An Apple a Day Keeps the Doctor Away

This post was first published at http://www.thinkaboutcrm.com/articles/apple-day-keeps-competition-away

I am listed as one of the Think About CRM Thinkers.

If there is one company that continues to generate exceptional levels of consumer loyalty and long time retention, it’s Apple. This week, they launched the IPAD2 (no doubt to be followed by #3, #4, #5 and so on) and as expected there were lines of eager Apple fans waiting outside the stores waiting to snap up the new version.

Apparently, there are back orders, Apple cannot meet the initial demand and this launch has caught all of the competition off balance by launching the new version before they have the opportunity to get a foothold in the 25% of the tablet market that Apple still does not yet hold.

What’s even more amazing is that while there are some improvements on the IPAD1, IPAD2 is not so much an upgrade as a small tweak (and they have not addressed the single biggest consumer complaint that there is no USB connection). Perhaps the most compelling reason to buy the new version is that it is being retailed at the same price as the previous version.

I thought it might be interesting to use this example as a case study for this post with the objective of understanding what we could all learn from Apple about retaining consumer loyalty. Here are my thoughts:

1. Apple has managed to successfully transition from being a company with great products to an organization that markets great brands: Apple is about an experience; that starts with entering the Apple world (either in a virtual or real store). They offer a differentiated and in most cases unforgettable experience. Whether it is ensuring that the customer’s new product is up and running before they leave the store,  working with the Genius or simply playing with the products instore, Apple delivers something that no other manufacturer has successfully managed to do: Engage the consumer before they buy and then hold on to them after the purchase. I currently do not own any Apple products (my last two IPODs crashed, failed and burned and I was told by the Apple store to buy a new one – note Apple, an unsatisfied consumer), but I can see how this sort of attention is compelling. When I bought my last computer I had to start it up, work out my options and take all the ‘risk’ of opening up the pack by myself. It would have been great to walk out the store with my new computer up and running. Whether it is the iPod, Macbook, iPhone Apple have done a great job of creating a positive consumer experience behind the brand taking the engagement to an emotional level – a much greater driver of loyalty than anything else.
2. Create and dominate the category: Apple, probably more than any other company since Sony has been successful at creating entirely new categories or totally redefining existing categories. What Apple does is completely change the consumer perception of the marketplace so that Apple’s products are more favorably viewed. Apple did not invent the MP# player, but they sure did capture the imagination by developing a consumer interface that was intuitive and accessible. They did the same with the iPhone and are doing the same with the iPad. A lot of what Apple does is disruptive because they make decisions about where they are not targeted. They think and act differently and do not mind if they are not targeted at all possible consumers. What they are great at is acting as an architect of the category. They are Marchitects.
3. Innovate, innovate, innovate: Here’s a company that never rests on its laurels. While I may not think that the iPad2 offers a lot more than the iPad1, what Apple has done is re-launch an improved product before most of the competition even had a chance to launch their fast following alternatives. Speed to market is increasing for every company, yet Apple remain ahead of the curve, compelling consumers to upgrade, rethink their functionality and look carefully at why the choice is moving to Apple instead of waiting for a new version of their preferred supplier. They also keep themselves relevant by offering the products that we did not even know we needed. My wife was totally unconvinced by the iPad until someone said to her “it’s just like having a big blackberry”. I am sure the people at RIM are delighted to hear this sort of comment…not. iPad is a business tool, out of home movie theatre, book reader, in fact it is probably a lot of other things as well that we just have not worked out if could be. For that reason alone, customers are flocking to it and all the discussions, blogs and communities building up around the product simply work to increase that buzz and loyalty to the brand.
4. Never lose sight of the fact that in the end consumers have to dig into their pockets to buy your offering: The iPad2 retails at the same price as the iPad1. Apple in this simple move promises more value, and is perceived to deliver much more value to its customers. We are almost programmed to having annual price increases and price hikes when new versions are released, when in fact, prices should come down as manufacturing becomes more efficient. Apple’s message here – production is at levels where we are making efficiency gains, we will pass on some of that benefit to you.

I think that the Apple case study goes to show that customer relationship management starts with great concern about delivering something meaningful to the consumer at a functional and emotional level and then backing that up with excellent support and follow through – because, let’s also remember, Apple has a world class leading CRM program that maintains all the records of existing customers. Through this they cross sell, up sell and manage the continuing customer relationship at a level that truly represents best in class.

CRM is dead: popularity and penetration are the keys to marketing success.

This post was first published at http://www.thinkaboutcrm.com where I am a Pro Blogger.

http://www.thinkaboutcrm.com/gurus/richard-kohn

OK so now I have your attention, perhaps a bit of an explanation. I’ve been looking at some thought leaders comments over the last weeks and trying to assess the importance and correctness of their theories and strategies.

One in particular caught my eye because of its connection to the CRM field, Kevin Roberts’ notion that great brands have emotional connections with their buyers and, hence, are ‘Lovemarks’. It seems that there are some commentators out there that think this worldview is wrong because there is simply no empirical studies to support these contentions – everything Roberts claims is anecdotal and so can be explained away by many other factors such as better customer service.

It is argued that many of the axiomatic and popular marketing truisms prevailing today simply fail to properly stack up to careful empirical analysis, because they have not been tested. This has major implications for accepted marketing belief about understanding brand loyalty, the relevance of market segmentation or that advertising works.

These new theorists argue that popularity or penetration is everything. If you have more popularity or penetration, your brand retains more loyalty – a view that is totally contrary to the popular theory that increasing the share of requirements of loyal consumers is the most effective way of building brand success. It they are right, this has serious implications for anyone working in the CRM field. Why, because in this model, CRM is less important: resources will be focused on old fashioned mass media which tells and sells rather than on developing lasting relationships with loyal customers.

As a proponent of purposeful positioning for all brands, I am sometimes challenged to explain how it is possible to expect that consumers will create emotional connections with brands operating ‘low involvement’ categories. If these theories are correct, and what we are talking about here is not just some flash in the pan conceptual study (see below), marketing for all such low involvement categories should be about increasing penetration at all costs.

Behind the scenes, it is beginning to look like some major organizations are beginning to incorporate some of the thinking here. Quietly, an increasingly metrics based study of marketing dynamics is driving decision making in major brand powerhouses. That’s not to say that they are forsaking their current market truisms, but they are adding a new context and gaining competitive advantage from so doing.

Where did all this begin? It is founded in the increasingly exposed and discussed work of Andrew Ehrenberg an academic and statistician who died mid 2010. His works are not widely read because of their complexity – who among us has heard of his concept of negative binomial distribution? They are, however, increasingly being explored and integrated into forecasting models and metrics analyses used by some of the world’s most prolific marketers.

Empirical statistical analysis of this type has been subject to some antipathy with marketers and their agencies because it goes contrary to the business model that they have established to keep the industry alive and kicking, but it has not been ignored. From Australia to Europe Ehrenbergian concepts now underpin analytics used by Nielsen, Unilever and P&G.

So shouldn’t the rest of us be looking at this as well? Well, this empirical analytical approach appeals to any business leader who wants to understand the direct financial implications of a specific marketing activity – something we all know is extremely difficult to pinpoint because of the wide range of variables that need to be considered – and also anyone, like me, who is increasingly agitated by the specious content-driven nature of marketing today.

I have already suggested that in “low involvement” categories it is possible to have sympathy for the view that penetration trumps loyalty. Proponents of this approach now think that it can, and has already, extend into much higher involvement categories.

Here’s the argument: Once upon a time, when it was a small side player in the business, Apple was all about customer loyalty. Steve Jobs’ aspiration, however, was to rival Microsoft and the company had to grow. Apple’s growth was not about getting more and more product into the hands of its small loyal customer base, no, it was all about getting more and more penetration through mass media advertising and exposure. Penetration trumps loyalty.

This sort of throws the world on its head. Sophisticated CRM applications are redundant because mass media is the vehicle for profitable growth. Brand loyalty is just a figment of marketers’ imagination, designed to justify their ever increasing spend. Consumers are not really interested in talking to brands on Twitter, Facebook or Tumblr, but to their friends and acquaintances.

Actually I think that there is some truth in the metrics based approach and it should be incorporated in a lot more analyses. I think that standard scan and panel data analyses are inadequate because they fail to offer a deep enough understanding of the dynamics that drive the metrics. Similarly, I have seen too much market research that is meaningless because the agency was briefed to ask the same questions that everyone else asks, but don’t get to the kernel of how we will be able to alter consumers’ behavior.

Notwithstanding, I remain a believer in developing purposeful positioning for brands because I do believe that is the key to retaining consumers over the long term, because a brand needs to mean more to them than just the functional benefits that are delivered. Is this true for all categories? Even those with low involvement? – Yes. Perhaps we did not have a detailed empirical explanation for every factor, but I can confirm (albeit anecdotally) that purposeful positioning works as well in the consumer tissue category as any other.

Superbowl: Social Media’s Damp Squib

This was going to be the year that the SuperBowl advertisers presented flly integrated social media campaigns into their commercials, bringing a modernity and connectivity to the whole event that had never been seen before.

Except it didn’t.

Placing #tags and urls into the ads hardly counts as a social media revolution. Where was the interaction, where indeed, was the behavior change that they were driving for in the ads? Where was the acknowledgement that there are many new and exciting media that the consumer already interfaces with to connect with their brands?

I have already posted on the futility of the Super Bowl ads. What has been revealing this year is that so many other people in the industry have commented on the same issue. This is new. This is different, but it is not going to have any impact. I have no doubt that next year we will read PR release after PR release about who is buying air time at the Super Bowl and we will get all the hype again about the spots we are going to see.

The problem is that there are simply too many vested interests in continuing this facade. The agencies want the profile, the TV company wants the revenue and the company executives who approve the spend no doubt suffer from the hubris of thinking that this spend is actually going to generate sales.

Sadly, the self same companies that have made such a hash (no pun intended) of integrating social media into their mainstream advertising, missing the key opportunity of the year, will none the less look to social media to measure audience reaction. There are probably there now in their meeting rooms exchanging power points on how many YouTube views their ad has received. They will be trawling twitter for mentions and their PR firms will pat themselves on the back because they got such valuable coverage that is worth millions.

Excuse me if I don’t jump for joy. You missed an opportunity (again) to connect with your customers in a meaningful way. There was not one of the ads that invited the customers to develop their connection with their brand. Where were the invitations that the consumer do anything? It is mindblowing.  A majority of people who watched the Superbowl have a smartphone and will have texted os sms’d during the match – but none of the ads engaged these people to do anything.

Advertising at the super bowl is real spray and pray advertising. Narrowing down the target and getting a response from as many people in the audience as possible should have been a key objective set for the marketers approving the spend here. The Superbowl offers an unparalleled opportunity to connect with people. They are in a good meed, they are receptive, they are waiting for the ads (not something that you can say during most TV shows), and then…nothing.

What could these advertisers have done?

Groupon could have signed up all the Tibetan restaurants it could find nationally and sent out a coupon for each city possible (for sure they should have found them in Texas).

Chrysler could have asked anyone touched by the Detroit Epic to contribute to a charity supporting a city that they themselves acknowledge is in need.

Doritos could have … well actually I am bit stuck as I was totally grossed out by the Doritos best bit pervert.

But you get the idea. I wanted these ads to develop connections between the advertisers and their community. It didn’t happen. What we got instead is a bunch of ads that allow and enable the marketing community to get together and propagate backslapping and congratulations about what a good Superbowl it was.

Maybe next year things will be different…

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Should you proactively reposition your brand?

Brands develop over time and one of the most over looked branding exercises required by any company is to pro-position. By this, I mean that leading brands remain leading brands because they do not rest on their positioning laurels and take proactive steps to review their core positioning every few years. Avoiding change has been proven time and time again to be counterproductive. Once a brand gets too comfortable that’s when you have to start to act. Any business that is standing still is actually going backwards because the competition is doing anything but standing still.

Sometimes, however, it’s just too late: Repositioning is required and the whole brand requires an overhaul to put it back on a growth trajectory. Repositioning is indicative of a brand that it no longer healthy and in a state of business decline. Repositioning is reactive and MArchitects should not be reacting. That’s like trying to repair your house after something has decayed and broken instead of maintaining the property in tip top shape all the time.

There are always risks involved as the rebranding of Gap in 2010 demonstrated, but in most cases, consumer reaction is not so extreme and the reshaping of the brand transforms the fortunes of the company.

My opinion is that ALL brands should carry out some sort of brand review or proactive positioning every three years. There are a number of reasons for this:

• Change is good. Change is essential, provided that the objective of the change is to exploit the full potential of the brand or to respond against major marketplace shifts.
• You don’t need to change the brand essence. I am a believer in purposeful positioning for brands. This means that the brand should stand for something at a societal level. It is unlikely that that this would change over a three year period (in fact it should not), but there will be other drivers for change that need to be considered within the context of brand positioning. Adaptive, iterative and proactive recreation of the brand over time is a good thing.
• Start while the brand is still healthy. If you start the process of reviewing the positioning while the brand is still healthy and growing, you are much more likely to increase the rate of growth. Stagnant brands stay just that. Stagnant.
• Demographics/psychographics and technologies do change over time. Competition and the external environment do not sit still. These days, so much changes over a very short period of time (where was facebook 10 years ago?) that you simply cannot sit still.
• Proactive positioning has many advantages: If you actively look at your positioning it is likely you will extend the life cycle of that brand, improve the brand’s strategic health and customer relationships – because you will be getting back to the basics of what makes the brand attractive to the target market. It also helps to protect the brand against competitive attacks because they can be understood more quickly.

There are some stellar examples of companies that have successfully reinvented themselves following a proactive positioning exercise. IBM, General Electric, Johnson & Johnson and most recently Starbucks. Others who constantly work on the positioning of their brands are not quite so noticeable – except in their financial results. Nike, the Dirt Is Good team from Unilever, Akzo Nobels Dulux are great examples of brands that continually manage their positioning for growth.

Part of their success comes for their purposeful positioning (they all have greater societal aims than simply being a brand leader) which vision, going beyond the conventional category boundaries offers a much higher level emotional connection with consumers. It is also driven by their willingness to continually question the conceptual framework of the competitive framework within which they operate. Companies that are always looking at their positioning are very sensitive to future development in consumer attitudes, behaviors, market place dynamics and many other factors.

It does lead to the question why more companies do not engage in proactive positioning and take the risk of engaging in repositioning. I think that the answer is that it does not sit well within the current corporate environment that is focused on the next quarter’s results. Additionally:

• There are few early warning signs for diminishing brand health. Increasing sales can often be a mask for poor brand performance.
• If the company is making the numbers, why change anything – it’s working.
• The average lifetime in a company of a Chief Marketing Officer is 18 months – there’s simply not enough time to deal with the major strategic issues.
• It’s dangerous politically – who wants to tell senior management that they want to invest in ‘changing’ the flagship brand.
• Many people do not know how to go about achieving a new positioning.
• It requires change – and as we all know, people resist change.

Don’t miss the opportunity to make your brand stronger while it is still strong.

Stop branded DTC Advertising?

Watching US TV it is hard to believe that there was no DTC Pharma TV advertising before 1997. It was then that Michael Friedman, at that time a deputy commissioner of the United States Food and Drug Administration, announced the policy change which opened up a vast and untested venue for drug companies’ marketing departments by freeing TV drug ads of the previously unworkable requirement that they painstakingly detail side effects.

This move has delivered on the health benefits that Dr. Friedman imagined: The ads raise awareness of disease, promote greater consumer awareness about prescription drugs and prompt consumers to talk to their doctor about often sensitive topics. Indeed, patients report valuing the information they receive. The ads appear to not only drive conversations between patients and doctors but also remind those who have been prescribed medicines to take them.

So, there is an upside, but this move, which at the time was neither actively sought by nor much discussed within the industry trade association, Pharmaceutical Research & Manufacturers of America does add pressure to the medical profession to prescribe the specific branded drugs that patients request – driving up the costs of healthcare.

From the Pharma industry a groundswell of opinion is starting to question whether opening up TV to DTC has had long term benefits for the pharmaceutical companies. More specifically, questions are being asked about whether this has been good for Pharma communications or has now become a major burden for the industry that does little for patients or improved healthcare.

Looking at the effect that DTC has on brands is enlightening. The agencies that support these ads advise the industry that they strengthen brand loyalty, increase brand awareness and drive sales; they would wouldn’t they? TV advertising for Pharma has been very good for the TV companies and the advertising agencies.

But do they really benefit the brands? Surveys now show that consumers/patients often perceive that these ads make drug developers appear to be more concerned with sales than with treating patients and research into medical conditions.

Intuitively, consumers know that Pharma companies are not altruistic but still they have difficulty in distinguishing commercial objectives (and that the companies have to keep an eye on the bottom line) from the concern that Pharma companies have for their customers’ health. Consumers are much happier at the prospect of Pharma companies spending billions on research and development than (admittedly much smaller amounts) on advertising.

Why are they feeling this? Partly, because TV ads for these drugs have just become plain vanilla. Much of the TV coverage suffers from such a serious degree of sameness and ubiquity. [See https://mytubefacetwitter.wordpress.com/2011/01/31/where%E2%80%99s-the-big-idea-in-your-communications/] There’s nothing in these ads that develops brand loyalty because there is no competitively distinguishable brand positioning demonstrated in the advertising.

So why are these companies continuing to pump (at the last estimation) up to $5bn into advertising every year? Firstly, it is argued that because of the competitive pressures in the industry, companies can’t forgo the ads; they have to keep up with rivals who are also promoting their products on TV.

Excuse me? Poppycock. If you need plain vanilla advertising to keep pace with the competition then someone is not doing their job properly. Your communications strategy and objectives are all wrong.

This is negative advertising, saying nothing more than we exist so choose us instead of our competitively undifferentiated colleague. Nice.

Now it’s been proposed that instead of each brand advertising its own products drugmakers collaborate on disease-focused campaigns that raise awareness of certain conditions and urge patients to talk to their doctors for treatment options.

This would certainly cut companies’ advertising budgets, end the ridiculous laundry list of frightening side effects mandated by the FDA and deliver important information to patients. The vision is that there would be unbiased information about the medical conditions and encouragement to seek out the medicines and vaccines that can help patients maintain and improve their health. It is argued that with this collaboration drug companies could trim their TV marketing budgets. Advertising agencies and broadcasters would still retain some of the billions of dollars in drug ads that support programming, including news. Patients and caregivers would be spared the assault of promotional messages, often unintelligible warnings about side effects, and cloying images that make up much of current TV drug advertising.

Wonderful, but this is avoiding the issue. This treats the symptom and not the cause. TV advertising is failing to achieve cut through because the advertisements are not imaginative or sufficiently compelling to change consumer behavior – thus making the investments worthwhile.

This industry does not need more awareness campaigns, it needs better communication strategies. The sooner we stop using regulation as an excuse for failing to create effective communications, the better. Every time you allow a communication to air that fails to cut through, you damage your brand. The opportunity to advertise DTC is too good to waste that way.