bed bath and beyond brand

This Should Not Have Happened: Bed, Bath & Beyond Entered Black Friday With Empty Shelves

In June of 2011, a retail sea change occurred. Storied brand, J.C. Penney, hired Ron Johnson, who led the success of Apple’s brick-and-mortar stores. Mr. Johnson decided that one of Penney’s problems was that the brand was damaged due to its consistent focus on deals and low prices. Without any Penney core customer insight, the pricing at Penney’s was changed. Using Apple as a model, the overhaul of Penney’s was something that turned off core customers. There were brand management lessons to be learned from the Ron Johnson tenure.

Fast forward to April of 2019. At another retail giant, Bed, Bath & Beyond hired Mark Tritton from Target. Mr. Tritton developed a turnaround plan for Bed, Bath & Beyond. Using Target as the model. Mr. Tritton’s alterations were not focused on core customers. So, the changes were startling for Bed, Bath & Beyond’s core base loyalists.

By February of 2022, it was clear that the strategies designed by the CEO of Bed, Bath & Beyond were not working. To complicate matters, Covid-19 had messed up supply chains and altered customer buying habits leaving stores like Bed, Bath & Beyond with limited merchandise or the wrong merchandise.

Now, we have just experienced Black Friday shopping day. Going into Black Friday, the business press indicated that of all the big box stores, Bed, Bath & Beyond was suffering from empty shelves. 

According to analytics firm DataWeave, and as reported in The Wall Street Journal, Bed Bath & Beyond continues to struggle with keeping its shelves stocked ahead of the holidays.  More than 40% of Bed Bath & Beyond’s inventory were unavailable in October 2022. This is nearly twice more than October 2021.

The report added that Bed Bath & Beyond had higher out-of-stock rates in October 2022 in comparable items than other retailers.

There is nothing more dismal and off-putting than empty shelves. If you need proof of that, step into one of the remaining Sears stores. Empty shelves are not just depressing but they are just dreadful for a brand’s customers’ perceptions and the brand’s value.

While many stores suffered from supply chain issues, at Bed, Bath & Beyond, these were severe due, in part, to the new Tritton strategies.

First, Mr. Tritton focused on limiting the number of price deals.  In 2021, Bed, Bath & Beyond decided to stop a lot of its print circulars that generated store traffic. Similar to the switch to everyday low prices instituted at J. C Penney during the tumultuous tenure of ex-Apple store maven, Ron Johnson, Bed, Bath & Beyond stopped coupon-generated and flyer-generated deals. The idea was to become less dependent on dollars-off shopping.  Mr. Tritton also wanted price parity with its competitors. 

Retracting circulars was a minor disaster. As with Penney, knowing the customer base could have avoided this kind of crisis. Bed, Bath & Beyond customers did not see the deals as brand degradation. They saw the deals as part and parcel of the brand. The deals were things they loved about the brand. 

Print circulars and mailers were mainstays of the brand for decades. Customers missed the circulars; store traffic dropped. When Mr. Tritton’s team finally recognized that circulars needed to be reinstated, Covid-19 paper supply issues along with labor constraints meant the brand could not print the circulars fast enough.

Second, Mr. Tritton, following the Target playbook, began a program creating own brands

Although an initial expense, private label brands are money-makers if handled properly. The Wall Street Journal has pointed out that private label brands, “… are no longer the cheap knock-offs you keep hidden in the back of the cupboard, but quite possibly the tastiest deals on the shelf.” Referring to Whole Foods’ reincarnation of the 365 brand and Target’s innovative private label creations, The Wall Street Journal stated private label brands are “… casting off their bland reputation and transforming themselves from dull to desirable.”

Mr. Tritton’s Target experience was that own brands are an essential, profitable revenue source. Adding more private label brands became a priority for the Bed, Bath & Beyond brand. In addition, Bed, Bath & Beyond created a partnership with Kroger Co. whereby Kroger will sell some of the Bed, Bath & Beyond private label offerings.

Mr. Tritton indicated that the own brand portfolios would consist of products in home décor, laundry, bathroom and kitchen, according to a Bloomberg BusinessWeek report. 

Own brands require manufacturing and supply. Manufacturing and supply were hard hit by coronavirus. It became nearly impossible to have these private label brands on the shelves. At the same time, the national brands were gone.

Third, Mr. Tritton focused on updating Bed, Bath & Beyond’s technology.

New technologies are always a winning issue as these technologies can make life easier for shoppers. 

At the time, retailtouchpoints.com reported that Bed, Bath & Beyond’s technology upgrade program was designed to “… support improvements in merchandising and inventory management, product lifecycle management, retail space planning and optimization, the launch of additional private-label brands and real-time tracking of merchandise fulfillment with the supply chain.” The technology changes were also designed to make shopping easier for customers.

One of the lessons of Covid-19’s supply chain problems is that real-time inventory practices create empty shelves and deficits in other critical items necessary for manufacturing. In an earnings call at the time, Bed, Bath & Beyond admitted that its poor quarterly performance was due to a “… compromised customer experience” when customers could not find what they wanted on its shelves. As Mr. Tritton said, there was demand but limited availability.

Bed, Bath & Beyond stated that the supply chain issues cost the brand $100 million at the November 2021 end of quarter. The December 2021 results were equally bad. Upgraded technology focused on pandemic-fueled customer needs such as e-commerce, curbside services, in-store pick-up and same-day shipping. Of course, if there is limited product availability, these services become moot.

Finally, Mr. Tritton made a classic marketing mistake by not focusing on the core customer base. 

Keeping core customers happy and loyal is essential at all times, and, most especially, during troubled times. The changes that were instituted were not based on core customers’ problems and needs. These changes were made based on Target customers. 

Further, the changes at Bed, Bath & Beyond did not match the changing behaviors of core shoppers.

One of bright spots in post-coronavirus marketing has been the Penney ads with core customers saying what they love about the brand.

Hopefully, this iconic retailer will have made it through the holidays with its brand intact. The problems at Bed, Bath & Beyond were self-inflicted. With Bed, Bath & Beyond’s Board of Directors recognizing the missteps, Mr. Tritton is now gone from Bed, Bath & Beyond. Of course, the supply chain was a disaster for many retailers, but from a brand standpoint, the brand mismanagement at Bed Bath & Beyond was extremely damaging. Brands can live forever, but only if properly managed. 

sears bankruptcy brand

Sears: The Agonizing Attrition of An Icon

As we enter the holiday season, we learn from BusinessWeek that Sears, once America’s holiday shopping mecca, is barely alive, in the continuing agony of attrition. The sadness of Sears is palpable. 

Let’s face the facts: Sears is no longer a living brand. Some refer to Sears as a zombie brand: no longer alive but lingering on the landscape. At this moment, according to a recent BusinessWeek article, Sears has fewer than two dozen stores. The fact that there are fewer than two dozen stores actually operating is a miracle. In 2021, there were about 40 Kmart and 39 full-line Sears stores left. Some press reports indicated that there would be 15 Kmart and 19 Sears stores left after November 2021 closings. Over the past 16 years, Sears and Kmart have shuttered more than 3,500 stores eliminating 250,000 jobs.

Business press and retail observers place most of the blame for Sears’ – and Kmart’s – demise on Eddie Lampert, the hedge fund magnate. According to the latest from BusinessWeek, “… years of underinvestment and dismantling under the stewardship of its would-be savior, hedge fund manager Eddie Lampert, also helped bring the company to this moment: it’s sprawling suburban headquarters on the block, signature brands including Craftsman and DieHard sold, and most of the jobs that Lampert’s purchase was supposed to preserve gone.” The general opinion is Mr. Lampert’s extraordinary talent for financial engineering and management by cost-cutting, of which he was the beneficiary, put Sears and Kmart into their vicious vortexes of death. Continuing in its analysis, BusinessWeek states the unfortunate situation that led to Sears’ demise was this, “Effectively, Sears was Lampert, and Lampert was Sears—pouring hundreds of millions of dollars into the company but also reaping hundreds of millions from interest, fees and asset sales.”

From a brand standpoint, Sears is a classic case of death by brand mismanagement. Let’s look at how Sears became a barely alive brand to its owners but an-already-dead brand to its customers.   

First, arrogance is a killer characteristic

Success is everybody’s aim. Sears had decades of successful retail dominance. From its beginnings in 1893, Sears was America’s mall.  With expertise in selling everything Americans could want (America’s Everything Store) with storied, trusted brands such as Kenmore, DieHard and Craftsman, Sears was the Amazon of its time. The Sears catalog was ubiquitous in American homes; yesterday’s version of long-distance, not-in-person shopping.

However, this great success fueled arrogance. Sears’ management’s mentality was that it could do no wrong. Sears believed it could sell anything and everything. Its retail outlets featured real estate (Coldwell Banker), financial services expertise (Dean Witter Reynolds) and Discover credit card. The diversity of these brands led to management taking its eyes off of the Sears brand. In a blink of an eye, Walmart became America’s brick-and-mortar everything store. Nothing Mr. Lampert’s team did changed Sears’ trajectory.

Thinking that you know everything and can sell anything is admirable. But, it is also dangerous. A review of Boeing and its tragic 737 Max crashes cites arrogance as one of the factors leading to Boeing’s being toppled from its top perch in aviation. The downfall of crypto exchange FTX is also a lesson in arrogance.

Avoiding arrogance takes effort on the part of leadership. Great leadership means fighting the inclination to focus on oneself rather than the customer and the brand. The leader who creates a culture of arrogance by letting success go to the and egos of managers is a leader who is more committed to self rather than brand.

Second, comfort feels good but it leads to complacency

Avoid complacency at all costs. Complacency stops innovation, renovation and keeping up with changing customer values and behaviors. Complacency allows employees to continue doing what they are most comfortable doing. Complacency lulls people into laziness and inaction. Complacency crushes curiosity and creativity. Complacency allows people to avoid looking at trends and changes. According to some, complacency leads to market share loss and underperformance. Complacency is passive. Brands are not passive. Brands are active promises of an expected relevant, differentiated experience. 

Apparently, Sears did not appreciate the rise of big box stores. Sears ended the catalog. Sears neglected investment in e-commerce. Lack of investment turned Sears stores into unlit empty boxes. Sears was fat, rich and complacent, said one observer. He added that the brutality of retailing combined with a Sears’ management’s self-satisfied complacency and arrogance allowed the great retailer to suffer.

Third, financial engineering above customer satisfaction is never the answer

The business press and analysts have been vocally public that Eddie Lampert “… undertook some of the most complicated and thorough financial engineering the (retail) industry has ever witnessed and which has now become infamous among retail observers. The recent BusinessWeek story indicates that Mr. Lampert had for years used his hedge fund “… to lend to and control Sears, while he was also the company’s CEO and chair.” 

Financial engineering is the catchall phrase for extreme cost cutting including job losses, debt accumulation, share buy-backs, increased dividends, forced spinoffs and money siphoned into the pockets of investors rather than invested into businesses. Financial engineering can damage brands. This is because the priority of financial engineering is building shareholder value at the expense of customer value… a formula for failure. Boeing suffered from cost-cutting and suffered catastrophic consequences.

Financial engineers see strong brand equity as an opportunity to extract value rather than extend brand strength.  This is a form of brand extortion. Last year, an observer stated, “(Eddie Lampert) is a mastermind of the corporate rule book. He was always manipulating Sears for the most profit for the owners of Sears, or for the companies he created to benefit from Sears.”

Another industry consultant stated that “Sears, under Mr. Lampert, had always been a, financial play.” Of course, he added, there were some things that could be achieved with the (Sears’ and Kmart’s) property. But, there is really and realistically no future for the Sears brand. And, yet, there are still some stores in place when everyone agreed that Sears would be effaced from the retailing earth.

Sears lost relevance 

Staying relevant means always staying aware of marketplace changes, altered customer behaviors and attitudes, competitive brands and your brands. Relevance requires learning about customers’ needs, problems and occasions of use that the brand satisfies better than alternatives. 

When a brand loses relevance, it can come close to death. However, brand demise is not inevitable. Ongoing brand management is a leadership challenge. Based on various reporting, it appears as if Sears’ and Kmart management was not focused on the customer. 

People who followed Sears were convinced for years that Mr. Lampert’s approach was anti-user. As one person posited, “There’s no love for the consumers, no relevance for consumers. There is no intention there of (operating) as a legitimate retailer.” 

In the 1970s and 1980s, Sears and Kmart were America’s largest and second largest retailers, respectively. Now, Sears and Kmart are irrelevant shadows, ghosts of arrogance, complacency and financial engineering.  Coming back to life will take leadership that cares about the brands. There is no indication that exists. The brands are a financial play.

Coming back to life means asking customers to care about the brands. Retail observers say that shoppers do not seem to care about Sears and Kmart anymore. One observer asked, “Why would you care?” If you can even find a store, the experiences do not compare to competition. The once-treasured Sears and its brands are distant memories, as is Kmart. 

Loss of relevance stems from lack of innovation and renovation. And, it comes from taking your eyes off of the customer. With proper resource allocation – not financial finagling – and a passionate belief in the brands, brands can recapture relevance again. There is no indication that this will happen.

Brands do not die natural deaths. As Sears and Kmart show, deaths and declines of brands generate internally from mismanagement and nonbelief. Brands can be revitalized but it is unclear if revitalization is in the works at Transformco. In the meantime, Sears and Kmart are in a twilight zone, shadows of their former selves, drained of life but still walking the earth, waiting for the inevitable. Eventually, all the life will be sucked out of Sears and, then, Kmart. When wringing all the worth out of a brand is the goal, there is no going back. The slow attrition of Sears is a sad fact. Sears… and its sibling, Kmart… are poster children for the fact that you cannot cost manage your way to enduring, profitable growth.

Twitter Brand Erosion

Twitter Is Torching Its Brand Power

A powerful brand is the consistent identity of a trusted source. A powerful brand reflects its trusted reputation for quality, leadership, and integrity, underpinning all stakeholder relationships.

A powerful brand is not merely a marketing concept. It is not an academic theory. It is not a line in an advertising slogan. A powerful brand is an asset. A powerful brand is an asset on a company’s balance sheet. A powerful brand is at the very core of accounting’s Goodwill. A powerful brand is valuable.

When a brand’s power diminishes, so does its economic value.

The back-and-forth decisions, the double-talk, the public real-time musings, the threat of bankruptcy are all eating away at the Twitter brand. Its brand power is draining away. Although never at the top of the lists of the world’s most powerful brands, since its inception, Twitter has had powerful global impact, politically and socially. 

The frightening vacillations at Twitter are having a deleterious effect on the brand, its brand power and its value. At the same time, driving the chaos is the reality of funding the $1.2 billion annual interest payment on its $13 billion debt load.

A powerful brand relies on four “must-haves”:

  • Be a credible source
  • Have an excellent reputation 
  • Be a pillar of integrity
  • Have a responsibility ethic

Be a credible source

  • Being a credible source means that all stakeholders – from investors to analysts to employees to users – have confidence that Twitter provides true information about itself. Although now a private company, Twitter still has an array of stakeholders. Being a credible source also means that Twitter will consistently deliver on its promises. Research shows that when brand is perceived to be a credible source, stakeholders believe that the brand’s past actions can predict its future behaviors. 
  • Discussing the fiasco of the $8 blue check system where some people were pretending to be celebrities and brands, a director at the Atlantic Council’s Digital Forensics Lab told The New York Times that “… the quality and credibility of content on Twitter could suffer if fraudsters created confusion and amplified lies.” Senator Edward J. Markey of Massachusetts said, “Selling the truth is dangerous and unacceptable.”
  • It is an imperative to be perceived as credible. Communications from highly credible sources are more persuasive. A credible brand acts as a “quality” cue lessening customer-perceived risk during customer decision-making. There are data to show that credibility makes decision-making easier. This is because the customer trusts the authority of a credible brand-business. Changing plans every day does not foster credibility. And, firing the entire communications, marketing, celebrity partnerships and human rights departments leaves the brand at a credibility disadvantage.

Have an excellent reputation

  • Having an excellent reputation means consistently and continually behaving in a quality manner. Reputation is all about the brand’s accomplishments. Reputation is based on the brand’s past. Think of reputation as the “collective representation” of a brand’s past actions and results. For the finance community, reputation means that the brand has been able … and will continue to be able… to deliver valued outcomes to multiple stakeholders. Whether you like Twitter or not, it has had accomplishments.
  • Reputation is the collection of stakeholder perceptions over time.  As with value, reputation is determined by the perceptions of stakeholders. Twitter does not determine its reputation. Twitter’s reputation is in the eyes of the beholders.
  • Reputation can increase business performance. This is because a great reputation helps sell offerings at an increased margin and can help leverage a sustainable competitive advantage. Having a great, positive reputation would be of enormous value for persuading advertisers to come back to Twitter. A powerful brand’s positive reputation alters preference. A strong, trustworthy business reputation contributes to high quality revenue growth. 
  • Losing a brand’s reputation is sinful. It is self-destructive brand mis-management.  When a magazine like Playbill cuts ties with Twitter, it is time to take action.  The CEO of Playbill indicated that in recent weeks, Twitter’s reputation for tolerating “hate, negativity and misinformation” left Playbill no choice but to remove its advertising and focus on Facebook and TikTok platforms.

Be a pillar of integrity

  • To be a pillar of integrity, a brand must make sure that at the core of all actions and behaviors, internally and externally, are the best interests of stakeholders and other constituencies. Integrity means that stakeholders and constituencies view the brand as fair, impartial, open-minded and just across all brand actions. Integrity refers to the brand’s core values and purpose: its guiding principles, and its reason for being.
  • Being a pillar of integrity means the brand recognizes that its relationships with all its stakeholders are valuable. Research indicates that responding to stakeholders with positive actions provides differentiation and/or cost advantage. This ultimately enhances a brand’s overall brand performance.
  • When the individuals responsible for oversight of internal and external relationships are fired or have quit, questions arise as to the brand’s commitment to integrity. When advertisers are wooed and reassured in person but whacked behind their backs, questions arise as to the brand’s integrity. The New York Times stated that Twitter threatened advertisers with “thermonuclear name and shame” if the brands cut off their advertising.

Have a responsibility ethic

  • Having a responsibility ethic means being an effective global citizen behaving positively on behalf of people, communities, nations and planet. Twitter had important roles to play in global events such as the Arab Spring revolutionary waves.
  • Being ethically responsible can influence brand preference as the brand’s reputation influences purchase decisions. People are more vocal in supporting businesses that “do good” while boycotting or publicly berating those perceived to be “not responsible.”
  • Playbill’s CEO pointed out that “… the line between actual news and insidious rhetoric…” had been blurred by Twitter’s recent actions. Saying it was a “respected news outlet for the Broadway community,” Playbill was essentially saying that Twitter was behaving irresponsibly.

If Twitter’s goal is to become a digital global town square where people discuss “a wide range of beliefs,” then being a credible source with an excellent reputation, integrity and a responsibility ethic are necessities. Making Twitter a profitable “trusted source of information and a haven from toxicity” does not happen in a vacuum. Brands can live forever but only if properly managed.

Amazon Prime Branding

Amazon Prime: The Bundle Is Better

Which is better for the brand? Asking users to pay for individual services? Or asking users to buy a bundle of services? There is a lot behavioral psychology involved in this choice that affects brand perceptions. There are inherent risks whichever approach a brand employs. 

Research shows that individual fees feel more personalized as a customer can select those services needed while rejecting services that will never be used. Apparently, however, a large number of price components seems to lower the brand’s perceived fairness while potentially lowering purchase intentions.

For example, hotels add on fees that a guest may not use, yet is expected to pay. Resorts are especially prone to charge fees that may go used. 

Many brands employ fees to gain revenues off of their ostensibly free service. According to The Wall Street Journal, Snapchat, Twitch, YouTube, Tinder, Grindr, Discord and TikTok, for example, all have additional services to which a user can subscribe for a fee. A complication for fee-based revenues is that special fees for special benefits usually means ad-free. But, ads, as we know, are the moneymakers.

Twitter is looking at all sorts of ways to monetize the brand by applying individual fees to different services. Its verification blue check will soon cost $8.

Interestingly, other research tends to show that the brand benefits of a bundle are better. Compared to individual (unbundled) pricing, a bundle offer increases users’ positive evaluations of the brand’s offer; increases purchase intentions while lowering users’ estimates of the cost of the bundle. Psychologically, users generally believe that bundles offer savings and/or convenience because there is a single invoice. 

Furthermore, according to Nicole Nguyen at The Wall Street Journal, prices for streaming entertainment services are rising due to production costs and licensing. Thus, fees for individual services are rising.  Nicole Nguyen writes, “… live-TV streaming services—which were already much more expensive because they attempt to replicate a full cable lineup—are raising prices again. Sling TV’s basic package has doubled since 2017. Music services, too, have crept up, though not as dramatically. Most recently, Apple increased its Music subscription by a dollar a month.”

Cable companies were castigated for promoting bundles by streaming services. Now, though, streaming services are seeing the benefits of bundles.

According to The Wall Street Journal, “In response to the deluge of options, services are exploring discounted bundles with rivals, which are sounding a bit like the cable packages we thought we left behind.”

For example, the Apple One bundle service includes six Apple services like Apple Music, Apple TV+, Apple Arcade, iCloud+, Apple News+ and Apple Fitness+. Disney+ offers an entertainment bundle that combines Disney, ESPN and Hulu.

Disney+ is also testing a “cross-selling” bundle. Disney+, under pressure to generate revenues, is testing a program whereby users can access exclusive themed toy and apparel deals. Disney+ also believes that offering “curated” merchandise might be a “lure” for new users. The idea of offering a membership program cross-sold with Disney’s hotels, theme parks and cruises is not part of this pilot merchandise project. Of course, Disney has the portfolio of brands from which to create an appealing entertainment and hospitality cross-sell bundle. 

Former Disney executive, Andy Bird, is bringing this thinking to Pearson, the educational brand. Pearson now offers Pearson+, access to all of Pearson textbooks for $14.99 a month. Pearson+ has a lot of educational assets other than textbooks such as workplace training, qualifications and accreditation.

Warner Bros. Discovery, another streaming entertainment brand desperately seeking positive cash flow, is preparing for an HBO Max/Discovery+ bundle.

But, in the world of bundles, nothing comes close to Amazon Prime. Amazon Prime allows users to experience the benefits of the Amazon brand in a myriad of ways.

Amazon is showing how to keep members engaged and willing to pay $139 a year (or $14.99 a month). Amazon Prime offers free, same day delivery, Whole Foods Marketplace, Prime Day (s), books, gaming, TV and movie streaming, a Grubhub+ membership, fashion, NFL’s Thursday Night Football, exclusive content such as its “Lord of the Rings: Rings of Power” series and all sorts of merchandise across all sorts of categories. 

To further enhance Amazon Prime, Amazon just announced that it is offering Prime members ad-free music from a catalog of 100 million songs and ad-free podcasts. Additionally, there will be a Podcasts Preview feature allowing users to hear a short podcast soundbite to help decide whether a podcast might be of interest. (Rumor is that Spotify’s paying subscriber base is growing frustrated with the fact that its podcast have ads, despite paying for the service.)

Steve Boom, VP of Amazon Music said, 

“When Amazon Music first launched for Prime members, we offered an ad-free catalog of 2 million songs, which was completely unique for music streaming at the time. We continue to innovate on behalf of our customers, and to bring even more entertainment to Prime members, on top of the convenience and value they already enjoy. We can’t wait for members to experience not only a massively expanded catalog of songs, but also the largest selection of ad-free top podcasts anywhere, at no additional cost to their membership.

“Things have changed,” added Mr. Boom. “As we’ve talked to people who have used music in Prime, they want access to a full catalog of music. It was time for us to expand and update the offering to match customer expectations today.” (Originally, the music catalog was 2 million songs.)

As one analyst stated, “When it (Prime) launched it (Prime) was a free shipping service and music was a deal sweetener. Now that’s changed – it’s a subscription service that has entertainment and free shipping.”

Another observer whose company follows Amazon Prime said, “What else can you sell customers that others can’t sell them? That’s where their (Amazon Prime’s) new frontier will be.”

Yes, Amazon needs to make the $139 a year beneficial to customers. Adding entertainment is particularly appealing. But, so are the mainstay offerings that have grown over the past years. 

Whatever your feelings about Amazon, the brand does focus on its core customers. The VP of Amazon Prime stated that “The No. 1 thing we heard from members was ‘I want more music.’ So, we figured out in the service, with the publishers, how to make that possible.”

For another example, Amazon now has an agreement to with Overtime Elite. Overtime Elite is a “quasi-professional” basketball league consisting of 6 teams with players whose ages range from 16 years old to 20 years old. Overtime Elite is particularly attractive to younger audiences. The agreement with Overtime Elite gives Amazon exclusive rights to stream live Overtime Elite games on Amazon Prime Video in the US.

Further, to enhance its streaming content, Amazon has licensed popular films from Warner Bros. Discovery, a brand under a serious debt load. According to The Wall Street Journal, Warner Bros. Discovery announced $4.3 billion in restructuring charges as well as an existing $50 billion in debt. To generate cash, Warner Bros. Discovery licensed the Lord of The Rings and Hobbit movies to Amazon Prime Video. These films helped Amazon in generating excitement for Amazon’s Lord of the Rings series.

Of course, Amazon’s vast network of offerings that are bundled into Amazon Prime makes the subscription worthwhile. One may not want video or music but may want Whole Foods Market and sports. 

Competing with Amazon, Walmart recently partnered with Paramount+ to add high-quality entertainment to its Walmart+ service.

Social media need to be creative in how to design “sticky” subscriber-fee offerings. Instead of creating a menu of services at individual price points, social media might look at offering bundles of services with a single price point. Partnerships might help social media create bundles that increases usage and attract new users. The idea of “what else can we sell that others can’t” that enhance the way in which customers interact with the brand, must be the goal.

Building Immersive Brand Experiences: American Girl and RH Restaurants

Prior to the pandemic, Starbucks’ founder, Howard Schultz, stated that the way forward for brands is making your branded space an “experiential destination.” At that time,  

Starbucks’ CEO, Kevin Johnson said, “To survive, merchants need to create unique and immersive in-store experiences.” Covid-19 changed things for Starbucks as the company post-pandemic focuses more on drive thru and digital rather than the original experiential third place.

Brands focus on making their experiences come to life in many different ways. This is because a favorable experience with, for example, an iPhone and/or an Apple Watch and/or earbuds increases the probability the same customer might buy an Apple iPad, Mac Air or Mac. With a stable of desirable offerings, Apple continues to build an over-arching power brand by connecting with younger cohorts. In 2018, financial news magazine, Barron’s commented, “Getting more people into the Apple network early can be extremely valuable, especially if they sign up for services that make them unlikely to switch to other phones. And, finding that interest in the Apple Watch is also growing would only help.” Samsung hopes that positive encounters with Galaxy mobile phones will persuade customers to purchase a washer and dryer or other appliance from Samsung when the time comes.

Extended brands that offer multiple product and service experiences strengthen the customer’s commitment and conviction in the brand promise. Disney created spaces where you can meet the animated and other movie “friends” through rides, hotels and cruises.

One of the ways that brands have become immersive is through food. Brands are using restaurants to make the brand encounter a far deeper three-dimensional sensory involvement. Think surround sound for your psyche, soul and stomach. Restaurants make brands immersive without the metaverse.

American Girl, the doll company, and RH, the upscale furniture lifestyle brand both have in-store restaurants that extend and enhance the brand for the customer.

The website for American Girl Stores states, “Ready to make memories together you’ll always treasure? Discover all the experiences our stores offer for a day full of fun!” In addition to in-store parties, a “Dolled Up” salon for the dolls, a doll hospital, activities and hotel packages, there is the restaurant. “Enjoy selections that appeal to girls and grown-ups alike – plus we offer special seats just for doll friends.”

One blog told the story of an American Girls Store dining experience as follows: 

“… hordes of customers (usually moms and daughters, but not always) lining up to have afternoon tea with their dolls. The dolls get their own scaled-down cups and saucers so they can sip invisible tea while the humans polish off petite sandwiches and glasses of American Girl signature pink lemonade.

“(The website states that) possessing your own American Girl is not a prerequisite for the dining experience: “And don’t worry if your girl forgot her doll – we always have extra dolls available to dine with you.”  

RH, formerly Restoration Hardware, has taken the in-store restaurant to an even higher level. As described in The New York Times recently, RH uses its restaurants to provide surroundings focused on RH’s special décor styles and offerings. The restaurants are décor showrooms with a menu. Unlike IKEA, where the spare cafeteria may feature some available lighting or a storage unit, RH has made its aesthetics palpable for its high-end customers. Although the food is quite elegant, albeit expensive, most guests indicate that the beautiful, pleasing surroundings is the draw.

The idea of using a restaurant to immerse customers in the brand, enhancing the brand experience, bringing the brand’s promise to life, is what intrigues Crate and Barrel. In the very tony Oakbrook, IL., mall, Crate and Barrel just opened its first in-store restaurant, Table and Crate.

Privately owned, UK department store, Fenwick’s, also uses the in-store restaurant as a customer draw. Fenwick’s has two different in-store branded restaurants, Fuego and Mason & Rye.

Brands use stores-within-stores to generate traffic. Many of these stores-within-stores are other brands such as Toys R’ Us in Macy’s and Sephora in Kohl’s. Having other brands enhances both brands. Both brands benefit. For example, Macy’s gains the ability to offer customers quality, fun, year-round toy shopping. Toys R’ Us gains actual brick and mortar facilities, a reliable stream of shoppers and the ability to reinforce its brand with old and new customers.

The in-store restaurants also generate traffic. But, the restaurants do much more. In-store restaurants allow a brand to enmesh a customer in the brand’s promise, enhancing the way in which the customer perceives the brand.

The focus on the total brand experience as a physically and emotionally “immersive” destination is not a new concept but a concept that has new traction as we navigate a virtual, digital environment. In 1998, B. Joseph Pine and James H. Gilmore wrote a pivotal, highly influential article for Harvard Business Review titled, “Welcome to the Experience Economy.” The authors argued that experiences are distinctly different from products and services. Increasingly businesses are “explicitly designing and promoting” engaging experiences, and charging for these experiences. An experience happens when a brand “uses services as the stage and goods as props… creating a memorable event.”

In a marketing environment that is weighing the benefits of an artificial immersive world of the metaverse, many brands are choosing to immerse customers in the real world of tastes, smells, feel and food.

Walgreen’s Bets Success On Segmentation

Walgreen’s’ CFO told The Wall Street Journal that the pharmacy’s almost two-year focus on Covid-19 was at the expense of its established customer base. While selling hand sanitizer rubbing alcohol, masks and dispensing vaccinations, Walgreen’s lost relevance with its core customers’ other needs. Walgreens’ is clearly unhappy about this situation. Now that the urgency of coronavirus has abated, Walgreen’s is planning a marketing surge to regain its lost customers and convert vaccination-only people into “permanent” customers.

What is Walgreen’s first step? Needs-based, occasion-driven market segmentation. Using its customer data base, Walgreen’s is analyzing the who, why, how, when and where of customers’ behaviors and needs. Walgreens’ CEO said that the pharmacy intends to group customers into segment “communities” based on needs, preferences and how, where, when they shop.

This is a smart move.

Needs-driven, occasion-based segmentation is a for effective marketing. Market segmentation is especially essential when trying to restore brand relevance. Identifying markets and market potential is the underlying premise of market segmentation.  Segmentation recognizes that the marketplace is diverse.  It recognizes that not everyone is the same; will want the same things; will use products and services in the same context.

Segmentation creates a customer-driven map of the category divided into 1) what the needs are, 2) who has the needs, and 3) in what occasions people have these needs. Knowing the audience, knowing the needs and knowing the occasions are all important. The challenge is to integrate this three-dimensional view of the market into brand- focused market segmentation which is exactly what Walgreen’s plans to do.

Industry classification, price classification and product classification do not reflect customer needs. For example, the automotive industry is adept at segmenting the industry with language that customers never use—mid- size luxury, near-luxury, entry level – but no customer comes in to a dealership with these constructs in mind. The customer has a need. The customer wants a vehicle that can carry a group of kids or is appropriate for a night out with a significant other. Or the customer wants a sporty performance vehicle that is great for winding, country roads. Or the customer wants an off-road vehicle for winter weather. 

The hotel industry continues to use language such as entry level, mid-scale, upper mid-scale, limited service, full service, luxury. Would you say to your significant other, “I made a reservation for us at a mid-scale hotel for Valentine’s Day.”? Segmentation must reflect segments that are meaningful to customers not the industry.

Market segmentation is an important guide for product innovation and renovation. Products and services must address customer problems, satisfy customer needs or anticipate customer needs. Market segmentation provides specific directions (not the answers) for developing relevant, differentiated creative solutions. Walgreen’s will be using these types of insights to create digital ways to regain and convert customers. 

For example, according to Walgreen’s, some groups of Walgreen’s customers could be called “efficiency enthusiasts.” These customers “… are often digitally connected.” They wish to have their shopping over and done with as efficiently yet effectively as possible. “Efficiency enthusiasts” would be those best addressed with promotions offering local store pick-up of online orders.

On the other hand, some groups of customers could be viewed as “support seekers.” These customers probably desire more in-store pharmacy support. “Support seekers” would receive promotions dealing with in-store services. 

Regardless of “community,” Walgreen’s will use its segmentation to fit in with a customer’s “everyday living.”

Using needs-based, occasion-driven market segmentation as a first step is the right thing to do. And, as Walgreen’s is demonstrating, market segmentation is more than math. It is also craft. Walgreen’s is using its information to generate a more creative, yet potentially powerful customer understanding based on actual customer needs and occasions.

In order to find competitive advantage in this fast-paced changing world, it is imperative that Walgreen’s – and all brands – have the clearest understanding of their consumers from all angles – what they buy, who they are, why they buy, how, when and where they use.  

How Burger King, Subway and Starbucks Are Planning to Win in Our Post-Pandemic World

In our post-pandemic world, brands are dealing with changed customer behaviors. Attitudes about and usage of technology leap-frogged decades. How and where we work together is now very different. How we buy foods and beverages has altered dramatically. 

For several brands, one of the outcomes from coronavirus is the reinspection and revitalization of their brand experiences. Peloton and Netflix are just two. Peloton is becoming a subscriber brand while becoming more of a mass brand. Netflix is now offering ad-supported services and is getting into gaming. 

But, it cannot be mere coincidence that, at the moment, three brands in fast food are “remaking” their brand experiences. Burger King, Subway and Starbucks announced major brand revitalizations, all with the same intention: brand revitalization to provide customers with a more relevant experience. Although these brands had problems prior to Covid-19’s advent, the pandemic exacerbated areas of weakness in adapting to users’ changing habits. 

At Burger King, the initiative to modernize and refresh the BK experience is called “Reclaim the Flame” At Subway, the initiative to reinvigorate the brand and upgrade the brand’s customer perceptions.is called “Eat Fresh Refresh” Starbucks’ initiative is called “Reinvention Strategy”. According interim CEO and founder, Howard Schultz, Starbucks “lost its way”. Although Starbucks did fairly well during the pandemic, Mr. Schultz sees things differently. In an open letter to employees, Mr. Schultz wrote: “The Starbucks business as it is built today is not set up to fully satisfy the evolving behaviors, needs and expectations of our (employees) or customers. It is not designed for the future we aspire to for ourselves and the communities in which we serve.”

In order to achieve a successful brand revitalization, it is necessary to have a Plan to Win. A brand must commit to a roadmap defining how to win. A Plan to Win ensures the integration of brand actions across the Eight Ps: Purpose, Promise, People, Product, Place, Price, Promotion, and Performance. A Plan to Win puts the purpose, the promise, the actions, and the performance metrics on a single page. A Plan to Win generates organizational alignment behind the revitalization. 

It is essential to know what are the brand’s purpose and the brand’s promise. For Burger King, Subway and Starbucks, there was little talk about what the brand purposes and promises will be that underpin these new brand revitalization initiatives. Burger King said that it will update its brand in the customers’ eyes. There will be a focus on modernizing the “Have It Your Way” slogan and reintroducing the relevance of flame grilling. As far as Starbucks is concerned, the move to digital, drive-thru with more streamlined stores, some without seating, will affect the brand’s original premise as a third place. All three brands should probably review their brand purposes and promises to ensure that the revitalized experiences support the visions.

The five action P’s – people, product, place, price and promotion – are how a brand will bring a brand’s promise alive for customers as the brand actualizes its purpose. So, let’s look at the how Starbucks, Burger King and Subway have created their actions plans.

People

People are the first action P. This is because employees are the most important assets of any business. They are the frontline when it comes to customer relationships, especially in a service business. 

Starbucks will focus on making work more “appealing, including the availability of more sick time, increased training and technology allowing customers to use credit cards to tip individual baristas.” Additional technology is being installed to make drink customization easier (fewer steps) on the barista. Starbucks pledged to spend an additional $1 billion on labor including barista hourly wage increases. (According to The Wall Street Journal, the National Labor Relations Board has certified unions in 224 Starbucks restaurants.) Mr. Schultz wants to ensure that the next generation of leadership lives and breathes the Starbucks culture.

Burger King and Subway have not articulated to the press plans for their people. However, Burger King’s elevation of its brand should instill pride in employees. Subway’s new menu will allow customers to (hopefully) choose pre-made sandwiches without customization. This will put less pressure on employees during busiest hours. 

Product (and Service)

Product (and service) are the tangible evidence of the truth of the brand promise. A brand needs to be relevantly differentiated, delivering superior customer-perceived value. 

Subway’s renovation is primarily menu-based. Subway is upgrading its bread as well as upgrading eleven ingredients. Last year, Subway upgraded twenty ingredients. The chain of 21,000 US restaurants is “creating a whole new taste profile.” Additionally, the new menu should reduce customer customization that slows down the line. The menu is now organized into four categories consisting of three sandwiches for each category, called The Subway Series.

For Burger King, the focus is on the iconic Whopper. The Whopper will undergo a “premium makeover” so the sandwich is now off of the value menu. Burger King is also hyping its new chicken sandwich, the four-flavor Royal line. Burger King removed the Ch’King chicken sandwich from the menu.

Starbucks promised investors and analysts that the brand would be improving the menu. Fresh baked pastries and to-go salads are under consideration. Changes to machinery reflect the changed behaviors of customers: Gen Z prefer iced drinks to hot drinks.

Place

Place can be anywhere the customer interacts with the brand. It can be a physical location (a restaurant, for example) as well as a virtual location (a website, app or the metaverse, for example). Wherever and whatever it is, place is the face of the brand. 

Starbucks is planning to open 2000 restaurants in North America by 2025, approximately two a day. Some of these stores will handle only pick-up, delivery or drive-thru orders. New store designs will speed service. This includes the new cold bar that can cut the time of making the brand’s specialized cold drinks. Starbucks is also expanding mobile ordering as well as using Uber Eats and DoorDash. The brand expects that delivery will double in revenue in the next couple of years, according to Barron’s. There will also be a push to open stores in China.

Learning from the pandemic’s massive effect on delivery, Subway is instituting Subway Delivers – a DoorDash service available on the brand’s website or app.

Burger King will be investing $250 million in technology, as well as “… new kitchen equipment, building enhancements and high-quality remodels and relocations over the next two years,” according to Eat This, Not That!

Price

Price is a component of the value equation. Value is determined by the total branded experience a customer expects (functional, emotional, and social benefits) for the costs spent (in terms of time, money [price], and effort) multiplied by trust. 

Although none of the brands spoke about price, most of the brands in the restaurant industry have raised prices. Burger King announced that part of its remake is to push Burger King into more “premium” territory. Subway has raised prices over the past year. Starbucks raised prices from 30 cents to 70 cents.

New kitchen technology, simplified menus and digital connections also help to keep prices down. Lines and crew move faster. 

Promotion

Promotions about creating an integrated approach to raising awareness, familiarity, and preference of the brand. Promotion includes every communication on behalf of the brand. 

Subway has been advertising its new sandwiches over the past year. The campaign used sports celebrities. However, only Burger King committed publicly to $150 million in advertising. This is a 30% increase over the past year. Advertising will tout BK’s new experience. Starbucks has not been as active as other brands when it comes to advertising. However, the brand is currently running ads for a few of its coffee varieties offering personalization (“Made to be yours”) as the benefit.

None of the brands discussed metrics. One must assume that many of these revitalizations are based on data. And, it is safe to say that decisions on actions will be measured. For example, the chicken sandwich Royal line quickly replaced the Ch’King sandwich because data showed Ch’King was faring poorly.

Covid-19 upended the trajectories of many brands by ushering in new customer behaviors, attitudes, needs and problems. Having a Plan To Win is critical not just for internal alignment but for succinctly articulating the brand’s direction and actions and performance. The changes at Burger King, Subway and Starbucks show how each brand has outlined the necessary actions needed on the road to the future. Having a complete Plan to Win would be a more successful approach for each of these three brands.

Responsible Innovation Team at Meta

Relinquishing The Responsible Innovation Team at Meta

One of a brand’s most important elements is its perception as a responsible entity. This is especially true of a corporate brand. Responsibility is about demonstrating good corporate citizenship. Responsibility must be corporate-wide. Responsibility must be ingrained into the enterprise as a whole and reflected in all thought and action. Every brand should have a responsibility ethic. Having a responsibility ethic means being an aware, effective global business behaving positively on behalf of people, stakeholders, communities, countries, animals and the planet.

If there is one brand that has faced issues around its responsibility ethic over the past years, it is Meta, aka Facebook. Meta, as Facebook, careened from one irresponsible scandal to another. There was always denial and deflection. The brand’s behavior did not reflect anything close to a responsibility ethic. In order to address its ethical and social issues, Meta, then Facebook, created a Responsible Innovation Team. The Team’s mandate was to figure out how to address the disadvantages and drawbacks of Facebook’s product offerings. According to The Wall Street Journal, the Responsible Innovation Team comprised “… engineers, ethicists and others who collaborated with internal product teams and outside privacy specialists, academics and users to identify potential concerns about new products and alterations to Facebook and Instagram.”

The vice president of the Responsible Innovation Team stated that the Team’s efforts helped design product offerings “with a privacy-first approach.” She indicated that she was optimistic about the Team’s abilities as its efforts were advised by experts in “civil rights, accessibility, human rights and safety.”

Now, it turns out that all that “optimism” may have been misplaced. A spokesperson for Meta says that the Responsible Innovation Team is disbanded. The Team’s members will be dispersed into the company while its “safe and ethical design resources were better spent on more issue-specific teams.”

From a branding perspective, this is a mistake. Responsible business practices influence brand perceptions which in turn influence brand preference. A brand’s societal reputation influences purchase and usage decisions. Data show that ethical policies tend to increase profitability, not decrease profitability. This is because many people are prepared to pay a premium for products and services that have a responsibility ethic at the core.

Other data indicate that people build relationships with brands that do good things. And, increasingly, people are willing to reject brands they perceive as irresponsible. These data are not just recent. As far back as 2013, a large global study showed that 85% of the 10,000 respondents “considered corporate responsibility” when deciding where to shop, what to buy and what to recommend. Brands that are perceived as responsible gain customer trust, an extremely critical element in today’s uncertain world.

Meta is currently staring down some major hiccups with a slowing of its advertising business and a deft competitor. Younger users seem to prefer and interact more with TikTok. And, there is the transition to the “metaverse” that CEO Mark Zuckerberg wishes to achieve. These issues could be helped by reinforcing Meta’s commitment to responsibility. Advertisers are increasingly sensitive to responsibility as consumers are very alert to irresponsible brand behaviors and attitudes.  Furthermore, one of the mandates for the Responsible Innovation Team was to play a part in shaping the way Meta addressed and managed the potential ethical downsides to building the metaverse. Without this guidance, Mr. Zuckerberg’s metaverse could wind up as an amoral meta mess.

Brands do not exist in a vacuum. A brand is more than a consistent, distinctive identity. A brand contributes a common, positive, ethical relevant culture, values, purpose and ambition to the brand’s priorities and objectives.

Having a responsibility ethic within an organization builds a strong, trustworthy brand internally and externally. A strong brand is a value creation advantage. Having people perceive a brand to be responsible creates strong brand bonds. These strong brand bonds create value with customers. Without customer-perceived value there is no brand value.

Allocating responsibility project-by-project within a massive organization such as Meta is mismarketing and mismanagement. This approach does not create internal responsibility ethic. And, without an internal responsibility ethic, there will be no external responsibility perceptions. Responsibility cannot be corporate-wide if it is addressed in a piece-meal fashion. Responsibility becomes siloed within a project.

The Meta brand could use a corporate-wide responsibility ethic. For Meta, as for any brand, not having a corporate-wide responsibility ethic is irresponsible brand management behavior.

Apple: A Powerful, Valuable Brand Makes Money And Opportunity

Building powerful, valuable brands makes money. Building powerful, valuable brands generates opportunities for leverage across customer needs and problems. Building powerful, valuable brands must be the goal of every brand leader.

Case in point: Apple.

Do you pay attention to the yearly surveys listing the most valuable brands in the world? Do you think it matters which brands are the most valuable brands?  So, what if Apple, Google, Microsoft and Amazon are always the top four brands, should I care? 

If you are a marketer or a manufacturer, yes, you should care. Being one of the world’s most powerful, valuable brands matters. Your brand may be affected by the power of a leading, valuable brand.

The 2020 Forbes Most Valuable Brands survey listed Apple, Google, Microsoft and Amazon as the top four most valuable brands; Toyota at number 7 was the first automotive brand on the list. Kantar’s BrandZ top 100 Most Valuable Brands (2022) listed Apple, Google, Microsoft and Amazon as the top four most valuable brands. Interbrand’s 2021 survey listed Apple as number one and Toyota at number 7.

Do you think that General Motors or Ford or even Tesla care that Apple is always the most valuable brand, aside from the ego-kick-in-the-butt? After all, many new vehicles arrive with Apple technology, Carplay, inside. So, it is a selling point to have Apple be so valuable; it can raise the price of the vehicle. Besides, Apple makes phones, tablets, watches and other software. Apple has a virtual app store that can make or break an offering. It has brick and mortar stores that sell its products with the famed Genius Bar.

Right now, for General Motors, Ford, Stellantis, Audi, Volkswagen and many other car manufacturers, the brand to care about is Tesla. Every one of the big global brands wants to out-Tesla Tesla. 

Maybe these Tesla chasers need to make a strategic change. Perhaps, they should ask Siri.

According to Bloomberg, the street.com and 9to5mac.com and other business observers, the latest Strategic Vision (a research-based consultancy) automotive survey among 200,000 new vehicle owners included Apple on its list of 45 brands. The data show that 26% of these new vehicle owners would “definitely consider” purchasing an Apple vehicle in the future. Toyota came in first for “definitely consider” (at 38%) followed by Honda (at 32%). “Apple is the 3rd highest brand consideration with 26% of customers stating they would “definitely consider” an Apple vehicle in the future,” said Alexander Edwards, president of Strategic Vision. 

Even more interesting were the data for “I love it” – when asked about the quality of a potential Apple car. Apple was number 1 in terms of quality impression at 24%. Toyota came in with 15% and Honda with 13%. “What should be concerning to others is that Apple generates a greater amount of Love than any other automotive company, double that of strong brands like Honda, Toyota and Tesla,” Mr. Edwards added.

Tesla may be the darling of all EV’s, but car buyers are aware of Tesla’s quality issues. When it came to “definitely consider,” Tesla came in number 4 at 20%. But, its quality impression was at 11%, well below Apple’s 24%. And, according to Strategic Vision’s data, more than 50% of Tesla owners indicated they would definitely consider an Apple vehicle in the future.

Commenting on this data, Bloomberg Hyperdrive writer David Welch pointed out that Apple is a software company as well as a hardware company. Where many car companies are frustrated with software glitches, Apple could easily rise above these types of issues. “(Tim) Cook (Apple’s CEO) employs legions of coders capable of developing the brains a modern electric vehicle needs to manage battery power and navigate traffic.” 

Automotive software glitches create serious setbacks, embarrassments and safety concerns. In July 2022, the CEO of Volkswagen Group was fired due to software development issues delaying the launch of the prestigious new Porsche, Audi and Bentley EVs. General Motors’ Cruise self-driving robotaxis have been recalled due to software issues. The software was not correctly predicting the direction of oncoming vehicles causing a serious accident.

Mr. Welch also points out that although Apple does not have a factory, its strategic partner Foxconn just bought an assembly plant from General Motors that is big enough “… to make 400,000 vehicles a year.” Foxconn already has its own EV venture that already has 10,00 pre-orders. And, even though, its initial Apple Car initiative, project Titan, has been disbanded, one analyst believes Apple has not given up on an EV vehicle by sometime soon after 2025. Or, other options are a purchase of an existing EV startup such as Aurora Innovation Inc. whose CEO recently saw a purchase by Apple or Microsoft as one way to survive.

Assuming Tim Cook greenlights a vehicle, and assuming that the coders and factory all fall into place, Apple would be operating from an incredible advantage. Those most valuable brand ratings are not just for investors, analysts and the financial community. Those most valuable brand ratings also reflect consumer perceptions. This is because these most valuable ratings usually include a series of customer-centric elements, not just financial elements.  For example, ratings are gathered across elements such as familiarity, regard (esteem), relevance, uniqueness, performance and trust. 

A brand’s power is based on its distinctive identity, its familiarity, its special (relevant and differentiated) promise and its perception that it is an authoritative source including quality, leadership and trustworthiness. All of these combine to create value. The whole point of brand management is to profitably create and grow enduring customer-perceived value for the brand(s).

Powerful, valuable brands make money The goal must be to become the identity that is the most familiar, highest quality, leading, most trustworthy source of a relevant, differentiated promised experience. A powerful valuable brand is a preferred brand.  A preferred brand has loyal customers who are willing to pay more even when their second choice brand is less expensive. The Apple iPhone 14 is the latest example.

As Mr. Edwards of Strategic Vision stated, “Of course, what Apple ultimately presents in terms of styling, powertrain, product and other key features will finally determine the level of interest generated among car shoppers. However, their (Apple’s) brand awareness and reputation provide a formidable platform that automotive manufacturers should brace themselves for accordingly.”

Apple has spent decades building its brand into a global behemoth of authority and specialness. Customers have flocked to Apple’s product offerings not just because of their beauty and usefulness but because of the brand’s quality and trustworthiness. Apple’s reputation is stellar. All of these elements give Apple the leeway to cross over into categories outside of phones, tablets, computers, laptops and entertainment. Perhaps cars are a future step.

The Tesla chasers need to think about the power of the Apple brand now and how that power can vault a vehicle to become number one. When, even hypothetically, customers say they are more interested in an Apple EV than a Tesla EV, everyone needs to take notice.

As Apple shows us, building a powerful, valuable brand allows leverage across categories. Building a powerful valuable brand is an ongoing, every day activity that rewards customers and other stakeholders in the present and in the future. 

omega watch branding

Abundant Rarity and the Omega Swatch MoonSwatch

Recently, a commentator for Financial Times wrote that “luxury is scarcity.” The reporter referred to issues concerning the German wine industry and the German car industry. Apparently, German wines no longer have a cachet. One of the reasons is the expansion of its varietals. Quantity over quality. As for the German automotive manufacturers, Mercedes is excising its entry-level brands to focus on its more expensive, more luxurious models, in other words, fewer luxury vehicles. On the other hand, Porsche took the opposite approach: Porsche went for quantity and variety over scarcity and seems to have been successful. It is supposedly headed for an IPO.

Whatever, the situation, saying that scarcity is luxury and vice versa is a marketing miscalculation. Luxury is more than scarcity. And, some brands are winning by embracing a different luxury model for today’s changing world; a model that turns scarcity on its head.

The French branding expert, Jean-Noël Kapferer, writes extensively about luxury. He has examined the traditional concept of luxury as something exclusive and rare. A luxury brand in its classic sense is “an inessential, desirable item that is expensive or difficult to obtain.” In his writings, he describes a new concept of luxury that brand owners might consider: luxury can be both widely available and exclusive: he calls it “abundant rarity.” His concept is based on the discussion of how a luxury brand can remain a luxury brand even if it is so available that it is no longer rare.  

This is a paradoxical conundrum. If a brand remains highly exclusive with limited production units and waiting lists, it is a smaller, coveted brand than if it has wide distribution: think the Hermes Birkin bag. But, to satisfy the desires of people around the globe, some luxury brands are no longer difficult to obtain. One no longer has to travel to Paris to find Louis Vuitton or Chanel. Once a luxury brand is widely available it may become less exclusive, even if it maintains its price premium. It may run the risk of losing its hard-won cachet. Many luxury brands are no available on upscale resale sites as well.

Mr. Kapferer says that some luxury brands will have to figure out how to maintain a high-class, exclusive aura while being available to many.

This brings us to Swatch. Not exactly your brand defining luxury. Please be surprised. Abundant rarity not only is a way for luxury brands to exist in today’s changing world, it is also a way to create a sense of scarcity for more mass market brands.

Swiss-based Swatch Group is the owner of some of the world’s most coveted luxury brands. Swatch Group owns Blancpain, Breuguet, Harry Winston, Omega, Longines, Tissot and Rado, to name a few. It is also the owner of Swatch, the inexpensive, battery-powered, quartz-regulated watches that became cult offerings in the 1980’s and 1990’s. 

Swatch was your “second watch,” hence the name. Swatch wanted you to change your watch every day according to how you felt and what you were wearing and doing. Over time, Swatch generated a wide variety of “collectible” watches even though the brand was widely available. Swatch offered the caché of Swiss precision in a whimsical, unique, “affordable accessory.” Swatch was so successful that in its heyday its sales reached close to $20 million a year. Consumers fell in love with the creative, colorful designs. New models were scooped up immediately.

One of the extraordinary elements of the Swatch brand was its ability to leverage abundance and rarity. Although not a luxury item, Swatch understood the consumer need to own something inherently unique that was available to anyone, anywhere. Swatch dropped new, immediately coveted designs on a regular basis.

You may not know this but plastic Swatch single-handedly resuscitated the sedate, serious, exclusive traditional Swiss watch industry in the late 1980’s and 1990’s. So much so, that currently, extreme luxury watch brands are hot. Financial Times sometimes devotes an entire section to watches. Not only are these watches bought as investments, these watches are pitched as items that can be passed down to future generations as more than mere status but as family tradition.  High-end watches are rare and expensive. They are also prestigious, conferring a particular image to the wearer.

Furthermore, it turns out that coronavirus lockdowns have hyped the desire to own expensive Swiss timepieces. During the pandemic, expensive mechanical watches became hot items for those stuck at home. Brands such as Rolex, Patek Philippe and Omega Speedmaster saw prices rise. According to CE Noticias Financieras English, with Covid-19 forcing people to stay at home, “…prices for some steel sportswatches (sic) more than doubled on the secondary market, and today it’s nearly impossible to buy a Rolex at the suggested retail price, even from an authorized dealer.”

However, Swatch brand watched from the sidelines. As its high-end siblings grew more coveted, Swatch’s fortunes were hammered by fitness wristbands, smartwatches and smartphones, all of which changed the way we perceive and use watches. According to Swatch CEO, Nick Hayek, Swatch lost some relevance to younger generations. 

In order to bring back the swagger, Swatch joined with one of the Swatch Group’s more prestigious brands, Omega. The result is the Omega-Swatch MoonSwatch. This is another example of Swatch employing abundant rarity to its advantage. The Omega Speedmaster Moonwatch is a rarity among timepieces. It is also a fine, luxury Swiss watch. Swatch’s version shares in its sibling’s limelight.

The Omega-Swatch MoonSwatch highlights the look, feel and tradition of the coveted Omega Speedmaster Moonwatch, the watch worn on the wrists of U.S. lunar astronauts. The Omega Speedmaster Moonwatch is a steel, hand-wound timepiece selling for about US $7,000. Its new, scrappy sibling, the quartz, ceramic and plastic Omega-Swatch MoonSwatch costs around US $260. 

As quoted in CE Noticias Financieras English, CEO Hayek credits the collaboration with Omega for bringing Swatch back into the luxury category.  Mr. Hayek says that “… sales of Swatch brand in Switzerland (excluding the MoonSwatch) rose 41 percent since the watch’s launch, and other regions have seen similar increases.”

Although the Omega-Swatch MoonSwatch is not a limited edition, there appears to be a robust resale market for the brand. Data show that Omega-Swatch MoonSwatch watches are selling for twice its original price online. This is something you see with high-end brands such as Rolexes due to the brand’s scarcity. But, twice the price for a Swatch?

Swatch has come back and grown relevant by cleverly using the concept of abundant rarity. The German wine makers and automotive companies might want to take a look. The collaboration with Omega that draws on Omega’s heritage while maintaining the benefits of a Swatch watch shows that the disruptive marketing of the 1980’s and 1990’s that made Swatch a must-have are still as applicable today. One of those elements is abundant rarity, the ability to be seen as highly unique and highly available.