Posts

Why Companies Need Their Customers to ‘Love’ Them

Everyone today realizes the importance of digital technology and social media. For most firms, however, the road ends with “likes” on Facebook and promotions on Twitter. According to Barry Libert, Jerry Wind and Megan Beck Fenley, these limited strategies leave a lot of value on the table when customers are looking for a company to “love.” The winners in the market will be those firms that can pivot their business model for great customer intimacy and inclusivity, they write in this opinion piece.

Every morning, like us, you probably pick up your Apple iPad, check your Facebook feed to see what family and friends are up to, and then Google something that catches your eye. If you like what you see, you probably purchase it with your Amazon Prime account and receive it the next day. All we now need is for our iPads to dispense our morning Starbucks coffee and we’ll be happy campers.

For many of us, Google, Apple, Facebook and Amazon (the GAFA four), feel as essential as the air we breathe. It’s hard to imagine our lives — working, socializing, shopping and entertaining — without them.

Sure, we may interact with other companies. But it’s less frequently and with a lot less enthusiasm. We merely “transact” with these other firms. They have not created endearing or profound relationships with us, and we don’t want to share much, if anything, with them. We save all that good stuff for Facebook.

The GAFA four are outstanding in the intimacy that they create with their customers. They make a strong effort to understand the unique characteristics and preferences of each customer and use the insights that they gain to serve the customer better. Further, they see each customer as a complete personality with needs around different facets such as work, play, socializing and self. They serve these needs wholly — and this, in turn, encourages more sharing and openness from their customers.

In short, these four companies are building a long-term, holistic and generous relationship with their customers. It’s almost as if they love us — not like our parents or spouses, of course, but by way of “unselfish, loyal and benevolent concern for the good of another.” And the result? In 2014, Google’s revenue was up 19% year over year, Amazon’s sales were up 20% year over year, Facebook’s revenue was up 58% year over year and Apple’s revenue was up 7%, ending the year with their best-ever quarter.

Likes vs. Love

Traditional brands are trying to join the game and gain that essential-as-air quality. But they find it difficult to move beyond a transactional relationship. Usually, we only see and hear from them when they want something from us. These companies are very focused on whether or not customers are loyal to them, but they rarely consider how loyal they are to their customers. Their actions often seem self-serving; soliciting Facebook “likes” to promote themselves. This short-sighted approach stems from a common view that customers don’t have much to offer beyond what’s in their wallets.

Traditional companies are very focused on whether or not customers are loyal to them, but they rarely consider how loyal they are to their customers.

For example, you have probably purchased many cars over a period of time, but it is unlikely that any car company has offered you a loyalty program that allows you to buy four cars and get the fifth for free. Nor is it likely that they have asked you to partner for the design of their next car — except, perhaps, a company like Local Motors. They probably haven’t asked you for anything other than your purchase, and haven’t offered you anything other than a vehicle. The once-every-few-years transaction you have with a dealer is unlikely to create “love.” A car company that wants a relationship with you would act differently.

For those organizations that take a new perspective and build genuine and mutual relationships with each customer, it is a win-win situation. These organizations move their customers along the spectrum of affinity from “transactors” — who have no relationship beyond the purchase, to “supporters” — who regularly interact with the firm, to “promoters” — who share their enthusiasm for the brand with friends and family, to “co-creators” — who actually feel that they are partners with the organization (Figure 1).

Sponsored Content:

Figure 1: The four types of customers

The good news is that your customers are already there, seeking to share and collaborate with corporations. For example, customers are already sharing opinions on Yelp and TripAdvisor; they are helping create advertising for Danone yogurt, designing new Nike shoes, offering products on Etsy and eBay, and creating content for LinkedIn and Facebook. And by doing so, they are offering these companies their skills and assets, plus a great deal of insight into who they are.

Need to Change the Business Model

But most established firms remain hesitant when it comes to this type of customer equality and mutuality. Our research on the business models of the S&P 500 Index companies (based on data from 1972 to 2013) indicates that at present more than 80% of companies employ older business models where customers are valued only for their dollars and not for their assets, insights and contributions. If your organization can break ranks and adopt this new way of thinking and acting, you will see that the more you share with your customers and the more you understand them, the more they will love you.

Some companies are building initiatives and the technological capabilities needed to develop co-creation relationships with their customers — lasting relationships that are mutual and self-reinforcing. Nike, The North Face, Jeld-Wen and many more firms now offer customer co-designed products, and the sharing economy is growing from cars (Uber), to lodging (Airbnb), to clothing (Rent the Runway). Many firms, however, are only building a token Facebook page and Twitter account. In the journey towards “love,” creating a social business is only a small step. The final destination is one where [both] customers and companies enjoy success, fulfillment and shared value.

So, the real question is: “What does it take to love our customers and be loved in return?” The answer: Serve your customers the way they want to be served. Fulfill their needs not just for products and services, but also for connection, community, participation, recognition and fulfillment. Of course, we recognize that customers are not heterogeneous and have unique preferences in how they wish to interact with different companies. What we suggest is that you create opportunities for those customers eager to have a relationship with you.

Changing your relationship with your customers means changing the way you interact with them. Most companies attempt to do this through marketing initiatives and social media. As mentioned above, this is a very superficial approach. The most successful and most loved companies adapt at the level of the business model and find ways to share value creation with their customers.

Changing your relationship with your customers means changing the way you interact with them.

The Winning Moves

Let’s return to the GAFA four, and see how they have created network businesses that expand the customer relationship.

  • Google: Google made the decision to make two of its most popular products open source: Chrome (a browser that is open source through Chromium) and Android (an operating system). This allows users to help guide the development and get bug fixes and desired features faster. People love Chrome so much that it dominates the browser market with three times as many users as the next popular browser.
  • Apple: Along with its wildly popular products such as the iPhone and iPad, Apple formed a developer network to help outside parties create software for its platforms. This ensures that there is a great market for the apps the customers want, and allows those with an interest to participate. In 2014, 59% of iPhone users described themselves as “blindly loyal” to the platform.
  • Facebook: The world’s largest social network, where the users create all of the content, Facebook allows users to communicate with their friends and family and share whatever they want to with the world. In Q1 2015, Facebook had 1.4 billion users, nearly 20% of the world population, and 70% of them interact with Facebook on a daily basis.
  • Amazon: The behemoth Internet retailer allows both individuals and companies to sell through its online channel. This increases the selection available to customers and probably also brings down the prices through increased competition. According to the 2014 Harris Poll Reputation Quotient study, Amazon.com had the best reputation among U.S. companies (for the second time), and it also was the leader by way of emotional appeal.

If you would like to join this movement and expand your business model, partner with your customers and cultivate “love,” we recommend a simple, five-step process, PIVOT, to build these capabilities in your own organization:

  • Pinpoint: Know your starting place. Gauge customer sentiment and how well you know your customers and how well they know you.
  • Identify: Take inventory of the places, if any, where customers contribute to your organization. Take inventory of your customers’ groups and their characteristics.
  • Vision: Envision a new future where you partner with your customers in a new business model, allowing them to participate and share in the value.
  • Operate: Begin shifting a small amount of your capital (including time, talent, and money) to this new business model. Start small, insulate from the politics of the larger firm, and prepare to iterate.
  • Track: Put in place new metrics appropriate for this customer-centered, network effort. Add key performance indicators (KPIs) such as number of interactions (sales or other), number of customer-partners, and value returned to customers, to your standard financial measures. Use these to guide rapid iteration.

Despite their incredible size, the GAFA four are still rapaciously eating up companies and expanding into new industries (see Figure 2, excerpted from FABERNOVEL, GAFAnomics, October 2014). They are gaining more and more attention from, and forging deeper intimacy with, their customers. And it’s not just Google, Apple, Facebook and Amazon that incumbents should be worried about. Their emerging and younger siblings like Uber, Airbnb, Pinterest, Instagram and Alibaba have hundreds of millions of customers the world over that spend a significant time of their day with them.

Figure 2: The industry-consuming growth of GAFA

 

The stumbling block that most companies encounter on the path to “love” is simple: Leaders believe that “love” belongs at home and not in business. Companies also believe that customer partnerships bring dangerous risks and loss of control. But that old way of thinking now brings its own significant risks as Google, Apple, Facebook and Amazon garner our “love” across an expanding industry profile.

To capture customer attention, organizations need to move beyond their everyday tactics of “faster, better, cheaper.” They also have to elevate their game beyond the current mantra of “delivering a quality experience” or the latest fad, Facebook “likes.” These steps are important, but still insufficient to compete in a world where your competitors know your customers as unique individuals and partner with them to create shared value.

In short, remember this phrase: In a world of likes, “love” matters. Companies and individuals used to believe that our business lives and personal lives are, and must be, separate. But that is no longer true. Cultural changes and technology have broken down these traditional silos, creating an environment where people want to interact with organizations in new and very personal ways. If you don’t believe us, just watch what happens over time to your top and bottom lines as customers contribute their dollars, plus their assets, skills and ideas, to the companies that listen to them, share with them and love them.

Interested in learning more? Take our Customer Type Assessment to help figure out what type of customers your organization has.

Barry Libert is CEO of OpenMatters, an angel investor, digital board member, and senior fellow at Wharton; Jerry Wind is director of the SEI Center and a marketing professor at Wharton; and Megan Beck Fenley is a digital advisor and research associate at OpenMatters. Susan Corso, a leadership consultant with OpenMatters, contributed to this article.

 

Pop Shoppe

By Matthew Thomson and Kendra Hart:

The Pop Shoppe was once a leading player in the Canadian soft drinks market, but changing market conditions and corporate mismanagement drove the company into bankruptcy in the early 1980s. In 2003, an entrepreneur purchased the rights to the brand, and was considering reintroducing it in the market on the idea that many Canadians would be as fond of the Pop Shoppe as he was. The challenge was significant: the new potential buyer had little experience in the beverage industry and limited funds for a brand revival, and consumer habits had changed in the many years since the brand died. Questions about market segments and brand positioning loomed large. Older consumers might embrace the reintroduction of the old brand, but did they comprise a sustainable market segment? Would older consumers be able to turn their children onto the brand? How true should the brand stay to its original concept? Was a new positioning strategy required to meet growth goals? Could enough consumer and retailer interest in Pop Shoppe be raised to make the brand succeed? This case lets students grapple with the difficult task of re-launching a once-iconic brand after a significant absence from the market. A B-case supplement to Pop Shoppe (A) deals with the entrepreneur’s decision in 2010 on whether to enter the U.S. carbonated soft drinks market. The B-case highlights important distinctions between two seemingly similar markets in an attempt to demonstrate that success is not always easy to replicate.

Susan Fournier Interview re DeflateGate and brand relationships on WBUR

‘Deflate-Gate’ Report: Good For Ticket Sales, But Key Moment For Patriots Brand

New England Patriots quarterback Tom Brady gestures during an event at Salem State University in Salem, Mass., Thursday, May 7, 2015. An NFL investigation has found that New England Patriots employees likely deflated footballs and that quarterback Tom Brady was "at least generally aware" of the rules violations. The 243-page report released Wednesday, May 6, 2015, said league investigators found no evidence that coach Bill Belichick and team management knew of the practice. (AP Photo/Charles Krupa, Pool)

New England Patriots quarterback Tom Brady gestures during an event at Salem State University in Salem, Mass., Thursday, May 7, 2015. An NFL investigation has found that New England Patriots employees likely deflated footballs and that quarterback Tom Brady was “at least generally aware” of the rules violations. The 243-page report released Wednesday, May 6, 2015, said league investigators found no evidence that coach Bill Belichick and team management knew of the practice. (AP Photo/Charles Krupa, Pool)

Here we are in May, in the middle of the NBA playoffs and the NHL playoffs. And what is everyone on sports radio and TV talking about? An NFL team that’s not even playing right now.

“I mean, the Patriots are the team that people love to love and the team that people love to hate,” said Susan Fournier, a branding professor at Boston University Questrom School of Business. One of those fans is her father, and she says “he’s so upset by this.”

Full Story

G.I. Joe: Marketing an Icon

G.I. Joe: Marketing an Icon (2007) Harvard Business School Case (McGovern)

In the winter of 2003, Billy Lagor, the Hasbro toy company’s brand manager for G.I. JOE, faced a set of decisions that would ultimately determine the 2004 marketing plan for the G.I. JOE brand. Under consideration were three different ways to market the military action figure: use traditional media: supplement traditional media with a short, animated DVD; or rely entirely on nontraditional marketing. In evaluating these options, Lagor grappled with a more basic question: What is the nature of the G.I. JOE and Hasbro brands? Should he market G.I. JOE as a short-term fad or as a marquee property akin to the Barbie franchise?

Mountain Man Brewing

Mountain Man Brewing Co.: Bringing the Brand to Light (2007) Harvard Business School Case (Abelli)

Chris Prangel, a recent MBA graduate, has returned home to West Virginia to manage the marketing operations of the Mountain Man Beer Company, a family-owned business he stands to inherit in five years. Mountain Man brews just one beer, Mountain Man Lager, also known as “West Virginia’s beer” and popular among blue-collar workers. Due to changes in beer drinkers’ taste preferences, the company is now experiencing declining sales for the first time in its history. In response, Chris wants to launch Mountain Man Light, a “light beer” formulation of Mountain Man Lager, in the hope of attracting younger drinkers to the brand. However, he encounters resistance from senior managers. Mountain Man Lager’s brand equity is a key asset for Mountain Man Brewing Company. The question is whether Mountain Man Light will enhance it, detract from it, or irreversibly damage it.

Red Bull: The Anti-Brand Brand

Red Bull: The Anti-Brand Brand (2005) London Business School Case (Kumar, Tavassoli, Linguri Coughlan)

Founded in Austria in 1984, Red Bull was credited with creating the energy drinks category. In 2004, the worldwide energy drinks category was worth 2.5 billion euros and Red Bull commanded a 70% market share. Sold in over 100 markets, Red Bull was the market leader in the USA as well as in 12 of the 13 West European markets where it was present. Central to Red Bull’s success was the use of word-of-mouth or ‘buzz’ marketing. Through its sponsorship of youth culture and extreme sports events, it developed a cult following among marketing-wary Generation Y-ers, (18- to 29-year olds) who perceived it as an anti-brand. While it purported to be a sports drink, Red Bull was mostly sold in clubs and bars as an alcohol mixer, where its caffeine doses helped revive clubbers into the early morning hours. By playing on associations with energy, danger and youth culture, Red Bull carefully cultivated its mystique, which earned it nicknames like ‘liquid cocaine’. The company used additional non-traditional marketing techniques, such as consumer education teams who drove around handing out free cans of Red Bull to those in need of energy, and student brand managers who promoted the product on university campuses. In 2004, Red Bull found itself at a crossroads, challenged with defending its market share. It faced a maturing market and an onslaught of competitive brands, some of them promoted by beverage industry giants such as Coca-Cola and Pepsi, others as private labels by mass retailers such as Asda (part of Wal-Mart). Red Bull needed to determine whether it was outgrowing its anti-establishment status. As a mature brand, it needed to assess whether the time had come to transition to a more traditional marketing approach. But this raised a critical question: would this move toward a more mainstream approach fundamentally destroy Red Bull’s anti-brand mystique?

In-N-Out Burger

In-N-Out Burger (2003) Harvard Business School Case (Moon, Herman, Cummings, Thakarar, and Sampat)

In-N-Out Burger is a fast-food chain with 171 company-owned locations in three states–California, Nevada, and Arizona. It has an extremely hardcore customer base and the company appears to be in good financial health. The primary issue in this case concerns expansion: how quickly should the company expand and should that growth occur regionally or nationally? A secondary issue involves the question of brand stewardship, namely, who is in the best position to steward the brand as it continues to grow over the next decade?

J&B

J&B (2000) Harvard Business School Case (McCracken)

Michael Stoner finds himself called upon to reposition a once venerable and highly profitable brand of Scotch whisky. He must find a cultural trend.

Brands in Culture Exercise

Brands in Culture Exercise

Description:
Illuminate the culturally shared meanings of brands through cultural analysis of how the brands are used in popular culture.

How to Run it:
In advance of the class session, deliver the following assignment:
“Think about movies, television shows, songs, videogames, etc. that feature brands. How is the brand used to tell the story in each of these mediums? Who are the characters using the brand and what defines them? How does the brand help the story move along? What types of movies, television shows, songs, videogames feature the brand?”

In class, prompt discussion of the cultural meaning of brands with the following questions:
1.) Why do popular culture artists (writers, songwriters, movie and television producers) use brands in their work?
2.) Which types of brands are most used in popular culture? Why? What does this usage say about the brands?
3.) How does this type of usage help and hurt the brands? What are the opportunities and risks for brand managers?

LOGORAMA Exercise

LOGORAMA Exercise

Description:
Illuminate the culturally shared meanings of brands through cultural analysis of how brands are used in a popular movie

Materials Needed:
Student access to the short film Logorama, which can be found at http://vimeo.com/10149605

How to run it:
Logorama is a short 16 minute film that was directed by the French animation collective H5, François Alaux, Hervé de Crécy and Ludovic Houplain. It was presented at the Cannes Film Festival 2009 and it opened the 2010 Sundance Film Festival. Recently, it won a 2010 academy award under the category of animated short.

The film depicts events in a stylized Los Angeles, and is told entirely through the use of more than 2,500 contemporary and historical brand logos and mascots.

WARNING: Logorama contains explicit profanity and is for adult audiences only. If you are uncomfortable watching the film, please contact me and I will provide you with an alternative assignment.

Once you have watched the film, answer the following eight questions.
1.) Which types of brands are included in Logorama? Which brands were noticeably absent from Logorama? Why were you surprised not to see these brands?

2.) Why do you think the film’s directors chose to include the brands they did in the movie? Choose three brands featured in the film and analyze what messages they carried or helped convey in the plot through their brand meaning.

3.) The film’s producer claimed, “I’m the producer of the film, so I have to thank the 3,000 non-official sponsors that appear in the film. And I have to assure them that no logos were harmed in the making of the project.” Was he correct? Did the film build or destroy brand equity for the included brands? Why?

4.) How exactly did the film’s directors parody different brands? How harmful are these parodies overall to the brands’ image?

5.) Analyze the Ronald McDonald character that you saw in the film and its effect on the McDonald’s brand equity. If you were the brand manager for McDonald’s, how would you respond to Logorama? Would you a.) sue the producers for violation of your trademark, b.) ignore it, or c.) pursue a path somewhere in between? Why?

6.) A brand manager from Cash Converter, a brand featured in the film sent this email to Logorama’s directors, “Thank you, I just saw our logotype in some pictures [from the film] and we appreciate you used the logotype in the middle of all the big brands. It matches perfectly with our strategy that you put Cash Converter on the main street, in the heart of the city, thank you so much!”. How has Logorama increased the brand equity of Cash Converter?

7.) Given the guidelines for branding in Web 2.0, what advice would you provide to brand managers regarding Logorama?

8.) Looking at Logorama as a whole, what does the film tell us about the role of brands in contemporary life? Is this a positive or negative view of branding and our consumption culture? Why? What is the overall message the directors are trying to convey?