Tuesday, March 30, 2010

Asking the Right Question Might Change Branding Decisions

I have talked to a number of companies recently that might be candidates for changing their company names to get rid of the baggage of past problems and start anew. The reason these companies give for not changing is that research found that their corporate names had a lot of awareness and they felt it would be difficult to duplicate that awareness with a new name.

Bernie Madoff's name has a lot of awareness, but I would not want to launch the Bernie Madoff School of Management. We need to understand not only awareness, but also the attributes and associations that are imbued in the name that have become so crystalized that we cannot change them.

I lived through an example of bad research that lead to bad branding decisions. Before I arrived at Nortel, the name of the company had been Northern Telecom. Prior to my arrival, the company decided to change its name to Nortel to modernize it and because too many customers around the world thought the company was a telecom service provider rather than an infrastructure developer. The branding firm did research and asked customers whether it was clear to them that Nortel was the same as Northern Telecom (Nortel was the stock market notation for the company). About 50% recognized the connection. The brand firm went on to develop a new name (Nortel) and logo that completely dropped the Northern Telecom name.

When I arrived I started asking questions about the research. Think about it--50% did not recognize the connection, and this was with aided research. That means that a vast majority did not recognize the name Nortel unaided. One would likely only do this if one were trying to distance the company from past problems, which we did not have. It made no sense. The only way to build the brand and its connection to the past was to invest tens of millions in advertising, which we likely could not afford to do. So, I had the logo changed with a lock-up of Northern Telecom written below the Nortel, to bring the past equity to the new logo and name. This was bad brand strategy based upon bad research. We needed the name Northern Telecom during our transition.

Some companies could use a clean break from the past (think Altria, which became the parent name for Philip Morris; or Airtran, which had been Value Jet). These were names that were changed to give the company a new lease on life--not to bury the past, since all things are transparent, but to allow the company to build new attributes and associations and not be saddled with so much baggage its messages cannot break through all the noise. There are many such companies that are living with tremendous baggage (e.g., AIG).

Ask good questions and you will get good answers. Ask bad questions and you might end up making some terrible brand decisions.

Friday, March 26, 2010

Sprint and 4G Need to be Repositioned and Rebranded

Sprint has developed a 4G network, one that runs more than 10-times faster than 3G. But, more than that, 4G offers the bandwidth needed to handle all of the data that is now clogging the mobile networks and interfering with voice calls.

There is a new commercial from Sprint by their CEO, Dan Hesse that comes close to defining 4G, but still falls short. He talks about how other phone companies charge you for all of the data used, which is why most of us buy the phone in the first place. Voice is a "throw in". It is the right of entry for anyone in the mobile business. But, most of us are increasingly using our phones for data.

This situation is akin to what happened on the public phone networks in the late 1990s when data started increasing relative to voice. This is the time that Cisco blew away Nortel (where I worked), Lucent and others, who were focused primarily on voice. Cisco not only had routers that handled data better, they also understood and articulated the new value proposition of the Internet.

Mobile is now at that same point in time. Data is not quite 50% of the mobile network traffic, but it will be in the near future. All of this data clogs the network and makes it difficult to make a simple telephone call. 4G is the answer. It has the bandwidth to handle both voice and data.

Currently we have a "Coke vs. Pepsi" ware going on between Verizon and AT&T concerning who has better 3G coverage. Meanwhile, Sprint has built a 4G network that it has deployed. But, if one were to draw a perceptual map of the mobile phone companies based upon price and features, one would see Sprint gathered near Verizon and AT&T, which is a dangerous place for them to be. If they do not move into a new positioning, they could go out of business.

They are not going to get there with a CEO as a talking head in a commercial. I know that the CEO is intended to invoke trust and confidence, but Dan Hesse is not Steve Jobs and Eric Schmidt--he doesn't evoke images of high-tech prowess or innovation. While he has a background in data networks before joining Sprint, he comes across as just another CEO--nice and open, but not cutting-edge. He speaks slowly and precisely about an exciting new technology. It doesn't work to capture the listener and help them to emotionally connect with the technology so that they have a reason to change.

Sprint needs to redefine 4G around bandwidth and make it an emotional connection for customers. There is so much value in 4G and so little perceived value currently. A good play could be with the new mini-computers like I-Pod, Kindle, and others that will need greater bandwidth to realize their potential. The advertising needs to be refocused on products in use and greater use of social media needs to create and build buzz around what 4G could mean.

It's a shame that Sprint hasn't recognized this. They even have priced 4G comparable to 3G, thereby killing its perceived value. The only reason to take this pricing strategy is to attempt to siphon customers from Verizon and AT&T. I don't think that will happen. Palm found out that despite its features, the mobile world has become defined as I-Phone vs. Blackberry. Even Droid is having a tough time making inroads. Perhaps Google will do better, but if I were Sprint I would want to stay clear of a market in which Google and Apple want to do battle with Verizon.

At work, also, is the so-called "Market of Three" phenomena in which markets, when they mature, devolve into 3 major players. The #3 (in this case Sprint) has problems when it tries to be as broad and deep as the #1 and #2 players. The #3 needs to focus and find its niche.

Sprint might be better to rebrand itself as a technology, data company with voice as a plus rather than to continue to sell itself as a voice company with better data. Take the data plus route rather than the voice plus route and move into a different perceptual space with greater value than its competitors. It they do not reposition and rebrand themselves and 4G, they may find themselves either a take-over target or they will continue to be the 7-Up in the Coke-Pepsi war--a marginalized, afterthought of a brand.

Wednesday, March 24, 2010

Right Wing Branding Can't Hide the Facts

The right wing in the US has been very good at branding. They branded the anti-abortion movement as Pro-Life and now has branded its new movement as the Tea Party, using symbols and flags from the Revolutionary War period. Today, after the vote on healthcare legislation, we saw evidence of violence against legislators who had voted for the bill by those who said they were opposing "tyranny" and standing for "freedom and liberty".

While the so-called Tea Party might want to brand themselves in a way that links them to the leaders of Colonial freedom from England, they are really the reincarnation of John Wilkes Booth, George Wallace and others who have opposed federal law over states rights. These are the successors of those who argued for slavery and against laws allowing multi-racial marriages. They are not Tea Party revolutionary. They are not seeking to advance freedom, but rather to stop the country from progress.

What they are very good at is branding and fear-mongering. We have heard that the next election will be between "Americans and Europeans", or those who favor American ideals against those who want the US to become a European socialized state. If these people only knew something about Europe or socialism, this might make sense. But, once again, it is all about spin over facts.

The new US healthcare legislation would never be acceptable in Canada or any of the European countries. It does not provide for universal care. It is not government healthcare. But, for millions who know nothing about the world outside, these statements about socialism and European-style healthcare, strike fear, as they are intended to do. It is not fact-based arguments; it is, rather, an attempt at the worst sort of branding-pure spin over substance.

This brand management effort by the right-wing did not start with any actions by President Obama as they would have one believe. It started when Obama was a candidate. Remember Sarah Palin invoking "Joe the Plumber" and claiming that Obama was a socialist? Newt Gingrich continues to label Obama as a "secular socialist". I'm not sure Gingrich believes this, but the words incite people to fear, which is what he wants. The right has believed, just like right-wing regimes in other countries, that you label your opponent and continue to label until it sticks. This is dangerous stuff. They are not too far from inciting violence. Characterizing ones opponents with a quick label can translates into anger and it stirs up rage in many unbalanced people, especially in a country full of guns. There are plenty of "wing-nuts" who may actually believe that they are defending freedom and liberty through violent acts against Democrats. Remember that John Wilkes Booth shouted "death to tyrants" when he jumped to the stage of Ford Theatre after shooting President Lincoln. The anger the Republican leadership is inciting among the right-wing may go beyond the ballot box to the streets. Remember what happened in the South during the Civil Rights actions in the 1960s? We are getting close to this now.

There are many thoughtful Republicans, but they are afraid to speak up against the rising right-wing lest they loose their seats. Scott Brown learned his lesson pretty quickly. He voted with Obama on one small issue and was put on notice that the Tea Party would run someone against him if he didn't straighten out. This is not a "spontaneous organization", as some would have us believe. This is the creation of the right-wing of the Republican party designed to destroy the President and any progressive ideas that might stand in the way of their ideological orthodoxy. It is a "take no prisoners; no compromise" style of politics. They see no shades of gray, only black or white.

The US is fragmenting. It is getting as close to the divisions that it saw in the 1860s during the debates over slavery and states rights. That lead to the Civil War. One wonders if the right really wants to keep the union together or if it is trying to reverse the course of history and bring the North and progressives to their knees in the same way they believe their ancestors were forced to bend to the will of the nation. This is not a movement trumpeting "The South will Rise Again", but it is damn close to that sentiment and closer to that than it is to the intellectual spirit that fueled the Revolution of the colonies from England. That revolution was lead by intellectuals. The Tea Party is lead by anti-intellectual thugs who claim not to want government interference, but at the same time want Constitutional amendments against abortion, gay marriage and anything else they don't like.

It is time that people begin to see this for what it really is--a mass of angry people; not political--just angry, uninformed and easily swayed by rhetoric and false labels.

Tuesday, March 16, 2010

Navigating Social Media for Brand and Reputation

The Internet has transformed virtually every company, empowering consumers, increasing the threat of new entrants, and creating new competitive opportunities or risks. In his Nobel Prize winning paper, The Nature of the Firm (1937), Ronald Coase noted that the primary economic rationale for integrated corporations was the lowering of search and transaction costs. The Internet has stripped these advantages from many companies. As a result, a “Long Tail” has developed (Anderson, 2004), allowing many businesses to use the Internet to realize significant profit from selling to niche rather than mass markets.

The term social media relates to those web-based activities that allow individuals to publish, share or network with others. Social media are like a big cocktail party. Markets are the conversations taking place. How one handles these conversations becomes more critical. It also changes marketing since relationships are more difficult to monetize than transaction. As a result, we are seeing a convergence of marketing, advertising and public relations.

Research by Razorfish and eMarketer have found that a majority of customers are influenced in their perceptions of brands by social media. These findings support the Edelman Trust Barometer findings that “a person like me” has become the primary influencer of perceptions.

There are still many who are confused as to whether they should have a strategic plan, a social media plan or a “Twitter” or “Facebook” plan. I would offer the following recommendations:

Technology will continue to evolve and change. Focus on strategy & reputation objectives, not on the technology.
Understand that social media are not all the same. Some are good for listening; some for sharing; some for networking; and others for publishing. Engage in all appropriately.
Become a real member of the community—once you have built credibility as a legitimate member of the social community, you might be asked for some suggestions and information.
Focus on your organization’s values—they must be honest and transparent. Values are the foundation of reputation. Clarify your values and hold people responsible for upholding them—they are now on full display.
Engage your employees and help them to understand their role in living your strategy, brand attributes and reputation objectives. Make certain that you have clear guidelines for employee use of social media.
Build Relationships. As Jim Grunig has noted, this may be the core competency of public relations. Relationships build value and multiple stakeholder relationships may well build value exponentially.
Monitor, listen and remain calm. Not everything said will be positive. You do not have to defend every criticism. Stop thinking of yourself as a corporate messenger and focus on being a relationship manager.

Sunday, March 14, 2010

Hyundai Needs to Create a new Brand for its High-End Car

The votes from Consumer Reports and others are in. Hyundai has introduced a new high-end car that is the equal of BMW and Mercedes. The problem, I believe, is that they intend to sell it as a Hyundai.

Hyundai is a successful South Korean car company. It recently bought KIA, another Korean company. The plan, it seems, is to position KIA at the lower price end and Hyndai at the higher end. That would be find if these were new cars in the market. The problem is that both cars--Hyundai more than KIA--have been well positioned as inexpensive, quality cars. If one draws a perceptual map for the auto industry with two axes: price and quality, Hyundai would be in the prime position of low price, high quality car. It is lower priced than Toyota or Honda or Chevy or Subaru. It has done an excellent job in this category. In fact, if one were to ask consumers to name the top low priced car with good quality, Hyndai would likely be top-of-mind for many.

It is a given that it is easier to build a brand image than to change one. Once attributes and associations start to crystalize, they are more difficult to change. Hyndai has been on the market for some time and has done a great job in branding its cars. Now, it wants to change and reposition what a Hyundai means.

Toyota faced this issue and decided that the parameters of attributes and associations of the Toyota brand would not extend to a high-priced, luxury car. It introduced Lexus. Honda faced the same challenge and introduced Acura. I am a bit mystified that Hyundai believes that it can reposition their car and get people to spend $50,000 plus. Think about the scenario. You drive home in your new luxury Hyundai and park it in the driveway. Your neighbor comes over and admires it and asks what it cost--$55,000 you say. He responds: "for a Hyndai? are you crazy, you could have bought a Lexus or BMW or Mercedes for that money". And the post-purchase dissonance would begin. I don't think enough people will get to that point. They will think about their neighbors, their egos, their resale values, etc.

The old consumer purchase steps we used to think about (need, alternatives, evaluation, purchase, post-purchase) was conceived to parallel the sales funnel that ran from awareness to familiarity to favorability to consideration to purchase. We now know that with the proliferation of alternatives in the market and all of the media and social media exposure, most consumers begin to eliminate brands before they even begin shopping; they focus on a few brands. We are not living in a world of mass advertising anymore. Hyundai has more avenues to reposition itself within, but a more fragmented market in which to do so. It will take the company a lot more time, money and other resources to reposition Hyundai than it would to introduce a new brand of car with a shadow endorsement from Hyundai.

Comcast Drops the Ball in Launch of XFinity

Comcast did not show a lot of marketing prowess in its recent launch of its new Xfinity brand. Instead of having a launch plan that framed understanding and expectation of Xfinity, the announcement was made during a conference call with financial analysts. Letting the investor relations folks handle brand announcements is a new strategy, but it is not one that I would recommend to other companies.

Comcast should not be faulted for developing the Xfinity brand. It is a cable company and the Comcast name is saddled with all of the attributes of a cable company, none of which are typically positive, progressive, or exciting. This is not only true for Comcast, but also for Time Warner and other cable companies. Cable companies are thought of as public utilities--pipes that bring other people's talents into ones home.

Comcast is competing head-on with Verizon and its high-speed Fios. While Verizon does not develop its own technology, it is perceived to be far ahead of Comcast in technological prowess, principally due to its association with high-tech devices such a smart phones. Verizon has been battling AT&T on 3G network coverage, and that also has made it seem like a technology leader, at least in comparison with Comcast.

So, Comcast looked at its attributes and the attributes of Verizon's Fios, and determined that it needed a new brand. Xfinity was a combination of two ideas that had been at play at Comcast for some time. It had been talking about cross-platforms and also about its infinite capabilities in the entertainment and connectivity space. By combining the two ideas, Xfinity was born. This was to be the brand for Comcast's here-to-fore "triple play" of cable, computer, telephone--matching Verizon in terms of speed, security and price.

I used to work for a CEO who used to say that "execution is 90% of the determination of success". So, the strategy behind Xfinity was good; the execution was not so good. In fact, really poor.

Xfinity gave Comcast the chance to reframe the discussion and expectations of customers, to talk about the new Comcast--the one focused on customer service and the one poised to buy NBC Universal. It could talk about its high-speed competition to Fios, what it was doing in the telecom and wireless spaces, etc., etc.

Comcast blew it big time. When one doesn't frame the brand or discussion about the brand, it allows others, primarily competitors, to frame the discussion. Customers now believe that Comcast is changing its name to Xfinity, which it is not; Verizon is running ads making fun of the change as being nothing more than "window dressing" and also suggesting that Comcast has changed its name.

In the meantime, the Xfinity ads that Comcast started to run after the "non-announcement announcement" look very much like ads that were supposed to run as teasers before the announcement. So, there were no teasers, no public relations build-up with the press, not heightened sense of excitement, no framing of technology discussions about fiber optics (Verizon) against high speed alternatives from Comcast. There was no discussion of how Xfinity will be Fios without the dirty work of tearing up property to bring fiber optics to the home. All of these opportunities were lost and now the discussion is being framed by those who either dislike Comcast or by its competitors. Companies have held successful press conferences for brands with less vitality and possibility than Xfinity.

I guess trying to get a company like Comcast to think and act like a major marketing company will take some time. It seems like a Spanish procession--one step forward, two steps back. In its customer service activities, Comcast has taken a major step forward. With the Xfinity announcement, Comcast took at least two steps back.

Saturday, March 13, 2010

Google Stays True to Its Brand Promise

Google continues to be in disputes with the Chinese over what content should be restricted. This dispute started many years ago. How Google has handled it shows their differentiation versus Yahoo! and others.

Google has a mission to "do no evil". Its founders wanted to attempt to do well by doing good. The company was wise early on when it brought on CEO Eric Schmidt, one of the best CEOs in Silicon Valley--adult supervision that Yahoo! could have used.

About 10 years ago, California wanted the search engines to provide the names of anyone who did a search that might be related to child pornography, in hopes of entrapping pedophiles. Yahoo!, MSN, AOL and others quickly complied; Google refused, saying that those who used its search engine did so with the guarantee of anonymity. Identifying someone as a pedophile from a search was a "slippery slope" that would open the Internet to censorship. While pedophilia is a horrific crime, how might one differentiate a student or journalist doing research on the subject from a true pedophile. It could become a new "McCarthy era" witch-hunt, with people being judged guilty until they could prove themselves innocent, but tainted nonetheless. Google judged that agreeing with California authorities would not be true to their brand promise. They incurred the wrath of California authorities and others who questioned their morals and ethics.

Fast forward, and Google ran into trouble with the Chinese government that wanted the names of anyone in China who searched for information about banned subjects (e.g.,Tiananmen Square, or Falun Gong, a banned religious group, or the Dalai Lama). Yahoo! complied, turning over the names of journalists which lead to their arrest and incarceration. Google stayed consistent. It refused to turn over names of those doing searches. Instead, it agreed to put up a notice blocking the information and telling the searcher that they were complying with Chinese law. While the government did not like this, it was accepted.

Google's actions at the time were not applauded by all. Many members of Congress, including the late Cong. Lantos of California, wanted Google and all other companies to abandon China until the country agreed to improve its human rights. Lantos had been a holocaust survivor and had tremendous sensitivities to country abuses of human rights. He had wanted a "Sullivan Principle" (the principles that were introduced by Rev. Leon Sullivan that kept U.S. companies from doing business in South Africa during the time of apartheid) for countries like China.

The dispute in China has continued. Now, Google believes that not only has China been the source of international hacking, but that the Chinese authorities might be behind the hacking of Google and other companies. While the Chinese say that they are not responsible, they do not deny that they want to block Internet and search access that they deem "disruptive to the state and its people". They also have the motive and the ability to get back at Google for its unwillingness to comply with their desire to hunt down offensive searches and searchers. The dispute might drive Google out of China.

Lest anyone think this is easy for Google to stand its ground, they should recognize that China is the largest potential Internet market in the world. The future development of that country's Internet will be enormously profitable. Google could find itself pushed out of operations in China and may make the decision to abandon the country. If Google is not in China, it gives the Chinese the motivation to create a competitor that could challenge Google not only in China, but also around the world. I can image that this will be a difficult situation for Google and its board, given the profits it would be foregoing.

While this may seem like a dispute amongst competing governments and philosophies of government, it is a demonstration of the difficulty companies have globally. Many times, companies argue that they must adapt to the whims and cultures of their different world markets. While adaptation to local customs is a correct action, a company still must maintain a core set of brand attributes that it will keep immutable. This is what Google has been trying to do. I applaud them! They have earned my respect and admiration.

Friday, March 12, 2010

Brands Need to Be Part of the Strategy, not Spin

One of the cases I love teaching in my classes is the Rosewood Hotels case from Harvard Business Review. The case outlines a situation when the CEO and chairman of the board both decide that they want to transform themselves from a House of Brands into a Branded House in hopes of increasing cross-property stays and increase lifetime customer retention. At the time of the case, the name Rosewood in not known, but the individual Rosewood properties (Mansion at Turtle Creek, the Carlyle, Inn at Little Dix Bay, and others) are highly regarded, individualized properties loved by their clientele. When studies are done, it is found that the hotel managers and clients do not see any value in touting the Rosewood name.

Students often move quickly to a sensible solution of a sub-brand strategy, linking all the hotels to the Rosewood name, similar to the architecture used by Marriott, e.g., Fairfield Inn by Marriott. However, then the fun starts because I start to push the students to consider what the damage could be and how this strategy, without the proper understanding of the corporate strategy, could backfire.

For example, consider the the type of hotel managers Rosewood had hired would likely be entrepreneurs who love running their own high quality hotel. Ritz Carlton, Four Seasons and other hotel chains the Rosewood CEO covet would likely hire corporate types who want to be part of a large, "cookie cutter" hotel chain. Consider also the promise made by the individual brand properties--to be individualistic, tailored to the local community and culture. Could linking these to Rosewood damage the brand promise and loose customers? Think about travel agents who had not incentive to push the Rosewood name and whose help would be needed if the masterbrand or branded house plan was implemented.

The case illustrates that branding is not about spin, but rather about making certain that a company maintains its brand promise at all touch points. If changes are made, there also need to be structural or process changes. For example financial incentives for the hotel managers to cross-sell properties rather than relying purely on the marketing and advertising of the Rosewood name. Or, incentives for travel agents to push more Rosewood properties. What about getting more hotel employees to the other Rosewood properties so that they can help sell the virtues of the other Rosewood hotels? What about software like CRM that would help each hotel to know more about the customer so that they have knowledge of the visitors Rosewood property visitations.

The case is a great one for use to highlight that brand management is not as easy as it seems. They has to be an infrastructure and strategy that supports the brand and its promise. The case is great for students in brand management classes. I also use it in MBA and Executive MBA classes so that general managers and future general managers understand the complexities of brand--it is not about a logo or slapping a name on a sign.

Wednesday, March 10, 2010

Customer Service is a Major Driver of Reputation

There has always been a debate about the extent to which reputation really matters to investors. On the one hand, there has been research showing a positive correlation between positive financial results and reputation. On the other hand, some hard-nosed quantitative types argue that investors only care about getting rich and are willing to forgo reputation when they are getting favorable returns.

However, we often fail to step back and consider what reputation does to the sell-side analysts who influence the market value of the stocks we buy. In an October 2009 Journal of Marketing Research article, Eugene Anderseon and Sattar Mansi looked at the impact of customer satisfaction on bond ratings. They found that customer satisfaction by those handling the bond does influence the ratings of the bond.

Customer satisfaction is a major driver of reputation. It is interesting, though, that it often does not show up in the literature as a focus of reputation. Most of the reputation literature and many of the people who profess to be reputation experts, focus instead on good public relations or corporate advertising or corporate social responsibility. They seem to neglect the fact that reputations, like brands, are built, enhanced and destroyed at all of the "touch points" a company meets its various stakeholders.

Step out of the bond market for a moment, since it may be a bit too esoteric for many readers. Consider the reputation of a hotel. Where does a hotel's reputation rest? To a large extent, it rests on customer service. We determine if we are going to like a hotel before we enter the room--how are we greeted, how long are the check-in lines, is our room ready, does the bell-hop let us carry our own bags if we wish to? By the time we get to the room, we are already predisposed to either enjoy or not enjoy our stay. This is customer service. But, where do hotels spend their so-called reputation dollars? On advertising, websites, public relations, and social media. Why is customer service not considered part of reputation management?

It is a waste of time and energy to attempt to "spin" a reputation. There is too much transparency today. Expectations of performance are low. That's the good news. Companies that care can exceed expectations more easily than ever. But, what is happening in many companies is that they look to their competitors and see them cutting costs for customer service and figure that they can also cut costs. Sounds like a bunch of kids saying: "all the kids in school are doing it so I want to do it". Let the rest of the "kids" do what they want to follow one another--be an adult. By doing so, you may actually differentiate and not only increase reputation but also customer attraction and retention, which means greater profits.

Tuesday, March 9, 2010

Tiffany--An Amazing Brand

One of the groups in my brand management class did a brand audit of Tiffany that highlighted up some amazing information.

First, the Tiffany blue box was first introduced in 1837 by the founder of the firm. It is amazing to think that he was such a brand genius at a time when few people thought about such things. He determined the color blue that would be associated with Tiffany and introduced the box, knowing that he could differentiate gifts from his store that were presented in the distinctive box. To this day, the blue box is one of the most coveted and most protected brand attributes of Tiffany. Without the box, it is just a piece of jewelry. With the box, it becomes a true piece of differentiated luxury.

Second, the brand value of Tiffany is estimated to be $4 billion. The company itself has a market cap of a bit over $5 billion. This means that the inventory, if sold by someone else, would have less value than it does when sold in a Tiffany store. Also, once again, without the blue box the jewelry looses perceived value.

Third, if one looks at year-over-year sales, one can see the impact of the recession on all luxury, non-essential goods. All of the jewelry chains had declining sales. Even thought Tiffany is at the highest end, it only had a modest decrease in sales versus other major jewelry chains. In terms of return on assets, Tiffany continues to exceed the industry average.

Tiffany shows that a brand can maintain its relevance in a competitive market over more than 150 years by being consistent in its brand attributes and associations. Tiffany retains a differentiation strategy of high perceived value--incremental costs of their jewelry might not be that much higher than competitors, but the perceived worth to customers is much higher and they are willing to pay more to get a Tiffany item.

In the brand exploratory, the student group talked to a few people who felt that Tiffany was over-valued and too expensive--that other stores offer equally high quality and better priced merchandise. If the decision to buy is based on fair price vs. quality, then Tiffany looses. They know they do. The decision must be based upon exclusivity and high differentiation--it's not just jewelry, it's Tiffany. Exclusivity is not for everyone.

Tiffany's ads focus on the giving of a box, not the gift inside. All it takes is the box to drive the familiarity and key attributes. Can anyone else think of another company that has become so intertwined with its packaging that the gift inside becomes almost irrelevant compared to where it was purchased? This is almost a reverse ingredient brand. I had never heard of a packaging brand, but perhaps Tiffany represents one.

Sunday, March 7, 2010

Canada Defines its National Brand for Itself and the World

The recent Olympics gave both Vancouver and Canada a chance to define themselves for the world. Both suffer from lack of clear definition for many. Canada borders the U.S. and many in the U.S. and around the world cannot quite determine what differentiates Canada from its southern neighbor. Vancouver has a reputation for being beautiful, but most people have never had the chance to see it or experience it.

Canadian Olympic organizers went to great lengths to define their country's attributes during the opening and closing ceremonies. In showing off the attributes of the country in the opening statements, Canada found many in the U.S. confused. The major reason is that the vast majority of Americans have virtually no knowledge of Canada. This has been a real problem for Canada--it has not invested in shaping its own image. When one doesn't shape ones own image, it is shaped by others. In the case of Canada, it became thought of as a small version of the U.S., which it is not. Canada is more like a North American enclave of the European Community than it is like a mini-USA.

What happens when an organization or nation has not invested and then has the chance--given during the Olympics--to define itself? It must shape images that are fuzzy. In the process, it can cause confusion, because others already have an image that they believe is correct. It also must help focus internally, helping those inside the organization or nation to understand the key differentiating attributes, and talk to them as well as to outsiders. It is a tough task. We saw that during the Olympics. The opening ceremonies were aimed as much at Canadians as they were at the outside world. Canadians were defining themselves to one another as they defined themselves to outsiders. For those, like myself, who have lived in Canada for some time and understand the country, it was a beautiful display. To others outside of Canada, it might have seemed uninvolving--sort of like being an outsider as a group of friends regale themselves with past memories. Outsiders saw the vast patchwork of Canada but likely found themselves a bit confused. This was especially true for Americans who see everything as a reflection of themselves. It was likely strange to most Americans to see Canada invite the First Nations and Aboriginal peoples to be equal sponsors. Inside Canada, there was a lot of criticism from Quebec that there was not enough French. I also thought that the opening ceremonies did not focus enough on Quebec--a very unique, French-speaking province within a mostly English-speaking country. It is difficult to find the right balance when one has just so much time and has not engaged in framing a brand for some time.

I have read a number of articles in the U.S. papers that were amazed and even irritated by the demonstrations of Canadian patriotism--wearing red, waving the Maple Leaf, and the loud singing of "Oh, Canada". The most recent was from a write in Texas, of all places, one of the most xenophobic states in the U.S. The writer seemed irritated, perhaps because many Americans cannot fathom that Canadians love their country as much as Americans love theirs and prefer living in Canada. The writer actually compared the Canadian shows of patriotism with rallies during Nazi Germany!! The Canadian displays were no different from a sports team encouraging its fans to where all white (Penn State) or orange (Philadelphia Flyers), etc. "Wear red and show your Canadian pride"--what is wrong with that? Customers respond well to companies in which employees love to work or to communities with lots of citizen pride.

I just saw a commercial on Baltimore television for a tour to British Columbia to see Vancouver and Whistler-Blackcome--the settings of the Olympics. Perhaps that branding helped, at least for the west coast of Canada. I would not be surprised at all to see the Olympics lift the image of the rest of Canada as well.

Thursday, March 4, 2010

Could Toyota Damage Other Japanese Brands?

Kelly Blue Book Market Intelligence indicates that Toyota owners are shifting their car-buying interest to Ford and Korean automakers Kia and Hyundai, and away from not only Toyota, but also from other Japanese brands, including Honda and Nissan. This suggests that Toyota was not only a brand in and of itself, but also was the "Japanese car category".

Category is more important than individual brands. We think category before product brand. The leader in the category sets the standards against which all others in the category are judged. A funny thing happens, according to research. When competitors attack the category leader, it often helps to reinforce all the good things that led to its leadership position in the first place. But, when the category leader fails, it can damage others without clear brand preference attributes other than they are members of a desired category.

We are now seeing a very interesting situation arise. Since Toyota was the first and most prominent brand amongst the Japanese car manufacturers, it became not only a brand, but also the standard-barer for all Japanese made cars. All other Japanese cars--Nissan, Honda, Mazda, etc.--were judged against Toyota, but also were defined by it. They lived under Toyota's umbrella. When Toyota's metaphorical umbrella began to fold, the other Japanese car makers started to get wet. In other words, a significant number of Honda buyers select that car because it is a Japanese brand. Toyota build the Japanese brand, defined and lead in its key attributes of quality and reliability, and may be helping to damage the category now.

We are still seeing sales of other Japanese cars increase, but that is because there is market share to be gained by everyone at the expense of Toyota. But, the Blue Book analysis shows that Toyota's aura was big and may have encompassed the entire category of Japanese cars. So, Toyota's problems created a crack for all cars from that country--they were somehow lumped together, just like consumers got used to talking about the problems in "Detroit". Ford is still trying to distance itself from that category. It helped itself when it did not take federal bail-out money. GM and Ford have shown good increases in sales recently. People may be reconsidering a US-car category and Ford's success could be lifting even GM, even though the public is still not sold yet on GM's future.

We are witnessing an interesting situation of demand elasticity that is not related to price as much as it is related to perceived value of a category. Market demand for cars has a lot segmentation appeal and category attributes. Some people look for a car, but most people decide they want to look at European cars, or Japanese cars, or US cars. One might think that other Japanese makers would benefit, but they are getting hurt by category linkage.

At the same time, we see stories that Toyota is succeeding in getting its loyal customers to friend the company's Facebook site and to tout the car brand in social media. These are attempts by advertising and PR firms to drum up support and hopefully create a ground-swell--sort of like a political campaign. The problem is that Toyota is leading what happened in the last election. No Republican could win because Bush had damaged the brand and category. A similar situation could be at work in the market, with other Japanese manufacturers getting hurt for things that had nothing to do with. Toyota is rapidly becoming the Japanese car category George Bush.

Wednesday, March 3, 2010

Toyota Fix Falls Short

This story just broke in the news:

Ten Toyota owners have told federal safety officials that the recall repairs didn't work and that their cars still accelerate when they're not supposed to.

That's enough to trigger a robust response from the National Highway Traffic Safety Administration, which was bashed in congressional hearings for not moving faster on years of Toyota unintended acceleration complaints.

"NHTSA has already started contacting consumers about these complaints to get to the bottom of the problem and to make sure Toyota is doing everything possible to make its vehicles safe," NHTSA Administrator David Strickland said in a statement Wednesday.

"Toyota is aware of the complaints filed with NHTSA and has been working to obtain access to the vehicles," said Brian Lyons, Toyota's spokesman.

Federal law would allow NHTSA to make Toyota replace or buy back the models if it can't repair them. The agency can give an automaker several chances to make repairs, says former NHTSA enforcement chief Bill Boehly.


As unbelievable as it might sound and beyond my comprehension a few weeks ago, Toyota could be on the cusp of a major failure in the US market, the kind that will be talked about for years and years in business schools. The US government is being pushed into action, and when pushed, governments usually react irrationally. When a foreign company is involved and US regulators want to show that they are protecting citizens against the "evils" of foreign products, the reaction could get downright ugly, egged on by Detroit manufacturers. We are even hearing from those still angry at Japan for barring US beef a few years ago who want to strike back by barring Japanese cars until the problem is fix--never mind that all of the affected cars were made in the US. As I said, governments act irrationally, and when the current US Congress is involved, one can imagine that it could act like a "crazy uncle".

Toyota is in deep, deep trouble. The lawsuits have not even begun to surface. The company's 2010 cars are sitting on lots with no buyers; while the 2011 season has begun. How will Toyota clear all of the inventory it has sitting in the US? This could be a problem that will impact the company for many, many years.

When Toyota first built its reputation in the US, it had fewer competitors. The US car industry was producing shoddy cars and Toyota emerged as a company whose cars delighted customers--the best in terms of price vs. quality. It's a truism in competitive markets that those who differentiate will cause others to follow suit to close the gap and the differentiation becomes more difficult. Not only has Ford closed the gap, but the market now has high quality brand names like Honda, Acura, Infiniti, Hyundai, Nissan, and others. When people decide to buy a car, the alternatives now are plentiful. The category of high quality, high reliability cars with good price has grown. Toyota now will fall from consideration for at least a full cycle. How will it get back into consideration? What will it have to do in terms of price cuts and credit offers? What will that cost the company? What will all the law suits cost?

This is just an amazing unraveling of a great company. Of course, we also are seeing the failures of the Japanese mindset and management style. In Japan, auto design engineers are revered. They have felt almost above reproach. It seems likely that they could not accept responsibility for what they heard was happening and stayed deaf to the problems. The culture that made Toyota great may have been the same culture that could lead to its downfall.