electric vehicle brand loyalty

The EV Challenge: Brand Loyalty Is More Than Trial

Let’s discuss brand loyalty.

It used to be a principle of marketing that a brand needed trial and repeat before you had brand loyalty. In fact, at the haven of marketing, P&G, the concept was three tries before you could feel comfortable that a customer had become a loyal customer.

And, this makes sense. Brand loyalty is purchase behavior based on actual preference for the brand. Brand loyalty is behavioral and attitudinal commitment over time. Brand Loyalty is based on customer conviction that this one brand is the superior alternative for satisfying a particular want in a particular occasion.

More than just repeat behavior, brand loyalty is like a ladder. There are degrees of commitment to the brand. A marketer’s goal is to move a customer up the loyalty ladder from commodity consideration to short-list brands to preference and, ultimately, to true brand loyalty. It is rare, even with durable goods products, to have true brand loyalty or even preference after one trial. Of course, it is possible, but loyalty, which includes a trust factor, is earned over time. And, in new categories, such as electric vehicles (EVs), where there is learning and where there are many new options across many brands, trial can be expected.

However, somehow, this idea of building brand loyalty is being tragically tossed into the trash. This is a huge mistake. Not a good omen for brand owners.

This is why The Wall Street Journal story titled, “With New EVs Arriving, Brand Loyalty Goes Out The Window” is so unfortunate. The article’s premise is that drivers of EVs have been switching brands. It turns out that first time EV buyers who are now looking for a replacement are selecting from a different brand. 

So? This does not mean that brand loyalty is dead or “going out window.” It may mean that the driver was not “loyal” in the first place. It may be that when the first EV was purchased, the selection was limited so the driver opted for what was available. Or, as in the case of the Chevy Bolt, the model was recalled and sales halted due to battery fires.

The Wall Street Journal did point out in a subsequent story that there is a lot of “jockeying” happening among the auto brands. The hope is to attract those early EV adopters. Ford CEO Jim Farley said he hoped that this activity in EV would throw all brand preferences up into the air. Clearly, he is hoping that drivers move away from Tesla.

Data cited from Edmunds indicates that 80% of people who bought a Kia EV6 early this year have traded in that vehicle for another brand. Perhaps the Kia EV6 did not live up to expectations. Bloomberg’s Green Rating put the KiaEV6 below many other EV brands. To turn over a vehicle within a year means that the brand probably did not deliver on its promise or had “issues” with maintenance. Or that a competitive brand appears very attractive.

Other Edmunds data show that people who purchased a Ford Mustang Mach-E traded in a non-Ford vehicle. OK, so perhaps that driver really craved an electric Mustang. A Mustang is an iconic vehicle. The data cited do not indicate whether the trade-ins for EV Mustangs were electric or hybrid or gasoline powered. People wanted the Mach-E.

JD Power research among 2000 car shoppers revealed that “only 3 in 10 customers were able to find an EV that works for them in terms of price, vehicle type and other factors.” For example, General Motors introduced the pricey EV Hummer and the EV Cadillac Lyriq SUV. Neither did much for GM’s bottom line nor for its expertise in EVs. The EV Hummer sold 854 vehicles. The much-hyped Lyriq sold 122 vehicles.

One customer interviewed told The Wall Street Journal that he was a Chevy Volt plug-in hybrid owner who wanted to trade in his 10-year-old vehicle. He said that he had once owned a VW so he looked at the ID.4 from Volkswagen and he looked at the Kia EV6. He found it difficult to find either vehicle so he purchased a Hyundai Ioniq 5. He said, “I was definitely still partial to Volkswagen, but Hyundai won me over. I love it.” He also indicated that “if all things went well” he might consider buying a Hyundai for his next purchase.

Why is this brand loyalty going out the window? This is the opportunity to build brand loyalty. 

What The Wall Street Journal gets correct is that in this relatively new category with options beyond just Tesla, drivers are shopping around. Yes, drivers are learning the category. And, yes, drivers are trading in their current models which may not be the same brand as the new EV being purchased. After all, the data indicate that currently there are 53 EV models available now. That was not the case for the early adopters when Tesla, Volt and Leaf were the only vehicles. (By the way, there were 625 vehicle models sold overall in 2022.) And, EV sales were 6% of the market in 2022, up from 3% in 2021.

Other JD Power data show that on average only 50% of new car buyers buy from their current brand. The idea that a driver purchasing a brand of vehicle will buy that same brand next time is only true half the time.

The EV category is beginning. And we should expect a lot of “jockeying.” But, the automotive industry also has a problem regarding customers and loyalty: its persistent belief in the Allison-Fisher Funnel approach to a car purchase. The Allison-Fisher Funnel is an outdated marketing approach. With this model in minda potential car buyer is in a funnel moving through various stages from awareness to familiarity to opinion to consideration to make-model intention, shopping and purchase. The dealer wants to own the customer through the process and capture the sale at the end of the funnel. The dealer believes that once the driver is through the funnel, the driver is now a committed customer. But, just because a driver purchases a vehicle does not mean instant loyalty.

They call this Conquest marketing. 

Conquest marketing is about seizing, catching, capturing, vanquishing or triumphing over prospects that are shopping at rival dealers, convincing them to buy from your dealership. With conquest marketing, every sale is a singular event. With conquest marketing, every sale is an in-the-year-for-the-year sale. Brand loyalty is disregarded. 

In conquest marketing, a conquest sale is a term describing a sale to a particularly hotly contested customer, who does not have a specific reason for shopping at one store over another or for purchasing a particular item or service over another.

Another problem with the Allison-Fisher Funnel is that there is little or no place for brand and dealership loyalty. Every customer is a new customer to be won over. 

A primary goal of marketing is to create, reinforce and broaden the base of customers who are loyal to the brand and/or dealership. EV dealers and their manufacturer brands must change their perspective on brand loyalty. Winning new customers is important. But, building, maintaining and reinforcing brand loyalty are critical. And, the current marketplace, where shopping around and trying new vehicles, does not reflect the last days of automotive brand loyalty. This is the beginning of EV brand loyalty not the end.

Do’s and Don’ts for 2023

It has been a wild year for marketers. Based on events of 2022, here are some do’s and don’ts to keep in mind for 2023.

Do’s

Do know the business in which you do business.

Please be specific. For example, you are not in the restaurant business; you are not in the fast food business; you are not in the casual dining business, you are not in the burger business. These are generic categories. These are not markets. A market is a specific group of people who have a specific need in a specific context. You are in the business of delivering an exceptional, relevant, differentiated, consistent eating experience time and time again. Brands are a promise of a relevant differentiated experience. CVS does not see itself as being in the drug store or pharmacy business. CVS sees itself as a provider of quality, affordable, convenient, wide-range health care services to help you feel your best.

Do create and deliver your brand-business’ Brand Promise. 

Having a Brand Promise means that you know the brand experience you intend to deliver. A Brand Promise summarizes the special contract that exists between a brand and its users. A Brand Promise describes what a brand is intended to stand for in the mind of a specific group of guests and/or prospects. By consistently living up to the Brand Promise, you ensure that your brand(s) will be relevant and distinctive. Peloton has a great brand-business promise but it seems as if this promise is only for Annual Reports. Build your brand-business around your Brand Promise and let your customers and prospective customers know.

Do be willing to abandon practices that do not yield the results you want.

Just because you have been successful doing something one way for years does not mean that it will continue to be a successful approach. If the holiday Southwest Airlines debacle has shown us, anything it is that with climate change generating ferocious, frequent weather events, a hub-and-spoke system may be more successful than point-to-point. Also, technology changes rapidly. Assuming that an outdated technology system can survive a crisis is brand-business mismanagement.

Do continue to build Brand Power.

Powerful brands make money The goal must be to become the identity that is most familiar, the highest quality and most trustworthy source of a relevant, differentiated promised experience. Example: Apple. Apple always tops the lists of most powerful brands. This brand power provides Apple with a pervasive perception of quality, leadership, innovation and trust. So much so that this year an automotive survey among 200,000 new vehicle owners with a list of 45 brands showed that 26% of these new vehicle owners would “definitely consider” purchasing an Apple vehicle in the future. Toyota came in first for “definitely consider” (at 38%) followed by Honda (at 32%). As of yet, Apple does not make cars.

Do focus on customer problems.

Please ask your customers what problems, worries, concerns they have with your product/service category, with your specific product/service offering. Asking customers what they want is not productive: you will receive generic answers. Asking people to complain and then finding a solution is the best way innovate and renovate. One of the biggest problems that Southwest Airlines customers complained about was the lack of communication. Of course, their flights were cancelled. But, Southwest’s lack of direct communication and inability to answer the phone was as serious as the flight disruptions and the lost luggage.

Do create and implement a Brand Architecture for your brand portfolio

Brand Architecture informs how the brands within your portfolio interact. Without an agreed Brand Architecture, brands compete with each other internally rather than compete with competitors externally. There are 5 types of Brand Architecture: Hallmark, Solo, Extended, Family and Combination branding. Remember that it is not necessary to use the same branding approach across the portfolio. Marriott uses the Family branding endorsement approach for many of its brands: Courtyard by Marriot. But Marriott treats its Ritz Carlton brand as a Solo brand.

Don’ts

Don’t reject your heritage.

Your brand-business was built on something important. Your provenance is critical. You can be contemporary and still leverage your past. Old can be new. Brands such as Chanel, Gucci, Louis Vuitton and Tag Heuer, for example, are considered adept at maximizing their genuine, authoritative heritage with an emphasis on the future. Car brand Jeep has four Willys models. The descriptor says, “Inspired by the original. Willys rakes inspiration from the very first Jeep Brand vehicles built by Willys Overland in the 1940s. Willys today combines heavy duty Trail Rated component upgrades with classic Jeep Brand styling.”

Don’t be generic.

Being generic, offering generic category benefits leads your brand-business to become a commodity with no relevant differentiators. When you stand for everything general, you stand for nothing special. Patagonia does not make outdoor clothing. Patagonia wants to be a brand-business that inspires and implements innovative solutions to our environmental crisis.

Don’t focus communications solely on price.

Selling the deal instead of selling the brand cheapens the brand. Rather than saying “Great price” say, “Great brand at a great price.” Peloton spent a lot of marketing dollars on deals and price advertising. The brand-business’ core values were never articulated. Once the leader in indoor fitness, after years of price-based marketing, Peloton is struggling to maintain relevance in its fast-changing market. 

Don’t rely on results to decide for you.

Data do not decide. People decide. Data do not speak. People speak. Use the data to understand and prioritize the decisions that need to be made. Please do not find yourself bogged down in the paralysis of analysis. When Dyson first came on the vacuum scene, competitors were convinced that fledgling Dyson would fail. Why? Data showed that noise was a problem and Dyson vacuums made a lot of noise. One global competitor even manufactured and sold a silent vacuum. The data were not correct. Noise was not the problem: it was the type of noise. Dyson’s noise helped people believe that the Dyson vacuum was powerful and had the strongest suction. The silent vacuum failed because no noise told consumers there was no suction.

Don’t behave inconsistently.

Customers want consistency. Inconsistent behavior erodes trustworthiness. Erratic behavior and changing values confuse customers. Familiarity does not generate contempt: it generates comfort. During the pandemic, familiar brands such as Campbell’s and Kraft saw vastly higher sales. Clearly, Twitter’s daily changes matter to users and advertisers.

Don’t be complacent.

Complacency stops ideas and innovations in their tracks. Complacency stops your brand from keeping up with its customers. Complacency lulls employees into inaction. Complacency crushes curiosity and creativity. When brands and their leaders become complacent, the brands suffer market share loss and under-performance. Complacency leads to brand irrelevance. Complacency stops brands and their leaders from looking outside at what other brands are doing and what are the threats. In 2016, Bloomberg Businessweek pointed out that complacency was at the heart of Levi Strauss’ struggles. The brand-business focused on churning out blue jeans missing the fact that yoga pants and leggings were alternatives for casual wear.

Who knows what this new year will bring for marketing. We cannot predict the future. But, we can prepare by futureproofing our brands. As strategies are generated and tactics defined, please keep this list of Do’s and Don’ts on hand as a guide for enduring, profitable growth.

dollar general market segmentation

Dollar General Chooses Market Segmentation

Market segmentation is fundamental to brand-business building. When creatively and intelligently managed, market segmentation can provide insight into:

  1. Superior understanding of the customer so the brand-business can provide outstanding competitive advantage;
  2. Strategic focus that is essential for effective marketing;
  3. Identifying market priorities that can drive brand-business strategies.

Dollar General applied market segmentation to generate its two-year-old pOpshelf brand-business.

Without altering its brand promise, Dollar General is leveraging market segmentation to expand its footprint with pOpshelf. Dollar General is not alienating its core customer base but has created pOpshelf for a new customer base. And, to prove the relevant differentiation of Dollar General and pOpshelf, in some Dollar General stores there are mini pOpshelf stores inside.

After the pandemic, Dollar General noticed a new market segment. But, this new market segment seemed to have different needs than Dollar Generals’ core shoppers. Dollar General understood this customer as an affluent bargain shopper who is inflation weary. The affluent bargain shopper is a suburban shopper with a couple of children and an income between $50,000 and $125,000.  

The affluent bargain shopper is more interested in general merchandise than food. This shopper wants buy basics at a good price (such cleaning products or toothpaste) but also wants to buy fun items as well. A pOpshelf store has that “treasure hunt” vibe that makes shopping interesting. (The treasure hunt experience should never be underestimated: it is also part of what makes TJ Maxx so popular.) Shopping at a pOpshelf store allows affluent bargain shoppers to treat themselves without a sense of guilt, according to Dollar General’s Chief Merchandising Officer. She added, “pOpshelf continues to positively resonate with customers through our fun shopping experience, on-trend merchandise and relevant price points.”

In a Goldman Sachs Retail conference in September 2022, Dollar General described pOpshelf’s shopper as follows, “… it’s a different customer. We’ve gone to school on that customer and made some changes accordingly, but it’s the same basic need of value and convenience for an underserved customer that other retailers can’t get to. So that makes us extremely excited. We serve a different customer and it’s a different occasion.”

Dollar General executives described pOpshelf this way, in its 3rd quarter 2022 Earnings Report, “pOpshelf aims to engage customers by offering a fun, affordable and differentiated treasure hunt experience delivered through continually refreshed merchandise, a differentiated in-store experience and exceptional value with the vast majority of our items priced at $5 or less.” 

According to CNBC, at a pOpshelf store, many of the items are ones that are available at higher-end markets such as Mrs. Meyers soaps and Amy’s frozen foods. The pOpshelf shelves are filled with a mix of holiday-themed party platters, home goods, crafts, toys, party supplies and seasonal décor with most items priced at $5 or less.

One industry observer wrote that while most of pOpshelf’s shelves are filled with “… decorative accessories and consumables, its home textiles assortment includes towels, kitchen textiles, decorative pillows and throws”. pOpshelf avoids utility items such as sheets. This allows pOpshelf to “make it all about fashion.”  All these items are own brand.

According to Dollar General, pOpshelf differs from a Dollar General in that a Dollar General is mainly anchored in small towns or rural areas. Dollar General customers tend to have household incomes of $40,000 or less. And around 20% of items are offered at $1 or less. Executives at Dollar General tell us that they constantly speak to their core customers. These core customers need the $1 price point to survive from paycheck to paycheck.

Because pOpshelf focuses on general merchandise over food and has a $5 or less price range, pOpshelf is not just a retail establishment for a different segment; it is a retail establishment that has higher sales and higher profits.

The purpose of market segmentation is identifying and understanding a brand’s customers. A brand-business may have different customers with different needs. Or, the same customers who have different needs due to different situations or contexts.

At its core, market segmentation is the idea that what people want is a function of who they are, why they need the product or service and how, when and where (context) they use the product or service. So, a market is particular people with a particular need in a particular context. The goal is to profitably satisfy customer needs.

Satisfying customer desires and understanding occasions in which these occur is the key differentiator between marketing and selling. Selling is convincing people to buy what we know how to make. Marketing is providing what we know customers want or what solves their problems. This is how brand-businesses leverage competitive advantage for success. This what Dollar General is doing. And, market segmentation is at the core of its growth.

beyond meat marketing branding

Beyond Meat: A Brand-Business Needs a Relevant Differentiated Brand Promise

In its latest earnings call, Beyond Meat articulated a three-step turnaround plan.

Observers, investors and analysts agree that Beyond Meat is a troubled brand-business in need of a turnaround. In yet another analysis of Beyond Meat on CNN, there was the familiar litany of issues. As CNN points out, Beyond Meat is facing a “waning” of interest in plant-based meat products. Part of this is due to price points and customers’ desires to fall back on less expensive alternatives. With prices high, people have been cutting back on dining out. This impacts Beyond Meat’s non-grocery channels. There have been some C-suite resignations. And, there has been a recent report on the hygiene of a processing facility in Pennsylvania. Adding to these woes is the fact that McDonald’s has not added the highly touted McPlant burger to its menu in the US, while Dunkin took its Beyond Sausage breakfast sandwich off its menu.

CEO, Ethan Brown reiterated most of these issues in the earnings call. Mr. Brown stated, “As consumers intensify (their) focus on making ends meet, health and environmental considerations take a back seat. This phenomenon makes it more difficult to broadly convey our core value proposition to the consumer.

“To summarize the current situation, we face an economy where blistering inflation pressure is shifting consumer behavior in the grocery store, category where competition has dramatically increased despite a broad and precipitous category slowdown and a consumer base whose focus understandably turned to fulfilling immediate basic needs of pursuing the broader benefits that represent our core value proposition.”

In a turnaround plan, the first step is to stop the bleeding. Mr. Brown stated Beyond Meat must “…significantly reduce operating expenses, while focusing on a more narrow (sic) set of strategic partner, retail, and food service opportunities and utilizing lean value streams across our beef, pork, and poultry platforms.”

Second, Beyond Meat will “… aggressively manage down inventory and rationalizing our production network..” This is due to “…more moderate volume assumptions to improve overhead absorption, address underutilization fees, and support margin improvement.”

And, third, Mr. Brown indicated that Beyond Meat would apply “…a laser focus to our sales and marketing activities, emphasizing those opportunities that we believe strike the right balance between restoring near-term growth and nurturing our most valuable long-term opportunities.” This means “restoring growth in retail and food service, through a series of targeted innovation, sales and marketing execution.”

All of these are important strategies. When a brand-business is in trouble, focusing on Financial Discipline, Operational Excellence and Leadership Marketing are critical for a turnaround. 

Financial Discipline is priority number one. Make money. Get back to profitability. Eliminate waste. Improve productivity. Every brand needs to earn the right to continue to grow. Financial Discipline is more than cost cutting. It is also a focus on building brand value. Cost cutting takes you only so far. Brand value contributes to quality revenue growth.

Operational Excellence means focusing on delighting customers so that an increasing percentage of customers look forward to purchasing more often. Operational Excellence involves creating an efficient and effective balance between meeting customer expectations and minimizing waste. When managed properly, Operational Excellence both decreases costs and improves customer satisfaction. And, this in turn helps generate quality revenue growth leading to brand value.

Leadership Marketing means focusing on building the relevant differentiation of the brand. Innovation and renovation are important. But, so is clarity of the brand’s Purpose and Promise, both internally and externally. Articulating the brand’s Purpose and Promise help to increase brand value.

Thus, here is what Mr. Brown’s turnaround plan lacks. There is no mention of the brand-business’ Brand Promise. Mr. Brown does suggest that there must be better communications of the health benefits of Beyond Meat. And, there must be a better connection between the brand-business and its role in sustainability. These are about the brand’s Purpose. But, there is nothing about the brand-business’ Brand Promise. And, the CEO of Impossible Foods is saying exactly the same thing. 

Beyond Meat has not created a relevant, differentiated brand promise. Without a relevant, differentiated brand promise, a brand tends to fall into commodity corner.

A Brand Promise summarizes in a brief statement the special contract that exists between a brand and its customers. A Brand Promise describes what the brand is intended to stand for in the mind of a specific group of customers or prospective customers. By consistently living up to and delivering the Brand Promise, a brand will be relevant and distinctive. A Brand Promise is something that a brand continuously strives to achieve. It is a future-focused description because it states what the brand will do for its customers. 

A Brand Promise has three components: the Brand Claim, the Brand Character and the Brand Support. The Brand Claim is the combination of functional benefits, emotional and social rewards: that is, “what does the brand do for me?;” “how do I feel when the brand does this well?” and “how are my social interactions and connectedness enhanced when the brand does this well?”  

The Brand Character reflects the values of the customer (that means, who is the person we wish to have as a loyal customer?) and the brand’s personality (if the brand were a person, what would be those traits most compelling to the target customer?). 

The Brand Support is the combination of relevant, differentiated features that are necessary to bring the Claim to life for those with the articulated Character. Identify the Brand Support only after the Brand Claim and Brand Character are identified.

The role of the Brand Promise is multidimensional. First and foremost, it defines the brand. Brand Promise defines the parameters for all development, communications, innovation and renovation on behalf of the brand. Brand Promise must be a motivating, relevant, differentiated description of the brand experience that you want the brand to deliver. Consistently living up to this Promise is the way customers perceive the brand’s performance quality. 

The Brand Promise is an internal force as well. All employees must know and understand the Brand Promise. They must be able to define it and deliver it, day after day, for every customer. Regardless of function, employees must know what they need to do to live up to the brand’s Promise to its customers.

Beyond Meat has had and still has many operational issues and retail challenges.

It is a mistake to believe the Brand Promise can fix everything. But, it is also a mistake to believe that Brand Promise is a mere marketing construct. Not only does Brand Promise define the total brand experience, it is a galvanizing force within the brand’s organization. 

A brand is a multidimensional, multilayered, multifaceted relevant differentiated idea. That idea is the Brand Promise. And, since a brand is a promise of a relevant, differentiated experience, the Brand Promise is key. This is especially true for new brands and for brands in intensely competitive market spaces.

Beyond Meat has never clearly differentiated in a relevant manner from its original competitor, Impossible Foods. That was a mistake. Now, that quality plant-based meat and chicken alternatives are taking up a lot of grocery refrigerated and frozen spaces, being known for something special is a make-or-break necessity.

Being first in a category does not matter if entries that follow are relevant and differentiated and high quality. Beyond Meat could have an amazing relevant differentiated Brand Promise. If the brand-business’s management team starts to focus on brand-business revitalization, let’s hope this time the focus is on the brand.

Macy's brand marketing

Macy’s: A Mall Within A Mall

Is the rejuvenation of retail going to be the idea of a mall within a mall? 

While some retail establishments bit the dust after years of overwhelming debt and pressures from coronavirus, some surviving stores are giving up the old “department” store approach for the idea of a store within a store. And, logically, as more retail establishments give their space to other retail concepts, the old department store is becoming more like the mall it anchors. 

Macy’s is leading the way.

Just this year, Macy’s decided to offer prime space in all of its stores to Toys R’ Us. According to the recent press, this brand within a brand has been successful. Macy’s states that the customers who visit Toys R’ Us are younger than Macy’s core customer base. And, these toy shoppers are cross-shopping by visiting other parts of Macy’s and buying. Now, Macy’s is offering space to Claire’s, a tween fashion-and-accessories store, in 21 of its stores. The hope is that even younger shoppers will frequent Macy’s to visit Claire’s.

The department store has been an American fixture since 1824 when Lord & Taylor opened its doors. Soon after in 1825, Arnold Constable opened. Marshall Field’s and Wannamaker’s followed. The department store offered a wide variety of goods in different areas of the store, hence departments. In 1858, Rowland Hussey Macy founded R.H. Macy & Co.

Macy’s first New York store grew by expanding its footprint into neighboring buildings to accommodate all of its departments. In 1902, Macy’s moved into its new building at Herald Square. Through all of its ups and downs, Macy’s proved it was a survivor. Macy’s outlasted its neighboring department store on Fifth Avenue and 34th Street, B. Altman’s. B. Altman’s, like Macy’s a high-end retailer, went bankrupt in 1990. Macy’s also outlasted Lord & Taylor, again a nearby Fifth Avenue & 38th Street establishment. (Lord & Taylor is now reincarnated as a digital-only department store.)

The difficulties in navigating the fast-paced changing retail environment have sapped the energy from many stores including Macy’s. Amazon’s digital super store changed shopping. Discount stores changed shopping. And, of course, coronavirus changed not just shopping but the supply and variety of items in the store. Many stores, such as Bed, Bath & Beyond, had either too little inventory or the wrong inventory or both.

Some of the current retail winners are stores that have figured out the successful marriage of brick-and-mortar and digital. Behemoths such as Walmart and Target have been able to offer the best of both brick-and-mortar and digital.

Macy’s, however, appears to be experimenting with a different approach to relevant differentiation of its brand. Rather than opening a new “department’ or a new channel, Macy’s is allowing existing retail brands to become those new departments: a store-within-a-store, turning Macy’s into a mini-mall.

The idea is not new. Sears tried this when it offered financial services through Dean Witter and real estate services through Coldwell Banker, brands that Sears owned. Unfortunately, these brands were not a good match with its core customer base. Furthermore, the focus on these peripheral brands took management attention away from the Sears brand, hastening Sears’ decline. (Interestingly, Sears created Allstate Insurance in 1931 and placed Allstate insurance agents in the stores. Allstate was spun off in 1993 and became completely independent of Sears in 1995.)

Macy’s approach is component branding. Component branding is when a brand is inserted into a host brand, in this case, Macy’s. The main benefits of the host brand do not change. However, the perceptions of the host brand are enhanced. The component brand – in Macy’s case, brands Toys R’ Us and Claire’s – is given the space to generate familiarity and sales within an established brand.

Basically, this is a modern version of the department store. But, unlike Sears, the brands within the Macy’s brand are not owned by Macy’s. These brands within the Macy’s brand are already well-established retail brand names. And, these are brands with loyal followings.

Macy’s appears to be doing something bigger than remaking the idea of a department store. Macy’s also appears to be remaking the idea of a mall. What if the mall were within the store instead of the store being inside the mall? It is an intriguing question. Malls have been facing hardships as anchor stores and smaller stores closed during the last recession and then recently during the coronavirus lock-downs. 

Imagine, people might stop saying, “Let’s go to the mall and shop the stores.” People may start saying, “Let’s go to Macy’s and shop the stores.” What if Macy’s became the draw rather than the mall? It used to be that way at Wannamaker. People would meet under the eagle in the main court area. What if Macy’s becomes the center of the retail experience rather than the mall itself? What if Macy’s itself becomes the hub for conversation, conviviality and connections? That would be a return to the ancient Greek concept of the agora. The agora was the heart and soul of the city.  It was the meeting place; the place where people gathered, listened, spoke and shopped. 

Whatever the case, Macy’s has a good idea. Making Macy’s a destination for shoppers looking not just for Macy’s items but for toys and accessories adds relevant differentiation to the Macy’s brand without changing Macy’s core brand. Relevant differentiation is the name of the game. Macy’s brand-business game plan seems to be a winner.

bed bath and beyond brand

This Should Not Have Happened: Bed, Bath & Beyond Entered Black Friday With Empty Shelves

In June of 2011, a retail sea change occurred. Storied brand, J.C. Penney, hired Ron Johnson, who led the success of Apple’s brick-and-mortar stores. Mr. Johnson decided that one of Penney’s problems was that the brand was damaged due to its consistent focus on deals and low prices. Without any Penney core customer insight, the pricing at Penney’s was changed. Using Apple as a model, the overhaul of Penney’s was something that turned off core customers. There were brand management lessons to be learned from the Ron Johnson tenure.

Fast forward to April of 2019. At another retail giant, Bed, Bath & Beyond hired Mark Tritton from Target. Mr. Tritton developed a turnaround plan for Bed, Bath & Beyond. Using Target as the model. Mr. Tritton’s alterations were not focused on core customers. So, the changes were startling for Bed, Bath & Beyond’s core base loyalists.

By February of 2022, it was clear that the strategies designed by the CEO of Bed, Bath & Beyond were not working. To complicate matters, Covid-19 had messed up supply chains and altered customer buying habits leaving stores like Bed, Bath & Beyond with limited merchandise or the wrong merchandise.

Now, we have just experienced Black Friday shopping day. Going into Black Friday, the business press indicated that of all the big box stores, Bed, Bath & Beyond was suffering from empty shelves. 

According to analytics firm DataWeave, and as reported in The Wall Street Journal, Bed Bath & Beyond continues to struggle with keeping its shelves stocked ahead of the holidays.  More than 40% of Bed Bath & Beyond’s inventory were unavailable in October 2022. This is nearly twice more than October 2021.

The report added that Bed Bath & Beyond had higher out-of-stock rates in October 2022 in comparable items than other retailers.

There is nothing more dismal and off-putting than empty shelves. If you need proof of that, step into one of the remaining Sears stores. Empty shelves are not just depressing but they are just dreadful for a brand’s customers’ perceptions and the brand’s value.

While many stores suffered from supply chain issues, at Bed, Bath & Beyond, these were severe due, in part, to the new Tritton strategies.

First, Mr. Tritton focused on limiting the number of price deals.  In 2021, Bed, Bath & Beyond decided to stop a lot of its print circulars that generated store traffic. Similar to the switch to everyday low prices instituted at J. C Penney during the tumultuous tenure of ex-Apple store maven, Ron Johnson, Bed, Bath & Beyond stopped coupon-generated and flyer-generated deals. The idea was to become less dependent on dollars-off shopping.  Mr. Tritton also wanted price parity with its competitors. 

Retracting circulars was a minor disaster. As with Penney, knowing the customer base could have avoided this kind of crisis. Bed, Bath & Beyond customers did not see the deals as brand degradation. They saw the deals as part and parcel of the brand. The deals were things they loved about the brand. 

Print circulars and mailers were mainstays of the brand for decades. Customers missed the circulars; store traffic dropped. When Mr. Tritton’s team finally recognized that circulars needed to be reinstated, Covid-19 paper supply issues along with labor constraints meant the brand could not print the circulars fast enough.

Second, Mr. Tritton, following the Target playbook, began a program creating own brands

Although an initial expense, private label brands are money-makers if handled properly. The Wall Street Journal has pointed out that private label brands, “… are no longer the cheap knock-offs you keep hidden in the back of the cupboard, but quite possibly the tastiest deals on the shelf.” Referring to Whole Foods’ reincarnation of the 365 brand and Target’s innovative private label creations, The Wall Street Journal stated private label brands are “… casting off their bland reputation and transforming themselves from dull to desirable.”

Mr. Tritton’s Target experience was that own brands are an essential, profitable revenue source. Adding more private label brands became a priority for the Bed, Bath & Beyond brand. In addition, Bed, Bath & Beyond created a partnership with Kroger Co. whereby Kroger will sell some of the Bed, Bath & Beyond private label offerings.

Mr. Tritton indicated that the own brand portfolios would consist of products in home décor, laundry, bathroom and kitchen, according to a Bloomberg BusinessWeek report. 

Own brands require manufacturing and supply. Manufacturing and supply were hard hit by coronavirus. It became nearly impossible to have these private label brands on the shelves. At the same time, the national brands were gone.

Third, Mr. Tritton focused on updating Bed, Bath & Beyond’s technology.

New technologies are always a winning issue as these technologies can make life easier for shoppers. 

At the time, retailtouchpoints.com reported that Bed, Bath & Beyond’s technology upgrade program was designed to “… support improvements in merchandising and inventory management, product lifecycle management, retail space planning and optimization, the launch of additional private-label brands and real-time tracking of merchandise fulfillment with the supply chain.” The technology changes were also designed to make shopping easier for customers.

One of the lessons of Covid-19’s supply chain problems is that real-time inventory practices create empty shelves and deficits in other critical items necessary for manufacturing. In an earnings call at the time, Bed, Bath & Beyond admitted that its poor quarterly performance was due to a “… compromised customer experience” when customers could not find what they wanted on its shelves. As Mr. Tritton said, there was demand but limited availability.

Bed, Bath & Beyond stated that the supply chain issues cost the brand $100 million at the November 2021 end of quarter. The December 2021 results were equally bad. Upgraded technology focused on pandemic-fueled customer needs such as e-commerce, curbside services, in-store pick-up and same-day shipping. Of course, if there is limited product availability, these services become moot.

Finally, Mr. Tritton made a classic marketing mistake by not focusing on the core customer base. 

Keeping core customers happy and loyal is essential at all times, and, most especially, during troubled times. The changes that were instituted were not based on core customers’ problems and needs. These changes were made based on Target customers. 

Further, the changes at Bed, Bath & Beyond did not match the changing behaviors of core shoppers.

One of bright spots in post-coronavirus marketing has been the Penney ads with core customers saying what they love about the brand.

Hopefully, this iconic retailer will have made it through the holidays with its brand intact. The problems at Bed, Bath & Beyond were self-inflicted. With Bed, Bath & Beyond’s Board of Directors recognizing the missteps, Mr. Tritton is now gone from Bed, Bath & Beyond. Of course, the supply chain was a disaster for many retailers, but from a brand standpoint, the brand mismanagement at Bed Bath & Beyond was extremely damaging. Brands can live forever, but only if properly managed. 

sears bankruptcy brand

Sears: The Agonizing Attrition of An Icon

As we enter the holiday season, we learn from BusinessWeek that Sears, once America’s holiday shopping mecca, is barely alive, in the continuing agony of attrition. The sadness of Sears is palpable. 

Let’s face the facts: Sears is no longer a living brand. Some refer to Sears as a zombie brand: no longer alive but lingering on the landscape. At this moment, according to a recent BusinessWeek article, Sears has fewer than two dozen stores. The fact that there are fewer than two dozen stores actually operating is a miracle. In 2021, there were about 40 Kmart and 39 full-line Sears stores left. Some press reports indicated that there would be 15 Kmart and 19 Sears stores left after November 2021 closings. Over the past 16 years, Sears and Kmart have shuttered more than 3,500 stores eliminating 250,000 jobs.

Business press and retail observers place most of the blame for Sears’ – and Kmart’s – demise on Eddie Lampert, the hedge fund magnate. According to the latest from BusinessWeek, “… years of underinvestment and dismantling under the stewardship of its would-be savior, hedge fund manager Eddie Lampert, also helped bring the company to this moment: it’s sprawling suburban headquarters on the block, signature brands including Craftsman and DieHard sold, and most of the jobs that Lampert’s purchase was supposed to preserve gone.” The general opinion is Mr. Lampert’s extraordinary talent for financial engineering and management by cost-cutting, of which he was the beneficiary, put Sears and Kmart into their vicious vortexes of death. Continuing in its analysis, BusinessWeek states the unfortunate situation that led to Sears’ demise was this, “Effectively, Sears was Lampert, and Lampert was Sears—pouring hundreds of millions of dollars into the company but also reaping hundreds of millions from interest, fees and asset sales.”

From a brand standpoint, Sears is a classic case of death by brand mismanagement. Let’s look at how Sears became a barely alive brand to its owners but an-already-dead brand to its customers.   

First, arrogance is a killer characteristic

Success is everybody’s aim. Sears had decades of successful retail dominance. From its beginnings in 1893, Sears was America’s mall.  With expertise in selling everything Americans could want (America’s Everything Store) with storied, trusted brands such as Kenmore, DieHard and Craftsman, Sears was the Amazon of its time. The Sears catalog was ubiquitous in American homes; yesterday’s version of long-distance, not-in-person shopping.

However, this great success fueled arrogance. Sears’ management’s mentality was that it could do no wrong. Sears believed it could sell anything and everything. Its retail outlets featured real estate (Coldwell Banker), financial services expertise (Dean Witter Reynolds) and Discover credit card. The diversity of these brands led to management taking its eyes off of the Sears brand. In a blink of an eye, Walmart became America’s brick-and-mortar everything store. Nothing Mr. Lampert’s team did changed Sears’ trajectory.

Thinking that you know everything and can sell anything is admirable. But, it is also dangerous. A review of Boeing and its tragic 737 Max crashes cites arrogance as one of the factors leading to Boeing’s being toppled from its top perch in aviation. The downfall of crypto exchange FTX is also a lesson in arrogance.

Avoiding arrogance takes effort on the part of leadership. Great leadership means fighting the inclination to focus on oneself rather than the customer and the brand. The leader who creates a culture of arrogance by letting success go to the and egos of managers is a leader who is more committed to self rather than brand.

Second, comfort feels good but it leads to complacency

Avoid complacency at all costs. Complacency stops innovation, renovation and keeping up with changing customer values and behaviors. Complacency allows employees to continue doing what they are most comfortable doing. Complacency lulls people into laziness and inaction. Complacency crushes curiosity and creativity. Complacency allows people to avoid looking at trends and changes. According to some, complacency leads to market share loss and underperformance. Complacency is passive. Brands are not passive. Brands are active promises of an expected relevant, differentiated experience. 

Apparently, Sears did not appreciate the rise of big box stores. Sears ended the catalog. Sears neglected investment in e-commerce. Lack of investment turned Sears stores into unlit empty boxes. Sears was fat, rich and complacent, said one observer. He added that the brutality of retailing combined with a Sears’ management’s self-satisfied complacency and arrogance allowed the great retailer to suffer.

Third, financial engineering above customer satisfaction is never the answer

The business press and analysts have been vocally public that Eddie Lampert “… undertook some of the most complicated and thorough financial engineering the (retail) industry has ever witnessed and which has now become infamous among retail observers. The recent BusinessWeek story indicates that Mr. Lampert had for years used his hedge fund “… to lend to and control Sears, while he was also the company’s CEO and chair.” 

Financial engineering is the catchall phrase for extreme cost cutting including job losses, debt accumulation, share buy-backs, increased dividends, forced spinoffs and money siphoned into the pockets of investors rather than invested into businesses. Financial engineering can damage brands. This is because the priority of financial engineering is building shareholder value at the expense of customer value… a formula for failure. Boeing suffered from cost-cutting and suffered catastrophic consequences.

Financial engineers see strong brand equity as an opportunity to extract value rather than extend brand strength.  This is a form of brand extortion. Last year, an observer stated, “(Eddie Lampert) is a mastermind of the corporate rule book. He was always manipulating Sears for the most profit for the owners of Sears, or for the companies he created to benefit from Sears.”

Another industry consultant stated that “Sears, under Mr. Lampert, had always been a, financial play.” Of course, he added, there were some things that could be achieved with the (Sears’ and Kmart’s) property. But, there is really and realistically no future for the Sears brand. And, yet, there are still some stores in place when everyone agreed that Sears would be effaced from the retailing earth.

Sears lost relevance 

Staying relevant means always staying aware of marketplace changes, altered customer behaviors and attitudes, competitive brands and your brands. Relevance requires learning about customers’ needs, problems and occasions of use that the brand satisfies better than alternatives. 

When a brand loses relevance, it can come close to death. However, brand demise is not inevitable. Ongoing brand management is a leadership challenge. Based on various reporting, it appears as if Sears’ and Kmart management was not focused on the customer. 

People who followed Sears were convinced for years that Mr. Lampert’s approach was anti-user. As one person posited, “There’s no love for the consumers, no relevance for consumers. There is no intention there of (operating) as a legitimate retailer.” 

In the 1970s and 1980s, Sears and Kmart were America’s largest and second largest retailers, respectively. Now, Sears and Kmart are irrelevant shadows, ghosts of arrogance, complacency and financial engineering.  Coming back to life will take leadership that cares about the brands. There is no indication that exists. The brands are a financial play.

Coming back to life means asking customers to care about the brands. Retail observers say that shoppers do not seem to care about Sears and Kmart anymore. One observer asked, “Why would you care?” If you can even find a store, the experiences do not compare to competition. The once-treasured Sears and its brands are distant memories, as is Kmart. 

Loss of relevance stems from lack of innovation and renovation. And, it comes from taking your eyes off of the customer. With proper resource allocation – not financial finagling – and a passionate belief in the brands, brands can recapture relevance again. There is no indication that this will happen.

Brands do not die natural deaths. As Sears and Kmart show, deaths and declines of brands generate internally from mismanagement and nonbelief. Brands can be revitalized but it is unclear if revitalization is in the works at Transformco. In the meantime, Sears and Kmart are in a twilight zone, shadows of their former selves, drained of life but still walking the earth, waiting for the inevitable. Eventually, all the life will be sucked out of Sears and, then, Kmart. When wringing all the worth out of a brand is the goal, there is no going back. The slow attrition of Sears is a sad fact. Sears… and its sibling, Kmart… are poster children for the fact that you cannot cost manage your way to enduring, profitable growth.

Twitter Brand Erosion

Twitter Is Torching Its Brand Power

A powerful brand is the consistent identity of a trusted source. A powerful brand reflects its trusted reputation for quality, leadership, and integrity, underpinning all stakeholder relationships.

A powerful brand is not merely a marketing concept. It is not an academic theory. It is not a line in an advertising slogan. A powerful brand is an asset. A powerful brand is an asset on a company’s balance sheet. A powerful brand is at the very core of accounting’s Goodwill. A powerful brand is valuable.

When a brand’s power diminishes, so does its economic value.

The back-and-forth decisions, the double-talk, the public real-time musings, the threat of bankruptcy are all eating away at the Twitter brand. Its brand power is draining away. Although never at the top of the lists of the world’s most powerful brands, since its inception, Twitter has had powerful global impact, politically and socially. 

The frightening vacillations at Twitter are having a deleterious effect on the brand, its brand power and its value. At the same time, driving the chaos is the reality of funding the $1.2 billion annual interest payment on its $13 billion debt load.

A powerful brand relies on four “must-haves”:

  • Be a credible source
  • Have an excellent reputation 
  • Be a pillar of integrity
  • Have a responsibility ethic

Be a credible source

  • Being a credible source means that all stakeholders – from investors to analysts to employees to users – have confidence that Twitter provides true information about itself. Although now a private company, Twitter still has an array of stakeholders. Being a credible source also means that Twitter will consistently deliver on its promises. Research shows that when brand is perceived to be a credible source, stakeholders believe that the brand’s past actions can predict its future behaviors. 
  • Discussing the fiasco of the $8 blue check system where some people were pretending to be celebrities and brands, a director at the Atlantic Council’s Digital Forensics Lab told The New York Times that “… the quality and credibility of content on Twitter could suffer if fraudsters created confusion and amplified lies.” Senator Edward J. Markey of Massachusetts said, “Selling the truth is dangerous and unacceptable.”
  • It is an imperative to be perceived as credible. Communications from highly credible sources are more persuasive. A credible brand acts as a “quality” cue lessening customer-perceived risk during customer decision-making. There are data to show that credibility makes decision-making easier. This is because the customer trusts the authority of a credible brand-business. Changing plans every day does not foster credibility. And, firing the entire communications, marketing, celebrity partnerships and human rights departments leaves the brand at a credibility disadvantage.

Have an excellent reputation

  • Having an excellent reputation means consistently and continually behaving in a quality manner. Reputation is all about the brand’s accomplishments. Reputation is based on the brand’s past. Think of reputation as the “collective representation” of a brand’s past actions and results. For the finance community, reputation means that the brand has been able … and will continue to be able… to deliver valued outcomes to multiple stakeholders. Whether you like Twitter or not, it has had accomplishments.
  • Reputation is the collection of stakeholder perceptions over time.  As with value, reputation is determined by the perceptions of stakeholders. Twitter does not determine its reputation. Twitter’s reputation is in the eyes of the beholders.
  • Reputation can increase business performance. This is because a great reputation helps sell offerings at an increased margin and can help leverage a sustainable competitive advantage. Having a great, positive reputation would be of enormous value for persuading advertisers to come back to Twitter. A powerful brand’s positive reputation alters preference. A strong, trustworthy business reputation contributes to high quality revenue growth. 
  • Losing a brand’s reputation is sinful. It is self-destructive brand mis-management.  When a magazine like Playbill cuts ties with Twitter, it is time to take action.  The CEO of Playbill indicated that in recent weeks, Twitter’s reputation for tolerating “hate, negativity and misinformation” left Playbill no choice but to remove its advertising and focus on Facebook and TikTok platforms.

Be a pillar of integrity

  • To be a pillar of integrity, a brand must make sure that at the core of all actions and behaviors, internally and externally, are the best interests of stakeholders and other constituencies. Integrity means that stakeholders and constituencies view the brand as fair, impartial, open-minded and just across all brand actions. Integrity refers to the brand’s core values and purpose: its guiding principles, and its reason for being.
  • Being a pillar of integrity means the brand recognizes that its relationships with all its stakeholders are valuable. Research indicates that responding to stakeholders with positive actions provides differentiation and/or cost advantage. This ultimately enhances a brand’s overall brand performance.
  • When the individuals responsible for oversight of internal and external relationships are fired or have quit, questions arise as to the brand’s commitment to integrity. When advertisers are wooed and reassured in person but whacked behind their backs, questions arise as to the brand’s integrity. The New York Times stated that Twitter threatened advertisers with “thermonuclear name and shame” if the brands cut off their advertising.

Have a responsibility ethic

  • Having a responsibility ethic means being an effective global citizen behaving positively on behalf of people, communities, nations and planet. Twitter had important roles to play in global events such as the Arab Spring revolutionary waves.
  • Being ethically responsible can influence brand preference as the brand’s reputation influences purchase decisions. People are more vocal in supporting businesses that “do good” while boycotting or publicly berating those perceived to be “not responsible.”
  • Playbill’s CEO pointed out that “… the line between actual news and insidious rhetoric…” had been blurred by Twitter’s recent actions. Saying it was a “respected news outlet for the Broadway community,” Playbill was essentially saying that Twitter was behaving irresponsibly.

If Twitter’s goal is to become a digital global town square where people discuss “a wide range of beliefs,” then being a credible source with an excellent reputation, integrity and a responsibility ethic are necessities. Making Twitter a profitable “trusted source of information and a haven from toxicity” does not happen in a vacuum. Brands can live forever but only if properly managed.

Amazon Prime Branding

Amazon Prime: The Bundle Is Better

Which is better for the brand? Asking users to pay for individual services? Or asking users to buy a bundle of services? There is a lot behavioral psychology involved in this choice that affects brand perceptions. There are inherent risks whichever approach a brand employs. 

Research shows that individual fees feel more personalized as a customer can select those services needed while rejecting services that will never be used. Apparently, however, a large number of price components seems to lower the brand’s perceived fairness while potentially lowering purchase intentions.

For example, hotels add on fees that a guest may not use, yet is expected to pay. Resorts are especially prone to charge fees that may go used. 

Many brands employ fees to gain revenues off of their ostensibly free service. According to The Wall Street Journal, Snapchat, Twitch, YouTube, Tinder, Grindr, Discord and TikTok, for example, all have additional services to which a user can subscribe for a fee. A complication for fee-based revenues is that special fees for special benefits usually means ad-free. But, ads, as we know, are the moneymakers.

Twitter is looking at all sorts of ways to monetize the brand by applying individual fees to different services. Its verification blue check will soon cost $8.

Interestingly, other research tends to show that the brand benefits of a bundle are better. Compared to individual (unbundled) pricing, a bundle offer increases users’ positive evaluations of the brand’s offer; increases purchase intentions while lowering users’ estimates of the cost of the bundle. Psychologically, users generally believe that bundles offer savings and/or convenience because there is a single invoice. 

Furthermore, according to Nicole Nguyen at The Wall Street Journal, prices for streaming entertainment services are rising due to production costs and licensing. Thus, fees for individual services are rising.  Nicole Nguyen writes, “… live-TV streaming services—which were already much more expensive because they attempt to replicate a full cable lineup—are raising prices again. Sling TV’s basic package has doubled since 2017. Music services, too, have crept up, though not as dramatically. Most recently, Apple increased its Music subscription by a dollar a month.”

Cable companies were castigated for promoting bundles by streaming services. Now, though, streaming services are seeing the benefits of bundles.

According to The Wall Street Journal, “In response to the deluge of options, services are exploring discounted bundles with rivals, which are sounding a bit like the cable packages we thought we left behind.”

For example, the Apple One bundle service includes six Apple services like Apple Music, Apple TV+, Apple Arcade, iCloud+, Apple News+ and Apple Fitness+. Disney+ offers an entertainment bundle that combines Disney, ESPN and Hulu.

Disney+ is also testing a “cross-selling” bundle. Disney+, under pressure to generate revenues, is testing a program whereby users can access exclusive themed toy and apparel deals. Disney+ also believes that offering “curated” merchandise might be a “lure” for new users. The idea of offering a membership program cross-sold with Disney’s hotels, theme parks and cruises is not part of this pilot merchandise project. Of course, Disney has the portfolio of brands from which to create an appealing entertainment and hospitality cross-sell bundle. 

Former Disney executive, Andy Bird, is bringing this thinking to Pearson, the educational brand. Pearson now offers Pearson+, access to all of Pearson textbooks for $14.99 a month. Pearson+ has a lot of educational assets other than textbooks such as workplace training, qualifications and accreditation.

Warner Bros. Discovery, another streaming entertainment brand desperately seeking positive cash flow, is preparing for an HBO Max/Discovery+ bundle.

But, in the world of bundles, nothing comes close to Amazon Prime. Amazon Prime allows users to experience the benefits of the Amazon brand in a myriad of ways.

Amazon is showing how to keep members engaged and willing to pay $139 a year (or $14.99 a month). Amazon Prime offers free, same day delivery, Whole Foods Marketplace, Prime Day (s), books, gaming, TV and movie streaming, a Grubhub+ membership, fashion, NFL’s Thursday Night Football, exclusive content such as its “Lord of the Rings: Rings of Power” series and all sorts of merchandise across all sorts of categories. 

To further enhance Amazon Prime, Amazon just announced that it is offering Prime members ad-free music from a catalog of 100 million songs and ad-free podcasts. Additionally, there will be a Podcasts Preview feature allowing users to hear a short podcast soundbite to help decide whether a podcast might be of interest. (Rumor is that Spotify’s paying subscriber base is growing frustrated with the fact that its podcast have ads, despite paying for the service.)

Steve Boom, VP of Amazon Music said, 

“When Amazon Music first launched for Prime members, we offered an ad-free catalog of 2 million songs, which was completely unique for music streaming at the time. We continue to innovate on behalf of our customers, and to bring even more entertainment to Prime members, on top of the convenience and value they already enjoy. We can’t wait for members to experience not only a massively expanded catalog of songs, but also the largest selection of ad-free top podcasts anywhere, at no additional cost to their membership.

“Things have changed,” added Mr. Boom. “As we’ve talked to people who have used music in Prime, they want access to a full catalog of music. It was time for us to expand and update the offering to match customer expectations today.” (Originally, the music catalog was 2 million songs.)

As one analyst stated, “When it (Prime) launched it (Prime) was a free shipping service and music was a deal sweetener. Now that’s changed – it’s a subscription service that has entertainment and free shipping.”

Another observer whose company follows Amazon Prime said, “What else can you sell customers that others can’t sell them? That’s where their (Amazon Prime’s) new frontier will be.”

Yes, Amazon needs to make the $139 a year beneficial to customers. Adding entertainment is particularly appealing. But, so are the mainstay offerings that have grown over the past years. 

Whatever your feelings about Amazon, the brand does focus on its core customers. The VP of Amazon Prime stated that “The No. 1 thing we heard from members was ‘I want more music.’ So, we figured out in the service, with the publishers, how to make that possible.”

For another example, Amazon now has an agreement to with Overtime Elite. Overtime Elite is a “quasi-professional” basketball league consisting of 6 teams with players whose ages range from 16 years old to 20 years old. Overtime Elite is particularly attractive to younger audiences. The agreement with Overtime Elite gives Amazon exclusive rights to stream live Overtime Elite games on Amazon Prime Video in the US.

Further, to enhance its streaming content, Amazon has licensed popular films from Warner Bros. Discovery, a brand under a serious debt load. According to The Wall Street Journal, Warner Bros. Discovery announced $4.3 billion in restructuring charges as well as an existing $50 billion in debt. To generate cash, Warner Bros. Discovery licensed the Lord of The Rings and Hobbit movies to Amazon Prime Video. These films helped Amazon in generating excitement for Amazon’s Lord of the Rings series.

Of course, Amazon’s vast network of offerings that are bundled into Amazon Prime makes the subscription worthwhile. One may not want video or music but may want Whole Foods Market and sports. 

Competing with Amazon, Walmart recently partnered with Paramount+ to add high-quality entertainment to its Walmart+ service.

Social media need to be creative in how to design “sticky” subscriber-fee offerings. Instead of creating a menu of services at individual price points, social media might look at offering bundles of services with a single price point. Partnerships might help social media create bundles that increases usage and attract new users. The idea of “what else can we sell that others can’t” that enhance the way in which customers interact with the brand, must be the goal.

Building Immersive Brand Experiences: American Girl and RH Restaurants

Prior to the pandemic, Starbucks’ founder, Howard Schultz, stated that the way forward for brands is making your branded space an “experiential destination.” At that time,  

Starbucks’ CEO, Kevin Johnson said, “To survive, merchants need to create unique and immersive in-store experiences.” Covid-19 changed things for Starbucks as the company post-pandemic focuses more on drive thru and digital rather than the original experiential third place.

Brands focus on making their experiences come to life in many different ways. This is because a favorable experience with, for example, an iPhone and/or an Apple Watch and/or earbuds increases the probability the same customer might buy an Apple iPad, Mac Air or Mac. With a stable of desirable offerings, Apple continues to build an over-arching power brand by connecting with younger cohorts. In 2018, financial news magazine, Barron’s commented, “Getting more people into the Apple network early can be extremely valuable, especially if they sign up for services that make them unlikely to switch to other phones. And, finding that interest in the Apple Watch is also growing would only help.” Samsung hopes that positive encounters with Galaxy mobile phones will persuade customers to purchase a washer and dryer or other appliance from Samsung when the time comes.

Extended brands that offer multiple product and service experiences strengthen the customer’s commitment and conviction in the brand promise. Disney created spaces where you can meet the animated and other movie “friends” through rides, hotels and cruises.

One of the ways that brands have become immersive is through food. Brands are using restaurants to make the brand encounter a far deeper three-dimensional sensory involvement. Think surround sound for your psyche, soul and stomach. Restaurants make brands immersive without the metaverse.

American Girl, the doll company, and RH, the upscale furniture lifestyle brand both have in-store restaurants that extend and enhance the brand for the customer.

The website for American Girl Stores states, “Ready to make memories together you’ll always treasure? Discover all the experiences our stores offer for a day full of fun!” In addition to in-store parties, a “Dolled Up” salon for the dolls, a doll hospital, activities and hotel packages, there is the restaurant. “Enjoy selections that appeal to girls and grown-ups alike – plus we offer special seats just for doll friends.”

One blog told the story of an American Girls Store dining experience as follows: 

“… hordes of customers (usually moms and daughters, but not always) lining up to have afternoon tea with their dolls. The dolls get their own scaled-down cups and saucers so they can sip invisible tea while the humans polish off petite sandwiches and glasses of American Girl signature pink lemonade.

“(The website states that) possessing your own American Girl is not a prerequisite for the dining experience: “And don’t worry if your girl forgot her doll – we always have extra dolls available to dine with you.”  

RH, formerly Restoration Hardware, has taken the in-store restaurant to an even higher level. As described in The New York Times recently, RH uses its restaurants to provide surroundings focused on RH’s special décor styles and offerings. The restaurants are décor showrooms with a menu. Unlike IKEA, where the spare cafeteria may feature some available lighting or a storage unit, RH has made its aesthetics palpable for its high-end customers. Although the food is quite elegant, albeit expensive, most guests indicate that the beautiful, pleasing surroundings is the draw.

The idea of using a restaurant to immerse customers in the brand, enhancing the brand experience, bringing the brand’s promise to life, is what intrigues Crate and Barrel. In the very tony Oakbrook, IL., mall, Crate and Barrel just opened its first in-store restaurant, Table and Crate.

Privately owned, UK department store, Fenwick’s, also uses the in-store restaurant as a customer draw. Fenwick’s has two different in-store branded restaurants, Fuego and Mason & Rye.

Brands use stores-within-stores to generate traffic. Many of these stores-within-stores are other brands such as Toys R’ Us in Macy’s and Sephora in Kohl’s. Having other brands enhances both brands. Both brands benefit. For example, Macy’s gains the ability to offer customers quality, fun, year-round toy shopping. Toys R’ Us gains actual brick and mortar facilities, a reliable stream of shoppers and the ability to reinforce its brand with old and new customers.

The in-store restaurants also generate traffic. But, the restaurants do much more. In-store restaurants allow a brand to enmesh a customer in the brand’s promise, enhancing the way in which the customer perceives the brand.

The focus on the total brand experience as a physically and emotionally “immersive” destination is not a new concept but a concept that has new traction as we navigate a virtual, digital environment. In 1998, B. Joseph Pine and James H. Gilmore wrote a pivotal, highly influential article for Harvard Business Review titled, “Welcome to the Experience Economy.” The authors argued that experiences are distinctly different from products and services. Increasingly businesses are “explicitly designing and promoting” engaging experiences, and charging for these experiences. An experience happens when a brand “uses services as the stage and goods as props… creating a memorable event.”

In a marketing environment that is weighing the benefits of an artificial immersive world of the metaverse, many brands are choosing to immerse customers in the real world of tastes, smells, feel and food.