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Brand Strategy

Using Brand Communities To Fight Low Cost Rivals

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Using Brand Communities To Fight Low Cost Rivals

Classic business strategy proposes three equally viable ways to create customer value and achieve competitive advantage – operational excellence, product leadership, and customer intimacy. Even when Wiersema and Treacy proposed it, some strategists argued that operational excellence would beat the other two strategies in the end.

Today’s global economy and internet infrastructure have lowered costs dramatically. This makes it possible for Amazon and other operationally excellent organizations to achieve scale that affords them significant cost advantages and the ability to squeeze competitors steadily by driving down prices across categories. At the same time, product leadership is harder to claim and maintain, as features are easily copied and patent infringement is common.

As a result, brands that are not the cost leaders in their categories need to try the third way – they need to understand how to win through customer intimacy.

A New Interpretation Of Customer Intimacy

Customer intimacy has always sounded a little creepy, like a relationship with a stalker. In today’s economy, intimacy is about more than a one-to-one relationship. It’s about shared values and community. It’s about brands standing for (and behind) how their product and service offerings make their customers’ and other stakeholders’ lives better. It encompasses providing real human connection through a brand’s physical presence in their communities, and through its employees, who are members of and understand these communities intimately. Alignment through intimacy allows brands to side-step the race to the bottom that can occur when facing low cost competitors that win on price by offering interchangeable products and a no-frills, no-aspirational experience.

Competing On Community

Consumers’ decision criteria for brand choice have broadened. Forrester research in April 2017 shows that “consumer decision making is changing: Shoppers increasingly evaluate products and brands based on a company’s ethics and values.”

Research with consumers in the US, China and elsewhere shows that buyers increasingly are willing to spend more for green products, support environmentally friendly companies and seek out experiences that will enrich their lives. According to the 2015 Nielsen Global Corporate Sustainability Report, “Sixty-six percent of global respondents say they are willing to pay more for sustainable goods, up from 55% in 2014 (and 50% in 2013). And it’s no longer just wealthy suburbanites in major markets willing to open their wallets for sustainable offerings.” Similarly, The Boston Consulting Group recently reported that “80% of Chinese consumers feel that brands and companies should be environmentally responsible. A separate study of Alibaba’s customers—conducted by AliResearch—found that 66 million (or 16.2%) bought five or more “green” products in 2015, up from just 4 million in 2011 (3.4%). Notably, they are willing to pay a price premium—up to 33%—for those products.”

Making Competing On Community Work

To compete based on intimacy and succeed against Amazon and other low-price leaders enabled by operational excellence, brands need to do three things:

  1. Build community into their brand positioning in ways that truly serve customers
  2. Elaborate the elements of their offering that make this commitment believable
  3. Leverage their unique assets – their people and locations

Here’s a starter list for how to build community with current employees and customers, and entice newcomers:

1. Walk the talk with products and offerings that are consistent with your values. Big food is overhauling its entire lineup to get in sync with changing consumer values around real ingredients, minimizing spoilage and ‘good-for-you’ claims. Meanwhile, brands like Honest Tea and Annie’s have been promoting their goodness since day one. Audit your portfolio to identify gaps and shortcomings relative to your core values and put addressing them at or near the top of your product/service offering roadmap.

2. Build your values into your operations. Walking the talk is about more than products. If you claim to be committed to sustainability, then you should be looking for ways to reduce your brand’s use of energy, packaging, water, and other inputs and generate less waste. Sustainability resonates with consumers as well as with business leaders (particularly CFOs and Risk Managers). As McKinsey anticipated in 2010, increasingly volatile input costs, driven by the emergence of bigger, fewer suppliers and natural-resource shortages make it a business imperative.

3. Get transparent in your pricing.
Help customers understand why your products cost more than Amazon’s. Show how paying a living wage with benefits, paying rent and property taxes on your locations, and sourcing local or domestic inputs all cost more, as do design details that improve product quality. Everlane and Elizabeth Suzann are doing this now as are Starbucks and Costco, to some extent. It’s time for more organizations to get on board. Think in terms of unit costs. Deconstruct competitive offerings to identify differences between yours and theirs. Find the best ways to communicate your costs while also exploring opportunities to improve them in ways that are consistent with your values.

4. Ensure your customer experience is competitive in and across channels. Many brands have not yet integrated e-commerce with the rest of the business. Some, but not all, have optimized their web presence for use on mobile devices. Few have mastered social media as a two-way marketing and communications channel. The omnichannel imperative is real, and it’s now. Audit your cross-channel customer experience and identify the low hanging fruit to address. Optimize for mobile ASAP. If you’re a retailer, figure out how to allow customers to pick up online orders in-store, and get smart about your shipping offerings.

5. Foster a company culture and employee experience that reflect your values. Amazon, Apple, Facebook, Google, and Netflix are scooping up top talent as fast as they can. For everyone else, it’s getting harder to attract and retain the best people. Culture change is a huge undertaking that may be worth pursuing. Meanwhile, organizations can take smaller steps to engage employees and help them feel appreciated. One example is to encourage employees engage with their local communities (geographic, interest-based, etc.) in ways that are on-brand for you and personally rewarding for them. Inventory your employee offerings (benefits, training, matching contributions, volunteerism) to identify opportunities to better reflect your core values and engage employees.

6. Create on-site events to draw customers and prospects into your brand community. Use events to showcase the ways your brand makes the community a better place to live. For example, make the first Monday of the month new product demonstration day where employees or suppliers share what’s new with consumers who value being in the know or treated like insiders. Every other Tuesday could become “How-To Tuesday” where employees showcase a new way to use an existing product, adding to the perception of the product’s value (and of your commitment to helping customers maximize the value of your products). And when you put on your own events and participate in others’, ask participants to capture and share them on social media.

7. Call out Amazon and others who use arguably predatory pricing, early and often. Highlight your organization’s commitment to its core values (pricing transparency, ethical sourcing and community involvement) and use them as a platform for raising the hard questions about Amazon’s values. Make it obvious that Amazon’s aggressive pricing is designed to drive competitors out of business obvious. Use your pricing transparency to raise questions about Amazon’s sources, costs and margins.

There is no silver bullet here. Chasing or imitating the low-cost competitor in any industry is a sure way to fail. Product leadership is hard to sustain, and success is not guaranteed. The surest path to success requires brands to understand who they are, what they do and why it matters to employees, customers and the communities they serve. The route to intimacy takes aligning offerings, programs, promotions, communications, pricing, and distribution to the brand’s shared values and community.

Contributed to Branding Strategy Insider by: Judy Hopelain of Brand Amplitude

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