Going through some reading this morning, I came across a story, on the blog of business nerd Jeff Gardner, that I heard long time ago while I was studying branding and its fundamentals; perceived value. This story as simple as it is, is probably to branding what "Who Moved My Cheese?" is to adapting to change.
I once heard about a wedding photographer (who charged average prices) that wanted to work less. So, she figured that if she just began raising her prices there would simply be less interest from clients. First she bumped up to $3,000 a weekend, then $4,000, then $5,000. To her astonishment, she actually began receiving more requests from clients. The clients figured that if she was charging such a high sum, she must be really good. Truth being told, she hadn’t gotten any better, she’d always been a good photographer – but the higher price led her potential clients to believe this and, in the end, they were never disappointed. Finally this photographer raised her prices to $20,000 per weekend, essentially pricing herself above what almost anyone could afford. Her potential clients then began offering to fly her to remote locations around the world just for the chance to have her shoot their exotic weddings.
I think you get my point. The old economic adage that higher price correlates to lower demand doesn’t always hold true, and this is especially true of luxury goods. Design is a premium service. A luxury good. It is certainly not necessary to run a business (just take a look at all the used car dealers of the world for confirmation), but results in a definite advantage to the businesses who value good design. Don’t be surprised to find that design and the pricing of design follows a slightly paradoxical pricing relationship.
This little story also illustrates how important market positioning is to luxury goods. Positioning, positioning, positioning, positioning, positioning, and positioning... In a recession, work on attracting quality clients. Life will be much more enjoyable. Get the idea?
Tuesday, July 14, 2009
The Fight of the Decade
This morning, I can’t keep myself from smiling and finally give an honest two thumbs up to GM as they finally had the courage to look at their issue from a global stand point, and finally reposition of their brands.
They have a lot on their plate, as this is probably their most ambitious enterprise in years. However, as Larry Light, author of "Six Rules for Brand Revitalization" and global CMO of McDonald's from 2002 to 2005 said: "McDonald's Did It, and You Can Too".
This morning in an article published in Advertising Age, General Motors Vice Chairman Bob Lutz says that: “…one of the first things he plans to do as the new head of marketing is make "drastic" changes in the "tone and content" of all of GM's advertising” (I just hope they will not lose sight of the need for change for the car itself to stick with their new tagline “The Rebirth of the American Car”).
See, beyond perception there’s the product itself. As Columnist Collis Ta'eed writes on his blog, “Changing features on a product is the most obvious way to take on a competitor. And out of all the features that businesses try to use as a hook, price is probably the most common. What is important to remember though is that you need a substantial difference in features for this to work. If you say take 10% off the price, add one or two “oh that’s neat” features, chances are your product won’t be different enough to really win away many users.
A while back I was surveying project management web apps for a blog post. The first couple I looked at stuck in my head, but by the time I’d gotten to about 10, they’d all kinda blurred into one. Sure some of them were cheaper, some had an extra feature or two, but really the only ones that I’d remember were the first couple. Now a small change in features or price may win some users, and you can even build a healthy business out of it.
But you will never be able to really challenge the competition with a 10% upgrade.
If you want to go this route, you need to turn things on their head. If price is the feature, then it needs to be like 90% cheaper. If it’s a feature it has to be a feature that makes people go “wow this changes everything”. These sorts of game busting differences effectively create new markets, ones which can then be dominated.
A great example of a company that turned pricing on its head is iStockPhoto. Before they came along, traditional stock houses would charge hundreds of dollars per photo. iStock initially charged just 50 cents. Sure the product was the same - a photo is a photo (and believe me the quality sometimes is pretty indistinguishable between cheap and expensive stock) - but with that price difference they’d created an entirely new market. iStock went on to dominate so well that their original behemoth competitor Getty not only acquired them, but then made iStock a large part of the core strategy of the company.
Two examples of companies that have delivered huge non-pricing feature changes spring to mind, Dell and Amazon. In the first case, Dell introduced the ‘configure to order’ model of PC manufacturing, which along with its innovations in delivery changed a lot about how people bought PCs. In the latter case, Amazon took bookselling online effectively using online ordering and delivery as a massive feature change to a traditional business.
Of course a dramatic feature change doesn’t need to be quite as industry changing as these examples to be an effective strategy, but they do illustrate how the bigger the change, the better the play. It’s hard to imagine any other way unknown companies could have broken into the top echelons of industries like personal computers and book sales!”
In this morning’s article, “Mr. Lutz says his first priority will be to create the public relations and advertising messages that will "not only break through but actually leave consumers with an enhanced view of each of our brands."
"Easier said than done," he said, "but we must do it."
Mr. Lutz claims that can happen as GM works to increasingly differentiate its vehicles through improved design.
For example, he said, the new Chevrolet Equinox small SUV and the soon-to-be launched GMC Terrain small SUV "don't even look like they were made by the same manufacturer."
Lutz gave some other indications as to how he thinks GM can better define its brands.
"The new Buick design direction, coupled with a soft and luxurious driving experience, is radically different from the more angular and sporty Cadillac design direction," Mr. Lutz wrote.
"Marketing also needs to respect brand differences in how we advertise the various brands and to whom."
With that in mind, Mr. Lutz said, he intends to have Cadillac rival German luxury and performance brands such as BMW, while Buick's task is to take on Lexus.”
I give a round an honest round of applaud to the initiative am still concerned about the quality of the product itself and its ability to compete with the other guys on that angle. He sounds exactly like a hard core disciple of Thomas Watson of IBM who famously said, "Good design is good business." This isn’t a bad thing but we’ll see if design only will be sufficient to give BMW a run for their money. Nevertheless, it will be an interesting battle of creativity to reestablish GM’s rights to hang out with the rich royal families of Europe. I remember Mr. Ta'eed referring to a book called The 22 Immutable Laws of Branding, “…in which the authors discuss what they call the Law of Duality. The idea is that in the long run every market becomes a two horse race. So think Coca Cola and Pepsi, McDonalds and Burger King, Crest and Colgate. The authors state that there is only really room for two brands in a consumers head - the leader and the other guy.
This idea implies that one way to take on an established competitor is to be … the other guy!” Let’s see how GM will set themselves up as the yin to their yang.
At the end of the day, it’s all about differentiation again, and I am eager to see the fight. For me, it will be as exciting as the Stanley Cup finals.
They have a lot on their plate, as this is probably their most ambitious enterprise in years. However, as Larry Light, author of "Six Rules for Brand Revitalization" and global CMO of McDonald's from 2002 to 2005 said: "McDonald's Did It, and You Can Too".
This morning in an article published in Advertising Age, General Motors Vice Chairman Bob Lutz says that: “…one of the first things he plans to do as the new head of marketing is make "drastic" changes in the "tone and content" of all of GM's advertising” (I just hope they will not lose sight of the need for change for the car itself to stick with their new tagline “The Rebirth of the American Car”).
See, beyond perception there’s the product itself. As Columnist Collis Ta'eed writes on his blog, “Changing features on a product is the most obvious way to take on a competitor. And out of all the features that businesses try to use as a hook, price is probably the most common. What is important to remember though is that you need a substantial difference in features for this to work. If you say take 10% off the price, add one or two “oh that’s neat” features, chances are your product won’t be different enough to really win away many users.
A while back I was surveying project management web apps for a blog post. The first couple I looked at stuck in my head, but by the time I’d gotten to about 10, they’d all kinda blurred into one. Sure some of them were cheaper, some had an extra feature or two, but really the only ones that I’d remember were the first couple. Now a small change in features or price may win some users, and you can even build a healthy business out of it.
But you will never be able to really challenge the competition with a 10% upgrade.
If you want to go this route, you need to turn things on their head. If price is the feature, then it needs to be like 90% cheaper. If it’s a feature it has to be a feature that makes people go “wow this changes everything”. These sorts of game busting differences effectively create new markets, ones which can then be dominated.
A great example of a company that turned pricing on its head is iStockPhoto. Before they came along, traditional stock houses would charge hundreds of dollars per photo. iStock initially charged just 50 cents. Sure the product was the same - a photo is a photo (and believe me the quality sometimes is pretty indistinguishable between cheap and expensive stock) - but with that price difference they’d created an entirely new market. iStock went on to dominate so well that their original behemoth competitor Getty not only acquired them, but then made iStock a large part of the core strategy of the company.
Two examples of companies that have delivered huge non-pricing feature changes spring to mind, Dell and Amazon. In the first case, Dell introduced the ‘configure to order’ model of PC manufacturing, which along with its innovations in delivery changed a lot about how people bought PCs. In the latter case, Amazon took bookselling online effectively using online ordering and delivery as a massive feature change to a traditional business.
Of course a dramatic feature change doesn’t need to be quite as industry changing as these examples to be an effective strategy, but they do illustrate how the bigger the change, the better the play. It’s hard to imagine any other way unknown companies could have broken into the top echelons of industries like personal computers and book sales!”
In this morning’s article, “Mr. Lutz says his first priority will be to create the public relations and advertising messages that will "not only break through but actually leave consumers with an enhanced view of each of our brands."
"Easier said than done," he said, "but we must do it."
Mr. Lutz claims that can happen as GM works to increasingly differentiate its vehicles through improved design.
For example, he said, the new Chevrolet Equinox small SUV and the soon-to-be launched GMC Terrain small SUV "don't even look like they were made by the same manufacturer."
Lutz gave some other indications as to how he thinks GM can better define its brands.
"The new Buick design direction, coupled with a soft and luxurious driving experience, is radically different from the more angular and sporty Cadillac design direction," Mr. Lutz wrote.
"Marketing also needs to respect brand differences in how we advertise the various brands and to whom."
With that in mind, Mr. Lutz said, he intends to have Cadillac rival German luxury and performance brands such as BMW, while Buick's task is to take on Lexus.”
I give a round an honest round of applaud to the initiative am still concerned about the quality of the product itself and its ability to compete with the other guys on that angle. He sounds exactly like a hard core disciple of Thomas Watson of IBM who famously said, "Good design is good business." This isn’t a bad thing but we’ll see if design only will be sufficient to give BMW a run for their money. Nevertheless, it will be an interesting battle of creativity to reestablish GM’s rights to hang out with the rich royal families of Europe. I remember Mr. Ta'eed referring to a book called The 22 Immutable Laws of Branding, “…in which the authors discuss what they call the Law of Duality. The idea is that in the long run every market becomes a two horse race. So think Coca Cola and Pepsi, McDonalds and Burger King, Crest and Colgate. The authors state that there is only really room for two brands in a consumers head - the leader and the other guy.
This idea implies that one way to take on an established competitor is to be … the other guy!” Let’s see how GM will set themselves up as the yin to their yang.
At the end of the day, it’s all about differentiation again, and I am eager to see the fight. For me, it will be as exciting as the Stanley Cup finals.
Tuesday, June 30, 2009
Six Rules for Brand Revitalization
In a recent post on AdvertisingAge, Larry Light, author of "Six Rules for Brand Revitalization: Learn How Companies Like McDonald's Can Re-Energize Their Brands" and global CMO of McDonald's from 2002 to 2005, teaches us about how McDonald was able to revitalize their brand following 6 simple rules. His catchy phrase confirms what I've been preaching for the past few years; small and mid-sized players have a tremendous advantage in size over bigger entities by their ability to reposition themselves fast. To quote his own words: "McDonald's Did It, and You Can Too".
Rule 1: Refocus the organization
"Refocusing the organization begins with redefining the brand and business purpose and goals. The brand purpose should be aspirational. At McDonald's, where I held the post of global CMO, we defined the long-term ambition "to be our customer's favorite place and way to eat and drink." For the first three years, the primary focus was on becoming the "favorite place and way to eat." As Jim Cantalupo, McDonald's CEO, liked to say, we would "be bigger by being better." How would we accomplish that?"
Rule 2: Restore brand relevance
"The brand promise is an articulation of the relevant and differentiating experience that the brand will deliver to every customer, every time. Brand revitalization means defining where you want the brand to be and then deciding how to get there.
Over the years, the essence of the McDonald's brand was the perception that it was an affordable, convenient brand for families with kids. There were those who said that equity could not and should not be changed. But McDonald's set out to change people's perceptions and go from appealing to the child in your heart to appealing to those with a young-adult spirit at heart."
Rule 3: Reinvent the brand experience
"To revitalize a brand, we need to bring the redefined brand promise to life. This is what the five action P's are all about. The five action P's are people, product, place, price and promotion.
People come first. Building employee commitment to the new direction, employee confidence, and organizational and employee capabilities are critical factors that influence future success.
And it's imperative to inspire those in the organization to believe that the new brand future will happen and that they can help. At McDonald's a new on-boarding communication was created called "Learnin' it. Livin' it. Lovin' it."
Product is the next P. Products and services are the tangible evidence of the truth of the promise. When we redefine the promise, product and service renovation and innovation are imperative.
A disciplined approach to brand extension can revitalize and strengthen a brand. McDonald's extended its product range to include products such as salads, yogurt parfaits and coffee. The Crest revitalizations included extensions beyond cavity prevention to include tartar control, whitening, breath freshening, dental floss, mouthwash, tooth whiteners and toothbrushes.
The place is the face of the brand. Whether a store, a website, a retail display, a kiosk or wherever the "place" may be, the experience must be consistent with the intended brand direction. For example, McDonald's embarked on a very ambitious retail reimaging program. It also updated the brand website.
Price comes next. The launch of the McDonald's Dollar Menu created an everyday-low-price list of items and enabled the brand to significantly reduce marketing emphasis on on-and-off discounting. Overemphasis on deals and discounts builds deal loyalty rather real loyalty.
Promotion comes next. In September 2003, a new global campaign was launched in 119 countries. The common signature theme was "I'm lovin' it," supported by a distinctive set of five musical notes. The character of the communications was designed to reflect the new young-adult spirit of the brand. The following year, McDonald's adopted its first global packaging approach. It's the longest-running theme in the history of the brand.
Whether advertising, special events, public relations, online, cause marketing, sponsorships, Olympics, World Cup or other forms of communication, the goal was to be consistent with the new McDonald's brand promise. Disconnected, monthly promotional messages and tactics destroy brands."
Rule 4: Reinforce a results culture
"Measuring and managing performance is the eighth P. The McDonald's Plan to Win included three-year, measurable milestones.
Creating a results culture means it is important to produce the right results the right way. A balanced brand-business scorecard should include measurable elements such as brand familiarity, brand reputation, employee pride, customer-perceived value, brand loyalty, sales, share and profit."
Rule 5: Rebuild brand trust
"In this skeptical, demanding, uncertain world, trust is a must. As part of revitalizing a brand, rebuilding trust is critical. Investment in rebuilding trust is an important, challenging marketing imperative. There is demand for more openness, more social responsibility and more integrity. Over the years McDonald's invested in building trust -- Ronald McDonald House, environmental responsibility, commitment to employee diversity, local community activities. As the concern with healthful living has grown, so has McDonald's commitment to providing appropriate choices -- for example, salads, apple slices, yogurt parfait, water, juices and milk."
Rule 6: Realize global alignment
"The power of alignment is awesome. During brand revitalization, we often talk about the need to get everyone on the same page. But we rarely, if ever, define the page we want everyone to be on. That's the purpose of the one-page Plan to Win, the one-page document that summarizes the eight P's and the desired outcomes."
Despite of all the controversy and bad publicity about unhealthy eating habits, McDonald's today success is the living proof that "Brands do not die natural deaths. However, brands can be murdered through mismanagement" as he quotes. "Brand revitalization needs the courage and perspective of strong leaders", ...and can be achieved.
Rule 1: Refocus the organization
"Refocusing the organization begins with redefining the brand and business purpose and goals. The brand purpose should be aspirational. At McDonald's, where I held the post of global CMO, we defined the long-term ambition "to be our customer's favorite place and way to eat and drink." For the first three years, the primary focus was on becoming the "favorite place and way to eat." As Jim Cantalupo, McDonald's CEO, liked to say, we would "be bigger by being better." How would we accomplish that?"
Rule 2: Restore brand relevance
"The brand promise is an articulation of the relevant and differentiating experience that the brand will deliver to every customer, every time. Brand revitalization means defining where you want the brand to be and then deciding how to get there.
Over the years, the essence of the McDonald's brand was the perception that it was an affordable, convenient brand for families with kids. There were those who said that equity could not and should not be changed. But McDonald's set out to change people's perceptions and go from appealing to the child in your heart to appealing to those with a young-adult spirit at heart."
Rule 3: Reinvent the brand experience
"To revitalize a brand, we need to bring the redefined brand promise to life. This is what the five action P's are all about. The five action P's are people, product, place, price and promotion.
People come first. Building employee commitment to the new direction, employee confidence, and organizational and employee capabilities are critical factors that influence future success.
And it's imperative to inspire those in the organization to believe that the new brand future will happen and that they can help. At McDonald's a new on-boarding communication was created called "Learnin' it. Livin' it. Lovin' it."
Product is the next P. Products and services are the tangible evidence of the truth of the promise. When we redefine the promise, product and service renovation and innovation are imperative.
A disciplined approach to brand extension can revitalize and strengthen a brand. McDonald's extended its product range to include products such as salads, yogurt parfaits and coffee. The Crest revitalizations included extensions beyond cavity prevention to include tartar control, whitening, breath freshening, dental floss, mouthwash, tooth whiteners and toothbrushes.
The place is the face of the brand. Whether a store, a website, a retail display, a kiosk or wherever the "place" may be, the experience must be consistent with the intended brand direction. For example, McDonald's embarked on a very ambitious retail reimaging program. It also updated the brand website.
Price comes next. The launch of the McDonald's Dollar Menu created an everyday-low-price list of items and enabled the brand to significantly reduce marketing emphasis on on-and-off discounting. Overemphasis on deals and discounts builds deal loyalty rather real loyalty.
Promotion comes next. In September 2003, a new global campaign was launched in 119 countries. The common signature theme was "I'm lovin' it," supported by a distinctive set of five musical notes. The character of the communications was designed to reflect the new young-adult spirit of the brand. The following year, McDonald's adopted its first global packaging approach. It's the longest-running theme in the history of the brand.
Whether advertising, special events, public relations, online, cause marketing, sponsorships, Olympics, World Cup or other forms of communication, the goal was to be consistent with the new McDonald's brand promise. Disconnected, monthly promotional messages and tactics destroy brands."
Rule 4: Reinforce a results culture
"Measuring and managing performance is the eighth P. The McDonald's Plan to Win included three-year, measurable milestones.
Creating a results culture means it is important to produce the right results the right way. A balanced brand-business scorecard should include measurable elements such as brand familiarity, brand reputation, employee pride, customer-perceived value, brand loyalty, sales, share and profit."
Rule 5: Rebuild brand trust
"In this skeptical, demanding, uncertain world, trust is a must. As part of revitalizing a brand, rebuilding trust is critical. Investment in rebuilding trust is an important, challenging marketing imperative. There is demand for more openness, more social responsibility and more integrity. Over the years McDonald's invested in building trust -- Ronald McDonald House, environmental responsibility, commitment to employee diversity, local community activities. As the concern with healthful living has grown, so has McDonald's commitment to providing appropriate choices -- for example, salads, apple slices, yogurt parfait, water, juices and milk."
Rule 6: Realize global alignment
"The power of alignment is awesome. During brand revitalization, we often talk about the need to get everyone on the same page. But we rarely, if ever, define the page we want everyone to be on. That's the purpose of the one-page Plan to Win, the one-page document that summarizes the eight P's and the desired outcomes."
Despite of all the controversy and bad publicity about unhealthy eating habits, McDonald's today success is the living proof that "Brands do not die natural deaths. However, brands can be murdered through mismanagement" as he quotes. "Brand revitalization needs the courage and perspective of strong leaders", ...and can be achieved.
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