Smucker, Hostess And Occasion Segmentation

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Market segmentation is fundamental to marketing. Segmentation is evergreen when it comes to building and managing brands.

J.M. Smucker, purveyor of jams, jellies, Jif peanut butter, Folgers coffee, Uncrustables, Carnation evaporated milk and pet food items including Milk Bone dog biscuits and Meow Mix, has just purchase Hostess brand snack foods. Hostess makes Twinkies, Ding Dongs, Ho Hos and Donettes.  

Wall Street does not appear to be happy with this purchase, as Smucker shares dropped 7% after the announcement. Wall Street frets that the frenzy around new weight loss drugs and the ongoing focus on “healthy” snacks makes the Smucker purchase questionable, especially at the price paid: $5.6 billion according to Bloomberg/$4.6 billion according to The Wall Street Journal with the assumption of $900 million of debt. Additionally, Wall Street worries that the Hostess portfolio of brands is “mature” and only sold domestically.

There are also the two Hostess bankruptcies – 2004 and 2012. Although Hostess revitalized around the iconic Twinkies brand, there are concerns about Hostess vibrancy.

Smucker, like Campbell Soup Company (owner of Pepperidge Farm and Snyder of Hanover snack brands), sees a rosy future in sweet snack food items. Data show “indulgent snacking” saw a 20% faster growth than healthy, snack-food alternatives. Smucker also believes that the Hostess purchase will “strengthen” Smucker’s power in grocery store center aisles. Observers agree that people are snacking more often. The Wall Street Journal points out that 70% of consumers eat at least two snacks a day. 

While the jury is out on how Smucker will leverage the synergies of Hostess with the existing Smucker portfolio, there is an important factor that the business press is glossing over. If Smucker can optimize this factor, the future of the Hostess purchase may, in fact, twinkle.  That factor is occasion segmentation.

Occasion segmentation recognizes that people have different needs in different occasions. As situations change, sometimes so do the benefits desired by consumers. A simple occasion segmentation is by daypart. Fast food chains see differences by breakfast, lunch, dinner, late night and all night. Beverages may segment by occasions such as start the day, between meals, with meals, alone, with kids, with friends, with business associates and in the evening.

For example, you might drink one type of beer at a sporting event and another type of beer when you are dining with a client and another type of beer when you are at home hanging out with friends. The original Starbucks segmentation focused on four occasions: Emergency (as in “I must have this coffee right now to wake up.”), At home, Coffee Break and Café Society.

Levi Strauss ran into trouble because it did not move fast enough when the yoga clothes craze began. People wanted comfortable, stylish clothes for yoga but also wanted comfortable, body-revealing stylish outfits for wearing to the yoga class, after the yoga class and on weekends doing errands. Levi Strauss discovered that casual, chic, colorful yoga clothes were relevant wear for more occasions than yoga class. Yoga clothes were relevant for going to the bank, driving the car-pool car, having lunch with friends, taking strolls with family and participating in gym classes. Most of these occasions had been blue jeans occasions. 

With snack foods, there are multiple eating occasions, including new dayparts as the lines between main meals and snacks blur. Barron’s, the financial newspaper, commenting on the Hostess purchase, wrote, “Consumers’ hunger for snacks is boosting cookie and candy makers as younger generations use them to substitute for full meals, according to research firm Circana Group. Snack sales were up 11% last year to $181 billion, the firm said.”

Grazing occasions have changed the way we eat as well. As has the shifting line between work and leisure, especially with work-from-home situations. 

Carried food occasions such as bringing lunch to work, lunchboxes at schools or hand-held snack foods such as granola and energy bars or confectionary have also made occasions more dynamic. In fact, according to an in-depth account of the Smucker purchase of Hostess, The Wall Street Journal points out that many Hostess snack foods are designed to be “eaten on the go” or “to squeeze into a lunchbox.”

What we eat at home relative to what we eat out of home are different. For example, putting Halloween aside, confectionary items for at home-consumption tend to be bought as bagged rather than individual. 

Smucker CEO, Mark Smucker agrees with the expansion of occasions. Mr. Smucker indicated that having Hostess in the Smucker portfolio would help Smucker reach people during new dayparts “beyond when they might reach for Uncrustables or Jif squeeze peanut butter.” Hostess recognizes that sometimes customer want a health snack for a specific dietary occasion. But, there are many times that customers want a snack that is designed for a treat occasion. Hostess data indicate that customers increasingly integrate healthier snacks and sweet, indulgent treats into their diets.

Mr. Smucker is not alone. Occasion segmentation is on the mind of Popeye’s president of US and Canada. In a discussion with Bloomberg, Sami Siddiqui stated that the average Popeye’s customer stopped by a Popeye’s restaurant only 3 times a year. At McDonald’s the average customer stops by 18 times a year. Mr. Siddiqui said that people talk about Popeye’s as a special treat occasion. In fast food, special treat can be a problem. The goal for Popeye’s is to become “an everyday occasion.”

Signet, the owner of Zale’s, Kay’s and Jared’s jewelry stores, is also facing issues with changing variations of occasion segmentation. Apparently, Valentine’s Day and anniversaries are now not as significant in jewelry purchasing occasions as are experiences, homemade items or dinners. According to Bloomberg, occasions such as receiving a raise or a promotion or a bonus leading to a jewelry purchase have increased. How people shop in bridal occasions has changed as well. Bridal is no longer a solely in-store experience. Shopping online for engagement rings and other bridal jewelry is growing. Signet told investors that it tracks “45 milestone occasions” in a couple’s life, each one of which is potentially a jewelry-buying occasion. 

In its IPO filing, Instacart indicates that it is pursuing an array of occasions other than home delivery of groceries. Apparently, Instacart is looking into catering, stocking food for small- and midsize businesses like preschools and corporate offices and delivering food and nutritional programs through hospitals, medical providers and insurers.

Of course, knowing who is the customer and what are the customer’s needs in a given occasion are critically important. But, occasion-driven segmentation will be key for snack food innovation and growth. Wall Street should understand the marketing implications. Smucker understands. 

applebees deal loyalty real loyalty

Deal Loyalty Versus Real Loyalty

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This is a brand-business truth. To be considered fair value and not be perceived as cheap, brands must avoid excessive marketing communications that emphasize price as the reason to buy. Excessive emphasis on price builds deal loyalty. 

Building deal loyalty does not build brand loyalty. Deal loyalty is not real loyalty. True brand loyalty cannot be bought with bribes. When you consistently lure customers with incentives, all you do is make the customer loyal to the deal instead of loyal to the brand. If there is a better deal elsewhere, deal-loyal customers are out your door and in through the competitor’s door. If a customer does not prefer your brand’s experience, then making it cheaper and easier will not build brand strength. 

Occasionally reminding people that a brand is affordable is important. But, undue, extreme stress on price alone destroys real loyalty and builds deal loyalty. Instead of the dominant message being price, brand-business communications must emphasize brand-business-relevant differentiation. Tell customers that this is a great brand at a great price rather than just communicating that this is a great deal. 

And yet, even C-suite executives seem to be unclear as to the difference between brand-business-building price promotions and discounting. And, in most cases, to be fair, executives tend to be vague about the distinctions between value and price are synonymous.

For example, here is an exchange that took place during the recent Dine Brands Global Q2 Earnings Call. Dine Brands Global owns Applebee’s, IHOP and Fuzzy’s Tacos. Applebee’s and IHOP are iconic American brands that grew with strong relevant differentiated brand promises. And, Applebee’s and IHOP managed through the COVID era. 

In the Dine Equity Earnings Call Q&A section, one analyst asked this question:

“Mine (my question) is really about the approach to value. And, I think there’s a general concern among the investment community is (sic) that the industry might kind of slip back into deep discounting. And, so, I am wondering how would you characterize the level of value now?  And, I think that the two for $25 with the steak (transcript mis-typed as stake) whatever’s coming on Monday, it’s a bit like deep discounting. And, I’m just wondering how you’d characterize the level of discounting now, what you expect versus kind of some of the pre-COVID levels, which were so margin destructive. I think industrywide, just any comment would be helpful to start.”

The analyst’s question was a fair one to ask. In the Dine Equity’s Earnings Call opening comments, executives referenced declines in restaurant traffic at Applebee’s relative to the consistency of the average check size. In other words, fewer people were visiting Applebee’s but due to higher ticket prices, the amount spent per food stayed the same, on average. Dine Equity stated that when guests come for a promotion, they tend to spend more. On the other hand, Dine Equity did confirm that customers were now cutting back on monies spent at its restaurants such as reverting to pick-up versus delivery, saving money on fees. And, Dine Equity executives did reference that this traffic issue and the cut-back-mentality seemed more applicable to Applebee’s. IHOP was performing marginally better even though with less than stellar performance.

As reported in the Earnings Call transcript, here are the verbatim Dine Equity executives’ responses* to the analyst’s question:

“What’s the value? I think an important thing to keep in mind is that both of our brands work very closely with it, with our franchisees to determine what these value promotions look like or what an LTO (limited time offer) looks like. And, that includes not only the marketing behind it, but the margins behind it as well…”

“… so when our guests are with us, they continue to enjoy the full offerings of both brands – Applebee’s and IHOP – when they’re in the restaurants. So that’s a great data point for us that demonstrates that it’s not discounting but we’re using the value offers to bring in guests in a way that resonates with them. So, they maintain that average check.”

“Value remains incredibly important right now, but honestly, it’s … it remains the same across all economic cycles. Applebee’s is built for the average American, eating good in the neighborhood is more than just a tagline. It means we’re providing good food at an affordable price in an environment where everybody can come and be themselves. That’s value that’s the value that the American consumer is seeking and expects from Applebee’s.”

“An example you mentioned in Q2, we delivered value through affordability through campaigns such as our two for $25, which we ran in June with strong results. It’s compelling and it provides the value again, that the guests are seeking in this environment, which is why we have outpaced our direct competitors from a value attribute perspective. For many years.”

(*It is important to keep in mind that these are real time responses that are most probably unrehearsed.)

Is there a strategic demarcation between brand-business-building promotions and discounting? Is there a clear articulation differentiating price from value?

Look at Applebee’s. For quite some time, Applebee’s has advertised a food offering at a price with music followed by its tagline about eating good in the neighborhood. The Applebee’s communications have been, and still are, “Here are yummy foods at this great price that happen to be at Applebee’s.” Currently, the promotion is wings with 6 sauces at $12.99.

Applebee’s has a relevant differentiated promise. But, that promise has not been articulated to the customer in ages. Applebee’s has spent a lot of money communicating food at a price. So, it may not surprise that traffic is down. Deal customers are loyal to the deal. If a competitor has a better deal, that deal loyal customer is eating at the place with the best deal.

Perhaps Dine Equity assumes that just by stating the eating-good-in-the-neighborhood tag line will be enough to remind customers of Applebee’s promise. However, there may be younger guests who have no idea what eating-good-in-the-neighborhood really means other than good price at a local hub. And, there could be guests who may have known the relevant differentiated promise of Applebee’s but have forgotten. Applebee’s excessive, consistent reliance on price promotions without providing a brand promise may reinforce that Applebee’s is a great place for a deal.

Dine Equity executives are not alone. Many executives buy into the idea that price and value are one and the same. This is a problem. If executives cannot define the difference between deal loyalty rather than real loyalty, there is an overarching strategic challenge. And, if there is a reluctance to separate price and value then the likelihood a promotion is a discount is probably real.

Analysts as well as brand-business owners should not let this confusion pass unaddressed. 

Every consumer has a mental value equation in their head. Value is the numerator divided by the denominator. Value is the brand-business’ total brand experience numerator – the relevant, differentiated functional, emotional and social benefits – relative to the brand-business’ total costs denominator – money, effort and time. 

When the emphasis on is on the denominator of the equation – the costs, specifically money – and there is no mention of the numerator (the total brand experience), the brand-business’ costs overwhelm the experience. In other words, when the denominator is greater than the numerator, then the brand-business is a poor value.. If the numerator is greater than the denominator than the brand-business is a good or great value. 

This means that customers must understand what the numerator – the brand-business’ total brand experience – is all about. The brand-business must remind customers what the brand-business stands for: is this a relevant, differentiated brand-business promise or a deal? Real loyalty builds when brand-businesses emphasize what they deliver to the customer relative to the cost of the customer’s expenditures. 

Additionally, the entire equation is subject to the customer’s assessment of trustworthiness. Trust is a multiplier of the value equation: do I trust the brand-business to deliver up to my expectations? If there is not trust than there is no value. Anything multiplied by zero is zero.

Based on the Dine Equity Earnings Call responses, both Applebee’s and IHOP appear to have a similar approach to value as a “price deal”. Both brands tend to neglect mention of the great benefits each brand has to offer. For example, what is the relevant differentiator at IHOP? Is it a brand with abundant food at a good price? Or is the brand promise about a special brand-business experience? Do the IHOP promotions generate deal loyal or real loyal guests?  

One executive highlighted a crepe roll-out buy-one-get-one-free promotion. The executive phrased this example this way:

“We rolled out brand new crepes. And, when we rolled those out, we did those with a buy one get one promotion. And, while that may seem like a deep discounting, the purpose of that really was to get trial by two people at a time when they came in to try our new menu and try the new crepes. And, it worked to perfection. It not only provided great value for guests coming in, but when the buy one get one promotion went off, crepes sales actually went up, compared level (sic) was when they were coming in and people were getting on for free also.” 

The real success indicator would be how many of those crepe customers came back to IHOP. Were these deal customers or loyal customers? Did the promotion build the brand-business long-term or not?

Financial consultant and author, Adrian J. Slywotzky, wrote that one of the most crucial set of questions for value creation leading to market value focuses on differentiation. “What is my basis for differentiation; my unique value proposition? Why should the customer want to buy from me? Who are my key competitors? How convincing is my differentiation relative to theirs?”

Many brands have price or affordability as part of their brand-business promise. H&M and Zara are known for fast, chic, young- spirited fashion at affordable prices. IKEA provides furniture, bath- room fixtures, kitchen layouts, lamps, and other home accessories at affordable prices; you just need to assemble them yourself. Sam Walton built a retail empire making shopping for every- day needs affordable and available in small town America. Ray Kroc democratized eating out. His vision was a restaurant that made eating out so affordable that more people could eat out more often. Superior availability and affordability were key contributors to the success of McDonald’s. 

Value and price are not the same. Value is much more than a price point. Price is important. But, leaders must remember that although marketers set price, customers set value. Brand-business value decisions must be strategic. What is the customer-perceived trustworthy value for our brand? Are our marketing efforts affecting customer-perceived value? Is price sensitivity increasing or decreasing? 

To increase shareholder value, a brand-business must be the most efficient and productive provider of a branded offer that customers value. Customers need to perceive the brand-business as great value, not merely appreciate the brand’s price point. 

In this increasingly competitive world, excessive emphasis on price incentives – the generator of deal loyalty – may severely damaged brand loyalty and brand value. Brand-business leaders must ensure that the organization clearly understands the difference between value and price. Brand-business leaders must ensure that communications focus on great brand at a great price. Affordability is a feature. This feature supports the benefits of the brand. Leaders have the responsibility to keep a brand-business’ promise top-of-mind with customers while reminding customers of its value.

Gap And The Contradictory Leadership Challenge

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Brands face the challenges of optimizing contradictory customer needs. This is because customer do not want to compromise one benefit for another. Leaders face the same challenges. Leaders must figure out ways to maximize seemingly uncompromising views such as focusing on profitability and sustainability. Or focusing on core customers’ views while satisfying other customers’ views.

Another seemingly difficult leadership challenge is being data-driven rather than creative-driven and vice versa. This is the problem that has faced many retailers. Fashion needs data. On the other hand, fashion decisions, are in many cases, creative, gut-driven decisions. And, data-driven versus creative-driven is apparently seen as a challenge that plagues Gap, the once popular, de rigueur clothing establishment.

A creation from 1969, Gap was a store stocked with Levi’s denims. It promised to never be out of stock. The clothing was available in all styles and sizes. An instant hit with the baby boom cohort (the Gap name came from the concept of the generation gap), soon there were stores nationwide. It was not until the 1980’s that a new CEO focused on raising the style level. Gap was great until it was not great. 

In its latest analyst earnings call, Gap signaled a less than encouraging forecast. Reporting indicates that Gap dragged down the overall company (Banana Republic, Athletica, Old Navy and Gap).

One of the problems with brand management and marketing is the mystique of measurement. As business has become more demanding, business has become more defensive. In a world where marketing activities and budgets are being squeezed by limited resources, there is a tendency to over-rely on metrics.  Sometimes, leaders allow the mystical muscle of measurement to take over the role of marketing expertise and experience. Creativity is forced to conform to measures. While there is much that we can measure, there is also much that is not measurable. If the value of marketing and creativity need validation within the organization, then the organization has a bigger problem than can be solved through measurement. 

It is necessary to recognize that data show us what has happened. Data are backward looking. And, in most cases, data do not tell us why customer behavior is what it is, only what it is now and what it was then. 

At Gap, there were CEO’s who leaned towards fixing Gap’s issues by drilling down on what data were showing. Until recently, with the hiring of a creative-style-focused leader, Gap has cycled through executives who, according to The Wall Street Journal, fixed “weak spots here and there but (these) were not the fundamental problem.” Gap’s new CEO is “the first creative-minded leader” in quite a while.

These Gap fixes were important. But, when the enterprise is clothing, creativity is important too. It is possible to maximize creativity and data. All that a brand needs is a leader who is insight-focused acting on informed judgment.

Leadership, regardless of industry, must not allow process to dictate over passion.  Leadership must not sacrifice accountability on the altar of measurement. Leadership must not fear failure. When decisions fail, it is very easy to say, “It is not my fault. The measurement process made me do it.” 

Disciplined research is an important contributor to effective business management. But, research discipline alone cannot be creative; it cannot be innovative. Measurement can evaluate but not create ideas. Creative ideas require creative insight. People provide these insights based on data and judgment.

Real, actionable insight will not come from superior data analysis. Superior analysis provides understanding of where we are and how we got to where we are. Superior analysis does not provide insight into what kind of future we can create. 

Leadership must use their expertise and their judgment. Leadership must use their creativity to make reasoned, informed, and insightful decisions. 

In this increasingly competitive, sometimes frustrating brand-business world, there is a pervasive fear of taking the leap of faith based on informed judgment. Informed judgment is not guesswork. Of course, no one intentionally commits valuable resources to something that is likely to fail.

Informed judgment is critical. The emphasis is on “informed.” Personal judgment can become a hindrance to success. 

In 2011, Ron Johnson, the former star of Apple’s retail stores, took on the CEO role at J.C. Penney. Mr. Johnson had some ideas as to the direction of J.C. Penney. According to the press, most of these ideas went untested. These ideas were not particularly “informed.” The result was a retail debacle.

On the other hand, informed creativity is a formula for success. The Wall Street Journal cites the case of Abercrombie & Fitch. A new CEO made a huge difference using informed creativity. It was clear that Abercrombie & Fitch’s “cool-kids” approach lost its luster. The brand-business’ revitalization changed the target audience and the over-reliance on logos, “to cater to working-age adults who might be searching for tasteful wedding guest outfits.”  This type of rejuvenation relies on creative interpretation of data.

Part of the problem comes from the muddled definitions of information, trends and insights Not only do we tend to use these terms interchangeably but also, we overuse and misuse the word “insight.” 

This matters because there is a relationship between information and trends, and trends and insights. Information happens first. Information leads to the generation of trends, which then lead to the creation of insights. It is a process that sets the context for creativity. 

Information are facts. And, in our data processing world, information are data that are processed, stored and/or communicated. There are massive amounts of data being processed into massive amounts of information. 

A trend is something that is developing or changing. A trend is enduring. A trend is an idea or concept that is happening around us and influencing the way and manner in which we behave.

Trends have implications, of course. And we can generate strategies to address these trends. 

But, trends are not insights.  Trends are valuable because they inform us about the world around us.  But, collecting and analyzing information and turning these into trends are not enough. We must go from information to insight.  

Informed insight is not guesswork. Insight means seeing below the surface of information.  Insight is all about “why?” This necessitates synthesizing rather than only analyzing.  Analysis travels backward. But brand-businesses move forward. Use synthesis. Synthesis means, “the combining of diverse concepts into a new coherent whole.” Analysis leads to understanding what is happening and why.  Synthesis leads to insight into what might happen. 

Trends are general. It is the insight about the trends that is critical.  It means looking under the surface, beyond appearances and seeing ahead. Meaningful insights are more than mere information and trends. 

A consumer insight is not what you always believed. A consumer insight is not driven by what the factory makes. A consumer insight is not just information or facts. A consumer insight is not product attributes. 

An insight needs to meet two criteria: 1) Surprise at what you learned; and, 2) As a result, a change in behavior based on this learning. An insight is a fundamental consumer truth that has the power to open our eyes. It is relevant, recognizable, believable, ownable, adaptable to geographies and capable of building business for the long-term.

Right now, Gap could use some creativity-driven informed insight. The Wall Street Journal indicates that many on Wall Street are pleased with the choice of a creative leader for Gap. As newly appointed CEO, Mr. Richard Dickson stated that it is time to redefine the Gap’s image for consumers. Mr. Dickson also admitted that many problems were self-inflicted. One way to rejuvenate Gap will be to recognize the limits of data-driven only strategies. Data will be key but as a way to inform judgment, allow executives to take that informed leap of faith, and help evaluate ideas. 

Dear Amazon And The FTC: A Market Is Not A Channel

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Amazon and the FTC are facing off. Putting any discussions of trust-busting, Prime enrollment issues and “monopoly” aside, the fascinating, underlying discussion is about Amazon’s market. The FTC and Amazon are at odds over how much of the e-commerce market Amazon controls. And, whether Amazon’s market is e-commerce or is online marketplace.

According to Bloomberg Technology, one FTC argument will be that Amazon has enough market share to be called a monopoly. And, as a monopoly, Amazon illegally abuses its market position. Bloomberg Technology states that there will be a contentious disagreement about what is Amazon’s actual market. Amazon will doubtlessly argue that it commands a tiny sliver of global and US retail, online and off. 

Amazon’s argument will be macro. That is, Amazon sees itself as an e-commerce player. Using this definition, Amazon has a 37% market share. The FTC wants, according to Bloomberg Technology, a different definition. The FTC wants to define Amazon as an online marketplace, platforms that allow a variety of sellers to conduct business online. Using the FTC definition, Amazon has a 70% market share.

From a marketing perspective, the Amazon-FTC arguments about market do not reflect how consumers think. Amazon and the FTC are arguing about the world of distribution. E-commerce and online marketplace are channels. E-commerce and online marketplace are how and where a consumer buys something. A channel of any kind is how goods and services are delivered. 

Both Amazon and the FTC do not have the consumer in mind with their arguments. Why? Because a market is a want. Decades ago, Harvard professor Ted Levitt posited that people do not want drills. People want holes. People want the benefits of the drill. The market is for holes.

From a consumer and marketing perspective, a market is not a product category. There is no lip gloss market; there is no mascara market.  But, there are wants for attractiveness, for youthfulness, for status and for elegance. A market is a want.  If there is no want, there is no market.  There is no such thing as the automotive market.  Nor is there such a thing as the cola market or the pet food market. There is no such thing as the granola bar market. There is a market for portable, quick, and easy-to-eat nutrition. There is a market for an afternoon pick-me-up. There is a market for a healthy, attractive and fit body. There is a need for portable protein before or after strenuous activities. There is a need for a non-messy, vitamin-enriched gym bag food. 

A market is not a geography.  There is no such thing as the French market, the Japanese market, the Italian market, the Common Market.  Geographies are where markets exist.  Geographies are how you organize to deliver the brand promise to the market.  

A market is people with a want. If it is a global want, there is a global market.  If it is a growing want, it is a growing market.  If some people in Italy and some people in France and some people in Australia share the same want, then they are in the same market.  It just happens that they live in different places.  If there is no want, there is no market. 

A market is not a distribution channel.  A distribution channel is how you reach the market, not the definition of the market.  There is no such thing as the warehouse store market or the department store market or the supermarket market. Or, in the Amazon-FTC case, an e-commerce market or an online marketplace market. Brands are not specifically designed for channels. Companies design brands for people, people with a want.  

Brands may choose a particular way in which they deliver their experiences. For example, a brand may choose to be online only, such a Blue Apron Or a brand may choose to be a brick-and-mortar brand such as Publix. Or a brand may create a combination of online and brick-and-mortar, such as Walmart or Target. Consumers want the ease of choice when it comes to how brands are bought and delivered. However, it is the brand with its benefits that the consumer purchases.

A market is a specific group of people who share common needs in a common context. Product categories, channels, and price categories are not market segments. 

Many companies, as well as both Amazon and the FTC, compute market share based on geographies and categories and channels and price points.  Category share, geography share, channel share, price point share are not market share.  These reflect what the manufacturer desires, not what the customer desires.  Specific shoppers go to Amazon for specific products that satisfy specific needs. A person may need 8-foot replacement lamp cords. Or a person might want Carhartt thermal pants. It is doubtful that an Amazon shopper says, “I am looking for an e-commerce site or an online marketplace. These are where the goods exist but these channels are not what the goods are good for.

Looking at markets in terms of channels or geography affects how business looks at its data, how business looks at its business and how business is managed.  If a teenager in Paris has the same want as a teenager in New York or in Tokyo then these teenagers are in the same market no matter how the brand is organized or delivered.  But, if two teenagers living next door to each other in Paris have different wants, then these teenagers are in different markets. So, online Shein offers youth clothing that are globally appealing satisfying the consumer want for stylish, inexpensive, fast fashion. It is doubtful that a global teen considers Shein’s benefit as being an online mall. Being online is wonderful. But, online is a distribution channel for wanted items.

The what-is-a-market discussion is not an academic issue. Look at the automotive business. Car companies see markets as product types. Car companies see potential “conquests” as wanting an SUV or a truck, for example. But, in reality, the driver is looking for a vehicle that can carry four people and lots of stuff but looks attractive and feels luxurious on the inside.

The hotel industry defines markets as features at a price point. The markets are mid-scale, upper mid-scale, or upscale, or luxury or economy. No one says to their beloved, “Dear, I made a romantic reservation for this weekend at an upper-midscale hotel.”

Brands are promises of expected relevant, differentiated, trustworthy experiences. Amazon is a brand. Amazon delivers an expected, relevant, differentiated, trustworthy experience. Amazon wants to be the Earth’s most customer-centric company. Of course, operations and price help create customer-centricity. So, Amazon’s fight should be about the want that it satisfies.

Amazon and the FTC are confusing market with marketplace. These two constructs are different. Language is important. But, so is the understanding at the basis of this Amazon-FTC fight. If market is the issue, then recast the arguments into actual markets based on consumer wants. But, if channels are the issue, then be clear, because consumers see channels as how and where they obtain wanted goods and services. A channel is not a market.

Beyond Meat And Its Trust Deficit

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On August 8, 2023, Beyond Meat, the company that makes plant-based meat alternatives, tanked. Reporting its second quarter performance, Beyond Meat missed analysts’ expectations. Beyond Meat’s revenue for second quarter was down 30.5% compared to the same quarter in 2022. Many analysts have lost enthusiasm for Beyond Meat with four analyst groups listing Beyond Meat as “Sell” and four listing Beyond Meat as “Hold.”

The poor performance is not a surprise. Almost a year ago, in September 2022, The Wall Street Journal ran an opinion piece “Beyond Meat is Beyond Hope”. The author stated that Beyond Meat’s problem is that there are just too few people who will eat its products. The writer pointed out that the pool of vegetarians and vegans is too small for profitability. Only 5% of Americans say they are vegetarian while 3% identify as vegan. 

However, as The Guardian pointed out, the non-dairy milk category is booming. At the time, The guardian wrote: “Dairy alternatives now make up 15% of the market and are worth $2.5 billion. A third of Americans drink some kind of non-dairy milk weekly.” The prospective people are out there: just give them relevant, differentiated reasons to buy.

There is a lot of Monday morning quarterbacking stating that plant-base food is a fad. On the other hand, there is a significant lobby believing that plant-based protein is a more sustainable, more innovative food system with a lot of growth potential.

Underlying Beyond Meat’s laggard performance is this: Beyond Meat has a trust deficit. Customers and prospective customers are concerned about how the product is made. Beyond Meat products are perceived to be too processed. And, for vegans, vegetarians and organic eaters, processed is a dirty word. Trust is an essential element for a brand.

There are many reasons why Beyond Meat has a trust deficit. Beyond Meat did not appear to build a compelling, relevant, differentiated brand.  Rather, Beyond Meat always seemed to be a company with innovations. Beyond Meat never seemed to communicate its benefits to customers and prospective customers. Beyond Meat products have been and still are priced at a premium to animal proteins. And, these are just a few reasons.

Now, Beyond Meat wants customers and prospective customers to perceive Beyond Meat plant-based products as trustworthy. Beyond Meat wants people to believe that Beyond Meat products are OK to eat; not processed, but created. Beyond Meat is running a communications campaign to address its trustworthiness as a food stuff. But, again, at the moment, there is no discussion of the total brand experience; no addressing of Beyond Meat’s functional, emotional and personal social benefits.

Beyond Meat has a mission. Founder and CEO Ethan Brown stated this at the earning call:

 “As we look to the future, we remain steadfast in our belief that plant-based meat, and Beyond Meat specifically, will play an important part of the global response to a climate crisis that appears to be rapidly intensifying, while also delivering health benefits to the individual consumer.”

Beyond Meat’s mission is laudable. However there are complications. A research study cited in The Guardian shows that even when people learn that huge reductions in meat consumption are essential for climate-change avoidance, people are reluctant to change behaviors when the environment is “the sole beneficiary”. Self-interest overcomes altruism. A different study from Purdue University shows that even when confronted with information about meat’s carbon footprint, people still prefer meat over plant-based alternatives

A food analyst at Mintel, a global market research company, said, “Awareness of the impact of meat on climate change is expected to underpin long-term demand, although products featuring more natural vegetable and vegetarian proteins, such as chickpeas and lentils, were likely to lead growth as consumers sought more transparency and reassurance about the origins of ingredients in vegan ready meals.”

According to the press, Beyond Meat has a marketing campaign with the title, There’s Goodness Here.” This Beyond Meat campaign aims to “demystify” the way in which Beyond Meat’s products are created. For example, did you know that The American Heart Association certified Beyond Meat’s Beyond Steak as a heart-healthy food? Did you know that Beyond Meat’s products are labeled 35% less saturated fat?

One online source describes the ad campaign as follows:

“In the first phase of the campaign, consumers visit Munich, North Dakota to meet a 5th generation farmer and father who grows fava beans for Beyond Meat’s plant-based heart-healthy steak, which was recently certified by the American Heart Association for meeting its exacting nutrition requirements. Fava beans, which naturally enrich the soil with nitrogen, can enable healthier fields without the use of harmful and expensive fertilizers. This benefits farmers, consumers and our big beautiful planet. In addition to fava beans, Beyond Meat sources clean, simple, non-GMO plant-based ingredients like peas, rice and wheat. This farmer’s story and others like it underpin the goodness that is the beginning of Beyond Meat’s product journey which uses wholesome plant-based ingredients and a simple and clean process to create nutritious food options that are also environmentally friendly and kind to animals.”

This idea of taking people behind the scenes is good. It is one of the critical steps necessary to build trust. Openness Is an Opportunity 

Transparency is a key to trust. Transparency requires truth. Truth is not the same as trust. Truth is a fact,; trust is a feeling. To build your brand into a trustmark, you need both truth and trust. To be worthy of a customer’s trust, people need to see the truth and not just read about the truth. By taking customers behind the scenes, Beyond Meat is telling customers, “We have nothing to hide.” “See for yourself.”

In our fast-information-access, knowledge-sharing world, transparency is important. Increased emphasis on transparency affects trustworthiness. It is only a matter of time before the public discovers the facts about any issue. There are no secrets. There is nowhere to hide. Beyond Meat has discovered that people actually do read the labels. And, what the Beyond Meat labels indicate is more process and less made-by-nature.

By relying on a family farm to deliver a message, Beyond Meat is opting for a more convincing messenger. It is easy to rely on traditional advertising to tell someone what a brand stands for. It is more convincing when others tell the story on the brand’s behalf. And it is even more convincing when people can learn the truth for themselves. 

However, there are other essential steps to build trust. Beyond Meat must not simply hang its hat on openness. Beyond Meat must invest in the following trust-building efforts.

You Are What You Do 

Beyond Meat must display trust before Beyond Meat can declare it. Customers must consider Beyond Meat worthy of trust before they commit to trusting it. Saying, “trust me” does not track with today’s customers. 

Beyond Meat must provide iconic tangible, visible evidence that what Beyond Meat claims can be trusted. Iconic products or services are tangible demonstrations of the truth of Beyond Meat’s claim. Labels matter. Looks matter. 

Part of its new campaign is a demonstration of Beyond Meat’s tangible evidence of its “goodness.” Beyond Meat will need more than advertising to showcase its evidence.

Trust is the confidence that a brand will live up to expectations. This means that the promised expectation of the brand can be relied upon. 

Lead the Debate; Do Not Hide from It 

Staying silent when there are big issues at stake is not a signal of leadership. Silence means agreement, and trust is too important for silence. Leaders stand up for what they believe in. 

Beyond Meat stayed silent on the issue of “processing” even when the cattle industry came after Beyond Meat with very easy-to-grasp messages. Getting ahead of the issues is critical. Beyond Meat failed to do so.

For example, years ago, Domino’s could have taken a defensive position when customers complained about the quality and taste of their pizza. Instead, the brand agreed that its offerings were below par and told us so in national television advertising. 

If you are in the food business and you are selling food people think is questionable, fix it. Going on the defensive is the wrong approach. For a brand to be taken seriously, a defensive posture implies that you have something to hide. When you are silent or when you hide, others can create the truths about you. Others, such as the cattle industry, will recast your profile. A brand will have a reputation. The only question is who will have the strongest voice in managing that reputation. It is not in a brand’s interests to let outsiders trample on a brand’s truths. 

Rather than hide from an issue, lead the debate. Take positive action. Tell your story. When you tell your story you win. When you are silent, you lose. Trust leadership is more than just standing out. It requires speaking out. In revitalizing a brand, it is necessary to speak up for your brand if you want your brand to stand out. 

Trustworthy Messages Must Come from a Trustworthy Source 

How you say things is as important as what you say, especially in a world where conversations occur online digitally and through blogs, apps and with a limited number of characters. 

Just as peer testimony is more trustworthy than corporate testimony, the voice of the customer is more trusted than a corporate voice. So, it is helpful that Beyond Meat is showing customers and farmers.

Beyond Meat will also rely on health organizations to deliver the “goodness” message. In a polarized society this may be an iffy approach. True, Beyond Meat’s products are recognized by the American Heart Association, which certified Beyond Steak as a heart-healthy food. Additionally, Beyond Meat will rely on a clinical study from Stanford University (The American Journal of Clinical Nutrition). The study looked at the benefits of replacing animal-based meat with Beyond Meat’s plant-based meat over an 8-week period.  Results showed improvement in key health metrics when participants replaced animal-based meat with Based on the positive outcomes of the study, Beyond Meat created the Plant-Based Diet Initiative at the Stanford University School of Medicine. Beyond Meat also has an agreement with the American Cancer Society to advance research on plant-based meat and cancer prevention.

Providing trustworthy information is critical. The challenge is to become a trustworthy source of information that is helpful, convenient, understandable, and valuable to your customers. Become an open source of information that is understandable, accessible, timely, and trustworthy. 

Beyond Meat has a trust deficit. This trust deficit was self-created. At Beyond Meat, there seemed to be a sense that people would overlook the product-generation because the idea of plant-based meats was so enticing. Consumers are not like that anymore. “Trust me, this is good for you and sustainable” is not a viable message.

Beyond Meat must build trust. Brands live and breathe with trust. Without trust, brands have little value. If trust in the brand is high, then the brand has great value. But, if trust in the brand is low, then the brand has little value. If there is zero trust, there is zero value, as zero times anything is zero. Brand value leads to enduring profitable growth.

Banana Republic, Lifestyle And The Age of I

Banana Republic, Lifestyle And The Age of I

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We live in The Age of I. Banana Republic wants to leverage this phenomenon.

The Age of I refers to the tension between two strong human desires: the need to belong (inclusivity) and the need to have a unique identity (individualism). It is an overarching paradox that drives attitudes and behaviors. People want to be seen and respected as individuals with special characteristics. But, people also want to belong to something bigger: a community, a network, a business, a family, an ethnic group, a religious institution, a union or a nation. People want to be independent and interdependent at the same time.  People want to be self-expressive, while at the same time acceptable to a community.  

Trading off between these two desires is uncomfortable and difficult. Data show that the personal self and the social self mutually reinforce each other.

In our increasingly digital, networked, mobile environment, it is easy to be oneself and part of a group at the same time. Ubiquitous technology and online communities allow people to create different social identities depending on the group in which someone participates. 

But, digital is not completely satisfactory. Humans are social animals. People may opt for Spotify but there is nothing like attending a music festival. This desire for individualism and inclusivity in real life is powering one of the major manifestations of The Age of I: the desire of brand-businesses to become lifestyle brands.

Lifestyle brands create communities. Lifestyle brands generate emotional and social values that connect with particular customers, exciting these customers to want affiliation with the brand. At the same time, lifestyle brands are based on the idea that individuals have their own unique identities. These identities reflect customers’ values, hopes, opinions, experiences and wants. The ability to personalize products and services within a real-world physical, emotional and social community is a sought-after experience.

There are many lifestyle brands on the marketing landscape. Ralph Lauren, Anthropologie, Restoration Hardware, Goop (the wellness lifestyle brand-business) and, now, Barbie, are a few.

Anthropologie states the following: 

Anthropologie is a unique, full-lifestyle shopping destination, with a mostly exclusive assortment of clothing, shoes, accessories, beauty, furniture, home décor, garden, bridal and more.  

Our customers are creative people who want to be and look like themselves. They have a sense of adventure about what they wear and take a thoughtful, personal approach to interior décor and the harmony of home. Although personal style is important to them, they’re not governed by trends. We listen to our customers and community for inspiration and feedback – the intention is to exceed their every expectation in unexpected ways.

Ralph Lauren states:

Our Purpose at Ralph Lauren is to inspire the dream of a better life through authenticity and timeless style. Each word is deliberate, deeply rooted in our history and in our culture. Inspiring the dream of a better life is not about material status, but about a life filled with hope, possibility and a sense of realness that never goes out of style.

We do this The Ralph Lauren Way – love what you do, be passionate, work hard, embrace individuality, work together, take risks, stand up for what you believe in and aspire to the best. The Ralph Lauren Way is what built this Company; these values are enduring and will help carry us into the future.

Lifestyle brand-businesses focus on embodying beliefs and behaviors that have meaning for a specific group.  Lifestyle brand-businesses aim to encourage, entice and excite people to want to belong to the community. Lifestyle brand-businesses want their products and services to help define how the customer wants to define their way of life. 

The latest entry into the lifestyle experience is Banana Republic, part of the Gap group. Banana Republic wants to become a lifestyle brand. This means adding home goods to the established clothing line. And, according to Banana Republic, the lifestyle strategy could mean adding hospitality.

According to The New York Times, Banana Republic is selling “… home textiles… having rolled out throw blankets, rugs and bed frames….” Banana Republic CEO, Sandra Stangl, indicated that the inclusion of home décor items gives Banana Republic “a bigger addressable audience.” CEO Stangl also admitted that adding these home-oriented items will help to “stabilize” the bran-business, as the pandemic and changes to work behavior and dressing impacted Banana Republic sales.

Observers are not particularly upbeat about Banana Republic’s lifestyle brand-business strategy. It is not just that the competition is tough. Will Banana Republic be able to capture the values, aspirations, attitudes of its target audience in ways that optimize the paradox of The Age of I? Will Banana Republic be able to satisfy individualism and inclusivity? Can Banana Republic create a world in which people can be self-expressive while wanting to belong in a Banana Republic-defined world?

One issue is how Banana Republic sees its market segment. According to the brand-business’ chief commerce and experience officer, Banana Republic has an opportunity because “… no company has more than 5% of the home market.”

This comment is a red flag. 

A market is a want: a customer want. If there is no want, there is no market.  A market is not a category: there is no home décor market. There is no lifestyle market. For Banana Republic to be successful, the brand-business needs to focus on the “want” for its lifestyle brand: who are the customers, why do they want this brand and what is the context for this brand? The retail lifestyle brand-business landscape is not unidimensional. Which brand-business is Banana Republic’s competitor according to customers?

There are probably many different customer-defined markets for lifestyle brands. Banana Republic does not define the market: customers do. Ralph Lauren or Anthropologie would probably say they are not competitors in the same market as Banana Republic. Nor would Ralph Lauren and Anthropologie agree that each is the other’s competitor.

Banana Republic is not alone in the pursuit of a lifestyle strategy. The Wall Street Journal reported that H&M, the Swedish fast-fashion brand-business is moving towards a lifestyle approach. H&M is adding home décor as well as makeup and brand-name items. And, then, there is Sporty & Rich, highlighted in The New York Times. Once an Instagram account; now, a lifestyle brand-business aiming to be “a younger person’s Goop.” The New York Times labeled Sporty & Rich as “ a brand world.”

Lifestyle brand-businesses are important in The Age of I. But, customers are savvy. Having a bed frame does not make a lifestyle. Banana Republic needs to define its market space, own it and then consistently deliver. What is the driver of Banana Republic’s ability to offer independence and interdependence, or as one professor states, our desire for separability and situatedness? In other words, what is the definition of Banana Republic’s optimization of individuality and inclusivity? Rather than starting with a bed frame, Banana Republic must articulate its promised experience in ways that are both provocative, persuasive and profitable.

Allbirds: Adore the Core

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Customers’ needs may alter. Markets may change. New products challenge the status quo. No matter how a brand-business landscape morphs, there are some evergreen brand-business marketing principles that must never be forgotten.

One principle is this: keep the brand-business core strong. A brand-business’ core must be continually re-energized, protected and strengthened. It is the brand-business core that will profitably finance a turnaround, keep a brand-business growing and provide a platform for the future. Ignore what core customers love about your brand-business at your peril.

This is the current situation at Allbirds, the sustainable shoe enterprise. According to The Wall Street Journal, Allbirds, once a Silicon Valley statement footwear brand-business, has “lost its way.” Allbirds lost its way by looking beyond its core base; by coveting others at the expense of Allbirds lovers.

Core customers already know what is great about a brand. When a brand-business expands beyond its core group, the brand risks losing its core group. When this happens, the goal must be to restore and repair core customers’ relationship to the brand-business. It is imperative to reinforce what core customers like about the brand. Encourage core customers to frequent the brand more often.

This is exactly what did not happen at Allbirds. And, now, recognizing the problem, Allbirds is making strategic changes to re-excite its core customer base. This is good. But, how Allbirds goes about its changes needs to be reviewed.

Stop the Bleeding


Allbirds first step is stopping the bleeding by trimming shoe and clothing options, opening fewer stores and creating more compelling footwear. This is a strategic necessity.

More Loyal, More Profitable Customers


Yet, nowhere does the Allbirds strategy say that it will aim at core customer frequency.

Here is a fact: it is easier to get a customer who already uses your brand to come a little more often than it is to attract a new customer who does not use your brand at all. When a brand-business is in trouble, the brand-business’ objective must be to stop the shrinking of the customer base and to increase purchase frequency. A small increase in frequency can make a huge difference to brand health. Coveting customers you do not have is not a pathway to profitability. Furthermore, a focus on tactics and products that might seduce specious segments becomes a major and financial distraction.

Allbirds needs to convince its core customers to buy at least one more time a year. And, perhaps if possible, have these core customers buy just one more item each time they are purchase ready. For example, Allbirds has seasonal footwear as well as athletic footwear
Etsy, the craft website changed its strategy in 2017. Etsy recognized the need to increase frequency among core customers. Etsy stated, “… we disclosed that about half of our buyers only buy once a year on Etsy. And, we really believe there’s an opportunity to bring those buyers, our existing buyers, back to buy more things on Etsy. So making it so that our existing buyers come back more than once, I think, is a big opportunity. Because half of them only come back once.”

There are reams of data showing the value of a core customer. Seminal research from Frederick Reichheld on the lifetime value of a loyal core customer essentially showed that as brand loyalty increases, the likelihood of defection decreases. Mr. Reichheld concluded that reducing defections by 5% could increase profits by 25% and more. Other research indicates that loyal core customers are 8 times as valuable as those who just consider the brand-business.

The reverse is true as well. Losing a small percentage of core customers will account for a disproportionate amount of lost income.

There are data confirming that it costs 3-4 times as much to attract a new customer as it does to keep a customer loyal. And, now that there are so many digital, online options for media, researchers show that these attraction costs may be as high as 6 times more for non-core customers. Focusing on core customers, strengthening their core brand beliefs is an excellent way to build brand loyalty.

Of course, brands must manage attract new customers while creating more brand loyalty among its core customer base. But, when a brand is in trouble, the first priority is to stop the hemorrhaging of the customer base.

Know Your Core Customers


One of Allbirds’ founders told The Wall Street Journal that core customers tend to buy Allbirds’ products because of price, stylishness and comfort. These attributes are features, potentially, functional benefits at best. But, what about the brand-business’ emotional and social rewards? Focusing on features and functional benefits alone does not help in understanding the customer.

Repeatedly, The Wall Street Journal reports an Allbirds focus on the age of the core customer and the age of the desired new customers. Is there a real understanding of the core customer and like-minded others that does not depend on age? Viewing the audience by age alone is dangerous.

Based on the original promise and mission of the brand-business, age was not a factor: personal values and rewards were key drivers. Sure, values and rewards shift as one ages, but not for everyone. And, many younger customers share or adopt values with those who are older.

Love your core customers if you expect them to love you. Ultimately, the brand-business’ aim must be more customers, more often, more brand loyal, more revenues and more profitable. When a brand has lost its way, the first focus must be to shore up the core customer base. In other words, adore the core or your brand is done for.

For Twitter To “Make History,” CEO Vaccarino Must Become The Chief Trust Officer

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Recently, new Twitter CEO, Linda Vaccarino, told the world that Twitter would be “making history.” CEO Vaccarino faces many challenges. Current business press describe Twitter’s challenges on a daily basis. One of Twitter’s most pressing challenges is its stultifying trust deficit. Twitter’s trust decay is said to be the result of Mr. Musk’s Twitter changes since his purchase of the social networking site. Here are just some of the issues highlighted by business writers and observers.

  • Advertisers are still “spooked:” by Elon Musk’s “laissez faire attitude about free speech and content moderation.” 
  • Elon Musk stated by March of 2023, Twitter’s ad dollars showed a slump of 50%-60%, depending on the specific press report. 
  • Fidelity Investments “cut its private valuation” of Twitter by one third. 
  • Mark Reed, CEO of WPP Plc, the world’s largest advertising organization, continued to advise clients that in regards to running ads on Twitter, clients should “proceed with caution.” 
  • Some big advertisers still stay away from Twitter as Mr. Musk eliminated the “guardrails” protecting Twitter from rampant “misinformation and toxic content.” 
  • New Twitter CEO, Linda Vaccarino, has as her first task to “stop the bleeding” of ad dollars. 
  • CEO Vaccarino told sales teams that “hand-to-hand combat would be on the agenda in order to “persuade” advertisers to return.
  • CEO Vaccarino’s job just became more difficult as owner Musk’s limits on user activity “… further erode” advertiser trust in Twitter. Said one industry director, “The advertiser trust deficit that Linda Vaccarino needs to reverse just got even bigger. And, it cannot be reversed based on her industry credibility.”
  • Fortune magazine reported results from a May 2023Pew Research Center study revealing that 60% of U.S. users had “taken a break” from the platform over the past year.
  • CEO Vaccarino defended Mr. Musk’s caps on allowable-number-of-posts-read by stating, “When you have a mission like Twitter you need to make big moves to keep strengthening the platform. This work is meaningful and ongoing.”
  • However, CEO Vaccarino’s statement and other Twitter statements appear to not be working. Fortune magazine reports that users “…continue to slam the company’s latest unpopular move.”
  • And, according to Bloomberg BusinessWeek on July 6, 2023, Meta’s Threads, its Twitter fighter, signed up 30 million users in its first 24 hours, 10 millions of these signed up in Threads’ first 7 hours, and there are currently 70 million sign-ups.  
  • The Wall Street Journal points out, Threads’ ability to entice advertisers is the real prize for Meta… and the real problem for Twitter. Facebook generates $115 billion in ad revenues while prior to Mr. Musk’s purchase and the loss of advertisers, Twitter generated $4.7 billion in advertising. Apparently, since its inception, advertisers have flocked to Threads. One reason is its Instagram base allowing advertisers to identify specific customers.

Amid its trust deficit situation, the now competitive market, and, hopefully, to galvanize Twitter’s employees, CEO Vaccarino articulated Twitter’s new mission and Brand-Business Promise. Ms. Vaccarino said, “Twitter is on a mission to become the world’s most accurate, real-time information source and a global town square for communication.” As for Twitter’s Brand-Business Promise, Ms. Vaccarino said, “…to drive civilization forward through the unfiltered exchange of information and open dialogue about the things that matter most to us.”

Two things. First, “unfiltered” exchanges are exactly what spook advertisers. Second, nowhere in the mission or promise do we read the word trust. Twitter wants to be accurate; Twitter wants to be an information source; Twitter wants to be a global town square for communication; and Twitter wants to be a positive change-agent for civilization. But, Twitter (and perhaps, Twitter’s users?) does not seem to care about being trustworthy.

This is problematic. To create positive, strong advertiser relationships, Twitter must become trustworthy. Trust is an essential asset in building and maintaining long-term relationships. Without trust, nothing else matters. Trust is indispensable when building a powerful brand-business.

To combat both internal and external trust deficits, CEO Linda Vaccarino must become Twitter’s Chief Trust Officer. Be the most trusted brand-business in every market in which you compete. Trust cannot be delegated. Trust is the CEO’s responsibility. Trust begins at the top. The CEO creates an enterprise and a culture.

Trust must be on the Twitter agenda. A powerful brand is more than a trademark; a powerful brand is a trustmark. For trust to develop, a brand-business must deliver its promise in a quality manner (consistently delivering against stakeholder expectations). 

With a new CEO, Twitter has an opportunity to become a trusted social medium in a world where institutional trust is in severe decline. CEO Vaccarino, in her role as Chief Trust Officer, should create a Trust Agenda that includes these four Trust building components.

  1. Be a credible source
  2. Have an excellent reputation 
  3. Be a pillar of integrity
  4. Have a responsibility ethic

Be a credible source

  • Twitter must become a credible source. Credibility means that what you say and do are plausible. Twitter must create believers. Is Twitter perceived as predictable, reliable and of quality? This means that users are satisfied. It means that users prefer the brand-business to alternatives. Fortune magazine reports that users are using Twitter less. Credibility means that Twitter must provide superior complaint resolution. And, must provide correct information.
  • CEO Vaccarino stated that Twitter would focus on becoming “the world’s most accurate, real-time information source.” At the same time, she indicated that Twitter would be “unfiltered.” This paradox promise of accuracy and unfiltered might work if Twitter were deemed credible. But, nowhere in the mission and promise is the idea that what you read on Twitter will be credible. If Twitter is not credible, then its information can be deemed not true and, then, not trusted.
  • Being a credible source means all stakeholders have confidence that Twitter provides true information. This is critical as communications from highly credible sources are more persuasive and more likely to be believed. 
  • A credible brand acts as a “quality” cue lessening client- and customer-perceived risk during decision-making. Credibility makes decision-making easier because the customer trusts the authority of the enterprise. 

Have an excellent reputation

  • Having an excellent reputation may be a tough challenge for Twitter. One of the troubling issues for clients has been the mercurial behavior of its owner. As pointed out in the business press, it is the “cavalier attitude” of Mr. Musk towards content that has sent shivers down advertisers spines. Having an excellent reputation means continually behaving in the same quality manner during each and every interaction. Reputation is a competitive advantage. 
  • Additionally, according to Bloomberg BusinessWeek, Mr. Musk has not been as transparent as he says he is when it comes to opening data to academics. Openness is critical for trust.
  • Reputation signals what a brand-business previously accomplished: its track record for quality, leadership, innovation and leadership. Think of reputation as a representation of the brand-business’ past behaviors and results. Twitter has a reputable past. But, there is a disconnect between Twitter’s past accomplishments and its recent actions. 
  • Reputation describes a brand-business’ ability to deliver valued outcomes to multiple stakeholders. 
  • Twitter does not create its reputation. Reputation is not something a brand-business determines.  Reputation is based on stakeholders’ perceptions. Reputation is the collective accumulation of stakeholder perceptions over time. 
  • Do not think that reputation is a theoretical construct. An excellent reputation facilitates client and customer decision-making. Reputation can increase business performance. For Twitter, this means helping to sell ad space at increased margin. 
  • It is not enough to say that advertisers have returned. Have advertisers returned with the same financial willingness? Are their budgets comparable to pre-Musk-ownership levels?

Be a pillar of integrity

  • CEO Vaccarino’s statements do not appear to cast Twitter as a pillar of integrity. And, maybe, Twitter does not want this role. The take-away is that in order for Twitter to be a transformed global town square, users and advertisers will be allowed to say and show what they wish… unfiltered.
  • Being a pillar of integrity means that all actions and behaviors, internally and externally, have the best interests of stakeholders at heart. Being a pillar of integrity means that stakeholders and others perceive Twitter as impartial and open-minded (Twitter is clearly focused on these two characteristics), but also perceived as respectable, just and unthreatening. Trust can help Twitter maximize these contradictory needs.
  • Integrity refers to a brand-business’s core values and purpose. Integrity derives from the brand-business’ guiding principles; the brand-business’ reason for being. Based on the limited information publicly available, it is difficult to know if any of Twitter’s underlying principles focus on integrity. Such principles should be basic truths and checkable claims.
  • As a pillar of integrity, a brand-business understands the value of its relationships with all its stakeholders. This value is more than monetary. Stakeholder value means generating a client and customer base that is larger, using more often, more profitable and more loyal. 
  • Integrity is seen through the eyes of all stakeholders. Does Twitter share values with its stakeholders? Does Twitter have stakeholder best interests at heart? Is Twitter accountable for its actions? Is Twitter perceived to be executing with ethical behaviors? Does Twitter have confidence in its employees? Who are the audiences for Twitter?

Have a responsibility ethic

  • Having a responsibility ethic means that as a global citizen or global forum, Twitter must behave positively on behalf of people, communities, nations and the planet. When Twitter states it wishes to be “the world’s most accurate real-time information source and global town square for communication,” Twitter must take some responsibility for what it does and what ensues. Complete freedom is anarchy. This is why we have laws. Having laws does not crimp freedom. Laws save freedom from anarchic destruction… or as Twitter’s mission of “unfiltered” appears to be advocating, participatory anarchism.
  • Responsibility can influence brand preference. Data show that a brand-business’ social reputation influences purchase decisions. Customers and clients are drawn to brand-businesses that “do good. These same groups are not averse to boycotting or publicly berating those perceived to be “not responsible.” 
  • CEO Vaccarino’s rejoining the Tech Coalition is a good first step. A pan-industry group, the Tech Coalition is dedicated to child safety. Owner Musk had pulled out of the coalition in March in order to save the $40,000 membership fee.

Chief Trust Officer is not a function. It is a fundamental leadership responsibility. The role of the Chief Trust Officer is more than a title. It is an indispensable trust-building task of major cultural significance inside and outside the enterprise.

As Chief Trust Officer, CEO Vaccarino must create and implement a trust agenda. A trust agenda provides direction for how the enterprise will build trust across geography, people, local communities, nations and time. A trust agenda’s goal is to create and reinforce trustworthy stakeholder relationships, which are the basis for high quality revenue growth.

art basel brand

Art Basel: Brand-Business Building Is Not Just For Packaged Goods

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Branding is not just about advertising, although many marketers view branding as such. Branding is not just about message management or device management or digital management. Branding is about promising to profitably deliver an expected relevant, differentiated, trustworthy experience to a specific audience. 

Many pundits argue that brand management is best operationalized in the realm of packaged goods, such as the stuff that P&G sells. But, as the worlds of automotive, appliances, computers and farm equipment show, branding is vitally important in durable goods. Brand is also critical to the success of luxury goods. Some of the world’s best known and best-marketed brands are luxury goods. So, it is not surprising that brand is now front and center in the world of art. As one gallerist stated, we sell luxury items at luxury prices.

Recently, the future of Art Basel, the international art fair, has been linked with being a successful global brand-business. Mr. Noah Horowitz, Art Basel’s new CEO, and James Murdoch (Mr. Murdoch’s private investment firm, Lupa Systems, now holds 49% of MCH Group, the Swiss parent of Art Basel) have been quite vocal on the potential of Art Basel to become a major global, cultural brand, similar to Formula One.

Both leaders spoke out on the subject. The vision for Art Basel is to be a cultural experience that draws on and “engages” other cultural forces such as fashion, film, music, design, cuisine and connections, with a mingling of social classes. Of course, at Art Basel, there is the job of delivering high-end art pieces from galleries to clients. But, surrounding this upscale mercantile necessity is a vibrant sociocultural gathering and economic marketplace. Mr. Murdoch has cited Formula 1 as an example of such a happening. For example, when Formula 1 comes to Miami, the experience goes well beyond the actual race. Think reserved best-of-Miami-restaurant tables on Miami Beach, for example.

According to Mr. Murdoch, the vision for Art Basel is similar to a ‘traveling circus” that appears in a city with various contiguous events – not just buying and selling art but entertainment and dining, attended by people of various social classes. The traveling circus becomes a “a gathering, a center of gravity” for a significant cultural co-mingling and creation.

In the mind of Mr. Murdoch, there are few “brands” that can pull off such a feat. Formula 1 can. And, so can Art Basel. TED had this for a while. Its concept of Ideas Worth Spreading was, at one time, the de rigeur place to bring your vision. But, TED has not generated the ancillary “marketplace” for and engagement with the cultural community about which Mr. Murdoch and Mr. Horowitz speak. And, its audience for its two main conferences was not socially flat.

This type of movable, cultural festivity is not a new idea. The vision for Art Basel is similar to Medieval fairs. Medieval fairs were significant economic events in Medieval towns. Merchants across various European towns would come together to buy and sell goods. Vendors would sell items like rugs, textiles and spices. Medieval fairs were the main way merchants could sell and trade goods, locally and internationally. But, around the merchants’ stalls, contiguous to the fairs, were social happenings. There was entertainment provided by jesters, jugglers, magicians, poets, musicians, strolling players, dancing bears and plays. People danced, played games, ate and drank. Part of the cultural co-mingling was the fact that people from different backgrounds came together. Aside from merchants, there were locals, itinerants and the international sellers; there were peasants and nobles. The fairs were a source of amusement, enjoyment and allowed people to step away from their daily, possibly, mundane lives.

Building a brand-business, however, is not just having the vision. Building an Art Basel brand-business is a strategic, ongoing plan. What is the Art Basel Brand-Business Promise? What is it that Art Basel will deliver, to each participant, time and again, that is relevant, differentiated and trustworthy? What are Art Basel’s functional benefits, emotional and social rewards, values of the participants, personality of the brand and features that support these criteria? 

Before Art Basel can become a powerful brand with its powerful purpose, the Brand Promise must be clearly defined. 

Although not yet fully formed in statements to the press, Mr. Murdoch and Mr. Horowitz have, in some ways, articulated the purpose of Art Basel: to be a powerful, cultural gathering of community and connectivity – a center of gravity in the cultural space – with a focus on the artistic and cultural life of the area.

(In many ways, this purpose reflects the tug-of-war in the luxury arena between being the purveyor of very expensive luxury goods (i.e., art) and the all-encompassing socioeconomic theater of cultural expression. Many luxury brands struggle with being available everywhere and being rare. There is no question that the selling and buying of high-end art is a luxury enterprise.)

Think about how one creates a Brand Promise. First, one must define who the brand will be for: who are the people for whom this brand will appeal? Interviewed, Mr. Murdoch suggested the potential audience, outside of the buyers of luxury art, are those who have an appetite for culture; who are truly excited by the changing and challenging world of fine art, film, music, food, beverage and fashion. These are individuals who want to be connected “to the creators who are developing new ideas,” many of whom are community-based.

Second, what are the emotional and social rewards these people who are not potential buyers of luxury art want from their Art Basel experience? What are the emotional and social rewards of Art Basel for this identified audience? Mr. Murdoch hints at the benefits for participants in his recent artnet.com interview. For some, Art Basel will help people realize what is going on culturally and artistically. As a service to the community (city), Art Basel allows people to engage developing a broader creative perspective. For local creators, Art Basel is a cultural platform for intriguing participants with their creations.

Third, what possibly is the brand personality of this future-forward Art Basel brand-business? Again, both Mr. Murdoch and Mr. Horowitz suggest that Art Basel will be innovative, creative, bold, exciting, engaging, in touch with a changing world.

Fourth, what are the functional benefits of this future Art Basel? The fair-like, community atmosphere offers individuals a chance to engage with local creators; learn what is happening culturally; be a part of a larger artistic cosmos; participate in cultural events; and purchase art.

And, fifth, what are the supporting attributes of Art Basel: what characteristics would this Art Basel brand-business have that would bring Art Basel to life and provide its credibility? Extrapolating from the press reports and statements, the features of this future Art Basel brand would be galleries selling their artworks some of which are ‘trophy-level”, an immersive experience of varied cultural and artistic events, community involvement and engagement, showcases of local creativity, dining experiences.

In very broad strokes, using this five-bucket format, this future Art Basel will be: For people who desire community engagement and are excited by our changing cultural world; Who seek a broader cultural perspective or who want to share their art to intrigue others; Creative, festive, innovative Art Basel offers people an opportunity to engage with local creators, learn what is happening culturally, participate in events, and purchase art. Art Basel will do this because it offers trophy-level art, varied cultural experiences and community level engagement.

Regardless of the industry or category of a business, brand-business building is applicable and extremely beneficial – and necessary – for enduring profitable growth. But, brand-business building takes discipline. It is not enough to say that you are going to create a brand-business. It is not enough to state a vision. The enterprise must commit to the basic, evergreen principles of brand-business building. Do not pass go until the purpose and promise are clearly articulated. A brand-business must know where it wants to be and what it wants to be in the future world in which it will win.

Ian Schrager Hotel Segmentation

Ian Schrager May Be (Thankfully) Transforming Hotel Segmentation With His Public Brand

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The hotel industry uses a segmentation designed by consultancy STR that is all about price, service and amenities. This segmentation uses language that most humans would find bizarre when thinking about their hotel stay. No matter how many consultants provide insight to hotel groups, the default is always price, service and amenities. The STR hotel segmentations basically looks like this: Economy, Mid-Scale, Upper Mid-Scale, Upscale, Upper Upscale and Luxury.

But, now, possibly, as intriguingly described in Bloomberg BusinessWeek, Ian Schrager, entrepreneur, hotelier and co-founder of famed Studio 54, has decided to defy the conventional hotel segmentation approach in describing his vision for his new hotel idea. Mr. Schrager wants to create hotels that are luxury but without the services and amenities. Mr. Schrager wants to create hotels with luxurious experiences that do not depend on multiple on-site staffers and niceties.

In other words, M. Schrager is looking at the hotel from the guest’s standpoint, appealing to their emotional and social rewards associated with experiences rather than the owners’ views as to “… how little can I offer for the room fees I am charging?”

According to Mr. Schrager, the idea for expanding and enhancing his already established lower Manhattan Public hotel is based on his observation that “… luxury has a new and different meaning today. Luxury right now is having freedom – freedom from hassles to make everything easy, freedom of time, freedom to devote your personal tie to the things that matter to you.” Mr. Schrager envisions a chain of these hotels.

This new luxury concept turns the standard STR segmentation on its head. Forget the linear track from Economy to Luxury. In this new world, Economy and Luxury are merged: a luxurious lifestyle feel of bold and cool delivered minimal staff and lack of goodies. Mr. Schrager compares his new Public concept to his legendary (notorious) Studio 54. The aura of luxury is delivered socially – a mixture of celebrities and locals of all ages– rather than by “white glove services that are over two hundred to three hundred years old.” 

The new Public will be a new “genre.” At its core is a “soul of luxury” packaged into a lifestyle hotel configured with less expensive, limited services. How is this such an explosive thought? Here are the standard STR definitions of hotel segments (see STR online definitions):

Economy hotels: Tend to have a mix of mostly K-type (king-size) rooms, offer only a self-serve breakfast and usually lack function space and recreational facilities.

Midscale hotels: Usually have a mix of mostly K-type (king-size) rooms, offer self-serve breakfast only. They may have limited function spaces (if so I typically is about less than 1 seat per key) and offer fitness room and/or swimming pool.

Upper Midscale hotels: Typically have a mix of mostly K-type (king-size) rooms, may offer full service or fast casual model F&B facilities. They offer a function spaces (about less than 2 seats per key), fitness room and may have a pool.

Upscale hotels: Typically have a mix of mostly K-type (king-size) rooms. May offer full service or fast casual model F&B facilities. They offer a function spaces (about less than 3 seats per key), fitness room and swimming pool.

Upper Upscale hotels: Typically have a mix of mostly K-type (king-size) rooms and Club level rooms, they will offer at least 1 full service 3 meal restaurant plus one bar or lounge. They offer a function spaces and business center (a minimum than 3 seats per key), fitness room and swimming pool and they might have a spa.

Luxury hotels: Typically have a mix of mostly K-type (king-size) rooms and Club level rooms. Typically, they have two or more restaurant plus one or two bar/lounges. They offer a function spaces and business center (a minimum than 3 seats per key), fitness room and swimming pool and spa facilities.

As you can see from the definitions of the hotel segments, the merging of Economy and Luxury is antithetical to hotel owners.

Of course, there is a financial benefit to an economy luxury hotel. Margins are better at economy style hotels. Luxury hotels have much more overhead what with staff, bathrobes, slippers, towels, restaurants and spas. Since Mr. Schrager does not franchise his hotels, he is quite conscious of margins, according to Bloomberg BusinessWeek.

But, just imagine the merging of both ends of the hotel segmentation. Imagine a segmentation that includes the guest’s emotional and social desires. Mr. Schrager believes that the first iPhone exuded these same qualities of desire, luxury, simplicity, “design and utility.” When you first opened the iPhone box it was a “wow” moment.

If Mr. Schrage pulls off this new concept in hospitality, and there is no reason to doubt his success, the standard approach to hotel segmentation may forever be altered. No potential guest discusses their hotel stay using language like Upper Upscale or Upper Mid-Scale. The hotel industry would be able to create properties designed to satisfy guests’ functional, emotional and social benefits while reflecting guests’ personal values.