The Brand Man Speaks

Wall Street Journal declares "Branding" is more important than ever

In a recent WSJ article entitled, "The Wrap: consumers do spend on innovative goods" the newspaper declares that consumer spending is not dead in this recession, rather it is becoming more selective as money is tight and waste cannot continue in this new paradigm.

I was surprised by this revelation, as it is not really anything new. Consumers have always made selections of goods based on what fulfills their needs, desires and emotions.

What seems to have changed is that consumer products' companies are waking up to the fact that just creating tons of "me-too" products that do not provide meaningful reasons for being in consumers' minds no longer works. These companies got lazy finding the robust economy would absorb many useless products and services that did not provide any differentiation from what was already available.

Differentiation and uniqueness along with tapping into consumers' emotional needs has always been key to successful products and services. Many of us call this "Branding": creating a core reason for being for any product. Too many companies cut back on R and D in the last recession and failed to bring to market anything very interesting and innovative to consumers. Sony Electronics is a prime example of this. A company once known for innovation, it became almost an afterthought in the past decade.

A few companies have always understood the need for meaningful differentiation. Apple tops the list in my mind and in many ways they have replaced Sony as the master electronics innovator. Actually, left them in the dust like the endless line of useless jets airlines no longer use that sit in the desert somewhere in the US west.

Contrary to the WSJ piece, we are not entering a new era of marketing. Rather, we are experiencing a re-awakening of marketers brains to the fact that "old school" marketing is still important...more than important...mandatory for success in the world of consumer products. I am relieved to hear this news. Faux branding is dead. Real branding is about to take its rightful place at the top of the marketing world again. Consumers rejoice.

Watching out for you everyday.

Eli

Corporate Group Travel down dramatically; Will the word "Resort" be dropped from hospitality brand names?

The economy has had an enormous negative impact on bookings at hotels and resorts throughout the US. Especially hard hit have been hotels that cater to corporate groups as business travel has been reduced dramatically across the board.

A recent report indicates this may not be the only or primary reason that hotels that live off corporate business are sufferings so much. Blame the AIG fiasco last year at the St. Regis Hotel in Dana Point, CA. While banks were being bailed out to the tune of billions, AIG executives were partying like it was "1999" at the St. Regis, running up a nearly $500,000 bill. Needless to say the negative publicity this event generated was unprecedented in corporate travel circles.

Since that time the St. Regis Hotel and Resort filed bankruptcy as bookings dropped to such low levels that the facility could not pay its creditors. But the mess hasn't just impacted the St. Regis.

It turns out the word "Resort" in a hotel's brand name or in the parent company's name may now be a kiss of death to that hospitality operation. Apparently, due to the AIG backlash, corporate travel groups are told to avoid bookings at ANY facility that uses the name "Resort" to avoid the possibility of communicating corporate partying vs. real work.

This has hit the top end hotels mostly but even properties with few frills are feeling the impact if their corporate parent's name includes the "Resort" word.

Hotels in South Florida, which has been a popular US destination for corporate retreats and meetings in the past, are complaining heavily that because so many of them are called resorts or affiliated with resorts they are no longer being considered by corporate travel planners.

Will this lead to the dropping of the word "Resorts" from hotel brands? It could if this AIG backlash continues for much longer. One travel planner indicated he was told he couldn't book any meetings with an organization that had the word "resort"  in its brand name--- indefinitely. Wow! If that is true for lots of other travel planners that is very bad news for "resorts" and the hospitality industry in general.

Watching out for you everyday.

Eli

Brand Reinvention: Defunct retailer brands get new life: Linen and Things revisted

The recession has taken a toll on a whole host of retailers many of whom were well known names in the consumer products industry. Several notables include Polaroid, Sharper Image and home goods retailer Linen and Things.

When Linen and Things went out of business some months ago after failing to recapitalize and restructure out of bankruptcy, many thought it was a dead brand name. Not so. A partnership of Gordon Brothers Brands and Hilco Consumer Capital bought the former retailer's brand and have reinvented it hoping to capitalize on good will, a notable name and a strong loyal consumer base through email addresses.

The new venture is only web based with no effort to launch any brick and mortar stores. The goal to use a lower overhead business model via the internet to regenerate the brand into a profitable one.

Can it be done? Maybe yes, maybe no.

Linen and Things came to life in a robust economy in which consumers couldn't stop consuming especially for their homes. Housing sales were booming and people were spending lots of time in upgraded home environments entertaining and living large. Bed Bath and Beyond created the big box "discount" home goods category and Linen and Things was a me-too follow up.

When Linen and Things business started to waiver, I wrote that one of the reasons it was suffering (and Bed Bath and Beyond was not) was it had no real brand identity. It was just enjoying the spill over from Bed Bath and Beyond and it thrived on sales generated by easily available and plentiful discount coupons (20% off a single item) to spur sales. BB and B also used these coupons, but they were distributed more sparingly. I had at any one time 3 LNT for every 1 BBB coupons. That drove my business to LNT over BBB frequently.

I found the stores very very similar, preferring BBB which seemed to have more higher end goods and an overall better selection. But save for the coupons, I really couldn't see any reason for LNT to exist...other than the sheer volume of people buying stuff for their homes.

As the economy faltered, so did the fortunes of LNT, as has been the case with many me-too brands when consumers cut back spending and the brands with less identifiable reasons for being had little to keep them in business.

Can LNT reinvent itself and succeed just online? I think it can as long as its brand strategists understand they have to create a meaningful reason for being....a pricing strategy that under cuts BBB significantly because the LNT brand's overhead is so much lower?...perhaps offering unique items BBB does not carry that are desired by consumers (yes, consumer interest is key...just carrying different stuff that doesn't sell isn't going to work)....great online service? Top notch experts online or by phone to help with decisions, (BBB is weak in this area both online and in-store)...

I have read that the company is planning to launch a private label brand called, "Linen and Things" as well. That might have some value (if the products are good value) given consumers strong interest in private label brands these days...decent quality and a great price...

Whatever it is, LNT will only succeed online if it develops a core reason for being that resonates with consumers and is significantly distinguished from BBB and any web-only home goods "store". One key competitor in the web only game is Overstock.com which offers an amazing array of home goods for some incredibly low prices. (I recently picked up a high end flatware set for 70% less than a home goods store and 40% less than Amazon.com). So if LNT takes a discount pricing posture they have stiff competition already in the web only marketplace.

I expect more defunct brands to be reinvented but online only.

Watching out for you everyday.

Eli

Starbucks testing new retail concept without Starbucks' brand name

The recession has impacted many industries and businesses that might historically not have been hurt by a weakened economy. Starbucks which re-defined an entire industry around coffee has seen sales and profits plummet unexpectedly over the past two years along with much stiffer competition from fast food brands like McDonald's and Dunkin' Donuts.

In addition, Starbucks has made many strategic missteps even before the recession in an effort to expand their business beyond coffee and the local gathering spot strategy. Music, movies, casual dining food are among the various "products" the brand has tried to add to its offerings....with mixed results. Most importantly, some of these elements worked to undermine the core brand strategy adding more problems beyond the recession's impact.

Now comes word that Starbucks is exploring new retail ideas but without the Starbucks name attached. Some industry experts think this is a mistake and another strategic blunder. I do not agree.

I have recommended to clients many times over the years the idea of establishing a new sub-brand to introduce ideas and concepts that might undermine the core brand and give an entity the opportunity to reach different/new audiences. The new Starbucks concept is called 15th Avenue Coffee and Tea and will serve food and wine and beer beyond the coffee offerings. 15th Avenue will not have any Starbucks IDs on-site and will appear to be a completely independent concept giving even the most ardent anti-Starbucks consumer an opportunity to experience this brand's new ideas.

Starbucks can use its existing marketing muscle and savvy to successfully launch the new brand quickly if the idea is well received. The initial store is in the home market of Seattle replacing an existing Starbucks location. The company says additional locations will be in new real estate and not re-furbished existing Starbucks.

Success will depend on the actual concept itself, its appeal to consumers and uniqueness as well as how well the concept is executed in its test form.

I look forward to seeing this concept first hand soon.

Watching out for you everyday.

Eli

Sears Tower to be called Willis Tower; will brand change undermine iconic skyscraper?

When Chicago became home to the tallest building in the world (now eclipsed by buildings in Asia) it was an important milestone for the windy city giving it great cache and bragging rights over New York. Retail giant Sears was the building's primary tenant and since the 70s when the huge building was opened it instantly became a notable US landmark: The Sears Tower.

Now the building's owners are changing its name to Willis Tower to reflect its new largest tenant, Willis Insurance out of London. And a great debate has ensued.

Ballparks, stadiums and notable buildings make a bundle when they sell rights to name their structures to high paying sponsors or building tenants. Names change often in this world as one company's fortunes decline another takes up the helm with new naming rights and signage.

In the case of the Sears Tower, the brand ID for this impressive structure that just opened an observation deck of glass hanging off the top of the building, is key to its stature. It has been called the Sears Tower since day one and changing it now seems a bad move. The Sears Tower is more than a sponsorship or important tenant name (Sears has NOT been a tenant for over a decade or more). It is a name tied to the building itself; its Brand ID. Sears is still based in the Chicago area and although not the major retailer of the past, it still is a important retail player US wide and closely tied to its Chicago area roots.

Additionally, the name Willis just seems flat doesn't roll off the tongue and somehow in my mind will diminish the iconic nature of the "Sears" Tower.

I have read the name change is a done deal but does that mean it is a good idea when it comes to tourists and Chicago's brand? It will take a long time for people to "forget" the Sears Tower brand and ask to be taken to the Willis Tower. Further, naming the building after an obscure English insurance company no one in the US knows about or cares about also seems foolhardy and anti-American, no?

Fans of the Sears Tower are taking their case to the world via Facebook and other social media to try to generate enough negative support for the new name to try to force the building's owners to not change the name. They also are seeking landmark status for the building and its name (although the building is not old enough for such a status as those things go), hoping a government decree will make it impossible for Sears to be replaced with Willis.

Some have said changing the name of the Sears Tower would be like changing the name of the Empire State Building or Eiffel Tower...it just wouldn't be done no matter how much money was put up for the rights. What do you think?

Watching out for you everyday.

Eli

Tide testing Tide basic; less expensive version of original brand to offset sales loss

P & G, the most well known consumer products company and one of the world's largest, producer of brands like Tide and Crest is facing a major challenge. After strategically going up-market during robust times with many of their brands, the prolonged weakened economy is hurting the bottom line big time.

Tide, a premium priced laundry detergent, has seen some of the biggest declines in sales in anyone's memory. So much so the brand is testing a lower priced Tide called Tide Basic in powder form. The idea? To keep the franchise's market-share and loyal consumers as best as possible without losing too many to other price oriented brands.

The problem? The Tide brand was built on the premise it was a superior performing product, one that was used by grandmothers and passed down to mothers and their daughters. It has had strong emotional loyalty unlike any other laundry detergent brand. However, in this new economy consumer buying behavior is changing dramatically in ways most consumer product companies are not accustomed to. Price is the factor even for affluent consumers and product performance and efficacy seem to be less important. The paradigm shift has not been completed making it even harder to gage what steps are best to keep consumers loyal and which to avoid that might cause damage that cannot be undone when the economy improves. Thus, we are in uncharted territory.

With Tide Basic P & G definitely runs the risk of losing its loyalists who have bought the liquid original brand for years. The lower priced brand that has reduced some of the benefits of the original can both undermine the original more so than has already occurred and, more importantly, question the entire brand premise. If you can buy a cheaper version and it is almost as good why then ever buy the original?

When price becomes the brand purchase driver and all other brand elements are not sustained or emphasized the brand becomes a commodity brand and its competition becomes broader and more dangerous.

Let's see how the test does in various cities and we shall revisit this discussion in a number of months. It may prove to be a noteworthy case-study of how to successfully or not successfully handle the new consuming world we have entered.

Watching out for you everyday.

Eli

WalMart trying (again) to go upscale with offerings to keep more affluent consumers

WalMart has been one of the few bright spots in the retail industry over the past two years since the recession began. Its strong value proposition has reinforced its relationship with lower income Americans and has brought in more middle class consumers and some upper middle class folks as well. Everyone seems to be looking for a bargain or at least the lowest price on the items they need for everyday living.

Empirical evidence does show that more middle income consumers are willing to go to WalMart instead of Target and the other higher image stores they frequented in the past. The question remains can WalMart again try to win over these more affluent consumers for the long term and if they can, do they risk once again alienating their core customer?

Not more than a few years ago, WalMart in more robust times, was upgrading their stores, bringing in higher margin goods and "better" brand names. The plan failed simply because the more affluent consumer didn't become a regular consumer and the core customer felt that WalMart had forgotten them raised prices everywhere and drove these people to dollar stores.

WalMart, after a number of reporting periods with declining sales when others were doing well, figured it out...they did NOT belong in the more affluent consumer chase. They refocused their marketing and ad efforts back at savings and value and business began to boom again.

Along comes the recession and WalMart is perfectly positioned to benefit...and has...from this difficult economic environment. Yes, not unexpectedly given the extent of this near depression economy, more middle class shoppers (who now see themselves a lower middle income) have turned to WalMart. Some upper middle class shoppers (who now see themselves as more middle class) have also sought out savings at the big W. WalMart is benefiting greatly.

Now comes word that the retail giant is not satisfied and is hell-bent on figuring out a way to keep the higher income more status conscious shopper long term. They are already back bringing in higher margin goods, better brands and more "service". The stores are getting major overalls to look more like Targets (again). Will it work this time?

Yes and No.

To some extent the answer is YES because we have seen a significant buying behavioral change among middle and upper middle income consumers. They are giving up their need for status consumption (they can't afford it) and going for the basics with an occasional indulgence. They are acting more like lower income consumers than ever before. I do see a lot of these people continuing to shop for bargains and value over image and prestige long term. This recession has had a profound effect on millions of Americans. They like saving money and the stigma of shopping at WalMart is fading because saving money is more important than where something is purchased.

Will these consumers spend more at WalMart? They already are buying more than commodity items there. But, there does remain a major risk. Going too upscale with goods and brands may again backfire because consumers are in general doing without stuff they do not need regardless of store. Thus, WalMart could get stuck with inventory they shouldn't have added in the first place. I also believe some portion of the upper middle income consumer who now is willing to shop at WalMart will choose to go elsewhere when conditions improve why?

Simple. People still have a tendency to gravitate to people like themselves or those of a higher income level (if they can get into that club). I do not see that psychological element changing long term. Shopping at WalMart is still a stigma for many not just because it is WalMart but because of the fact that it still attracts the kind of lower income folks upper middle income people really rather not shop around.

In research my firm has conducted, we found upper middle income consumers still wary of unemployed young people loitering around the WalMart stores, especially in their parking lots. They find the stores unattractive (even the upgraded ones) and the service extremely poor (despite efforts to improve it). Finally, even though buying cheap is chic, upper middle income consumers still need to feel good about where they shop and indications are most will abandon WalMart when the economy turns upwards or sooner if other more image oriented retailers lure them back with better pricing and values.

Research also shows that lower income shoppers are having a harder time making ends meet at all and feel that WalMart is still charging more than they should for basics. Further, as before, when lower income shopper see (empirical evidence) more well-heeled folks in "their" store, they become suspicious that prices are going up further and feel maybe it's time to go elsewhere for better prices. Finally, research shows that prices are good at WalMart but many times not the lowest. Surprisingly, more upscale retailers and sundry/drug stores are competing with WalMart prices and in cases beating them. Consumers are more savvy than ever and will seek out the "best" prices. WalMart is trying to deal with this new competition by advertising they are constantly researching other stores prices to "ensure" the best prices in their stores....they clearly are aware their value positioning is being challenged by a whole new set of competitors.

Interest times. Interesting stuff. I will continue to monitor the WalMart strategy shift and report back as new information and findings surface. Until then....

Watching out for you everyday.

Eli

Ford takes bailout money from Energy Dept; Chance for brand to be #1

Ford Motor Company has successfully avoided the need to take the government's bailout money like both GM and Chrysler and has been able to keep its employees, dealers and operations mostly intact.

Now Ford has announced that it will take some US Taxpayer money but as an investment from the Energy Department to develop and launch fuel efficient automobiles.

I think Ford is doing the right thing and handling this economic situation far better than its (former) competitors. The Ford brand has enjoyed unprecedented positive perception among the American public because of its expert handling of this difficult economic condition in the auto industry. Fox News asked me if I thought this perceptive would be hurt now that Ford has taken bailout money.

View my interview here:
Ford Takes Government Money

I think that Ford has the opportunity to become the premier auto company in America, a position it has long desired but been unable to obtain. Ford could be the "hero" company that saves the American auto industry if it plays its cards right and brings the right product to market.

Watching out for you everyday.

Eli

Netflix brand evolving while unexpected competition grows from Redbox

I have been a fan of Netflix since its inception. The idea of ordering online, sitting back and having the movies come to your home and just mailing them back (at your leisure) when you're finished transformed how I watched movies. I hated going back and forth to Blockbuster stores incurring late fees and always wishing I had some DVD at home to watch on that unexpected rainy day or "special' evening.

Many didn't believe Netflix would survive. My mom's investment adviser said not to buy the stock despite my strong marketing intuition about the company and its future. To his surprise, but not mine, Netflix has done extremely well in this recession with its stock price doubling.

Netflix is actively competing with itself by offering more downloadable movies directly from the internet to laptop or home TV and smartly understands technology based entertainment is a rapidly moving target. I have yet to download a movie from them, although I have three free movies that are available to me to do so, because I think watching movies on my laptop is disappointing (size and impact-wise) and I have not bought the requisite equipment to send downloable movies directly to my big flat-screen TV....yet.

Despite their success, Netflix has strong competition from an unlikely source, Redbox. Redbox is a vending machine DVD rental business that was started by McDonald's during a time when McDonald's like Starbucks was looking for new revenue streams from ideas inconsistent with their core brands. McDonald's had some success with Redbox but sold the concept to Coinstar this past year after they started investing in the business in 2005.

I understand why Redbox can be successful. $1 rentals of recent releases sold like buying Coke from a vending machine in thousands of locations. However, it doesn't work for me. I hate the idea of having to take the DVD back to some place especially if I am not going that way and find dropping the DVD in the mail so easy and effortless. But I am obviously increasingly part of the minority. Redbox's old fashioned delivery system is growing fast even as movie downloads (on the other side of the technology spectrum) are also developing steam. I suspect I will go the download path far sooner than renting from a Redbox, but that's just me.

Watching out for you everyday.

Eli

H&M, the cheap chic Swedish based retailer to sell high end Jimmy Choo line

As the economy continues to plague the retail industry, cheap chic Swedish based retailer H&M is taking a step to meld more high end fashion names with lower prices at its stores worldwide.

After showcasing limited edition apparel from such fashion and celebrity names as Madonna, Stella McCartney, Karl Langerfeld, Roberto Cavalli among others, H&M has struck a deal to sell shoes and accessories from luxury brand Jimmy Choo. Choo shoes are most well-known (and rose to notoriety) for their frequent appearance and inclusion in the story line of the TV Show, "Sex and the City". Many feel that Sarah Jessica Parker's character Carrie Bradshaw single-handily put Jimmy Choo on affluent and not so affluent women's "must have" list.

I believe the key to surviving this retail meltdown is providing meaningful and desirable as well as unique merchandise to consumers at a "good" value. Women will always love their shoes but will love them more at a better price. At the same time, luxury brands are suffering greatly and associations with retailers like H&M can help boost consumer interest and sales in these difficult times.

In a related effort, high end retailer Neiman-Marcus announced that it will begin offering more value-priced quality goods this summer and fall to offset the brand's image as only a purveyor of high priced goods. Neiman's like Saks 5th Avenue has seen double digit sales and profit declines for several reporting periods over the past two years and has been looking for ways to stop the bleeding a bit.

The question is; can a retailer like Neiman's go somewhat down market and not tarnish its years of branding itself as a retailer to the rich and famous? Can it offset its long-term brand image to bring in more shoppers? Is this a good idea or just a short-term revenue generating gap until economic conditions improve?

There is tremendous risk for Neiman's with this strategy especially since consumers see little reason for high end retailers to continue to exist favoring smaller boutiques for pricier goods these days...if they are buying at all. Are we seeing the end of the larger nation-wide luxury retailer? Possibly a slow death, however, just changing the goods to slightly less expensive ones isn't the answer. Saving Neiman's, if that even makes sense, requires a complete re-branding effort not a band-aid.

Watching out for you everyday.

Eli