Category Archives: Brand Strategy

Brand building and brand health issues.

Best Western Gets a Modern Logo

Best Western has been around for nearly 70 years.  The familiar logo set against a blue background with a red crown on top of the words “Best” is being replaced with a modern looking brand.

Here’s how the brand logo has evolved over the years:

Best-Western-LogosFrom 1993, the brand logo has been fairly consistent.  On a couple of occasions the logo has been changed in quick succession.  The new look is more modern and is likely to be web and social media friendly.  The new logo is actually three different logos:

What is the motive behind this move?Best-Western-New-Logos It is partly an attempt to refresh the brand and make it relevant to the millenials.  The last major refresh of the logo happened 22 years ago.  The new one is more mobile/app and social media friendly.

It also an attempt by Best Western to stretch its brands upward.  Best Western is synonymous with budget hotels.  Over the years, they have added many properties that are upscale and offer lot of amenities.  Notice how BWP Premier (the luxury brand) gets as endorsement from Best Western, but has a completely different look and color scheme.  The Best Western name itself is unlikely to succeed as a luxury brand.

Lastly, with the advent of boutique hotels and the lower-end option provided by Airbnb, there may be an over supply of rooms.  Traditional hotel chains have to offer more if they want to grow.

The new logo is not visually stunning, by any means.   The proposed brand architecture seems appropriate.  If the logo change is backed by a better customer experience at the more than 4000 Best Western properties, then it will be make an impact.  A mere logo change without any meaningful change in the customer experience will make no difference.

Best Western has a franchise model with individual franchise owners having a fair amount of autonomy.  Changing the signage and new promotional materials will not be inexpensive.  But getting the franchisees to go along with substantive changes to the customer experience will be the bigger challenge.

Volkswagen Lets Down Customers

vwVolkswagen reportedly manipulated emissions tests, an unethical action that is going to cost the company $7.3 billion to cover the cost of recalling 11 million vehicles worldwide.  In addition, the stock price went on  downward spiral, losing 23% of its value.  This may not be the end of bad news for Volkswagen.

The deliberate attempt to mislead officials and consumers is shocking.  We haven’t seen dishonesty of this scale from a major global brand in recent years. From Yahoo News:

The company told U.S. regulators that it intentionally installed software programmed to switch engines to a cleaner mode during official emissions testing. The software then switches off again, enabling cars to drive more powerfully on the road while emitting as much as 40 times the legal pollution limit.

Interbrand, which ranks world’s top 100 brands by brand value each year, had Volkwagen at #31, with a brand value of over $13,716 million.  The brand saw a 23% jump in value from 2013 to 2014.  Volkswagen has a great portfolio of brands including Audi, Porsche and Bentley.  It’s global ranking and brand value are sure to decline as a result of this scandal.

Toyota lost a lot of brand value when they recalled over 5 million vehicles due to the “unintended acceleration” problem.  In that case, an extensive investigation revealed that there was no “electronic defect in Toyota vehicles”.  There was no accusation that Toyota deliberately did something wrong.

In Volkswagen case, any savings from the fudged emissions tests would have been insignificant compared to the penalty, damage to brand equity and future effort needed to win back customer trust.  Doing it right the first time would have been far less expensive.

It will be interesting to watch if and how they win back consumer trust.

A Few More Thoughts on Social Couponing

I was recently interviewed by News 97.5FM on this topic.  Most of what I said was reiteration of the earlier blog entry on social couponing.  The interesting part is when small business owners called in to express their views.  The few that called didn’t have a positive experience with social couponing.

You can listen to the interview here:

Social Couponing Interview – Part 1 and Social Couponing Interview – Part 2

It is increasingly evident that small firms that use this technique for customer acquisition will be disappointed if they don’t have a strategy for converting the coupon consumers into full paying, regular consumers.  From the consumer side, as consumers get used to great deals, will they ever want to go back to paying a full price?  There are more close to a 100 coupon sites now.  A great deal, it seems, is just a mouse click or two away.

One of the callers during the radio show said, (paraphrasing) “coupon people are coupon people.” That could be true.

Story Behind an Iconic Logo

It’s a sad  day for Apple and its legion of fans.  Apple is always part of the discussion on great brands, customer experience, business strategy and so on.  This story on how Apple’s famous logo came to be is fascinating.

See “Unraveling the tale behind the Apple logo.”

apple-logoAs brand strategists, we talk about how to align the various brand elements, including to logo, with the brand DNA (brand values, promise and identity).  But it seems like the urban myths regarding the origin of this logo may have just been that.

At the end of the day, the lesson is simple.  Even if you don’t go by the brand management textbook, doing things right and standing by a set of values (like the focus on innovation and customer experience in Apple’s case) is important.  Great brands become great in large measure because the products behind those brands are great.

Steve Jobs, RIP.

Social Couponing Effect on Brands

Social coupon offers are all over the Internet.  It seems like you can’t visit a site these days without seeing ads by Groupon, LivingSocial or yet another site offering discounted offers on local services.  Some may remember the early aggregate buying pioneers like Mercata (backed by Paul Allen, formerly of Microsoft), which started in 2000 and collapsed a year later.  Fast forward to 2011.  Thanks to social media sites like Facebook and Twitter, aggregate buying has had a new avatar.

Using social media to spread the word, It’s a lot easier now to build the critical mass needed for the tipping point.  Groupon reported revenues of $645 million for Q1 this year (which could potentially make them a $2 billion plus company this year, although they are losing money heavily).  This rapid growth of social couponing leads to an interesting question.   For brands that use social couponing, what are the short-term and long-term effects?

Short-term benefits for the business:

  • Topline Growth.  There will be a spike in sales.  If the deal is capped at a certain number and all of the coupons are redeemed with no extra purchases occurring, fairly accurate sales projection is possible.
  • Smoothing Demand and Supply.  In the case of businesses with inventory to liquidate or perishable inventory (such as restaurants, where a vacant table is lost revenue), couponing has the potential to ensure optimal capacity usage, although the sales generated via coupons often happens at a price below cost or at the marginal cost (where price of a product equal the additional cost of producing an extra unit).
  • Inducing Trial.  For relatively new businesses, social couponing can be used to lower the risk of a product trial.  Groupon is known to prefer established/reputated brands, but there are plenty of others who are only too eager to sign up any business that wants to offer coupons.
  • Weathering the Storm.  When the economy is sluggish, this may seem like a good way to keep the business going.  It may keep employees in services businesses happy (because of tips they get) and create a sense of security (it appears like the company is weathering the storm) even when the company is losing money on every sale.

Such short-term benefits seem enticing, but one has to consider the long-term impact on bottom line and on the brand.

Long-term pains for business:

  • Lower Margins. Consumers get very low prices on a whole range of services and some products.  While most are local businesses, from time-to-time national brands participate.  As consumers get used to the low prices, will they ever be willing to pay full price?  Consumers’ reservation price (or the highest price willing to pay) is likely to diminish over time.  If fact, Groupon’s ad campaign asks, “Why are you still paying full price?” Increased use of social coupons will likely lead to downward pressure on prices.  In a study done at Rice University, 32% of companies using Groupon reported that the deal was unprofitable and 40% companies said they would not use such deals again.  Erosion of margins will make it difficult to innovate and create superior customer experiences.
  • Your Target Market.  You will likely draw clients that were not part of your original target market.  Those who were not willing to pay the price for that spa or restaurant or resort experience, now have access.  Your control over customer selection is greatly diminished.  You would hope that they will turn into profitable, good customers.
  • Brand Loyalty.  Will proliferation of social couponing diminish brand loyalty?  There are no definitive answers yet.  If customers who buy at reduced prices don’t buy other items at full prices or come back to buy the item at full price (more than once) and/or encourage others to buy at full price, the net effect might be diminished brand loyalty.  A few businesses I have talked to report that their best and most loyal customers, who previously paid full price, are showing up with coupons.  Such customers in the past would have paid a full price, but not any more.
  • Focus on Price and Not on Brand.  Widespread use of coupons will shift the focus to price and not on brand attributes that provide differentiation or a unique experience.  Brand marketers want the consumer to focus on brand benefits and appreciate the points of difference.  But if price is going to drive consumer decisions, the brand becomes less relevant.  If the brand is diminished, the business loses a strategic asset and a competitive weapon.

When and How to Use Social Coupons?

“Stickiness” or Conversion Potential. The hope is that those who buy at heavily discounted prices will later repeat purchase at a full price (hopefully more than once).  For instance, a fitness club membership may have good potential being renewed at full price.  The local YMCA fitness center offered a discounted 3-month membership.  If these new patrons get hooked and see the benefits of going to the gym, there is a good chance of a high renewal rate at full price.  On the other hand, a luxury spa or a beach resort or even an upscale restaurant experience do not have the same conversion potential.  These are not very essential or regular experiences.  An upscale restaurant I know sold nearly 1000 coupons and is now learning hard lesson.  The conversion potential of the category is important.

Set Limits and Be Strategic. It may make sense during a slow period or specifically for slow-moving items or entry level services etc.  Limit the number of coupons and set expiry date (if law permits). Frequent use of coupons will erode profitability and long-term brand value.   Use online coupons strategically.  Think about whether offering deep discounts is consistent with the brand positioning.

Measure. Measure and monitor the impact.  Look at new customer growth, mix of couponing using customers (new vs. existing customers), conversion of new customers to full price paying customers, margins, and impact on brand equity.

Focus on  Customer Experience. Providing a great customer experience is not optional because you offer a low price.  It is all the more important now to focus on delivering quality and a good customer experience, because that will increase the chance of the customer coming back and paying a full price.

Story of a Lost Customer – Lessons for Brand Engagement

Last year I switched to a new land-line telephone service provider.  For years I was overpaying with my previous telco.  Over an 18 year period, I reckon I’ve spent at least $36,000 with this company.   Finally, one day I called customer service and asked them why they were overcharging me when lower rates are available.  The terse response was that the rates are publicly posted and that it was the customer’s responsibility to switch plans if the one they had did not serve them well.  To adjust injury to insult, the tone of the call center agent was plain rude.

There is no doubt consumers have to be vigilant and ensure that their interest is protected at all times.  In this case the business did not do anything illegal.  But they sure didn’t look out for the customer’s best interest either.  Isn’t there a moral responsibility? What if companies operated with a different mindset?  What if they also looked out for the customers’ best interest, at least once in a while?

The company could have handled such a profitable customer in a couple of different ways.  They could have automatically switched me to lower rate and then informed me that this is their way of appreciating my business relationship with them.  Alternatively, they could have called me or written to me and proposed that I switch to a lower rate to save money.  I would have been delighted at such a call/letter.  Such communication would have presented them a great opportunity to sell me another service.  Delighted by their service, I probably would have fallen for their sales pitch.  Instead, they chose to do nothing.

If they had taken the aforementioned steps, they may have lost a little bit on my monthly bill, but I sure would have stayed with them.  Their proactive approach to saving me money, would have been worthy of blog posts and tweets.  I would have spoken about it to not only friends and family, but to my students and business associates.  I might have considered using this as a positive example in my professional writing and speeches.  Such endorsement and word-of-mouth has real value.

First they lost residential account.  They lost the opportunity to sell me a bundle of other telecommunication and entertainment services.  Then, when I needed a business line, I chose a competitor.  I should have been a brand ambassador.  Instead, I am a brand detractor.  I felt that I was taken advantage of.  Their single focus was on the high margins I afforded them.  My long-term value (from my own spending with them and the value of WoM I can provide them) was unimportant to them.

A couple of weeks after I left them, I received a standard card from the company, signed by a VP, expressing regret that I had left them and wanting my business back.  It sounded very insincere.

What is my advise to companies, based on my personal story?

  1. Treat customers fairly.  That’s the sure way to build brand reputation.
  2. Ensure every employee is trained to treat customers with respect and courtesy.  Every touchpoint and interaction with the company should create a positive impression, even if the customer’s demands are not always met.
  3. Don’t focus just on short-term profits always.  Consider the long-term value (direct and indirect) of retaining happy customers.  In an earlier post titled Select, Not Fire Customers, I talked about Sprint firing some of its “unprofitable” customers.  But too often, it is profitable customers who leave because they don’t like the way they are treated.
  4. Proactively manage customers, especially the profitable ones.  Some degree of churn is inevitable.  But there is little to be gained by losing profitable customer due to neglect.
  5. Don’t use brand engagement and customer experience as buzzwords.  If you really want to create strong brand engagement focus on delivering superior customer experience.  Often, a fundamental shift in management’s attitude is needed.  In many cases, changes to compensation plans are needed to ensure customer satisfaction and experience get the requisite attention.
  6. Last, but not least, look at the damage caused when you ignore the above five recommendations.  The negative sentiment that is expressed by unhappy/former customers can’t really help the brand.  Positive sentiment in today’s social media world cannot be manufactured.  Positive sentiment occurs when companies show customers that they really care.

Brand Visual Identity and Social Media

Gap recent attempt to change its logo didn’t work out the according to plans.  Fans of the venerable apparel retailer took to social media sites such as Facebook and Twitter to voice their opposition.  Gap quickly reversed its decision, given the huge consumer opposition.  Here are the old and new versions.  Gap is still identified by its old logo, which is 20+ years old.

Gap is not giving up.  It is now trying to turn the logo change into an “brand engagement” exercise.  They have announced a crowd sourcing project for a new logo.

According to this announcement Gap wants consumers to suggest ideas for a new logo. This is following the recent trend of letting consumers design packaging, ads or propose new product ideas.

Here is what Gap says on its Facebook page:

Thanks for everyone’s input on the new logo! We’ve had the same logo for 20+ years, and this is just one of the things we’re changing. We know this logo created a lot of buzz and we’re thrilled to see passionate debates unfolding! So much so we’re asking you to share your designs. We love our version, but we’d like to see other ideas. Stay tuned for details in the next few days on this crowd sourcing project.

It appears that the agency that did the work for Gap did not really serve the company well.  Was there any consumer research?  Why wasn’t the negative reaction anticipated? Why wasn’t there any explanation for the logo change?

Every major brand wants a more contemporary logo now with stylish, lower case font. Pepsi, Kodak and Xerox, to name a few, have a new look now. In an earlier post, I argued against ill-conceived changes to brand visual identity.

But is crowd sourcing via social media the way to go when it comes to creating a new visual identity for the brand?  Social media definitely had a lot to do with Gap reversing its earlier decision on the logo change.  Is the logo just a creative or should it be embedded with meaning? If the logo has to reflect the underlying brand attributes, personality or vision, should Gap really leave it to consumers?

What do Gap’s consumers think?  Many are opposed to the logo change.  Many are opposed to crowd sourcing the logo design.  As I said in the earlier post on brand logos, I believe it is good to revisit the brand visuals from time to time.  When visuals change, they still need to reflect the brand’s essence and have some connection to the brand’s heritage.

Protecting Brands from “Product Recall”

It’s been a year when several brands have taken a big hit on their reputation.  The most famous cases being Tiger Woods and Toyota.  But many others like Citi, UBS and many others in the financial sectors lost brand value, partly attributable to the crisis in the sector and partly attributable to faulty business models.  And then there are brands like Kodak which may have permanently lost their foothold in the consumer market.

The case of “product harm”, when brands are recalled due to a defect, has been well researched. Generally, firms that recall defective products in the midst of media publicity do pay a price – loss of sales, market share and financial value.  Apart from Toyota and a few other automotive brands, we have seen toy manufacturers (Mattel), food companies (Maple Leaf Foods) and pharmaceuticals (Tylenol) recalling brands in recent times.

One recent study in the Journal of Marketing reported that companies that proactively manage the response to product harm crisis lose more value in the stock market because the stock market may perceive a proactive strategy as a sign of a more serious case.  One would think that companies that take proactive steps will get some marks for acting swiftly.  Perhaps, that is not the case.

Product failures and recalls do adversely impact brand equity. The impact may depend on degree of ambiguity of the firm’s response according to one study.  It is possible that in the short-term the stock market’s response and consumer’s response to a recall may be different.  In the long-run the two will be aligned.

Another study in the journal Marketing Science found that marketing instruments such as advertising may be diminished in their effectiveness post-crisis, meaning firms may have to spend more in marketing post-crisis to get the same impact they got in the pre-crisis phase.  You can think of this as the added cost of winning the consumer trust back.

The case of BP is interesting.  When the scope of the oil spill crisis became known, the brand reputation and the stock price took a hit.  After much stonewalling and facing criticism from many quarters, the company seems to have responded.  If the stock price is any indication, the worse may be over for BP (see chart below).  After hitting its lowest point in late June, the stock price is on the upswing.

BP Stock Quote on October 31, 2010. Courtesy:

It is, however, interesting to note that the sentiment of the community (made of consumers and individual investors) lags behind the sentiment of analysts (see bottom of chart for “Sentiment on BP”).

It looks like the average consumer still has some reservations about this brand.

There have been other examples of harmful behavior in the oil industry (e.g., Exxon Valdez), from which the companies have come back.  The importance of the product (oil) and the somewhat short public memory is helpful in such cases.

So, what is the best way to protect a brand from a failure that results in recall? Here is my take based on previous cases, research evidence and a bit of common sense:

Prevention is better than cure in this case.  If companies build high quality products and have appropriate processes, employee training, safety standards, quality controls and consumer education, many of the crises can be avoided.

When you fail to do the above and have a product harm crisis at hand, try to:

  1. Take responsibility and respond unambiguously (stock market reaction notwithstanding).  Try not to shift blame (remember Ford-Firestone tire blowout case?).
  2. Communicate to stakeholders clearly on what went wrong, why and steps you have taken to prevent this from ever happening again (Tylenol did this well in the mid 1980s, but recently they’ve had problems again).
  3. Go beyond the call of duty to establish safeguards and to compensate customers who have been hurt.

There is no doubt these steps will increase the cost of doing business in the short to medium-term.  If you believe brand is reputation as I do, there are no shortcuts to building reputation.  Plus, as a CEO you will sleep better at night.

Resurrecting Brands: It’s Nostalgia, not Good Strategy

Some well-known brands disappear from the marketplace altogether.  GM retired Oldsmobile and is set to do the same to Saturn and Pontiac.  Hummer will meet the same fate if a buyer isn’t found soon. Kodak eliminated Kodachrome film, which was synonymous with photography for many generations.

Well-known brands from Studebaker to Commodore (remember the “first” PC for home users?), which played significant roles in lives of many families, are long gone.  Others like the 123 year old financial services brand Paine Webber have been acquired and renamed.  Eaton’s, once Canada’s largest department store chain founded, went bankrupt in 1999 after a 130-year run.

Why do some brands disappear? Here are the major causes:

  1. Losing Relevance.  Brands at times fail to keep up with changing consumer tastes and values.  Krispy Kreme, once the darling of Wall Street, is an example of a brand that has lost relevance.  It happened very quickly.  The company is still surviving, but the immense popularity of Atkins and other diets (low carbs) has hurt the brand badly.
  2. Unseated by New Technology. The digital revolution has hurt many brands. Kodachrome is an example.
  3. Superior Competition. Take the case of VW Beetle. Superior competition from the Japanese companies redefined the small car market. They incorporated features which offered greater value to the consumer.
  4. Losing Differentiation and Brand Identity. Some brands that have been around for very long tend to become stale and lose their differentiation.  This was the problem with many GM brands.  Brands like Buick, Pontiac and Oldsmobile were created to supposedly cater to different segments, but the drive for efficiency in operations (and some muddled thinking) led to multiple “look alike” brands.
  5. “Grandfather’s Brand” Syndrome.  Some brands simply don’t appeal to today’s youth because they are too closely associated with previous generations.
  6. Victim of M&A.  Paine Webber is not the only brand that went out of circulation after acquisition.  HP acquired outsourced IT service provider EDS, but has now abandoned the EDS brand name and calls its new division HP Enterprise Business. Compaq, once the largest PC manufacturer, has been mostly absorbed into HP with most of its sub-brands now featured with the HP name.  It is a greatly diminished brand, and will likely end up like EDS.

I have wondered what GM and others who own these dead brands will do with the trademark and whatever brand equity there is left in these brands? Is it worth resurrecting these once-famous brands in the future? In most cases, I would argue that it is not.

These iconic brands are part of a certain time and place in our history.  They meant something to those generations of consumers.  Many are part of the popular culture.  The new owner of the brand name will seldom be able to capture the old magic.  In the case of technology products or even food products, the old product itself will no longer be relevant or acceptable.  That means the old brand has to be used to dress up what is essentially a new or more contemporary product. This may not appeal to nostalgia seekers.  Even retro-style brands have a limited appeal.  Also, the history of past failure is a baggage that will continue to haunt the resurrected brand.

The old fashion or style has to come back in a big way to even consider brand resurrection as an option.  Until then these once-famous brands belong in museums and homes of memorabilia collectors.

Your thoughts and comments are welcome.

Stretching a Brand Too Far?

Brand extensions are are certainly less expensive than building a new brand from the scratch. If a brand has strong equity and an established customer franchise, the extensions may even have a ready-made market.  The problem arises when companies stretch brands in ways and directions that don’t make sense.

When Nike went from shoes to apparel and sporting goods, consumers had no problem accepting these extensions.  Nike went from “athletic shoes for winners” to a brand that represents high performance, excellence and success – all relevant attributes in the new categories that Nike entered.

When Unilever turned Dove into a master brand and launched shampoo, deodorant and facial cleansers, some of these extensions made sense.  But others like the Dove dishwashing liquid turned the “personal cleanser” brand into a household cleanser. It failed miserably.  Dove’s extensions were complicated by the fact that the brand was at the same time being repositioned from a “functional” brand (remember the “one quarter moisturizing lotion” ads?) to one that focused on “real beauty”, turning Dove into a social activist brand aimed at improving women’s self-esteem.  All Dove products contain the moisturizer.  Was the “moisturizing” attribute relevant for something like a deodorant?  I can’t see a strong relevance.  But if you go by the sales figures reported, Dove’s repositioning combined with the brand extensions have produced great results for Unilever.

For every successful extension, there are dozens that have failed.  Some well-known failures include Levi’s formal clothing and McDonald’s “Golden Arch” hotels.  Golden Arch, a four star rated hotel aimed at the business traveler, seemed at odds with the McDonald’s brand image.  Nike’s acquisition of Cole Haan a few years ago gave Nike a play in the upscale fashion and footwear category.  The Nike brand (with a stronger tie to “performance”) would not have translated well in that category.

It is not just the strong brands like Nike that have pursued brand extensions, but often brands that are in trouble or have weaknesses in brand equity seem adopt this strategy as well.  When Hummer launched footwear, men’s fragrance (licensed to Elizabeth Arden), a tough notebook for the warrior on the road and so on, it seemed like an attempt to exploit the short-term popularity of Hummer.  The brand, despite some initial excitement, was never firmly established.  Some might even say the idea of a Hummer is fundamentally flawed.  Peter Waxman, Dove’s brand manager, once said:

A cardinal mistake you can make is that things are going well and you jump into a new category when you haven’t given a brand a strong enough base.

One could say that Hummer was trying to leverage its perceived image of ruggedness, masculinity/high testosterone and military-strength.  But the Hummer is also a brand with many liabilities – it is seen as a gas guzzler and a symbol of the 1990s excess.  Look at where Hummer is today.  GM is trying to sell it to a Chinese automotive company.  If the deal does not go through, Hummer will be shut down.  What will happen to its offspring?  Building a strong brand equity through great customer experience (i.e., consistently delivering on and sometimes exceeding the brand promise) should really take precedence over creating brand extensions for brands that have yet to establish themselves.

When you think about extensions that succeed, it has often been said that the “fit” between the brand’s image and the extension category is important.  The benefits promised by the brand must be relevant in the new category where the brand is being extended. The dozens of cases that I have examined suggest that the brand strength or brand equity is a critical determinant.  Stronger and more dominant brands seem to do better with extensions.  Brands with a narrow brand identity and positioning do well when the extension is closer to the original category.  Whereas, brands with a broader positioning have a greater chance of succeeding even in unrelated categories.

Brands whose identity and positioning is tied to a category or specific functional attributes will often have trouble going outside the category.  Examples of brands that have narrowly defined identity and positioning include Bose (better sound through research), CNN (the most trusted name in news), British Airways (the world’s favorite airline) and many others.  Mr. Clean, for instance, seems to have the license to extend into virtually any type of cleaning product.  But its name and brand persona clearly define the boundaries for extension.

Nike, in contrast, did not define itself narrowly by the product category or specific functional attribute, but on more abstract attributes such as performance, excellence, active and success.  Such a brand positioning strategy makes it easier to enter new categories, especially when the parent brand has strong brand equity.

The increased cost of brand building, the need to break-through clutter and the desire to reign in proliferation of brands are reasons for resorting to brand extensions.  Conventional wisdom suggests that a failed extension can damage the parent brand.  When you stretch a brand too far, its core values and message may get lost. But it seems like companies are willing to try different extensions, hoping some will click. The risk of a few failures along the way does not seem to be deterrent.