Thursday, April 24. 2008

In my most recent blogs, I’ve argued that marketing per se is not enough for building a brand. Infusing high-profile marketing onto a bland mediocre product or a me-too service is unlikely to shape a powerful, sustainable brand. I’ve argued that if a vendor offers an exceptional value proposition that creates a special customer experience, then and only then will imaginative marketing (and it’s got to be imaginative) truly serve to strengthen and sustain a brand. Case in point: AND1. If that means nothing to you, then you are not a genuine nitty-gritty basketball freak who sweats and fights for the ball under the net. Here’s the deal: Over the past few years, a tiny enterprise called AND1 muscled past giant Nike in the teen and young adult male basketball attire market with a product/marketing mix that was mindblowing and hard to replicate. AND1 is a privately held company that sells its apparel wares in over 125 countries through retailers like Foot Locker and The Finish Line. The company has grown with double and triple digit rates to around $200 million since three twenty-something basketball fanatics launched it in 1993. The whole vibe of the company and the product line reeks of attitude and basketball. The company cranks out ghetto-designer basketball shoes and related paraphernalia like trash-talking basketball T-shirts and bigger baggier basketball shorts, and it does so specifically for people who love to play a no-holds-barred game in gyms and playgrounds. Its philosophy revolves around its name: "AND 1" You get fouled, you score anyway. AND 1! Two points for the basket AND 1 additional free throw. (If you don't know what AND 1 means then don't wear our gear.) While AND1 has attracted a small stable of NBA endorser-players like Stephon Marbury and Latrell Sprewell over the years (conventional marketing), the high-impact imaginative part of its marketing effort has revolved around its breakthrough streetball tours and videotapes. The company scoured the country for phenomenally athletic and flashy urban street basketball players, putting them together for entertaining competitive tours in packed parks and schoolyards throughout the U.S. The extraordinary threatrics and skills of the 15 hitherto unknown players, all anointed with distinct nicknames, and all African Americans except for one little white dude, were captured and sold in DVD format, often given free with shoe purchases, and presented on a regular ESPN “streetball” series. Of course, the players on the tours and videos wear AND1 clothing and the games are like rock concerts that offer customers ancillary opportunities to purchase AND1 product. The whole deal has been a branding sensation—so much so that there’s even a spinoff video game featuring AND1 streetballers. Thanks to these product and marketing efforts, AND1 has a fanatically loyal customer base and a distinct, trash-talking brand. Jay Gilbert, one of the founders, is clear that AND1 is literally a special brand, which means it’s not for everyone, which means it’s not aimed at a general, diffuse public that just wants to dress “cool.” Neither is it aimed at people who play sports other than basketball. (Check out the company website www.AND1.com and you'll notice that it's all about basketball; only one link seems to be about the products). Talk about a targeted business model! As Gilbert says: "In terms of marketing, our message is first and foremost targeted to the hard-core baller. We make what he needs: shirts, shoes, shorts. The end. Our message is all about performance. If you can't play, don't wear our stuff." Unsurprisingly, they do anyway. So what’s the lesson for the rest of us—you know, we who work in less sexy enterprises like insurance companies and auto parts suppliers? The lesson goes right back to how I began this blog: the best branding occurs when a distinctly imaginative product/service/value proposition is coupled with a distinctly imaginative marketing/promotion effort. Both conditions must exist, and the best leaders are unequivocal in insisting on reaching for both those criteria and continually raising the performance and innovation bar for both criteria. Bottom line: If both conditions exist, your brand will flourish. And if you augment the process with a passion for the products and a love for the “game” you’re playing-- like they do at AND1--your brand will rock. Yes, even if you’re selling insurance and auto parts.

One More Time, Don't Confuse Marketing with Branding

Some of the comments I got from readers of last week’s blog (http://www.harari.com/blog/index.php?/archives/174-Branding-My-Nikes.html) ranged from “Great stuff, love the P/E idea” to “Hey idiot, what’s your beef against marketing, anyway?” Naturally, I commend the brilliant readers who posted a variation of the first sentiment, but I concede that I might have to be a little clearer to address the concern represented by the second sentiment. Let me repeat my original point: Great branding is a consequence of the reliability, consistency and authenticity of the great, unique stuff (products, services) that the organization provides the marketplace. All the conditions (consistency, authenticity, uniqueness, etc.) have to be present. If they are, the customer is likely to have an exceptional experience, a predictably exceptional experience, that is, an exceptional experience he or she can count on. Once again, if all these conditions exist, then innovative marketing can definitely help build both brand equity and sales volume. If they are not all present, the impact of marketing is often questionable and iffy. Sometimes positive, sometimes irrelevant, sometimes ambiguous. For example, prior to being bought out by Disney in 2006, Pixar’s profit metrics and market buzz were monumentally bigger than those of the much larger animation unit of giant Disney. When Pixar was independent, millions of people were devoted to the company’s films because they could count on having a uniquely delightful movie experience every two to three years, an experience with cutting edge 3D computer technology and a great, original story line with new characters that spawned separate but equal joy appeal for kids and adults. With that underlying reputation of carefully crafted unique value, it’s no surprise that a strong marketing campaign created by Pixar for each upcoming film made a lot of sense, and had a lot of impact. But--had Pixar posted an uneven track record, with occasional good films mixed in with a lot of mediocre ones and a periodic stinker, its marketing campaigns would have generated as much noise as impact. For Toyota, marketing also makes a lot of sense. Millions of people are wedded to buying Toyotas because they can count on having a uniquely positive experience regarding quality, design, innovative technology, fair price, comfort, “feel” and after-sale service. For Toyota, marketing specific exceptional products like the Prius or Tundra spreads the good news about the already-inherent strength of the Toyota brand in addition to the unique feature of the individual products. In contrast, consider Toyota’s Big 3 competitors. Their mega-marketing campaigns—from multiple ads in magazines to intricate product placements in films to sleazy faux Super Bowls with scantily clad models on TV -- sure haven’t helped much, have they? In fact, until last year when Toyota finally entered the world of NASCAR, all of the wildly popular motor sport’s cars were built by GM, Ford or Chrysler. How did that work out for their sales, profitability, and stock value? See what I mean? A few years ago, Goodyear’s $60 million annual ad budget generated some very charming commercials, like the one in which parents in different parts of the world were shown enduring their kids’ whines in native languages of the universal “Are we there yet?” Nice stuff, but the problem was that Goodyear lagged behind competitors like Michelin and Bridgestone in several quality and innovation assessments. Unsurprisingly, while people enjoyed the commercials, they didn’t desert Michelin for Goodyear. The Wall St. Journal reported one Goodyear dealer saying “I didn’t have people coming in and saying, ‘I saw that cute commercial—let me see some of them tires’.” My point is simple: Don’t equate branding with marketing. Equate branding with the consistency, reliability and integrity of the extraordinary things you will do on behalf of your customers. If you have that foundation, a little imaginative marketing will help build the brand. Otherwise--??????One last point. I’m cynical about Disney’s upcoming “Pixar” movie: Toy Story 3. Disney has a track record of bleeding its successful products to death via overexposure in order to max out revenue (remember the three times per week “Who Wants to Be a Millionaire?” on Disney/ABC?) If Disney starts doing Toy Story 4 and 5, or Incredibles 2 and 3, you’ll know that Pixar’s soul is being strangled. And then, the brand will fizzle, and all of Disney’s mega-marketing will be for naught.

Branding My Nikes

I don’t make it a habit to think of my work when I’m jogging. But on a run through the hills near my home a couple days ago, for some odd reason I began to think about my running shoes and my loyalty to the Nike brand. Confession: All my athletic footwear—running shoes, cross trainers, tennis shoes—has been Nike for several years. I’ll tell you why, because I think there’s an important lesson for branding here. My loyalty to Nike has nothing to do with their ads and promotions. It has everything to do with the fact that I can count on (remember that phrase) Nike to provide me with the following: • a great, snug fit for my size 13 extra-narrow feet. • state-of-the-art innovative, constantly improving cushioning technologies that give a better and better support for my fragile lower back. • a quality and durability that will make those above-two features last for the life of the shoeThat’s basically it. The fact that great athletes endorse Nike is nice. The fact that Nike shoes look cool is nice. I like both those features, I admit it. But other shoe providers boast celebrity endorsements and snazzy looks. And while I enjoyed seeing Rafael Nadal wearing “my” tennis shoes in a recent magazine ad, I’d never buy them just because he gets paid to wear his. (By the way, Marian Salzman, the ex-chief strategist at ad giant Euro RSCG Worldwide, has concluded, “People are becoming far less susceptible to the power of celebrities who are seen as shills for a brand.”)For me and my unique needs, I buy Nike because it does a better job on those three critical variables above than any other competitor shoe I have ever tried. I can count on Nike to provide me with ongoing success on those variables, so much so that I am 100% confident of ordering product on-line (which I rarely do with other clothing retailers) and will pay whatever the asking price is. What makes brands great is not their visibility, nor their celebrity endorsements, nor the marketing pizzazz behind them. Remember, during the 1990’s Nike and McDonald’s lost a lot of their sheen (and stock value), despite their heavy promotional strategies and the ubiquity (and near 100% recognizability) of the swoosh and the Golden Arches. Only when both companies revamped their product lines did the swoosh and arches generate a positive halo. Don’t mistake presence and recognizability for corporate vitality. Nowadays, Levi Strauss and Coke are struggling, and as I’ve explained elsewhere (see http://www.ftpress.com/articles/article.aspx?p=1180989), Starbucks' buzz and market cap have fallen—but everybody recognizes the brands. Regardless of whether you’re in the business-to-consumer or business-to-business space, a vendor’s brand flourishes when customers can trust the vendor to provide them with a special experience and constantly evolving great products. With that excellent foundation, judicious imaginative marketing can certainly fan the flames of exposure (think Toyota and Pixar, for example) , but on its own, marketing does not make a great profitable growing brand. (And think about the fact that there are many companies, like Google and retailer Zara and tube fitting manufacturer Swagelok, which build a healthy brand solely around their unique value proposition and do practically no conventional advertising). Tom Peters says that a brand “is a promise of the value you’ll receive.” In that spirit, I sometimes urge my clients to think about a new “P/E multiple”, one that supplements the traditional “price/earnings” metric. Think about a “Promise/Experience” metric. If, in effect, you can implicitly (not via sexy ads, but in the way you run your business) promise the marketplace that you will churn out a cool, special value in products and services-- and then actually deliver it in a way that generates a really desirable experience for the customer--the payoff in customer and investor loyalty is a genuine multiple. That’s what they do at Toyota, Pixar, Google, Zara and Swagelok, among many others. Put simply, the way to build a break-from-the-pack brand is not by public relations campaigns, ad rollouts, logos, color schemes, viral marketing, etc. etc. Those can definitely help if you’ve got the basics down. And what are the basics? The capacity to demonstrate to the marketplace that your organization will consistently, reliably, efficiently, authentically, and quickly deliver on great things that are implicitly promised in your business model. Retired Atlanticare CEO George Lynn used to tell me that from his perspective as a hospital CEO or an individual customer—the value of any organization he buys from must be “pervasive, relevant, and credible.” Once again, it all boils down to this: Can I count on this vendor to provide me with special value that truly matters to me? For me and my feet, it's Nike. What about you?

Real Illusions

Jerry Flint writes a regular column on cars for Forbes magazine. In his April 7 piece, he castigates Chrysler (now owned by private equity firm Cerberus) for its “global illusions.” I think he’s right for the right reasons, and those right reasons have some important implications for leaders in any industry. Basically, Flint’s point is that if Chrysler can’t find customers in the U.S., what makes it think that it can find customers abroad? Despite ruinous price cuts and incentives (all of which depress margins, cash flow, and product buzz), Chrysler’s U.S. sales fell 3% in 2007 to drop market share to 13%. Don’t count on a wave of cool new products in the pipeline, either. As Flint observes, Chrysler is “killing more vehicles than it’s bringing out.” So once again: If American auto buyers aren’t itching to buy Chrysler cars, why would buyers abroad be? Especially since only two of Chrysler's models made the Consumer Reports list of recommended models for 2008. Especially since four of its models rank in the bottom ten of Consumer Reports worst cars for 2008. So, throwing in more of my two bits, here’s the lesson for all you leaders. Yes, we operate in a truly global economy. And yes, looking beyond one’s borders for new sales opportunities is in many cases a competitive must. But no, don’t look at “going international” for sales boosts as some magic bullet for your “non-international” corporate woes. If your domestic product/service mix is unexciting or flawed, or if your domestic business model is yielding uninspired margins, earnings and stock values, then going global might boost your top line, but it won’t do anything to enhance the kinds of returns on investment that make a difference to stockholders. On top of that, remember that going global requires some serious investment in product enhancement, systems integration, human resource development, logistics, marketing, relationship management, and such. Hence, the happy dream of fat international sales can become an expensive nightmare—unless you’ve got both a solid, compelling base here at home, and the capacity to adapt and customize that solid, compelling base to other countries.