When times are tough, people look for brands upon which they can rely. People look for brands they can trust. This is why now is an excellent time to aim for brand greatness. 

Grand greatness has several basic components. Without these, the brand cannot be on the road to greatness.

First, be popular. Great brands are the popular choice. Marketing is a popularity contest. People prefer to buy books that are best sellers. They seek movies they think their friends are seeing or likely to see. People frequent restaurants that receive great reviews from their peers. People talk about popular brands. They recommend popular brands. They voice their opinions about popular brands.

Second, be a leader. Great brands represent undeniable leadership. Leadership is not about how big you are. It is about how big you act. It is not the number of stores or hotels or offerings or the size of the brand’s sales. Brand leaderships is about size of your ideas.

Third, have great aspirations. Great brands have great aspirations. Leading brands aim high. A great aspiration is the guiding force that provides the direction for all thought and all action on behalf of a business. 

Fourth, Be relevant. Great brands stay relevant. To remain relevant in a changing world is essential for brand health. Relevance is a key driver of purchase intent.  When a brand is no longer relevant, customers think the brand does not understand them anymore. Your brand’s promise is the contract with the customer. Make sure that you know what that contract entails.

Fifth, be consistent. Great brands stay consistent. Consistency is a hallmark of a great brand because consistency leads to quality. Quality is all about consistency. Quality is the consistent satisfaction of customer expectations. This means brand leadership must know what are the promised customer expectations. Brand leadership does not leave quality to chance. Inconsistency is ruinous. This ability to change (be relevant) and be the same (be consistent) is a marker of great brands. It is about being new and old – familiar and contemporary – at the same time: a critical, paradoxical element of astute and successful brand marketing.

Sixth, Be trustworthy. Great brands are trusted. A great brand is more than a trademark: it is a trustmark. Even though we live in an instant culture, trust cannot be earned instantly.  Trust cannot be bought. It must be earned over time. Being a trustworthy brand is not an advertising claim. Trust is built through the everyday reality of how brands behave toward all stakeholders, toward the communities in which they operate, toward the environment and so on.

These six elements are the table stakes for brand greatness. But, there are more components of a great brand. Our world has changed. People require a moral, principled set of commitments from a brand.  It is no longer acceptable to think only about the brand you are building today: it is an imperative to think about the brand’s social impact on tomorrow. 

A great brand must commit to a four-point ethical framework: 1) It must commit to being a Credible Source; 2) It must commit to a Reputation for Excellence; 3) it must commit to being a Pillar of Integrity; and, 4) It must commit to a Responsibility Ethic.

Being a Credible Source means consistently providing true, trusted information about itself and its actions.  All stakeholders should have confidence in what the brand communicates. And, all stakeholders should believe that the brand would answer questions accurately and truthfully. When stakeholders perceive a brand to be a credible source, they use the brand’s past actions to predict the brand’s future behaviors. 

Social media is struggling with the fact that a lot of what is posted is not credible but, in fact, misleading. Facebook has changed its corporate name to Meta hoping to distance its VR vision from being tainted by its social media brand’s issues. Google is positioning itself as a credible source with its corporate ads touting its safety and its enterprise services such as Google Workspace.

Having a Reputation for Excellence means continually behaving in the same quality manner each time, every time, across geography. Reputation signals past accomplishment. Reputation is the amalgam of the brand’s past behaviors, and past results. Reputation describes the brand’s current and future ability to deliver valued outcomes across multiple stakeholder constituencies. Having a reputation for excellence is a competitive advantage.  Because a brand’s reputation is the collection of stakeholder perceptions over time, the brand manages its reputation but is not the creator of its reputation. Toyota has an excellent reputation in automotive, a reputation that extends to its Lexus brand. 

Being a Pillar of Integrity means making sure that all actions and behaviors, internally and externally, have stakeholders’ best interests at heart, for today and for tomorrow. It means that external constituent groups perceive the brand as fair, impartial, honest, open-minded, truthful, and just.  Apple has taken on users’ concerns about privacy by offering the ATT framework. The ATT framework, launched in 2020, gives users a choice on whether they wish to be tracked or not across apps and websites owned by other companies. 

Having a Responsibility Ethic means the brand behaves as an aware, effective global citizen acting and reacting positively on behalf of people, communities, nations, the planet, and society in general. Patagonia is a prime example of a brand with a responsibility ethic. It has an activist commitment to the environment and social issues.

Recently, Google has been enmeshed in a discussion of sentience within its LaMDA project. A researcher on the project believes he is speaking with a sentient being. Google is repudiating this. LaMDA, (Language Model for Dialog Applications), is one of several large-scale AI systems that has been trained on large swaths of text from the internet and can respond to written prompts. They are tasked, essentially, with finding patterns and predicting what word or words should come next.  

What is Google’s ethical responsibility? 

In a statement, Google stated that LaMDA went through 11 “distinct AI principles reviews,” as well as “rigorous research and testing” related to quality, safety, and the ability to come up with statements that are fact-based. “Of course, some in the broader AI community are considering the long-term possibility of sentient or general AI, but it doesn’t make sense to do so by anthropomorphizing today’s conversational models, which are not sentient,” Google concluded.

Being a popular, leading, trustworthy, consistent, relevant brand with great managerial talent and processes along with innovation and renovation are all critical elements. But, in today’s world, these alone will not take the brand from good to great. 

Great brands are not only defined by the quality of their products and services. Great brand leadership must not only ask, “What is the future we wish to create in which our brand will win?” Great brand leadership must also ask, “What is the impact my brand will have on that future world in which my brand will win?” 

In order to journey onward to that world, brands must commit to the ethical framework of being a credible source, having a reputation from excellence, being a pillar of integrity, and having a responsibility ethic.

The primary role of the CMO is to be the voice of the customer for the brand-business. The CMO embodies the customer informing the organization. Customer understanding and insight generation are the CMO’s highest priorities. Sure, the CMO has numerous other functions these days. But, being the voice of the customer must be the number one function.

CMOs must embed themselves in customers’ psyches and, then, create future scenarios and actions to keep the brand-business viable, especially during volatile, uncertain times. According to a new book from two Deloitte principals, one of the main CMO roles is to translate customer needs into “… trendspotting that will then generate observational insights” that will hopefully “… shift” the brand-business strategies. 

To do this well, CMOs cannot just rely on interpreting digital data. These data provide answers on what customers have done and what they are doing. Based on past and current behaviors, data can provide predictions. But, these predictions are behavior-based and do not allow for consumers changing their minds and their behaviors. Most data do not tell the CMO why customers are behaving in these ways. Knowing what is happening is interesting. Knowing why it is happening is imperative. Knowing what is information. Knowing why is insight. This means the CMO must not just focus on what the customer wants. It means focusing on problems and concerns. For which the brand-business can create solutions.

CMOs need to be interacting with consumers daily, in real time, translating what into why. With this knowledge, the CMO must act. CMOs must allow their informed judgments to provoke strategic actions. Without actions, the knowledge is useless. As the well-known, well-respected economist and Harvard Business School professor Theodore Levitt said, “Ideas are useless unless used. The proof of their value is in their implementation. Until then they are in limbo.” Professor Levitt believed that just having the insights without taking the responsibility for implementation is irresponsible.

According to the Deloitte authors, CMOs are supposed to be the “sensing system” for the organization. As you will read, that sensitivity was not as acute as it should have been over the past year.  Unfortunately, for some big-box retailers, a lack of real-time customer knowledge and strategic action triggered bad, grim news.

Target, Walmart, Big Lots and Wayfair are just a few retailers that admit to being blind-sided by changing consumer behavior and the speed of this changing consumer behavior.  

Statements from executives indicate that during the pandemic, these businesses went out of their way to give customers what they wanted. Target and Walmart went as far as hiring their own container ships to bring in goods that consumers desired.

But, with lock-downs ditched and with inflation rearing its ugly head, consumers have changed their minds. Products consumers wanted during the pandemic are not the items they want post-pandemic. Retailers are stuck with inventory that will need to be sold with steep discounts. Such a scenario eats into margins, affecting profitability and earnings.

Of course, there are multiple reasons for this disastrous situation. Consumers stuck at home bought goods for the home and for dressing at home. That balky washing machine could no longer be ignored. It had to be replaced. Dressing for Zoom meetings did not require that buttoned-up office look. US manufacturing lines were hindered due to operators calling in sick with coronavirus. Overseas manufacturing was also slowed. Ports faced similar issues: longshoremen get sick, too. Containers piled up at piers.

When these backs-ups started to ease up, the products in-store were no longer desired. As Bloomberg reported, retailers have “too much stuff” that no one wants and is now piled up in warehouses and stores.

This current dilemma is not due solely to supply chain issues, although supply chain is a driving force for the inventory mishaps. CMOs could have provided better real-time intelligence. Although knowing the customer intimately could not have prevented the current inventory situation, it definitely could have worked to prevent the scope of the current inventory situation. CMOs could have been quicker to alert the brand-business to rapidly changing customer attitudes and behaviors.

CMOs had an amazing opportunity to get ahead of the pandemic. However, The CMO role is now tasked with far-ranging, multi-functional responsibilities. CMOs’ array of functions – digital transformation leader, personalized customer experience leader, leader of customer-focused data capture and usage, and customer data privacy captain – means that there is less time allocated to being the voice of the customer. 

Reading the press reports, it is clear that real-time consumer intelligence could have been better. Predictive analyses that forecast demand and potential disruptions to inventory are terrific tools. But, in a volatile environment, there needs to be a more intense focus on the customer. The retail brands experiencing the worst inventory pile-ups are all admitting that there needs to be a stronger focus on customer understanding.

As reported in The Wall Street Journal, Brian Cornell, Target CEO, told investors, “We’ve had some additional time after earnings to really evaluate the overall operating environment.” This includes “watching consumers’ behaviors as they face high rates of inflation.” He added, “the demand signal has changed.”

The CEO of Big Lots, Jonathan Ramsden, told The Wall Street Journal, “We didn’t anticipate the abruptness of the change in consumer behavior.” Suffering from excess inventory, Big Lots’ net sales fell 15% in the quarter ending April 30^th.

Macy’s CFO, Adrian Mitchell, said, “We know that our ability to maintain margin depends on our understanding of consumer demand within and across categories. A spokesperson for Macy’s told The Wall Street Journal that the brand had anticipated declines in certain popular pandemic categories, it was just that “The shift happened at a quicker pace than expected.”

There is an urgency to truly understanding the customer. As Andrea Felsted writes for Bloomberg, retailers are soon going to be ordering for the holiday season. What will consumers want to purchase?

This current situation at these remarkable retail brand-businesses should be a wake-up call for the C-suite’s perspective on the value of the CMO. Being the voice of the customer must be the highest priority of the CMO’s role. When a brand-business loses its real-time connection to customer behavior and customer attitudes, the brand-business suffers. Even when there are extenuating circumstances such as supply chain issues, taking your eye off of the customer creates losses. Let’s make sure that the CMO is the brand-business’ is the voice of the customer.

There is angst in Stuttgart, Germany. The executives at Mercedes believe that Mercedes has lost its luxury caché. Part of this concern has to do with its brand image. And, part of this has to do with its valuation in the eyes of investors and analysts. It seems that Mercedes is troubled that it is valued at a lower multiple than, well, tobacco. Mercedes CEO, Ola Källenius, wants analysts and investors to reconsider how they assess the brand’s PE multiple, especially when compared to Ferrari and Tesla.  

At its analyst and investor event in Monaco, Mercedes “pleaded” with investors and analysts “to take another look at Mercedes”. In order to raise its valuation in the eyes of the financial community, Mercedes is rebranding itself to become “the world’s most valuable luxury car brand”.  According to its new brand ambition, Mercedes will focus on luxury in order to woo the financial community.  In fact, Financial Times reporting indicates that the new Mercedes strategy is designed to entrance the financial community.

Mr. Källenius is said to be frustrated. He is quoted as saying, “Our (price to earnings) multiple now is kind of stuck with every other incumbent… which we don’t think reflects the true value of this company. I am not dreaming about (a multiple of) 20. We are not crazy, but five or six is not the right number.”

So, now, the brand’s new strategy organizes Mercedes vehicles into three luxury groups: Top-End Luxury, Core Luxury and Entry Luxury. Top-End Luxury will have the lion’s share of resources, including the Maybach brand. Core Luxury will primarily focus on E-Class vehicles while Entry Luxury will have only 4 models. Three entry models are being axed, as there is concern that these less expensive models have tarnished Mercedes luxury perceptions. Mr. Källenius told the business press that luxury has always been at the core of the Mercedes brand. But, now luxury needs to be woven into its strategy.

There are two problems with the new Mercedes reorganization and mission. First, Mercedes is turning itself inside out to become a darling of analysts and investors rather than customers. Second, Mercedes has confused luxury and prestige. This confusion will affect its marketing and communications with its customers.

1. Focusing on Satisfying Analysts Rather Than Customers

In its quest to raise its PE ratio with analysts and investors, Mercedes is admitting that it will do whatever it takes to create an organization and a brand that analysts and investors will love. Being analyst/investor-driven may not be in the best interest of customers or in the best interests of the brand. 

Brand-driven, customer-driven growth must be the goal of the brand’s management. This is how the brand’s management links its business performance to brand performance. How you manage your brand is how you manage your business and vice versus. The goal of a brand’s management must be about profitably attracting and retaining customers. This leads to quality revenue growth and enduring profitable growth.  

Brands must focus on satisfying customer needs, rather than catering to shareholder interests. Losing customer focus is a certain path to trouble. The future will belong to customer-focused businesses that are best at attracting and retaining customers.

2. Confusing Luxury and Prestige

Unveiling its new strategy in Monaco, Mr. Källenius made it clear that he wanted Mercedes to be rated the same as Tesla and Ferrari.    Tesla and Ferrari may not be in Mercedes’ customer-perceived competitive set. Tesla and Ferrari are in Mr. Källenius competitive set.

Tesla and Ferrari are different types of brands than Mercedes. Tesla is not a luxury brand. Neither is Ferrari. Tesla and Ferrari are prestigious brands. These two concepts – prestige and luxury – tend to be used as synonyms. This is a marketing mistake. And, for Mercedes, it is a strategic mistake. Mercedes may have mis-defined its competitive set for the sake of proving itself to investors and analysts.

The misuse and muddling of these two concepts – prestige and luxury – is a problem for luxury brands and for prestigious brands. It is also a problem for brand owners. The two words are different, denoting different brand and cultural experiences. 

Prestige and luxury should not be used interchangeably. Prestige is something a person assumes; it is bestowed; it is given; it is leveraged. Prestige is objective. Luxury is a state of being defined by great comfort, extravagance and the absence of vulgarity. Luxury is subjective. A prestigious brand is not necessarily a luxury brand and a luxury brand is not necessarily a prestigious brand. 

Although not mutually exclusive, prestige and luxury deliver different functional, emotional and social benefits. And, the values of the target customer may be profoundly different.  For example, a power seeker will want to associate with goods and services that bestow an image of control over and a sense of elevation relative to others. This does not mean that this power seeker will refuse to buy luxury items. What it does mean is that the power seeker uses the luxury items not for the experience but for stature and reputation.

Bernard Dubois of the HEC School of Management, a French grande écoles, wrote a journal article in 2002 on this subject of prestige and luxury. He reported, “… prestige is based on unique human accomplishment” while luxury refers to the “benefits of refinement, aesthetics and sumptuous lifestyle.” His research demonstrated that prestige and luxury have different consumer perceptions that if ignored have “substantial consequences” for a brand. Prestige was associated with admiration for a person or for an object while luxury reflected perceptions of comfort and beauty. 

Professeure Elyette Roux teaches at the University Paul Cézanne in the IAE Business School, in Aix-en-Provence. Professeure Roux is considered to be France’s most reputed (luxury) brand researcher. 

In 1999, Professeure Roux wrote a “white paper” on understanding luxury, describing the difference between prestige and luxury. She wrote, “Prestige is the act of striking the imagination, demanding respect and admiration. Prestige implies that one is looking for power over others, impose power over others.” Luxury is not about seeking power over others. “Luxury is more a way of being, a way of living. Luxury refers to pleasure, refinement, and perfection as well as to rarity, and the costly appreciation of that which is not a necessity.”

According to the French, and they should know, luxury is “a way of living represented by great spending to show elegance and refinement… it is a way of being rather than a way of appearing.” Professeure Roux regrets that the concept of luxury has come to be associated with ostentation, which is all about “showing”. In her opinion, luxury is this paradox of total rejection of everything economical and the aesthetics of sensory consistency. Coco Chanel was quite clear when she said, ‘Luxury must be comfortable, otherwise it is not luxury.”

The American sociologist, and author of The Power Elite, C. Wright Mills, wrote, “Prestige is the shadow of money and power.” Synonyms for prestige are status, standing, stature, reputation, repute, regard, fame, note, renown, honor, esteem, celebrity, importance, prominence, influence, eminence, and more. These are not synonyms for luxury.

Ferrari is a racing vehicle. And, it is a prestigious brand. Ferrari’s website says so. 

“The Prancing Horse symbolises exclusivity, performance and quality all over the world. 

Our prestige is built upon decades of sporting success and the inimitable style of our cars, which are unique in their innovation, technology and driving pleasure.

We craft exclusive, authentic and memorable experiences for our clients in everything we do.”

Tesla is a prestigious brand. And, it is a brand that is not afraid of offering less expensive, entry level models. The brand is prestigious because of its credibility and innovation in sustainability and environmental impact. Being associated with Tesla says a great deal about a person’s ecological commitment, whether warranted or not.

For Mercedes, using Tesla and Ferrari as its competitors, from a marketing standpoint is a mistake. There is no indication in the new strategy that actual customers see Tesla and Ferrari as brands among which to choose. 

Mercedes is correct in wanting to emphasize its luxury pedigree. Perhaps, over time, its luxury perceptions have diminished. Certainly, some investors and analysts think so. In fact, one automotive analyst at the Monaco event told Financial Times that although its Maybach brand is luxury, the Mercedes brand is “everyday” as in common.  

Mercedes should clarify whether its reorganization and new strategy are designed to create customer love and loyalty. If it has made changes just to satisfy shareholders, then this is a terrible mistake.

Additionally, brands must identify whether they wish to deliver a promised experience of prestige or a promised experience of luxury. And, then, uphold whichever is chosen. Prestige is about the power of respect, status, and reputation. Luxury is “a world of creations that make life more beautiful.” Brands and their owners must understand and never confuse or misuse these differences.

Many times, brand-businesses have insights about the future but do not find the courage to act on these insights. Lack of courage occurs for a number of reasons. Costs, fear of failure, complacency, the comfort of manufacturing what the business knows how to make rather than what solves customers’ problems, a chief of manufacturing who says, “Not on my line” or a siloed organization: all tend to collapse courage and get in the way of making things happen.

These brand-businesses do not have the will to do. So, something amazing passes through their systems causing lost chances, missed opportunities and the chance to get ahead of curve. Having the courage to commit to a vision or an insight is essential for brand-businesses, especially today in a fast-changing, volatile world. The courage to commit starts with brand leadership. Brand leadership is the key to action.

Brands thrive if leadership sees ahead and creates a plan for winning. Brands need to keep innovating in order to stay relevant. Brands need to keep in touch with their customers. Brands need leaders who love the core products and who want to make these better. But, brands also need leaders who can see ahead, adopt new ideas and act.

One of the criteria for great brand leadership is knowing the difference between being certain and being confident. Looking for certainty is a dead-end street. Brand leaders who seek certainty usually will not have the courage to act. Death and taxes are certain: all else are not. On the other hand, confidence is critical. A brand leader who is confident that an idea is worth investing in has the courage to bring the idea to fruition. Being able to say, ‘No, I am not certain this will work, but I am confident this is the right thing to do,” is a mark of a great brand leader.

Great brand leaders are authoritative, credible, responsible, trustworthy and they have integrity. When great brand leadership is lacking, brands suffer. Those seeking certainty will jettison ideas because there is no way of supporting a world of no doubt. There is no way of having absolute conviction that something is true if it has never yet happened. Great ideas die when the brand leader, presented with a new idea, asks, “Can you give me an example of who has done this before successfully?”

In the early 2000’s, an appliance company created a smart fridge. It was years ahead of the marketplace. This fridge would have the ability to communicate when foodstuffs were going bad; it would be able to order food stuffs that were running low; and it had a computer that allowed you to keep a meal calendar and create meal planning. The smart fridge would be hooked up to your home Internet system and become a communications hub for the family. The appliance company made one of these. This one-of-a-kind smart fridge was trucked around to various cities and company offices. But, the smart fridge never saw the light of day with consumers. Leadership was unsure and non-committal. Leadership wanted to continue to know more. Leadership was concerned more about failure of this product than the product’s success. No one could promise leadership the certainty of a win.

Today, smart fridges abound. Take the Samsung Hub concept. According to its website, Samsung Hub… “… with Alexa built-in, helps you stay connected to your family and home, whenever and wherever. Family Hub™ lets you control your Samsung smart appliances and devices, stream music, share pictures with your family, and so much more, all right from your fridge.” Samsung has always had leadership that respected innovation and accepted risk. As early as 2005, Samsung previewed a digital convergence fridge. It had a home organizer on the front door.  This organizer had categories such as Food remember, Digital schedule and calendar, digital memo pad and digital radio. 

Samsung’s early innovations in clothes washers and dryers, again from 2005, changed the way other manufacturers thought about these appliances. Samsung featured the Silver Nano Health System clothes washer. This feature used silver ions that melt in the water to get rid of germs and provide sterilization.  The video on the Silver Nano indicated that the silver ions decomposed detritus to 1/1000^th of a hair width, provided 99.99% sterilization and odor removal and removed irritants thus preventing atrophic dermatitis.

Ten years ago, in 2012, a hotel company had a plan for a net-zero, sustainable hotel. At the time, research indicated that a sustainable, responsible hotel would solve a problem for many travelers who expected products and services to reflect their personal values. The sustainable hotel’s concept was designed around the idea of innovating for responsible living. This hotel was to be a disrupter: a building that would be green from top to bottom. Partners with expertise in specific areas of sustainability and technology were signed; the specific location was identified and the land owner was eager for discussions to start. The innovation hotel would also be a pipeline for the company’s other branded hotels as new ideas could be tested, measured and managed in real-time with winning ideas transferred within the company’s system. Data showed that this sustainable hotel would be a profitable entity for the company, especially when it came to the key hotel-industry metric of RevPar, revenue per available room.

A team worked on the strategy and planned for months. Money was spent, presentations were delivered. And then, nothing… shelved with all the other what ifs. It was the hotel that never happened. At least not at this company. Leadership was worried about short-term investment rather than the long-term profitability of the innovation. Leadership wanted certainty that this sustainable hotel would succeed.

Now, as reported in The New York Times, there are many hotels with the same sustainability concept that are actually being built or have been built, receiving guests. Leadership at these hotels are willing to commit to the greater good. As in 2012, once again new research states travelers commitment to eco-consciousness when it comes to the actual hotel. In a Booking.com survey, 71% of respondents say they plan to travel greener. And, more than 50% of the respondents indicate that they “are determined” to make greener travel choices. The New York Times states that these hospitality options are way beyond the ditching of tiny plastic shampoo bottles and asking guests to reuse their towels. These hotels are focusing on the entire building. These hotels are focused on environmental efficiency and effectiveness, from solar panels to zero waste.

When Boards of Directors, investors and analysts see the present and the future, and if they believe in ing strong, resilient, authoritative, trustworthy brand-businesses that will continue to generate enduring profitable growth, great leaders must be in place to make these insights realities. 

Great brand leadership takes courage. Great brand leadership requires a will to do based on confidence. Great brand leaders know what they do not know and exercise informed judgment. Great brand leaders weigh informed action against inaction: they balance the need to know with certainty against the necessity for a confident decision. Great brand leaders take risks; they take leaps of faith based on informed judgment: they have confidence that these are leaps in the right direction.

Employees are the frontline when it comes to customer relationships and delivering the brand experience.  This is especially true in a service business. Investing in a brand’s people should always be a priority.

In March 2022, Starbucks changed its CEO. Kevin Johnson who became CEO in 2017, announced that he was leaving. Mr. Johnson was replaced by Starbucks founder, Howard Schultz. Faced with external pressures and internal unrest, Mr. Schultz is defying the financial norm of purchasing buybacks and focusing those monies on Starbucks’ employees. Mr. Schultz will be investing in the gold mine that is his frontline.

Regardless of one’s position on Starbucks’ unionization, investing in a brand’s employees is the right thing to do. Just because a business is customer-focused does not mean that customers come first. Customers come second. Employees, the brand’s people, come first.

Internal alignment is essential. A committed culture is critical. A disgruntled culture is a crisis. Internal brand pride is a key success factor affecting external attitudes and outcomes. If a brand’s people are not proud and inspired then a brand will falter.

If a brand wants its employees to love the brand then the brand needs to love its employees. If a brand wants its employees to have passion and pride in the delivery of a trustworthy relevant, differentiating quality experience than the brand must demonstrate passion and pride in what employees do and in who they are.

Data show that employees play a powerful role in shaping business perceptions through positive communications with all stakeholders. Proud employees communicate well beyond their place of work. Proud employees’ advocacy of the business enhances perceptions among external and internal stakeholder audiences. Employee pride translates into higher job satisfaction. Employee pride and satisfaction contribute to customer satisfaction. 

The difficulties brand-businesses face due to the impact of coronavirus have just exasperated the difficulties of keeping a workforce happy, engaged and committed to the brand. Keeping a brand’s culture alive when working from home is incredibly challenging. Even more challenging is keeping a workforce that must show up at work committed during a pandemic. 

It is unfortunate that a keen, laser-like focus on employees is something that tends to be put aside when management and investors focus on financial engineering such as 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. Investments in continuous improvement and innovation are decreased as dividends and share buybacks are increased. Monies are siphoned from employee training and recognition programs, R&D, customer insight research, service and support and marketing resources. 

As for buybacks, data in The New York Times indicates that in 2021, companies in the S&P 500 repurchased $882 billion in shares. The New York Times also reported that analysts at Goldman Sachs expect this year’s forecast to be over $1 trillion in buybacks.

Barron’s, the financial magazine, wrote that there may be a slowing in buybacks. Quoting a variety of sources, Barron’s indicated that where dividends are “sacrosanct,” buybacks are more flexible. Additionally, with a rising interest rate, using debt to buy back shares is looking like a less desirable action. However, Barron’s also notes that there are few examples of companies “de-emphasizing or suspending share repurchases.” There is nothing quite like juicing your stock price.

This is what makes Starbucks’ move so interesting.

The first action Mr. Schultz took in what is now his third term as CEO was to suspend buybacks and invest the money in Starbucks’ people. Mr. Schultz said that stopping the share buybacks would allow Starbucks “… to invest more profit into our people and our stores – the only way to create long-term value for all stakeholders.” The Wall Street Journal reported that during a “forum” at Starbucks’ headquarters, Mr. Schultz told employees that Starbucks had not done enough for them in recent years. He said, “We have to reimagine the role and responsibility of a public company in America today. We have not done enough. I promise to do better.”

Recognizing that there is quantity of growth and quality of growth, Mr. Schultz said, “… Starbucks has a winning strategy and millions of loyal customers and that it was not worth fixating on the company’s stock price. He said he faced pushback when investing returns in benefits for part-time employees when he first started the company, but it was the right thing to do for Starbucks and its workers. He added, “For all of you following the stock price today and that stock is going down, that’s a short-term thing.”

With more Starbucks voting to unionize, Mr. Schultz and his leadership team are out in the field listening to employees express their complaints and concerns. Mr. Schultz wants to better understand how employees feel. Mr. Schultz said employee feedback will “inform” the brand’s “decision-making” according to The Wall Street Journal. In addition, Mr. Schultz has hired a Chief Strategy Officer, Frank Britt, reinstating this function that was eliminated in 2018. According to Mr. Schultz, Frank Britt, formerly of Penn Foster, a workplace development enterprise, has spent his career “… empowering frontline employees to unlock their full potential in work and life.”

As The Wall Street Journal reported, Mr. Schultz is “… reviewing the company’s benefits to develop an expanded employee-benefit package in an effort to better recruit and retain baristas.” It appears as if these benefits will only be for non-union personnel. Legal restraints prohibit alterations to union-agreed terms for unionized workers without bargaining with their union. Mr. Schultz has been clear as to his feelings about unionization. On the other hand, investing in people and stores should not be seen as simply a way to bust burgeoning unions. Investing in people and stores should be seen as a way to build a better brand.

If you think that focusing on building employee pride and passion is less effective than product or service or pricing, you would be wrong. The 2003-2005 turnaround at McDonald’s was not achieved solely by the creation of its continuing “i’m lovin’ it” campaign. There was a concerted effort to build back employee enthusiasm and advocacy for the McDonald’s brand. In 2002, morale among employees, corporate and in stores, was funereal. Unhappy employees at the counters took out their feelings on customers. Reports of rudeness and inaccurate orders rose, bathrooms were not cleaned as frequently, tables were dirty, lines at drive-thru were long and drive-thru times increased.

Then CEO, Jim Cantalupo, publicly defended the reputation of every individual who worked at McDonald’s. He invested in employees and in the quality of the HR department. McDonald’s created an onboarding program, “Learnin’ It, Livin’ It, Lovin’ It” and focused on a lifetime of skills that a job at McDonald’s offered. Not every employee looks for a lifetime job, but they do want a job that delivers a lifetime of skill sets transferable to other jobs. Employees want to acquire skills that can last them a lifetime.

Horscht Schulze, founding president and former COO of The Ritz Carlton Hotel Company, built The Ritz Carlton brand on employee passion. The core guiding employee concept was “Ladies and gentlemen serving ladies and gentlemen. In a 2006 article from Dealerscope, Audrey Gray wrote, “The Ritz Carlton is so intent on empowering their employees to ‘wow’ customers, each employee has permission to spend up to $2000 a day per guest to fulfill expresses or unexpressed wishes.” “… the company’s most successful customer service policies revolve around hiring and empowering their employees. The Ritz Carlton acted on the belief that if its people did not believe in the brand then the brand could not expect its guests to believe in the brand. 

Publix supermarkets has about 1000 stores, about 800 of which are in Florida. Publix’ culture is one element that makes Publix so successful and such a nice place to shop. And, its culture is based in part on employee ownership. Publix is also a non-unionized organization. According to Barron’s, of its 225,000 employees, 205,000 own Publix stock. Publix is the largest employee-owned company in the United States. Publix is a private company that is owned by employees, Board members and the Jenkins family which founded the business. Publix shares are not traded publicly. Stock is awarded yearly to staff members. Staff members can also purchase stock from the company. Barron’s calls Publix’ culture “strong and durable.”  Publix treats its employees as owners, which they are: the workers are the winners, not the investors, as Barron’s points out. And, Publix has stated that it plows its money into its operations and stores rather than investing in buybacks.

A brand’s service experience is a key factor in making a brand more attractive. How customers are treated makes all the difference in the world. To be successful, brands must take their service to the next level. This includes building and reinforcing employee pride and brand commitment. Pride transfers to the other side of the counter.

Howard Schultz is making a bold move. What is especially important to note, politics aside, is that he is making this move in a business world that has been increasingly focused on the short-term. Mr. Schultz understands that Starbucks grew based not just on product but by offering a comfortable third place staffed with knowledgeable, friendly baristas. These baristas were not just serving the brand’s products; they were serving the brand’s experience. They were aficionados of coffee. The baristas were not just agreeing to Starbucks’ brand experience, they were advocates and adherents of Starbucks’ brand experience. Starbucks’ baristas put the brand experience in the hands of every single customer. The Starbucks brand cannot afford to have unhappy baristas.

Putting monies into its employees is the right thing to do. Not just for the employees, but for all stakeholders. With a committed workforce, Starbucks, and any brand for that matter, has a competitive advantage. Focusing on the long-term health and welfare of employees at the expense of short-term stock gains is not an expense at all. It is an investment for high quality revenue growth.