Branding Strategy Insider

Brand Loyalty And The Fall Of Borders Books

It's been said that a good book tells the truth about its hero and a bad book tells the truth about its author. But the liquidation of a 40 year-old bookstore chain ultimately tells the truth about the brand and how it was managed.

Last Friday Borders bookstores began liquidation sales at their remaining 399 retail stores. Former Borders VP and Chief Merchandising Officer and current interim CEO, Mike Edwards, sent out an email to Borders Rewards customers, which was an interesting spin on events. But to paraphrase Oscar Wilde, a thing is not necessarily true because a brand dies for it, so here are some portions of his letter and some of our observations from a loyalty and engagement perspective.

"I want to personally thank you for your loyalty and support. . . "

Observation: What loyalty? It's been more than half a decade since Borders declared an actual profit, and has lost a billion + dollars since. That's occasional shopping, not the loyalty that drives profitability.

"You might be asking yourself what happened?"

Observation: Not really. Borders was egregiously bad at identifying consumer product and lifestyle trends, introducing candles and stationary, CDs and DVDs at a time when consumers were moving in other directions. The chain was late to the e-book movement, but more about that later. We don't know what they relied upon for insights, but we're sure they weren't real loyalty measures. Actual loyalty measures identify consumer behavior trends 12 to 18 months before they show - or in the case of Borders -- do not show up at the register.

Brand Loyalty Rewards For The Ultra-Luxury Shopper

When it comes to luxury store retailing, properly rewarding a customer who spends $200,000 a year could be as easy as a walk in the park, or Park Avenue. But recognizing those dedicated shoppers who spend upwards of $1 million a year takes more than diamond points – this kind of shopper requires sincere eloquence. 

It’s a high-class, and at times bewitching, problem. 

After all, identifying these shoppers is not difficult. Luxury comes with an implied level of unparalleled customer service, so the top-tier shopper often develops an intimate relationship with her sales associate. That associate in turn becomes a de-facto ambassador, loyalty mechanism and extension of the retail brand. 

The trick then is combining that on-the-ground intelligence with shopper data to identify a loyalty reward the luxury consumer finds of real value. These are shoppers who can literally afford anything they want, remember – there is no question of need. Rather, it comes down to delivering a one-of-a-kind service or experience that falls squarely within their values. 

This is not exactly a revelation – wealthy shoppers have long equated luxury with their life experience. But in the past couple of years, the top-tier consumer has been changing how she shops, opting for private services rather than buying on the sales floor, and having items shipped home instead of advertising her splurge on the street. This indicates that even the exceptionally affluent are sensitive to flaunting their wealth when so many others are suffering economic hardships.

Understanding these philosophical shifts is critical.

Forgiveness and the Tiger Woods Brand

Tiger Woods as super-athlete cum Human Brand, resonates with values that sports fans and non-sports fans adore: skill, planning prowess, the ability to get of out of sand traps with a single stroke. PR traps, too. These values –beyond his ability to win and his status as the first billion-dollar athlete in the history of the world – create a loyalty bond that’s second to none. And when you engender loyalty like that, people are six times more likely to give the brand (in this case The Human Brand, Woods) the benefit of the doubt.

Yesterday, Nike, Woods’ largest sponsor announced that its advertising plans involving him would not be altered by Mr. Woods’ “transgressions.” In a statement, Nike said, “ Tiger and his family have Nike’s full support. We respect Tiger’s request for privacy and our thoughts are with Tiger and his family at this time.” 

“Sponsor expedience,” you say? That’s as well may be. But had the company an iota of evidence that the “transgression” was appreciably affecting company image and sales, they’d dump him as fast as a golfer scraps a driver with a cracked shaft! 

Loyalty isn’t capricious. It’s palpable, especially as it regards sales and situations where the brand requires the benefit of the doubt. It’s far more emotional than rational, which is why virtually 100% of people asked if Tiger’s behavior was acceptable, would tell you “no,” and why that same 100% are willing to forgive his indiscretions. Which is why his biggest sponsors – along with his fans – have reaffirmed their support for him. 

Here’s a marketing truth: Loyalty is always accompanied by positive consumer behavior and sales, and consumers willing to buy more, recommend more, rebuff competitive offers, and even invest in publicly traded companies. And sometimes it comes with a metaphorical ‘Get Out of Jail Card.” 

But here’s another marketing truth: engendering that level of loyalty doesn’t happen by chance.

Courtesy: Robert Passikoff, Brand Keys 
 
Sponsored By: The Brand Positioning Workshop

Building A Brand Community

Even though it may seem a simple marketing concept, building brand communities that resonate with loyal customers is indeed a Herculean task. There are four defining characteristics that allow companies to actively involve customers in creating communities around their brands. Each are essential in building brand communities.

   1. Create a strong brand story/myth: Brands in today’s world are not mere inanimate ‘things’ but thriving entities with identities and personalities that allow customers to express themselves through its consumption. As such, to attract customers to it and encourage them to actively participate in varied branding activities, brands must have a strong story or myth that customers can easily identify and relate to. A story/myth not only provides authenticity to the brand but also allows customers to express their sense of self through the consumption of the brand.

   2. Create a need for collaboration among consumers: For a community to be actively adopted, customers must feel a need to connect with each other in the context of the brand’s consumption. A need to connect with other brand users can arise for a number of reasons such as:

         1. Sharing information – Members of many video game communities, technical products communities become members in the first instance because such communities allow members to share information with others and learn many technical details easily.
         2. Validation – Members of the Nike or Louis Vuitton brand community seek validation from fellow members about their choice of the brand, its usage situations and its superiority over other brands in the market

Attitude, Behavior and Brand Loyalty

Allan L. Baldinger and Joel Robinson of The NPD Group conducted a major study to better understand the link between attitude and behavior in brand loyalty.  They found the following:

•    The larger the brand, the larger the group of consumers whose attitudes towards the brand are stronger than their behavior (“prospects”) and the larger the group of consumers whose attitudes toward the brand are weaker than their behavior (“vulnerables”).

•    Brands that have more “prospects” than “vulnerables” tend to increase market share; brands that have more “vulnerables” than “prospects” tend to lose market share.  A key characteristic of a healthy brand is that it has more “prospects” than “vulnerables.”

•    Healthy brands would do well to focus on trial-generating strategies because the attitudinal commitment of its buyers, both current and new, will be strong.

•    Unhealthy brands would do well to fix image problems and strive for improvements in key attribute ratings among their current loyal consumers.  This would lead to an emphasis on retention strategies through communications and product offerings.

Baldinger and Robinson also discovered a surprisingly low year-to-year retention rate (approximately 50%) among consumers who were highly loyal (behaviorally) to brands.

Source: Baldinger, Allan L. and Joel Rubinson, “Brand Loyalty: The Link Between Attitude and Behavior”

Sponsored By: Brand Aid

One-Night Stands: Not the Love Brands Need

Consider, for a moment, how many people you have ever had sexual intercourse with. Now compare that figure with the number of people you have been in love with.

Really in love. So in love that you could not live without them or consider being with anyone else. Chances are that the first number is a lot bigger than the second. Most people in their lifetime will make love to many different partners, but it is highly unlikely that they will fall in love more than once or twice.

It is the same way with brands. In our lives as consumers we will buy thousands of different brands. We may even re-buy many of these brands over and over again.

But this does not necessarily mean that we are brand-loyal. Consumers can repurchase a brand because it is the cheapest, because the product or service is deemed to be the best available, or they may remain loyal because of the switching costs associated with changing their preference from one brand to another. These are all reasons for loyalty, but not brand loyalty.

When consumers are brand loyal they love you for being you, and they will very rarely consider any other alternative brand as a replacement.

Tony O'Reilly, the former chief executive at Heinz, is a remarkable man.

Aside from transforming Heinz under his leadership, he also has a PhD in marketing, a knighthood from the Queen, and even 10 caps playing rugby for the British Lions.

But his greatest achievement was defining the concept of brand loyalty.

Religion: Inspiration For Brands

My father always said not to talk about religion, politics and money. So right here and now I’m going to break the first rule by revealing some of my most fascinating revelations by placing branding in dare I say, a religious context.

This left me pondering… What makes people go that far? What are the ingredients that make up such an extreme brand obsession? And ultimately, what can the world of advertising learn from this when setting out to build a brand?

How can a brand hope to achieve the ultimate? Just two weeks ago, on the streets of Tokyo I got the answer. Walking down the road were two girls dressed from top to toe in Hello Kitty items. Nothing was left “unbranded”. Apart from their dresses, shoes and handbags, they had Hello Kitty nails and Hello Kitty earrings, and Hello Kitty phones.

This form of brand admiration taken to the max has emerged over the past decade. The first time I encountered it was in a pub in Sydney where I met a man with a Gucci barcode tattooed on his neck. I described the meeting in my book BRAND sense. We got talking, and introduced ourselves. When I asked what made him get the tattoo, he told me, “I simply love the brand.”

The best answer to these tough questions seemed to be found in the controversial topic of religion. I embarked on a fascinating journey in an attempt to discover what is it about religion that creates such staunch devotees. I also wanted to know what are the ingredients that create steadfast and strong religious faith.

The exploration resulted in a list of 10 powerful criteria. As I was writing BRAND sense, I wanted to call this list the Ten Commandments, but my publisher felt that this was pushing it a little too far. What’s interesting about this list however is that the parallels between it and the world of branding are surprisingly strong.

Don’t get me wrong. I do not wish to imply that religion has learnt anything from branding, but branding has definitely been inspired by the world of religion. These were the 10 components that I found:

1. A sense of belonging
Think Weight Watchers, and you’ll know what I’m talking about. This amazing community of more than two million consumers is run almost exclusively on peer advice and support. Without a peer community Weight Watchers would not exist. Needless to say that sense of belonging is always a strong component of any religion.

2. A clear vision
Steve Jobs' powerful vision for the Apple Company dates back to the mid-1980s. He said, “Man is the creator of change in this world. As such he should be above systems and structures, and not subordinate to them.” This vision was referring to computers, but 20 years later and a few billion iPods later; it still applies, and will probably still be relevant in 20 years’ time.

3. Power from the enemy
If we play a game of association and I say Coke, more than likely you’ll say Pepsi. The rivalries gone on for so long, that it’s legendary. A former executive at Coke once stated that going to work was like going to war. In fact the chances are that Coke would not be what it is today if there was no Pepsi. The rivalry has forced both brands to grow and perpetually challenge one another for market leadership.