buy. Someone in cyber space can influence, enhance or destroy the perceived value. Employees, often the forgotten link to value creation, can destroy good marketing and PR efforts through their own lack of willingness or ability to support the company. A bad investor report can keep not only investors but also customers away and can hurt employee recruiting efforts.
The companies that excel will be those who not only manage stakeholder relations well--meaning that they exceed the expectations of stakeholders--but that they also focus on creating value with various stakeholders. The value creation with one group can influence another. Perceived value, then, can increase exponentially, not just arithmatically. Network effects take over. When this occurs, the organization is perceived as being differentiated and distinguished from its peers.
We have always looked at innovation as a key element in value creation. I believe that we will find that truly great companies will have core competencies in innovation and stakeholder engagement.
Customer Service Becomes the New Brand Differentiator
Brand managers have always sought a point of differentiation for their brands. Typically, these were unique selling propositions or technical points that would convince a customer that the brand was different and worth more than competition. The field has typically followed the traditional marketing and PR formulas for finding differentiation, but what we should be realizing is that customer service is rising as a key point of differentiation and most companies do not do well.
If we look at ways that companies can differentiate, we have basically three choices: product innovation, operational innovation or customer innovation (we actually should think of this as stakeholder innovation since all stakeholders can derive, create or destroy value). The real winners differentiate in all three areas. Southwest Airlines gained customer favor by cutting costs through operational efficiencies while at the same time increasing customer service beyond the level found on most other commercial airlines. WalMart has been an expert in operational innovation, gaining its leverage through supply chain management that shifted the inventory burden from WalMart to its suppliers. This helped them to further cut costs and free up resources for customer service beyond the typical discount operation. Apple has been an expert in product innovation and customer innovation. The list goes on.
Increasingly, companies are finding that it is difficult to sustain differentiation in product and operations. These are fairly easy to mimic. There are many consulting firms that will help a company copy its best competitors. The really difficult task is excelling in customer service. And, increasingly this is separating the good from the also-ran companies.
While companies say they care about customer service, they really don't. Most customer service operations are looked at as being a cost center and a burden. Customer service people are not well paid. Often, customer service is outsourced and forgotten. Too often, companies do not know what it happening in customer service and actually reward people for getting in as many calls as possible--not solving the problem, but rather handling them.
A few companies, like Comcast, Southwest, IBM and others are excelling at customer service through the use of social media. They are listening and responding to problems and actually getting involved in helping people with their concerns.
For marketers who think in transaction terms of price, quality and service, it is time to shirt the emphasis to the latter. Price and quality can quickly come to parity, but customer service, which seems easy, is not and actually creates distinct advantage since it often exceeds expectations, which helps build loyalty.
It's time to take customer service out of the "back office" and make it front of the house.
If we look at ways that companies can differentiate, we have basically three choices: product innovation, operational innovation or customer innovation (we actually should think of this as stakeholder innovation since all stakeholders can derive, create or destroy value). The real winners differentiate in all three areas. Southwest Airlines gained customer favor by cutting costs through operational efficiencies while at the same time increasing customer service beyond the level found on most other commercial airlines. WalMart has been an expert in operational innovation, gaining its leverage through supply chain management that shifted the inventory burden from WalMart to its suppliers. This helped them to further cut costs and free up resources for customer service beyond the typical discount operation. Apple has been an expert in product innovation and customer innovation. The list goes on.
Increasingly, companies are finding that it is difficult to sustain differentiation in product and operations. These are fairly easy to mimic. There are many consulting firms that will help a company copy its best competitors. The really difficult task is excelling in customer service. And, increasingly this is separating the good from the also-ran companies.
While companies say they care about customer service, they really don't. Most customer service operations are looked at as being a cost center and a burden. Customer service people are not well paid. Often, customer service is outsourced and forgotten. Too often, companies do not know what it happening in customer service and actually reward people for getting in as many calls as possible--not solving the problem, but rather handling them.
A few companies, like Comcast, Southwest, IBM and others are excelling at customer service through the use of social media. They are listening and responding to problems and actually getting involved in helping people with their concerns.
For marketers who think in transaction terms of price, quality and service, it is time to shirt the emphasis to the latter. Price and quality can quickly come to parity, but customer service, which seems easy, is not and actually creates distinct advantage since it often exceeds expectations, which helps build loyalty.
It's time to take customer service out of the "back office" and make it front of the house.
Saturday, February 13, 2010
Philadelphia Orchestra Sounds a Sour Note with New Brand Campaign
The Philadelphia Orchestra, long considered one of the greatest orchestras in the world, is nearly bankrupt. It is little wonder. Costs continue to escalate but the audience has not. Attend a symphony performance in almost any American city and you will feel young if you are under the age of 70. The audience is graying and dying and donations are dwindling and orchestras are having a difficult time finding new devotees.
To make themselves more relevant to a younger audience, the Philadelphia Orchestra has embarked on a new campaign with the tag line--ready for this-- "Unexpect Yourself". That's right, the symphony, the bastion of high culture, has gotten so desperate that it has gone low culture, bastardizing the English language in hopes of drawing in younger people who think that it must be a pretty hip place. If letters to the editor and blogs can be a measure of reaction, the current symphony membership base is not too enthralled with the campaign.
The creators of this disaster is a firm called Annodyne. According to their own press release, Annodyne "utilized its strengths in digital marketing to create a campaign that cultivates and engages a growing and diverse audience that may be unaware of the Orchestra as an entertainment option. Annodyne’s creative strategy focused on communicating the extrasensory experience of attending the Orchestra with a unique positioning aimed at competing against the growing entertainment market that now includes options both in and outside of the home".
As someone who has worked in the brand and reputation business for a long time, the only thing I can respond to this is: "Huh?? I can't even imagine what my reaction would have been had this plan been presented to me. I likely would still be laughing or walking out of the room.
The orchestra is a brand. Yes, the brand needs to be revitalized, but not against the growing media options inside and outside the home. One does not choose a symphony against playing video games. One chooses a symphony against other cultural activities. Our selectivity process is more narrow than that. Has this firm really every heard of customer segmentation analysis and perceptual mapping? The symphony is not competing against all other activities. It is competing against "in-kind" activities within the same cultural category. That's how people make choices--not from a huge arrangement, but from smaller categories of choice. I would really suggest that Annodyne read some of the more current work on customer choice, selection and segmentation. No wonder they went for a "street cred" slogan--they really think that they are up against a wider selection of choices than they really are. The problem is the symphonic music, as a category, is no longer within the alternative selection criteria of most baby-boomers, let alone Gen X and Y and Millenials. You have to recapture the category, not try to sell against entertainment alternatives.
Annodyne suggests on their website that the Internet is a channel that has become essential. It is not a channel. It is a technology that has created and will continue to create social and cultural upheaval and change, as fundamental and the advent of the printing press. So, a group of orchestra leaders--most who have little or no understanding of the Internet--listened to a group that told them they they must communicate to the web-based generation on their terms. This was a disaster compounding itself.
Needless to say, the campaign has become the fodder of countless news media commentaries deriding it. How could a board of a symphony allow an ad agency to sell them on something like this? That, of course, is a rhetorical question because it appears that a desperate board turned to an agency that likely had some board connections that sold them on a poorly conceived campaign. It makes me embarrassed for the Philadelphia Orchestra. If this is the best that the orchestra board could come up with, they may soon be considering a new theme: "Stick a Fork in Us... We're Done!"
To make themselves more relevant to a younger audience, the Philadelphia Orchestra has embarked on a new campaign with the tag line--ready for this-- "Unexpect Yourself". That's right, the symphony, the bastion of high culture, has gotten so desperate that it has gone low culture, bastardizing the English language in hopes of drawing in younger people who think that it must be a pretty hip place. If letters to the editor and blogs can be a measure of reaction, the current symphony membership base is not too enthralled with the campaign.
The creators of this disaster is a firm called Annodyne. According to their own press release, Annodyne "utilized its strengths in digital marketing to create a campaign that cultivates and engages a growing and diverse audience that may be unaware of the Orchestra as an entertainment option. Annodyne’s creative strategy focused on communicating the extrasensory experience of attending the Orchestra with a unique positioning aimed at competing against the growing entertainment market that now includes options both in and outside of the home".
As someone who has worked in the brand and reputation business for a long time, the only thing I can respond to this is: "Huh?? I can't even imagine what my reaction would have been had this plan been presented to me. I likely would still be laughing or walking out of the room.
The orchestra is a brand. Yes, the brand needs to be revitalized, but not against the growing media options inside and outside the home. One does not choose a symphony against playing video games. One chooses a symphony against other cultural activities. Our selectivity process is more narrow than that. Has this firm really every heard of customer segmentation analysis and perceptual mapping? The symphony is not competing against all other activities. It is competing against "in-kind" activities within the same cultural category. That's how people make choices--not from a huge arrangement, but from smaller categories of choice. I would really suggest that Annodyne read some of the more current work on customer choice, selection and segmentation. No wonder they went for a "street cred" slogan--they really think that they are up against a wider selection of choices than they really are. The problem is the symphonic music, as a category, is no longer within the alternative selection criteria of most baby-boomers, let alone Gen X and Y and Millenials. You have to recapture the category, not try to sell against entertainment alternatives.
Annodyne suggests on their website that the Internet is a channel that has become essential. It is not a channel. It is a technology that has created and will continue to create social and cultural upheaval and change, as fundamental and the advent of the printing press. So, a group of orchestra leaders--most who have little or no understanding of the Internet--listened to a group that told them they they must communicate to the web-based generation on their terms. This was a disaster compounding itself.
Needless to say, the campaign has become the fodder of countless news media commentaries deriding it. How could a board of a symphony allow an ad agency to sell them on something like this? That, of course, is a rhetorical question because it appears that a desperate board turned to an agency that likely had some board connections that sold them on a poorly conceived campaign. It makes me embarrassed for the Philadelphia Orchestra. If this is the best that the orchestra board could come up with, they may soon be considering a new theme: "Stick a Fork in Us... We're Done!"
Wednesday, February 10, 2010
Why Universities Need Brand and Reputation Management
A friend of mine is heading to Italy to meet with a group of European communications heads. The topic is why universities need branding. Since I work in a university and actually have done brand and reputation management for a university in Canada, I thought it was an interesting question.
Academia has always thought that it was above commercial enterprise. However, as costs for an education have increased and as universities compete for the best talent in faculty and students, the brand or reputation of the university has become more important. This has become fairly common-place in the U.S., but she was heading to Italy, so I thought that the experience in Canada might be closer to the issues in Europe.
Canadian universities always considered themselves to be on a fairly equal basis. There are no public universities in Canada--it is not allowed by government. The Minister of Education has responsibility for universities, as well as public primary and secondary schools, and Catholic schools (this was an arrangement with Quebec). There is relative consistency in the cost of a university education across the country--relatively inexpensive by US standards. A Canadian university education costs about $4500 for tuition per year compared to about $15,000-20,000 for a state university in the US. While we have had wide variations in the quality of colleges and universities in the US, Canadian education is consistent in its quality, although there are some places more equal than others in terms of quality and students, faculty and parents know it.
Every year, McLean's magazine in Canada runs a ranking of the best universities. Educators pretended not to notice. Then, Canadian business schools started showing up in the list of best business schools outside the US. As the Canadian schools moved up the ranking, the percentage and quality of applicants from outside of Canada started to grow. There was a recognition that reputation of the school made a difference in the quantity and quality of applications. In fact, I talked to a few Chinese students who said that they could not get government grants to study abroad at a university that dropped below the top 100 mark in the FT ranking of best business schools.
What typically occurs when there is a tight status-quo competitive environment in a sector began to happen. First one school then another started to advertise and create branding campaigns. Money started to flow to the schools considered the best from private donors. Soon, most of the schools started to differentiate.
Universities are big business. The cost is high and the prestige or lack of it makes the degree and important benefit or liability to the holder. Schools that drop in rankings often find it harder and more expensive to attract top faculty.
Symphonies, museums and other institutions that always considered themselves above the pedestrian commercial interests are now branding and building reputation campaigns. It is more difficult in a university to deliver the experience commensurate with the promise since it all depends on the department, college, etc. University experience is personal and individual and no administrator can engage faculty member in "living the brand". However, it is every bit as important to a university as it is to any other organization in a competitive environment.
Academia has always thought that it was above commercial enterprise. However, as costs for an education have increased and as universities compete for the best talent in faculty and students, the brand or reputation of the university has become more important. This has become fairly common-place in the U.S., but she was heading to Italy, so I thought that the experience in Canada might be closer to the issues in Europe.
Canadian universities always considered themselves to be on a fairly equal basis. There are no public universities in Canada--it is not allowed by government. The Minister of Education has responsibility for universities, as well as public primary and secondary schools, and Catholic schools (this was an arrangement with Quebec). There is relative consistency in the cost of a university education across the country--relatively inexpensive by US standards. A Canadian university education costs about $4500 for tuition per year compared to about $15,000-20,000 for a state university in the US. While we have had wide variations in the quality of colleges and universities in the US, Canadian education is consistent in its quality, although there are some places more equal than others in terms of quality and students, faculty and parents know it.
Every year, McLean's magazine in Canada runs a ranking of the best universities. Educators pretended not to notice. Then, Canadian business schools started showing up in the list of best business schools outside the US. As the Canadian schools moved up the ranking, the percentage and quality of applicants from outside of Canada started to grow. There was a recognition that reputation of the school made a difference in the quantity and quality of applications. In fact, I talked to a few Chinese students who said that they could not get government grants to study abroad at a university that dropped below the top 100 mark in the FT ranking of best business schools.
What typically occurs when there is a tight status-quo competitive environment in a sector began to happen. First one school then another started to advertise and create branding campaigns. Money started to flow to the schools considered the best from private donors. Soon, most of the schools started to differentiate.
Universities are big business. The cost is high and the prestige or lack of it makes the degree and important benefit or liability to the holder. Schools that drop in rankings often find it harder and more expensive to attract top faculty.
Symphonies, museums and other institutions that always considered themselves above the pedestrian commercial interests are now branding and building reputation campaigns. It is more difficult in a university to deliver the experience commensurate with the promise since it all depends on the department, college, etc. University experience is personal and individual and no administrator can engage faculty member in "living the brand". However, it is every bit as important to a university as it is to any other organization in a competitive environment.
Monday, February 8, 2010
Cultural Differences Impacting Toyota's Handling of Its Crisis
I believe that I overestimated how well Toyota would handle its crisis. When they made the decision to withdraw cars from the market, I applauded. They took the right decision to shore up the confidence of their customers and potential customers.
However, I did not foresee an organization that seems paralyzed to say and do the right thing in a timely manner. The Japanese culture may be holding the company back from meeting the needs and interests of US customers who are the ones impacted by the sticking accelerator problems. The Japanese are not expected to admit mistakes publicly as readily as are Americans. Their companies do not practice transparency in the same way expected of US companies. The Japanese have built their success on the art of imitation; not the art of innovation. They have taken watches and made them better than the Swiss. They have taken cars and made them better than the Germans. They take inventions or innovations from others and make them better. Public criticism is difficult, if not impossible, in Japanese culture. This holds back invention and innovation--the risk of failure is too great.
I think that the complexities of the Toyota corporation has gotten in the way of effectively dealing with this crisis. They centralized this problem, but that meant taking it to the other side of the world from where the issues are the greatest. Mr. Toyota has apologized publicly--finally! However, the US CEO, Lentz, has been used more like super salesman on TV talk shows than as a CEO of a company. Lentz's background is sales and he has looked like the company salesman rather than the company leader. He has shown little contrition and has been more focused on rebuilding sales. All the while, rumors, innuendos, new stories, and plantiff attorneys cases are all building. Frustration and fear are also building. Competitors are offering incentives to Toyota customers to change cars. The clock keeps ticking and Toyota seems to treat this as a manufacturing problem. This is a crisis of confidence in the qualities that made Toyota great--quality and reliability. Take those away and it is just another car company.
I had thought that Toyota would not be inexorably hurt by this crisis since I had assumed that their withdraw of product from the market would be followed quickly by communications with its owners and the public of what it was doing, day-by-day. That hasn't happened. I have been surprised and dismayed. They may be hurting their brand and reputation inexorably.
An indication of how poorly they are communicating are the ads they have been running. An open letter from Lentz to the American consumers reads like a recall letter. The logo on-top is "Toyota: Moving Forward". Isn't "moving forward" the problem that started this crisis?? Did anyone think that maybe the logo lock-up with the tag line might be dropped while they dealt with this issue? During the Super Bowl, several commercials were run with a voice over that sounded like a government assurance that things were being done to protect the consumer. The end slide--the same logo lock-up.
Note to Toyota--get your ad agencies out of this and start dealing with this as a major crisis of confidence. When a crisis hits, do not let ad agencies take the lead. Their MO is to sell, not to communicate. They don't listen, they talk. Stop trying to sell the next car and start trying to stop your current owners from fearing death from their current car. You have a lot of owners who are counting the days until their leases are up and many others who will try to unload the car, even if they loose money, just to feel safer. When humans are fearful, they return to animalistic tendencies. Reason and rationale take a back-seat to emotions. Stop trying to tell the public what wonderful cars Toyota makes and how they will be returned to their greatness and talk to Toyota owners in the fear-instilled "caves" they are now living in.
However, I did not foresee an organization that seems paralyzed to say and do the right thing in a timely manner. The Japanese culture may be holding the company back from meeting the needs and interests of US customers who are the ones impacted by the sticking accelerator problems. The Japanese are not expected to admit mistakes publicly as readily as are Americans. Their companies do not practice transparency in the same way expected of US companies. The Japanese have built their success on the art of imitation; not the art of innovation. They have taken watches and made them better than the Swiss. They have taken cars and made them better than the Germans. They take inventions or innovations from others and make them better. Public criticism is difficult, if not impossible, in Japanese culture. This holds back invention and innovation--the risk of failure is too great.
I think that the complexities of the Toyota corporation has gotten in the way of effectively dealing with this crisis. They centralized this problem, but that meant taking it to the other side of the world from where the issues are the greatest. Mr. Toyota has apologized publicly--finally! However, the US CEO, Lentz, has been used more like super salesman on TV talk shows than as a CEO of a company. Lentz's background is sales and he has looked like the company salesman rather than the company leader. He has shown little contrition and has been more focused on rebuilding sales. All the while, rumors, innuendos, new stories, and plantiff attorneys cases are all building. Frustration and fear are also building. Competitors are offering incentives to Toyota customers to change cars. The clock keeps ticking and Toyota seems to treat this as a manufacturing problem. This is a crisis of confidence in the qualities that made Toyota great--quality and reliability. Take those away and it is just another car company.
I had thought that Toyota would not be inexorably hurt by this crisis since I had assumed that their withdraw of product from the market would be followed quickly by communications with its owners and the public of what it was doing, day-by-day. That hasn't happened. I have been surprised and dismayed. They may be hurting their brand and reputation inexorably.
An indication of how poorly they are communicating are the ads they have been running. An open letter from Lentz to the American consumers reads like a recall letter. The logo on-top is "Toyota: Moving Forward". Isn't "moving forward" the problem that started this crisis?? Did anyone think that maybe the logo lock-up with the tag line might be dropped while they dealt with this issue? During the Super Bowl, several commercials were run with a voice over that sounded like a government assurance that things were being done to protect the consumer. The end slide--the same logo lock-up.
Note to Toyota--get your ad agencies out of this and start dealing with this as a major crisis of confidence. When a crisis hits, do not let ad agencies take the lead. Their MO is to sell, not to communicate. They don't listen, they talk. Stop trying to sell the next car and start trying to stop your current owners from fearing death from their current car. You have a lot of owners who are counting the days until their leases are up and many others who will try to unload the car, even if they loose money, just to feel safer. When humans are fearful, they return to animalistic tendencies. Reason and rationale take a back-seat to emotions. Stop trying to tell the public what wonderful cars Toyota makes and how they will be returned to their greatness and talk to Toyota owners in the fear-instilled "caves" they are now living in.
Sunday, February 7, 2010
More Commonality and Less Functionality is Needed
As a result of the Internet and social media, marketing, branding and corporate communications are converging. All all looking at a multi-stakeholder world in which relationships become king. Each of these disciplines has begun arguing that they deserve to have prominence in the management of social media.
Social media are surrounding companies and pulling knowledge that was once held inside the company to the "edge of the network". Companies can no longer push information at a stakeholder. Conversations and relationships are what predominate in the social media world. Consumers and other stakeholders have gained power of information and the ability to create and destroy value. They expect to be dealt with in a respectful dialogue, not as passive consumers of old.
So, who should own social media? Marketing argues that social media is part of the marketing mix. Brand management argues that people are talking about brands in social media and they should be the owners. Corporate communications (public relations) argues that they have always been relationship-driven and so they are best prepared to own social media.
The correct answer, I believe, is that none of them should own social media. Social media are not new channels, but rather conversations happening in cyberspace that involve the organization in one way or another. The Internet is fundamentally changing society and all organizations. The best way to deal with social media is to organize horizontally, not delegate social media to a vertical function within the organization. The reputation of the company depends on the organization's ability to manage all "touch points", and since no one function owns all the touch points, they should be managed in a coordinated, integrated fashion. However, this is not happening in most organization.
The old way of thinking is that a function within the company was given prominence or ownership over an activity. They could decide whether or not to partner with anyone else. It made for a very ineffective way of dealing with various stakeholders. Investors heard one message; customers heard another; employees still another. Things have gotten better, but improvements are still needed to keep pace with changes in the market environment.
Social media is a disorganized set of relationships and conversations. The best way to deal with social media is through the integration of marketing, branding and communications, along with employee engagement and sales management. Companies should be trying to create networks within their own organizations that mirror the networks on the outside. It's the best way to enhance the effectiveness of all of these functions and the perceived value of the company.
Social media are surrounding companies and pulling knowledge that was once held inside the company to the "edge of the network". Companies can no longer push information at a stakeholder. Conversations and relationships are what predominate in the social media world. Consumers and other stakeholders have gained power of information and the ability to create and destroy value. They expect to be dealt with in a respectful dialogue, not as passive consumers of old.
So, who should own social media? Marketing argues that social media is part of the marketing mix. Brand management argues that people are talking about brands in social media and they should be the owners. Corporate communications (public relations) argues that they have always been relationship-driven and so they are best prepared to own social media.
The correct answer, I believe, is that none of them should own social media. Social media are not new channels, but rather conversations happening in cyberspace that involve the organization in one way or another. The Internet is fundamentally changing society and all organizations. The best way to deal with social media is to organize horizontally, not delegate social media to a vertical function within the organization. The reputation of the company depends on the organization's ability to manage all "touch points", and since no one function owns all the touch points, they should be managed in a coordinated, integrated fashion. However, this is not happening in most organization.
The old way of thinking is that a function within the company was given prominence or ownership over an activity. They could decide whether or not to partner with anyone else. It made for a very ineffective way of dealing with various stakeholders. Investors heard one message; customers heard another; employees still another. Things have gotten better, but improvements are still needed to keep pace with changes in the market environment.
Social media is a disorganized set of relationships and conversations. The best way to deal with social media is through the integration of marketing, branding and communications, along with employee engagement and sales management. Companies should be trying to create networks within their own organizations that mirror the networks on the outside. It's the best way to enhance the effectiveness of all of these functions and the perceived value of the company.
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