sears brand mismanagement

Sears’ Twilight Saga: Tracing Sears’ Downfall to Troubling Brand Management Behaviors

Unless you live in Illinois, you might have missed the news: the last large Sears department store has closed. Twenty minutes west of Chicago’s O’Hare airport, the Sears at Woodfield Mall in Schaumburg, Illinois took its last breath this November: the property will be redeveloped. This is poignant. Chicago, Illinois was where Mr. Sears and Mr. Roebuck founded the brand in 1892. 

The Sears at Woodfield Mall is just one of thousands of Sears stores shuttered over the past couple of years. Along with its financially-stressed step-sibling Kmart, Sears is no longer a living brand. Some refer to Sears as a zombie brand: no longer alive but lingering on the landscape. 

According to investigative reporting in Retail Dive (a provider of … “in-depth journalism and insight into the most impactful news and trends shaping retail. The newsletters and website cover topics such as brick-and-mortar, retail technology, e-commerce, marketing, payment technology, store operations, omnichannel, and more”), there were about 40 Kmart and 39 full-line Sears stores left as of May 26, 2021. USA Today reported recently (November 14, 2021) that there would be 15 Kmart and 19 Sears stores left after November closings. And, recently CNN reported that there are only 23 full-line Sears stores in the US including Puerto Rico. And, CNN said also that by December 2021, there will only be  12 Kmarts in the US, including the Virgin Islands, Guam and Puerto Rico. Over the past 15 years, Sears and Kmart have shuttered over 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. His 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. Mr. Lampert was chairman, and later, CEO of Sears Holdings.

During 2018, Sears Holdings filed for bankruptcy. In January of 2020, Mr. Lampert bought 400 Sears and Kmart stores out of bankruptcy, placing them in a new company, Transformco (Transform Holdco – a financial entity of Mr. Lampert’s creation.) It was a last minute sale approved by the bankruptcy judge. Sears Holdings, the old Sears, including Kmart, are still in bankruptcy and litigation. Transformco said its intention was to keep the 400 stores open. This has not happened, so there are now 34 stores, approximately.

Although Mr. Lampert’s history with Sears Holdings was unfortunate, to be fair, there was plenty of brand mismanagement prior to Mr. Lampert’s control. Nevertheless, Mr. Lampert did not implement any brand building to right the Sears and Kmart sinking ships.

Rather than reiterate the sad – and litigious – saga of old Sears’ Holdings and new Sears (Transformco), let’s look at the ways in which Sears Holdings’ brand-diminishment behaviors prior to its 2018 bankruptcy led to Sears’ soon-to-end night of the living dead.

Here are four tendencies for trouble that put Sears into zombie mode.

Troubling tendency #1: The arrogance of (great) success

Success is everybody’s aim. Sears had decades of successful retail dominance. From its beginnings as America’s catalog with expertise in fulfillment to its selling everything Americans could want 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.

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 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 new book on 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.

Avoiding arrogance takes character and 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.

Troubling tendency #2: The comfort of 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. Brands are active promises of an expected relevant, differentiated experience. 

A professor at the University of Michigan Ross School of Business pointed out several Sears’ management missteps. Sears did not appreciate the rise of big box stores, ended the catalog and neglected to invest in e-commerce. The professor told Retail Dive that even prior to Eddie Lampert, “Sears was fat rich and complacent.” He added that retailing is just an incredibly “brutal” business and fat, self-satisfied, complacency and arrogance allows great retailing to suffer.

Troubling tendency #3: Financial engineering above customer satisfaction

Retail Dive states that Eddie Lampert “… undertook some of the most complicated and thorough financial engineering the industry has ever witnessed, and which has now become infamous among retail observers, as well as the target of litigation.”

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. A retail analyst and president of a retail consulting firm told Retail Dive, “(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.”

As one industry observer stated, “It’s a financial play. There are probably some things to do with the (Sears’ and Kmart’s) property, but as a viable retail business, there’s no future there.” This highlights one clear rule: you cannot cost manage your way to high quality revenue growth.  

Mr. Lampert saw the gold in Sears’ brands. In 2017, while heading Sears Holding Co., Mr. Lampert sold Craftsman, the 90-year-old tools brand to Stanley Black and Decker for $900 million. Transformco sold the DieHard (batteries) brand to Advance Auto Parts in 2019. A Transformco spokesperson indicated that at Advance Auto parts, Diehard would be able to innovate: something that was not happening at Sears Holdings.

Troubling tendency #4: Loss of 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, however, it appears as if Sears’ and Kmart management is not focused on the customer. 

One data consultant interviewed stated the obvious about Tranformco: “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. But, it also 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. 

Just look at Sears’ Kenmore brand.

Those who said Mr. Lampert would make money by licensing the Kenmore name, for example, might want to reconsider. Kenmore loyalists are aging out of the marketplace. Those who are shopping large appliances most likely have never heard of Kenmore. Or, they may associate Kenmore with their grandparents’ homes. This happened to Electrolux vacuums, those heavy, long metal cannisters. A survey from the 1990s showed that Electrolux vacuum cleaners had incredible brand relevance, but it was among loyal 70+ year-olds. The brand lacked familiarity, let alone relevance, with most vacuum cleaner shoppers. Oldsmobile also suffered from a lack of relevance. The brand actually put its own nails in its own coffin by (ironically) advertising that Oldsmobile was not your grandfather’s Oldsmobile anymore. General Motors subsequently killed the brand.

Loss of relevance is self-inflicted. Loss of relevance stems from losing touch with the customer and from taking your eyes off of a world is changing. Loss of relevance stems from lack of innovation and renovation. The good news is that relevance can be built quickly, unlike trust which takes time to rebuild. With proper resource allocation – not financial finagling – and a passionate belief in the brands, brands can recapture relevance again. 

A statement from Transformco in USA Today indicated that there is a “go-forward strategy” for Sears and Kmart. This strategy is “ … to operate a diversified portfolio consisting of a small number of larger, premier stores with a larger number of small format stores.” Transformco believes it “… will continue to expand both Hometown Stores (appliances, tools, garden implements) and Home & Life Stores (Smart home and home services, replacement parts and connected appliances) in cities and towns that previously had larger format stores.” Additionally, efforts will be made to grow and the Sears Home Services business.

This remains to be seen. 

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. You’ve entered the twilight zone.

Peloton’s Three Marketing Must-Do’s

Apparently, Peloton is losing its shine. Press reports indicate that Peloton’s shares are down as are investors’ hopes. Now that cities and towns are open, why workout from home anymore? 

Peloton will need to work harder to generate new customers. And, the brand could risk losing some of its current customers. 

Answers to Peloton’s dilemma are not as simple as home workout versus gym workout. Peloton came on the scene well before Covid-19. Peloton provided a solo at-home workout within an avid online community. With the advent of coronavirus lockdowns, in-home physical activity became critical. All Peloton did was leverage the lockdowns. The schedule of classes grew to include outdoor runs and walks, yoga, meditation, Pilates, barre, stretching, core, weight training, bodyweight training, bike and tread bootcamps and dance cardio. Peloton added pre- and post-natal classes. The brand also segued into apparel and accessories. 

Fewer sign-ups with purchases of its hardware cannot be blamed completely on the waning pandemic. Peloton’s marketing could use an improvement. 

Here are three marketing must-do’s that Peloton should implement to get its mojo back with customers and potential customers:

1. Stop The Excessive Price Marketing

Peloton communications have been price-focused, not brand-focused. Peloton has been luring customers with incentives. This has serious implications for brand loyalty. Brand loyalty cannot be bought with bribes. True, the communications show lots of different people on Peloton cycles and treads or people taking off-equipment, mat classes. But, the main message point is that the cycles and treads are now cheaper. Making the brand’s experience cheaper does not build brand strength. Reminding people that a brand is affordable is important. But, emphasizing price alone damages brands. Peloton’s communications should say “Great brand at a great price” instead of this is a great deal. Unfortunately, Peloton’s recent messaging has not emphasized the “great brand”.  The message has been “We are on sale. This is a great deal.”

2. Connect With The Brand’s Purpose

Peloton’s communications have not connected with Peloton’s core mission. A brand must be in sync with its desired spirit. Mission statements express the brand’s intent, its purpose. Peloton’s prospectus offered the following: “Peloton uses technology and design to connect the world through fitness, empowering people to be the best version of themselves anywhere, anytime.” Clearly the instructors are aligned. You understand this if you actually take classes. But, for a prospective customer, the brand’s purposeful message is unstated. There are probably a lot of people who would appreciate the opportunity to participate in Peloton’s world view. Peloton’s uplifting, positive, you-can-do-it message is not communicated to the uninitiated. It is a best-kept secret.

Describing Peloton’s business model in a recent Harvard Business Review article, the authors conclude that even though participants are in different locations, participants exercise “…with a virtual community of peers and instructors” and “… the brand’s meaning extends beyond what they would experience with the bike alone.” 

This is true. But in order to increase owners/subscribers, Peloton must share its meaning with prime prospects. Peloton’s meaning has to be meaningful to both users and like-minded others. 

3. Maximize The Paradox of Inclusive Individuality 

People want to be seen and respected as individuals. At the same time, people want to belong so something bigger than themselves. People want both independence and interdependence at the same time. People savor their uniqueness while wanting to share that uniqueness with like-minded others. People cherish their particular characters and their commonalities with others. They want to respond as individuals and they want to share as members of a community of common interests. “I am an individual with unique wants and needs. But I am not alone. I belong to communities of people who want the same things as I do.”

This is what Peloton does really well. This is what Peloton is: the epitome of Inclusive Individuality. And, yet, you would not know this unless you were actually part of the Peloton family. There is no relevant distinctive messaging around this critical connective social force. Peloton must manage its brand messaging differently, articulating that its brand experience promises to respect, encourage and strengthen individuality while belonging to a supportive family. Peloton is the ideal place where people are praised for who they uniquely are and what they can uniquely do while belonging to a group that shares their distinctiveness. Peloton’s messaging lacks this compelling, powerful promise of inclusive individuality. Going to a gym pales in comparison.

No one really knows the extent to which people’s attitudes and behaviors changed during the past 20 months. Peloton needs to determine what the actual causes are for fewer signups. But, there is no question that needs to be marketing improvement. 

Peloton has a lot to give. Implementing the three must-do’s will allow Peloton to demonstrate that it has more to give than exercise equipment, physical fitness, music and leggings. By connecting to its stated purpose and emphasizing its inclusive individuality, Peloton will be on its way to becoming a great brand that is a great value.

Hertz Bets On An Accessible Tomorrow In Which We All Will Win

This is surprising news.

If any legacy automotive company were to have a clear, concise, inspirational vision about the future it would be Ford Motor Company. Ford Motor Company became successful because its founder, Henry Ford, had an incredible vision. Simply put, Henry Ford saw a future where everyone who makes a car would be able to drive to work in their own car. To do this, his company would make a car that would be affordable to every American.

However, it is not Ford Motor Company that is creating a future in which it will win. It is a most unlikely candidate: Hertz.

Hertz is over 100 years old. Its car rental business was decimated by Covid-19. When people stopped traveling, they stopped renting cars. Hertz filed for bankruptcy selling off inventory just to keep the business operational. If you did wind up at a Hertz counter during the pandemic, your choices were not only limited, but iffy as some vehicles had maintenance issues.

In a detailed and rather distressing review of Hertz’ problems in Bloomberg BusinessWeek, Hertz suffered for decades with financial engineers managing the business. Hertz amassed extraordinary debt. Additionally, there were operational problems merging its Hertz systems with newly acquired Dollar Thrifty, pressure and input from Carl Icahn, serious accounting issues resulting in an SEC fine and a lawsuit against three executives and a CEO, still ongoing.

Yet now, under new ownership and leadership, Hertz is being viewed as visionary. Hertz’ post-bankruptcy future is being guided by interim CEO, Mark Fields, who is an ex-Ford Motor Company leader. Mark Fields is not just a car guy: he is a Ford Motor Company car guy. He understands the value of creating, articulating and actualizing a galvanizing, startling, compelling possible dream. 

You cannot work at Ford Motor Company and ignore its provenance. The greatest part of the Ford Motor Company legacy was the democratization of mobility. Anyone could afford to buy a car. And, according to Mark Fields, underlying the purchase of 100,000 Tesla vehicles, the construction of EV charging stations and a partnership with Uber, is the belief that for electric vehicles to become the norm, some company will have to democratize electric vehicle mobility. Mr. Fields stakes his bet on Hertz.

Surveying the established automotive brands, most of these have or will have EV’s with prices out of range for the average car buyer. And, as Mr. Fields points out, only Tesla has the capacity to churn out electric vehicles “at scale.” Success for electric vehicles will only come when they can be owned by anyone. This is vintage Henry Ford.

“I will build a motor car for the great multitude. It will be so low in price that no man making a good salary will be unable to own one.

“When I’m through everybody will be able to afford one and everyone will have one ad will be able to enjoy with his family the blessing of hours of pleasure in God’s great open spaces. The horse will have disappeared from our highways, the automobile will be taken for granted and we will give a large number of men employment at wages.”

In other words, the purpose of Ford Motor Company was to make “… mobility accessible to everyone.”

Some of the most successful brands are based on democratizing their categories. McDonald’s democratized eating out. Target democratized stylish, well-designed yet affordable products. The Franklin Mint democratized owning artworks. Its die-cast airplanes and vehicles, plates, commemorative pieces, dolls, coins, sculptures gave people the opportunity to own and collect art. Olay skincare democratized scientifically designed products that work at affordable pricing. The Ordinary, recently purchased by Estee Lauder, takes that affordability to a new level. The Ordinary’s serums oils and creams in most cases cost around US $8. IKEA democratized furniture while its Swedish relative, H&M, democratized fashion.

Many of the automotive companies betting on the all-electric future envision a cleaner world, a more sustainable tomorrow, a smarter (AI, digital) tomorrow. Sustainability is essential, of course. Opening that sustainable world to everyone in ways that make mobility accessible to the masses is even more bold and exciting. (The Chevy Bolt EV and the Bolt EUV could have been positioned as democratizing EVs but all Bolt electric vehicles have been recalled because their batteries could be defective and cause fires. In San Francisco, bolt EVs are banned from parking lots citing “public safety.” General Motors has focused on EV leadership rather than on EV’s for the masses, look no further than it electric Hummer, starting at US $80,000.

While business press and practicing pundits focus on the financial implications of Hertz’ statements, and while Elon Musk (a visionary in his own right) tweets about the on-off nature of the unsigned Hertz contract along with the pace of Tesla-to-Hertz deliveries, Mark Fields presents a future-oriented, ambitious goal with opportunities that others did not see. Mr. Fields is creating the dimensions of the world in which Hertz will win, a world in which competitors will be playing by Hertz’ rules. He is providing a framework that will guide decision-making, planning and action.

In Hertz’ tomorrow, Hertz will succeed by owning the bat, the ball and the playing field. And yet, in Hertz’ tomorrow, we will all be winners.

Friendly’s Faces the Future

Recently, Friendly’s, the 80 year old east coast, family-friendly restaurant known for its ice cream creations and flavors, along with signature sandwiches, burgers and other main courses, hired a new advertising agency. The new advertising agency will help Friendly’s transform itself into a modern, fast-casual restaurant that is more in touch with our “on-the-go’ dining behaviors. The agency’s task is to revitalize an aging brand.

Founded in 1935, Friendly’s became a place to take the kids where adults could enjoy a nice, substantial meal at a fair price. Since 1935 dining out with kids changed. Fast food brands offer family-friendly environments. Frozen treats chains offer ice creams and frozen yogurts. Entertainment dining options (i.e., Chuck E Cheese) make dining fun. Casual dining restaurants offer kids’ menus. People are having fewer children. Now, Friendly’s finds itself in a shrinking market with a shrinking need with a shrinking customer base. 

To make matters worse, Friendly’s fell into a vicious cycle of being bought and sold. Friendly’s has had numerous owners (Hershey’s, Sun Capital, Dean Foods), none of which were able to get Friendly’s back in sync with customers. And, as part of this vicious vortex, Friendly’s filed for bankruptcy twice. Also, Friendly’s closed numerous stores up-and-down the Eastern Seaboard. 

In early 2021, Amici Partners Group, an investor group with expertise in restaurants, purchased Friendly’s. Amici Partners Group is affiliated with BRIX Holdings, owner of RedBrick Pizza Kitchen Café, Souper Salad, Red Mango Yogurt Café Smoothie and Juice Bar, and other restaurant chain brands.

Friendly’s describes itself as “… an iconic brand offering everyday value, full-service … with great tasting food and ice cream creations.” Now, Friendly’s wants to be a player in “on demand dining” while keeping its essence as a joyful, fun place to eat with fair prices and great service. According to recent press releases, Friendly’s wants to deliver a revitalized brand experience in a fast casual, take out, grab-and-go digital dining world.

This will be a challenge. But, Friendly’s can be revitalized. 

Friendly’s has a foundation that is relevant in any age. The key will be to modernize its provenance without completely discarding the brand’s inherent, powerful values. Sure, Friendly’s has been in trouble over its eight decades. But, Friendly’s heritage provides an enduring fundamental core. 

Legacies can actually be liberating if managed properly.

However, brand revitalization is more complex than hiring an advertising agency. Successful brand revitalization requires a disciplined adherence to six basic rules. 

The six rules for brand revitalization are:

  1. Refocus the Organization
  2. Restore Brand Relevance
  3. Reinvent the Brand Experience
  4. Reinforce a Results Culture
  5. Rebuild Brand Trust
  6. Realize Global Alignment (if a global brand)

Refocus the organization around financial discipline, operational excellence, leadership marketing and the brand’s purpose.

Friendly’s is familiar with this first rule. Friendly’s has a deep-rooted ethic dedicated to growth and operational excellence. 

According to an online archive from its Hershey-owned days (1999), Friendly’s believed success would be based on its ability to: “Achieve profitable growth by leveraging Friendly’s brand strengths and heritage, while utilizing franchising as a key growth initiative designed to fully penetrate identified opportunity markets,” 

Financial discipline means getting back to profitability: stop the bleeding, eliminate waste, improve productivity. Friendly’s already endured massive store closings. Friendly’s emerged from two bankruptcies. Cost cutting alone should not be the only solution. There may not be anything left to cut. 

Operational excellence means delighting customers with a branded experience so an increasing percentage of them look forward to purchasing the brand more often. Key is achieving an efficient and effective balance between meeting customer expectations and minimizing waste. Friendly’s already understands this. One of its guiding principles was Operations Excellence: “Consistently achieve operations excellence – 100% guest satisfaction, 100% of the time… taking great care of our guests, no matter what it takes.”

Leadership marketing means attracting new customers to the brand, encouraging existing customers to purchase more often and increasing customer loyalty. Operational excellence moves customers to the door; leadership marketing moves them into the store. Friendly’s move to communicate its new direction will help.

The brand’s goal – its purpose – clarifies the brand’s strategic direction. Purpose articulates the brand’s intent: its North Star. In the online archive, Friendly’s North Star was: “To be the leading casual full service restaurant/ice cream shoppe and premium retail ice cream brand in the Eastern United States…known for operations excellence, great signature foods, famous ice cream shoppe desserts, sparkling clean facilities, prompt, friendly service and dedicated, talented people… resulting in outstanding customer loyalty and consistent profitable growth.” There is a lot to work with here.

Friendly’s must focus on articulating and implementing a relevant, differentiated North Star as Friendly’s is aiming for the already crowded, competitive fast casual category.

Restore brand relevance through a thorough knowledge of the market, needs-based occasion driven market segmentation and a clear statement of the brand’s brand promise. 

There is nothing more important in brand revitalization than understanding what is relevant to today’s customers. Know your customers as if they were your BFFs. Focus on customer needs, problems and occasions. 

Articulate a compelling brand promise describing the trustworthy branded experience that will be delivered in a quality manner, each time, every time, to each and every customer. 

Friendly’s has a history of quality and integrity as expressed in its value statements: (Integrity) “Practice the highest standards of business ethics and integrity in all lines of our work.” And, (Quality) “Consistently exceed our customer’s expectations in terms of great tasting recipes, spectacular presentation, quality and value.”

The dining landscape changed around Friendly’s. Customers changed attitudes and behaviors. Friendly’s advertising will only work if there is a truly insightful understanding of how to solve for customers’ altered perceptions of family-friendly dining.

Reinvent the brand experience through innovation, renovation, focusing on the brand’s Trustworthy Brand Value, the brand’s fair value and the total brand experience. 

Innovation and renovation create news. News moves customers into the store, onto the website, onto the app. Product and service innovation and renovation are essential for enduring profitable growth. News generates frequency. News helps to change behavior.

Build trustworthiness. Customers’ new value equation is Trustworthy Brand Value: what the customer receives (functional emotional and social benefits) relative to the perceived costs (money, time and effort) multiplied by trust. Without trust, a brand has no value. To generate Trustworthy Brand Value, the brand’s inherent value must be perceived as fair value. More than price, fairness means that the benefits-per-costs are equitable and just. Friendly’s has always promised fair value. Keeping this promise will build trustworthiness.

Total brand experience defines what the brand will do for its customers. How will the brand’s people deliver the brand’s experience? How will the brand’s product and/or service deliver the brand’s experience? How will the brand’s place (store, website, app, etc.) deliver the brand’s experience? How will the brand’s price deliver the brand’s experience? How will efforts to promote the brand deliver the brand’s experience?

Friendly’s must assess its perceived trustworthiness while updating its total brand experience. Years of financial instability and store closings affect customer perceptions of trustworthiness.

Reinforce a results culture by establishing measurable milestones, through recognition and rewards and by implementing a balanced brand-business scorecard.

This should not be difficult for Friendly’s. It has a results culture provenance: “Build a results driven organization by attracting, motivating and retaining a diverse, talented and friendly workforce who takes responsibility and has a passion for great service and a keen sense of urgency for fulfilling customer needs,” as stated in the online archive.

Measurable milestones help measure progress. People need to know where the organization is headed and whether the organization is making meaningful progress in getting there.

People manage what management measures, recognizes and rewards. Leadership defines how progress will be measured. The right results must be produced in the right way for the right reasons. Recognition is visible, public and vocal praise, acclaim and tribute in front of your team, your function or the entire brand or company.

A balance brand-business scorecard is a single integrated report card with metrics that represent business strengths and weaknesses as well as brand strengths and weaknesses. Prove progress.

With its checkered history, an immediate must-do for Friendly’s is to galvanize the organization and all stakeholders into believing the brand is stable and capable. Everyone must become an adherent of the new brand direction.

Rebuild brand trust both internally and externally. 

Friendly’s has always been dedicated to building trust with investors and with the community. 

Friendly’s values and guiding principles state, “Continually increase shareholder value through annual increases in customer counts and through performance focused on return on investment, asset productivity, cash flow returns and a strengthened balance sheet.” And, “Solidify Friendly’s image by developing strong, sincere and long term community relationships.

Trust must be earned. It does happen automatically. Friendly’s has endured some troubling times. Trust is needed on the inside and the outside.

Internally, rebuild commitment through education, implementation, inspiration and evaluation. Externally, rebuild trust by following the five principles of trust building: You are what you do; Lead the debate; do not hide from it; Openness is an opportunity; Be a trustworthy source of trustworthy messages; Be a good citizen.

Trust rebuilding requires amassing Trust Capital, along with the other sources of organizational wealth: Financial Capital, Intellectual Capital, Human Capital, Climate Capital and Social Capital. Trust Capital is the customer confidence in the authority, credibility, integrity, leadership and responsibility of the organization to deliver promises of value to all stakeholders.

Realize global alignment (if global) through creating a brand framework and a Plan to Win, and through managing using a collaborative three-box model.

Friendly’s has a heritage of strategic planning for the future. As stated in a guiding principle: “Apply a strategic and planned approach to developing the Friendly’s brand both short and long term, through full-service family-oriented restaurants, retail expansion and other brand tested channels of distribution.”

A Brand Framework provides the non-negotiable guidelines and policies that define the brand’s common customer experience.  The Framework creates the brand’s boundary lines within which the brand is to be communicated and delivered. 

A Plan to Win is a one-page aligning document that articulates 8 must-do’s: the brand purpose, promise, 5 actions (people, product/service, place, price, promotion) and performance metrics. Friendly’s 9 values and guiding principles ( focus, growth, brand, operations, people, integrity, quality, shareholder, community) form a solid starting point.

A collaborative three-box model for global brands is all about shared responsibility. It requires brand personnel to coordinate, cooperate and collaborate. 

Although Friendly’s is not global, the brand must create its brand framework to guide its creativity. And, having a Plan to Win will ensure that everyone knows what to do, when to do and what it will achieve and when. Friendly’s values and guiding principles are an excellent start.

Brand rejuvenation is more than an advertising campaign. Friendly’s has a provenance that connected with customers for decades. Figuring out how to bring that core back to life in a compelling, surprising, delightful, exciting, quality manner for a new, demanding dining marketplace will require following the six rules of brand revitalization.

The Future of Marketing

Marketing needs a new business purpose. Without a new business purpose, marketing will have no purpose. Instead of a profession, marketing has become a trade: the trade of managing and executing marketing and media tactics. Marketing has fallen in love with the increasing number of communication channel opportunities, social media, entertainment, events, online and so on.  In fact, the most recent 2021 Deloitte CMO survey indicates that digital marketing is the CMOs primary responsibility. Digital is a communication channel. Communication channel management is not marketing management. 

Marketers have been complicit in degrading marketing. In 2018, three years ago, in Deloitte’s previous CMO survey, the data indicated that CMOs are not fulfilling responsibilities that go beyond brand recognition, brand value and specific tactics. In the study, 34% of the 200 responding CMOs said their role in their organization was ‘storyteller’ while only 20% said their role was identifying and mapping new routes to client revenue. In other words, the CMOs focus first on what they do day-to-day rather than focusing on the client’s business results as the first priority.  

The latest survey reports the same unfortunate situation. CMOs say their focus is on short-term value. CMOs still have no solid idea if what they do has any long-term value. Brand building and trustworthiness take time. Short-term is important but for enduring profitable growth of the enterprise, there needs to be a long-term as well.

Telling brand stories is fine. Producing quality revenue growth is better. Increasing penetration and building brand loyalty makes money. Being great storytellers is nice if it contributes to the client’s enduring profitable growth. Telling isn’t selling.

Even with the pandemic, it appears as if little substantive has changed over the past 3 years. 

In September 2021, ADWEEK ran an opinion piece on the “trust gap” between the CEO and CMO. In order to bridge the “trust gap,” the author asked us to rethink the CMO role. Part of this “rethinking” is that marketers tend to use marketing language rather than business language (value creation, growth, revenue and share price, for example). Of course, driving enduring profitable growth rather than defining value creation, growth, revenue and share price would be better. 

The recent 2021 Deloitte survey agrees. It indicates that CMOs must defend and “justify” the value of marketing to the CEO and the CFO. CMOs must “explain” the value of marketing. It is not enough to “show how marketing spending is aligned with business priorities and strategies.” Marketing leaders must show the marketing impact on generating quality revenue growth. This is bigger than sales.

Additionally, the ADWEEK author stated that marketers must stop believing that marketing alone can change the enterprise. This is a particularly bad habit. It makes a mockery out of marketing.

We need to look no further than the recent announcement from Nielsen, the giant media measurement company, that the Nielsen logo and brand purpose have been “updated” in order to transform the company. For some time, Nielsen has been criticized for services that do not accurately count audiences in the new world of streaming, cable cord cutting and multiple devices. Nielsen lost its third-party accreditation for its national and local TV panels… the foundational lifeblood of Nielsen. Nielsen is struggling to gain back this accreditation. The updated logo and brand purpose create a new Nielsen. Forget about our past issues. A new brand identity can fix all previous problems.

Somehow, a new logo and brand purpose have magically transformed Nielsen into an enterprise that is “Powering a Better Media Future for All People.” Marketing is not about magic. Being chief magician is not the job description.

Facebook is also considering a name change. The Verge stating that Facebook wants to create a holding company of which Facebook would be just one product. Facebook wants to be known now as a metaverse company. The assumption is that analysts and investors, as well as other stakeholders, will focus on the profitability of the holding company and forget the management and marketing miseries and missteps of Facebook. This thinking assumes that marketing the company as an alternative world will defray the difficulties of the real world. Financial Times wrote, “A rebrand won’t fix Facebook.” And added, “The metaverse promises extraordinary parallel realities, perhaps even including one in which Facebook is well run. … what the company needs is not a new name and a new mission, it (needs) a new culture.”

Marketing can make things sound rosy. Unfortunately, marketing cannot make systems and culture right.

Finally, the ADWEEK piece stated that marketers must rethink the reliance on the “old” definition of brand management which the author believes is “outdated.” It all depends on how you define marketing. The purpose of marketing is the profitable satisfaction of customer needs. There is nothing out of date about this. What is outwardly wrong is the belief that marketing is all about advertising, channels and media.

Marketing is about managing the business. Managing the business is bigger than managing messages and media. Peter Drucker, the most respected management guru ever, once said, “The purpose of business is to create a customer.”  Effective marketing is not merely about message and media management: it is about business management. Effective marketing is fundamentally about attracting and retaining customers. The CMO – the marketing leader – must be the business leader responsible for generating, supporting, and activating a customer-driven focus within the organization.

Marketing leaders must bring a distinctive brand-business perspective to C-suite table by being responsible for:

  • Helping to define the quality revenue growth strategy: attracting and maintaining customers who frequent the brand becoming brand loyalty to generate enduring profitable growth
  • Achieving organizational alignment behind a common brand-business purpose and direction
  • Helping to define the Brand-Business priorities such as 
  • Being the voice of the customer, whether B-B or B-C
  • Knowing more about the customer than anyone else in the organization: being the customer’s advocate
  • Leading the effort to drive true customer-insight focused growth strategies and innovation
  • Leading the effort to break down organizational silo
  • Developing and implementing a Balanced Brand-Business Scorecard
  • Leading customer-driven innovation, through providing insights into customer needs and problems, defining the focus for the development of innovative insight-driven products and services
  • Contributing to the development and implementation of a Brand-Business Plan
  • Developing the price-value strategy (Deloitte states that a collaboration between the CFO and the CMO on pricing is essential for driving organizational growth in a world of inflation and shortages.)
  • As well as responsibility for brand communications, internal and external

Marketing is all about profitably managing customer-driven, top-line growth. 

Respect for marketing will continue to decline unless CMOs re-form and transform marketing’s role from a communication channel role to a brand-business leadership role. (It is interesting that the recent Deloitte CMO survey excerpt from The Wall Street Journal does not mention the word brand at all.) 

But, also, shame on CEOs, CFOs, COO’s and other C-Suite executives when often the first questions they ask a new marketing leader are, “What will the new advertising be? Will there be a new slogan? Will there be a new advertising agency? What is our new digital strategy?”

Marketing leadership must revitalize the marketing function now. It is not enough to be “at the C-suite table.” Deloitte 2021 states that 53.5% of CMOs interviewed participate in Board meetings. Whatever this participation entails, apparently it has not helped increase perceptions that marketing has value.

Marketing must reassert its role as the leader in guiding the development of customer-driven growth strategies that lead to brand value creation and enduring profitable growth. Digital transformation is necessary. But, what you are communicating and why and its impact on enduring profitable growth are critical.

The future of marketing will depend on leaders who understand marketing’s role as driving a brand-based, customer-focused business that attracts and retains customers resulting in sustainable, profitable growth. Marketing is more than a multi-channeled, multi-device communications role; it is a business management role. 

Gen Z Corporate Accountability

Forget Resilience, The Future of Business Is Accountability

For several years, the business press and business books have promoted the idea of resilience. The notion of a resilient enterprise or a resilient brand has been bandied about one of the goals of business management and leadership. Resilience is now beyond a buzzword: it is a critical and desired characteristic. 

Resilience is important. The ability to recover fast has been especially important in the Covid-19 environment. Flexibility, learning on the go, elasticity are essentials for corporate and brand endurance. Toughness and grit are considered exceptional qualities for C-suite executives. 

However, the political, social, institutional and environmental challenges of the past few years show that accountability is now more important than ever. Increasingly, people are expecting businesses, their leaders and their brands to be accountable. Not only do people expect businesses, leaders and brands to justify their actions, people will hold businesses, leaders and brands accountable for those actions. Customers do not go around asking about resilience; they do focus on accountability. To be customer-centric, accountability must be prioritized.

In the recent Deloitte Global 2021 Millennial and Gen Z Survey, the researchers point out that these two cohorts expect “institutions” to “drive change on the issues that matter to them the most.” The report concludes that it is going to be imperative that businesses “take actions and be accountable for activities that will help build a more equitable, sustainable world.” According to the Survey among 14,655 Millennials (b. 1983 – 1994) and 8,272 Gen Zs (b. 1995 – 2003), “… young adults are pushing for accountability … on issues including racism, the environment and wealth inequality.”

Brands are at their best and are most compelling when they align with the values, concerns and hopes of their customers and prospective customers. In our changing world, there is a growing and vocal audience expecting brands to stand up for what they stand for. And, young adults are savvy enough to know when a brand is talking appropriately but not acting appropriately.

For example, there is a difference between Tesla’s vision and that of General Motors. Tesla states:

We are designing and manufacturing a complete energy and transportation ecosystem that is fully vertically integrated. By doing so, we are creating affordable products that work together to amplify their impact, leading to the greatest environmental benefit possible. We seek to achieve this through our research and software development efforts as well as through our continued drive to develop advanced manufacturing capabilities.

General Motors recently announced that is wants to be “a growth-focused technology company.” General Motors wants to be the Apple of automotive. Where is the promise of a sustainable future? Where is the accountability?

Corporate America has tended to focus on making money for shareholders. This has spawned all sorts of financial finagling that at best lines executives’ and shareholders’ pockets at the expense of all other stakeholders and brands. At, its worst, a focus on making money for shareholders has an unpleasant relationship with the amorality of greed.

As former Unilever CEO, Paul Polman said in an interview with Financial Times, “The social responsibility of business ultimately is to ensure that we have a healthier planet. If businesses cannot show they’re making a positive impact on the world, why should we let these businesses stay around? You should put the interests of your children and your grandchildren ahead of your personal greed.”

We are now witnessing the beginning of an era of goodness. The Wall Street Journal pointed out in September 2021, that for a handful of branded organizations seeking IPOs, the underlying mission is not greed, but “do-gooding”. These branded enterprises are focusing on profitable operational and organizational global good as their goal. These branded enterprises recognize that their customers are their customers because of an inherent provenance of accountability on critical social and environmental issues. Patagonia has been a leader for decades. Patagonia has consistently managed with a belief that everything they do should have a positive impact – resulting in using less energy, not wasting water and creating less trash. Patagonia has added to its history of being an environmental leader to being a leader in social issues. Its website informs you that Patagonia is learning to become an anti-racist company. Readers can review Patagonia’s commitment.

Branded enterprises such as Allbirds have been built on the premise that sustainability and clothing are not oxymorons. Allbirds’ website not only points out that the fashion industry is one of biggest contributors to negative climate changes, but that it is time for people to hold these businesses accountable. Further, Allbirds promises to hold itself accountable for its impact. In the name of transparency, Allbirds lists its “Better Business” vision and offers its sustainability report to download.

The Wall Street Journal also highlights branded enterprises such as Chobani, Warby Parker and Rent The Runway as “do-gooders” focused on profitable operational, organizational global good. For all of these companies the underlying idea is that doing good is the pathway to enduring profitable growth. From the perspectives of these companies, there is value in values. 

In his Financial Times interview, Mr. Polman tells us that new food businesses based on sustainability are value creators. For example, food companies such as Beyond Meat, Impossible Foods and Oatly are highly valued – all of the value creation is there. On the other hand, Mr. Polman notes, “The value creation for the big companies, even Unilever, has been fairly dismal.” Mr. Polman’s opinion is that businesses should “… aim to do more good rather than just aim to do less harm.” He thinks this should require businesses “… to focus on their stakeholders’ long-term interests and taking responsibility for their impact on the wider world.” 

Of course, resilience is a nice-to-have factor, but resilience while wrecking the planet is woefully perilous. Resilience that is empty of moral accountability is bad for business and bad for brands.

Corporate mission statements that articulate generic thoughts will go nowhere. Mission statements such as “being the best fast food company” or “being the easiest to do business with“ or “generating happiness” or “being the Apple of automotive” pale in comparison to ideas such as Chobani’s, “‘transforming our food system for the betterment of our planet, our people and our communities, from cow comfort on dairy farms to responsible manufacturing practices.”

Many enterprises have used and may still use a RACI system to clarify management strategies and actions. With the RACI chart, managers list who is responsible for a plan or program; who is accountable; who is to be consulted; and who should be kept informed.

The future is not about separating responsibility, accountability, consultation and information. The future is a business that has in its soul the idea that the entire business must be responsible, accountable, consulted and informed. As the Deloitte Study showed, Millennials and Gen Zs are buying brands that connect with their personal values. ADWEEK supports this claim as well, stating that people are “increasingly citing purpose as a factor in buying behavior.”

To its credit, McDonald’s has committed to making its Happy Meal toys more sustainable by 2025. Reporting indicates that the fast food giant is shifting production of Happy Meal toys to plant-based materials. Each year, McDonald’s buys something like a billion toys for its Happy Meal children’s’ meals. This makes McDonald’s the largest toy company in the world. According to McDonald’s, this will “… be equivalent to more than 650,000 people eliminating plastics from their lives each year.”

This is a good step. But, at its heart, McDonald’s needs to have a vision of doing good that is closer to what Ray Kroc imagined when he said that doing good business was good for business. 

A focus on accountability as part of a brand’s reason for being is increasingly necessary. Focusing on profitable operational, organizational global good means only making money if the business is doing good across all functions, strategies and tactics.

Accountability must be the first step. Resilience makes you flexible. Accountability makes you forceful. Resilience defines behavior now. Accountability defines the basis of the future.

skechers reebok

Reebok Should Take A Page From Skechers’ Playbook

As reported in Bloomberg BusinessWeek, athletic shoe brand Reebok, recently orphaned by Adidas, has a new owner: Authentic Brands Group, Inc. Authentic Brands is known for the rejuvenation of mismanaged, once wonderful brands. 

One of the questions raised in the press focuses on whether Reebok should revitalize its original brand promise or whether Reebok should find a more relevant, differentiated brand promise. The shoe brand Skechers is an interesting model to follow.

Reebok has an incredible backstory. 

Joseph William Foster, who designed some of the earliest spiked running shoes, founded a business with his sons in 1900. J.W. Foster and Sons became famous across the British Empire for innovative athletic shoes. (The Olympic runner, Harold Abrahams, wore a pair of Foster’s “running pumps” in the Paris Summer Olympics in 1924. The film, Chariots of Fire, commemorated Mr. Abrahams.)

Two of J. W. Foster’s grandsons, Joe and Jeff Foster, started Reebok in 1958. 

In 1979, at a Chicago trade show, Paul Fireman, worked in his family’s Boston, MA outdoor and fishing gear business, saw Reeboks for the first time. Mr. Fireman gained the rights to license and sell Reeboks in the US. In the space of two years, in 1981, Reebok’s sales were $1.5 million.

Mr. Fireman made a savvy observation. Most gyms, such as the iconic Gold’s, focused on men and bodybuilding. Newer health clubs and aerobics classes had mostly female customers.  Reebok created the Reebok Freestyle aerobics shoe in 1982, the first athletic shoe designed for women. 

If you lived in Los Angeles in the early 1980’s, it seemed as if every woman’s foot was sporting a Reebok Freestyle shoe. Reebok was the fitness shoe brand before fitness became fitness, as we know fitness today. Reebok owned aerobics. The Reebok Freestyle was part of the liberating acceptance of women into non-professional physical fitness. The Reebok Freestyle was so successful that by 1983, Reebok’s sales were $13 million.

Reebok’s success led Mr. Fireman to buy the UK-based parent company in 1984. The Reebok brand went public in 1985. And, during the later 1980’s, with new shoe products, shoe innovations, clothing and accessories, Reebok’s sales soared to $1 billion. Reebok closed sponsorship deals and sports celebrity endorsements. Reebok was one of the most connected sports brands next to Nike. In 2005, Reebok became part of the Adidas family.

Adidas could not keep the energy going. Adidas replaced Paul Fireman while pushing Reebok into a wider array of partnerships and logo changes. There were turnarounds, write-downs and restructurings. Each effort had a new rationale. But, none of the actions could replicate Reebok’s prior success. The Reebok became lost in brand mismanagement. Adidas focused primarily on its namesake brand fearing any huge push behind Reebok might jeopardize Adidas’ success.

Cost cuts did place profit on the bottom line. But, as one analyst told The Wall Street Journal, “Returning profit was a good step but driving the top line is something else.” According to Bloomberg BusinessWeek, Reebok no longer fit into Adidas’ strategic plans. 

Authentic Brands’ revitalization of Reebok will be a challenge. 

The history of Skechers provides some insight on brand building. There are some early similarities between Reebok and Skechers. For example, both brands were built by retail mavens who observed cultural market trends to identify a powerful position. It is unfortunate that Reebok lost its way during its Adidas years.

Here are four principles that Skechers followed in building the Skechers brand. 

Skechers was the brain-child of Robert Greenberg who, along with his son, founded L.A. Gear in 1983. In 1992, Mr. Greenberg and his son Michael were ousted from L.A. Gear after a downturn in sales. The two Greenbergs started Skechers. 

  1. Know your customers 

Skechers focused on a specific audience with specific unsatisfied needs. Robert Greenberg saw that the athletic shoe category dominated by Nike was highly competitive. But, he noticed that there was no brand aiming at casual street wear. Skechers aimed at young, with-it males who needed casual and stylish street shoes rather than more athletic shoes. As with Paul Fireman’s insight into women and fitness, Skechers made casual, stylish footwear for young hip men.

  1. Know your customer’ needs and problems

The Greenbergs had a skill for staying aware and on top of style trends. This is an imperative in all categories but especially necessary in fashion. As fashion tastes changed, Skechers changed its product offerings. Adidas worried that innovative additions to the Reebok brand would cannibalize Adidas. Skechers saw that innovative products kept the brand successful. The Skechers Collection aimed at young, professional, more fashion-aware men with smarter, more sophisticated and formal casual footwear. Today, Skechers has over 3000 styles. Skechers’ brand essence is comfort technology. In our current stressed out world, people want to feel reassured, relaxed, recharged and revitalized. Comforting technology is technology that cares about how the person is feeling. Skechers describes itself as a brand for every lifestyle. Its provenance is a “growing legacy of comfort, innovation, quality and style.

  1. Create a product that is a representative symbol for the brand’s market

Early on, to generate awareness and familiarity, Skechers created an iconic product, the Chrome Dome, an urban street boot. The Chrome Dome reflected the zeitgeist of youth at a time when Nirvana owned the music charts.  The Chrome Dome was the perfect brand user’s experiential example. Popular with both men and women, the Chrome Dome was sold with a grungy, well-worn look. Having an iconic product that is synced with current trends modernizes and connects a brand. Nissan did this during its first renovation under Carlos Ghosn by resurrecting the 280Z. Reebok did it with the Freestyle. What would McDonald’s be without the Big Mac? What would Dodge be without the Charger?

  1. Break through with exciting news highlighting creative, valued solutions to the customer’s needs and problems

Skechers believes marketing communications is essential for brand success. Having a great brand is great, but if no one knows about it, that great brand will languish. Today, Skechers is a heavy user of celebrity TV advertising for its innovative comfortable, stylish walking shoes and other products. Skechers knows that communicating something new generates interest: new is news. For example, in the recent Wall Street Journal weekend magazine, Skechers ran a print ad hyping its Skechers Max Cushioning shoe. It has Ultra GO® cushioning, air cooled GOga mat and other materials to make your walk comfortable, breathable with lots of traction and a “snug, sock-like fit.” On the first page of The New York Times Sunday Style section Skechers advertised its Skechers Uno, a stylish walking shoe with a visible air bubble (Skechers Air) and memory foam.

In its Reebok article, Bloomberg BusinessWeek asks if the best way to rejuvenate Reebok is to go back to its original positioning or to go somewhere else with R&D and new, innovative styles. The article quotes a branding executive who captures Authentic Brands’ Reebok conundrum. “It’s almost not worth trying to break into it (the original positioning) again, even with an iconic name. The shelves are full. No one’s going to move over for you to move in.”

Due to brand mismanagement, Reebok lost its own identity. Brands can last forever. But, only if properly managed. 

Let’s hope Reebok focuses on articulating a core promise in a relevant, differentiated, trustworthy way. And, let’s hope Reebok focuses on delivering that relevant, differentiated, trustworthy promised experience each time, every time, to every customer everywhere in a quality manner. Let’s hope Authentic Brands focuses on revitalizing Reebok not by going backwards. Reebok’s success will rest on identifying a market space where it can profitably satisfy customer needs with innovative product news that captures today’s changing world. Following the four steps from Skechers’ playbook would make sense.

Trustworthy Brand Value Is An Imperative

The coronavirus pandemic is forcing brands to raise prices. General Mills, Chipotle, P&G and others are planning for or already implemented price increases. With fraught supply chains, climatic distresses and overall uncertainty, brands face hits to profitability as important parts and ingredients are less available. 

Raising prices can be problematic. If a brand raises its price too high, customers will reassess that brand’s value. Is this brand really worth what I will have to pay? Is this brand a good value? Or, is this brand not worth the money? Is my second choice brand a better value now?

In order to make create and implement the correct pricing strategies, businesses must calculate their brands’ Trustworthy Brand Value. This is an imperative.

When it comes to value, customers have a mental value equation. This mental value equation kicks in when making a purchase.  This customer value equation is not math: it is a mindset. It is a mental process where customers evaluate a brand’s benefits relative to its costs. As a mental construct, this value equation has a denominator (bottom) of costs and a numerator (top) of benefits. 

Over decades, the basic understanding of customer value has been and continues to be the same: value is what you expect to receive and what you do receive (benefits) for what you expect to pay and do pay (cost). However, how business specifically defines benefits and costs has undergone an extraordinary evolution. Brands must be cognizant of these changes in order to satisfy customer needs profitably.

In the 1950’s, business understood the value equation simply as features for the money. But, in the 1960’s, the numerator’s definition changed to reflect the fact that customers do not actually buy features. Customers buy the benefits (needs) of these features. Marketing’s purpose became the way in which brands profitably satisfied customer needs.

The social upheaval of the 1960s also gave brands permission to not only focus on functional needs but to make choices based on emotional needs. The customer perceived value equation’s numerator was now more than just features and functions.  Emotional benefits were also relevant. 

In the 1980’s, with the proliferation of two income families and the beginning of busy, over-scheduled lives, the value equation’s denominator changed. Price was no longer the only cost that people considered when evaluating value. People looked at time as a cost. The denominator of the value equation evolved to include both money and time. 

By the turn of the 21st Century, there was again another evolution in customer perceived value.  In addition to money and time, consumers added a third cost: effort. Customers started assessing a brand’s costs in terms of money, time and effort, where effort means the physical and mental energy cost. Even if I have the money and the time, this purchase requires too much effort on my behalf.

Technological and social changes including the seismic changes from coronavirus have forced the value equation to evolve again. Consumers now look at the numerator of the value equation as a total brand experience defined in terms of functional, emotional and social benefits, such as sharing, belonging, self-image, status and respect. 

This means that customers now assess a brand’s worth based on its total brand experience (functional, emotional and social benefits) relative to the costs of money, time and effort. 

However, there is now a very important new component to the value equation. It is a value multiplier. That value multiplier is trust. 

Trust is the customer’s belief that the brand will deliver the experience relative to the costs in a quality manner. Trust is the customer’s evaluation of the future experience with the brand: How confident am I that this brand will deliver this experience for these costs? 

The new customer perception of value is total brand experience relative to total experience costs all multiplied by trust. This is the new Trustworthy Brand Value equation.

If trust in the brand is high, then as a multiplier, the perceived brand value is increased. If trust in the brand is low, then the perceived brand value is decreased. If there is no trust in the brand – if trust in the brand is zero – then it does not matter what the promised brand experience is relative to the costs. Anything multiplied by zero is zero.

Brand trust significantly affects consumer commitment. This influences price tolerance. Brand trust is a critical piece of the decision process. If you want a strong, enduring, loyal relationship with a customer, you must have brand trust. Trust is essential to the calculative process of brand acceptance. It is not enough any longer to be just a good price; your brand must be a trustworthy value.

If your customers perceive your brand to be a trustworthy value, they will increasingly opt-in to share personal information. But they will do this in exchange for the brand’s ability to deliver on its promise. This exchange of information will enhance the relationship. And, research shows that the stronger the relationship, the stronger the preference and this drives revenue.

Recent research from Deloitte indicates that 62% of people who report highly trusting a brand buy almost exclusively from that brand over competitors in the same category.

Understanding value is much more than asking people whether they believe your offer is good value. Asking customers if your brand is a good value is a hopeless quest for a useless answer. Trustworthiness is incredibly multi-dimensional. Adopt an analytic metric that assesses each of the components of the Trustworthy Brand Value equation.

As an analytic construct, the Trustworthy Brand Value equation integrates all the elements that customers expect to receive – functional, emotional and social benefits and the costs they expect to pay for this experience: money, time and effort. Research from as far back as 2004 indicates that total brand experience and cost characteristics and qualities of the brand have meaning and add value for the customer. Brand value is more than satisfaction with the functional performance of the brand. Brand value is a function of the customer’s relationship with the brand. Trust is one of the most critical components of this relationship.

Value is not absolute; it is relative. Calculate Trustworthy Brand Value for each brand in the customer-defined competitive set. A specific brand’s Trustworthy Brand Value is indexed to the average of the competitive set. This is the Relative Trustworthy Brand Value. 

Recent research indicates that as Relative Trustworthy Brand Value increases, the willingness to pay more also increases, as long as the price is perceived to be fair value. This is common sense. Building Trustworthy Brand Value builds preference, loyalty, sales and profit margins. And, Trustworthy Brand Value is the basis for enduring profitable growth.

The essential imperative for marketers today is to incorporate the Trustworthy Brand Value equation into brand management. Trustworthy Brand Value is a critical tool in the 21st Century-marketers’ toolbox. Trustworthy Brand Value is not a mere marketing theory, it is major management metric. 

Today’s biggest marketing challenge is to build Trustworthy Brand Value, in every market in which your brand chooses to compete.

department stores

Kohl’s Approach Is The Way Forward For Department Stores

Department stores such as Macy’s, J.C. Penney’s and Saks Fifth Avenue, for example, have faced troubled times over the past few years. Covid-19 did not help. Most department stores are seeking solutions that leverage America’s changing shopping habits such as delivery and pick-up. Amazon is reported to be entering the department store arena. But, how much Amazon will be effective in creating a new shopping approach is still unknown. Coronavirus notwithstanding, the concept of the department store has become less relevant and less differentiated.

Relevant differentiation is critical for any brand. If a brand is just differentiated, but not relevant, it is a novelty but not a frequent favorite. If a brand is relevant, it has meaning but it is just like other brands with nothing special to say. This lack of relevant differentiation is plaguing department stores. 

Department stores have focused on technology, delivery, data, promotions and inventory. The goal is to be omnichannel. But, there appears to be a lack of focus on the brand: what does my brand mean to customers?  Saks Fifth Avenue focuses on its inventory – the latest couture from clothing designers, for example. But, Neiman Marcus has that approach, too. And, inventory is a feature of the brand: it is not a benefit. Exactly what are the functional, emotional and social benefits of inventory? What customers’ needs? Nordstrom had a famous signature brand essence but bankruptcy and other financial issues has eaten away at Nordstrom’s fabled service orientation positioning.

One department store is focusing on its brand. One department store is focusing on making its brand relevantly differentiated to make it a customer favorite. Kohl’s is that store.

Kohl’s, once a popular Wisconsin grocery chain established in the 1920’s, opened a department store in the early 1960’s. The original Kohl’s department store positioned itself as an affordable, but not discount, emporium with a wide variety of goods.

Since its opening, Kohl’s experienced decades of management and ownership changes. And, although, over time, the enterprise faced the same sorts of issues that most brick-and-mortar stores experienced, it has managed to successfully emerge as a popular shopping venue.

Rather than just concentrate on getting goods to customers, Kohl’s has concentrated on generating and implementing a focused, relevant differential advantage. In other words, Kohl’s has spent time and effort in the development and activation of a brand promise. And, Kohl’s is making sure that everything it does is focused on delivering that brand promise to its customers regardless of how these customers prefer to shop.

In a brand-affirming interview with The New York Times, the CEO of Kohl’s, Michelle Gass, spoke about the brand’s positioning. She stated, “Kohl’s had a successful model for a long time, sort of this hybrid department store brand, but with mass convenience. But, over time, that got blurred. So, the challenge and opportunity is, ‘OK, what is the space we can occupy that will be differentiated?’”  Ms. Gass stated that Kohl’s did focus on its ability to be an “omnichannel retailer”. Customers look for this. She added, “But from a product and brand standpoint, how are we going to be more relevant? How are we going to have a brand stand for something?” 

Defining a brand promise is an important strategic step for establishing or revitalizing a brand’s relevant differentiation. Brands are promises of relevant and differentiated, trustworthy experiences. The total brand experience (functional, emotional and social benefits) is what defines the relevant distinctiveness of the brand. It is a mistake to believe that a brand promise is a mere marketing construct. A brand promise is what attracts – and generates loyalty of – customers, potential customers and employees and other stakeholders.

Creating a brand promise is essential for brand longevity. Without a concise, clear, well-articulated, credible brand promise, a brand can find itself a commodity… a generic version standing only for the basic characteristics of the category. Unfortunately, this is what has happened to department stores.

For Kohl’s, claiming a relevant differentiated position is allowing Kohl’s to become incredibly meaningful to its customer base and like-minded others. And, if the brand consistently delivers its brand promise in a quality manner, trust will build.

According to Ms. Gass, Kohl’s “… is not a traditional department store.” So, what is Kohl’s? Kohl’s is “… small… super convenient” especially when it comes to how customers wish to interact with the brand. “But more importantly, we (Kohl’s) see ourselves as a specialty concept, that Kohl’s is the curator and the editor to bring you all of the products and brands you need to lead a more active and casual lifestyle. Our strategy is the active and casual lifestyle, and selling the kinds of products that were amplified during the pandemic. People want to look good. They want to be comfortable. Their work wardrobe is going to look very different coming out of this eventually than what it was going in.”

Brand success requires many things. But, one of the most critical is defining what you want your brand to stand for in the mind of the customer. Without a brand promise, a brand runs the risk of becoming generic. And, a category with brands that are generics is a category without a market. This is because a market is a homogeneous group of people sharing common yet specific values, common yet specific needs within a common yet specific occasion. Without needs to satisfy, there is no market.

Department stores need to move on from a relentless, progressing omnichannel focus to figuring out what they want to be now and for the future. Department stores need to follow Kohl’s lead if they want to generate enduring profitable growth.

medicinal mushroom products marketing

The Pursuit of Perception: The New Dimension of Personalization

Marketers: if you have not already reread your copy of Aldous Huxley’s, The Doors of Perception, now is the time. The trend of using planted-based psychedelics– that is, mushrooms – is once again a desired experience. That 1960’s “turned on, tuned in” experience of opening one’s inner doors to greater personal perceptiveness and universal understanding is now increasingly desired.  Jim Morrison must be looking down and smiling with an “I told you so” grin. 

The need for self-knowing, perceptual experiences that help us be better people is real. And, this deep desire to understand ourselves and the world is changing the concept of personalization. Some CMOs describe this as the more emotional component. Actually, it goes beyond emotional to spiritual.

For several years, personalization has been a desired brand benefit. Personalization still is desired. We appreciate products and services designed to satisfy our individual needs in ways that might not work for someone else. Brands can address you personally with recommendations, specific promotions and worthwhile information. Hotels can remember how you like your mini-fridge stocked. Airlines know how frequently you fly and how you want to be rewarded. Personalization is a status symbol. Personalization is part of our external image of success and our internal image of achievement. This is because personalization delivers an individualized recognition of who we are. Personalization is powerful because of the use of real time digital responsiveness and data collection.

Brands delivering data-driven personalized experiences are valuable brands. Brands offering personalized experiences reinforce respect and uniqueness. All of this is good. The ability to factor down messaging to an audience of one across millions of users and viewers has been profitable. This type of personalization, all pervasive in today’s world, can also, unfortunately, be seen as self-centered and somewhat superficial. It generates an “all about me” sensibility.

So, in our slightly dystopian, worrisome world, weary people are looking for a different type of personalization, something with more meaningfulness. People want more connection, not so much with like-minded others although that is still a huge desire, but with one’s inner self, with the truth about who they are while gaining some sort of existential understanding about the world.

More than mindfulness (an awareness of something), research shows meaningfulness is associated with life satisfaction, happiness and positive wellbeing. Meaningfulness is intensely personal.

Marketers should be expanding their definitions of personalization to include the meaningful pursuit of connections with the more “spiritual, soulful” side of their customers’ sense of self. Many people are seeking true self-perception. This dimension of personalization is about empowerment, healing self-transformation and personal resetting. Think of this as yoga on steroids.

This need for self-enlightenment goes beyond the commercial wellness industry as highlighted in Bloomberg BusinessWeek, “This Vacation Is a Real Trip: Psychedelic experiences are beginning to play an integral role at luxury resorts.”  Bloomberg points out that spas designed around opening one’s doors of perception are big business. Additionally, the “shroom boom” as some call it, is also playing an important therapeutic role in treating a variety of medical issues including depression, PTSD and other trauma, substance abuse and pain.  

Increasingly, what used to be regarded as a recreational experience for hippies, dead heads, festival goers and the EST set (Erhard Seminars Training, the new age awareness groups held from 1971 to 1984) is seen as a respectable personal pathway for achieving heightened self-understanding, personal development and taking responsibility with physical and emotional relief. As Timothy Leary famously said, “You have to go out of your mind to use your head.” 

The state of California, Denver, CO, Oakland, CA, Santa Cruz, CA, Grand Rapids and Ann Arbor, MI, Cambridge and Somerville MA have all passed legislation to decriminalize possession of the active ingredient in “magic” mushrooms – psilocybin, as well as LSD, mescaline and DMT, the active ingredient in ayahuasca. 

And, although psilocybin is still a powerful Schedule 1 drug in the US, there appears to be some universal recognition that people want help understanding themselves and their individual purpose on earth. Faced with the pressures and difficulties of life in today’s coronavirus world, people are seeking critical insight into how to be the best human being they possibly can. 

Some brands are actually delivering on the inspirational, personal perceptual experience.

For example, Silo Wellness describes itself as a “legal psychedelic and functional mushroom company focused on your mind, body and spirit. Silo Wellness cultivates psychedelic mushrooms and offers retreats in Jamaica and Oregon and products”. Most recently, as stated in The New York Post and other information outlets, Silo Wellness has launched a brand called Marley One. Marley One is a brand of psychedelic mushroom products.

Medicinal mushrooms are appearing in beverages and wellness products, similar to the proliferation of CBD edibles, tinctures and creams. 

Research from Mordor Intelligence highlighted in Financial Services Monitor Worldwide indicates that in 2020, the global functional mushroom business was US $12,415.12 million. Mordor Intelligence estimates that from 2021-2026 the business will register a CAGR of +8.4%. Mordor Intelligence reported expectations of functional mushrooms seeing growth beyond healthcare and pharmaceuticals but into the food and beverage sector.

Not all brands are or should be peddling the magical. However, the broadening of personalization is more than a mere fad. People want to open doors to new self-awareness. For brands and marketers, this additional intensely spiritual dimension to personalization means there is work to be accomplished now. Brands need to take this into account. Technological and digital connections alone may not help brands accomplish this. Marketers need to pay attention.

  • Knowing the prime prospect should include more than opinions, attitudes, buying habits and demographics. What are your prime prospects’ intentions regarding actions to improve self-understanding and experiences? How can your brand support this? Who do prime prospects think they are and what do they wish to become?? How does that affect the brand? Does the brand’s personalization efforts sync with the users’ current self-assessments?
  • Knowing problems that the prime prospect may have with the brand should be examined on functional, emotional, social and “spiritual” levels. Problem detection can run to the more functional. 
  • When thinking about the brand’s ease of choice, ease of use and ease of mind, marketers should put more effort into understanding how the brand affects the customer’s ease of mind. People put a lot of emphasis on self-perception, open-mindedness and insight. 

In a recent column for The New York Times on neuroscience, holistic brain research and how we construct our realties, David Brooks quotes a neuroscientist from the University of Sussex. Professor Anil Seth stated, “Perceptions come from the inside out just as much, if not more, than from the outside in.”  

Along with how people perceive brands, marketers must now start understanding how people wish to perceive themselves. These insights will be crucial for engaging customers with truly personalized experiences.

Learn more about paradoxes like this one: Navigate how to satisfy conflicting needs, and look beyond single-minded solutions with the insights and guidance in The Paradox Planet.