People don’t believe what you have to say. They believe what others have to say about you.
We have to retrain people to understand that in the digitally generated worlds (including social, w3, VR) marketing as a practice no longer exists.
People exist. Products themselves are merely objects intertwined within people-populated moments shared across social, digital, and traditional platforms. Sometimes these products become positive puff points on our shared streams. Sometimes not.
If you must advertise (via online video ads, digital out-of-home, video streaming, digital media story ads, sponsored events or good ole linear tv advertising), fix your strategy. Don’t advertise to get new customers — advertise to keep the customer you already have.
That customer is singular, individualized, personal. Keeping that customer means having an advocacy strategy — getting your customers talking about you, suggesting you, embellishing you, waving their arms in your direction, which leads to more new customers.
If everyone is doing it, it must be good.
Want to be authentic? Let your customer do your marketing for you. Mostly, because they’re better at it than you are. Here’s a quick paragraph (or two) on how to get that done.
Creative strategies are typically built from fog. The fog is not knowing (exactly) what motivates your Users (customers, consumers) to choose your product rather than just skipping over you and buying rain boots instead. (If you’re in NYC today.)
The key is learning to adapt to customer needs. Learning comes from asking consumer Zealots — your mouthy WOM advocates — what makes you sticky. (You’ll be amazed at the responses.) Build from those VOC insights.
Then do this. Now that you know all about your Zealots, ask Potential Zealots what holds them back from fitting your product into their life more often. In other words, Why aren’t they Zealots? (You’ll be amazed at the responses.) If you’re already doing this and not improving your life, you need a consult.
Anyone measuring advocacy? Research guru Joel Rubinson says, “Math could explain a nonzero transition probability from noncustomers to customers. As soon as that is accepted, it’s not a matter of if, but when.”
Then, it’s about retention. Keeping existing customers should be happening while you sleep. Being intentional matters. Help them to stay engaged (e.g. gamification). Be persistent about it (people need to see you across five different media). Stay attentive and be conscious when they move to other media platforms. Keep the people who desire you, believe in you and feel they belong with you, informed, inspired, happy.
What joy.
Since these people are already eager to participate in your community, give them more reasons to stay. Knock their socks off.
And, stay they might.
Contributed to Branding Strategy Insider by: Patrick Hanlon, Author of Primal Branding
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]]>Accomplished rock climber Yvon Chouinard founded Chouinard Equipment (later Patagonia) in 1957. He had the ambition to produce sports equipment that would allow people to enjoy the great outdoors but have a minimal impact on the environment. How consumers saw the brand and what made it appealing stemmed from Yvon’s vision and how he and his like-minded colleagues ran the business.
Company founders often provide this clarity on branding. They may also inspire the whole company to operate in a way that projects the brand to the wider world. Companies with a leader who is passionate about the business are more likely to thrive. Apple lost its way in 1985 when its inspirational leader, Steve Jobs, left the business. It only found its mojo again when he returned in 1997. Many of today’s biggest companies, including Amazon and Facebook, are still led by their founding entrepreneur.
How can organizations whose founders have departed maintain the same branding clarity of the early days? In these situations, marketers need to take the lead. Jim Stengel was Global Marketing Officer for Procter & Gamble between 2001 and 2008. He was the driving force behind the company’s success over this period, during which its sales revenue doubled. Great marketers are futurists. They can imagine how the company could address people’s frustrations, needs and desires – and use this understanding to build the business. It’s the Chief Marketing Officer, rather than other board members, who can say, “This is what the world needs, and here’s how we will deliver it.”
One of the world’s most successful companies over the past 50 years has been Nintendo. Having made playing cards and toys since 1889, the company expanded into video games in 1972. Since then, it has had four competent presidents, but they have all given the limelight to the company’s talisman, Shigeru Miyamoto. ‘Miyamoto-san’ announces the company’s most exciting new products with infectious, child-like enthusiasm. He is the company’s Chief Marketing Officer in all but name – his recent job titles include Head of Studio, Representative Director and Creative Fellow. His vision for new types of games and consoles has enabled Nintendo to broaden its user base.
Other organizations should follow Nintendo’s example. People who understand consumer priorities should control innovation strategy, corporate direction, and marketing.
Of course, even the most gifted marketer cannot influence a company’s fortunes unless they have the backing of the whole organization. For a marketing strategy to work, employees need to be aware of it, understand it, believe it, and act upon it. One way of achieving this is to think like a boxer. Boxers need to understand their competitors’ strengths and weaknesses, decide whom to challenge and in what order, make sure all parts of their body work together, build the necessary muscles and skills, and know how to always stay grounded. Marketers can use a similar checklist.
DIAGNOSIS
OBJECTIVE
ALIGNMENT
CAPABILITIES
SYSTEMS AND PROCESSES
Once your organization is fully prepared and match fit, your brand should be ready to take on all comers. Even then, you’ll need the flexibility to think on your feet and adjust the strategy if circumstances change.
Contributed to Branding Strategy Insider by: Dan White, author of The Soft Skills Book, The Smart Marketing Book and The Smart Branding Book
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]]>Which is to say that price involves both perceptions of value and the reality of affordability. The former is competition, expectations, benchmarks and benefits. The latter is what’s actually in the wallet. Value comes into play only when affordability is no barrier.
Most of the time, value is the salient pricing issue. Meaning that the typical task is managing brand perceptions. To build growth and equity, pricing power is critical, which is perceptions. A big part of locking that in is framing price properly.
We have studied these pricing issues extensively at Kantar. Mastering the levers of pricing power must be part of a brand’s competencies.
We also have a good view of affordability. This is the bigger issue right now. Wallets are being stretched thin, so a different mindset is influencing decisions. Consumers want value, but more than that they need help with affordability.
This probably seems surprising, given recent news about a strong economy. Real GDP growth in Q4 2023 was 3.2 percent and 4.9 percent in Q3, both above expectations. As was job growth. Real spending in December was up 3.2 percent year over year, the highest monthly bump in nearly two years. Holiday spending was strong. Real spending in January came in at 2.1 percent, roughly on par with the 2023 average of 2.2 percent. Early tracking of February looks good. And the Fed is projecting the economy to improve by year-end.
All in all, good news. There is another side to the coin, however.
Consumer sentiment remains low. In the University of Michigan tracking, there was a sizable bump in January, but that flattened in February. More importantly, the level remains low. The last three years have been remarkable because sentiment this low has been seen only during recessions. The last time sentiment was this low for this long was the early 1980s, but it took two sharp recessions then. Whatever spending trends show, something is deeply amiss with consumers.
Part of this is uncertainty and volatility, both economically and politically. People are not yet convinced they can count on the economy.
Inflation is down substantially since peaking in June 2022, but we tend to forget that low inflation is not a reversal of prices, just slower growth. Inflation compounds. Prices have reset higher. In particular, post-pandemic topline growth for global FMCG companies has been driven by price increases not unit volume growth. The past three years of cumulative price increases have been equivalent to the prior nine-plus years. That is the consumer story in a nutshell.
Household budgets include insurance, housing, medical expenses, and other obligations like tuition or unexpected mishaps. Not just groceries. The costs of all these things have gone up. When everything costs more, consumers are not thinking about value as much as stretching every dollar.
Relief monies from Trump and Biden sustained people during the pandemic shutdowns. By and large, though, those dollars could not be spent right away, so people banked it. To the tune of $2.5 trillion, which fueled the strong spending in 2022 and 2023. But that money is gone.
The strong job market has also helped sustain consumers. But inflation took a toll on spending power. Wage growth did not get ahead of inflation until the middle of last year, and now wage growth is slowing.
Consumer spending is narrowing as well. A Morgan Stanley analysis of the Consumer Expenditure survey of the Bureau of Labor Statistics found that the top 20 percent of households in terms of income accounted for 45 percent of all spending growth in 2021 and 2022.
Compared to 39 percent over the 15 years prior to the pandemic. In other words, middle-income households have been struggling.
Consumer debt is spiraling up, especially credit card debt, which is very expensive given current interest rates. In parallel, and unsurprisingly, delinquencies are rising. Delinquencies are not high by historic standards, but the trend is telling.
What this trend is telling us is that affordability is the reality facing most consumers right now. Spending has been robust, but consumers are more fragile than before the pandemic. When it comes to pricing, affordability is the challenge at hand.
Contributed to Branding Strategy Insider By: Walker Smith, Chief Knowledge Officer, Brand & Marketing at Kantar
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]]>With a captivating blend of humor and audacity, Legere declared war on his competitors and the mobile industry’s tarnished reputation. His rallying cry signaled a radical new strategy: No Contracts. No Data Plan. No Overages. “We are the Un-carrier!” The impact was electric, igniting the audience, stirring the media, and inspiring his team back in Bellevue.
While Legere is often celebrated for his bold leadership, keen insights, and strategic acumen, his true genius lies in understanding what all leaders must do: assess their situation, recognize their strengths and limitations, and make a Big Bet when it counts.
But Legere didn’t stop there. He constructed a powerful engine capable of churning out one Big Bet after another, dubbing them “Un-carrier Moves.” Over several years, T-Mobile executed twelve Un-carrier Moves, driving more than twenty consecutive quarters of industry-leading subscriber growth, record-breaking net promoter scores, and an enterprise valuation that grew over 700 percent.
Legere was a master of Big Bet Leadership, defining and harnessing the systematic transformation of T-Mobile from a financially hamstrung, laggard, fourth-position mobile telecommunications provider to a market-leading brand viewed as the market innovator.
Legere’s Big Bet challenged the industry orthodoxy of fixed contracts, roaming fees, and data caps, but Big Bets can take many other forms. Legere’s Big Bet is just one type. Let’s identify the other common types of Big Bets our playbook is for:
First, there are go-to-market and brand repositioning initiatives. These are fundamental repositionings of a product or service within the marketplace, such as the T-Mobile Un-carrier announcement.
Second, there are digital transformations. A digital transformation is the integration of digital technology into all aspects of a business, fundamentally reshaping how it operates and delivers value to customers, with a focus on improving efficiency, innovation, and the customer experience.
Third, there are innovation programs, which are a systematic approach to incubating transformative new businesses and product line extensions. When a concept from the innovation program involves a significant change or investment, it is a Big Bet.
Fourth, there are technology platform investments. Often there is a thin veneer of a business change and justification, but at their core these are 80 percent major system overhauls, upgrades, and transitions.
Fifth, there are operating model transitions. An operating model is a framework outlining how an organization aligns its resources, processes, and technologies to deliver its value proposition to customers effectively and to achieve its strategic objectives. When the operating model involves a significant change or investment, it is a Big Bet.
Sixth, there are mergers and acquisitions. Both pre-deal diligence and post-transaction merger-integration programs are typically Big Bets because there is a clear thesis for benefit.
All of these Big Bets are connected by these realities: they almost always underdeliver in benefits, take longer and cost more than planned, and oftentimes are considered failures.
Why Big Bets Fail
An examination of the data suggests that the likelihood of John Legere successfully executing even one Big Bet was slim, let alone a series of them in rapid succession. Digital transformations, operational shifts, product launches, innovation initiatives, large-scale technology migrations, mergers, and other Big Bets suffer a staggering failure rate of over 70 percent. Every piece of research we’ve examined converges on a similar finding—substantial and critical transformations are typically considered failures:
The true hazards of such major initiatives stem not just from the high likelihood of underperformance or budgetary excesses, but from the genuine risk of colossal failure. One global expert on megaprojects, Bent Flyvbjerg, notes that “In total, only 8.5 percent of projects hit the mark on both cost and time. And a minuscule 0.5 percent nail cost, time and benefits.”
Is there hope?
Our responsibility is to learn from both legends and failures, proactively sidestepping the many pitfalls, enabling our organizations to confidently pursue innovations, technology initiatives, digital transformations, and operational adaptations that drive exceptional financial results and a formidable competitive edge.
John Legere isn’t alone. There are a few leaders who have proven an ability to systematically beat the dismal odds of getting Big Bets right. Leaders like Jeff Bezos, Elon Musk, and Satya Nadella repeatedly succeed at Big Bets and then can take on more of them, while other leaders roll the dice and fail more often than not. Studying the leadership styles of these Big Bet legends offers lessons and makes it clear that they act in ways that Big Bet losers do not.
Imagine possessing a leadership playbook akin to a mystical codex, filled with insights empowering the holder to conquer complex problems, challenges, and transformations and avoid the traps and enemies hidden on the path to treasure. If you could have a map illuminating your path, steering you through perilous journeys, and pushing you up to the limits of your company’s potential, teaching you how to compete and win in the next era of competition and hyper-digital companies, would you pay attention? Would you be willing to reconsider the dogma of traditional management practices?
Solving Wicked Problems
The CEO of a company has a unique perspective and obligation. Their viewpoint is based on seeing the world and their business through the lens of risk. The CEO job is to always scan for the enterprise risks that might threaten the organization—competitive, capability, capital, cyber, reputation, regulatory, and legal. More than ever, there is the existential risk that disruptive technologies and artificial intelligence represent to products, services, operations, and business models. Responding to these risks and complex problems is what drives the response—the strategy, the transformation, the initiatives.
Risks are often both threats and opportunities. Big Bets don’t stem from simple or predictable problems and challenges. Big Bets are a response to multi-sided, complex, and difficult-to-predict problems with many facets to them. These are often referred to as wicked problems.
A wicked problem is a complex situation that is difficult to define, unique, has multiple constraints, has no universally agreed-upon solution, and is one in which solutions are difficult to test. Wicked problems can happen at any level of the enterprise, from an all-encompassing situation, such as a business turnaround or digital transformation, or at a functional or department level, such as a legacy core technology platform transition or a supply chain transformation. In his seminal book Good Strategy/Bad Strategy: The Difference and Why it Matters, Richard Rumelt argues that a good strategy is a coherent set of actions designed to address a challenge or a specific complex problem, while a bad strategy is an ambiguous or incoherent plan either not attached to a specific challenge or one that fails to confront or resolve the crux of a problem. Good strategy is marked by a kernel consisting of three elements: a diagnosis, a guiding policy, and a set of coherent actions.
Our book, Big Bet Leadership builds off Rumelt’s work, giving a structured collection of guidelines, strategies, and tactics that will assist organizations and executives in achieving specific goals and solving wicked problems. This playbook provides a structured and paced approach to problem-solving and decision-making, outlining innovative practices, key principles, and practical steps. The playbook includes identifying the core issue or challenge, a generalized principle in approaching and solving the challenge, and tactics to demonstrate a path to action. This guide develops not just a good strategy for wicked problems, validating the riskiest parts of the strategy from the inception and setting up the effective transition to strategy execution, but also addresses the most significant risks and challenges in executing this strategy.
It is when attempting to solve these difficult challenges, in these calculated moments in which a path is chosen, where management either prove their mettle or set out upon another foolish journey. In all cases, Big Bets have material risk. And in most cases, they fail. Yet these are the Big Bets we must make. The mission of Big Bet Leadership is to help you mitigate the risks while maintaining the ambitious goals that motivate you to transform.
Contributed to Branding Strategy Insider by John Rossman and excerpted from his new book, Big Bet Leadership: Your Transformation Playbook for Winning in the Hyper-Digital Era, an actionable playbook for senior leaders to succeed at complex transformations.
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]]>Most strapped consumers are looking to stay above water rather than looking to snare an expensive handbag with prices well above $4,000, such as Hermès’ Birkin bag. Hermès recently raised the price of its iconic Birkin handbag by 10%, according to The Wall Street Journal. The basic, 25-centimeter (approximately 9.8”) Birkin handbag now sells for $11,400. Birkin’s closest competitor, the Chanel Medium Flap handbag, sells for somewhat over $10,000. For other high-end spenders, Prada’s Galleria handbag sells for $4,600.
While many of us are avoiding tapping into savings just to put food and beverages on the table, there is high-end purchasing that exists in a nether world of beauty, status, glamorous image perceptions, luxury, and prestige.
But, even the brand-businesses in this world of luxury and prestige face a price-value conundrum of their own making. Their paradoxical conundrum is how to maintain exclusivity while being available everywhere around the globe. Or, as The Wall Street Journal stated: how to maintain an aura of exclusivity at the same time as growing strong sales from global availability.
The French branding expert, Jean-Noël Kapferer, writes extensively about luxury. He defines the traditional concept of luxury as something exclusive and rare. He says that a luxury brand-business in its classic sense is “an inessential, desirable item that is expensive or difficult to obtain.”
In a seminal article, M. Kapferer described the current situation that many luxury brand-business owners face: can a luxury brand-business be both widely available and exclusive? M. Kapferer labels this phenomenon “abundant rarity.” And, because of extraordinary availability, some luxury brand-businesses, are struggling to maintain exclusivity.
Why? Because many believe that wide availability erodes rarity. If a brand-business remains highly exclusive with limited production units and waiting lists, it is a smaller, coveted, exclusive brand-business of rare items than if it had wide distribution. But, to satisfy the desires of people around the globe, some luxury brand-businesses are not difficult to obtain. A customer no longer has to travel to Paris to find Louis Vuitton, Chanel, Gucci, Prada or Hermès. In many cases, such as London’s Heathrow Airport, you do not have to leave the airport to purchase items from luxury brand-businesses. So do I really want to part with $4,600 or $10,000 for a handbag when anyone, anywhere can have one?
Kapferer says that some luxury brands will have to figure out how to maintain their high-class aura while being available to many. An article on washingtonpost.com once asked, “How can you sell enough on a quarterly basis to make Wall Street happy while at the same time maintaining the aura of exclusivity that got you where you were in the first place?” The writer questioned whether a luxury brand-business can manage to maintain a high level of exclusivity while available everywhere and still be profitable. This is today’s luxury brand-business paradox.
Many observers think this is a discussion that is not worth having; they simply do not believe that luxury can be both restricted and available. These experts believe that too much exposure saps the luxury out of a product or service. Once a luxury brand-business is widely available, it becomes less exclusive, even if it maintains its price premium. Some luxury brand-businesses may run the risk of losing their hard-won cachet.
For example, Coach.
The history of Coach is interesting. Coach tried extensive availability growth and harmed the exclusivity of the brand-business. Coach succumbed to short-term financial engineering, greater ubiquity and the opening of discount stores. Coach’s history demonstrates the pitfalls that a luxury brand may face when becoming more available. A few years ago, Motley Fool wrote, “If you’re a luxury brand with outlet stores, maybe you’re not a luxury brand.” Coach addressed the tension of ubiquity and exclusivity. The brand-business managed to revitalize its high-end aura while remaining affordable. The Coach brand-business changed strategies in order to find its way again.
Sonja Prokopec, a marketing professor, has written about the “fine line” a luxury brand-business must walk when maximizing rarity and availability. She posits that there is an ongoing “democratization” of luxury based on elite brands going after a wider audience using creative approaches that may be blurring the line between mass and class.
Some luxury brand-businesses, wishing to attract more customers, use brand-business extensions, entry-level items and licensing. Prada has its lower-priced Miu Miu line, for example. Prada just reported retail sales of Prada and Miu Miu increased 17% versus 2022. Prada added nearly $3 billion in market value.
When it comes to licensing, it is possible to take it to extremes. The luxury brand-business that licensed itself to demise is considered to be Pierre Cardin. Originally, a high-fashion icon, the designer of the era-defining bubble dress, the Pierre Cardin brand was extensively licensed across all sorts of items such as cosmetics, fragrance and then across non-adjacent categories such as pens, key chains, baseball hats, the AMC Javelin automobile and, sigh, toilet paper. This mania for exuberant extension eroded the Pierre Cardin luxury reputation.
Problems occur when wide-availability strategies go beyond growth generation to brand-business-status harm. The hope is always that sibling or sub-brand-business buyers will attract customers to trade-up within the brand-business portfolio, buying the iconic, expensive items.
The Wall Street Journal writes that “… one way to avoid overexposure is to sell fewer items at much higher prices,” which is happening now. Data cited indicate that even though luxury brand-businesses limit volume growth by raising prices, apparently selling only 1% to 2% more items, if the brand-business is popular, and can still be paid for, customers – most likely loyal customers – will remain with the brand-business and not defect to other brands. For example, Johnny Walker Scotch identifies tiers by label color: Red, Black Double Black Green and Blue Gentleman’s Wager. American Express credit card has an original Green card and Gold, Platinum, and Black Centurion, not counting the various business cards and cards that let you pay off less than the actual amount, like MasterCard and VISA.
There are noticeable luxury brand-businesses shifts in shopping behaviors. Certain luxury brand-businesses have raised prices too much relative to the customer-perceived value of the item. The Wall Street Journal points out that Burberry’s small Lola handbag, more than 40% higher-priced today than a few years ago, is seen as a lesser value than the vastly more expensive Louis Vuitton Neverfull bag. The Neverfull bag is more expensive but its customer-perceived value is stronger and its resale value is better. The status of Louis Vuitton seems to stay steadfast.
Furthermore, consignment/resale shops are doing well. If a customer is amenable to barely- or never-used items, secondhand options are a compelling purchase. Again, The Wall Street Journal writes that a barely-used Prada Galleria handbag has been available on a resale website for $1,500. In Palm Beach, Florida, the consignment-resale shops have an entire section of US 1 all to themselves. Many items, such as Armani jackets, may still have their original price tags and were never worn.
The RealReal, a luxury online reseller, is now opening new brick-and-mortar stores. The RealReal’s goal is to “build an inventory of luxury goods at higher values,” according to The Wall Street Journal. This inventory will attract customers and sellers of high-end goods such as brand-businesses from LVMH and Kering. Based on a 2023 strategic shift, The RealReal is asking its luxury managers to be less accepting of merchandise that is under $100. Current order value grew to $500 or more.
Regardless of the availability, The Wall Street Journal indicates that luxury brand-businesses affected by the abundant rarity paradox are retaining and reinforcing their exclusivity via higher prices. Years of data, including sociological, behavioral data, indicate that price is associated with customer-perceived quality. Although not always the case, higher price seems to be perceived as a marker of higher quality. Range Rover tends to be at the bottom of J.D. Power’s automotive quality surveys.
Solving for a paradox problem is one of the best ways in which to attract and maintain customers for enduring profitable growth. Finding the solution for rarity and availability is the holy grail.
However, as with any strategy, care must be taken that the solutions do not damage the trustworthy value of the brand-business. This means that price must not be the only component of the brand-business that rises. Exclusivity is not just about high price. Uniqueness matters as do restrictions other than price such as limited manufacturing, limited editions, one of a kind fabrics, leathers and fewer venues for purchase. Figuring out how to deliver rarity to a wider world while creating endurable profitable growth remains to be solved.
Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I
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