Friday, October 30, 2009

"Irreconcilable" Differences

What is considered “strategic” can depend on ones time horizon. Short-term goals, like meeting a sales quota and longer-term goals, like earning a premium require different strategies. Frequently, short-term strategies (e.g. discounting) are at odds with long term-strategies (e.g. standardized pricing). So too, short-term strategists are often at odds with long-term strategists. But the animosity is usually unnecessary.

Most corporations are bound by quarterly reporting. Immediacy rules their thinking. The decreasing tenure of senior management tends to add to the urgency. The average tenure of a CEO was 8.3 years in 2006, down from 9.7 in 1999. A full 40 percent of CEOs hold their positions for two years or less. With such a short time at the helm, it’s not surprising that many managers have little reverence for the past (or great concern for the future). Their bonuses are paid in the here and now. As a result, short-term strategists are highly valued and tend to dominate the halls of corporate America.

Branders and marketers, both inside and outside of corporations, tend to be long-term strategists. Their charge is to manage the perceptions people have of companies and/or their products—something akin to managing a person’s reputation. Reputations aren’t as pliable as business decisions. As Benjamin Franklin said, “It takes many good deeds to build a reputation, and only one bad one to lose it.” As such, branders tend to value continuity over experimentation, which can make them appear cautious and slow to react.

The irony is that each perspective benefits from the other. Responding to changing market conditions keeps a company viable. And having strategic continuity ensures that a company’s actions don’t become disjointed, arbitrary and ultimately meaningless. Tension is a positive dynamic. Conflicting forces require creative solutions and propel companies forward. Being strategically homogeneous might feel good during meetings, but it’s a sure sign that trouble is brewing.

Friday, September 25, 2009

Do You Have a Brand…Or Do You Brand?

Most marketers tout the virtues of brands. And to listen to us pontificate, it might appear that we all sing from the same hymnal. After all, we use the same verbiage with equal enthusiasm. However, there are subtle differences in our marketing-speak that signal significant differences in the output of our work. The most notable of these linguistic differences is in the use of the term “brand” itself.

Consider the difference between brand and branding. A brand is a thing, or a collection of things—logos, identity systems, advertising, blogs, Tweets, etc. Branding is a process or behavior. The former is static, the latter active. Viewing brands as things places the emphasis on the executional elements themselves. Viewing branding as a process places the emphasis on the strategy behind them. The line between these two perspectives is easily blurred because both result in some form of expression. However, the quality of expression differs depending on the perspective of the marketer.

Marketers who view brands as things tend to talk about executional elements and brands interchangeably. Their work tends to be expressed through a limited set of mediums, usually their strength. Their portfolios typically consist of one-off campaigns because their ideas lack strategic continuity. And in some cases, they become salesmen in search of a client for their favorite executions.

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The superficiality of executional branding diminishes the value and importance of branding. Additionally, assigning the concept of brand to specific executional elements unnecessarily limits a marketer’s purview. Branding is the process of managing perceptions—determining what perceptions, if created, will produce an advantageous result and then behaving in a manner that will create them. As such, a positioning idea can and should influence more than a company’s marketing materials. If it can’t or doesn’t, it’s the marketer’s failing.

Ideally, companies wouldn’t have brands, they’d brand. It might also be more descriptive if we called ourselves “branding consultants” rather than “brand consultants”. But doing so would be committing a sin—creating proprietary lingo. So we’ll simply have to trust that people understand what we mean.

Friday, August 28, 2009

I’m No Demo

What do all 25-year-old women have in common? Not much beyond the fact that they are 25 years old and female. However, this doesn’t stop businesses from using such benign demographic terms to define their target audiences. And the unfortunate consequence is equally benign products and marketing.

Being a 25-year-old woman isn’t a universal experience. Nor is being a Hispanic man or a Catholic beekeeper. People with similar demographic profiles have different life experiences and vastly different talents, interests and personalities. Their perspectives on life are borne of these differences and ultimately influence their behavior. As such, people who share similar attitudes and perspectives tend to behave more alike than people who share a similar demographic profile.

Fans of Harley Davidson demonstrate the concept. Demographically speaking Harley drivers have little in common, but attitudinally they all aspire toward the rugged individualism embodied in the Hell’s Angels.

Often companies make the mistake of looking at the trees rather than the forest. They start thinking, “we have such and such types of customers” and then they begin catering their products and marketing toward individual demographic groups. This parsing results in an unnecessary lack of focus and overlooks the fact that despite demographic differences, all of their customers had something in common to begin with—affinity for the same brand.

Even if a company’s target has strong demographic correlations, it is rare that everyone in that demographic is a customer or that every customer fits the demo. Moreover, it isn’t the demographic that is important, but rather the associated perceptions. For example, femininity is associated with prudence, seduction and nurturing; youth is associated with vitality, energy and a free spirit. It’s the perception, not the demo that attracts people.

Our desire to be perceived in certain ways guides our behavior. Demographic profiles may suggest something about the perceptions that will attract a target, but they fall short of actually defining either the target’s motivations or a company’s intent. More precisely defined targets produce more meaningful products and marketing. Demographic profiles produce ubiquitous images of smiling [insert demographic profile here] using a product.

Friday, July 24, 2009

Eye of the Beholder

As promised a few weeks back, a post on the concept of viewing obstacles as assets…

The beautifully frustrating thing about branding is that it deals heavily in human idiosyncrasies. Given the same information, two people can form opposing opinions regarding a product or service (or religion, or politics, or just about anything). Some business people would prefer a more orderly world, but it’s the vagaries of the human mind that ultimately create opportunity.

All companies have strengths and weaknesses that influence the number and type of consumers they can attract. Sometimes, the potential audience is too small to support a company’s desired growth. If the obstacle is of a company’s own making (e.g. product design or functionality), then one solution would be to identify a different, larger or more profitable target audience, determine what beliefs and motivations drive their purchase decisions and then acquire the competencies to design, produce and market a product that will appeal to them. When the obstacle is more inherent, as it is when branding states (e.g. North Dakota), the challenge is slightly different.

A state like North Dakota has two inherent obstacles. First, North Dakota is sparsely populated and has few widely known attractions, so the state gets overlooked. Second, North Dakota’s climate is among the coldest in the union. Fortunately for North Dakota, and all brands, not every consumer wants the same things. For example, not all vacationers want the benign, contrived experience one might expect in Florida (note: repositioning the competition—another future blog topic). For more self-directed and adventurous vacationers, cold and sparsely populated can be positioned as rugged and untamed. While not appealing to every vacationer, for those seeking a more authentic, less commercialized experience, North Dakota might fit the bill perfectly.

Truly differentiated products and services are polarizing. In order for some consumers to fall in love with a product or service, it usually follows that others will hate it. The negative response is both the cost and validation of having created something meaningful. As the saying goes, “one man’s junk is another man’s treasure.” Sometimes the things that detractors point to…are the very things that make your offering special. It’s just that you are listening to the wrong people.

Friday, June 26, 2009

“Quality” isn’t a Positioning Idea.

Can you think of a company that has succeeded by claiming that its products are low quality, inconvenient or over priced? From a strategic standpoint, words like “quality”, “convenience” and “value” have no alternative, which is why every company claims them. The irony: companies continue to rely heavily on words that have become meaningless through overuse.

Every product or service must meet the quality, convenience and value standards of its category. Otherwise they cease to exist. Additionally, every category has its own unique standards. Food is supposed to be “fresh”, ad agencies “creative” and clothing “fashionable”. So of course we see entire categories promoting these claims. However, once the minimum standards are perceptually met, promoting them only reinforces a product’s sameness within the category.

Beyond the obvious futility of every business claiming the same things, words like “quality” have no inherent meaning. Quality means something different in an automobile than it does in a computer, a can of soup or an accounting service. Even within the same category quality can mean different things. In an automobile, quality can mean efficiency, power, precision, durability, practicality, opulence, etc. And even an amateur engineer can appreciate that there are trade-offs; no single automobile can excel at every criteria equally.

While category table stakes are important, they don’t differentiate a company’s product or service. And meaningless words like “quality”, “value” and “convenience” don’t provide a strategic foundation for differentiation. In order to add strategic value, positioning ideas need prescriptive language—language that not only suggests what employees should do, but also how they should do it. A company that has “precision” as a strategic filter guiding its behavior will build and market a car differently than a company with “practicality” as its guiding principle. And in the end, both can claim to have built a “quality” car.

Friday, May 29, 2009

Information Without Meaning

We live in the “information age”, or so we are consistently reminded. And while it’s true that business people have vast amounts of information at their disposal, the fact remains that making good decisions hasn’t gotten any easier. In some cases the challenge is too much information. In others, it is having the wrong information. However, the primary limitation of information isn’t its quantity or quality, but rather its application.

Facts, figures and insights have no inherent meaning. If a company discovers that 55% of its current customers give it a favorable rating for customer service, is this good or bad? It depends. If the company is in a category with historically low customer service ratings, it is probably good. If the company had a higher rating last quarter, it’s bad. If the competition has lower ratings but gained ground since the last measurement, it’s a mixed blessing. Information derives meaning from its context.

Context also influences the relative importance of information. “Price” will rise to the top of virtually any purchase criteria survey conducted. However, if consumers perceive that every competitor in a category is similarly priced, how important a role does price play in the purchase decision? If consumers perceive one company’s product to be more expensive than its competition, is this important? It depends on who was surveyed and the business strategy of the company. This isn’t to say that price isn’t an important criteria, just that this particular criteria might not be important when diagnosing and solving every business problem.

Unfortunately, too much research is conducted without a clear understanding of the context in which it is needed. Misinterpreted data leads to ineffective execution or, more often, inaction. Smaller quantities of actionable data have the greatest value. Since people solve business problems through their actions, only the pieces and combinations of information that produce constructive behavior have utility. The rest is just taking up space on our bookshelves.

Friday, May 15, 2009

A Rose by Any Other Name

A few years back North Dakota wanted to change its name to Dakota. Supporters of the idea argued that the word “North” suggested that the state climate was cold, and thus discouraged tourism. The national press got a hold of the story and the plan was abandoned under the scrutiny.

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There were two problems with the plan. First, the perceived cold isn’t North Dakota’s most significant barrier to tourism. North Dakota is relatively sparsely populated with few widely known attractions so the state gets overlooked. Second, North Dakota’s climate is among the coldest in the union, and changing its name isn’t going to change the weather.

Despite the obvious futility of pretending to be something we are not, it seems a natural inclination to change our name when we don’t like how we’re perceived. AIG is the most recent example. While there is enough gullibility and disinterest out there to defer some of the negative perceptions, simply changing its name won’t fool the majority. More importantly, changing its name does nothing to address the behaviors that created the negative perceptions in the first place.

Promoting state tourism is no different than promoting a company. Both have strengths and weaknesses that influence the consumers they can attract. When the obstacle is inherent, as in the case of North Dakota’s weather, the solution could be to view the obstacle an asset (a topic for a future post). When the obstacle is of one’s own making, the solution is to change behavior. The adage goes, “you can’t run from your past.” And while it may seem more difficult, making amends is usually more efficient and effective than avoidance.

Friday, May 1, 2009

Social Media Is A Tactic

You can’t read anything marketing related these days that doesn’t mention social media. And with a short enough memory, you might even think social media is the only vehicle presently available to marketers. Certainly the pundits think so.

The expansion of social media is a phenomenon worth noting. Participation has been growing at an astonishing rate and its ability to influence public opinion is remarkable. It has given consumers a bully pulpit, and they haven’t shied away from using it. Yet despite the medium’s popularity, it is only one option among many and not necessarily the right choice for every company or situation.

From a business standpoint, social media is simply a tactic. And like all tactics, why and how it is used determine its efficacy. Social media, TV, radio, print, collateral, product design, pricing, distribution, etc. are all tools for managing people’s perceptions. The key to using any marketing tool effectively is in knowing which perception, if created, will produce advantageous business results.

When a business knows which consumer audience matters most to its success and how it would ideally be perceived, it becomes fairly self-evident when and how to use tactics. The impression a company desires to create is a strategic filter guiding its behavior. A company that is struggling to determine how it’s going to use social media likely doesn’t have the strategic foundation to use it (or any other tactic) effectively and might want to abstain until it does.

Friday, April 17, 2009

Most Change Is Meaningless

Too many business problems are diagnosed and treated on a tactical level. Companies change their names, redesign their identities and switch their advertising (agencies) at the drop of a hat. Mostly, they are spinning their wheels. In addition to being grossly inefficient, few companies find solutions to their problems simply by changing tactics.

One of the most frequently cited reasons for executing tactics differently is to make companies appear more “contemporary”. Of course this rationale presupposes that consumers perceive a company to be “outdated”. It also presupposes that simply appearing more contemporary will solve a company’s business problems. Neither is necessarily true. Companies earn negative perceptions over time through their own actions, and superficial tactical changes do little to correct the behaviors creating their problems.

The more difficult challenge is determining what should replace a company’s current marketing elements. Even if we assume it is a worthy goal, there is more than one way to appear “contemporary”. Appearing contemporary can manifest itself as high-tech, innovative, youthful, fashionable or environmentally friendly (just to name a few). Tactical elements designed to communicate one of these interpretations would be different from those designed to communicate the others. Which direction is right?

Wanting to change isn’t strategic. Nor is the act of changing. Without an accurate diagnosis of its business problem, a company can’t know what perceptions will help solve its problems. And without a clearly defined goal, there is no foil for evaluating change. If a company is planning to change its name without the strategic foundation for doing so, it might as well pick something as arbitrary as Buttercup—every other option will be equally arbitrary.

Friday, April 3, 2009

Smoke and Mirrors: The Futility of Proprietary Models and Techniques

It seems fashionable for consultancies, researchers and agencies to tout proprietary techniques and models. Most seem to have at least one trademarked gizmo up their sleeves. But while these creatively named schemes may create some PR buzz for their pitchmen, techniques and models have little practical value on their own.

Inventing new techniques and models is driven by the desire to differentiate. Another driving factor is failure. Too many business people have seen the tried and true techniques and models fail, so they, like their consulting counterparts assume the techniques and models must be flawed. The harsh reality is that it is the practitioners who failed. And a new technique in the same hands is likely to produce similar results.

Research techniques and business models are nothing more than tools. And like all tools, each has inherent strengths and weaknesses. Choosing which, when and how to use them is the purview of people. Boxes and circles on a model filled in by a strategically gifted thinker will produce a sharper recommendation than the same model filled out by someone less gifted. Focus groups conducted by someone who understands human psychology will provide greater insight than those conducted by someone who believes that human behavior is completely rational.

Ability trumps tools every time. Who would you rather eat dinner with, a good cook working in a deficient kitchen or an average cook working in a professional kitchen? It is better to choose a strategic partner based on his skill rather than the shininess of his tools.

Friday, March 20, 2009

Companies and Consumers: Worlds Apart

Regardless of the industry, it is valuable for a company to step out of its own world and take a look at its products and services through the eyes of its customers. Take financial services, for instance. Financial advisors view risk in terms of Beta, Alpha, inverse relationships and diversification. This expertise is essential to their profession. However, it’s not how the average investor looks at financial risk.

Most investors, even many with substantial investment portfolios, have only a cursory understanding of their holdings and the litany of available investment vehicles. This relative naiveté causes many investors to feel like they are not in control of their finances, especially during volatile times. And since most of us don’t like feeling out of control, we do all sorts of things to create the perception of control. One way for investors to create perceived control is to stick with investments they know and understand. Perceptually speaking, an inherently “risky” investment that we’re familiar with appears safer than a truly “safe” investment we know nothing about.

For an advisor, risk is measured through empirical data. For investors, risk is measured in more intangible terms. Financial advisors who can see the task of managing risk and volatility from both perspectives will have a less volatile, more loyal book. Likewise, any company that is able to blend the realities of its business with the vagaries of consumer behavior will attract and retain more customers.

Friday, March 6, 2009

Lemmings: Following U.S. Auto Manufacturers

American auto manufactures are facing serious obstacles: over-saturated dealer networks, perceived quality deficiencies, the shaky economy, unsustainable union contracts and increasing government oversight. But it’s the portfolio redundancies that have been a mystery for some time.

Having two or three brands in the same portfolio that offer ostensibly identical products (e.g. Chevrolet Suburban, GMC Yukon, Cadillac Escalade) is a losing proposition. Operational efficiencies push vehicles in the same portfolio closer together, while dealer interests keep individual brands alive. However, these are conflicting forces. The efficiencies gained in manufacturing are offset by redundancies created in badging and marketing. And the effect on consumers is ambivalence. Virtually identical offerings trying to differentiate themselves exclusively via marketing does not fool or inspire consumers. Sadly, all this effort and expense could be spent competing against external competitors rather than within the same portfolio.

With so many good examples of bad business models available in the American auto industry, it seems illogical that foreign auto manufacturers would follow suit. But it appears that the Europeans are doing just that. While not yet completely identical, the Audi Q7, Volkswagen Touareg and Porsche Cayenne are remarkably similar in construction, appearance, performance and price—and becoming more so. One wonders if Volkswagen will model its pension plan after the Americans’ as well.

Friday, February 20, 2009

Testing Mettle: One Benefit of an Economic Downturn

When the economy is growing and consumers are feeling flush, it’s relatively easy for businesses to thrive because there is more than enough money to go around. However, there is a dark cloud surrounding this silver lining. Economic booms create a false sense of accomplishment.

The more confident consumers feel about their economic situations, the less discerning they are about how they spend money. As a result, relatively durable goods become more disposable. Switching phones, cars or even homes with lightning speed becomes commonplace. And disappointments are diminished due to the turnover. All of which enable companies to flourish with only a mediocre effort.

It isn’t until external pressures force people to reconsider spending habits that companies and their offerings come under the microscope. Tough times allow companies to find out what they are truly made of. Some fail, thinning the herd. Others survive. Those who survive are stronger and flourish—at least until the next test.

Friday, February 6, 2009

Consumers Only Need One Best Buy

Imitation may be the purest form of flattery, but it doesn’t make for good business. Take Circuit City, for example.

While we’re not privy to all of the inner workings of Circuit City, it has been obvious for some time that they were heading down a dangerous path. Not only was Best Buy the first retailer to “warehouse” the electronics industry, they have proven to be fairly good at it. Circuit City followed with essentially the same offering, and the differences between the offerings became fewer and fewer as Circuit City’s financial troubles mounted. Following the leader was its demise. And it appears that Ultimate Electronics might be heading in the same direction with their “shop the competition” tactic.

The problem with companies following the best practices of a category is that it produces nothing but carbon copies. Two or more identical offerings provide no benefit for consumers and as a result the category leader typically wins because they are the default choice. The leader’s ubiquity reassures people. Familiarity creates routine. Absent an intervening event, consumers have no reason to reconsider their behavior. Which isn’t to say that category leaders can’t be displaced. They can, just not with an identical offering.

Ideally, all companies should have the strategic fortitude to think for themselves. Some ideas are worth stealing; however, just don’t mimic the competition. Every tactic can be executed in multiple ways. And every organization should have a unique perspective on how it would execute a similar tactic differently than its competition. If it doesn’t, it should take a step back and focus on strategy rather than execution.