boeing building

Boeing and Starbucks Have A Common Brand Problem: Trust Generating Trust Capital

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Two of America’s foremost brands have new CEOs. Both brands appear to be in crisis. These two brands are very different. One brand is a consumer café brand. The other brand is a durable goods, engineering brand. 

Boeing and Starbucks. 

You could not find two more unrelated brands. And, yet, Boeing and Starbucks have a significant issue in common. This issue is so significant that it should be on the turnaround agendas of both of the new CEOs. 

That common significant issue is trust generating Trust Capital.

You may be thinking that trust in Boeing and trust in Starbucks have totally different implications. After all, trust in Boeing revolves around personal safety, in extreme situations, life and death. Trust in Starbucks revolves around the quality delivery of the expected total brand experience time and again. There are no life and death ramifications when choosing Starbucks, although it may seem like it when you really need that caffeine hit.

Trust is a complicated and elegant component for any brand. Trust is an absolute necessity for brand value. And, brand value is integral to Trust Capital. Research identifies trust as having a significant effect on brand value. And, brand value influences loyalty. And, without brand value there is no shareholder value. 

In a working paper from 2001, research supported the facts that trust

“… creates value by a) providing relational benefits derived from interacting with a service provider who is operationally competent, benevolent towards the consumer, and committed to solving exchange problems, and, b) reducing exchange uncertainty and helping the consumer from consistent and reliable expectations of the service provider in ongoing relationships.”

In other words, trust is the willingness of one party to rely on another partner to deliver what is expected. Trustworthiness relies on employees as well as management policies and practices designed with the customer’s best interests at heart.

Other trust definitions are “a willingness to rely on an exchange partner in whom one has confidence.” Or, “the expectation held by the customer that the service provider is dependable and can be relied on to deliver its promises.” Trust is fundamental in building and maintaining long-term relationships, both personal and brand-business. Trust enhances the quality of a relationship and minimizes perceived risk, financial or otherwise. 

Bottom line: People prefer to do business – whether business-to-consumer or business-to business – with brands they trust. 

A few years ago, the global financial services group, Deloitte, referred to trust as currency. Deloitte stated that trust is an exchange of value. Deloitte defined trust as “… our willingness to be vulnerable to the actions of others because we believe they have good intentions and will behave well towards us.”

Whatever your trust definition, to succeed – to win, organizations must build trust and generate Trust Capital. “Capital” means “… money and/or other assets and resources that contribute to the health and enduring profitable growth of the enterprise.”

In general, most brand-businesses focus on three forms of organizational wealth: Financial Capital, Intellectual Capital and Human Capital. But, Trust Capital is a critical fourth component.

Financial Capital is the money used by a brand-business to buy what it needs to make its products. Financial Capital is the money allocated to provide services to the sector of the economy in which its operation is based.

Intellectual Capital is the combination of three things. 1) Intellectual Capital is the organization’s intellectual property including trademarks, patents, licenses and brands. 2) Intellectual Capital is the brand-business’ unique processes, databases and infrastructures. 3) Intellectual Capital is the brand-business’ special customer, franchisee/owner-operator and supplier relationships for building and maximizing the organization’s wealth.

Human Capital is the collective skills, knowledge or other intangible people-assets of the brand-business’ individuals. Human Capital is the “people talent” of the brand-business helping to create economic wealth.

Add Trust Capital to these three.

Trust Capital is stakeholder confidence in the leadership, credibility, integrity and responsibility of a brand-business to deliver its promises of value to its stakeholders. Trust Capital is a value-creating asset. Trust Capital is an intangible asset that increases the power of marketing expenditures and reduces the cost of new brand introductions. 

Trust Capital is what the organization draws on during troubling events, mishaps or crises, such as coronavirus, plane crashes, perceptions of socio-political-cultural bias or eroding customer traffic. Trust Capital is a most valuable asset in those occasions when a brand needs to defend itself during unexpected, unfortunate situations. Generating and accumulating Trust Capital in a trust reserve – a Trust Bank – provides a trust buttress helping to weather crises of character. 

Trust Capital helps to create enduring profitable growth. But, although Trust Capital is an intangible asset, Trust Capital is an asset that strengthens brands, bringing stability, organizational confidence and the generation of future potential earnings. Aside from the myriad of issues facing Boeing and Starbucks, both Boeing and Starbucks need brand strengthening, organizational confidence and the hope of generating future potential earnings. 

Boeing and Starbucks demonstrate how easy it is for trust to become mistrust in a matter of moments. Whether there has been a disaster or a crisis of mismanagement, having a full Trust Bank reserve of Trust Capital stabilizes the situation helping organizations return to their trusted relationships with stakeholders. It appears that both Boeing and Starbucks have depleted their Trust Banks, especially among their various stakeholders.

Boeing and Starbucks have vastly different operational issues. There are also vastly different constituencies to satisfy. But, trust and building Trust Capital are essential for both brands. And, both brands have new CEOs who can add trust and Trust Capital to their other important, must-do’s strategies. 

When it comes to trust and building Trust Capital, what can Boeing and Starbucks add to their turnaround plans? 

Here are four actions to take right now.

First, create a Trust Agenda.

It is critical to produce the right results by doing the right things in the right way.  This principle applies to every stakeholder relationship. In order to grow trust and generate Trust Capital, the new CEOs at Boeing and Starbucks must have a corporate strategic platform based on a Trust Agenda. This Trust Agenda addresses issues such as: 

  • How will we build trust across our geographies, our brands, our people, our shareholders, our franchisees, our partners, our suppliers and our local communities? 
  • How will we build trust chains throughout all of our relationships, internal and external? 
  • How will we ensure that we include corporate responsibility is integrated into all of our decision-making? 
  • Are we a good global and local corporate citizen? 
  • How sustainable are our actions? A Trust Agenda will ensure that a sustainability opportunity is on the front burner. This means meeting the needs of customers, communities and businesses without compromising the needs of future generations. 

Having a Trust Agenda allows an organization to be a steady force for good while not standing still.

Second, the CEO must be the CTO, Chief Trust Officer.

The new CEOs at Boeing and Starbucks cannot delegate the leadership necessary for building trust and generating corporate Trust Capital. Trust Capital-building is a CEO responsibility. The CEO is the Chief Trust Officer. Chief Trust Officer is a fundamental, ongoing, leadership responsibility. Trust building begins at the top. The CTO role must not be delegated.

The role of Chief Trust Officer is more than a title. CTO is an indispensable, trust-growing and Trust Capital-building task of major cultural and financial significance inside and outside the organization. Studies show that increased trust is a critical factor leading to increased preference and loyalty, generating high quality revenue growth. 

Third, do what you say you will do.

Do what you say you will do is the foundation upon which trust is built. It is a cliché to say that actions speak louder than words. It is a cliché because it is so true. Nothing kills trust more than promising and not delivering. Boeing must deliver high quality, zero defect airplanes. Starbucks must deliver high quality coffee and the Starbucks connoisseur café experience.

Fourth, build Leadership, Credibility, Integrity and Responsibility.

  • Leadership must be demonstrated, not merely claimed. The brand-business must be a thought leader. Is your brand-business perceived to be innovative? And, are you growing in size? 
  • Credibility means your statements and actions are plausible. Be dependable. Be capable, competent and an expert in your field. Provide superior complaint resolution. Be a trustworthy source of information. 
  • Integrity means having customers’ interests at heart. Be accountable for actions. Behave ethically. 
  • Responsibility provides competitive advantage. Demonstrate good global corporate citizenship. Corporate Social Responsibility is not a separate division within the organization. It is a way of doing business. 

As the Edelman Trust Barometer continues to show, there is a global trust deficit. Building trust must be a brand-business priority. Accruing Trust Capital is essential for high quality revenue growth for profitability and success. Without trust there is no brand value. Without brand value there is no shareholder value. Trust plays a critical role in perceived value. Trust Capital leads to high quality revenue growth. 

Businesses want brand-businesses that businesses can trust. Trust is must. The recent story of Costco in The New York Times shows the power of trust and Trust Capital. In describing Sol Price, Costco’s founder, the co-author of The Joy of Costco said, “Everything was about trust. He (Sol Price)  would rather lose your business than your trust.” For Boeing and Starbucks, having  new CEOs provides the needed jump-start for rebuilding trust and generating Trust Capital.

Walmart Where Frugal Is Fashionable

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“Consumers are trading down to lower-priced items and those cans and boxes in the back of the pantry staples are now on the table,” The Wall Street Journal.

“… soaring sales of Popov Vodka and Majorska Vodka … at $9.49  and $7.99 a bottle … these are vodkas that languished for years next to the Grey Goose and Chopin … at $36 plus,” The New York Times.

“The consumer’s new mantra is value,” Financial Times.

The Wall Street Journal also reported that a consumer proudly showed off a bottom round roast she had found in the meat case of her Costco that was marked down to $7.21 from $18.26. Costco is not about buying cheap; it is about buying smart. After all, as Taco Bell would say, “Why pay more?”

Sound familiar? 

All four of these statements are from 2009. Today, consumers are falling back on shopping behaviors developed fifteen years ago. Many of these consumers are copying behaviors observed when they were kids. 

But, let’s be real. 

“Smart shopping” has been around for a very long time. Wal-Mart and Costco were not born last year.  Tesco in the UK did not just appear on the scene yesterday. Private label growth has been increasing for a long time. At Aldi, 95% of the goods in the stores are Aldi’s own brand.

This is what is happening: the current economy is once again putting a magnifying glass on the long-term importance of price-value. As Walmart just reported to Bloomberg BusinessWeek, “We are seeing that the consumer continues to be discerning, choiceful, value-seeking.” As CNN reported, “… shoppers are looking for deals after years of higher prices and interest rates and now a slowing job market. Although inflation has fallen to its lowest level in three years, Americans are still paying more than they were for groceries, housing and many goods.”

Consumers continue to be more informed, more demanding, more quality conscious, more convenience conscious, more environmentally conscious, more value conscious, more price conscious and, now, more price-sensitive than ever.

Online, CNN stated that, “… consumer spending, the backbone of America’s economy, is still resilient. Consumers are just being more selective about what they buy and where they shop.”

Frugal is fashionable. 

In the flight to frugality, consumers are moving from conspicuous consumption to careful consumption; from status conscious shopping to conscientious shopping.  This careful, conscientious consumption is not confined to those strapped for cash. Walmart states that “In particular, wealthier shoppers have been a meaningful driver as they search for deals, too.” 

Reporting indicates that higher-income shoppers represented most of Walmart’s market share gains. With an emphasis on online, spruced-up stores and its new own-brand, bettergoods, Yahoo Finance indicated that Walmart intends to keep these “… higher-income households by making shoppers think, ‘Hey! This is not the Walmart from 10-15 years ago.’”

Walmart continues to be a haven for shoppers seeking “a broad assortment of items and services.” As one analyst said, “The only place anyone is shopping right now is Amazon, Walmart and Costco. Walmart does a great job focusing on value. Value has become more important. Structurally, they’re well positioned.”

Shoppers are focusing on affordable groceries and other essentials. Walmart kept its grocery prices flat. Shoppers noticed. This is where Walmart shines: mass affordability. Mass affordability makes frugal fashionable.

“Mass Affordability” represents opportunity for the savvy brand marketer and always has been a winning opportunity. It is a fundamental marketing truth that mass affordability wins. 

  • Henry Ford made automotive transportation affordable.
  • Sam Walton made retail purchases affordable for the people in the small towns.
  • Ray Kroc made eating out affordable. He even put the 15-cent price point on his sign.
  • Bill Levitt, the founder of Levittown, made single-family homes affordable for everyone
  • H&M made fashionable clothes affordable
  • IKEA made stylish furniture affordable.
  • Aldi competes with high quality, low priced items
  • VW — the “people’s car” – an affordable reliable car for everyone
  • Swatch made low priced, affordable, watches stylish.

These brands and others have focused on the relationship between price and value. It is called price-value for a reason. Price comes first in defining mass affordability. Brands that ignore affordability such as Disney or Starbucks find themselves in dire straits. Brands that spent the last four years raising prices are not feeling the pinch from consumers who are opting for lower priced options and high quality tore brands.

Instead of asking “What do I want, can I afford it?” Consumers ask, “What can I afford? What am I willing to pay? What is the best value I can get at that price?” Price is the mass affordability decision gate.

Price is critical. The brand defines price. Price and value are not the same. The brand does not define value. Price, along with time and effort are costs that consumers factor into their value assessment of a branded product or service. Consumers define value. Value is the brand costs relative to the brand’s experience multiplied by trust. Price is just one of a brand’s costs.

Walmart knows this. Walmart understands that all consumers are value consumers, regardless of income. This is why Walmart offers branded value that amazes at prices that excite. Walmart understands that a price-value strategy is not just a tactical calendar of a series of price promotions. Walmart understands that value must be available all the time. Walmart understands fair value. But, instead, goes beyond fair value to amazing value. Amazing value is a great brand with its great branded experience at a great price. Amazing value is when a shopper says, “Wow! I didn’t think I could get this great value at this great price!” 

At its most recent earnings call, Walmart reported that US comparable sales rose 42% in the last quarter compared with same quarter a year ago.

Walmart also indicated that consumers focus on groceries. But, its shoppers are also purchasing discretionary items. Walmart stated that its prices are generally lower than other retailers. “We know that they’re looking for value and their dollars are stretched, they’re focusing in on those things that are providing value for them,” CFO John David Rainey told Yahoo Finance. Walmart is perceived to be amazing value.

How can brands and brand businesses manage is a world where frugal is fashionable? 

  1. Create branded value that amazes at a price that excites. 
Offer value that amazes at a price that excites. In other words, “Great brand, great quality product, great branded experience and great price.” Do not cheapen the quality of the offer to meet the price. Value that amazes is a great brand providing unique, high quality at a price that excites. Branded value that amazes at a price that excites is irresistible.
  1. Start with the price-point. Then, design distinctive value that amazes. The price must entice.
Engineer and innovate the offer. Design distinctive offers. Brand the price-point
Make it a branded signature price-value offer. Own a price-point perception.
  1. Create an Every Day Low Price strategy
Offer predictable prices. Have predictable offers.
Walmart is an EDLP retailer. According to The Wall Street Journal, Walmart is thriving. Rather than constantly dealing, Walmart is ensuring its perception as an affordable place to shop for all sort so items. Relative to its competitors, Walmart is an EDLPAV retailer: Every Day Low Price Amazing Value.
If a brand is offering deals, marketers should reduce deal-focused messaging to less than 20% of its expenditures.  
  1. The brand must be perceived to be value.
The entire brand’s offerings must be perceived as “value.” This means providing superior value at all price-points. Just having a few “value items” is not true value, it is voodoo value. Remember: every customer is a value customer. No one wants to purchase a “poor” value.
  1. Change thinking from “profitability of the item” to “profitability of the customer visit”  
Margins are important, but an obsessive focus on item margins will marginalize the brand. Focus on the profitability of the visit and the business. 

Price-value is the eye of the marketing storm. Having a strong brand, providing high quality, and getting the price right is the best way to be ready to weather anything and, not just for today, but for the times ahead.

Frugal is fashionable. Now is a great time for branded value that amazes at a price that excites 

If this sounds like a cliché, it is because it is true: Great brand, great quality, at a great price will win.

As Walmart told Bloomberg BusinessWeek, “They (people) want value.” 

 
disney florida park, magic kingdom

Disney And The Erosion of The Three Dimensions of Ease

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Ease is a multi-dimensional concept. Innovators, brands, entrepreneurs, organizations and others must recognize that it is essential to deliver on the Three Dimensions of Ease: ease of choice, ease of use, and ease of mind. 

People do not want to feel stupid. If a product or service is too complex or confusing, we do not feel comfortable. If too much effort and or time are required to choose or use, we feel frustrated or defeated. Humans are pain avoidance mammals. Discomfort is painful. We will avoid interacting with products and services that make us feel uneasy.

There is another reason to address the three dimensions of ease. It is based on work conducted by Nobel Prize winner Herbert Simon in 1956. Professor Simon’s focus was the decision-making process. He coined a word, “satisficing” that is a blend of satisfy and suffice. 

Satisficing is a decision-making strategy that attempts to meet criteria for adequacy rather than to identify an optimal solution. In situations where there are many choices or many choices are presented one by one, finding the best choice can be a hopeless quest.  We become stymied: we will opt for the first choice or opt for a choice that appears to address the most needs. In either case, we do not make the best choice. 

Additionally, our inherent desire to make simple, effortless choices in the face of too many, uncertain options, forces us to default to the cheapest, the most expensive, or whatever choice feels satisfactory whether it is best or not.

Brands addressing ease on all three dimensions have an advantage. If a brand loses its ease advantage, that brand will probably become less desired.

This is why the Disney brand’s dilemma is so unfortunate. Disney has finally made its streaming profitable and highly competitive. At the same time, Disney’s park performances are now less stellar. 

Marketers need to stop blaming outside events for marketing mismanagement. The reduction of Disney park visits can no longer be blamed on COVID. Nor is the reduction of Disney parks visits only the fault of lower income customers struggling to make ends meet. According to the information from a story in The New York Times, it appears that Disney has defaulted on The Three Dimensions of Ease.

The Three Dimensions of Ease

Ease of choice

Choice should be easy. We want more choice, and more personalization. But, we want choosing to be simple. Making a choice should be easy. It should require a minimum effort, and not take a lot of time. We do not want to spend a lot of time on a choice that should not take huge amount of energy to make.  In other words, we do not want increased mental and physical effort.

We do not want decreases in the speed of our decision-making. We live in a world of “now,” and that means we have expectations about making good, satisfying decisions quickly. Our current technologies allow us to swipe an icon to make an immediate purchase on our smartphone. We have become used to “instant” choice satisfaction. The idea of slowing down to make a choice is agonizing.  Apps and Amazon have made selection immediate. We are rewarded with immediate gratification.  

Under its previous CEO, Disney not only raised prices across the Disney parks’ board, Disney also started charging for products and services that used to be free. The price of a Disney visit skyrocketed.

When Robert Iger returned to run Disney, there was movement on restoring some of the free services and lowering some prices. But, according to The New York Times, the cost of a Disney vacation has skyrocketed. This makes a Disney visit a difficult choice. Can I find a family vacation that will be more affordable and as interesting?

Disney visits used to be “no-brainers” if you had children or if you were a life-long fan. Now, Disney appears to be losing some of its easy-to-choose cachet. 

Ease of use

We should live in a user-manual-free world. Service options should not require a lot of explanation. Once we easily choose, use of the product or service should be easy. People have so many things happening in their lives: people do not need to waste precious time and energy on learning how to use or navigate a product or service. It is the role of the provider to take the complexity out of choice as well as the use. Further, overly complicated products and services cause us to feel inept or inadequate and, sometimes, cause us to feel stupid or extremely frustrated.

Ease of use is essential, especially when it involves technology. Many companies get this right. But, then there are those companies that seem to make it more difficult.

Disney seems to be falling into the category of making the technology for ride-decisions difficult. Navigating Disney’s tools for rides changed from an easy-to-use and free Fast pass technology to something called Genie+ which is not free and not easy to use. Then, Genie+ morphed into Lightning Lane Multi Pass at a cost of $30 a day. Again, not easy to use. And, apparently, highly frustrating while requiring a lot of attention and vigilance to continue to score places on popular rides.

Ease of mind

It is not enough to be easy to choose and easy to use. People want to feel comfortable with their decision.  They want to feel reassured that they made the right choice. “Am I comfortable with the decision? Now that I am using this product or service, am I satisfied with the choice?” Am I doing the right thing for me? Am I doing the right thing for my family? Am I doing the right thing for my pet? Am I doing the right thing for the community? Am I doing the right thing for future generations? People want to feel right about their decisions rather than feel regret. And, people want to know that the brands and organizations with which they do business are doing the right thing. Are employees treated properly? Is the company a good global citizen?  Does the company have my best interests in mind? Is the brand or the company a decent contributor to my communities? Are the brand and corporate leaders making ethical decisions?

There is a concept called Prospect Theory that describes how people tend to prefer making decisions that are defined as “gains” rather than “losses.” In business, this means framing the decisions in terms of profitability.  It is similar to the value equation that runs through consumers’ minds.  What will I relative to what I will pay?

The costs, complexities and frustrations of a Disney visit seem to be overriding the joy and delight for many, at least the adult payers and planners. When the total brand experience marvel of Disney is marred by the total costs of money, time and effort, Disney’s value equation is thrown out of whack. Disney begins to lose its original vision, mission and purpose:

To be a place where the whole family can have fun and escape from the stresses of the real world. A place where Disney will make a safe, high quality, affordable, magical place appropriate for the whole family.  And, create happiness.

Disney just announced that it will expand its offerings in cruises and theme park experiences. The Wall Street Journal wrote that Disney is under “pressure to add new attractions as revenue from the Experiences unit softened recently.” Disney appears to convey that its “moderation of consumer demand” at Disney parks possibly reflects the need for an extreme re-imaging. This means that the Experiences division will be spending money to add new attractions that will “justify” the expense of a Disney visit. Will new experiences generate visits?

Maybe.

Disney should take a look at the entire value equation, remembering that it is the customer who defines value. And, Disney must keep in mind that price is not the only cost customers review when assessing value. In the customer’s value equation, time and effort are also key elements of cost, not just price. If the new Disney park experiences are still difficult to choose, difficult to use and cause frustrating psychic unease, then no matter how extraordinary the re-imaging and anticipated magical delight, customers will still opt for joyfulness and happiness elsewhere.

It does not matter whether your brand is affordable, premium-priced, packaged goods, durable goods, product or service, ignoring The Three Dimensions of Ease is major mismarketing.

party city

The Personalization of Party City

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In the 1970’s, the advertising agency BBDO had a set of principles for building, nurturing and managing brands. One principle was “Know your prime prospect.”  A second principle was “Know your prime prospect’s problems.” The concept was this: find out everything you can about who is the core customer for your brand. Know that customer inside out. Know your customer’s opinions, attitudes, interests, personal values. Know your core customer as if this person were your best friend. Then, figure out what troubles this core customer when it comes to your brand. What are the core customer’s problems with the category? With specific brands within the category? With your brand, if this is not a new product? After all, humans are pain avoidance mammals. And, we are great at complaining. We are very specific when it comes to problems, concerns, worries.

The principles of knowing your core customer and your customer’s problems are evergreen. Every marketer must begin with the core customer. Innovation and renovation must begin with the core customer.

Intimate knowledge about your customer has always been and will continue to be de rigeur for successful branding. A brand will not survive if it is aimed at everyone. If everyone is your customer then there is no relevant differentiation. A brand focused on everyone is a brand that a lot of people like but few love. Real brand loyalty is comprised of brand lovers. Deal brand loyalty is comprised of leavers. Real loyalists follow their heart. Deal loyalists follow the deal.

Data help marketers intimately know their core customers. Personalization continues to be a force with which marketers must manage. People value brands that create personalized experiences. Personalized brands promise to meet an individual’s physical, psychological, social and emotional needs. Personalization reinforces respect, status, and positive self-image. Data tell you about behavior: the what it is that we do. The marketer must synthesize the why: why do we behave in this particular manner.  Personalization is possible because of data. But, the data must be interpreted properly. 

When the brand delivers personalization, experience is key. Personalization is experiential. Personalization delivers a branded experience that recognizes and reflects the customer and is exclusively designed to meet an individual’s needs for a particular occasion. 

This is why personalization differs from customization. We tend to use the words interchangeably; this is wrong. Customization focuses on features and functions, the practical aspects of a brand, readying the brand for a transaction. A custom-made Nike shoe is about finding the features you like, colors, stripes, laces, and so on, creating a transactional event. This transactional event is similar to using your measurements and finding fabrics that customize your bespoke silk suit or shirt. Personalization is experiential. Personalization happens when, based on who you are and what you like, an entire branded experience is created. 

Party City is the largest retailer of party goods in North America. In September of 2023, Party City emerged from bankruptcy announcing that its Chapter 11 reorganization had achieved its promised plan of erasing over $1 billion in debt and eliminating underperforming outlets.  The Wall Street Journal indicates that Party City is focusing on becoming an omnichannel operation. And, becoming omnichannel means using personalization. 

The CMO of Party City told The Wall Street Journal, “Our goal is to show up on a one-to-one basis in the channels customers prefer, have conversations that fit the way they celebrate and plant the seed for return visits throughout the year.”

A large part of personalization means generating insights into customers as individuals.  Party City understands that insights going beyond behavior that supports building “customer lifetime value.” And, contrary to what many marketers are currently doing, including big brands like Harley-Davidson, Party City now segments its customers on psychographics. Of course, demographics such as age, gender and purchase behaviors are necessary. But, to deliver at those “moments that matter,” those “Kodak moments,” knowing the customer inside-out knowing the customers value, attitudes, opinions and interests is essential.

Personalization delivers a branded experience marketers design specifically to meet an individual’s needs for a particular occasion. Customers increasingly desire products and services that reflect personal wants and needs. Personalization delivers a respectful recognition of who I am as a person by reflecting aspects of my personality and by satisfying my needs and problems.

Party City is operationalizing personalization. 

Here are some rules;

Focus is fundamental

Mass marketing to masses of consumers with a mass message is a massive mistake.

Mass marketers try to appeal to all people for all occasions with a marketing message that everyone likes a little and nobody likes a lot. Mass marketing misdirects branding. It dilutes the brand…it genericizes and generalizes the brand.

Marketing must be more personalized. 

Merely communicating about new products, new prices, a new app or website will not build personal brand relationships. Customers want branded experiences that reflect the brand’s essence while at the same time reflecting parts of themselves. Increasingly, customers are willing to have the focus be on them as individual users of the brand. 

Brand management is customer-experience management.

Brand management is not mere advertising. Brand management is first and foremost customer-experience management. Experiential marketing is not new news. 

Brand management is about managing the whole experience end-to-end in a brand-coherent manner, from consideration, through shopping, deciding, purchasing, using, evaluating, and reconsideration.

Technology is the enabler helping brands stay in touch with customers at every single experience point, one customer at a time, any time, all the time. Think about ways in which you will manage, evolve, edit, create and curate the branded experience over the course of the entire customer journey.

Move from asking, “What can we predict?” to “Permissible Personalization.”

Avoid predictions based on intrusive, invasive information gathering. 

Permissible Personalization is based on informed knowledge about a person based on past experience and information provided or permitted by the customer. Permissible Personalization builds trust.

As you build trust with a customer, permissibility levels increase. Just remember, the customer defines the limits of personalization.

Use Brand Journalism.

For younger cohorts, user-generated content is a more trustworthy communication than branded or corporate or institutional information. Brand Journalism is the marketing approach that allows the brand to create personalized content while allowing the reader to become “personally” involved.

Brand Journalism involves telling journalism-style stories about a brand: this is not preaching or bombardment with a repetitive, uni-dimensional message. It means communicating authentic and interesting chronicles to which customers can relate and which they can share. A well-told brand story is the best way to get a brand across to today’s multi-media, multi-device consumers. Brand Journalism is today’s way of communicating a personalized branded experience while maintaining the core integrity of the brand promise.

domino's pizza

The Domino Effect

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McDonald’s recently announced that the $5 Meal Deal will be extended past its initial 4-week period. According to Bloomberg, McDonald’s hopes the $5 Meal Deal will “lure” in customers. This seems to be happening. McDonald’s believes that this $5 Meal Deal is an opening to “bolster its (McDonald’s) affordability plans through the rest of the year… including the potential to extend the current meal deal for an even longer period of time.” Offering a McDouble cheeseburger, small fries, four chicken nuggets and a small soft drink “is meeting the objective of driving guests back to our restaurants,” according to McDonald’s CMO.

But, what sort of customers? Deal loyal or real loyal customers? What happens when the deal dies? Do the customers who were “lured” into McDonald’s go elsewhere? Do these deal-focused customers go to another restaurant with a similar deal? If the $5 Meal Deal is a value signifier why is it a limited time offer? Why not put it on the menu? Why isn’t McDonald’s whole menu considered to be a value?

Deal loyalty is not real loyalty. Deal loyal customers see price as the deciding factor. Real loyal customers see trustworthy brand value as the deciding factor.

Domino’s, the pizza chain, seems to understand that value is more than price. And, Domino’s current earnings report indicates the benefits of knowing that value and price are two different ideas.

At the Domino’s recent (7/23/2024) earnings call, when an analyst asked about Domino’s value strategy, Domino’s CEO, Russell Weiner said, “ Our value strategy focuses on providing consistent value across all our platforms, not just low prices. This trusted value proposition drives order counts and integrates customers into our loyalty program, creating a sustainable growth model.”

Mr. Weiner also said, “I think what we’re doing in value is very special, and, it is very different than what you are seeing in the industry right now, which I think folks, it is clear that there’s been price taken. And, folks are dealing back kind of individual items, telling customer, hey, this is what you can get on value.”

It seems apparent that Mr. Weiner knows price and value are two different things. Mr. Weiner’s statements indicate, correctly, that value is what you receive relative to costs multiplied by trust.  The customer’s trustworthy brand value equation is created by looking at the total brand experience relative to total brand costs which include price, time and effort, all multiplied by trust. As Mr. Weiner pointed out, trust is imperative.

In other words, unlike the many fast food operations, Domino’s grasps the facts of the customer trustworthy value equation. And, this means, that Domino’s grasps and operationalizes the fact that price and value are not the same. And, that price alone drives a short-term, in-the-year-for-the-year profitability. We have two words – price and value – for a reason.

Here is more of what Mr. Weiner told analysts during the earnings call: 

“… value is two things. Value is price but it’s the price for what you want. If the price for what you want is high and the price for something you don’t want is not high, that doesn’t really do much. And, so, when you think about all of our platforms, you think about pizza, you think about pasta, sandwiches, desserts, salads, breads, chickens, all of those things consistently have been part of our promotional value play since the end of 2009. 

“And, having that consistency when people wake up in the morning and decide where they want to order, they know that they can trust Domino’s. That trusted value is leading to the order count you’re seeing. And, then, they become part of the loyalty flywheel.

“And so, I just … I think it’s important to make sure we explain our approach to value is not just price. It’s about price for what people actually want to order. And that’s, as you’ve seen over this time period, a very sustainable way to grow.”

Mr. Weiner focuses on the overall trustworthy brand value of Domino’s. Mr. Weiner tells us that superior value perception applies to Domino’s entire portfolio of offerings.

Compared to the deal-making fast food establishments, Domino’s recognizes that value is not just a menu invoice. Making a brand affordable does not mean marketers should cheapen the brand’s perceptions. Brand loyalty cannot be bought by bribes. Domino’s tells us that its entire menu is a value menu.

Domino’s has four pillars that drive its business. The acronym is MORE; the internal rallying cry is Hungry for MORE. M stands for Most delicious food. O stands for Operational excellence. R stands for Renowned value. E stands for Enhanced by our best-in-class franchisees.

According to Domino’s Mr. Weiner, Renowned value 

“… is not just about having the lowest price in the market. It’s (Renowned value) about providing value that is innovative and memorable. Renowned value breaks through the sea of sameness discounts you see in the marketplace. So, as Americans continue to look for value, Domino’s is providing renowned value and doing it profitably for our franchisees. Our results who that our strategy is resonating with customers and our system. All of this gives me great confidence that we can continue to drive significant long-term value creation for our shareholders.”

As far as shareholders are concerned, to actually increase shareholder value, the brand must be the most efficient and productive provider of a branded offer that customers value. There is no shareholder value without brand value. Brand value requires managing the relationship of what-customers-receive-for-what-customers-pay in the customer-perceived trustworthy brand value equation.

When customers think about a brand purchase, customers calculate the brand’s value based on the total brand experience (functional, emotional social benefits, brand character) relative to total brand costs (money, time, effort) multiplied by trust. The total brand experience is the numerator of this equation and the brand’s total costs are the denominator of the equation. Then, customers consider trust. Do I trust this brand to deliver these benefits relative to the costs consistently time after time? In other words, customers create the mental construct which is a trustworthy brand value equation. 

Occasionally reminding customers that a brand is affordable is important. But excessive emphasis on price alone destroys brand loyalty, which in turn affects revenues and profits. Instead of the dominant message being about price, communications should emphasize brand relevance. Instead of communicating “great price,” brands, like Domino’s does, should be communicating “great brand at a great price.” When marketers over-promote on price, marketers demote the brand. Demoting the brand short-term degrades the brand’s customer-perceived value long-term.  And, there goes shareholder value.

What are the lessons?

A brand is more than a deal price

Domino’s believes that its portfolio of offerings includes a range of prices, all of which must be perceived as fair value. It is okay to remind customers that your brand offers a range of prices.

Focus on the whole trustworthy brand value equation

Focusing on the denominator (the costs: price, time effort) of the trustworthy brand value equation is death-wish marketing. A focus on the denominator cheapens the brand. A focus on just one part of the trustworthy brand value equation will not help increase customer value perceptions. Domino’s wants customers to know that the brand offers value which is not just price. Domino’s goal: to have every customer perceive that every item on Domino’s menu is a great value.

The customer determines trustworthy brand value, not the marketer

Base your brand’s price decisions on the customer’s perceived value rather than on cost. Fully understand and correctly judge the effects of price manipulations. Domino’s focuses on trustworthy brand value that CEO Weiner says is “a very sustainable way to grow.”

Create communications thar promote rather than demote the brand

Every communication must enhance the brand, raising the brand to a higher level of affinity with and appeal to the customer. Domino’s communicates that it will not rely on “good enough,” instead, Domino’s adds value to offerings.

Focus on building customer-perceived brand value

Shareholders who sat by applauding yearly price hikes are now seeing that those price hikes eroded value, eroding shareholder returns. There is no shareholder value without customer-perceived brand value. The entire brand business must be driven by growing more customers who buy more frequently who become more loyal, generating more revenue and profits. Domino’s states that “there is truly a Domino effect of connectivity among all the programs we have going on right now.” Growing loyal customers is not a one-off. “Loyalty is multi-year.”

age of harley davidson

The Age of Harley-Davidson

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Age is important for marketers. There are many social, cultural and personal differences between age-defined cohorts. Having said this, a strategy based on age is not always the  best strategy for enduring profitable growth. Of course, there are products designed specifically for certain age-demographics such as diapers – baby and adult  – or wrinkle creams. But, it is always wise to remember that one condition is inevitable: people become older and older. Brands must always both maintain customers and attract customers.

Having a reputation for being a brand for older folks may be very profitable for a while but new, younger users may avoid becoming customers. Although it is possible to span cradle to grave very few brands do this successfully. Disney is probably the single brand that crosses the cradle-to-grave expanse. No matter how adorable the toddler jean jackets, Baby Gap did not help The Gap. No matter how fabulous their music, having AARP sponsor the Rolling Stones Tour is cringeworthy. 

And, lest we forget, the “Not Your Father’s Automobile” campaign for Oldsmobile only reinforced that the fact that the brand was for your father and his father. 

This brings us to Harley-Davidson. Harley-Davidson’s strategy focuses on the brand’s core Boomer biker constituency and on big expensive touring bikes that Boomers buy. The CVO Street Glide and the CVO Road Glide start at US $44,499.

Harley-Davidson CEO, Jochen Zeitz continues to trust in a strategy aimed at expensive touring bikes where the average age of the buyer is “late 50s” meaning there are lots of Harley-Davidson owners well into their 60s and above.

Mr. Zeitz says that Harley-Davidson “dominates” the “most profitable categories.” OK, but making money off of a diminishing segment cannot remain a profitable approach.  The Wall Street Journal has  opined, “ Harley will ride or die with the graybeards.” In other words, Harley-Davidson is committed to selling bikes for aging Boomers who connected with the zeitgeist of Stanley Kramer’s 1953 Marlon Brando film “The Wild One” (considered to be the first outlaw biker film).  Those Harley-Davidson riders are the aging Boomers who saw themselves in Dennis Hopper’s Peter Fonda’s and Terry Southern’s 1969’s “Easy Rider” which ”starred” three Harley-Davidson customized Hydra Glides. These are the aging Boomers who have compartmentalized the cultural disaster at Altamont Speedway where the Rolling Stones thought it was a good idea to have Hell’s Angels as security.

At some point, sooner rather than later, the Boomers buying the big, expensive touring bikes will stop squeezing themselves into their leather pants and hang up their leather jackets. Sure, these Boomers may still be listening to Steppenwolf’s Born to be Wild but the song will be on Spotify while maneuvering the golf cart.

As reported in The Wall Street Journal, when Jochen Zeitz was appointed CEO, he told analysts that the previous CEO’s strategy of model expansion while chasing new customers and markets added manufacturing complexity and “diverted attention from Harley’s profitable models.” Mr. Zeitz eliminated offerings aimed at entry-level riders. Mr. Zeitz’ strategy was and is to focus on “profit over growth.” This strategy is not, apparently, drawing riders into the Harley-Davidson franchise.

Focusing on a core customer base only works until it does not, just channel Jaguar. Jaguar’s marketing lesson is do not rely solely on the established, loyal customer base without seeking new customers. Jaguar’s reputation and reality of cars spending more time being serviced than driven forced the brand to sell to Ford. At the time, there was an extremely loyal user base but an extremely small user base. There were not enough users to maintain profitability, even though some drivers owned two Jags, one to drive while the other was in the service bay. Tried and true Jaguar owners hung in with the brand until the end. There were so few Jaguar owners left that the brand could have sent birthday cards to each one. To raise margins, Ford made Jaguars on the Taurus chassis. Stuck in traffic behind a Ford-made Jaguar which now had the rear end of a Taurus could bring you to tears. And so,  there went Jaguar’s exotic, enticing design. Eventually, even the loyalists let go.

Although Mr. Zeitz says that people “age into” the Harley-Davidson brand, this “aging into” is risky business. And, for Harley-Davidson, the Hog appeal has never been about age. Harley-Davidson’s appeal was fundamentally about a mind-set, a values set, a personal spirit. Anyone at any age can have the Harley-Davidson soul. (As a note, this is what VW is advertising now in the US. “We shape its metal. You shape its soul.’)

A little bit of Harley-Davidson history.

In 1981, AMF (American Machine and Foundry, now defunct, but at the time a very large recreational equipment company) sold the Harley-Davidson brand for $80 million. The new owners, a group of thirteen investors led by Vaughn Beals and Willie G. Davidson (grandson of co-founder William Davidson), completely restructured and rejuvenated Harley-Davidson.  Under AMF, Harley-Davidson endured severe cost cutting and produced poor quality machines, damaging Harley-Davidson’s reputation.

One of the key components of the Beals-Davidson brand revitalization of Harley-Davidson was Harley-Davidson’s now famous market segmentation. (The Harley-Davidson segmentation has been used many times in marketing lectures and presentations.) Harley-Davidson’s market segmentation helped spur one of the greatest periods of enduring profitable growth for the Harley-Davidson brand. 

The Harley-Davidson market segmentation divided the customer (owners/riders) base into seven segments. The brand recognized that its customer base was not monolithic. In fact, there were a variety of people with different needs, lifestyles and opinions who loved, owned and rode the brand. 

A 1998, Ad Week used Harley-Davidson’s segmentation to illustrate the fragmentation of American marketplaces. The journalist wondered whether this meant a brand would have multiple messages to different target audiences.  (Today, we take this type of communication for granted as big brands do have multiple audiences receiving different messages across multiple media and devices. The marketing approach is called Brand Journalism and was pioneered at McDonald’s during the 2002-2005 turnaround.)

In the June 25, 2012 edition of Hog Happenings’ part 2, the full segmentation of Harley-Davidson riders and owners appeared, taken verbatim from an “official” Harley-Davidson handout distributed at an internal marketing and management course. The segmentation was described as “The Diversity of HARLEY-DAVIDSON Buyers.” 

As a note, please keep in mind this segmentation was generated over 40 years ago, when the majority of Harley riders were male. Since then, Harley-Davidson has created communications and outreach to female bikers. Additionally, just because the segmentation was generated decades ago, reading the segment descriptions still sounds fresh and real. Even though brand-business segmentations need updating, it does not mean the segmentations should be completely overturned. 

Importantly, the Harley-Davidson segmentation is not about age. A person could be any age to reflect one of these segments. 

1) Sensitive Pragmatists (29%)

The largest segment of Harley owners tends to be blue-collar workers. They consider themselves easy going and practical. These owners take motorcycle riding seriously. They say, “You’d better know something about what you’re doing before riding a motorcycle.” They like the “high” of riding. They tend to be FL-series owners.

2) Laid Back Campers (24%)

Quiet and soft-spoken. That describes these Harley owners. This group likes to cruise, not speed or race. The also view their bikes as a way to get out of the city and in touch with nature. These bikers are patriotic: the “Made in America” label is their number one reason for buying a Harley. They tend to be Sportster owners.

3) Cool-Headed Loners (17%)

The loners consider a Harley motorcycle the perfect get-away vehicle to express their independence. They tend to be higher income “white collar” individuals. In their opinion the “Harley experience” is the ride itself. They describe Harley as a “fingerprint: you buy the basic cycle, then personalize it so no one else has one exactly like yours.” Loners also believe in “live and let live;” to them, riding a Harley reflects that attitude. They tend to be Softail owners.

4) Adventure-Loving Traditionalists (10%)

This market segment rides a Harley for its independence, freedom and adventure. These individuals love risk and seek thrills. Traditionalists consider new Harley-Davidson riders trendy and unappealing. Like the Laid Back Campers, this group believes the reason behind Harley’s great performance and quality is the “Made in America” label.

5) Classy Capitalists (8%)

Sometimes described as “Rich Urban Bikers” or “RUBS” this segment represents the traditional American success story – a class of winners. Famous stars are represented in this group; members are often 45 to 50 years old. Most promised themselves years ago they would reward themselves with a Harley-Davidson after making a certain amount of money. This group loves the attention they get when riding a Harley-Davidson. They tend to purchase Softails.

6) Cocky Misfits (7%)

This buyer enjoys its reputation as the ‘bad guy” and the “wild man.” These owners claim to have “tattoos with attitude.” The last thing they want is to be seen as stylish! They live for a chance to cut loose on their machine. The sound and speed of a Harley are important to this group. They’re always looking for an opportunity to “open it up.”

7) Stylish Status Seekers (5%)

The smallest Harley-Davidson market segment is young, stylish and elitist. This group tries to emulate the “famous stars” of the Classy Capitalists group. These riders say, “ Riding a Harley separates you and makes you stand out.” Like the Classy Capitalists, this group wants to be noticed. Harley aesthetics have the biggest appeal to this group. Owners liken a Harley bike to a vintage car –both are made for a ride on a sunny day.

As part of Mr. Zeitz’ continuing strategy, updating this incredible market segmentation would seem to be a necessity. Focusing on age was never a Harley-Davidson strategic imperative. The original segmentation shows the complexity of the Harley-Davidson core customer base as specific people with specific needs in specific occasions. 

Of course, a brand needs to have a bulls-eye target group. But, there are other core customers whose needs and occasions also need to be satisfied. The big Harley-Davidson brand is not uni-dimensional. Harley-Davidson is a multi-faceted, multi-dimensional, multi-segmented, multi-layered brand.

Using age as the discriminator may not be the best way for Harley-Davidson to ride on its road to enduring profitable growth.  The analysts, observers and commentators recently interviewed by The Wall Street Journal seem to believe that sidelining younger generations in favor of older ones is bad for the Harley-Davidson brand. The goal must be to maintain established core customers while generating new core customers. 

Age may be a descriptor but it is not a definer.

dior

Dior’s Dilemma And Anorexia Industriosa

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Over the two past decades, the concept of luxury underwent some conceptual changes. The definition of luxury as something inessential, desirable, expensive and difficult to obtain has changed. Luxury goods are now obtainable around the globe. Luxury goods can be purchased online. Luxury goods are available at airports and shopping malls. And, luxury goods are bought by many people, not just those from the upper echelons of society.

Jean-Noël Kapferer, a French brand marketing guru who writes about luxury, created a name for the current luxury brands situation. He calls the phenomenon, Abundant Rarity. This is paradoxical. That is, rare luxury items happen to be available to anyone anywhere. Abundant rarity is a marketing and conceptual paradox where items are rare and are available anywhere. Monsieur Kapferer believes that increasingly luxury brands need to figure out how to master the paradox of abundant rarity.

Abundant rarity has sparked many discussions around whether or not a brand can actually be a luxury brand and, at the same time, be sold to everyone everywhere. Many argue that it is impossible to be luxury and be abundant. They argue that abundance negates the exclusivity that is part of a luxury brand’s DNA. They argue that a luxury brand’s provenance and brand promise assure that the luxury brand – by virtue of the fact that it is luxury of the highest standards – is restrictive and limited in its availability and thus desired for this specific rarity. They argue that abundance tarnishes a luxury brand, demoting its luxury image to everyday.

Now, we learn from The Wall Street Journal, that luxury brands have figured out how to tarnish their provenances and promises in another way. Luxury brand are making their expensive offerings on the cheap, as it were. Think of this as Anorexia Industriosa. 

Anorexia Industriosa, cutting costs to the bone, is dangerously detrimental to brand health. CEOs and senior managers fall in love with cost management over brand management. Cost management allows for greater shareholder and C-Suite profits. Focusing only on cost cutting does not create real sustainable value. Businesses cannot cost manage their brands to enduring profitable growth. At some point, there are no more costs to cut. Cutting costs chokes off resources for investing in a brand’s future potential. Brands receive fewer resources, and then, are milked, thinned, and discarded. If high quality production is no longer a luxury promise than you might as well consider the knock-off hawked by the street vendor.

Cost reductions show up immediately in quarterly reports and on balance sheets. Of course, eliminating waste and improving productivity are a continuing challenge and important for maintaining brand-business health. But, cost cutting alone takes you only so far. Brands need plans, people and actions that will deliver high quality revenue growth leading to enduring profitable growth. And, luxury brands have heritages to uphold.

It is unfortunate that many businesses cloak cost cutting as a strategy for building strong businesses. Improving productivity is good. But, for enduring profitable growth, businesses need to invest in increasing brand strength. Financial discipline is more than across-the-board cost cutting.

Anorexia Industriosa is especially dangerous for luxury brands. One of the elements of luxury is the idea of craftsmanship. In other words, luxury brands have a caché of and heritage in quality of design and work made by hand; an overarching inherent artistry.

When luxury brands, such as we learned about Dior, farm out their manufacture to facilities that are like ‘sweatshops,” the essence of the brand can become denigrated. Sure, outside manufacturing facilities help with increased demand.  But, the use of certain types of outside factories to make luxury goods has one real purpose: margins. Worshiping at the altar of margins tends to have a negative effect on a brand, luxury or not. This is because high-margin brands are more attractive and reassuring to shareholders. Catering to shareholders over catering to customers is a tendency for trouble. Thin margins tend to convey less profitability.

It seems that some luxury brands are now made by the same sort of outside factories that make fast fashion items: factories that churn out items saving businesses lots of money when manufacturing. As The Wall Street Journal points out, the use of “independent workshops” by luxury brands can create a “reputational” crisis. Not only are there the social and legal ramifications, but there are image-tarnishing issues that no luxury brand wants to shoulder.

And, Dior. Mon Dieu.

Dior is one of those luxury brands that helped define an era of haute couture. Dior’s  “New Look” in the late 1940s, restored France’s heritage of fashion. Dior brought glamor and youthfulness back to fashion.  After years of world wars, Dior’s creations helped to bring back life and liveliness to France. 

And, now, we learn that using the outside facility, Dior’s cost of assembly for that US $5000 handbag may be as low as US $57. Anorexia Industriosa!

These financials may make sense to you. After all, look at the margins! Just a note here: consumers do not care about your margins. Consumers care about quality and living up to expectations. A brand is a promise of a relevant, differentiated expected experience.

When people are willing to pay large sums of money for your brand, it is because people see value in that brand. But, brand value depends on trust. Trust is built over time. Trust can dissolve quickly. Can a consumer trust that the $5000 handbag assembled by a “sweatshop” for under $100 has the same brand value as the one created in-house with care? Is the Dior name strong enough to manage this discrepancy? Can a consumer trust that a brand is luxury when that brand is made in a non-luxury manner? Is this assembly in keeping with the brand’s provenance and promise? Is this assembly a new version of abundant rarity? Should a luxury brand be subject to Anorexia Industriosa? Could be, as the outside facility is a cost-cutting factory designed to make an abundance of ”rare” items.

The global services company Deloitte writes that luxury brands are now using digital passports. These digital passports relay the luxury brand’s “authenticity, sustainability and trust” to the customer. However, what happens if that luxury brand is manufactured not with the expected craftsmanship but with the outside, independent facility? Deloitte indicates that the digital passport certifies authenticity and insights in craftsmanship. How does this work in this manufacturing mindset of Anorexia Industriosa?

The combination of abundant rarity and anorexia industriosa is self-immolating for luxury brands. To provide abundance, some luxury brands will need to manufacture product at minimum costs to meet demand. The cheaper the production, the better for the bottom line. But, more availability which may be based on less traditional craftsmanship and art could damage a luxury brand’s customer perception as exclusive and worth the costs.

Just as Dior defined a new luxury couture in post-war France in the late 1940s, all luxury brands must start redefining what it means to be a luxury brand today. Does luxury extend to the way in which a product is manufactured? Does the luxury brand’s provenance and promise extend to how the luxury brand is made? Of course, financial discipline is expected in every Board room and every analyst earnings call. But, does that mean that a luxury brand be subject to Anorexia Industriosa? Does Anorexia Industriosa  tarnish a luxury brand to the extent that the brand is no longer considered luxury? If so, then the paradox of abundant rarity will define luxury as we move forward.

Nestlé Ozempic

Danone, Nestlé And America’s Changed Eating Habits

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Something amazing is happening when it comes to food, nutrition and brands. After all the decades of low fat, no fat, fat free, fewer calories, Olean cookies and chips, keto-paleo-Atkins-South Beach diets, macrobiotics, vegetarianism, veganism, fruitarians and other dietary regimens, the CEO of Danone just informed us that “The food industry is at a tipping point: health, and the role food plays in health, will become more critical than ever.”  All of a sudden, the healthy foods landscape has grasped the attention of American eaters.

Put your yellowed, dog-eared copy of Mollie Katzen’s Moosewood Cookbook aside and shelve your well-read copy of Frances Moore Lappé’s Diet For A Small Planet. Apparently, America has finally found a reason to change the way it eats; change the way it ages and change the way it lives. 

All because of drugs. Forget the War on Drugs. We are now embroiled and engaged in the Way of Drugs. Those diabetes drugs that help you lose tonnage – the GLP-1 winners such as Ozempic, Mounjaro and Wegovy – have altered the landscape for dieting and food-focused packaged goods companies.

Now, that does not mean that millions of Americans have stopped clamoring for Whoppers, Big Macs and fries. Not everyone is on GLP-1 drugs. But, a sizeable number of people are taking the drugs. 

Both Danone and Nestlé are reviewing their strategies so each company can cater to users of weight loss drugs. The guiding principles seem to be helping users to keep weight off while providing proteins and other nutrients that are lost from massive weight loss. These drug-users account for a large enough segment  of our population that food companies used to selling Kit Kat bars and Danette desserts are now suddenly seeing opportunities for weight-loss designed protein-laden, keep-the-weight-off foods.

According to CNN, Nestlé will offer frozen food meals for people taking GLP-1 drugs, such as Ozempic. Named Vital Pursuit, the line of GLP-1 associated foods is currently  “12 portion-controlled meals, high in protein plus fiber, intended to be a companion for GLP-1 weight loss medication users and consumers focused on weight management.” 

CNN commented that this line of Nestlé foods and other offerings from other food giants is a golden opportunity to stay relevant in a world where the parameters for weight loss have dramatically changed. 

Apparently, CNN says, customers perceive Nestlé’s Lean Cuisine, its 40-year-old diet-focused, low-calorie brand, as “old school.” Vital Pursuit, says one retail analyst, is “… a much more scientific approach with an emphasis on nutrition and balance. Nestlé is hoping to gain new customers and widen its audience.”

Vital Pursuit is not just a knee-jerk reaction to a growing or full-grown trend in eating. Nestlé has a lot to worry about. To quote CNN, “J.P. Morgan last year said that current GLP-1 users purchased around 8% less food – including snacks, soft drinks and high-carbohydrate products – over the prior year, compared with consumers who were not on these drugs.”

Danone reports a different strategy. Danone is already invested in a portfolio of dairy, plant-based and water brands. Its current portfolio is very weight-loss compatible. After jettisoning underperforming businesses, Danone is now viewing the acquisition of businesses that will contribute to expanding its health-and-wellness focus. The Wall Street Journal stated, “The French food producer (Danone) said it see changes in the way people eat, age and live as structural tailwinds for its business. It (Danone) is confident a focus on health and nutrition will help (it) deliver profitable growth.”

For those Boomers who worshipped at the altar of George Ohsawa and Michio Kushi; who spent time filling jars with organic peanut butter and brown rice at Erewhon stores carefully noting the empty jar and full jar weights; and who mixed lecithin into sticks of butter to make better-butter, this must be some kind of karmic, cosmic redemption.

Danone and Nestlé are not the only brand businesses gaining perspective from losing weight with GLP-1 drugs. With J.P. Morgan predicting that obesity drugs will soon be a $100 billion market, with about 9% of the US population being on a weight-loss drug by 2030, there is a brand battle to get on the drug-weight-loss bandwagon.

This year Weight Watchers abruptly changed its strategy, with a CEO apology, telling customers that will-power, point-counting and group support may have caused more harm than good. Weight Watchers now has a program for drug-focused weight loss, once considered the “easy way out.” Through Weight Watchers, members now have access to physicians who can prescribe GLP-1 drugs. Weight Watchers is also buying a telehealth company that provides “virtual prescriptions to patients for these weight loss drugs where appropriate.”

Weight Watchers’ new strategy now competes with retail giant Costco, now offering its warehouse way tow eight loss.  Costco provides Ozempic at its in-store US pharmacies. Costco uses Sesame, its affordable health care partner. Like Weight Watchers, Costco provides users an online consultation with a weight loss physician who is able to provide prescription for a GLP-1 or other weight loss drug. And, like Weight Watchers, Costco is offering personal support “through unlimited messaging and guidance with a health care provider.”

GNC, the vitamin and supplement store, now in Chapter 11 and closing at least 1200 retail outlets, says it will sell “vitamins, protein shakes and supplements tailored to people on GLP-1 medications.” GNC told CNN that there will now be a dedicated GLP-1 user section of the store. 

What some might see as opportunistic is really an example of how brands can adopt and adapt quickly to changing circumstances. Innovation and renovation are the lifeblood of brands. Cynics may comment that brands will do anything to make shareholders happy for the short term. And, in many cases, this may be true. However, the idea of health and wellness has been around for a long time. Health and wellness have gone through many iterations leaving legacies such as spas, wellness cruises, herbal supplements, plant-based beverages and proteins and all sorts of dietary regimens. 

Brands are not passive. Brands are active promises of relevant, differentiated experiences. Being able to adopt and adapt quickly saved many brands during COVID-19 lockdowns and the aftermath. 

Brand management is fundamentally about attracting more customers who purchase more often and become more loyal, generating more sales while becoming more profitable.  Brand management is about generating value for customers and creating value for the company. Brand management is business management and vice versa. 

Instead of seeing this new food revolution of new GLP-1 offerings as crass, observers and critics should understand that brands can live forever but only if properly managed. Proper brand management means understanding customers, staying relevant, satisfying users, not doing business as usual, innovating, renovating, creating news and being aware of the changing world. 

CVS and the Paradox of Do-It-Myself Vs. Do-It-For-Me

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There is a powerful conflict raging in brand management. This conflict reflects how brands define customer service. The conflict is a paradox that most brands have not yet solved: it is the paradox of DIM vs. DIFM: Do-It-Myself vs. Do-It-For-Me. At its heart, the DIM vs. DIFM paradox is about customer control.

Technology, apps, mobility, digitalization, robotics, constant contact, 24/7-time spans and artificial intelligence create everyday customer control issues. For years, data showed that customers are willing to cede control for increased personalization of services.

Kiosks, voice-activated applications, digital wallets, conversing bots, self-tracking of physical and mental functions (the quantitative self), driverless cars, connected cars, connected-smart appliances in the connected-smart home – all of these shift accountability of actions to things other than ourselves, changing our perceptions of what we can accomplish. We may set the parameters, but the operations are no longer ours.

However, we expect the technology to deliver outcomes just the way we want. Wearables track our movements, sleep, health, etc., yet, we set our own goals expecting the wearable to participate in helping us to deliver against our personal strategy.

Robotics and AI (supposedly) make our choosing and using easier. But, can robots or AI deliver humanized ease of mind? What happens when you take the person out of personal? What happens when we take the self out of self-service?

We appreciate the convenience benefits of the digital world. However, we desire the experience of human contact. In an increasingly digital world, we seek person-to-person contact. Of course, each cohort perceives self-control and the relationship of man and machine differently. One challenge for brands is to maximize each customer’s desire for being in control while in many cases not being the controller. In the battle for the soul of control, the best brand experiences will be the optimization of DIM and DIFM: control delivered my way, regardless of who or what is in control.

To understand how at odds are these two sides of branded customer service look no farther than CVS and your local grocery store.

The chief digital, data, analytics and technology officer at CVS, Tilak Mandadi, spoke with The Wall Street Journal about the future of the CVS customer experience. Mr. Mandadi stated that CVS research indicates customers want “accurate real-time status of their order, wanting to know where is their prescription and when that prescription will be filled.“ So, CVS is building a new self-service app. This new CVS app will employ “conversational AI” using natural language. Mr. Mandadi believes the conversational app will be able to answer most customer questions. And, this new self-service will not include “annoying menu-based options such as press 1 for this and press 2 for this, etc.”

In real life, pharmacies are struggling. Profits are at risk. For example, Walgreen’s is closing stores. Walgreen’s dismal reporting to analysts detailed the challenges facing drug stores. Walgreen’s says that its store closings will not entail firing employees, just reassignments. On the other hand, CVS “cut costs and thousands of jobs” according to The Wall Street Journal. Pharmacies including CVS say they are committed to staffing stores but there have been complaints and mistakes. The Wall Street Journal indicates that there are reports of overworked staff and “dangerous” order-filling errors.

Self-service, according to CVS, will place some of the pharma responsibility onto the shoulders of the customer while reducing the need for pharmacists to attend to phone calls. The tacit understanding seems to be that there will be less need for extra personnel.

The CVS app will also test how much trust customers will invest in the CVS brand. After all, this is our personal health and wellness. Pharmaceuticals go beyond aches and pains to life and death. AI, conversational or not, takes the human out of experiences, especially service. Who or what do we trust?

Trust is at the heart of all relationships. Can customers trust voicing their feelings, fears and their human interactions to AI? Is trustworthiness related to degree of technology or to depth of human service? Can trust be digitized? Can pharmacy services be trusted if it is an algorithm? Or an inanimate conversationalist? Is CVS having these discussions?

Trust is earned, not given. Customers must trust the technology to deliver the promised brand experience in a quality manner. Customers must trust the machine to perform the task and without depersonalizing and dehumanizing the task. Doubt damages trust. Damaged trust destroys brand value.

Another challenge for brands is whether trust can be de-humanized. To what degree? Brands must determine how much is technology and how much is human. Then, ensure quality delivery of both. There are going to be areas where human autonomy is needed. Can the app know when to turn the conversation over to a real person?

There is a definition of service as “a set of one-time consumable and perishable benefits. It relies on the human connection aspects of a relationship.” But, the CVS app is allocating the services to a non-sentient operation. Helpful assistance makes life easier. But, each brand experience requires different levels of technological integration. Sometimes it is necessary to have a human on the other end.

Digest this CVS story along with another story from The Wall Street Journal about the issues surrounding self-service check-out in grocery stores. Self-service check-out in grocery has not turned out to be the panacea grocery store owners envisioned. Many stores are eliminating their self-service kiosks. Even Amazon has stepped back from its people-less, smart-cart stores. Amazon’s lesson is described as not grasping the desire for human interaction in the supermarket.

Regarding self-checkout, as with all technology, there are always glitches. This necessitates an employee standing by for assistance. There is theft. Just like the behaviors on National Geographic’s How To Catch A Smuggler, self-service check-out seems to attract those with sneaking and cheating behaviors where certain items can be manipulated to lower prices on larger items. California has a new proposition ready for a vote that would post one employee for every two self-check-out registers. The only function for these employees is to assist customers and, hopefully, spot the sneaky ones. Self-checkout is supposed to be an efficiency provider: fewer employees at registers. Now, those employees are still on payroll, just doing a different job.

As for customers, only 26% of shoppers over 60 like self-service check-out. Under 45 year olds are most likely to approve of self-service, with a little more than half of the under 45-year olds saying the preferred self-service. As with everything, age matters. Brands need to find ways in which to satisfy customers of different cohorts without trespassing on the brand’s core reason for being.

Furthermore, new data in an article in Harvard Business Review reveal that for office personnel AI can make office workers feel lonelier and less healthy. Is there a possibility that grocery and pharmacy customers, looking for assistance and solace will feel the same way as office workers from frequent interactions with a conversational bot? Will cashiers and other grocery staff start to feel lonely?

So, with contradictory needs of Do-It-Myself and Do-It-For-Me, what happens with brands like CVS? All brands must continue to build and nurture a strong, adaptable, flexible intelligent and empathetic corporate culture. Digitized does not mean dehumanized. Yet, the technological changes in the workplace should not allow a dehumanized personal experience. CVS may be treading a fine line. Brands must determine by customer set where the line is between machine and me.

At the same time, brands must deploy self-service and control within the framework of their mainspring fundamental ethos. Don’t allow technology to impinge upon the brand’s core essence and reason for being. As the executive vice president and chief information and technology officer at CarMax told a Deloitte interviewer, “We’ve done a lot of cool things through machine learning and AI. I’m now focused on ensuring that whatever we deploy as a company is being used responsibly and in ways consistent with our core values.”

Value Meals And The Decline of Brand Experience

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Value. 

KFC, Wendy’s, Jack in the Box, Arby’s, McDonald’s, Burger King are all offering value meals. Even Starbucks is offering ‘Pairing Menus,” a euphemism for value meal along with steep promotions on coffee drinks.

Here is the problem. Value is more than price per offering. Value is not on the menu board. Price is on the menu board. Many brands today are defaulting to the bad habit of equating value and price. Over the years, marketing has corrupted the meaning of value equating value with price. Price is important. However, a brand’s worth depends on a lot more than price.

By focusing only on price per offering, these brands seem to be saying that the total brand experience and other total brand costs (time and effort) are irrelevant. Only price per pieces matters. 

And, this behavior is odd because increasingly our economy is experience-driven. Yet, these establishments, including Starbucks, are forgoing the total brand experience in order to gain immediate sales, albeit, from possibly deal loyal customers. Starbucks is saying that the café experience is no longer an issue. Visit us for the great price. This rankles Starbucks founder and ex-three-time-CEO, Howard Schultz. Mr. Schultz believe improving the Starbucks experience is the road to redemption.

The days of value being price per offer are gone. It is no longer “the price is right.” The better communication is “the great, branded experience is right for the price.” What you get for what you pay is now defined as the total brand experience relative to the total brand costs (price, time effort). Brands must deliver the total brand experience at an exciting cost to generate value. 

Defining value as merely low price is one of the riskiest practices of modern marketing. Brands have been their own worst enemies by letting “low price” become a substitute for the idea of “value.” 

Price and value are not the same thing. Yet, many brands continue to use these terms interchangeably.  Price is what marketers charge. Value is what customers perceive an offer to be worth. Price is the amount of money required to pay for something. Value is about worth. In fact, the actual word, value, comes from the Latin valere, which means, “to be worth.” Price means, “How much money does it cost?” Value means, “How much is it worth?” That is why we have two different words.

Worse yet, it is a marketing sin when owners of brand portfolios refer to a particular brand in their portfolio as a “value brand.” Each brand in the portfolio is a value brand. Each meal in the portfolio is a value meal. We value each offering for different reasons. The customers of a Toyota Corolla and the customers of a Lexus ES are both looking for a good value. Value can happen at any price point: “That’s a great value” can apply to a Porsche and a Prius; great value can apply to a shoe from Designer Shoe Warehouse and from Saks Fifth Avenue. Great value applies to Aldi supermarkets and to Whole Foods. Value is in the eye of the customer. It is learned from interaction. 

This means that it is a major marketing misdeed to identify a market segment as the “value conscious” customer. Every customer is value conscious. It is wrong to say that customers have become more value conscious. Customers have always been, and will always be, value conscious. And, yet, this is what brands are doing: brands are saying that lower income customers are value conscious while higher income customers are not value conscious. And, brand are saying that certain offerings are better value than others. Please keep in mind that the “good-better-best” approach to selling is a classic of brand mismanagement. Every offering must be a great value.

Value is relative. Brands must calculate value for each brand in the customer-defined competitive set. A specific brand’s value is indexed to the average of the competitive set.

Additionally, a brand’s perceived value must be seen as a fair value for the promised experience. Again, brands do not determine fair value. Customers do. Brand marketers set price. Consumers decide fair value. Fairness is more than mere price. Fairness contains justice. Justice means that the benefits-per-costs equation is equitable, just, dependable, trustworthy and fair.

The fast food industry has always used the terminology of Value Meal. This nomenclature has educated customers to the relative “cheapness” of the deal. However, Starbucks has always been uninvolved in this Value Meal marketing. Starbucks was created with a premium caché as the convivial place for coffee connoisseurs. 

But now, Starbucks has entered with its Pairings Menu. Starbucks is also touting deals, especially on its app. Starbucks’ CFO indicated that there is a “value perception” with Starbucks. Starbucks also is offering BOGOs and 50% libations.  Is a value meal the way to go? Are discounts part of Starbucks’ DNA? What about the Starbucks experience? Howard Schultz indicates that current management has been skimping on improving the experience as current management kowtows at the altar of data.

The looming danger is the loss of true loyalists and the temporary accrual of deal loyalists. And, the diminishment of the Starbucks experience; an experience that has relevantly differentiated the Starbucks brand. Restaurant Business thinks that the value menu for Starbucks is a good thing. 

Starbucks value perception must rely on more than a good deal. Starbucks is a great brand. Communications must focus on the great brand experience that is the best value.

The recent iteration of Forrester Research’s customer experience survey indicates that customer experience ratings have declined for a third year in a row, according to Wall Street Journal reporting. The Forrester study polls 98,363 consumers across 223 brands. The Wall Street Journal writes that the scores are the lowest since 2016.

Although Forrester points out that the pandemic did create customer “frustrations,” right now, “… consumers are skeptical of the value they believe they are getting from companies.”  A Forrester principal analyst indicated, “Somebody is paying more but then they’re not seeing the benefit of paying more. They’re not getting a better experience that they think should accompany that higher price.”

A brand is a promise of an expected relevant, differentiated experience. Once you determine that the experience is incidental to the price, you damage the brand. Once you determine that price is the prize rather than the total brand experience, you place your brand into the commodity corner. The data appears to show that experiences are not always the focus of marketing efforts. 

Howard Schultz recently complained – publicly – that the in-store Starbucks experience was declining and management needed to focus more on the store. Operational issues are marring the Starbucks experience. Now, Starbucks is falling into line with the fast food brands when it comes to price deals.

So, what happens next? Will Starbucks continue to offer promotions? When the prices return to higher levels what will happen? And, what about the Starbucks experience? Starbucks’ total brand experience – which drives value – has always been at the core of the brand. Starbucks has always been about more than the coffee. 

And, what about Burger King, KFC, Wendy’s, Jack in the Box, Arby’s, McDonald’s: what happens when the promos go? What will define value at these brands? Until brands start understanding value as something much bigger than price, brands will continue to harm their essential experience.