Wednesday, July 30, 2014

2014's Most Innovative Tech Brands

A long time ago in a galaxy far, far away. . . OK, 35 years ago, which in tech-time is a long time ago, Sony introduced the Walkman.

If you weren’t around then or aren't a student of portable, private music devices, it was a 14-ounce, brick shaped portable cassette player with big square buttons, and biggish headphones, that came wrapped in a leather case. It ran on two AA batteries, had no external speakers and was the height of technological sophistication when it came to on-the-go music. It fundamentally changed the paradigm of how consumers experienced music and, thus, sold a cumulative 200 million units. By 1986 the word “Walkman” was included in the Oxford English Dictionary and became part of the lexicon.

Sony kept at it, innovating formats to accommodate CDs, but corporate hubris being what it is, when it came to MP3s, Sony insisted on sticking to a proprietary digital music format (the music version of their Betamax video players), which left the brand way, way behind Apple and its iPod. It also left Sony way, way behind other brands when it came to consumer perceptions regarding brand innovation.

In a recent Brand Keys survey of consumer perceptions of innovative tech brands, 4,500 consumers (500 men and women, 16-65, from each of the 9 U.S. Census Regions) were asked to rate companies and brands on a 1-to-10 scale when it came to innovation for on and off-line technological innovation leadership. The top-20 rankings ended up looking like this:
  1.  Apple (98%)
  2. Samsung (97%)
  3. Google (96%)
  4. Amazon (95%)
  5. Microsoft (91%)
  6. Netflix (89%)
  7. HP/Panasonic (87%)
  8. YouTube (85%)
  9. Facebook (82%)
  10. Twitter (80%)
  11. Hulu (79%)
  12. IBM (78%)
  13. LinkedIn (77%)
  14. Canon/Dell (75%)
  15. Uber (74%)
  16. Airbnb (71%)
  17. Roku (70%)
  18. Sony (68%)
  19. Intel (67%)
  20. Pinterest/Yahoo (65%)

While Sony ended up toward the bottom of our list, and, by the way, lost nearly $1.4 billion in their fiscal year that ended in March, they apparently don’t intend upon staying there – either perception or profit-wise.

The solution? They’re introducing a new, $700 Walkman aimed at upscale consumers looking to trade up in the audio-to-go category. The XZ1 is Sony’s 21st century version of the Walkman; hefty and heavy, hand-carved from a block of aluminum, housing 128 gigabytes for radically high-quality files that combines data storage, download speed, and sound quality.

Brand Keys tracks consumer expectations in nearly 100 B2C and B2B categories, and generally speaking, expectations have only increased – especially when it comes to personal technology. This new Sonly entry is an example of a product built to address some of those consumer expectations likely created from consumer exposure to high-quality HD-TV and newly-popular premium headphones. And whether the new Walkman will be a niche product or a consumer phenomenon remains to be seen.

As Apple (#1 on our list) discovered, truly great innovative products can change everything for consumers – from how they listen to music to what they expect about how they’ll listen to music. And when brands do that, they elevate themselves from well-known brands to innovation icons.

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Monday, July 28, 2014

More Hot Water For Red Lobster

It’s been no secret in the restaurant world that Darden Restaurants has been trying to 86 their Red Lobster restaurant chain for a while now. It hasn’t been a secret to us either.

According to the Brand Keys Customer Loyalty Engagement Index for Casual and Fast-Casual Restaurants, brand engagement for the chain – a leading-indicator of consumer behavior and, axiomatically, profitability – has been lukewarm. All the advertising and promotion in the world – including seafood fests, endless fried shrimp, and for two-for-one meal- deals – hasn’t been able to help the brand claw its way up the list. Or with tanking same-store sales, which were down nearly 6% for the quarter. Current brand rankings looking like this:
  1. Panera
  2. Chipolte
  3. Au Bon Pain
  4. Arby’s
  5. Cosi
  6. IHOP
  7. Texas Roadhouse/Olive Garden
  8. TGI Friday’s/Applebee’s
  9. Ruby Tuesday
  10. Chili’s
  11. Golden Corral/Outback
  12. Red Lobster 

The brand found itself in even more hot water recently when the hedge fund, Starboard Value LP, who own an 8% stake in Darden Restaurants, sued over a $2.1 billion agreement to sell Red Lobster to the buyout firm, Golden Gate, alleging it was “a fire-sale price.”

Olive Garden, also operated by Darden (along with more successful specialty brands like Bahama Breeze, Yard House, and Capital Grill, too small to make our lists yet), hasn’t done much better either, on our Customer Loyalty Engagement Index (down two spots to #7) or in same-store sales, also down. And if/when the Red Lobster sale is completed, Olive Garden is expected to account for as much as 60% of Darden’s revenues, which was recently reported to have plunged 35% compared to same time last year. So putting extra stress on a brand structure that wasn’t up to code in the first place.

Darden has indicated that they intend to highlight quality, freshness, and health, all of which are values more and more customers attribute more and more to fast-casual brands like Panera, Chipolte, and Au Bon Pain (#’s 1, 2, and 3 on the Customer Loyalty Engagement Index list), none of which have fried-anything on their menus.

Starboard Value LP filed with the SEC last week requesting the Darden books and records, complaining of “months of maneuvers” looking to silence shareholder opposition. They argued that Darden should have placed their real estate assets into a separately traded company and, by selling Red Lobster, the potential value of the transaction has been diminished.

Darden is introducing lighter dishes to boost lunch business, and Eugene Lee, Darden’s president, has been quoted as saying they’re “in the early stage of exposing guests to what we call a brand renaissance plan,” but all that is pretty hard to swallow. And based on current brand rankings and customer engagement levels, we’d say near impossible.

But to paraphrase Lewis Carroll’s Red Queen about Darden’s chances, “Why, sometimes I've believed as many as six impossible things before lunch,” so we’ll have to see what they finally serve up.

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Tuesday, July 22, 2014

Luxury Brands Are Different

French luxury-brand Hermés posted second-quarter sales last week. They were reminiscent of the Orson Wells line, “Living in the lap of luxury isn’t bad except that you never know when luxury is going to stand up.” Sales were up, but only a little – 5.8%, a real softening of the growth the brand has seen in recent quarters. Down from the first-quarter’s 10.1% growth, and +12% achieved a year earlier.

And yes, these days there are regular retail brands out there that would be thrilled to see that kind of growth, but luxury brands are different. Luxury brands are the only ones where it is possible to make luxury margins. And they have come to expect consistent, strong growth. There was a time when it was said that luxury brands were recession-proof. You could safely say that because luxury brands possess something regular brands don’t – an increased emotional engagement quotient that provides consumers with products that possess an added-value well beyond primacy of product. A bag is a bag, right? Wrong! As every fashionista knows, a Hermés Kelly bag is not just a “bag.” Neither is their Birkin just a bag. Nor is Chloe’s Paddington, Fendi’s Baguette, Dior’s Saddle or Louis Vuitton’s Murakami just something to hold personal items. It’s the brand that’s different.

The bad news for Hermés is that some of their sales problems were related to a virtual cessation of sales in Japan, traditionally an enormous market for luxury goods, reporting sales growth of only 1.5%. The good news (or at least the better news) is that the slowdown had nothing to do with the brand and mostly the fact that sales were up nearly 22% the previous quarter boosted by price increases and heightened consumer purchases made in advance of an April 1st VAT hike. Growth in the United States was softer too: 7.9% down from 18% in the first-quarter.

Over the years Brand Keys has observed that luxury goods have precisely the same engagement drivers as regular goods competing in the same category. The difference is that consumers hold higher expectations for those engagement drivers when it comes to luxury goods. Held to a higher standard, if you will. And while expectations generally have increased faster than brands can keep up, lower-priced brands like Coach, Kate Spade, Michael Kors, Marc Jacobs, and Ralph Lauren have managed to edge their brands up the luxury-expectation incline, with new brands, like Detroit-based Shinola, entering the marketplace too.

Sales are always contingent upon the vagaries of marketplace and the competitive set, but ultimately luxury brands endure. It was Coco Chanel who wisely professed, “In order to be irreplaceable one must always be different.”

And, it turns out, luxury brands are.

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Wednesday, July 09, 2014

Reading GE CMO Beth Comstock’s HBR blog, Innovation Is Marketing’s Job, Too, some of Dr. Seuss’ advice that ran through my mind. Paraphrased, the good Doctor said, “Look at me! Look at me! Look at me NOW! It is fun to innovate, but you have to know how.” Ms. Comstock’s mandate was to make GE marketing a vital operating function, including innovation, something that would drive organic growth – beyond just helping to craft advertising and external marketing. Her shared her 4-part formula about how to innovate. She suggested:
  1. Go to new places
  2. Shape the market early
  3. Incubate new business and models
  4. Invite others in
We are big fans of innovation. Going into the black hole of (YOUR CATEGORY GOES HERE) can be an exciting and rewarding exercise. But you really do have to know how. To be perfectly transparent, our own philosophy and practice centers around Ms. Comstock’s #2, “Shape the market early,” which is a lot easier said than done for many brands. The best way to shape the market, of course, is to have a deep understanding of what the consumer wants and what they expect before even they know what they want or expect.

Want to know what consumers want and expect? The easy-answer is “everything.” In virtually every category you can imagine expectations have risen, 20-25% (more if you’re talking ‘tech’), while brands have only managed to keep up by 5-6%. That gap is called, the “expectation gap.” It’s the space between what people really want and what brand actually delivers, and is a fertile place to dig if you’re looking for areas where your brand can innovate. That corresponds with Ms. Comstock’s point #1, and while her “new places” were of the more tangible kind, and ours more notional, it’s a  “new place” for a brand to study nonetheless.

The thing is, from a marketing and/or research perspective, you can’t just ask consumers what they want. Consumer decision-making is more emotional than ever before, and often those emotional values turn out to be things consumers don’t articulate. Or don’t want to articulate to an interviewer. Or just can’t articulate. So you can ask, but if a brand doesn’t know how to accurately capture those emotional expectations, they usually end up talking about or thinking about rational aspects of the category. And these days, rational doesn't usually translate to something innovative and differentiating. By the time the rational bits of the category are articulated by consumers as something they expect, they’re more likely “table stakes,” basic things you need to have in order to play in the brand’s market arena, but something everyone has, and definitely not something innovative.

Brand Keys fuses emotional and rational aspects of the category to identify how consumers really view a category and what they really expect from their Ideal. We capture predictive lead-time insights of 12-18 months as regards expectations. How well your brand matches up to the Ideal identifies expectation gaps, valuable areas (or a new place to go) worth a drill-down exercise or, at the very least, a once-over, and typically results in innovation.

Do that, and your brand – to borrow Ms. Comstock’s phrase – gets “to shape the market early,” with the added benefit of getting a jump on the competition. In the last century, and depending upon the category, that “jump” à la traditional marketing and research might have been worth a 2 or 3 year lead. Today if you get 6 months, it’s a gift. You need something that will give you a real head start on meaningful and competitive innovation. Here’s a real-life example in the Automotive category from the Customer Loyalty Engagement Index.

Over the past two years, values related to personal connectivity and entertainment has grown at nearly double anything else as regards a positive contribution to auto brand engagement and customer loyalty and, therefore, profitability. (FYI, “fuel efficiency” grew too, just not as fast). But the gap between what consumers really want, and what the best of 22 automotive brands we track delivers, leaves an emotional engagement expectation gap of 23%, a gap large enough to drive a truck through. So if innovation is marketing’s job too, the opportunity these engagement metrics identified was a perfect place to drill down and uncover something your brand could have innovated, owned, and used to shape the rest of the market.

Sure, consumers are tech-conscious, and connectivity and technology have been slowly driving their way into the automotive category. Various brands have been using ”technology” as a differentiator to one degree or another, but the fact is that consumers have wanted this increased level of car-connectivity for what’s going on 4 years, and had some bright brand been able to identify it, they could have taken ownership of it, vrooming ahead of the competition instead of having to tailgate rivals.

Last week, a 2-page ad ran in the Wall Street Journal, with the headline on page 1, reading “The Connected Car Is Here,” and on page 2 the announcement “Chevrolet Is The First And Only Car Company to Bring Built-in 4G LTE Wi-Fi to Cars, Trucks and Crossovers,” which seems pretty innovative. Right now. But we’ll have to see how long that particular innovation window remains open, and how long it is before all cars have to offer it just to keep up. What was “innovation” will turn into “table-stakes.” What once delighted consumers, now has become obligatory.

It was Steve Jobs who famously pointed out that “innovation is the difference between a leader and a follower.” We would add to Ms. Comstock’s praise of innovation that innovation is the best way to ensure consumer engagement, brand growth, and corporate profitability, and it can fall easily within the purview of the Marketing and Research Departments, if you know how.

Harvard Business Review has pointed out that it’s tough when markets change and your people within the company don’t. But these days it’s even tougher when consumer category values change, and companies don’t change the research tools or marketing metrics they use to measure them.

Sticking with our automotive theme, it’s worth remembering that when it comes to innovation there are no old roads to new directions.

Connect with Robert on LinkedIn.

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Tuesday, July 01, 2014

Celebrating America’s Most Patriotic Brands

It’s a fair bet that lots of consumers are looking forward to this celebrating upcoming weekend. It’s the Fourth of July. Independence Day. A celebration of our battle for independence. A celebration of pride. And freedom. Accompanied by flag waving and patriotic music, picnics in town squares, parades and fireworks, and all varieties of red-white-and-blue decorations. A day off too. American consumers know how to throw a party, so what’s not to look forward to?

Marketers look forward to Independence Day too because it gives them an opportunity to “help” citizens celebrate. Brands cue the marching bands and majorettes, hire the Uncle Sam look-alikes, adopt red-white-and-blue leitmotifs, and generally look to squeeze as much of the patriotic emotions that symbolize America out of the holiday that they can. But while some of these tactics are in aid of the celebration of freedom and independence, most are simply in aid of, well, sales.

Too cynical for the 4th of July? Well, for today’s consumers, saying it, doing it, and doing it believably are three entirely different things, whether they have a 3-day weekend or not. So to determine which brands actually led when it comes to patriotism, Brand Keys did a statistical “drill-down” to identify which of this year’s list of 225 brands were more associated with the value of “patriotism.”

Statistical and face validity have shown that today, brand engagement is more emotional than it is rational, and while many emotional values drive engagement, and the study asked 4,680 consumers, ages 16 to 65, to evaluate a collection of 35 values, we focused on the value of “patriotism” to see which brands were more (or less) likely to get consumers to stand up and salute.

Today, when it comes to engaging consumers, waving an American flag and actually having an authentic foundation for being able to wave the flag are two entirely different things and the consumer knows it. More importantly, believability is key to the engagement paradigm. The more engaged a consumer is with a particular emotional value and the more they are able to associate the brand with that value, the more likely they’ll trust that emotion and act positively on that belief.

The ranking of the top-50 most patriotic brands, including ties, follow. The percentages indicate the emotional engagement strength for the individual value of ‘patriotism,’ versus an Ideal of 100%. Only the U.S. Armed Services – the Air Force, Army, Coast Guard, Marines, and Navy – rated that high, and we take this opportunity to note that and also thank them for their service.

  1. Jeep (98%)
  2. Levi Strauss (97%)
  3. Coca-Cola (95%)
  4. Colgate/Disney/ 
Wrigley’s/Zippo (93%)
  5. Ford/Harley Davidson/ 
Ralph Lauren (91%)
  6. Apple/Gillette (90%)
  7. Hershey’s/Walmart (89%)
  8. Amazon (88%)
  9. New Balance (87%)
  10. A T&T/Google (86%)
  11. Gatorade/Marlboro/ 
Sam Adams (85%)
  12. Budweiser (84%)
  13. Louisville Slugger/ Smith & Wesson (83%)
  14. American Express/Coors (81%)
  15. John Deere/L.L. Bean (80%)
  16. Facebook/GE (79%)
  17. 49ers/Cowboys/ NFL/Patriots/ (78%)
  18. Wrangler/Yankees (77%)
  19. Walgreens/
Wilson Sporting Goods (76%)
  20. Craftsman Tools/
Jack Daniels/Kodak (75%)
  21. Campbell’s/ Gibson (74%)
  22. eBay (73%)
  23. Heinz/Sears (72%)
  24. McDonald’s/KFC (71%)
  25. Kellogg’s/ Tide (70%)

It’s not surprising that many brands in the top-50 are true American Icons. It is worth noting, however, which brands in particular moved up the list into this year’s top-50: Apple, Amazon, Google, Sam Adams, American Express, Facebook, and eBay.

None of this should suggest that other brands are not patriotic, or that they don’t possess any patriotic resonance. Rational aspects like being an American company, or being “Made in the USA,” or having nationally directed CSR activities and sponsorships all play a part in the make-up of any brand, particularly as it regards its patriotic nature and public face. But if you want to differentiate via brand values, especially one this emotional, if there are high levels of believability, good marketing just gets better, along with brand sales and profits.

Last year, when the 2013 Most Patriotic Brands list was published, some readers posted comments how some of the brands didn’t belong on the list because their products weren’t actually manufactured in the United States. Alas, foreign production is something that’s become more-and-more a reality in today’s global economy. But then, it’s also worth remembering that’s the rational side of the decision-making coin, which isn’t making as big a contribution to brand engagement as it used to. And if you’re talking “brand,” emotion always trumps rational. Always.

One lesson marketers should have learned about brands over the past couple of decades is, more-and-more, brands, and what they “mean” and what they are able to stand for, have become surrogates for added-value. Those brands that can make the emotional connection with the consumer will always have a strategic – and sometimes even, tactical – advantage over competitors when it come to the marketplace battle for the hearts, minds, and loyalty of consumers. Kind of like the Thirteen Colonies and the British Empire!

Happy 4th of July!

Connect with Robert on LinkedIn.

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.