Listening to a Billion Consumers

Windows 7, the latest version of Microsoft Windows, a series of operating systems for use on personal computers, was released today less than three years after the release of its much-denigrated predecessor, Windows Vista.

With the official launch currently underway around the globe, Microsoft has released four new advertisements to market Windows 7. This round of advertisements is very direct and dubbed 7-Second Demos, with the theme “I’m a PC and Windows 7 was my idea,” an extension of the “I’m a PC” campaign, having consumers take credit for “developing” various aspects of the new operating system.

We cannot comment upon whether Windows 7 will live up to promises and expectations, but we think that the concept of a billion consumers co-creating the product, is a wonderful example of meaningfully leveraging the real voice-of-the-consumer, an often overused advertising expression.

Lots of companies – especially big companies like Microsoft – do all kinds of research. Most of that research ends up providing excellent answers to meaningless questions, and virtually none reflect the real voice or expectations of the consumer. Check out the new GM campaign if you doubt us. And while a product positioning approach of “we not only hear you but we’ve listened to you” isn’t new, it’s usually the small niche brands that do it well.

And it shouldn’t be surprising that it’s Microsoft who’s doing it now. After all it was Bill Gates who pointed out this strategy back in 2000, in his book “Business @The Speed of Thought.” “Your most unhappy customers are your greatest source of learning.”

And perhaps a meaningful voice for the brand.

What do iPhones, Grey Goose, Wal-Mart, and Mary Kay have in common?

Each was one of the top-10 brands in this year's Brand Keys Loyalty Leaders List. This year we rated 63 categories and 440 brands, so who else was among the top-10? Rankings were as follows:


iPhone
Samsung
Google
Blackberry
Wal-Mart
Grey Goose
Mary Kay
AVIS
Apple
Amazon.com

Customer values intrinsic to technology brands were seen to best meet, and even exceed, customer expectations, and the 'emotional engagement' that women share with their favorite beauty brands is still very powerful. But for a more in-depth look at this year's results (and a list of the top-25 brands with the most loyalty customers) we invite you to read Kenneth Hein's Brandweek coverage, "Dial 'L' for Loyalty."

More important than "satisfaction," and infinitely more important than "awareness," loyalty is a leading-indicator of consumer behavior and, thus, predictive of brand profitability. It's become more and more important, especially these days when many products and services are turning into commoditized category placeholders. And loyalty isn't static or managed via points, as witnessed by this year's big loyalty swings.

In the Automotive category, Hyundai moved up from 295th on last year's list to 24th - an increase in loyalty due to improved product quality, and it's emotionally resonating 'Assurance' campaign: their one-year promise to buy back cars from any customer who became unemployed.

McDonald's perked up loyalty and profits with an enormous increase in the Coffee category, moving from 156th last year to 16th, mostly to Starbucks detriment. Starbucks, already feeling the pain of customer disloyalty, ranked 191st last year and now ranks 428th, in the bottom dozen brands - a move that correlates highly with decreases in their same-store sales and profitability.

Some segments have, of course, suffered because of the economy, but brands that understand that the old 'price-value' equation has been transformed to a instantaneous 'value-for-dollar' consumer calculation, will have also realized that the brand can have meaning and can act as a surrogate for value, thus buttressing loyalty.

For a list of complete 2009 rankings - who got it right and who still can't figure it out - we invite you to visit http://www.brandkeys.com/awards/leaders.cfm

Which national brand ranked last? Much to the dismay of the bailer-outers of our great nation, General Motors clearly didn't get that memo and was ranked 439th (down this year from 363rd). GM might want to start with doing more than investing in a big string section in their advertising, and doing some value-based and meaningful branding.

Because when it comes to engendering loyalty, that's what sets us apart from other life forms - or at least the ones with driver's licenses.

Brand Keys, Inc. partner of
Brand Lounge in the Middle East

10 Branding Trends for 2010

Niels Bohr once noted that “prediction is very difficult, especially about the future,” but then he didn’t have access to predictive loyalty metrics. Happily, Brand Keys does. And as they measure the direction and velocity of consumer values 12 to 18 months in advance of the marketplace and consumer articulations of category needs and expectations, they identify future trends with uncanny accuracy.

Having examined these measures, we offer up ten trends for marketers in 2010 that will have direct consequences to the success – or failure – of next year’s branding and marketing efforts.

1) Value is the new black.
Excessive spending, even on sale items, will continue to be replaced by a reason-to-buy at all. This is trouble for brands with no authentic meaning, whether high-end or low.

2) Brands increasingly a surrogate for “value.” What makes goods and services valuable will increasingly be what’s wrapped up in the brand and what it stands for. Why J Crew instead of The Gap? J Crew stands for a new era in careful chic—
being smart and stylish. And the first family’s support of the brand doesn’t hurt either.

3) Brand differentiation is Brand Value.
The unique meaning of a brand will increase in importance as generic features continue to plague the brand landscape. Awareness as a meaningful market force has long been obsolete, and differentiation will be critical for success—meaning sales and profitability.

4) “Because I Said So” is so over.
Brand values can be established as a brand identity, but they must believably exist in the mind of the consumer. A brand can’t just say it stands for something and make it so. The consumer will decide, making it more important than ever for a brand to have measures of authenticity that will aid in brand differentiation and consumer engagement.

5) Consumer expectations are growing.
Brands are barely keeping up with consumer expectations now. Every day consumers adopt and devour the latest technologies and innovations, and only hunger for more. Smarter marketers will identify and capitalize on unmet expectations. Those brands that understand where the strongest expectations exist will be the brands that survive – and prosper.

6) Old tricks don’t work/won’t work.
In case your brand didn’t get the memo here it is: consumers are on to brands trying to play their emotions for profit. In the wake of the financial debacle of this past year, people are more aware then ever of the hollowness of bank ads that claim “we’re all in this together” when those same banks have rescinded their credit and turned their retirement plan into case studies. The same is true for insincere
celebrity pairings: think Seinfeld & Microsoft or Tiger Woods & Buick. Celebrity values and brand values need to be in concert, like Tiger Woods & Accenture. That’s authenticity.

7) They won’t need to know you to love you.
As the buying space becomes even more online-driven and international (and uncontrolled by brands and corporations), front-end awareness will become less important. A brand with the right street cred can go viral in days, with awareness following, not leading, the conversation. After all, everybody
knows GM, but nobody’s buying the cars.

8) It’s not just buzz.
Conversation and community is all: ebay thrives based on consumer feedback. If consumers trust the community, they will extend trust to the brand. Not just word of mouth, but the right word of mouth within the community. This means the coming of a new era of customer care.

9) They’re talking to each other before talking to the brand.
Social Networking and exchange of information outside of the brand space will increase. Look for more websites using Facebook Connect to share information with the friends from those sites. More companies will become members of Linkedin. Twitter users will spend more money on the Internet than those who don’t tweet.

10) Engagement is not a fad; it’s the way today’s consumers do business.
Marketers will come to accept that there are four engagement methods including Platform (TV; online), Context (Program; webpage), Message (Ad or Communication), and Experience (Store/Event). But there is only one objective for the future: Brand Engagement. Marketers will continue realize that attaining real brand engagement is impossible using out-dated attitudinal models.

Accommodating these trends will require a paradigm change on the parts of some companies. But whether a brand does something about it or not, the future is where it’s going to spend the rest of its life.

How long that life is up to the brand, determined by how it responds to today’s reality.


Brand Keys, Inc. partner of
Brand Lounge in the Middle East

Getting it right in retail

Has the story you tell your customers become more important than the product?
Richard Lewis, Friday September 04 2009

At a time when consumers are cutting back and businesses are failing, taking care of
customers has become more crucial than ever. So why do some stores continue to get
it so wrong?

I live in close proximity to two competing supermarkets, in France. Shop A is known
for lower prices, while Shop B has a more pricey perception. Shop A is closer and so
became my default choice for a short time. However, this came to an end. It was
nothing to do with the quality or freshness of the product and, although the store-fit was tattered, the store itself was intuitive and easy to shop. The real problem came at the tills. The store was staffed by four very unfriendly and unproductive people. None would greet you, none would help you and sometimes a cashier would get up in the middle of bleeping your shopping through and wander off, leaving you standing, while a queue built up. The staff worked painfully slowly, talking to each other, not the customers. The queues were interminable.
So I started walking a little further and paying a little more to visit Shop B. Here the cashiers were bright, chatty and friendly. They worked fast, there was never a queue and they fussed over my small daughter. There was a duty manager by the door who greeted customers as they entered. But the basket price was often higher, for much the same product as Shop A. So I was pleased when Shop A closed for refurbishment, imagining that the management had decided to address the outlet’s problems. I was wrong.

Getting it wrong
The refit was attractive, with wider aisles, a clean, modern feel and better lighting. But the decision to add more upscale product and place it front and centre seemed like an error, since it clouded the store’s chief point of difference in the neighbourhood: price.
But there was worse to come: the store added state-of-the-art tills and increased their number – but kept the same four unmotivated people to staff them. Long queues now block the aisles, while expensive, unmanned tills sit idle. The result, during busy periods, is nothing short of chaos. Shop A missed what should have been a great
opportunity to win new loyalty. And it did it by failing to confront and address the
only thing that was ever really wrong: people. Meanwhile, the ergonomic changes
failed to take into account the real size of queues and the speed at which staff worked.

In all, the relaunch raised customer expectations about experience while
simultaneously dashing them.
I was bemused by this missed opportunity, so I called Robert Passikoff – founder and
president of Brand Keys and a thought leader in engagement and loyalty – to get
some perspective. The problem, says Passikoff, is that retailers tend to look at their world through the eyes of retail, rather than those of the customer. “For too many retailers, store experience translates into better lighting and wider aisles. Whereas some [wage] raises and anger management training might have been a more
efficacious approach in this case.” But many retailers fail to measure for this sort of thing; the value equation of the customer is not the same as that of the retailer,
Passikoff says. “Basically, today, products are all the same. Value is now derived
beyond the primary features of the product.” In other words, the story you tell your
customers, through branding and store experience, is now more important than the
product or price.

Getting it right
I came across some examples of this while visiting the UK. I stayed in an area served
by a multitude of grocery retailers, each vying to give the best experience. I visited three well-known UK food retailers operating within a stone’s throw of one another and discovered that, in a market where competition is intense and often fierce, each retailer had decided to focus on one primary point of difference and tell that story strongly from the word go. Superstore A had clearly opted for Service. Although this was a large shop, the retailer managed to convey a sense of intimacy and hospitality. It achieved this primarily with highly visible and engaged staff, although design, lighting and neatness also contributed. The message was clear on entering the store: a customer service manager sat facing the entrance and smiling. Two steps into the store, I was able to enquire about child-friendly shopping trolleys and the gentleman leapt from his chair and procured one. Around the store, staff in clean, bakery style uniforms were chatting with customers and demonstrating products.
Superstore B had clearly decided to tell a story about Price. A giant display in the
atrium showed budget private label cleaning products piled high at a very low price.
The store was making sure that its primary message was strongly communicated right
from the outset. Within the store, point-of-sale banners displaying a bold low-price
message were attached to every gondola. Despite the “cheap” feel of the store, the staff experience was high-end, with friendly, helpful cashiers and aisle staff communicating well.
Superstore C had just opened next to Superstore B. However, it did not compete with
its neighbour on price. On the contrary, it had a single message from the word go,
using billboard displays outside the store and in the car park to display a slogan about Quality. The prices were often higher in this store, but the expectation of premium had been effectively set.

Managing the experience
Where these retailers win, and our French example would seem to lose out, is around
managing customer expectations. Each of the UK retailers told customers what to
expect, either as they entered or before they entered the store, and then set about
strongly delivering that experience. By contrast, our French retailer set customers up for disappointment and then compounded it by giving terrible service.
It’s tempting to see shopper data as a possible way for both the French supermarkets
to get a clearer picture of what their customers want. Neither operates a loyalty
scheme. Nearby, however, a Carrefour hypermarket has just relaunched following
extensive customer research via its loyalty card scheme. The data pointed to an
affluent shopper and so the new hypermarket has a premium feel and really does
deliver a market experience in places, with an extended fresh fruit and veg section,
alluring displays and a fishmonger calling out the day’s specials. In the US, Food Lion used shopper data to segment its customers and then executed a multi-banner
strategy, with each banner addressing a different cluster of shopper types. The first
two UK stores operated loyalty schemes. It should also be noted that both the French
stores are franchised, while all the UK examples are wholly-owned.
Researchers such as Mintel are sceptical about the ability of loyalty schemes to
engender loyalty by themselves. Even so, they can give the retailer valuable
information about who is shopping with them; information that can then be used, as
Carrefour has done, to create an accurately targeted experience, which may in turn
inspire loyalty. “In the 1990s, category management was all about point of sale data,” writes Willard Bishop analyst Craig Rosenblum in the August edition of Competitive Edge. “In the 21st century it’s all about shopper data ... With shopper data, retailers and consumer goods manufacturers can create unique promotional programs and events tailored to unique customer groups.” However, Rosenblum warns against starting without a clear vision. Before you begin leveraging the power of shopper data, you need to ask: “What is my strategy to win with shoppers?” he says.
Surely, though, it is even cheaper to spend some time talking to your customers on the shop floor. Had it performed this simple task, Shop A may have discovered that a refit was not necessary, that staff levels, morale and training were the issues damaging the business.

A Shock to the System

A week ago GM announced its plans to plug into the alternative-vehicle market with the Chevrolet “Volt,” an electric car Chevy claims will get 230 mpg in city driving. This would make it the first car to break the triple-digit barrier for mileage, and deliver over four times the mpg of the most popular car in the category, Toyota’s Prius. The price tag? Also a lesson in multiplication for car buyers: $40,000, or nearly twice the cost of the entry level Prius II.

While clearly GM needs to restructure the brand in serious ways, there remain some unanswered questions about how the buying public—already jaded with GM products—will respond to an electric car that comes with sticker shock, not to mention the challenge of plugging in, especially for city dwellers whose outlets may be out of range of any power cord. The “build it, they will come” philosophy was never a very good one, and is less so today when our research in the category continues to demonstrate that consumers expect their cars to be increasingly green, while more green stays in their wallets.

And while “green” and “fuel economy” are certainly high-percentage loyalty contributors, the current overall rankings in, for example, the smaller sedan and crossover vehicle segment demonstrates the marketplace reality of the data and match up pretty well to the top sellers in the recent “Cash for Clunkers” program:

1. Toyota
2. Ford
3. Honda
4. Jeep
5. Hyundai/Nissan

Faith, they say, is like electricity. You can’t see it, but can see the light. For consumers recently too often that light has not been a new car, it’s been a train. As Americans, and thus part-owners of General Motors, we would like nothing more than to see it move up in the world. But it will be consumers’ belief, and not faith, that will turn on the GM brand. And that belief will come when the brand delivers against the expectations consumers hold in the category, not before.

Brand Keys, Inc. partner of
Brand Lounge in the Middle East and North Africa

School Shoppers Looking Closely At Retail Value

Consumers will spend about 10% less on back-to-school shopping this year, although the recession is only partly to blame for the decline.

According to brand and customer loyalty research consultancy Brand Keys, shoppers will spend an average of $531 during the back-to-school season, about a 10% decline over last year.
"Despite whispers that the recession is over, consumers are showing steadfast frugality," says Robert Passikoff, president of Brand Keys. "They are looking at the back-to-school buying [season] by evaluating which retailer is going to offer the best prices for the things the kids really require."

According to the survey of 10,000 U.S. households with school-age children, people were expected to spend about the same on essentials like clothing (an average of $275, about the same as last year), while cutting back on luxuries like computers, software and printers (an average of $189, down 11% from last year). They are also expected to cut back on shoes ($105, down 10%), supplies ($95, down 5%) and books and study aids ($20, down 25%).

Meanwhile, consumers are expected to do more shopping at discount retailers than anywhere else, with 95% saying discount stores were their preferred back-to-school shopping channel -- up 12% from last year. Some 55% cited department and office supply stores as their preferred channel (the same and up 10%, respectively, compared with last year), while half cited online (up 25%). Only 30% cited specialty outlets as a preferred shopping channel, down 6% from last year.
"We've been seeing this pattern since before the recession," Passikoff tells Marketing Daily. "People are being much more laser-targeted about which [retail] brand will provide them the best value."

Among those discount store brands, Wal-Mart remained the most popular, with 70% of consumers citing the store as a preferred store (up 10% from 2008). Half cited Target (about the same as last year), while 40% cited Kmart, down 5% from a year ago.)

Among department stores, Kohl's led among consumer preference with 40% (up 15% from last year), while 35% cited Macy's (down 5% from last year) and Dillard's (about the same). Nearly a third -- 30% -- cited Sears as a preferred retailer (up 5%), while 15% said Sears was a preferred retailer (down 5%).

"Wal-Mart has spent the past decade getting the brand right for themselves," Passikoff says of consumers' continued preference for the retailer. "And they have broader merchandise offerings than they have had before. With all the companies outsourcing production to the same places, the quality is about the same, and Wal-Mart has been able to capitalize on that."

Ultimately, as the recession eases, consumers will still be looking for value, and may have decided that some products will not be worth the extra expense at some retailers. The answer, Passikoff says, will be to have a greater brand definition, both for the merchandisers and the manufacturers. "Consumers are going to be looking for brands that have a resonating meaning and differentiation," Passikoff says. "They're going to have to stand for something more than being a placeholder."


Brand Keys, Inc. partner of
Brand Lounge in the Middle East and North Africa

Starbucks Goes Back to Its Roots With Cafe Concept 'Inspired by Starbucks' Coffeehouses to Serve Alcohol, New Food Choices and Live Entertainment

CHICAGO (AdAge.com) -- Starbucks is going back to its premium-coffeehouse roots -- by building premium coffeehouses. The chain, in the latest attempt to negotiate its turnaround, is focusing on stores with smaller-batch coffee, community involvement and entertainment.
Starbucks will remodel three Seattle cafes as part of the initial test.

The first location, opening next week, will be named "Fifteenth Avenue Coffee and Tea, Inspired by Starbucks." Evening revelers can find beer, wine, new food choices, the occasional film screening and a variety of live entertainment, including music, acting and poetry reading. Bleary-eyed,
breakfast-time folks can get a cup of coffee they may not be able to find anywhere else in Seattle.

"It feels like the first time they've done something right in a long time," said Robert Passikoff, president of Brand Keys. "This has the opportunity of being the next evolution in coffee." He added that while coffee shop as night-time hangout isn't new, Starbucks can offer more by way of community involvement, environmental commitment and friendly baristas without visible tattoos.

This is also the latest in a string of long-closeted ideas that are seeing the light of day. The café concept dates back about 15 years. In February, Starbucks began testing Via, an instant-coffee product more than 20 years in the making.

Major Cohen, a senior project manager with Starbucks, said he's been working on this café concept for nearly 15 years. The idea came from thinking about the "good old days" when they could roast coffee in the morning and have it in a local store by that afternoon. The first three cafés will be in
Seattle, near one of its roasting plants, so they'll be able to offer smaller-batch coffees from far-flung locales such as Thailand, and loose-leaf Tazo teas from places such as India and Japan.

"We clearly want to present ourselves in a different way," Mr. Cohen said. "What we're really trying to do is build on 38 years of experience with great coffee and somehow extend that vision." He acknowledged that "some of us think as grandfathers of the coffee world." But he said, "I think people
know that we're often innovative and we innovate through products."

Changing the Starbucks experience
This project is different in that it's tweaking the Starbucks experience. But don't expect to find these cafés across the street from each other. While the number of "Inspired by Starbucks" locations is likely to grow if the test is successful, not every store is appropriate for a stage, night-time crowd and
alcoholic beverages. So it will be a boutique concept by definition.
Scott Bedbury, founder of Brandstream and former Starbucks marketing chief, noted that one of the primary benefits of such a concept is maximizing profitability per square foot. Starbucks has been known for its real-estate savvy since day one, but locations generally go dormant after dark. Adding an evening occasion is likely to boost profitability for appropriate locations, particularly if they serve alcohol. He said the concept could be Starbucks' next Frappuccino. "It was a godsend because it gave people a reason to come in hot months," Mr. Bedbury said about the frozen beverage. "And it brought in a whole different group of people who didn't even like coffee, which got us into ice cream." The café concept would keep stores open longer, "but you're using that square footage to get more out of it." It also combats Starbucks' critical saturation issue, particularly in the United States. "God knew they didn't want to open more stores, they want to do more with what they have," he said.

Technomic President Ron Paul cheered the move, and said he felt confident the test would be quite successful. However, he predicts the concept will look much different if rolled out on a national stage.

"I still think it's more a of test lab than something they're more serious about rolling out," he said. "That's not a national strategy."
Dennis Lombardi, executive VP-food service at WD Partners, praised the chain's risk-taking moxie. "I love chains that experiment," he said. "But if you're going to experiment, you've got to be wiling to fail fast if it doesn't work." That's why Mr. Bedbury said it's a good idea to start small, and with a different concept. "I think they're smart to walk before they run and not embed it in the consumer-facing brand they have today," he said.

Brand Keys, Inc. partner of
Brand Lounge in the Middle East and North Africa

Espresso Yourself!

Guess Who's Skating Into Town?
Robert Passikoff, Jul 14, 2009 03:02 PM

Tim Hortons Inc., the company founded in 1964 by NHL hall-of-famer Tim Horton, former hockey player for the Toronto Maple Leafs, the New York Rangers and the Buffalo Sabres, just started serving its premium coffee and fresh baked goods for the first time in New York City. It's entering the New York City market with 12 new locations, including 10 in Manhattan.

Tim Hortons has more than 500 locations in the U.S. and sells about 2 billion cups of coffee annually. With 3,000 stores in Canada, it accounts for more than seven of every 10 cups of quick serve coffee sold in Canada, but Manhattan poses a challenge with an already over- caffeinated market. Both Dunkin Donuts and McDonald's have more than 100 locations within five miles of each other, while Starbucks has more than 80.

But it's not all about the real estate. Something else drives customers, more than convenient locations. It's the "something else" that showed up in our metrics three years ago, allowing us to predict the decline of Starbuck's before anyone would believe it. Let's just say here that it's a lot
more centered on customer experience than it is what corner you're standing on. This is how the brands currently rank in the annual Brand Keys Customer Loyalty Engagement

Index:
1. Dunkin' Donuts
2. McDonald's
3. Starbucks
4. Krispy Kreme

Should the new team worry current players? Well, for the six months that ended in February, Dunkin' had posted a 9% growth in system-wide sales and a 4% increase in U.S. same-store sales.

For that same period, Dunkin' Donuts had total sales of $1.55 billion, and offered such new items as caramel iced coffee and an expanded rollout of scones. But McDonald's is expanding the coffee portion of its business in the U.S. and Canada too, and has installed McCafé mini-coffee shops featuring recreational coffee beverages at more than 10,000 U.S. restaurants It will test its in-store McCafé coffee shop concept in Canadian locations later this
year. McDonald's also recently launched a promotion for its Premium Roast coffee in Canada and, this week, McDonald's began a U.S. summer promotion called Mocha Mondays that gives customers a free iced or hot mocha beverage at participating stores.

Meanwhile, Starbucks, once first in our rankings, reported reductions in net revenues, comparable store sales, operating income, operating margin, and net earnings during Q2 2009, and is continuing with plans to close about 800 company-owned stores in the U.S. this year. But it's offering ice cream now, and via Facebook is promoting its ice cream by offering 20,000 pints of it free each day, at a rate of 800 per hour. This offer ends on Sunday.

Krispy Kreme isn't faring a whole lot better. It slipped slightly for the entire system, of which company-owned stores account for 29%, and same-store sales are down 2.4% for combined company-owned and non- company-owned -- and that's after closing what supposedly were its
"bad" stores. At the company's annual meeting, Krispy Kreme says it's planning to test "proprietary" ice cream in stores in cones, cups and shakes. And a doughnut sundae.

Advice for Tim Hortons? Well, hockey great Wayne Gretzky once noted, "Some people skate to the puck. I skate to where the puck is going to be," and the same is true about engendering loyalty. If you have predictive consumer metrics, you always know where consumer values are going to end
up. And winning and keeping customers is a goal to which every brand should aspire.

Dr. Robert Passikoff
Founder & President - Brand Keys, Inc. partner of
Brand Lounge in the Middle East and North Africa

Differentiate Or Die

Differentiate or Die
Jack Trout, President & Founder Trout & Partners Ltd.
posted by Hasan Fadlallah, Managing Director Brand Lounge

What has changed in business over recent decades is the amazing proliferation of product choices in just about every category. Its been estimated that there are 1,000,000 SKU’s (Standard Stocking Units) out there in America. An average supermarket has 40,000 SKU’s. Now for the stunner. An average family gets 80 to 85% of their needs from 150 SKU’s. That means there’s a good chance we’ll ignore 39,850 items in that store.

The dictionary defines “tyranny” as absolute power that often is harsh or cruel.
So it is with choice. With the enormous competition, markets today are driven by choice. The customer has so many good alternatives that you pay dearly for your mistakes. Your competitors get your business and you don’t get it back very easily. Companies that don’t understand this will not survive. (Now that’s cruel.)

Just look at some of the names on the headstones in the brand graveyard: American Motors, Burger Chef, Carte Blanc, Eastern Airlines, Gainesburgers, Gimbels, Hathaway Shirts, Horn & Hardart, Mr. Salty Pretzels, Philco, Trump Shuttle, VisiCalc, Woolworth’s.

And this is only a short list of names that are no longer with us.
In this global killer economy you have to find a way to differentiate yourself or you better have a very low price. To do this, here are the steps you must follow:


Step one. The context.

Arguments are never made in a vacuum. There are always surrounding competitors trying to make arguments of their own. Your message has to make sense in the context of the category. It has to start with what the marketplace has heard and registered from your competition.
The context also includes what’s happening in the market. Is the timing for your idea right?
Nordstrom’s differentiating idea of “better service” played perfectly into the context of a department store world which was reducing its people and service as a way to cut costs.

Lotus launched the first successful network on “groupware software” called Notes just as Corporate America was networking its PC’s. (IBM ended up buying Lotus and Notes for 2.5 billion dollars.)

It’s like riding a wave. If you’re too early or late you’ll go nowhere. Catch it just right and you’ll get a long and profitable ride for your difference.


Step two. The differentiating idea.

To be different is to be not the same. To be unique is to be one of its kind.
So you’re looking for something that separates you from your competitors. The secret to this is understanding that your differentness does not have to be product related.

Consider a horse. Yes, horses are quickly differentiated by their type. There are race horses, jumpers, ranch horses, wild horses and on and on. But, in racehorses you can differentiate them by breeding, by performance, by stable, by trainer and on and on.
A product or service can be differentiated by feature, leadership, preference, heritage, specialty, how it’s made and on and on. ( I wrote a book on this subject if you want more ways to differentiate your brand.)



Step three. The credentials.

To build a logical argument for your difference, you must have the credentials to support your differentiating idea. To make it real and believable.
If you have a product difference, then you should be able to demonstrate that difference. The demonstration, in turn, becomes your credentials. If you have a leak-proof valve, then you should be able to have a direct comparison with valves that can leak.
Claims of difference without proof are really just claims. For example, a “wide-track” Pontiac must be wider than other cars. British Air as the “world’s favorite airline” should fly more people than any other airline. Coca-Cola as the “real thing” has to have invented colas. When it’s “Hertz and not exactly” there should be some unique services that the others don’t offer.
You can’t differentiate with smoke and mirrors. Consumers are skeptical. They’re thinking, “Oh yeah, Mr. Advertiser? Prove it!” You must be able to support your argument.


Step four. Communicate your difference.

Just as you can’t keep your light under a basket, you can’t keep your difference under wraps.
If you build a differentiated product, the world will not automatically beat a path to your door. Better products don’t win. Better perceptions tend to be the winners. Truth will not out unless it has some help along the way.
Every aspect of your communications should reflect your difference. Your advertising. Your brochures. Your website. Your sales presentations.

In marketing, the rich often get richer because they have the resources to drive their ideas into the mind. Their problem is separating the good ideas from the bad ones, and avoiding spending money on too many products and too many programs.
Unfortunately, without the proper resources, even the best differentiating idea won’t get off the ground. Look what happened to AT&T in recent years. They failed to differentiate themselves from Sprint and MCI. The result: A price war which ended in the ignominy of being bought by a Baby Bell.

As I said, Differentiate or Die.


With more than 40 years of experience in advertising and marketing, Jack Trout is the acclaimed author of many marketing classics, including Positioning: The Battle for Your Mind, Marketing Warfare, The 22 Immutable Laws of Marketing, Differentiate or Die, Big Brands, Big Trouble, A Genie's Wisdom and his latest, Trout on Strategy. He is president of marketing consultancy Trout & Partners and has consulted for such companies as AT&T, IBM, Southwest Airlines, Merck, Procter & Gamble and others. Recognized as one of the world's foremost marketing strategists, Trout is the originator of "Positioning" and other important concepts in marketing strategy.With more than 40 years of experience in advertising and marketing, Jack Trout is the acclaimed author of many marketing classics, including Positioning: The Battle for Your Mind, Marketing Warfare, The 22 Immutable Laws of Marketing, Differentiate or Die, Big Brands, Big Trouble, A Genie's Wisdom and his latest, Trout on Strategy. He is president of marketing consultancy Trout & Partners and has consulted for such companies as AT&T, IBM, Southwest Airlines, Merck, Procter & Gamble and others. Recognized as one of the world's foremost marketing strategists, Trout is the originator of "Positioning" and other important concepts in marketing strategy.

Tales From The Marketing Wars (3)

Branding Lessons From GM: What Not To Do
Jack Trout, President & Founder Trout & Partners Ltd.
posted by Hasan Fadlallah, Managing Director Brand Lounge

Toyota is about to pass General Motors' seven-decade reign as the world's largest car producer by volume. That’s right 70 years of leadership coming to an end. Today, Toyota has America’s best selling car, the Camry, and GM is struggling to make dwindling brands, such as Buick and Pontiac, mean something to consumers.

When something like this happens to a company of this stature, it's important to discover why this occurred. These are important lessons as George Santayana warned, "Those who cannot remember the past are condemned to repeat it." I mentioned the GM brand schizophrenia problem in an earlier column. Here’s a more detailed analysis of what went wrong.

When Alfred Sloan joined GM in 1924 as operating vice president, he inherited what he called an "irrational product line"--one that had no guiding policy for the marketing of its many brands. The company's only objective was to sell the cars. The brands stole volume from each other and, with the exception of Buick and Cadillac, all lost money.

Sloan immediately realized that GM had too many models and too much duplication and lacked a product policy. In one of the earliest examples of market segmentation, he reduced GM’s offerings to five models, separated them by price grades and emphasized individual brand image to entice customers into the GM family and move them up.

These distinct and strong brands allowed GM to capture more than 57% of the U.S. market by 1955. Aware that pursuing more market share could lead to antitrust actions and the threat of a breakup, GM fatefully shifted its strategy from making better cars to making more and more money from a relatively stable number of sales.

Nothing dramatized this new direction more than the concept of "badge engineering," or selling identical vehicles under different model names. This invention of GM's finance staff was a way to increase profits through uniformity, by, among other things, making parts interchangeable. Slowly but surely, the different brands lost the individual personalities that the company had so painstakingly established. At the same time, to improve their numbers (and bonuses), the GM divisions began to push the boundaries of the product policies that defined their brands: Chevrolet went up in price with fancier models, as did Pontiac. Buick and Oldsmobile offered cheaper versions. In time, GM was once again producing multiple cars of different brands that both looked and were priced alike. For GM, it was 1921 all over again, with brands that look alike and are priced alike.

Like BMW, Toyota (nyse: TM - news - people ) pushed one brand in many forms. All these cars benefited by sharing in one powerful differentiating idea: reliability. And when they went up into the super-premium category, it became a Lexus with all "Toyota" identity carefully eliminated. Also, they are quick to invest in new innovations such as the hybrid (Prius) and, coming soon, the wheelchair friendly Porte, aimed at Japan’s elderly population.

The bottom line is that in the branding business, less is more.

A successful brand has to stand for something. And the more variations to attach to it, the more you risk standing for nothing. This is especially true when what you add actually clashes with your perception. If Altira's (nyse: MO - news - people ) Marlboro stands for cowboys out in Marlboro Country, how can it sell Marlboro Menthol or Marlboro Ultra Light cigarettes? Real cowboys don’t smoke Menthols or Ultra Lights.

If Coca-Cola (nyse: KO - news - people ) is the company that invented cola and the owner of that special formula, how can it be the "Real Thing" when the company offers a parade of new things including one called "Zero"? Why change that unique formula?

Should Wal-Mart Stores (nyse: WMT - news - people ) try to sell more up-market products to compete with Target (nyse: TGT - news - people )? No, that's not its market.

Should Porsche risk its sports car image by selling SUVs? No, it's an iconic sports car brand.

Should Dell (nasdaq: DELL - news - people ) try to sell home electronics to compete with the Japanese and Koreans in this category? No, it sells computers directly to businesses.

Until companies come to grips with the simple fact that they don’t really have an inordinate need to grow, but an inordinate desire to grow (because of Wall Street), bad things will continue to happen. Slowly but surely, brands will lose their meaning as they try to become more.

What is happening to General Motors (nyse: GM - news - people ) should be a lesson to all companies no matter how big and powerful they are. You cannot be everything for everybody, and the more you try, the more you risk sinking the ship.

As I say to many senior executives as a reminder of what can happen, put a simple sign on the wall that reads: Remember the Titanic.

With more than 40 years of experience in advertising and marketing, Jack Trout is the acclaimed author of many marketing classics, including Positioning: The Battle for Your Mind, Marketing Warfare, The 22 Immutable Laws of Marketing, Differentiate or Die, Big Brands, Big Trouble, A Genie's Wisdom and his latest, Trout on Strategy. He is president of marketing consultancy Trout & Partners and has consulted for such companies as AT&T, IBM, Southwest Airlines, Merck, Procter & Gamble and others. Recognized as one of the world's foremost marketing strategists, Trout is the originator of "Positioning" and other important concepts in marketing strategy.

Tales From The Marketing Wars (2)

Differentiate Or Be Fired
Jack Trout, President & Founder Trout & Partners Ltd.
posted by Hasan Fadlallah, Managing Director Brand Lounge

Chief marketing officers (CMOs) have a shorter tenure than NFL coaches. In fact, as you can see by the chart, they barely get beyond two years before they move on.
Average number of months at a position
CEO 44
CFO 39
CIO 36
CMO 26

"The job is radioactive," according to a recent article in BusinessWeek. The problem, it said, is that 70% of companies don't know what they're looking for when they recruit a CMO.

The chief marketer at Gap (nyse: GPS - news - people ) for two years, Jeff Jones, reported that he discussed 22 CMO positions over a five-month period. Not one, he says, spelled out coherently what he or she would be accountable for.
It's gotten so bad that Advertising Age editorialized: "Perhaps we should just call for the end of the CMO position." They went on, "Put the job out of its misery. It isn't really working anyway, is it?"

All this caught my attention, so I've decided to take a closer look at the problem and figure out what's going on. I'm starting with a quotation from legendary management consultant Peter Drucker that's worth repeating: "Because the purpose of business is to create a customer, the business enterprise has two--and only these two basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business."

So there it is. The father of business consulting pointed out that the CMO has one of the most important jobs in a company. And he even went on to describe its function, which is to develop "the distinguishing, unique function of the business." In other words, what is it that makes the company or product unique and different? That's the CMO's assignment. So, in simple language, marketing's role is to turn the one idea that differentiates your brand or product from all competitors into a full-scale program. The idea is the nail. The program is the hammer that drives it into the mind of the prospect. What could be simpler? Why all the fuzziness? In fact, my book on this subject, Differentiate or Die, lays out how to do all this in great detail.

Then, one day, I opened the Nov. 26 issue of Advertising Age and came across an interesting set of data culled from senior marketers. Anderson Analytics surveyed 1,657 senior marketing executives. Six hundred replied. Wow, I thought, that should tell me what's going on. And sure enough, it did.

The researchers asked respondents to rank the marketing concepts to which they devote time in their working day. The following list shows where they spend the most time:
Top 10 Percentage
Customer satisfaction 88%
Customer retention 86%
Segmentation 83%
Competitive Intelligence 82%
Brand loyalty 82%
Search engine optimization 81%
Marketing ROI 80%
Quality 79%
Data mining 78%
Personalization (one-to-one marketing) 79%

There, in graph form, is why CMOs are being fired left and right. "Differentiation" doesn't even make it onto the chart. While they are worrying about customers or segmentation or return on investment (ROI) or search-engine optimization, their brands are sinking into a sea of commoditization. Drucker told them what to do, and they ignored him.

Forget all about data-mining or number slicing or niche segmenting. Why should a customer buy your company's product instead of the 10 or so other competitive choices? That's the question you should be answering. Build a program around that answer.

But be careful. Don't expect the advertising agency to come up with this answer. Chances are, they will try to sell emotion, or entertainment, or something that doesn't supply that critical reason to buy. I saw another study by a well-known research company that analyzed 340 commercials shown in prime time and identified a differentiating brand message in only 7% of those ads. Ugh. (If you look at much television, I'm sure you'll agree with that observation.)

Figuring out the right positioning strategy is only the beginning. Next, a CMO will have to convince the CEO and chief financial officer that building or even maintaining a brand is a long-term process that requires patience and incremental change. They will have to avoid line extensions that just undermine what the brand stands for in the mind. And Wall Street's emphasis on quarterly and monthly results is a problem that you will have to tackle. I never said it would be easy.
All you can do to fight off the financial sharks is to point out that without that point of difference--what Drucker calls "distinguishing and unique"--you'd better charge very low prices. There's nothing in the middle. And low prices mean very low profits.

Following Drucker's advice is how CMOs can move from "radioactive" to influential. That's a far better place to be.

With more than 40 years of experience in advertising and marketing, Jack Trout is the author of many marketing classics, including Positioning: The Battle For Your Mind; Marketing Warfare; The 22 Immutable Laws of Marketing; Differentiate or Die; Big Brands, Big Trouble; and his latest, Trout on Strategy. He is president of marketing consultancy Trout & Partners and has consulted for such companies as AT&T, IBM, Southwest Airlines, Merck, Procter & Gamble and others. Recognized as one of the world's foremost marketing strategists, Trout is the originator of "positioning" and other concepts in marketing strategy.

Tales From The Marketing Wars

Fixing The Ad Industry
Jack Trout, President & Founder Trout & Partners Ltd.
posted by Hasan Fadlallah, Managing Director Brand Lounge


The press is abuzz with stories about big companies moving dollars out of traditional advertising media and into product placements and other newer marketing methods. One expert after another is predicting that the ad industry as we know it has lost its way and is in decline. Stories about TiVo, buzz and the Internet are all the rage. But before everyone packs up their resumes and jumps ship, I think it's time for a more reasoned view of things--or at least one that gets us away from all of the negative hype and the doom and gloom. Let's start with what should be the role of the advertising agency.

Traditionally, the agency's role is to be the objective "outsider." The agency counsels the client on how to best sell their products or services to their marketplace, how to position the brand vis-a-vis the competition, and how to verbalize their message with that "reason to buy." Candor and honesty were always the hallmarks of a good agency/client relationship, as agencies played a major role in developing strategy for their clients.

A true story is in order here: Many years ago, a senior account supervisor was reminiscing to me about the old days in the business. He recounted a meeting in a hotel where the CEO of the client and the head of the agency were lying in bed together discussing strategy. The account supervisor said to me, "Jack, the industry problem is that we're not in bed with the CEOs anymore."

He was right. As the years have rolled by, I've seen less and less of that kind of relationship. Agencies have backed off on pushing strategy, as clients became more assertive in this regard. Instead, agencies retreated to creativity, emotion or humor as their contributions to the brand. The net result: Today, a lot of advertising lacks that reason to buy. Too many people looked at the advertisement and said, "What are they trying to sell? It's no wonder clients are beginning to question traditional advertising's usefulness. As Pogo would say about the ad business, "We have met the enemy and he is us."
Step One: Get Back To Strategy

Forget about emotion, bonding, borrowed interest or show business, agencies have to rebuild their reputations around being able to help top management figure out the right competitive strategy for a brand. In simple terms, they have to be able to help establish the point of difference for a brand. Forty years ago, it was called a "Unique Selling Proposition." In more recent years, it has been called a "Position." In all cases, it's why a customer should prefer your product over the many other choices out there.

This difference is your ultimate weapon against all of this talk about who needs advertising when you have "buzz" and "product placement." Unfortunately, most of these new marketing tools that are getting all of the attention don't enable you to deliver that message. All they are good for is getting a name out there with no story attached.

Consider the famous Oprah giveaway of 200 Pontiac G-6s. (It won a Cannes Media Lion.) The result was great press but lousy sales, which are 30% below expectations. What was missing was the story about why I should buy one if I didn't get one for free. On the other hand, strategy gives you a guide for all of these newfangled activities. This differentiating idea can be carefully introduced into these non-advertising vehicles. In other words, your carefully developed strategy is the cornerstone for your multi-media plans. They can extend your selling message beyond advertising.
Step Two: Dramatize The Strategy

Creative people tend to resist a strategic approach to advertising. To them, it restricts their creativity. They sometimes view advertising as an art form. To me, the role of a good creative person is to take the strategy and dramatize it in a way that better involves the prospects. In a way, you are dramatizing that reason to buy. It could be a product demonstration or a dramatic solution to a perceived problem. Whatever it is, it captures people's attention while you deliver your sales message.

Consider BMW as a model client. More than 20 years and many agencies ago, they launched an attack on Mercedes-Benz with the dramatic concept of "The ultimate sitting machine vs. the ultimate driving machine." Today, they are still driving with the same concept and are one of the world's most successful car companies. Great strategies never die. Nor do they fade away.
Step Three: Do Away With Awards

Do away with all those creativity-awards shows, such as Cannes and Clios. Nothing does more long-term damage to the industry than making creative folks think that they are making movies and not commercials. Consider the "Curse of the Clio;" it's widely known that a large number of Clio winners lost their accounts not too long after taking home their statuettes. All of this undermines the industry's perceptions of being strategic in its work. It would be like lawyers having awards for creativity in trials. Agencies are supposed to be professionals helping clients solve problems and sell products. Their award should be getting to keep the account.

Besides, clients are on to the fact that awards are there to help agencies get more accounts, not to help clients get more business. That is not a helpful perception for an industry under attack.

With over 40 years experience in advertising and marketing, Jack Trout is the acclaimed author of many marketing classics, including Positioning: The Battle for Your Mind, Marketing Warfare, The 22 Immutable Laws of Marketing, Differentiate or Die, Big Brands. Big Trouble, A Genie's Wisdom and his latest, Trout on Strategy. He is president of marketing consultancy Trout & Partners (represented as Brand Lounge in the Middle East & North Africa) and has consulted for such companies as AT&T, IBM, Southwest Airlines, Merck, Procter & Gamble and others. Recognized as one of the world's foremost marketing strategists, Trout is the originator of "Positioning" and other important concepts in marketing strategy.

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