Brand Time-Out

A recent story in the Wall Street Journal brought into stark relief the mistake of thinking that exceptional creative doth a strong brand make.

E*Trade’s chief executive received one heck of a “Dear Steven” letter a few days back when he opened the email. In it was a letter, filed with regulators, sent by the hedge-fund firm Citadel, accusing E*Trade, under the watch of CEO and Interim Chairman Steven Freiberg, of “squandering” a “phenomenal franchise.” Those are fighting words whatever your category, but let’s take a moment to look at this through the lens of advertising, especially when it has not been built to solve severe problems with engagement and loyalty.

In the letter, Citadel wrote that the online brokerage has consistently received “high marks for its trading platform, customer service, and usability, and has benefited from strong customer loyalty.” Strong customer loyalty? Really? How does that sit exactly with the wave of withdrawals by E*Trade customers of billions of dollars of cash and other assets from the company’s bank and brokerage business as its investments floundered? We guess this is one of those loyalty metrics that came from questions that a research team decided meant loyalty, instead of what actual consumers said creates loyalty, based on what they considered important and expected—emotionally and rationally—from a category brand. Or they just talked to the customer they had left!

Through that lens, we saw a brand in trouble at the beginning of the year. E*Trade trailed four other brands and had problems meeting customer expectations in the category. So, can’t say the letter surprised us much, with Citadel a big shareholder in E*Trade. But, again, this speaks to what great creative can and can’t do.

The talking-baby ads from E*Trade are among the most well-liked, and highly viral, campaigns in recent history. These babies are not only funny, but the ads are well executed, and the creative team can’t be blamed if the message it was given to deliver is not the right one after all. When rumor on the street is that the brand did not behave like a responsible adult, the image of infants talking may be a little too close to consumer perceptions to be the best choice. Just saying.

We scratch our heads at what sort of research was done on these ads. We can only image it was one of the plethora of “tests” that measure liking and laugh-quotient, and not if the ads actually work to heal the brand in exactly the spot that hurts. That requires a sound strategic test, against a consumer-centric reality, and not just a laugh track. Note to brands: creative and advertising are not interchangeable words. Advertising can be highly creative, and not do the job it was hired to do: in this case, help save a wounded brand.

Advertising can never be evaluated on creative strength alone, outside the category and the brand problems and strengths. Only a baby would even talk about such a thing.

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Postmortem: a Borders Non-Fiction Selection

It’s been said that a good book tells the truth about its hero and a bad book tells the truth about its author. But the liquidation of a 40 year-old bookstore chain ultimately tells the truth about the brand and how it was managed.

Last Friday Borders bookstores began liquidation sales at their remaining 399 retail stores. Former Borders VP and Chief Merchandising Officer and current interim CEO, Mike Edwards, sent out an email to Borders Rewards customers, which was an interesting spin on events. But to paraphrase Oscar Wilde, a thing is not necessarily true because a brand dies for it, so here are some portions of his letter and some of our observations from a loyalty and engagement perspective.

“I want to personally thank you for your loyalty and support…“

Observation: What loyalty? It’s been more than half a decade since Borders declared an actual profit, and has lost a billion + dollars since. That’s occasional shopping, not the loyalty that drives profitability.

“You might be asking yourself what happened?”

Observation: Not really. Borders was egregiously bad at identifying consumer product and lifestyle trends, introducing candles and stationary, CDs and DVDs at a time when consumers were moving in other directions. The chain was late to the e-book movement, but more about that later. We don’t know what they relied upon for insights, but we’re sure they weren’t real loyalty measures. Actual loyalty measures identify consumer behavior trends 12 to 18 months before they show – or in the case of Borders -- do not show up at the register.

“We had worked very hard toward a different outcome. The fact is that Borders has been facing headwinds for quite some time including a rapidly changing book industry, the e-Reader revolution, and a turbulent economy.”

Observation: This is like Krispy Kreme blaming the Atkins diet on their brand positioning blunders. It’s true that the book industry has changed and the economy has been wonky, but volumes of competitors – from Barnes & Noble to Wal-Mart – have managed to take away market share and customers from Borders in that same economic environment. Borders was late to the Web, and late bringing e-tailing into their marketing mix. In fact, despite their “very hard work,” Borders actually contracted out their e-commerce business to Amazon.com. No. Really. We’re not kidding. They drove customers to an actual competitor. They only acknowledged the inertia of electronic books back in July 2010, a year after Barnes & Noble—nearly a year after that they changed their e-Reader apps to the Kobo. This move was, apparently, too little, too late to really engage customers.

“We put up a great fight, but regrettably, in the end we weren’t able to overcome these external forces.”

Observation: Not to mention the $1.293 billion dollars that they were in debt. After a good deal of financial negotiations, creditors rejected a bid from Direct Brands and Borders filed for an auction. But, alas, the bid deadline expired on July 17^th without a single bidder coming forward. Meanwhile Apple, which has extraordinarily high levels of loyalty and engagement, saw their shares traded at nearly $375 and have delighted consumers willing to camp out in the street just to get products despite the “turbulent economy.”

“Going out of business sales begin in stores Friday July 22. I encourage you to take advantage of this one-time opportunity to find exceptional discounts on your favorite books and other great merchandise.”

Observation: Pleeeeeeease. Did we mention they’re $1.293 billion in debt? OK, that notwithstanding, when you can only get customers in the door based on price, you’ve ceased to be a brand and have turned into a commodity. And today, consumers are looking to be delighted, and only real brands that can engage customers can do that. Loyal customers follow ‘The Rule of Six:’ they’re six times more likely to rebuff competitive offers, and six times more likely to invest in your company. In 2008 Border’s stock was 35¢ a share. Last year it was still under a dollar. Did we mention Amazon’s shares were being traded at $215.00?

“For decades, Borders stores have been destinations within communities…”

Observation: Although, apparently, not recently. If you’re a retailer, loyal and engaged customers are also six times more likely to visit your locations.

“I feel privileged to have had the opportunity to lead Borders…”

Observation: One can only imagine Mr. Edwards was paraphrasing the Captain of the Titanic or reading from a 60% off copy of the Charge of the Light Brigade.

“My sincerest hope is that we remain in the hearts of readers for years to come.”

Observations: You mean like other companies who had brands that were bankrupt in funds and bankrupt in meaning? How many consumer hearts today beat wildly for the likes of Caldor, Spiegel, Bennigan’s or Washington Mutual?

The bottom line? With real loyalty metrics, a brand doesn't have to invent a happy ending. It can actually write one.

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Wasted Beauty

The beauty category is, well, beautiful -- flourishing with images of gorgeous faces pictured with flowers/silk/wind accompanied by jewelry/fashion/lighting. You take the point: the beauty category is, for all its beauty, somewhat dull, presenting the same sorts of images with the current face plugged in, once in a while throwing in a white-coated lab tech to convince us this is all high science.

This is a sad commentary, especially considering that the beauty category has an awful lot to work with. Take the celebrity spokesperson, for example. A coup by Lancome, it snared the advertising-averse Julia Roberts to represent the brand. An icon of American cinema, Roberts has built an amazing career playing women that navigate personal strength and human vulnerability. And what did Lancome do in the advertising, having that kind of material to work with, you might ask? It put her against a field of flowers. Whoa! Who could have seen that coming?

It has a been a puzzle to many in brand research as to why celebrity/brand pairings in the beauty category don't capitalize on the spirits and personalities of the women they pay tremendous sums of money to sit at their makeup table. Beauty brands need to get over their phobia of real research and come out from behind the two-way focus group mirror, where insights are bound to be limited. Real engagement research can illuminate what happens when the golden celebrity egg isn't just put on the usual ho-hum pedestal, but used as a real ingredient in the brand/celeb recipe. That would not only save us all from yet another dramatic view of eyelashes, but might actually change the course of endorsement advertising altogether and make it meaningful, and thus even more profitable, for the brand.

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Expelliarmus

For the handful out there who are unfamiliar with this phrase, uttered famously in the Harry Potter books and films, this spell is used to disarm another wizard, typically by causing the victim's wand to fly out of reach. We could not help but think of this as we reflected on the prediction made by a modern-day “wizard” a number of years ago, right after the 6th Harry Potter book was released. An independent global branding consultant proclaimed, “Harry Potter is headline news today because of the media blitz surrounding the new book. Six weeks later, you won’t hear anything.”

The consultant based his insights on a Millward Brown survey of 20,000 children, 7 to 12 years of age, who were asked whether they thought Harry Potter was “a fading phenomenon.” Sixty-nine percent said they did. The consultant thought that the percentage was closer to 80%, a statement that raised questions for us, then and now:

1. Did 7-year olds even know what a “phenomenon” was?
2. Did the research consider category drivers and the rhythms involved in a category? People rarely think about the category or brand until the time is right – like just when a new movie is due to be released.
3. Did the researchers consider recommending a behavioral question, like “even if you think Harry Potter is a fading phenomenon, are you going to go see the movie?”

History is a wonderful thing because it allows you to recognize a mistake when you make it again. That’s why loyalty metrics are so useful – they predict what’s going to happen, although to be fair, you didn’t have to have taken classes in tea-reading at Hogwarts to have guessed that the newest Harry Potter release was going to be a hit.

It was no surprise to us to hear that Warner Bros.’ “Harry Potter and the Deathly Hallows – Part 2” smashed domestic box office records for a midnight opening taking in $43.5 million, a record that came on the heels of the film setting the record for advance ticket sales in the US and a staggering $476 million weekend box office worldwide. As to statements akin to “six weeks later you won’t hear anything,” this is likely only to be true because people are still standing on lines waiting to get into see the movie!

As to the future for brands, we suggest a spell known for removing dark marks—Deletrius. Or real engagement and loyalty metrics, if you prefer your magic a little more predictive.

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The Big Ideal

Ask anyone an opinion on any brand or product. Maybe you are thinking of buying one yourself, or maybe you’re just curious. What you are asking for, ultimately, is a vote. Is it cool; good; not so much? These answers are the kind of information that brands continue to pay good money for every business day.

It’s actually relatively easy to get that information, however. You find your customers, design your questions, and then ask away. Where this whole process gets tricky is not in simple scales of liking or who recalled the brand name. That’s just counting. What’s hard is really describing the target. What is the yardstick they are evaluating the product against?

Smart brands know that these sorts of statistics may not be lies, but they are deadly if they are counted on a predictor of fiscal reality. How people approach buying decisions is a mix of emotional and rational criteria, which changes depending on what they are buying. Meaning a brand can do something really, really well that consumers don’t care all that much about. We see this all the time with brands that regularly shout out about the heritage of the company, when legacy often matters less and less in a rapidly-evolving marketplace. The brand may score off the charts on this, and still find itself in layoffs.

We all hold an ideal in mind, even though we don’t think much about it, never mind talk about it. You often don’t know you even have one until you are face to face with buying your next smart phone and realize there are things that matter and things that don’t. When that happens, that’s the ideal at work: that hidden but critical criteria you have for what makes something worth buying or not. It’s what’s in play when your friend gives you her opinion about a product. She’s evaluating it against that emotional and rational dream device—perhaps not the one that exists, but the ideal one she wished existed.

It’s a mystery why more brands don’t understand this, since there are actually humans at the helm. Those same humans who can tell a friend in detail what they want in a mate, yet not understand that the same process exists, albeit with far less personal risk, when buying a car. Until brands get the target right, all they are getting is statistics. And, after the banking crisis, we all know what that is worth.

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Plastic Fantastic

It was reported last week that the number of dollar bills being printed by the government fell to a modern low in 2010. Production of $5 bills is at their lowest level in 3 decades. And for the first time the Treasury Department hasn’t printed any $10 bills. Cash has apparently lost its charisma.

Credit cards account for a part of the problem. You can’t spend cash online, and online retail grows every year. Certain restaurants and stores won’t accept cash any more. Try paying for an airline ticket or an airline snack with cash these days and you’ll end up grounded and hungry. And with modern technology, swipe systems, and small/micro payments becoming de rigueur, it appears it’s just easier and faster for consumers to use a credit card than sort through a purse or a billfold.

What drives such behavior? The “Ease and Speed of Retail Interactions” driver in the credit card category is the culprit. It’s moved from 4^th most-important driver to 3^rd last year, and is 2^nd this year, just trailing the “Rewards and Services.” But one can’t ignore the fact that the “Ease and Speed” driver has moved up so quickly over such a short period of time, and is actively defining consumer “delight” for the credit card category. As to how consumers rate the major credit card brands when it comes to that particular accommodation, here’s how they rank:

1. Discover
2. American Express
3. Capital One
4. Visa
5. MasterCard

Do not mourn for cash though. Production is also down because quality is up. The average dollar bill lasts almost two-and-a-half times longer in circulation than it did at the end of the last century. And it’s still the most convenient medium for paying a babysitter, tipping a waiter, or apportioning a child’s allowance, so don’t plan on plastic prevailing everywhere.

During Benjamin Braddock’s homecoming party, in the 1967 film The Graduate, one of his father’s business associates takes Benjamin aside and utters one word of career advice: “Plastic.” For brands that want to successfully cash in on consumer delight, our advice is “Category Drivers.”

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A Friendtelligence Test

Q: You're going off to grad school and the love affair is over. Response, once mind-blowing, has turned frustrating. Shutting down just happens. That's it. It's time to do a back up and get a new computer. What do you do first?

a. Message your friends and ask them to rate their laptop's cool factor

b. Search blogs and tech review sites for the naked truth about what's out there

c. Stop your TiVo to watch the commercials because you know that brands always tell the truth

A: A toss-up between a and b. Would eat dirt before doing c.

For brands, all the fuss when it comes to digital boils down to one big behavioral shift: consumers are talking to each other before they are talking to brands. Brand websites increasingly are not the first stop on the decision-making voyage, and sometimes not visited at all, but only after determining what brands are worth even hearing from.

Welcome to the world according to, well, me. Or others like me.

Brands increasingly use the term "conversation" these days to talk about the relationship they have with consumers. But a lot of that is wishful thinking. Brands are struggling with an above-ground consumer intelligence network that passes around information on products in rooms where brands can't even buy a vowel. Social networking is just one way this works, but it can be so incredibly effective that brands have rushed to create Facebook pages and twitter in an attempt to look like just another person. And who can blame them? You go where the fish are, right?

But the problem is it takes more than just throwing out a line. It's all about what's on the end of the hook. Brands are spending an awful lot of time trying to figure out how to make the digital space work, and not nearly enough time trying to deeply understand how to make their brand work.

Consumers want brands to exceed their expectations. We call it “delight.” Others call it the WOW factor. But whatever you call it, consumers want it. They want to have a brand surprise them with what matters most to them in the category. For some categories, that's customer service. For others, it's product design. Or it's the ability to customize and package offerings. It's different across categories. But if a brand has done its homework and knows what matters more than something else, then building a digital face from that knowledge just became a lot easier. Then, just maybe, the brand will have something worth listening to.

Back in the day, brands used to call this “strategy.” And, under all this year's jargon, that word will make it way to the top again, because it's what makes the difference between targeted tactics that ring the register and the spray-and-pray approach of just being somewhere because you're afraid not to be.

In this marketing pond, it's not just friendtelligence that matters. It's brand smarts, and that's always worth listening to.

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Freedom is Nothing But the Chance to Choose

Welcome back from your Fourth of July celebrations. As history reminds us, freedom is never given; it is always won. Just like loyalty.

Holidays tend to bring out allegiances in people, particularly as it relates to cuisine. When it comes to eating on this particular 4^th, consumers are loyal to hamburgers (78%), hotdogs (61%), sausages (43%), baked beans (45%), potato salad (40%), coleslaw (35%), guacamole & chips (31%), and grilled vegetables (22%). For desserts, celebrants are faithful to watermelon (50%), apple pie (46%), cupcakes and patriotic pastries (42%) and iced cream (40%). Sixty percent (60%) support apple pie à la mode. For beverages the old dependables are iced tea (63%), lemonade (45%), white wine (52%), Bloody Mary’s (40%) and beer (78%).

In fact, while many consumers cite beer as a necessary Fourth of July libation, it’s wine and spirits that have experienced uninterrupted growth. Most “legacy beers,” like Budweiser, have been seeing some fall-off with consumers either trading down for low cost beers, or trading up for high-end craft beers. Last week’s loyalty rankings of beer looked like this:

1. Coors/Sam Adams
2. Sierra Nevada
3. #9 (Magic Hat)
4. Guinness
5. Corona
6. Heineken
7. Amstel
8. Michelob
9. Miller
10. Budweiser

Aside from Sam Adams, a perennial leader in the craft brew category, loyalty beneficiaries have been craft beers, like the ones in the 2nd and 3rd spots on the list. These companies are small, independent, and traditional – kind of like the early-version honoree of this past weekend’s celebrations. In the case of fermented beverages, consumers’ loyalties are demonstrated by a willingness to pay more for such products.

And that’s something any brand would be proud to celebrate!

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