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Archive for October, 2011

Brand Watch

Brand Arrogance: The Threat Within

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Netflix reed hastings brand strategy  
Consumers don’t value brands; they value the idea the brand represents to them. This idea will always be worth more than the product, or the actual bricks and mortar of the business enterprise. When marketers behave arrogantly, the value of the idea people care about is instantly diminished. And once this happens, the road to redemption is long, difficult and expensive. 

A recent example of a marketer’s arrogance towards its customers is NetFlix.

The story is classic, almost cliché. In Netflix’s case, an innovative technology quickly ramps into an innovative business model with rapid customer acceptance and advocacy, and then inexplicably breaks its trust bond with the very people who were making it great. Other brands have done this as well. New Coke comes to mind.

Of course, much of the hubris and arrogance was initiated by Netflix’s CEO, Reed Hastings.  When the decision was made to raise prices and change how customers receive value without any consideration to the value of the brand’s “reason for being” and what it represents to people, the value of the Netflix brand was instantly diminished. Not even a gracious mea culpa from the CEO or promotional incentives will undo the damage done.

The Netflix brand paid an incalculable and heavy price.

The lesson for brand managers is clear:

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Advertising Derrick Daye

Targeting Consumers: A New Perspective

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Consumer Targeting Brand Marketing Strategy

Direct marketers have long known something that brand marketers haven’t: responsiveness counts. And not much else.

Brand marketers have long focused on targeting their advertising to consumers based on various demographic and psychographic characteristics. Women 25-34, Male beer drinkers 21+, Early Adopters, and so on.

Increasingly though, targeting and media buys will move away from this kind of targeting to what I call “response based targeting” – even among brand marketers. Response based targeting is just that: targeting consumers who are proven to be most responsive to your advertising, regardless of what they look like.

How does it work? For starters, let’s assume that your brand historically targeted Women 25-34 years old. Naturally, your media plan targeted this group too, maximizing reach at 80% using traditional TV.

Along comes single-source. Long hailed as the “holy grail” of advertising, single source matches individual household viewing behavior with the same households buying behavior. Several firms now offer this capability in the consumer packaged goods sector, and it’s likely to come to other categories in the not too distant future.

What now? Using single source, you can analyze historical data to identify households with similar purchase behavior prior to your advertising campaign. Then, households are divided into exposed versus non-exposed households and, using smart statistics, identify the single variable sales impact of your advertising.

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Brand Differentiation

Brand Strategy: Rethinking Brand Differentiation

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Diamond Shreddies Brand Strategy Differentiation

The ultimate goal of any brand effort is differentiation. Setting your product apart from its competitors is an essential first step toward creating preference and loyalty. According to research firm, Millward Brown, “Brands that are perceived as being different have a much higher potential for growth than do other brands.” Consequently, identifying and communicating meaningful points of difference has become the focus of much strategic branding work.

Yet we wonder if consumers are listening? Do they even care about our carefully crafted ‘points of difference’ and ‘reasons to believe’?  Harvard professor, Youngme Moon, observes in her book “Different: Escaping the Competitive Herd”, that corporations have become experts at augmentation and replication, but aren’t that good at creating meaningful differences. She provocatively writes:

“If aliens were to visit a grocery store or a drugstore in this country they would have to conclude that we are a people hooked on the pleasures of picking needles out of haystacks.”

The Case of Diamond Shreddies

In 2006, a clever Canadian campaign for “New Diamond Shreddies” turned the mirror back on marketers’ often inane attempts at creating differences. The joke is that the only difference is that the shape is no longer a square, it is a ‘diamond’, (“kind of like the difference between a 6 and a 9”), and therefore tastes better. The satire is carried off brilliantly with focus group testimonials and commercials touting the advantages of a diamond shape over a square.

Urban legend says this campaign was created by an intern at Ogilvy. If that is true, it’s a case of the newbie pointing out the emperor’s lack of clothes. How many of us are guilty of seizing upon some meaningless, but exclusive product point of difference as the supposed basis of brand preference?

My job as a qualitative researcher requires that I spend a lot of time talking to consumers about what really matters to them when making purchase decisions. What I’ve learned is that there are many types of relevance, but they rarely have to do with product attributes or even benefits.

The Many ‘Flavors’ of Relevance

  1. Brand Relevance

In his latest book, Brand Relevance, brand strategist David Aaker writes:

“The classic brand preference model is an increasingly difficult path to success in today’s dynamic market because customer are not inclined or motivated to change brand loyalties. Brands are perceived to be similar at least with respect to the delivery of functional benefits, and ofgten these perceptions are accurate. Why rethink a product and brand decision that has worked when alternatives are similar? Why go to the trouble to even locate alternatives? Seeking alternatives is a mental and behavior effort with little perceived payoff. Further people prefer the familiar, whether in regard to a route to work, music, people, nonsense words, or brands.”

Of course, if you are the incumbent brand, this is good news. But for brands trying to disrupt entrenched beliefs and behaviors, inertia presents a major challenge.  According to Aaker, the answer is not introducing yet another marginal difference but creating whole new categories or subcategories that redefine the market in such a way as to make competitors irrelevant or less relevant, and to cause consumers to rethink their decisions. Aaker points to beer and computers as examples of places where subcategory dynamics have driven brand growth.

Today there are a host of trends that can provide the impetus for new categories and subcategories. They include the green movement, the emergence of new knowledge centers, ethnic flavors, new design aesthetics, a desire for greater control over one’s time and personal health.

Key Takeaway: What are the trends that can be leveraged to help your brand define a new category or subcategory?

  1. Category Relevance

Not surprisely, most consumers don’t really care if a product has 6 types of vegetables rather than just two or works 21% better rather than 35%, or even if it works better at all. What they often want to know is why they should purchase the product in the first place, not which brand to brand. Many brand strategies assume the ‘frame of reference’ is other directly competitive brands within a category or subcategory. In fact, fact the customer perceived competitive set is often much broader. When making purchase decisions, many customers are asking should I buy juice or a soft drink? A vacation or an appliance? Should I buy a new car/computer/cell phone at all or just keep mine going another year?  An evening at a Casino competes with many other entertainment alternatives.

Establishing category relevance requires understanding the decision context and reframing the decision alternatives. Decision context includes things like where am I? What is the intended occasion of use? How rich am I feeling today? What is happening in the economy?

Homemade Pizza, which is part of the fast growing ‘take and bake’ pizza restaurant segment, is an example of a brand that has created category relevance. Rather than position itself relative to other takeout pizza’s, Homemade Pizza, explains why it is a better alternative to a home cooked meal.

“We’re in the business of helping hungry people prepare fresh, easy and delicious dinners at home. We always have been. We seem to have this nagging urge to bring everyone together for good food at the best place in town: home.”

Likewise, V8 is seen unique among juices because it can replace a serving of vegetables –it’s a ‘salad in a glass’ that satisfies hunger, not just thirst.

Key Takeaway: Does your Brand have an opportunity to position itself relative to a bigger ‘indirect’ competitor?

  1. Cultural Relevance

Millward Brown concedes that “being ‘different’ is not necessarily all about functional product benefits. Even the most generic products can make themselves different through creatively connecting with consumers.” Increasingly that connection comes through a shared sense of cultural relevance, the intangible sense that a brand is ‘hot’ or especially in tune with the prevailing cultural ideology. Let’s face it, some brands are cooler than others, and not just because they happen to be featured on the cool shows or celebrity endorsement. These brands — Starbucks, Nike, Patagonia, Vitamin Water and Innocent (U.K.), to name a few — are cultural innovators that resonate with what consumers care about today – community, sustainability, healthy living.

In his book, “Cultural Relevance”, Oxford professor, Doug Holt also takes issue with what Aaker called the ‘functional benefits trap” and advocates a theory of cultural relevance. He explains that the traditional approach to differentiation is based on the notion that brands succeed by ‘colonizing’ cognitive territory in consumers’ minds (i.e ‘positioning’). The problem with this approach is that finding and staking a claim to a gap not exploited by other brands is exceedingly difficult to do even when a brand has a functional advantage. It is even harder to sustain over time, as any truly improved performance is likely to be “summarily copied by competitors”, initiating the slugfest Youngme Moon described above. He even dismisses the idea that a brand can ‘ladder up’ and own a more emotional benefit as just another version of mindshare marketing.

Holt analyzed more than two dozen brands that differentiated based on cultural innovation to explain why these brands succeeded. The conclusion is that hot brands are the first to express a new ideology or to express and existing one in a way that shakes up the conventions of the category and prod consumers to seek out new alternatives. It’s about catching the cultural way, specific to a historical moment and particular group of people. Far from being a haphazard or serendipitous event, cultural innovation can be strategically planned and implemented. What I like best about this approach to differentiation is that is additive – even brands with better mousetraps can take advantage of cultural innovation to establish enduring differentiation. Would Nike be as powerful as it is today if it had simply rested on better performance? Or Ben and Jerry’s on funky flavors and a regional heritage?

Brands that become part of the cultural conversation are by definition ‘different’ and offer something more than what is inherent in the product or service.

Key Takeaway: What ideologies in the culture are speaking in a meaningful way to your customers and can be harnessed to distinguish your brand?

Contributed to BSI by: Carol Phillips, Founder, Brand Amplitude

Sponsored ByThe Brand Positioning Workshop

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Branding: Just Ask... Derrick Daye Place Branding

What Experts Are Best For Community Branding?

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Brand Strategy Place Branding Community Branding City Branding

We welcome and answer marketing questions of all types here on BSI. Today’s question comes from Lisa, an economic development executive near Toronto, Canada. She asks:

“I work in economic development for a small municipality that is challenged with negative brand perceptions from an association with radioactive waste. As I prepare a Request For Proposal (RFP), can you tell me who is the best partner to help us change these brand perceptions and help better the future of our city?”

Thanks for your question Lisa. First let me share, the best partner in place branding, city branding or community branding projects as they are known, is actually two partners. A brand consultant or brand consultancy that focuses on strategy, and an advertising agency or creative partner that focuses on implementing the brand strategy creatively. Each possesses a different skillset and specializes in one of the two critical areas of expertise you will need. Look at each in this way:

Advertising Agencies traditionally focus on the execution of creative strategies. That is, they will determine the best marketing vehicle to reach your target audience and will use compelling creative to make a connection and entice a reaction. The best ones are strategic in nature and see tactics as a second step.

A Brand Consultancy traditionally lives by this philosophy: Instead of trying to communicate a brands’ features and benefits, they recommend studying the minds of the target audience first and then try to “position” the brand in the mind, taking advantage of the strengths and weaknesses of the brand and competing brands. This process ensures that your brand has selected the most powerful benefits to own and that it has developed the proof points and reasons to believe for those benefits. Brand consultancies also aid companies (in this case municipalities) in any strategy-related brand decisions from brand equity measurement to brand extension.

Advertising Agencies and Brand Consultancies both strive to create brand insistence – creating a ‘category of one’ brand with no substitutes. Each work together for the good of the client.

In your case Lisa, you need specialists. Pairing a seasoned agency and consultancy will offer you the best team to help your city shed these perceptions and replace them with new, positive ones. To find partners, I suggest issuing two RFP’s segregating your search for brand strategy partners from creative strategy partners. I think you’ll find this approach will produce the best results.

I have a few other recommendations. For help in writing your place branding RFP I suggest a visit to here. For more insights on place branding go here (and scroll down) and see here for a closer look at changing brand perceptions.

Have a question related to branding? Just Ask…

Sponsored byThe Brand Positioning Workshop

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Brand Licensing Branding: Just Ask...

Brand Licensing: The Answer For Sears?

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Sears Brand Licensing Strategy Die Hard Battery

Regular readers of Branding Strategy Insider know we welcome and answer marketing questions of all types. Today's question comes from Ryan, a senior analyst with a private investment fund in New York City, New York. He writes:

"First question: I read today that Sears is thinking about licensing its Kenmore, Craftsman and Die Hard brands. Could you hazard a guess as to (i) the range in licensing fees such brands might generate, and (ii) the prospects that someone of substance would be interested in licensing those brands given their present distribution?"

Ryan, thanks for your question. My thoughts as a brand licensing strategist…

(i) Range of fees would go from $7.5 MM – $45 MM over three years (after commercialization commenced).

(ii) Prospects of someone interested – I think interest could be high based on my assumptions below.  The key is how to not compete with the parent brand. After all, those brands are why people go to Sears.

Kenmore, Craftsman and Die Hard are mid tier brands that have a long history and substantial brand equity.  Moreover, the brands are closely tied to the Sears name.  While there may be some confusion generated in consumers’ minds if these brands were licensed for distribution in other channels, I still believe they would perform well.

Royalty rate: These brands should command somewhere between 5% – 10% depending on the product category, the channel and the region.

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