“Bank of America Corp. is scrapping its plan to charge a $5 monthly fee for making debit card purchases after an uproar and threatened exodus by customers.” –Bloomberg, 11.1.11
“Netflix has decided to can Qwikster, the DVD-rental spin-off it announced to unlimited screaming last month.” --Wall Street Journal, 10.10.11
“Barely a month into Meg Whitman’s tenure as chief, Hewlett-Packard announced on Thursday that it would not sell the company’s dominant personal computer business — closing off a strategic path offered by her predecessor.”–New York Times, 10.27.11
These stories might be laughable if they weren’t such a tragic waste of shareholder value.
Most every company says it values its customers, and hates to ‘walk away’ from them. Leaders are called on to make tough decisions they believe are in the best interests of their companies. And sometimes, these decisions advantage some customers at the expense of others. That doesn’t make them bad decisions, just risky ones.
But leaders of some of our greatest brands act like they have forgotten (or never knew) what every junior brand manager surely knows — to test potentially risky messages and find ways to mitigate their negative impact. Instead, senior leaders are acting like bulls in a china shop, awkwardly and prematurely broadcasting their strategic decisions in ways that destroy their company’s (and their own) reputation and value.
Brand Management Process: Key Components
- Identifying/defining your most important customers
- Understanding what motivates your customers and what could cause them to choose your brand over your competitors’ brands
- Carefully selecting a brand position that could provide your organization with marketplace advantages
- Translating that position to a strong and consistent brand identity, including:
- Intuitive brand architecture
- Strong name and icon
- Tagline that succinctly reinforces brand promise
- Developing brand messaging including an elevator speech
- Educating employees about the brand promise, elevator speech and identity standards and giving them the incentives, tools and training to become effective brand champions
- Developing an integrated launch and ongoing marketing plan
- Reinforcing your brand’s promise at each point of customer contact
- Measuring the ongoing equity of the brand and making adjustments as necessary
The health of a brand needs to be critically maintained and managed if it’s to contribute sustained value to customers and brand owners over the long term. Of the many tools available for brand owners and managers to assess the well being of their brands, the brand audit is the most widely used and misunderstood.
When brands reach the inflection point where revenues begin to slide because customers no longer resonate with the brand’s value proposition, it’s time to put your finger on the pulse of your brand and determine the long-term outlook for brand health.
Conducting a comprehensive brand audit is how brand owners determine the health of their brand. Yet for some brand owners and managers, the insights gathered from brand audits can be much like reading tealeaves or making faces out of cloud formations. The results of such an effort are extremely insightful, often surprising, even difficult to accept.
Brands are not things; rather brands are a representation of a highly valued idea that resides in the minds of consumers and stakeholders alike. Brands represent a set of unifying principles that guide an organization’s behavior and its manner of delivering experiences customers highly value above the available alternatives in the marketplace. Strong healthy brands maintain an intrinsic value to customers that over time translates into tangible financial value for the brand’s owners.
Consumers care about what a brand represents to them on the highest emotional level. The physical properties and functional benefits that comprise and define a brand are of less importance–this explains the difference between Coke and Pepsi, Chevy and Toyota, Apple and the rest of its competitors.
Sounds simple enough. The trouble is consumer’s minds are fickle. And worse, the marketplace is a slush pile of competing brands. It’s easy for brands to lose relevance with customers quickly – especially in our age of instant connections, abundant choice and consumption. Brands with the sticking power to drive purchase behaviors over decades consistently lead their tribe of loyal advocates forward through a compelling value proposition and positioning that transcends the consumer’s inherent and natural tendencies toward fickleness for the next greatest thing.
A brand strategy's success or failure depends on how well brand owners understand how the mind operates.
The opposite of trading up is not trading down. In fact, there is no opposite of trading up; shopping behavior is more nuanced than that. When shopping hit the skids after the financial crisis, there was a lot of talk about a new normal of frugality, as if the only thing possible after a decade-plus of trading up was a generation to come of nothing but trading down. It’s clear now that those prognostications were flawed, not to mention overly pessimistic.
This is not to say that consumers aren’t buying less. Indeed, they are. The drop in discretionary consumer spending from the pre-recession peak to the recessionary trough was 6.9 percent, more than double the next largest post-WW2 decline during the second dip of the early 1980s double-dip recession. Since hitting bottom, spending has been growing, but on a trend line below the pre-recession trajectory. This so-called output gap is the shrinkage in the size of the economy that is playing out most problematically as high, enduring unemployment. Clearly, consumers have cut back.
The proper issue is not whether, but in what way consumers are cutting back. One way in particular is under-appreciated. More than trading down, consumers are trading off. Squeezed by tighter finances, many consumers – most, in fact – are not walking away from the things that matter most. Instead, they are prioritizing those things then trading off everything else to afford them. Brands suffering from trading down have simply done a poor job of making themselves a priority worth trading off to get.