Is the mass middle of the market a marketing death trap or is it a marketing opportunity?
Arcature CEO Larry Light explains in his latest piece featured in Forbes.
Is the mass middle of the market a marketing death trap or is it a marketing opportunity?
Arcature CEO Larry Light explains in his latest piece featured in Forbes.
The phrase “Be a runway, not a control tower” popped up a few of years ago in a Singapore newspaper. The phrase is a great way to put a frequent brand organization occurrence: the resistance to change.
For brands to be successful in the ongoing challenge to remain contemporary, the idea is not to oppose change but to drive it. Change happens all the time. Today it is almost impossible to keep aware of everything that changes around your brand. The digital advertising business has to deal with technologies, devices, and apps that change so much faster than people adopt and adapt.
Yet, opposition to change happens. Employees may fear how change will alter their jobs. They may think that what has been the current methods of operation should continue to be the standard operating procedure. Or, they are very happy and complacent and see no need to change.
Change initiatives usually come with a detailed program, an HR course, a set of slides, a video, a script, an app, a dictionary, a metric (or series of metrics), out of-office seminars, and in many cases a slew of young, junior consultants who take up a lot of office space. For many brands with change in leadership there is also a change initiative: new person, new ideas.
A brand’s culture sometimes can be the control tower keeping everyone on course, and focusing on avoiding any and all risk. Brands flourish in supportive organizational cultures. If the organization is risk averse or closed to change, it creates an inflexible and relevancy-resistant environment.
Brands must stay relevant. This requires change. Continuing to do the same old things when the world is dynamic is a formula for failure. The biggest challenge that brands face is ensuring that brand teams are open to change, and that the organizational environment is conducive to change. In organizations undergoing change, for that change to be genuine and not superficial, cultural change initiatives must be consistently reinforced, widely communicated, supported from the top of the organization, and realistic for the organization’s current situation.
Brands are dynamic, active promises about what they will do for the customer. Brands do not do well where the control tower effect is in place. Brands need continuous renewal. Brand teams must be aware and alert to marketplace changes and anticipatory ideas for satisfying customer needs. With too much control tower, without the continuous renewal of innovation or renovation, a brand will stagnate. The business will stagnate. Enduring profitable growth requires building a continuous renewal cycle.
When there is a misalignment and conflict between the brand strategy and the brand culture, the culture prevails over the strategy. Culture always wins. Brands need supportive, flexible cultures. If the culture is inactive and risk averse, in other words, a control tower closed to change, the misalignment is serious.
Brands need the runway. But, this does not mean there are no brand boundaries. Every runway is a well-defined pathway. Skidding off the runway is no good. Taxiing outside the boundaries of the runway is dangerous. Staying within the lane but being able to have change take flight is in a brand’s best interests.
Arcature CEO Larry Light has been tapped as the latest Forbes Contributor within their exclusive CMO Network.
From his Forbes Contributor Bio:
My focus is building brands as the basis for enduring profitable business growth. I have won a variety of marketing awards. In its report on Best Marketers of the Decade, AdWeek reported that “Larry Light, who turned around McDonald’s as CMO from 2002 to 2005 finished second to Steve Jobs.” In summarizing the top ten ideas of the decade, Ad Age selected “Brand Journalism,” “introduced by Larry Light as arguably the most realistic description of marketing today — perhaps ever.” And, I was the first Chairman of the Coalition for Brand Equity – a group founded by advertisers, agencies, and media. I authored articles accepted in peer-reviewed professional journals and other well-known publications such as the Journal of Brand Strategy, Journal of Advertising Research, Harvard Business Review. Along with Joan Kiddon, I have published four books on marketing, brand management and organization for brand-centricity. Two of the books are focused on the successful turnaround of failing brands.
Read his first piece in Forbes, Financial Engineering Damages Brands.
Almost 30 years ago, Peter Senge, a systems scientist and lecturer at MIT’s business school, developed the concept of the learning organization. This idea became a big wave in organizational development and thinking. Basically, a learning organization is a company that enables the learning of its members while continuously transforming.
According to Mr. Senge and his peers, a learning organization develops because of the pressured business landscape and helps keep businesses competitive. Others, such as Harvard’s business theorist, Chris Argyris, saw learning as being keenly aware of what competitors are doing; recognizing and keeping abreast of changes and innovations in the marketplace; and, then responding with creative solutions.
When people think of learning, they often focus only on learning only from successes. Some marketers call this the “transfer of proven success.” Others refer to it as “copying with pride.” But, it is just as important to learn from mistakes. Learn from your own mistakes and learn from the mistakes of others. Learn from your close competitors’ mistakes.
Last winter, Automotive News, the auto trade press bible, reported that Lincoln would be changing its model names from letters to names. Owners and customers were confused as to which brand was which. Its brands were named MKS, MKZ, MKT, MKC, and so forth. The head of marketing, sales, and service said, “There’s a lot of challenge associated with the letters and putting those together.”
Luxury car brands tend to use letters or alphanumeric combinations. The more mass-market vehicles tend to use names. So, for example, Toyota uses names while Lexus uses alphanumeric branding.
However, it was not just the letter names that put Lincoln in the hot seat. The vehicles were not differentiated enough to make the labels meaningful. Mercedes and BMW have highly differentiated models that are segmented by class (C-class, S- Class) for Mercedes, and series for BMW (3 series, 7 series).
Cadillac introduced a cavalcade of products. They have not learned from the mistakes of Lincoln. Cadillac had a model called ATS (a compact sedan), which was supposed to be the “BMW fighter.” It is being replaced by the CT5. Cadillac’s CTS will also be discontinued and replaced by a midsize sedan also under the CT5 nameplate. There will be the CT4, a small vehicle like a BMW 2 series. A CT6, also a sedan, will be differentiated by GM’s Super Cruise hands-free driving system. There will be the XTS, a large sedan. And, there will be the XT4, a compact cross-over, and a larger model the XT5, as well as a three-row crossover, the XT6. Is all this clear to you? The only named brand is the Escalade, which, by the way, is the only brand that actually makes money for Cadillac.
If you go on the Cadillac website, the coupes and sedans with the alphanumeric names and similar designs are just as confusing as the Lincoln models. The engines differentiate many Cadillac models. But, when parked in a lot, no one sees the engine; people see the vehicles. Striving to be a luxury brand is about more than labels and names. It is about meaningful differentiation. Mercedes, Audi, BMW, Lexus are successful not because of how they label their vehicles but by the relevant, differentiated experiences they promise and deliver.
It remains to be seen if the influx of new Cadillac models will raise the luxury image of the Cadillac brand. Unless the Cadillac models are clearly differentiated, Cadillac may find that the problem Lincoln had was not a Lincoln problem. It was a brand management problem. Learning from someone else’s mistake is far better than making the same mistake on your own.
Recent news about Etsy indicates that the new leadership under CEO Josh Silverman has implemented a successful brand turnaround. The online crafts seller was in dire straits just a year ago. There was consensus among many that Etsy was doomed, a victim of not only Amazon, but also other direct to customer selling on sites such as Instagram.
However, today, Etsy is thriving. As Financial Times so clearly stated: “The results suggest that the problem was not the threat from a Seattle e-commerce giant but rather its own mismanagement.” Brands do not die a natural death. There is no natural brand lifecycle. Brands can live forever but only if properly managed. Brands under inept leadership falling under the spell of common tendencies for trouble such as losing sight of the core customer, letting bureaucracy and processes take over, playing not to lose instead of playing to win, failing to adapt to changes in the marketing world, or not having a clear direction, inevitably move into the death spiral. Mr. Silverman followed what we call The Six Rules for Brand Revitalization.
Mr. Silverman did the following:
Rule #1 Refocus the organization: Mr. Silverman refocused the organization around a clearly articulated brand direction. He gave employees a vision of a possible dream, a common ambition that all could buy into and implement.
Rules #2 Restore brand relevance: Etsy had evolved to an “eccentric” crafts fair avoiding fundamental marketing approaches, and had favored its craftspeople over the customer. And, although the headquarters still retains its quirky character, there have been substantial brand changes designed to attract new customers. One of the top brand priorities is making and keeping core customers happy.
Rule #3 Reinvent the brand experience: Etsy’s website was cumbersome and off-putting, especially for novices. One of the first changes made was to improve the website to make the site easier to find and easier to use. Marketing the experience is now a priority as Etsy indicates it will increase its marketing budget to communicate the Etsy experience.
Rule #4 Reinforce a results culture: Mr. Silverman focused on stopping the bleeding. He implemented job cuts but also increased commissions, keeping these below that charged by Amazon. The focus is on generating high quality revenue growth. Furthermore, Etsy is solvent enough to begin reinvesting in the brand.
Rule #5 Rebuild trust: Etsy’s craftspeople made a record US$1billion in gross merchandise sales over the last holiday season in 2017. Even though sellers were miffed about the increased commissions, it is clear that the new approach is working, offering them a better platform for their goods. As for customers, an easier, more comfortable, consistent brand experience that delights is fulfilling the promised brand experience. Consistent delivery of the promise to employees, sellers, and customers builds trust. Be consistent.
Rule #6 Realize global alignment: Through Mr. Silverman’s focus, the brand has a common, global direction. Now, that the brand is on solid footing, Etsy is expanding its global presence. Etsy closed a deal with the German crafts site DeWanda, whereby DeWanda shuts down and refers its craftspeople to Etsy.
In speaking with analysts and fund managers, the problem at Etsy was a “classic” management problem. The previous CEO was a technical engineer rather than a brand-business focused leader. And, although there were technical difficulties at Etsy, brands need classic brand management even in our techno-obsessed, digital, online and mobile world. Brands can be murdered by misguided marketing practices. Brands die when they suffer from self-inflicted wounds of mistaken marketing actions.
The turnaround at Etsy has demonstrated that if properly managed, it is possible for brands to thrive in an Amazon-dominated business environment. It is all about winning and keeping customers every day. Brand leadership is a never-ending commitment. And, as Etsy shows us, brand success does not just happen; we must make it happen.
Many big holding companies are reexamining their organizations. Activist investors are urging many of their holdings to sell businesses for immediate profit. Advertising holding companies are also considering sales of businesses along with the consolidation of agencies into a more cohesive whole.
General Electric, WPP, P&G, Nestlé are just some of the companies that are working towards leaner, more immediately profitable profiles. These brands see divestiture as the means to future proof their businesses and generate cash in a fast-changing world.
But, there are other ways to future proof. One of these ways is to generate deep customer insights, translate these insights into ideas and actions, and create a new future scenario in which your business will win. There is a one brand that is taking the opposite approach to divestiture, all in the name of future-proofing the business.
An article in Irish Independent, details the plan of Maxol. Maxol is an Irish fuel company that owns a lot of filling stations. Maxol also owns retail sites, car-washing sites, and it is a partner with a brand called Mace, a convenience store group. It is not a surprise that filling stations and convenience stores have symbiotic relationships. For example, in the US, there is Wawa, a chain of convenience stores and gas stations operating in 6 East Coast states, and the District of Columbia (Washington).
The CEO of Maxol, Brian Donaldson, sees the growth of current fuel-efficient vehicles, and electric vehicles. He also knows that the margins for food items are better than the margins for fuel. And, as fuel sales decline, food sales can grow.
Mr. Donaldson is not sitting still. He is beginning now to ensure that Maxol remains a relevant brand tomorrow. He says that his view is 2030. Where do we want the brand to be in 2030? It is urgent to start putting Maxol’s strategy in place today. And, having an “open mind” is critical. All options are on the table, as it were. In pursuit of the world in which Maxol will win, the brand has hired analysts and others to get a grasp on tomorrow’s possibilities.
CEO Donaldson has decided to create a brand that will stretch across fuel and food. Mr. Donaldson told Irish Independent,
“We’ll be extending our name and label to milk, bread, cheeses, fresh produce, snacks. What we’re looking at in terms of our in-store offering is almost trying to set that Avoca-type standard in terms of the ingredients and the quality of ingredients that go into our sandwiches, our prepared meals. And, as well, it’s about the provenance of those ingredients… we’re trying to connect into local supply chains….” (Avoca is another Irish brand that started as a wool mill and is now a clothing manufacturing, retail, and food business selling a range of Avoca-branded items across soft furnishings, ceramics, books, soaps, perfumes, food and woolens.)
Rather than complacency, the vision for moving forward is expansive.
“What we’re looking at is: do we go into new energy markets, do we take ourselves onto the high street, do we start looking at standalone dry sites, do we look at taking a food franchise and taking that to the high street, do we look at supply chain and actually strengthening our supply chain by taking a shareholding? “We’re looking at everything. I think it would be wrong of me to focus purely on what we’re doing [at the moment].”
CEO Donaldson will reimage 70 stores, while deciding on whether some may evolve as food only, fuel only, or sites to be sold off or used to build apartments. His over-arching vision is to grow Maxol for the future leveraging any and all opportunities that appear to offer high quality revenue growth.
CEOs cannot forecast the future with certainty. Brands and their leaders want certainty about tomorrow before making decisions today. Yet forecasting is fallible. A futurist once stated, “The objective is not to fore-cast the future, for no-one can tell what the future will be. The objective is to take responsibility as an organization for the future.”
Being prepared for the future is called future proofing. Future proofing is not foolproof, but it is a serious step in the right direction. Leaders like Brian Donaldson understand that brands can be future-proofed by leveraging the best opportunities that may be available.
When it comes to brands, history is a valuable asset. A brand’s heritage or backstory is a signal of four things: content, clarity, consistency, and credibility. Some brands have been around for centuries while some brands are relatively new. Regardless of the age of your brand, recent research (Pecot, Merchant, Valette-Florence, De Barnier, 2018) reinforcing a brand’s heritage is of economic value. Whether you call this provenance, heritage, or history, a brand’s backstory signals quality, and can help a brand command a price premium. A clear, compelling, and consistent backstory helps overcome unfamiliarity. A backstory provides information for fuller, richer brand understanding.
A brand backstory is a formidable source of knowledge about a brand’s identity. A brand’s backstory generates confidence. The brand’s backstory engages customers with rich, authoritative information. The brand’s backstory, which provides customer perceived legitimacy, authority, expertise, authenticity, trust, responsibility, quality, and value.
For those people who are not familiar with the brand or are uncertain about the brand, a compelling backstory can increase confidence in the brand. Small or new brands, or brands with limited resources can use a backstory to “increase consumers’ perceptions of credibility and quality, as well as to possibly set a higher price.”
Levi’s® uses its heritage in a variety of ways. The website describes its 1853 beginnings. The brand transitions its heritage as an “invention for the American worker” becoming a “uniform of (American) progress” to the “purest wearable form of authentic self-expression”. Along with its new, fashion-forward designs, Levi’s® offers clothing designated “vintage” – “… sourced from our own archives and inspired by the pioneering West Coast wave riders of the 1940s”.
Chili’s is not as old as Levi’s® but it uses its backstory to shape the brand experience. Chili’s reminds us that in started in 1975 as a “funky” place for “… people who craved connection with family and friends, we were the only ones to offer a genuine Southwest spirit filled with positive energy.”
A backstory does not have to be steeped in decades of history. An interesting narrative of how the brand came to be is just as informative when communicated clearly, consistently, and credibly. Chobani is a relatively new brand, but its story is engaging. Founded in 2005, Hamdi Ulukaya purchased a factory that Kraft was closing. His first hires were Kraft employees. By 2007, the brand was selling its American-made strained yogurt.
A brand backstory reinforces the permission to believe through content, clarity, consistency, and credibility. In the brand decision-making process, customers ask themselves, “Why should I believe you will deliver to me your promised experience?” The brand’s backstory can help answer this question by offering a fuller understanding of the brand.
In a highly competitive, disruptive, changing environment, an intriguing, informative backstory is comforting, and reduces perceived risk. Research supports the idea that customers are willing to pay a premium for brands communicating a meaningful backstory or heritage. A credible backstory builds brand trust. As trust increases, price sensitivity decreases.
Today, we have so many ways to learn about brands: there are multiple platforms and information comes in multiple formats such as video, audio, VR, AR, as well as text search. When information is delivered in multiple formats, the information is considered “rich”.
New research (Maity, Dass, and Kumar) reveals that the “richness” of the available information affects our brand memories, and our consideration sets. The richer the information, the less we rely on our past experiential brand memory, and the more brands we are willing to consider prior to purchase. If the information is limited, we must put effort into searching for information. We are only willing to do this for a limited number of brands. When we have to rely on our own searches, we default to our past memory of experiences and learning.
Choosing a brand simplifies choice. In a complex, over-whelming, over-choice environment, brands are one-think decisions. But in a rich media environment, the one-think role of brands is in jeopardy. A good part of a brand’s value is based on familiarity and previous experience. Experience is built over time. Without relying on experience memory, a favored brand may lose some of its advantage to these new devices to make brand choices.
This research reflects one of the great paradoxes of brand shopping today: the desire for multiple choices and the desire for ease of choice. People desire choice, yet having too much choice increases uncertainty, decreases speed of decision-making, and requires more physical and mental effort. Consumers want more choices, but they want choosing to be easier. One-think shopping alleviates the uncertainty of too much choice while helping a consumer choose wisely.
With one-think shopping, the consumer can quickly make decisions based on the trustworthiness of the brand. It is a streamlined roadway through the cluttered confusion of choices. This trustworthiness is part of the brand’s value. The brand loyal customer trusts the expected total branded experience will be delivered as expected. Brand loyal purchase decisions are easier to make.
When rich media are available, processing information using modern smart devices to make choices for us makes decision-making easy. When information processing is easy, customers are less likely to rely on their memory of previous brand experiences.
In this future marketing world, brands have no choice but to focus on building real, customer-perceived value along with building and reinforcing trust. By building Trustworthy Brand Value, brands will maintain a marketing advantage even in information rich, smart device enabled environment. Instead of “Alexa, what soup should I choose today?” The interaction will be, “Alexa, buy Brand X soup today.”
The more ways a customer experience the delivery of a brand promise, the stronger the brand connection. Well-managed extended brands build brand loyalty. For example, having great experiences with Samsung mobile phones as a young adult can influence your choice of a Samsung washer and dryer later in your life.
Apple is enjoying the fruits of an attractive extended brand. Barron’s recently reported on PiperJaffray research indicating that among 6,000 US teenagers, in Spring 2018, 82% said they own an Apple iPhone, while 84% said they intend to buy a new iPhone the next time they buy a mobile phone. Compare these numbers to Spring 2014, when about 60% of 6,000 US teens said they own an iPhone, and about 66% said they intend to buy an iPhone.
Additionally, PiperJaffray asked about Apple Watches. Of the 6,000 teens in the study, 20% said they already own an Apple Watch, while 20% said they intended to buy an Apple Watch. Considering that the smart watch category is still taking hold, these are respectable numbers.
A favorable experience with an iPhone and/or an Apple Watch and/or an iPad increases the probability the same customer will by an Apple laptop. Apple is building an over-arching power brand by connecting with younger cohorts. As Barron’s states, “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.”
Amazon is another brand that is building a strong branded multi-product and service portfolio. According to The Toronto Star, Amazon has strong relationships with Millennials and older customers because these demographics have access to financial services. Many Gen Z individuals are still using the bank-of-mom-and-dad.
“Teenagers, otherwise known as generation Z, with their lack of debit and credit cards, their absence of bank accounts and their overwhelming preference for actually putting on clothes and going to physical stores to buy things they could purchase online, pose a big challenge to Amazon. Amazon’s answer: The internet behemoth is in early discussions with banks including JPMorgan Chase Co. and Capital One Financial Corp. to create a product similar to chequing accounts. Amazon aims to tailor the accounts to appeal especially to youngsters and those who own no plastic in their wallets.”
Airbnb is creating a portfolio of branded products and services for young people including rental apartments. The brand has created Airbnb Experiences with Generation Z and Millennials. CEO Brian Chesky sees Experiences as the future, as Millennials and Gen Z customers live in smaller urban spaces where amassing things becomes superfluous. It is the experience that matters. Currently, Airbnb offers 5,000 Experiences, and Mr. Chesky says there are 55,000 on the waiting list.
Extended brands that offer multiple product and service experiences strengthen the customer’s commitment and conviction in the brand promise.
Customization and personalization are increasingly important marketing opportunities. Customization means flexibility of product and service design. Personalization means respecting and reflecting personal differences, attitudes and values. Personalization conveys respect for customers as individuals.
There is another powerful force… the lure of localization. Localization is more than the farmers’ market or the neighborhood craft brewery. Local is a distinctive feeling of community. Local creates a sense of belonging.
Locally sourced, locally crafted, locally owned, regionally authentic, one-of-a-kind, bring a sense of cultural, ethnic, economic, and social connection. Artisanal, regional cheeses, local distilleries and breweries, grass-fed cows on local farms, cage-free chickens, arts and crafts, non-GMO, fresh, organic, locally made employing local people, and other local elements and activities that bring “real” into our lives continue to grow and are increasingly attractive and affordable. Homemade items from Etsy; retro items from eBay; and modern vintage from Restoration Hardware – all of these give us a sense of truth.
Local is more than location. It is also about local values. It is the comfort of belonging to a familiar community. Localism provides authenticity, genuineness, and a true sense of reality as in “This is what it is really all about.” It is a feeling of being a part of people just like me.
Feeling like a local gives us a sense of belonging to a social group with distinctive interests and priorities. In our current world, we have this need to belong while we consciously attempt to maintain our individuality. Feeling like a local means that we can stand out while we blend in.
For Millennials especially, it is important to feel like a local. Millennials value living and working in the same neighborhood. They like “walking neighborhoods where you step outside your home, and have opportunities to have exchanges with others. In walking neighborhoods, people pass others on the street, and can connect. In a digital, AI, VR, and AR world, we need neighbors and belonging more than ever before.
Short-term residential rental housing is leveraging this need. For many people, staying away from home creates a sense of loss. We lose our anchors. Instead of staying at a standardized global hotel brand, people are searching for hotels with a local, neighborhood feeling. As Airbnb says, short-term rentals let us choose a neighborhood where we can “live like a local.” Feeling and acting like a resident is important. Barry Sternlicht (former CEO of Starwood Hotels & Resorts, and creator of W Hotel and Westin’s Heavenly Bed) is investing in short-term residential rentals. His investment in a start-up goes to support the addition of new upscale, branded residences for short stays to compete with brands like Lyric, which is listed on Airbnb. Airbnb has its own brand as well, “Friendly Buildings Program” that features rental units provided by “friendly” landlords. The short-term residential rental market appeals to corporate travelers who prefer integrated neighborhood lodging experiences.
WeWork is another example of creating feelings of belonging. WeWork generates feelings of community. Not only does the brand provide communal office space, but, also, through its WeLive brand, it offers apartments. And, to provide for physical and mental wellness, We Work just opened Rise, its gym and spa featuring treadmills, boxing bags, saunas, and massage studios. (The New York Times indicates that the Rise memberships are from $100 to $360 a month.)
Brands have an amazing opportunity to leverage the need for feeling like a local – enhancing the sense of belonging – for all individual customers. Here are three things brands can do right now:
Feeling like a local helps us understand our places: our communities, our neighborhoods, our homes, or our countries. Feeling local binds us together as belonging to some place or communal physical, psychological, geographical or virtual space. Local provides kinship with a particular place, wherever that is, and in whatever physical/virtual state that is. Technology is transforming the world by lowering the physical barriers of place. By respecting local values and tastes and ideas, by rooting in the local space, brands deepen trust.