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Toward a better brand (12 thoughts)

April 27, 2009

This was my first official blog post on the Canadian Marketing Association blog back in September 28,2007. With some gentle editing I have brought it here.

With  economic conditions impacting ever more constrained budgets and the increasing pressure to drive transactional results – it’s easy to fall into the short-termism trap. But I think smarter marketers will come to recognize that it’s not impossible to combine strategic and tactical programs.

I hope you take the time to read and share your thoughts.

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1. Organically grown brands develop deeper roots.

Brands that have a greater emphasis on organic growth have no choice but to develop a more complete understanding of how well their brand promise is delivering existing needs. It forces brands to constantly look forward toward the innovation stream that will keep the brand promise relevant and fresh with its customers. Organic growth does not preclude acquisition – merely seeks to create a better balance between the two – of fixing the holes in the bucket. A study by Media Marketing* found that the probability of making a sale to new customers was 5-20 % compared to 60-70% of a sale to active customers – provides further support to this view.

Addendum:  Retention is the new Acquisition

2. Consistency is 99% of the solution.

Without consistency there is no possible foundation for a brand to keep its promise. We sometimes take for granted the ability of the human link to perform as envisioned. And because of any number of reasons – motivation, training, buy-in, challenging interactions etc… there are disconnects. To understand their challenges, their motivation and the tools they have for delivering the customer programs you develop, set a period of time each month to work alongside the customer facing staff.

3. To keep customers for life – first you need a plan, second you need a plan, third…

Keeping customers engaged with your brand for longer periods of time requires a commitment in understanding and evolving with their needs while keeping the brand fresh and relevant. As part of your long-term plan, consider creating a tenure incentive (membership has its privileges) benefit program to show your customers you are serious about wanting them to stay.

4. Needs change. Innovate or die. See rule # 3 If one has a strong brand/customer centric ethos, the evolution of a brand’s promise is a natural outcome. It’s based on staying current with the things one’s consumers find value in, fixing the things that are broken, throwing away the superfluous and move forward with evolving future needs.  Those interested might find The Game Changer (Lafley & Charan) to be of value.

Given the advent of social media – anyone not taking advantage of the ability to co-create the brand with one’s partner (see point #9) deserves their fate.

5. A good solution solves the problem.

The right solution leaves them wanting for more. Look beyond the immediate problem and try to understand the upstream and downstream ecosystem of the problem – at all the things that are impacted by the problem and then seek to develop extended solutions to address this. When you succeed, the customer will elevate you to partner status.

Case in point. Tide ColdWater…clean clothes and save energy cost and help reduce GHG

6. Listen, Focus & Astound.

Making an impact – a lasting impression on the consumer is critical. The innovation  by itself is usually not enough to make quick headway in the market- for that we need to bring in integrated marketing into the mix. The challenge is to make the communication and experience multi-channelled and simple by helping customers Visualize the End Result or Benefit (VERB). 

7. PULL is more powerful than PUSH.

Addendum: See here for a fascinating perspective and go to this Harvard Business Review Blog as well.

8. People are 90% of the brand.

Ask your customers where they place the greatest accountability for the brand’s performance/satisfaction both positive and negative – chances are they will point at somebody. Product failures are relatively infrequent because of the standards that go into the production process. But there is no way of engineering people. Somewhere along the way a person-to-person interaction will occur for which the consumer will hold the brand’s representative accountable – both positive and negative. Having responsibility for your brand actually means taking ownership of your customers and their end-to-end experience with the brand. See rules 1-7 and 9-14.

9. Not everyone buying your product is actually your customer.

A lot of people buy our products, only some of them are actually the customers we have developed our brand promise to deliver against. When filtering down to this group – you may be surprised by how few brand customers you may actually have. Congratulations – you have just taken an important step in reclaiming your brand. The big debate (at least in my mind) is how to manage the rest, the non-customer buyers who by some twist of fate are giving you money you never asked for – but your CFO is planning on. One approach seeks to integrate significant sub-segments into the fold – but only insofar as it doesn’t dilute the core brand platform. A more purist approach would minimize resource expenditures against non brand customers wherever possible and seek to create a self serve channel – even to the point of ‘firing’ their customers. However the first priority is always your brand’s customers, make sure you continue to grow with them and measure your progress because they are probably someone else’s target.

Addendum: Consider segmenting your franchise into:

BUYERS->CONSUMERS->CUSTOMERS->PARTNERS

10. The weakest link defines everything. Today matters most.

11. Actions speak, feelings resonate.

Learn how to make your customers feel your thanks. A perfect solution delivered by a surly attendant will not endear the kind of repeat business that an attentive helpful attendant can with an imperfect solution. Neither situation is ideal – but as long as the solution is satisfactory – I believe most people would go with option B.

One of the most power transformational differences you can make for your brand is to let customers feel they are appreciated. Not the polite “thank you have a nice day” discourse – but the actual sincere sentiment. So how does one manage to convey gratitude on a relatively large scale and still make it seem sincere and not some ploy? Providing some brand related benefit is not a wise path – because it lends itself to your customers putting a financial value and then wondering to themselves – “So after all these years and all the money I spend with Brand X, I only warrant $Y?” To avoid this, consider a gift that is ‘priceless’ by nature such as a good works program that allows your customers to define which charity they would like to have supported. You’ll be in excellent company since American Express did a program like this in 2007. And through it all remember that you are doing this because you in fact want your customers to understand they are appreciated and your thanks are just a small part of it.

12. A Brand is a Promise Kept.

Brand Affinity is a relationship strengthened.

Continuity without emotion is just a sequence.

Continuity with emotion is loyalty


I have already spoken about the brand promise and brand affinity in earlier posts. The important thing to remember about continuity programs is that by themselves they are only a series of conditioned responses. That you have purchase continuity is great as it proves you have a workable value proposition for the customer. But to leverage continuity programs one needs to engage the customer and transform the behaviour into a memorable experience. And therein lays the challenge we all have.

* The original research was done by Dr. Terry Varva who now is a principal with Ipsos. The original statistics where published by Doug Proden, Terry’s associate, in an article entitled “How to Win Back Lost Customers” in Direct Marketing to Business Report , October 1995, on page 7.

The art OR science of the Service Recovery Paradox.

April 16, 2009

In any customer facing organization, things are never perfect. Try as we might, by error of omission,commission and yes even deliberate design, there is a real or perceived discrepancy in the delivery of customer service.

A severe enough dissatisfaction, as we are all painfully aware – can sometimes result in a lost customer along with the investment put into acquiring and maintaining them as well as  the loss of future profit. To add insult to injury there is also the specter of negative Word of Mouth.

Academia has been trying to answer the question of whether a successful recovery from a service failure can ‘paradoxically” lead to a stronger customer bond. In other words can failure lead to success?

There have been many studies with various sample sizes, longitudinal and cross sectional in design and so its not really surprising that some studies will affirm the paradox, others not.

I recently came across this downloadable study of online banking customers at a Swiss Bank which stands out for its sheer size and scope.

Key sample sizes:
Total customers involved in study: 11929
Customers reporting no service failure: 9166 (8174 in study, 452 non response)
Customers reporting one failure: 2638 (1189 in study, 1025 resolution pending, 424 non response)
Customers reporting two failures: 125

Its key findings:
1) consumers are accepting of minor deviations in service
2) service failures are relatively rare
3) Customer Satisfaction impact hierarchy: exceptional service is better than exceptional recovery is better than nondescript service
4) Recommendation intention hierarchy: exceptional service is equal to exceptional recovery in scoring high intent to recommend and both are better than nondescript service

Other studies (Service Recovery Paradox: A Meta-Analysis) have pointed out that recovery is possible if the failure is not too severe, if the customer has a longer term relationship, if the customer perceives that procedural changes will be forthcoming as a result.

So at the end of the day it seems the studies agree on a few key points, namely that

To Err is Human…but divine forgiveness depends on sincerity and severity.

Many companies have therefore tried to implement process standardization at every critical juncture, but in the view of Hall and Johnson at Harvard Business Review

“The movement to standardize processes has gone overboard.
Some require an artist’s judgment—and should be managed accordingly.”

In their view when a ‘standard’ input is inherently variable (ie wood to make a violin), or when output variability is desired by the customer, the process needs to be managed from an ‘artistic’ perspective allowing for judgment and context while ensuring frequent feedback and mentoring oversight.

So what’s your experience with the service recovery paradox, is it something that needs to be managed scientifically or artistically?

What is your incidence of service failure?
What escalation processes do you have?
Do you allow front line staff to resolve issues directly?
Do you have (financial) limits on the resolution, or do you follow the Nordstrom rule “do what is right for the customer”?
What about preemptive measures, are you proactively informing customers about deviations that they may not even be aware of and the steps you took to correct the situation?

looking forward to the discussion.

The Big Shift – Managing resources in an uncertain world

March 16, 2009
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chess

John Hagel III, John Seely Brown and Lang Davison have started an intriguing conversation at HBR regarding The Big Shift,

…discuss how the world is speeding up. Peter Drucker probably started the trend in 1968 with The Age of Discontinuity. The most persuasive might be Ray Kurzweil’s The Singularity is Near, which observes that information technology displays “exponential growth in the rate of exponential growth,” which in turn fuels faster-changing events, practices, and processes–while, over time, accelerating economic expansion.

Do yourself a favor and spend the next 23 minutes to watch this amazing video

In their most recent conversation they broached the issue of Managing Resources in an Uncertain World,

We’re moving from a world of push to a world of pull. Push programs operate on one key assumption – that it is possible to forecast future demand. When demand can be forecast, we can efficiently push resources to where they will be needed when they will be needed.

to which I add my limited contribution to the conversation;

JJL, you are absolutely right about the demand/pull – offer/push transformation. But this has been underway since the introduction of the internet which gave consumers/customers access to more information and choice options.

I question your suggestion that forecasting is somehow a driver for that change. If I were to somehow unleash an army of forecasters (lets say the quants at Wall Street 😉 and managed to come up with more robust forecasting techniques- do you really think the “Push vs Pull” dynamic would change or stop?

The dynamic is an evolutionary transformation that stretches back from the roots of central planned economies, to production driven corporations, to the customer responsive global corporation evolving still from a central to decentralized command/control system…to where value is created…the consumer.

I have always been amazed that corporations can predict their results as well as they do, when we as individuals can’t predict what we are going to eat tonight. I think there’s always been a certain hubris to forecasting, that somehow we were able to capture the DNA of profit inside a formula. Need more profit…run the formula. Need more (loyal) customers…incentivize purchase continuity.

It’s all a zero sum game unless you develop deeper, more personal connections with customers, which then opens up new possibilities for cooperation and collaboration all along the value chain and within the industry as co-opetiton becomes a strategic option. (see Moore: The Death of Competition, Nalebuff & Brandenburger: Co-opetition)

Technology has progressed to the the point that it enables us to listen, communicate and inevitably …..let go. This fear of ‘letting go’ is no different than a parent teaching their child to ride a bicycle, we feel the apprehension but the child only feels the excitement of their new found freedom. Giving customers more direct access to the levers of change ultimately fulfills the old prophesy of the “Customer is King”.

Your point about logistics/resource planning is powerful, but it is a ‘management constraint’ that can be eradicated whenever desired. As long as one is prepared to work with heightened speed, scale and adaptability ….the inventory cushion provides the means to the end. The enterprise can unleash the certainty of real-time purchase data via interconnected just-in-tine systems.

Unfortunately most production systems have a higher volume requirement for economic scale. And so the challenge isn’t buying into the heightened profitability of the demand-pull side of the equation as much as pushing down the cost scale of production/resourcing/logistics.

cheers

Miro

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The Six Forces of Brand Value

February 18, 2009

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Michael Porter’s 5 Forces is an industry and market assessment framework first introduced in 1979 to help companies better understand the nature and extent of the competition arrayed against it. The problem it tries to solve is competition – how to manage it, how to deflect it, where to fight it and where to walk away – because as we know, the greater the competition, the more likely profit will be squeezed. But at the root, competition is ultimately based on value models.

And while businesses have the option of divesting from unvalued units, brands once engaged must stay engaged and endeavor to extract the most profit they can. One of the problems this can lead to is a zero-sum view of the world, which by definition perpetuates short-term solutions.

To break through this impasse we need to adopt a different paradigm, a reconfiguration of the existing pieces of the puzzle, the incorporation of some new pieces along with a positive-sum view. To help get us there, we’ll revisit the question of brand from a dynamic FORCES paradigm, to help us uncover better more valued, stable and resilient configurations. At the end of the journey we will come to recognize and blend both the Brundtlandian notion of sustainability with Rappaport’s customer-based value-creation view to yield a brand new dictum,

“Without sustainable customer value there can be no sustainable shareholder value”.

To get us there we first have to come to accept that a consumer’s perception of a brand’s value is shaped by up to six forces of value. Each (I.S.P.I.E.D) dimension works in concert with the others strategically and tactically to help support the price zone the brand seeks to compete in. It stands to reason that until consumers are made aware of the complete value bundle throughout the consideration process (Awareness, Interest, Desire, Action) those dimensions can hold no sway and the brand competes on less – perhaps just on price alone.

After we have neatly positioned our brand on some graph, the how and how often we communicate the brand’s value proposition (as well as its price proposition) will define the way the brand’s value is judged. CRM offer push efficiency driven by gains in data capture, pattern extraction and the ease by which offers can be pushed out puts us at one of the most perplexing cross roads.

Therefore one of  the most critical (and telling) questions you can ask  is when your volume is down, how are you going to stimulate sales. That answer will define your brand’s reality more clearly than anything else you say or do.

The Six  Forces of Brand Value

Iconic value – is simply how desired the brand is.

Not all brands can have iconic value; some categories simply do not lend themselves to this as they aren’t on the leading, creative or aspirational edge. But just to prove that one can ‘never say never’ seemingly non-descript ‘un-brands’ (Converse canvas running shoe, DocMartins) succeed by rocketing into the iconosphere.

Creating and sustaining a brand’s iconic value is typically accomplished in two steps. The first, a key brand dimension is selected where it’s hoped that it can be elevated above the category to achieve some level of brand envy among a particular brand constituency.

The second, harder step involves creating an aspirational loop that reinforces the brand’s rise in popular desire, yet avoids crossing the line and becoming ‘common’. This can be managed by evoking fresh imagery (preferably some lifestyle affirmation by a role model) to reinforce the brand’s dynamic and elevated leading edge status. But the true test of sustaining iconic value comes with a strict adherence to pricing integrity and retail channel distribution. The cult of desired belonging will tolerate some level of inevitable wannabe-ism from the onlooker fringe, but the brand must remain true to its economic pact – else it be seen as having sold out its original cachet and become less ‘valued’.

Much excitement exists in the marketing community with the premise and promise of viral marketing. Perhaps the most advanced thinking can be found by studying the works of Duncan J Watts and his model for Big Seed marketing blending as it does both ‘viral’ and mass media across three variables:

Seed: How many people initially exposed to the message
Propagation (Z): How many people this message has been forwarded to
Responsiveness (B): The % of the propagated folks that will ultimately act on the message when received

Frequently a brand’s iconic value will be intertwined and reinforced by its Design value (see below) since both are critical to defining the brand as a sought after category trailblazer. Therein lies the truth of iconic brands, they are the trailblazers, they push the envelope, take the risks, define the category which the rest then scramble to copy. The challenge is finding a group that will support the brand and help evangelize it to its maximum profit potential.

Societal value – encompass the benefits the brand enables/supports in the community

For some consumers, the allure of self-centric gratification evolves to a higher level to include the world/community around them. For these people the brand’s societal value will define a deeper evolution in the relationship and responsibilities consumers and organizations come to expect from each other. For example, Edelmann’s annual global study of good works reveals that 76% of consumers like to buy from brands that make a donation to worthy causes and also that when choosing between two brands of a similar quality and price, a social purpose has the greatest impact on consumer decisions (42%) ahead of design/innovation (30%) and brand loyalty (27%).

While these are reported intentions and not necessarily behavioral actions, clearly there is a substantial core belief among consumers that the economic value they bestow upon brands comes with a required reciprocity in good corporate citizenship.

Enlightened corporations have long viewed this as an inherent responsibility separate from any payback expectations, but indeed an ROI of GOOD is emerging enabling brands to craft a benevolence program that has a calculated strategic competitive advantage.

Whatever the motivation – moral or mindful, consumers are driving the change and placing an increasing importance on the societal value the brand supports. Failure to acknowledge and accommodate this will likely decrease brand value and increase brand risk over time.

R eliability value – reflects the brand’s value of enhanced up-time and the mitigation of downtime.

This force, refers to those aspects which can extend a brand’s utility, be it from ensuring performance reliability (and the fall back support) through to performance utility/efficiency. It’s an exciting dimension that can either establish unshakable value, help the brand recover from a past indiscretion or if mismanaged, totally eviscerate the brand.

The spectre of downtime risk (insurance/warranty extensions/service plans) is typically seen by consumers as a way brands try to recoup profit margins given up in the heat of competition. And while everyone recognizes the utility of managing downside risk, the challenge lies in its pricing. Brands therefore need to come to better consumer pricing terms in light of the long-term (strategic) value of establishing a deeper level of customer engagement. (A combined model that allows for a retainer plus a pay-per-use might be worthy of consideration.)

Fixing problems is one thing; the other is to be able to use the brand to its fullest efficiency/ potential. Many brands appear to be content their job is finished once the product is purchased. But with the growing technical sophistication and the feature rich capabilities that are engineered into many products, leaving it in the hands of customers to become self aware of their evolving needs is simply not enough. Smarter brands will develop proactive programs to promote knowledge enhancement thereby benefit from the deeper level of brand entrenchment and subsequent positive word of mouth referrals this will achieve.

For example, in a past life as brand manager of Lysol, I had initiated work to complete a Lysol-centric cleaning tips knowledge base. The intent was to become the ‘go to’ place for consumers with any cleaning problems. In so doing, it was envisaged, consumers would come to view Lysol as the cleaning expert, begin to use the product more frequently, with greater confidence and share their triumphs with friends and relatives, thereby extending the brand’s franchise-building impact.

Integration value – refers to how the brand contributes to creating greater value by being part of a larger system.

The idea of ecosystems was first developed in the B2B/IT world where the host product is often a conduit for enhanced customization by external providers. The larger, more powerful the ecosystem, the stronger the brand becomes in the market place and the more entrenched with the customer/user.

In B2C, a growing number of categories (hair care, personal care, fabric care, oral care) have thrived by creating system approaches where different tasks are solved by specific sub-products. The more interesting development will be when the integrated products unleash a catalysis that creates a total solution superior to that which can be achieved individually – perhaps a development for the future.

Food products face a more difficult challenge as they fight for share of stomach against a vastly wider competitive set. Hence they try to achieve integration value by taking ownership of specific recipes to gain prominence at key consumption moments. Those moments then become the value added link to the customer. For example Kraft Cheez Whiz gained ownership of microwave nacho cheese sauce – which it rode to double digit gains for several years on the rising popularity of Mexican food. However given the long tail of recipes, the greater strategic imperative is taking ownership of a class of recipe ideas, to be the “go to” place for healthful menus, microwave ideas, kids food ideas, BBQ ideas, ideas….ideas….ideas

Experiential value – relates to how the brand enhances a shared experience

This is a higher order value dimension that community-based brands (pop, beer, alcoholic beverages and digital products (cameras, videos, games)) tend to adopt. This value dimension refers not to the consumption of the brand, but in the community experience of that consumption – reminiscent of Kodak’s “Share the Moment” communications. Just as playing/competing with friends is often times more pleasurable than a solitary experience, this higher dimension allows the brand to establish superior value. The all important consumer connection is of primary importance, from which the brand consumption will naturally follow.

Design consumption value – links to how well the brand functions in solving the primary problem

This dimension refers to both the design of the product, its attractiveness and ease of use as well as how the product itself delivers against the core problem.

Not many companies give enough consideration to the design aspect of their brands. Design tends to be something that is done once for the product launch, and then refresh package graphics every 3 years or so, to get some new buzz in the market place. Other companies embrace design as a core brand differentiator and seek to evolve their design continuously. Apple is famous for its relentless pursuit of elegance and simplicity which gives it a tangible and substantial premium market differentiation.

A brand with a strong design ethic also tends to be more successful because it considers the consumer’s use of the brand from a holistic perspective, sometimes uncovering indirect value it can come to own. Tide Cold Water detergent for example, gains value by its ability to perform without the additional energy cost of warm water cleaning. (Tide wasn’t the first, All Tempra Cheer owned that positioning in the 1960’s)

In fact P&G (The Game-Changer) feel so strongly about design and its power to help unleash disruptive changes that elevate brand value in the market place, they routinely conduct internal and external design reviews. Additionally regular ethnographic field studies are plumbed to ensure all sources of inspiration are tapped, that the brand promise is understood in its entirety and managed proactively.

Conclusion:

Years ago, Michael Porter introduced the “5 Forces” model to help companies understand and manage the shaping of value in an industry, their competitors and themselves. Today we have come to view the consumer value dynamic as a win-win, co-creational model based on a pull versus push based  perspective of marketing from which we have come to recognize the 6 forces of value acting on/with/through the brand and its constituents. Managing those value dimensions is not a task to be divorced from the day-to-day duties of a marketer. In fact they are perhaps the most important things a marketer can do for the brand as the successes here come to define all other metrics.

See part 1:  Of Building and Pricing Brand Value

I. S.P.I.E.D. a customer centric campaign

January 20, 2009

This oped piece was published in the January 2009 issue of Direct Marketing (www.dmn.ca)

I. S.P.I.E.D. a customer centric campaign – by Miro Slodki

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It’s a new year. The slate is clean. Staring in front us is the new budget and the last approved 12 month matrix of key projects and initiatives. The traditional way of organizing this activity centers on crafting targeted programs to deliver against the budget and its ROI metrics. But if you’re wondering if there is a better way to integrate relevance with customer centricity, then you might be interested in reading a little further.

In light of current events, I doubt many would argue that the need to promote offers has been ‘supplanted’ by the mission critical requirement of creating value for our customers and indeed that this path helps us achieve both relevance AND success.

The problem (as I see it) is the difficulty, if not impossibility, of managing value-based messaging in a campaign centric approach as these events are designed to trigger a response to short-term (typically price led) activities. The shift to ‘telegraphic’ messaging media (search engine, SMS, Twitter and mobile) further exacerbates the issue as the constraints of these media limits marketers to essentially BARGAIN-based messaging. In the end, there is a significant black swan risk that the actions taken by marketers can actually detract from the value they are seeking to create.

But we’re putting the cart before the horse.

Before you can attempt to create value for your customers – you first need to know what it is they want. As you would expect, there are any number of specialists that can guide your organization in defining and operationalizing the consistent delivery of customer value. But this shouldn’t stop us from moving forward on a smaller scale because some of the value components are marketing and not process, supply chain or design related.

I offer this basic framework in the hope that it helps guide you in where you might look for value creation and communication opportunities for your brand:

Iconic value – How desired the brand is

Societal value – What benefits it enables/supports in the community

Priced value – Purchase price plus installation, warranty, service, financing

Integration value – How it contributes to creating a greater value by being part of a larger system

Experiential value – How it enhances a shared experience

Design consumption value – How well it functions in solving the primary problem

Each of these I-SPIED dimensions will have greater or lesser importance in the value matrix the customer seeks, defined relative to some primary competitor. Relying on just one dimension undersells and gradually, inevitably weakens the brand making it increasingly necessary for sharper pricing to trigger a customer response. And as long-term events in the auto sector have shown, if the underlying value of the brand is eroded, sometimes no amount of pricing (or marketing) can help.

Leaving that basic overview, we turn to the implementation.

The first order is to have the current value (i.e., revenue, gross margin, net profit) segmentation of your customers at hand. The next task is to reallocate your marketing promotion budget against each of your key customer segments reflecting the relative investment and effort allocation. It is also important to understand how the enterprise was able to generate value both for and from its customers, in order to uncover the potential up-sell, cross-sell and frequency of purchase opportunities for the coming year.

Using the traditional campaign/task oriented approach we would see a series of programs (sometimes integrated) executed to accomplish the desired behavioral/transactional response across a spectrum of customers. All of the thinking however is centered on the campaign. Will it yield the X% response rate, generate the $Y we have budgeted? But, if we pivot this approach we get a customer centric orientation.

In the customer centric method, within the database, we strive to look at both the immediate and future needs and solutions our customers will seek. Rather than having “10x$10 transactional conversations”, we change the focus and instead have an ongoing $100 conversation (using as many of the I-SPIED dimensions) with our customers.

Doing so energizes the message we send our customers because we let them know we see them in a bigger context and seek to offer the value/solutions they need to address their ongoing requirements. This in turn changes the scope of our activity from simply messaging to effectively communicating, which then requires the coordinated management of a broader expanse of communication (C), experience (E) and offers (O) to support the value of the relationship. We mustn’t forget that the value management of the relationship is a bi-directional flow, just as we see the $100 customer; the customer must look at our brand and see it as the $100+ “GO TO” brand for solutions.

Putting it all together yields a simple equation (Purchase (P) = xC + yE + zO), which I have elaborated and created some CRM calculations you can perform within a basic spreadsheet.( see here)

This is not news to large portions of the B2B world that routinely function in this manner. As a result of their extended purchase cycles, multiple stakeholders and more complex value chain requirements, they have been forced to learn how to effectively manage their customer acquisition/retention processes using a variety of touch points. For them, establishing value comes before pricing it.

Knowledge of value communication is tantamount to helping brands understand how to effectively manage going forward and answering questions like; are there different sequences that will be more effective or less costly, is the communication reinforcing the value AND the price? The B2C world seems to take for granted that pushed messages have no/little adverse impact on their brand, that consumers are resigned to irrelevant noise.  This is why a customer centric value communication approach is so important in what is like to be a protracted recovery period. The traditional campaign bargain-based messaging approach will still work and generate sales – but in time will fall behind in creating the longer term value that is needed to sustain viability. Unless of course, you happen to be one of the few that are too big to fail….

Of Building and Pricing Brand Value

January 13, 2009

The world revolves around value. Creating it. Selling it. Buying it. We all know it when we see it, solid as the Rock of Gibraltar where moments before there was nothing. But what exactly is value?

Critical to our understanding is the realization there are two parts to the process, the first being the creation of appreciated value which is separate from and followed by the pricing of it. In today’s economy where so much monetary value has been eradicated there is a heightened urgency for all things related to value (re)creation. Important as these new activities are to rebuilding, we must not lose sight that much of how the consumer deems things to have value is grounded in psychology as much as the tangible.

da-vinci-skull_drawing

While value is a dynamic construct that can be created, destroyed or transferred with the speed of thought, we don’t often see or report on its full dynamics. As a consequence of our measurements* we end up with an constrained view of the free market fluctuations consumers otherwise communicate to us regarding the proffered value.

*most retail pricing tends to be fairly static (within a prescribed range) and the lack of reporting on failed purchases

Fittingly our starting point begins with what economist call the subjective (marginal utility) theory of value which holds an item has no inherent value, until there is a shared and agreed upon:

  1. need or want that is satisfied by the value source, and
  2. a perceived or real constrained supply of the value source, otherwise an over-supply (ie free goods) can lead to de-valuation.

Perhaps the greatest contribution this theory brings is the formal recognition that value (creation or transference) can only thrive in a win-win environment. While economist debate value and point to its ‘invisible hand’ guiding the upward transformation and redistribution of economic resources from lower to higher value states, business tends to be more pragmatic.

Michael Porter’s seminal work, Competitive Advantage advocates conducting a value chain‘ analysis of a company’s internal processes and the interactions between key elements of the firm (inbound and outbound logistics, operations, marketing/sales, service) and customers in order to determine how and where value opportunities might exist. But to understand the context in which the value chain competes in, one must appreciate the generic strategy (Competitive Advantage Vs Competitive Scope) the enterprise is embarked upon as well as the Five Forces (Bargaining power of Suppliers and Customers, Threat of new entrants, Substitute products and Competitive rivalry within the industry) acting upon it.

Treacy & Wiersema (The Discipline of Market Leaders) put forward a customer centric model more reflective of the current competitive global technological landscape.

Customers today want more of those things they value. If they value low cost, they want it lower. If they value convenience or speed when they buy, they want it easier and faster. If they look for state-of-the-art design, they want to see the art pushed forward. If they need expert advice, they want companies to give them more depth, more time, and more of a feeling that they’re the only customer. pg 4

In their view a firm must select and excel at one of three value disciplines as a core operating model, while remaining adept at the other two:

operational excellence – executional excellence featuring an unmatched combination of quality, price and ease of purchase/hassle free service.

product leadership – the pursuit of innovation to continually redefine the consumers view of the category to one’s advantage.

customer intimacy – the pursuit and actioning of customer centric insight and sensitivity into the client’s underlying problem to deliver a personalized brand offering that helps customers achieve their success transforming the way the customer does business.

Each path then frames the key value activities the enterprise has to complete in order to consistently deliver the customer’s desired value.

However structural and technological market changes have led to refined thinking (see Moore: The Death of Competition, Nalebuff & Brandenburger: Co-opetition) . The broader view is that competition can lead to mutual cooperation that helps keep new entrants at bay, reduce total cost among participants and drive creative destructionism. This helps motivate a higher degree of customer relevancy that firms acting on their own volition might not have otherwise evolved fast/far enough and keep customers from seeking out alternative solutions. This reflects Taleb’s (The Black Swan) notion of ‘hidden’ risk where the absence of healthy competition is an unnatural economic reality… eliminating or weakening the enemy one knows can/will lead to emergence of an enemy one does not know…or as the saying goes “Keep your friends close and your enemies closer”.

Emerging also from this body of knowledge is the shift toward co-creational value building. What was once a top-down activity – where value happened “TO” or “FOR” a customer (operational excellence and product leadership) as a result of the enterprise’s ability to create the desired widget or experience, now includes a full circle/ecosystem of cooperation to create superior value.

This broader perspective appreciates the supremacy of the customer’s viewpoint of the value exchange. This is important because it runs counter to the management practices of many enterprises, where speed and metrics of business success have forced the enterprise to configure itself and its activities to generate immediate results for shareholders. Consequently marketers have drifted from pursuing value enhancement and value communication and instead, focussed more on the price management of value.

But in this new economic and market landscape – the price and value assessments of brands , not unlike the stock market have undergone significant transformation due to changed personal economic circumstances, priority realignment and de-leveraging of personal credit. McKinsey characterize this environment a structural break and opine that,

The wrong way forward in a structural break during hard times is to try more of the same. The break and the hard times are sure indications that an old pattern has already been pushed to its limits and is destroying value.

Hence there is a new imperative and window of opportunity to rebuild the value and value perceptions of one’s new/changed brand franchise. To do so marketers will need to rebuild the brand value dimensions available to them and take this opportunity to establish a more compelling pricing of that value.

In the next section we will review the 6 dimensions (Iconic, Societal, Potential, Integration, Experiential and Designed Consumption) available to them.  See:  The Six Forces of Brand Value

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The gift. How brand Values define brand Value.

December 9, 2008

Ginger Conlon at 1to1media.com

“Every holiday season includes gifts, as well. Mine is to share with you some advice from several of 1to1’s colleagues and associates on how to harness customer centricity to stay competitive in 2009. I posed the following question:

“What aspect of customer strategy will be the most useful to survive or thrive in this uncertain economy, and why?”

My reply/contribution to Ginger on December 5,2008 follows. Readers may also want to follow this link to an  interesting 2nd annual global study by Edelman, “Mutually Beneficial Marketing – why businesses and brands need a good purpose.” regarding the growing importance good works programs have on consumer purchase considerations of companies and brands.

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Customers have always wanted value and it’s the responsibility of all employees to create value for the customer, not just for marketing or sales or the call centre.

Somehow, as we have gained the immediacy and expediency of digital marketing, we have forgotten that in addition to price, there is an entire value chain that reinforces the brand and actually has greater importance to customer relevancy. It’s up to us to learn what components in that chain are more important than others, how that value is perceived relative to the competition, and how we go about optimizing it.

Indeed while value is derived from the brand’s price it is also sourced from its convenience, quality/reliability, image and fun/escapism benefits. In addition to those purchase relevance triggers, we must also focus on consumption triggers by understanding the solution the brand provides, the support/knowledge network surrounding the brand, and the societal benefit the brand creates. All of these components can be emphasized in either the long term or in the short term.

Therefore the first thing I would suggest is to revisit your brand value chain and understand how strong or weak it is, especially in the context of the new economic conditions. Some portion of your customer base may no longer have the means to support your brand, be new to the brand or have new priorities.

What remains consistent however, is the more one relies on price (in the guise of DM or ecommerce relevancy) to drive business, the weaker/more precarious the brand value platform becomes. Challenge yourself to include as many of the brand value chain elements in your offer communication and give it more prominence than the price. Dell has successfully reconfigured their tactical promotions giving significant prominence to benefits over price.

Complicating matters is the fact that the ground has ‘shifted’ (more like heaved) at a time when we have pervasive social networks and inter-connectivity that didn’t exist just a few years ago. And so the brand’s role in the community takes on much greater importance.

With the financial crisis spillover onto Main Street, people are scared, angry, and skeptical. They are searching for stewardship and a sense of community in the rebuilding efforts that lay ahead. For marketers this means brands need to support their constituency as much as they seek that support themselves. In the process brands will earn a level of customer trust, relevancy, and intimacy that will be invaluable for future success; it’s what I call Share of Life marketing.

Tangible steps to be taken by brand leaders for the immediate crisis of confidence:

1. Stewardship: A brand’s values help define the brand value.
Recognize that enterprise value stems from the user base and not the investor base, that Return on Customer drives Return on Investment.

Give the brand community a reason to support your market offering. Customers need to hear CEO’s give voice and action to their principles of human resources and community support and how the enterprise they lead plans to be part of the rebuilding solution.

A corporate stewardship pronouncement will boost the rank-and-file morale. Pay particular focus to customer-facing employees to ensure that service support is at its highest levels. Consider deploying a CEO-driven customer service rewards program to bridge the next 4-6 months so that everyone understands you are serious about customer service. Share stories (not statistics) of the impact service delivery has on customers; preferably in the customer’s own words or better still on video. Consider redeploying retired or surplus/underutilized employees as secret customer service observers.

2. Leverage. Use current customers to drive acquisition of new customers and/or generate higher sales multiples. For example:

a. Allow brand users to herd and share in the benefits of conjoined purchases. Instead of (Buy One Get One) BOGO’s directed to an individual, engage the customer’s clan and turn it into mother-daughter, or boy’s day out/girl’s day out shopping event. Or set a purchase threshold above which the shopping party earns some discount or reward. Create themed events that capture the spirit of a shopping party with contest prizing geared around the group as opposed to the individual shopper.

b. Engage the larger constituency by promoting some local community/social benefit tied into brand purchases, i.e. $x for every purchase this month goes to support your choice from this group of charities. Blend national and local good works programs to maximize relevancy. Have customers vote on which good works program they wish to support. Don’t put a cap on the donation amount (to avoid looking like a scrooge) but do commit to a minimum or matching formula. Try to engage good-works partners to help promote your efforts to their constituency.

c. For B2B, consider implementing a customer appreciation program rewarding customer referrals by sharing some of the incremental profit, perhaps yielding longer payment terms (net 35 vs. net 30) or awarding soft benefits. The intent is to demonstrate the value of the solution based partnership to your customers.
3. Social Media. Now you really have something to talk about.
Share your stories with the community. Give your brand constituency progress reports with the same frequency and importance given to your shareholder community. Update the constituency on the impact their support is having with their charitable causes. Solicit their input on new product development, packaging, and promotional ideas. The greater the inclusiveness, the greater the customer’s ownership of the brand, the greater the partnership.

While this dialog is taking place, consider a program allowing customers to self select/self create promotional events. For example if if the CRM assessment indicates the customer is to be targeted with six promotional events skewing toward particular up-sell/cross-sell products, why not let them create their own events on their timelines. Keep track of the activity to ensure compliance within any overarching constraints (i.e. number of events, timeline for completion), but take this opportunity to change the focus of marketing initiatives from a campaign-centric to a customer-centric approach.

The ground may have shifted, but the path to success is the same: brand value derived from customer relevancy, solution innovation, co-creation and co-dependency.

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