You can’t outsource your brand.
Not to rehash previous posts in their entirety, but I once more take the approach that marketing is the process of getting your product to and into the market—a larger discipline that includes R&D, sales, and customer care, not just promotion and advertising. Marketing also includes pricing and margin optimization, which can often mean needing to reinvent or reposition existing products with a new spin.
To be successful, marketing needs to take the customer’s side—to paraphrase a saying that has popped up at the top of my LinkedIn feed for the past week, marketing needs to listen to learn, not just listen to answer. What is the psychological driver that causes product adoption? Yes, a need is surely a driver, but among myriad choices, what differences matter to whom?
Therefore, both customer satisfaction and customer loyalty are critical measures of marketing’s success. However, satisfaction ≠ loyalty. You can have extremely satisfied customers, but if they buy based on price, and you raise your prices, they may not stay loyal. Thus, loyalty measured in price elasticity is an important metric to track.
Which brings me to Delta Airlines’ brilliant decision to revamp its frequent flyer loyalty program, and start rewarding travelers based on how much they spend, not on how far they travel. This shift has received tremendously negative attention in the press, I’m guessing because muckraking is fun, and business acumen is not required to write a compelling story.
Let’s first cite a different example. Grocery retailers reward their worst customers the best—those who spend the least get the quickest lines. But those who spend the most need to queue up in long lines while the ice cream is melting in their shopping carts. Grocery retailers are well advised to treat “high rollers” just as well, if not better than the “quickies.” The tactics supporting this strategy would be quite simple to implement.
Delta has grasped this. To date, like all airline loyalty programs, bargain shopping has been the most efficient way to maximize the value of a frequent traveler loyalty program—in fact, infrequent travelers are rewarded the best, needing just a few cheap cross-country flights to earn the right to a free flight. Those who need to travel last-minute, and thus pay the most, get no additional benefits. Their ice cream is melting.
Instead, Delta will be re-programming travelers’ mindsets from spend-less-get-more to spend-more-get-more. Bargain hunting will die a quick death with those who want to maximize the value of their loyalty program membership. And Delta’s profits will soar. They may lose some travelers, so revenues may stay flat, but margins will be better. Less work = more money; employees and stockholders love this!
And I even question the loss of travelers. Most airports have one anchor airline, maybe two. But in the end you need to get to where you are traveling in the most efficient and expeditious manner, regardless of who you want to be loyal to. My own attempt to switch from US Airways to United Airlines—because I desperately want to stay with the Star Alliance loyalty program after US Airways merges with American Airlines’ One World loyalty program—has been an utter failure, because US Airways dominates PHX, and can get me to most destinations more quickly.
I bet that’s what Delta is counting on: increased happiness from its best customers (those who spend the most, most frequently), and the inability of the least good customers to make serious changes to their travel needs, while still giving them the ability to earn the same level of rewards they are used to (by simply spending more).
That’s pretty damn good marketing—the process of getting your product into the market at a higher profit margin, while offering the disenfranchised the opportunity to stay engaged.
In the late 1990′s my friend Didier and I worked at the same interactive agency in NYC. He was (and still is) a designer. He’s also prescient. One day we were in his office and he was very excited. He asked me if I’d seen the movie “American Beauty.” I answered in the affirmative, adding that I thought it was a Hollywood rip-off of [some indie movie which title I can no longer remember]. Didier’s excitement stemmed from the little movie clip inside the movie itself, of the garbage bag that was circulating around itself in the windhose. He said that this is where personal entertainment would go; that people would be posting a lot more of this on the Web (“Web” was capitalized back then). Didier foretold of the coming of YouTube.
The thing that made Didier brilliant was that he didn’t realize he was brilliant—he assumed everyone else had the same mental acuity. In his design Didier did not think of appearance, but of use. This made him an excellent user experience designer before that term existed. The most important thing he ever said about web design was “For every click, a reward.”
As a marketer and marketing strategist—including interactive/online marketing—I live by that mantra. And it’s caused me to break some best practices, especially the age-old one of “what can be measured can be managed.”
Marketers love landing pages. I agree, they are useful, but not necessarily rewarding. They are useful because now I can measure an action; they can be annoying to the user, however, because they really are just an interstitial served up to meet my marketing bean-counting needs rather than my visitor’s needs.
As a marketer you need to deliver in-place experiences, not pathways to them. Landing pages are great for inbound traffic, but for internal linking you should consider foregoing accountability in favor of experience.
On our new corporate website (launching in a few weeks…hopefully) we will be focusing on calls to actions (CTAs) that can be satisfied immediately and transparently, rather than through redirects and and other invasive gimmicks.
To get around not being able to account for every click and associate it with a unique profile, our efforts are focused on delivering value as opposed to entrapment. Instead of relying on click-through rates (CTR) and conversion rates (CR), our new metric will be action rate (AR).
Our hope—an experiment to be measured—is that AR will correlate more closely with new revenues, and become a predictive indicator, than CTR or CR.
The onus will be on us to deliver meaningful content that prompts visitors to engage in a dialogue with us, but we’re using this as an opportunity measure a hunch that we have.
Apparently Barnes & Noble has different online and in-store prices. I didn’t know this, since I haven’t shopped there in ages (nor on their website), but this recent thread on The Consumerist website makes the pricing discrepancy abundantly clear.
Bringing a business mindset to this issue, it is easy to understand why the prices are different: because the cost structures are different. But the resulting price discrepancy is somewhat unusual for consumers to deal with…apparently. That is something that B&N’s media and customer relations departments didn’t seem to grasp, as evidenced by their well-reasoned business-like response when confronted with customer dissatisfaction over this issue:
“Barnes & Noble.com is a subsidiary of Barnes & Noble, Inc., with its own management, operations and price structure.”
“The online and retail businesses each offer their own unique selection and competitive price structure.”
“Neither business advertises the other’s price structure.”
“Neither business matches the other’s advertised prices.”
And, as stated on BN.com:
Barnes & Noble.com usually is able to fill your order with less expense than our retail stores, and we pass those savings on to our online customers. This is why our prices online sometimes are lower than prices in your local Barnes & Noble store. Similarly, at times, your local store may offer exclusive promotions that are not offered at Barnes & Noble.com.
The correct response would have been, “The two business units have different cost structures…[blah blah blah]. This is also because of differing labor costs across these two types of businesses. You see, we love our employees as much as we love our customers. And to attract and retain high-quality employees to give you the best possible service and in-store experience, we need to pay people well and also provide benefits. That’s why our in-store cost are higher—to create a win-win. Both of us need happy employees to make sure you are a satisfied customer.”
I’m not quite talking cause-marketing here, but according to a Nielsen study, consumers apparently are “…willing to pay more for goods and services from companies that have implemented programs to give back to society…”
B&N could have humanized the problem and made sure that customers understand that their hard-earned money goes to a good cause: making sure that other people can also earn a living wage in a service-oriented economy. That’s turning lemons into lemonade (and brought to you by the “duh” department).
In the past I’ve read many a different explanation of what differentiates B2B and B2C marketing and purchase decision-making processes. I very much like Jerry Rackley’s take on this, which is that in B2B it is relationship-based, whereas in B2C it is brand-based.
I’ve finally come up with my own differentiation:
- B2C: benefit-based
- B2B: value-based
Both are versions of ROI, but I believe that for consumers most purchases are considered sunk costs, and that the emotional accounting is benefit-based, e.g., food needs to not just satiate an appetite, but also taste good. But on occasion we’ll just choose the functional solution so that we’re not hungry even though the food may not taste very good.
However, in B2B a prevalent mindset is that a solution wouldn’t even get considered for purchase if it didn’t provide a benefit (duh!), but it must also generate a measurable/tangible return. “Will this make me money, not just cost me money?” That’s value.
Brand = Category + Differences
I pretty much disagree. This not only implies, but the authors state outright that a company can create and own a brand. You can read about the reasons for my disagreement in my previous posts on this topic: You Don’t Have a Brand and The Successful Brand Steward.
While they wholly missed the truth, they also didn’t miss by much. Here’s my fix:
Identity = Category + Differences
That’s a winner! Knowing who you are and how you compare is huge. This is the basis for a dialog with prospects and customers. Now you just need to work on your corporate culture.
A brand―a trusted solution that meets the expected psychological and utility needs of the purchaser―is an important competitive differentiator. Having a brand means one’s product or service is chosen more frequently over similar solutions, and one can command a price premium, which results in greater profitability.
A brand, however, is not owned by the company that manages it—it’s the intellectual property, including service marks and trademarks behind the brand that are. Instead, the consumer who experiences the product or service elevates it to brand status, thus exercising “ownership.” [See previous post, “You Don’t Have a Brand.”]
What makes a brand, then, is the implied agreement by the consumer that the product or service delivers the desired experience repeatedly, so that switching to another solution is not a consideration (unless under duress). A brand is a primary choice, and often a secondary choice may not even exist.
To be considered a brand, a wide adoption must be in place in the target market; a brand is a social experience validated by other consumers. The market for the product or service does not need to be large—luxury markets are narrow segments of the population—but the penetration should be significant and profitable.
If the customer loses faith in the brand’s ability to deliver the expected or promised experience, and he/she instead begins to choose another solution repeatedly, then the original solution has lost brand status. If this happens on a large scale with an incumbent customer base, then the product as a whole loses brand status, suffers market share losses, and cannot maintain its pricing, for it has not maintained its promises and differentiation.
This risk is what makes a brand not just an intangible but an ephemeral asset, and therefore necessitates constant vigilance in brand protection measures.
The Brand Steward: A Definition
If the owner of the brand is the consumer, what is the company that owns the intellectual property? It is the “brand steward.” Although the company originated the product, its success was created by the purchaser. Certainly, a company must take great care to foster an environment that will give the product the greatest chance of success at brand status, but there is no guarantee of success, only preparedness.
The brand steward is thus entrusted with caring for an asset that is highly valued by a sizable consumer community, which wishes for the product to continue to deliver the same, or better, benefits. However, this steward is not a person—even though there are “brand managers”—it is the entire organization behind the product or service.
This organization is made up of various departments—executive leadership, R&D, manufacturing, sales, marketing, customer care—that must work together to continuously meet the promises offered by the product, and the expectations these promises have created within the customer.
Because brands are ephemeral, the entire organization is tasked with keeping the product alive and relevant within the expectations set by customers, so that the product will continue to be a primary choice for the longest time possible. Sales, marketing, and customer care interface directly with the customer on a regular basis, making these departments particularly responsible for carrying out careful brand stewardship activities. But R&D and executive leadership are equally important, as their work affects the direction of a product or service to which customers have attached brand status.
The customer may not always be right, but the customer can always damage the brand. As a consequence, the company stewarding the brand should make every reasonable effort to prevent a lasting poor impression in case of a brand experience failure by a customer. Further, the company should leverage failure into an opportunity that causes the affected customer to praise the company and its product to others. This is how brands are maintained.
Ultimately, not one person but the entire culture of a company stewards a brand.
To innovate and keep a brand alive, a company must regularly engage in market research to learn how its product performs against customer expectations, and also to learn what additional value the customer would like to receive. These findings must then be tested against the brand’s ideals (its mission/mantra), compared against competitors’ existing capabilities, and validated for market acceptance within the incumbent customer base.
Sometimes the customer does not want change (“New Coke”), but customers often value continuous improvement, as long as these improvements are in keeping with the brand’s ideals and differentiating factors (iPhone 5)—the reason for why the product or service was chosen in the first place.
Sameness does not a brand make. Think evolutionary, not revolutionary.
Thus, in addition to collecting meaningful customer insights, a company must (1) have a framework against which to evaluate potential product changes, (2) the know-how to make those changes in accordance with customers’ wishes, and (3) the ability to communicate and support these changes. This entire process is called brand stewardship.
(1) The Positioning Journey
When the marketing department (often the customer/consumer insights division) has observed or learned of a new benefit the customer would like to receive from an existing product or service, the typical next step would be to test the possibility of adding this value (a feature) and costing out this process, including its effect on final price.
However, the first step should be an analysis of how this additional utility affects the perception of the brand. Just because someone has requested something, or a competitor has added a feature to its product, does not necessarily provide good enough reason to incorporate the same change into one’s own product. Parameters must exist against which the viability of an idea can be tested against brand perception
To do this, a company must understand itself, its product, and the competitive landscape. In case these analyses have not been performed in the past, basic strategy tools exist to help produce the answers to each of these questions. With these answers, the company can very clearly define the positioning of its product, enabling it to compete effectively, and better evaluate future product innovation and feature requests.
In combination, SWOT, VRIO, and Five Forces analyses help a brand steward figure out (1) what the company itself is capable of, (2) how the product or service is presently positioned, and (3) what competitive forces the company is facing. These basic insights are critical to helping the company create the correct positioning and customer expectations that can help elevate a product to brand status, or maintain an already earned brand status.
Positioning is more than just deciding to produce a luxury or a mass-market product or service. The company must envision its customers and figure out why they would be attracted to the product. This is the most difficult step, because it involves making long-term strategic decisions that affect customer adoption and competitive positioning.
While the consumer will ultimately decide the positioning, value, and utility of the product that can lead to brand status, the company needs to get its initial positioning right―it must define the core essence of its offering to which a self-selecting audience will be attracted.
Positioning is not necessarily permanent, but it must be impactful the first time to permit future adjustments. Apple Computer did not start out as the world’s largest digital music retailer, but its original positioning as a computer design and manufacturing company which understood the wider implications of “personal” computing, enabled it to successfully transition the Apple brand into new markets, with even greater brand equity as a result.
Analyzing the Company: SWOT
A SWOT analysis is probably the most commonly used strategy tool, and examines the overall ability of a business. It asks the following questions of the company:
- Strengths: What do we do well?
- Weaknesses: What do we do poorly?
- Opportunities: What can we exploit?
- Threat: What external threats do we face?
The analysis process should include members from the aforementioned departments in order to get a wide variety and inputs to help create a complete picture. If necessary, an external facilitator should manage this process to keep potentially strong political forces at bay and to assist in collecting all valuable input.
First, the company needs to look inward and review its own strengths and weaknesses. What is the company good at, what are its core competencies? The answer can include any number of things, such as design, customer service, and patents. Where does the company underperform and how might those areas jeopardize the idea’s success? Again, any number of things can be identified, such as project management, distribution, and key employee retention.
Next, examining opportunities and threats takes into account external factors over which the company has little or no control. What opportunities can the company’s strengths create for the idea? Is its marketing better than that of its competitors? Does it have a more resilient supply chain with less country risk or pricing volatility? And what threats do its weaknesses expose it to? Does it have poor distribution that would keep it from rapid market penetration? Or does it lack the ability to scale customer service? Are some competitors simply better at some things, which could put the company at a market disadvantage?
The more precise and quantifiable the SWOT analysis, the more valuable its information and results will be for long-term strategy planning. Knowing one’s own strengths and weaknesses, as well as the external opportunities and threats that these strengths and weaknesses can exploit or create, is critical to successful product planning and potential brand success.
Analyzing the Product: VRIO
A VRIO analysis is not performed on the company (that’s what SWOT does) but on its inputs or outputs. VRIO is used to analyze the proposed service or product, or the requested change.
- Is the product Valuable? Does it help meet a threat or exploit an opportunity?
- Is the product Rare? Is it not already a widely available solution?
- Is the product (in)Imitable? Is it difficult to copy or easy to defend?
- Is the company Organized? Can it readily exploit the product and repeatedly deliver on all of its promises?
The obvious answer is that the more valuable, rare, and difficult to copy the product or service idea is, the more advantaged the competitive positioning will be. This is critical in evaluating any proposed change. How would such a change affect the value, rarity, or imitability of the product or service? Does it lead to homogeneity, or does it create further differentiation, driving VRI?
Any successful/profitable product will ultimately cause others to enter that market. The most difficult thing to copy, however, is not a product or a service, but the execution of that, which itself is driven by the corporate culture behind it. How well a company is able to defend its output over time is therefore a matter of how operationally well it executes—how well organized the company is, and how well it communicates internally.
The better organized a company is, the more difficult it is to imitate its success, and the better protected the brand is.
A baseline VRIO analysis needs to be crated first, so that any new product or service idea can be evaluated in context. If the new/revised idea maintains or increases competitive differentiation and can be brought to market cost effectively, a defensible competitive advantage with favorable economic implications will have been maintained or increased. The opposite needs to be avoided!
Analyzing the Competitive Landscape: Five Forces
A Five Forces analysis examines an industry’s overall structure and the competitive external pressures a company will face. It provides further context against which to evaluate the outcomes of the SWOT and VRIO analyses.
Five Forces includes the following points of analysis:
1. Research any direct competitors. The more unique an idea—tested or re-adjusted via VRIO—the greater the likelihood of the idea’s short-term survival, as few or no direct competitors will presently exist.
2. Quantify the risk of new competitors entering the space. Can current pricing be maintained in the face of cheaper competition? Is the product attractive or defensible enough (think patents or market share) to ward off new entrants wishing to encroach on its market share? What inputs can the firm dominate to keep competitors at bay?
3. Identify the possible threat of substitutes. Substitutes are dissimilar solutions with similar benefits (e.g., portable digital cameras being displaced by smartphones). What can solve the same problem differently? Will the product remain relevant in the face of competition by substitutes?
4. Determine the bargaining power of the company’s customers. How much power can customers wield to affect pricing? If a company is dependent on a few customers for most of its business―e.g., 80% of revenues generated by 20% of customers―its top customers can dictate what they will pay; unless the company has a monopoly, which is a situation customers will try to avoid by seeking out substitutes.
5. Determine the bargaining power of the company’s suppliers. Suppliers provide raw materials, ingredients, or components, but even the labor market itself can be a supplier if the product is intellectual property such as software. If a company depends on only a few suppliers for the majority of its inputs, these suppliers can charge whatever they want, because their pricing is inelastic.
As a first rule of thumb, the brand steward wants to occupy a market space with the lowest potential for both new competitors and substitutes. The more unique an offering or positioning, the fewer direct and indirect competitors will need to be dealt with.
As a second rule of thumb, the company needs to avoid buyer and supplier monopolies because of the risk such exclusive dependence poses to a company’s ability to generate significant profits that can be reinvested into brand stewardship. Management should seek many suppliers and customers so that none can create a bottleneck in production or dictate pricing that would jeopardize the product’s viability or a brand’s status.
In summary, brand stewards need to know:
- What the company is capable of and what its limitations are (SWOT).
- How the product/service is different, or needs to be differentiated (VRIO).
- What the competitive landscape is and who holds power (Five Forces).
Once the brand steward has figured out the product’s uniqueness and competitive white space, product innovation or changes can then be better evaluated.
During this phase of brand stewardship a company is tasked with maintaining and further enhancing the positioning and identity of the product that the consumer has deemed critical—not that the company itself has decided is most important.
(2) The Customer Experience Phase
Marketing is the process of getting one’s product or service into the marketplace, noticed, and bought. Therefore this includes traditional marketing activities (such as promotion and advertising, which communicate positioning and create expectations), sales people (who further communicate positioning and create expectations), and customer care activities (which manage incongruities of positioning and expectation).
A sale is not truly complete or successful unless the customer’s expectations have been met. The customer care department’s role, therefore, is to help the customer avoid buyer’s remorse, making customer service and care a marketing activity in and of itself.
Marketing communication activities (including promotion and advertising), sales promises, and customer care activities must all fully understand the product’s positioning in order to carry out brand their brand stewardship responsibilities. Does the execution of sales and marketing tactics communicate the product’s intended brand ideals? Have the promises implied in the company’s positioning been carried all the way to the customer?
When any of these MarCom activities, including customer care, touches the customer, it is critical that they act and communicate in one voice with one message. Otherwise, if incongruities in messaging and positioning do occur, it is possible that customers will become confused and differentiation will be lost. As a result, brand perception will slip in status.
To manage and optimize cooperation and interoperation among sales, marketing, and customer care activities, one first needs to determine what gaps may exist in these processes.
The Services Gap Model
Brands can only come into being when the correct expectations are set and delivered. Executive management makes product feature and positioning decisions, which must then be communicated by the marketing department, implemented by the sales or services departments, and supported by post-purchase customer care activities. Here a variety of disconnects can happen. Is the promised experience envisioned by management, promised by marketing, delivered by sales, and supported by customer care congruent with the customer’s perceived experience?
The Services Gap Model provides a framework for understanding and improving service delivery, and thereby customer experience, which directly affects brand perception. Even when the item sold is a product, not a service, the framework remains applicable because intangibles that are perceived as services are always involved in delivering a good.
Figure 1: The Services Gap Model Triangle
Executive leadership makes “executive decisions” about a product or service; marketing encapsulates these as value propositions; sales communicates these value propositions to customers; and customer care deals with customers when the promises thought up by executive leadership, encapsulated by marketing, and communicated by sales are not perceived by the customer.
Clearly, communication breakdowns can happen at every level and juncture.
(1) How has executive leadership learned what the customer wants? Through direct interaction with the customer, or though surveys or other traditional quantitative research methods? If those who set the tone—who are responsible for defining positioning—have little to no engagement with real customers, then critical decisions related to product positioning (features and benefits) are made in an information vacuum, and often may not be customer-centric. If insights were gained through direct customer interaction, it is rather more likely that leadership will have a well-informed understanding of what the market really wants, as well as what the market does not need. This does not negate the need for aggregate market research, however.
Therefore, the highest echelons of the company must be involved with the customer, even if only from time to time, so that the true customer desires are learned, their solutions implemented, and the correct promises communicated back. This avoids or minimizes the occurrence of the customer having a different experience than was promised, which is important for maintaining brand identity and loyalty.
(2) Executive leadership and marketing (who encapsulate leadership’s value propositions) must also have a rapport with frontline staff, and must regularly inform customer-facing departments of what was learned during high-level interactions with customers, and how that might have affected messaging and positioning.
Further, by empowering customer-facing departments to remediate customer experience issues immediately, without frequent escalation, customers whose expectations were not met can still be converted into happy customers (or into happy non-customers who at least will not damage the brand’s reputation). This avoids or minimizes the occurrence of the customer perceiving a different experience than was delivered, which is equally important for maintaining brand identity and loyalty.
But communication is not a one-way street. If properly trained, frontline staff can listen to customer ideas and complaints, and report upward the best ideas and greatest failures as reported by customers. Therefore, frontline people are exceptionally well positioned to learn, summarize, and communicate important ideas and experiences from highly valued and profitable customers, as well as new ideas that may lead to additional product differentiation not previously considered. Those ideas will then need to be evaluated against the strategy frameworks discussed above, but the fact that these suggestions have come from existing satisfied customers gives them additional credence for consideration.
The two, communication and empowerment, may seem like separate issues, but both are focused on customer satisfaction, either by encapsulating and messaging the correct promises, or by fixing perception issues when promises were not met correctly the first time. This also helps avoid the very unfortunate occurrence of a customer’s experience being different from his or her expectation of that experience, and tests and validates the organizational capabilities of the company.
(3) Obviously, companies know that over-promising and under-delivering is the most assured recipe for failure. Few know that the opposite—under-promising and over-delivering—can be damaging, too.
Instead of trying to give customers the best experience ever, which should be a goal but not necessarily a stated promise, leadership needs set expectations in the positioning, marketing, and sales phases that can be met repeatedly.
When a firm temporarily over-delivers on product reliability, features, customer service, and so on, it has likely raised the expectations bar permanently. Disappointment will later ensue should the original—but now superseded—performance levels take hold again. For example, If 24/7 world-class service has been promised, then that expectation must be met. But if 18/7 world-class service has been promised and the firm delivers at a higher level, then customers will be disappointed if the company later falls back to 18/7 world-class service.
Therefore, brand stewards must make promises very carefully, and ensure that these promises are met continuously without fail.
So the Services Gap Model recipe is simple:
- Customer experiences that are incongruent with customer expectations must be avoided.
- All departments, including executive leadership, must listen to customers.
- Internal communication about customer expectations and experiences must flow both ways, up and down.
- To turn negative customer experiences into positive ones, employees must be empowered to resolve issues without frequent escalation.
The Customer’s Journey
So far we have discussed strategy schemes for competitive and strategic positioning wrapped in a customer-centric R&D and services approach. Next let’s discuss actual customer needs.
The customer’s thought process on purchases always boils down to the following:
- “I have a need or a problem.”
- “Is there a solution out there I already know and trust?”
- “If not, let me do some research.”
- “This product/service is purported to be great/terrible/okay.”
Obviously, the potential customer will not reach step 3 if a default solution is readily available. However, should the potential customer reach step 3, it is critical that the brand steward has positioned and made available its solution in such a way that it seems the obvious next choice. This is no longer achieved simply by having dominant shelf space or an appealing advert in the Yellow Pages.
Since the advent of the commercialized Internet, traditional advertising has become less and less effective. The Web has given nearly every person the ability to perform research on products and customer satisfaction. And social networks have enabled instantaneous and asynchronous communication with trusted advisors (friends and family, colleagues, hired professionals) to receive product recommendations anywhere in the world.
Additionally, potential customers do not rely exclusively on personal relationships for product recommendations; they also rely on other trusted networks to aid in discovery and decision-making. For example, new mothers who are otherwise complete strangers may congregate at CafeMom.com to share experiences and recommendations. In-person Meetups (www.meetup.com) take place on an infinite variety of topics across the globe, allowing complete strangers to share their interests and passions. Customer reviews on Amazon.com and Zappos.com serve the same purpose of sharing product and service experiences. In any of these situations, the opinions of strangers are treated as expert recommendations that can at the very least lead to a one-time trial of a suggested solution.
This new landscape is why customer satisfaction—which can lead to customers becoming net promoters (rabid fans who promote and defend a company and its offerings)—is very important, and why incongruities between the expected and perceived customer experience need to be minimized or eliminated. This is also the reason why traditional advertising is becoming less effective, and authentic endorsements from trusted resources is the most effective form of marketing.
While advertising is still relevant, a brand steward’s responsibility is to be an active member of the communities that have embraced and are talking about its products. Red Bull Energy Drink is a prime B2C example of how a brand steward has become part of the community that champions its product. In B2B, marketing materials such as believable client video testimonials must be available collateral in places where potential customers perform their research before reaching to the company for further information—the least and last of which is the brand steward’s own website.
As the saying goes, you can lead a horse to water, but you cannot make it drink. Likewise, by being visible and authentic in the arenas and communities where customers participate and start their research, brand stewards can effectively enlarge the pond so that the proverbial horse no longer has to be led to it.
The other critical component is the long-term, post-purchase experience. Customers will forgive product mishaps if they receive the proper care and support. To win at this stage, management must have empowered frontline employees to resolve issues without the need for frequent escalation. Spending a little on customer satisfaction returns a lot in customer lifetime value. Or, to co-opt yet another cliché, a customer saved is a customer earned (perhaps even a net promoter).
Have You Been Listening?
Brand is the perception of how an offering is positioned and whether a buyer’s experience was congruent with his or her expectations. It is rare that a company is permitted by the customer to attempt a brand do-over, because customers don’t wish to relearn how they think about a product or service.
In the journey from evaluator to customer, people typically wish to make choices that represent little risk, especially as the monetary cost of these choices increase. It is therefore the brand steward’s responsibility to understand the customer and then incorporate that understanding into product design, delivery, and support. The innovation/improvement cycle can only succeed if the brand steward keeps this ultimate outcome in mind: that experience matches expectation.
If the brand steward (including executive leadership) listens only to customer complaints in the hopes of fixing them, then it is too late to listen to the customer. Listening is a broad and active process. Brand stewards need to listen to everyone who interacts with the customer, not just the customer itself.
Further, brand stewards should not listen only to downstream and in-house suggestions and outcomes, brand stewards also need to listen upstream: suppliers also need to become part of the conversation about customer satisfaction and continuous improvement. And the upstream also needs to be connected to the downstream: suppliers need to be enabled to listen to their customers’ customers. With this process, brand stewards can build a complete chain of information trust, and may discover additional efficiencies and opportunities for product or service enhancement that will deliver value to the customer.
To steward a brand successfully, follow these basic steps:
- Create a multi-functional brand stewardship committee to collect and evaluate new ideas.
- Test and refine ideas against strategy frameworks to assure continued positioning and differentiation.
- Keep your promises: only make promises and implement as ideas when these can be delivered on repeatedly.
- Measure to see if the promised experience matches the perceived customer experience.
- Pinpoint areas in your processes and organization that have led to customer experience mismatches and develop processes to fix them.
- Listen and learn: participate in and add value to communities where large numbers of brand consumers and advocates aggregate.
One good thing about talking to smart people is that they typically know other smart people. After my interview with Jerry Rackley he introduced me to Stephan Sorger. Stephan is the VP of Strategic Marketing at On Demand Advisors, and also on the marketing faculty at the University of San Francisco and U.C. Berkley, where he teaches marketing analytics.
Earlier this year Stephan released the textbook “Marketing Analytics.” The book is aptly named—it’s just that with the current hype surrounding “big data,” most readers will probably expect a book purely on that topic. A better title would have been “Marketing Analytics: How to Measure Everything,” because Stephan’s book discusses all the metrics that marketers should concern themselves with, not just big data. Little data matter, too!
As with Jerry Rackley, Stephan Sorger and I had a lengthy conversation regarding marketing, branding, and metrics. Below are several nuggets from that call.
The Book and the Framework
What I needed was a textbook where people who are not math experts could learn about what analytics could do for them. The most important element is establishing a framework by which to tackle a subject like that. The framework itself is in six sections, going from strategic to tactical.
The first block, or strategic side, is market analysis, which includes models and metrics such as market sizing, SWOT analysis, Porter’s Five Forces, market terminology, market segmentation, targeting, and positioning.
The second block is competitive analysis. Now that you have understood one side of the coin, which is the demand side, you look at the supply side. You look at what competitors are doing.
The next block is strategy and operations. What are needed to get analytics done? This includes understanding market entry and exit decisions, forecasting, predictive analytics, data mining, and so forth.
Block number four is the marketing mix, the four P’s: product, price, place, and promotion. I talk about individual strategic decision models and metrics for each of those four categories.
Block five is sales and support. That’s looking at the tools that people can use to facilitate sales and support, like customer lifetime value, the net promoter score, and so forth.
And the sixth and final block is what I call analytics in action. How can you really start a revolution inside your company? What things should you be working on today?
Three Sales Funnels
We actually have three funnels. The first funnel is from contacts to marketing qualifying leads (MQLs). How many people do we need to know about before we can actually get some expressions of interest?
The next funnel is from MQLs to sales qualified leads (SQLs), where the MQLs have now been nurtured to where we know something about how they are qualified. By studying that funnel, I can know more about what it takes to go from one to the other, and just as importantly, the ratio of SQLs to MQLs.
And the third funnel goes from SQLs to opportunities, meaning these are good, bona fide sales opportunities. The kind of thing that you want to actually get sales involved with.
I did this type of analysis for a CEO I worked for long ago. First, I started off having these huge fifty-page PowerPoints with lots of data: “Here’s our brand equity; our social media efforts, and so forth.” I quickly came to realize that the CEO didn’t look at any of that, nor did he care about it. He actually thought that was a waste of his time.
So I replaced the PowerPoint with a half-page weekly email: metrics for MQLs; numbers we got from a trade show; numbers of SQLs; numbers of opportunities. The CEO said to me, “These are the only emails I read. I just want to be clear, these aren’t the only emails I read from you, but these are the only emails I read from anybody in the marketing department, ever. So keep up the good work.”
Using Analytics to Drive Sales
Macy’s started doing some data analysis of stores in resort locations, and they found that the shopping behavior changes depending on the perception of the location.
For example, Hawaii. Macy’s initially thought that people would buy Hawaiian shirts, sunglasses, shorts, and so on. But customers weren’t—they went on shopping sprees. They bought suits and other expensive attire, because they were on vacation. They wanted to spend money!
Macy’s analyzed the data and realized this. They found that any sort of suits and fancy dresses were always out of stock because people were buying them up as soon as they came in. But no one had ever bothered to analyze those data.
Macy’s changed their collections, and that actually generated quite a bit of revenue.
Using Analytics Post-Sale
I used to work at Oracle, and we were conducting a big study as to what is a reliable indicator that customers are actually happy. Customers were asked to fill out customer satisfaction surveys, and they would mark all fives across the satisfaction board. Everyone was happy, and then the next month the customer would leave us. It was my job to figure out why this was happening.
The first problem I found was that the regional reps were assigned to gathering the satisfaction information. But the sales reps’ bonus compensation plan was based on customer satisfaction. So lo and behold they all came out with all glowing reviews. Once I realized this, I started looking for any correlation between satisfaction and anything else that we record. And there was only one metric: days sales outstanding.
If customers pay their bill on time, chances are very, very excellent that they like you and will continue to do business with you. If customers pay their bill late, no matter what they tell you, they are about to leave.
Presenting and Leveraging Data
I had the privilege of being at an absolute train wreck of an operations review. We had the heads of each department—marketing, professional services engineering, and so on—present to the GM of the division to (a) tell him what and how they were doing, and (b) typically ask for more resources.
I saw the engineering department head come up and just completely miss his opportunity. He told the GM how all the engineers are overworked, how the department is putting in huge hours, how things are starting to slip behind schedule, how the morale is low. He went on and on talking about people getting burned out, and then at the end, he pitched for more people. And the GM said, “No.”
And I couldn’t blame the GM because at that moment I would have said “no” as well. I would have said, “You haven’t talked about anything I care about.” In this case the GM cared about revenue. It was sadly ironic that the engineering department had the biggest impact on revenue of any group in the organization, but the presentation hadn’t captured that.
The very next presentation was from the head of professional services who had a dinky little organization. But she actually said “Number 1, here is how we can contribute to revenue. Number 2, here is the correlation between headcount and revenue, and as we add headcount, how the revenue goes up. But we’re getting increased demands, and at some point we are going to stop being able to increase our revenue. We’re going to have to stop incremental revenue, and it’s going to occur on this date right here.” She actually showed a graph of when that was going to occur.
And the GM’s reaction was: “What can I do? How can I help? How can we hire more people? Can we get a team to hire more people?”
Getting Started Simply
Remember, the CEO doesn’t want everything, he only wants what’s relevant to him. Spend your time on identifying the two or three numbers that the CEO wants. The number one thing that you can do immediately is to start segmenting your sales process into the three funnels. If you can do that, you’ll gain a lot more insight. You’ll see results almost automatically.
The other day an email came in from my friend Steve in NYC, who writes the Smoky Beast (weekly whisky reviews) blog with his wife, saying “we published our first interview with a bona fide master distiller.” Aside from reading the post, and additional whisky reviews, I thought to myself that I, too, know great people who are passionate about the same topic I am. And since I am a marketer I was obligated to steal Steve’s great idea.
I first became aware of Jerry Rackley on a Demand Metric webinar, where he was simply incredibly insightful (he’ll introduce himself below). After the webinar I reached out to Jerry, and to my joy, he responded. I’ve been following Jerry’s insights ever since, and was ecstatic when he recently referenced a blog post of mine on Demand Metric’s Analyst Perspectives Blog: Creationism Versus Evolution: A Branding Debate.
It was a no-brainer that I would reach out to Jerry Rackley to interview him on marketing. The following is a distillation of eight pages of our transcribed telephone conversation. A lot was left on the cutting room floor, but these nuggets of wisdom will inspire any marketer.
Who is Jerry Rackley?
I am the chief analyst for Demand Metric, which is a marketing advisory firm. In addition to that, in my free time, I get to be an adjunct faculty member in the marketing department at Oklahoma State University. I enjoy being in the classroom and working with students, and also really love being chief analyst and working with our members and clients on their marketing issues.
What do your marketing students need to understand today?
Some of the most interesting, rewarding marketing work is going on in small, hungry, lean companies where you don’t have the safety net of a large budget bank account to just run lots of experiments and try different things. Now you really have to figure out how to communicate, how to position, how to contribute and provide a return. If you don’t, the company can’t afford to have you. To me, that’s what I really try to make sure that my students understand.
How do you know your customer?
That’s the $64,000 question. Any effort of marketing, whether it’s content marketing or just any marketing, that doesn’t begin by asking, “Who is our audience?” or, “Who is this content for?” is destined to fail.
The problem is we marketers have all kinds of assumptions built in about our audience that we just don’t bother to back and check. Or we just think that we’re so smart that we don’t have to ask, we already know, because we’ve been doing this for a long time. We get in our own way. That makes it hard culturally to really do the things we should do to understand our audience.
The second thing that happens is that customers don’t reveal themselves as readily as they once did. If you look at any buying process, especially in the B2B world, the customers choose to remain hidden and self-educate much deeper in the buying process than they used to. They can do that because look at what marketers are doing: we’re putting all kinds of great content out there for potential customers to consume.
For those reasons, it takes a lot more effort to understand who our customers are, understand their preferences for communication, what sources of information do they trust, what biases they have. A lot of companies simply just choose not to take advantage of that knowledge either because they think they can’t or because they think it’s too difficult.
On content marketing.
A lot of companies buy into the notion of “we’ve got to be content marketers.” Great, do it. Then they just randomly start emitting content and they don’t necessarily think about what content is needed in each stage of the buying process. (1) What is needed in the need-phase when someone is just figuring out they need something? (2) What’s needed in the discovery-phase when they are actively out there looking for a solution? And (3) what’s needed in the consideration-phase when they are trying to separate the wheat from the chaff?
Companies need to pay attention to the different kinds of content that customers are looking for in each phase.
In the Need-phase, third party content is always valued, so much more in this stage of the sales cycle. Peer input, analyst research and reviews are very much sought after. While marketers can’t directory author this type of content, they can create mechanisms and processes to facilitate its creation and capture. In terms of vendor content for this stage, things like eBooks, White Papers and educational webinars work well.
During Discovery the kind of content valued in this stage is still very light on promotional messaging, but heavy on being helpful! How-to guides and case studies are two examples of what works well. Both of these content types are very effective in video format.
Lastly, the Consideration-phase marks the point where the buyer stops expanding the list of possible solution vendors, and in fact begins narrowing the list. Content that is very helpful in this stage is anything that conveys critical success factors, user success (or horror) stories, content that effectively articulates differentiation as well as description and quantification of benefits.
Are there differences still between B2B and B2C marketing?
A lot of the principles of marketing apply across both, but B2C is still is about brand strength and awareness. B2B has a much stronger relationship component.
B2C players have very little chance of actually knowing their customers. When I say knowing them, I mean an actual real relationship and interaction like you and I are talking now. You know my name and I know your name and I know where you live and work and that kind of thing. That’s pretty unheard for the big B2C players. Yes, they’re going to know their customers demographically, but the bigger they are the less likely it is they’re going to have a real relationship. There are simply too many players between them and the consumer in the supply chain.
B2B on the other hand is an environment in which most of the time you actually know do your customer. You can have a face-to-face interaction, you have a relationship. While brand is still important—and brand is always going to be important—relationship strength can really overcome some brand weaknesses in the B2B realm.
That’s what a lot of B2B companies have figured out: we’re going to go establish relationships. We’re going to know customer needs better than anyone. We may not have the market-leading solution for each one of those needs, but we’re going to use all the influence we have through the relationship to secure business and serve the customer well. Many times, it does work very well as a strategy.
What excites you in marketing?
I think the thing that continues to excite me is when I see real genuine authentic creativity and pure marketing genius. We as consumers are subject to such a barrage of marketing messages, we kind of are numb. We see so many different messages in so many different forms from so many different places that we just kind of tune a lot of them out. When one actually gets through, when we allow one to penetrate our consciousness, that’s a pretty remarkable thing. I think that as marketers we all sit up and take notes. How did they do that? I think usually it’s because it was very clever, or in some cases their cleverness was exploiting an opportunity that was handed to them.
An example is the Super Bowl, the famous Oreo tweet that occurred during the Super Bowl. That was genius, but when you study it, it didn’t happen accidentally. I really admire the way that occurred. Oreo had a creative team on, I would call it, hot standby. These folks were sitting somewhere in kind of a war room during the Super Bowl. Of course, they were thinking social media, but they were ready and they understood there is a potential opportunity on a really big stage for us to do something. When they had the blackout, they put out that now famous tweet. It just skyrocketed in terms of the retweets. It was a huge success from a social media standpoint. I have no idea what it did to their revenues or their market share or anything else. It was brilliant, and they positioned themselves to do that.
Those kinds of things excite me. When I see someone who takes creative risks, and it’s very creative, I respect the fact that they’re not trying to serve up the same old thing that we’re used to seeing all the time.