Yogi Berra once lamented that, “The future ain’t what it used to be.”   Today companies have a related complaint:  “Brand loyalty ain’t what it used to be.”

No longer can brands expect long-term loyalty, even from its most faithful customers.  As economic pressures mount, competitive landscapes shift, and life simply happens, it may seem pointless for companies to try to lock-in customer loyalty.

Nonetheless, last month the folks at SymphonyIRI Group released a study entitled, “Brand Loyalty:   How Understanding Brand Equity Impacts Brand Loyalty and Delivers to the Top and Bottom Line,” [free registration required] which attempts to deconstruct the drivers of brand loyalty.

The scope of the report is limited to consumer packaged goods, so the findings may not apply to all categories.  Also the analysis defines loyalty as, “Greater than 50% of buyer’s total purchasing is of a single brand, not including ‘private label.’” While you can argue whether or not this is an accurate definition of loyalty, the report points to a few truths about brand loyalty which stand on their own and which stand the test of time.

1. Price does not equal value.

Perceived value drives loyal purchase behavior.  The report explains, “…even when times are tight, brands are important. However, in the context of the new, more conservative world of CPG, brands that provide value are critical.”  But value isn’t about price alone.

The researchers found that when it comes to brand decisions, 79% of consumers consider price and 76% consider past usage and trust of the brand.  Shoppers also factor in requests of household members, product labels, in-store displays, and much more into their buying decisions.

Further twice as many people agree with the statement, “I tend to buy the items that give me the best value for the money” as those agreeing, “I tend to buy the lowest price item.”

So, bottom line, brands can’t bribe customers into loyalty with price.

2.  As brand loyalty increases, consumers are less sensitive to price changes.

While marketers may know this intuitively, SymphonyIRI reports category data to prove the point: “In sugar and butter, where loyalty is pretty low, substantial price hikes have led to sharp drops in loyalty during the past three years. In blades and dish detergent, on the other hand, relatively high brand loyalty has continued to grow despite rather sharp price increases.”

This should be good news to the many companies whose categories have been hit with rising raw material and manufacturing costs.  It suggests that consumers accept some price increases – loyalty is leverage.

And just because a category may not inspire high loyalty in general, it’s not stuck.  The research shows that brands can still build loyalty during inflationary times.  Chocolate candy is an example of a category with relatively low average loyalty (16%) that has seen an increase in loyalty between 2008 and 2011.

3. Private label enjoys loyalty too.

“Private label products have captured the attention, the respect, and the wallets of American consumers,” the report declares. The researchers found nearly all consumers purchase private brand products these days and more than one in three actually seek out private label products.

Although 47% of consumers are buying more private label today versus before the economic downturn began, the strength of private label isn’t simply a result of belt-tightening.  Consumer perceptions of the quality of private label products have become quite favorable in some categories. Across retail channels, store brands are viewed as offering the same or better quality as national brands by more than 50% of the population.

Private label loyalty is strong and growing across many of the top 100 CPG categories, the report shows.

Concluding recommendations come straight from the report:

• Invest heavily in establishing and strengthening brand loyalty, focusing in on and delivering against the most meaningful needs of key and target shoppers.
• Leverage frequent and granular assessments of core and target shoppers to ensure a comprehensive and always-current understanding of value drivers for key categories and brands.

John Costello gives a behind-the-scenes look at Dunkin’ Donuts in today’s podcast interview.

In his post as Chief Global Customer and Marketing Officer for Dunkin’ Brands, the parent company to Dunkin Donuts and Baskin Robbins, John oversees strategic worldwide marketing efforts and brand identity for the company which posted some excellent 2010 results last month.

An industry veteran, John previously served as the Executive Vice President of Merchandising and Marketing at The Home Depot, Senior Executive Vice President of Sears, and Chief Global Marketing Officer of Yahoo.

Today he takes us through the thinking behind some of Dunkin’s initiatives including:

• DDSMART menu which features better-for-you products
• DDPERKS, Dunkin’s loyalty program
• franchisee engagement

Take a listen!

other interviews:

• dick lynch on the turnaround at popeye’s
• mike kelly on what’s cooking in restaurants
• sheryl adkins green on global brand building at mary kay

A couple of weeks ago I wrote a blog post, Future of Marketing, which recapped the themes, tools, and tactics that 60 marketing experts expect will shape the future.  Given the interest the piece raised, I thought it might be equally interesting to review the history of marketing.  After all there’s a reason why philosopher and poet George Santayana’s quote, “Those who cannot remember the past are condemned to repeat it,” resonates.  History is full of great lessons.

As my source for the history of marketing, I turned to a culturomics project which recently made headlines (culturomics is the application of high-throughput data collection and analysis to the study of human culture.)

Back in December, the folks at the Cultural Observatory at Harvard, Encyclopaedia Britannica, the American Heritage Dictionary, and Google launched the world’s first real-time culturomic browser on Google Labs. It uses a corpus of over 5MM digitized texts containing about 4% of all books ever printed.

A detailed explanation of the undertaking, along with an explanation of the methods of validation, an acknowledgment of its limitations, instructions on proper interpretation, and usage ideas, can be found at http://www.culturomics.org and in a dense but enlightening paper in Science magazine.

Ultimately my research led me to The Google Labs N-gram Viewer through which I produced a graph showing the frequency of “marketing” appearing in English books between 1800-2000.  On that timeline, I plotted some of the more significant events in general U.S. and business history and then looked into the books which were included in the search.

I recognize the limitations of my approach, not the least of which is that the database is comprised of books only and excludes content from magazines, newspapers, and motion-media which would probably represent a much more accurate view of marketing.  But even so, I believe the results are as telling as are the insights from my Future of Marketing analysis.

Here’s Part 1 of what I found (Part 2 will be published next week):

Pre-1920

The concept of marketing was virtually absent from books until the early 1900’s. “Marketing” finally did show up in texts with titles like Marketing: Its Problems and Methods, Principles of Marketing, and Marketing: Methods and Policies.

The last of these, Marketing: Methods and Policies published in 1921, provides a quite entertaining read as it seeks to explain what marketing is:

“There are three different kinds of things that must be considered by everyone who has anything to sell.  One group of considerations has to do only with personal salesmanship and sales management. Another has to only with advertising.  Still a third is concerned solely neither with personal salesmanship nor with advertising, but is common to both…

“The plan behind the campaign is the thing that primarily determines the success or failure of every salesman and of every advertisement.  On it depends the selection of advertising or personal salesmanship as a marketing tool; on it depends also the choice of one trade channel or of another and the decision to use established methods of reaching the market or to hew out some new road between distributor and consumer…There is no name in general use to indicate those activities that are included in the complete campaign…the word “marketing” is gradually coming into popular use to apply generally to the distributing campaign…Marketing methods, in a sense, are inclusive of everything that is done to influence sales.” (emphasis mine)

1930-1970

Marketing seemed to flat line between 1930 and 1970, with very little change in the frequency of its appearance in books.

1970′s

Then in the 1970’s marketing took off, nearly doubling in frequency in 10 short years.  Books which brought an analytical approach to marketing appeared, as evidenced by titles such as Marketing: An Integrated Analytical Approach.

In 1972 Philip Kotler wrote Marketing Management, long considered to be the bible on modern day marketing.  In it, Kotler legitimized and standardized marketing by synthesizing ideas from economics, behavioral science, organizational science and mathematics.

He argued that companies ought to be driven by customers and markets, rather than by the intuition of marketing executives, saying:

“Marketing is the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines, measures and quantifies the size of the identified market and the profit potential. It pinpoints which segments the company is capable of serving best and it designs and promotes the appropriate products and services.” (emphasis mine)

(BTW, Kotler continues to enlighten us – the 14th edition of Marketing Management was just released.)

Also International Marketing and similar texts reflected the influence of globalization in business which occurred in the 70’s.

1990′s

After another, albeit shorter, period of stalled growth, the mid-1990’s showed renewed interest in marketing.  Actually, it wasn’t so much in interest as it was insurrection.  Books seemed to focus on calling out the misuse or misunderstanding of marketing which must have occurred in the interim.  Three seminal texts (all of which grace my bookshelf) were published at this time:

1.  The 22 Immutable Laws of Marketing: Violate Them at Your Own Risk by Al Ries and Jack Trout (1994).  In this instructive text, the authors took on marketing:

“Billions of dollars have been wasted on marketing programs that couldn’t possibly work, no matter how clever or brilliant.  Or how big the budgets…As far as we can tell, almost no one is willing to admit that there are any laws of marketing – certainly none that are immutable…We have been studying what works in marketing and what doesn’t for more than 25 years.  What we have found is that programs that work are almost always in tune with some fundamental force in the marketplace.”  (emphasis mine)

They outlined the Law of Leadership, the Law of Focus, and the Law of Exclusivity, among others.

2.  In 1991 Kevin J. Clancy and Robert S. Shulman wrote The Marketing Revolution:  A Radical Manifesto for Dominating the Marketplace.  In similar fashion to Kotler, these authors condemned the marketing practices of their day, saying:

“The marketing revolution is coming because failure is self-evident and everybody…is angry because marketing, which should be driving business and marketing, doesn’t work.

“…Many company managers in their deepest hearts regard production or finance as the secret to success. Too many still regard marketing as an adjunct to sales.  And even within companies serious about marketing, executives disagree over basic methodologies.” (emphasis mine)

Clancy and Shulman predicted a marketing revolution that would “transform American business in the 1990s as top managements comprehend marketing’s significance to their companies’ future and drive this new thinking through their companies.”

3.  In the same year, Managing Brand Equity was written by David A. Aaker.  He explained the need for his book:

“Brand equity is one of the hottest topics in management today…Yet research shows that managers cannot identify with confidence their brand associations, levels of consumer awareness, or degree of customer loyalty.  Moreover in the last decade, managers desperate for short-term financial results have often unwittingly damaged their brands through price promotions and unwise brand extensions.” (emphasis mine)

The book set out to “define and illustrate brand equity, providing a structure that will help managers see more clearly how brand equity does provide value” and “to discuss how brand equity should be managed.”

These three texts – and others like them which were published in the same time period — were similar not only in their disdain for the marketing practice of their time, but also for the case study and analytical approach of the content.  By the time of their writing, the authors had years of good and bad stories and mounds of data to draw upon to make their points and call for a new understanding and practice of marketing.

Today

Most recently, marketing has evolved even further. Check back next week for the History of Marketing Part 2 which outlines what the books of the most recent decade say about marketing today – and concludes with some overall observations about the history of marketing.

related posts:

• future of marketing
• favorite brand books
• stuff that matters (write-ups from recent talks given by Kotler and Clancy)

Bloomberg BusinessWeek’s publication of its “The Popularity Issue:  America’s most popular products and how they got that way” makes some fascinating statements about today’s business culture — but not because of the items it named (although those do make for an interesting read.)

The fact that a business publication would devote an issue to things which are “popular” and that it plans to do this every year (as this issue was named its “1st Annual”) suggests that popularity is a concept businesspeople care about – which is an interesting, and not necessarily  good, development.   Further, the methods by which BusinessWeek measures so-called popularity reveal the vagary in any undertaking to understand popularity – which leads to some important implications about business success.

First, some context.  The TOC of the issue features the following subhead:  “A guide to America’s favorite stuff:  the food we eat, the sneakers we wear, the churches we visit, the colors of cars we drive. Not the coolest or best – just the ubiquitous, omnipresent No. 1s.” (emphasis mine)

And the piece itself ends with, “Our mission here is not to judge but to use the best available methodology—it varies widely from item to item—to determine the winners of the never-ending popularity contest that is the American economy. Your taste may differ. In fact, we’re sure it does.”

So it seems the BusinessWeek people define popularity by breadth – that is, the most popular items are the ones with the broadest awareness or penetration.  Most of their metrics support this – they use unit sales to name the most popular brands of cereal, sneakers, underwear, sports cars and more – and share of traffic indicates the most popular airport, vacation spot, and church.

But the problem is breadth of awareness or penetration is not an indicator of appeal or affection.  To understand this, we have to look no further than a story which ran as a sidebar in the BusinessWeek piece – it chronicled the unlikely rise to stardom of Olivia Munn, the co-host of G4’s Attack of the Show!

Despite her better-than-average looks, Munn was a somewhat unremarkable figure until she joined the show and flamed her sex appeal among its geek fans by assuming the personas of sexy, domineering female characters with a goofy sense of humor – she’s now ranked No. 8 in this year’s Maxim magazine’s list of hottest women.  Munn herself admits, “Popular doesn’t mean people like you.  Popular just means that people know who you are.  In the end, it could all go away.”

Clearly broad “popularity” is tenuous and not the best aspiration for companies.  Just because people know you and buy you doesn’t mean they like you.

It’s more appropriate to align with dictionary definition of popularity:  regarded with favor, approval, or affection by people in general (popular. (n.d.). Dictionary.com Unabridged. Retrieved August 13, 2010, from Dictionary.com website)  We should stay true to the root meaning of word which is borrowed from the Latin popularis in 1490, originally meant common or “belonging to the people“. (Etymology Online entry for Popular, April 05, 2009.)

Dollar sales is a slightly better indicator of popularity, then. By factoring in the price people pay for products, we get a better indication of their affection for them.  The BusinessWeek piece does indeed use this measure to report on the popularity of deodorant, soda, lipstick, and alcohol brands.

But I would argue that even dollar sales isn’t the most accurate read on what’s hot and what’s not.  Distribution dominance, an underdeveloped category, or strong advertising and promotion can generate more sales at a higher price point for a brand which is not necessarily preferred.

Companies are better off measuring esteem.  Wikipedia states, “Popularity is the quality of being well-liked or common, or having a high social status.”  If we truly want to understand popularity, we need to measure how people think and feel, not simply what they buy.  Do they hold the brand in high regard?  Do they prefer it?

In the end, though, I question whether popularity is really the right goal for many brands. If you’re competing in a mass market category and have the resources (distribution power, ad and promo dollars, etc.), then aspiring to win the hearts of as many people as possible makes sense.  More power to ya, Coke, McDonald’s, and Ford!

But the reality is most companies don’t have these resources – and actually, they don’t need to.   Especially in today’s new media environment, companies can reach specific targets and stimulate purchase and cultivate strong affect among those discrete groups.  These brands might be less popular but they’re no less powerful when it comes to generating sales volume, staving off competitive threats, and commanding a price premium.

Plus generally speaking it’s easier and more efficient to go deep vs. broad.  And given the fickleness of our fad-driven culture, stronger, more focused appeal is more sustainable than broad awareness.

This counters much of the prevailing wisdom in business these days.  Most companies seem to be fixated on generating buzz – they want to get as many people talking about their products as they can.  There’s no such thing as bad buzz, it seems.  But awareness and conversation don’t build a brand – strong attachment and affection does.

It would have been far more instructive for BusinessWeek to have run a “Most Loved” issue, but then, perhaps it wouldn’t have been as popular!

This is a continuation of the debrief from the Brand Managecamp conference.  In my last post, I relayed insights about Innovation from the “elite conference on branding” that I attended in Las Vegas last week.   Today I’m covering the 2 remaining themes that arose – both fall under the category of “stuff that matters”:  Substance (meaning, mission, authenticity, integrity) and Results (ROI, accountability, behavior, reality).

Substance
In an age when “branding” is often associated with nifty social media campaigns and cool logo designs, it was refreshing to hear many of the conference speakers emphasize the Substance of brand development:

•    John Gerzema, Chief Insights Officer of Y&R and author of The Brand Bubble, explained emerging cultural values that call for more substantive management approaches.  For example, the rising emphasis on ethics and fair play requires a consumer strategy rooted in empathy and respect.  Therefore the management principle is to deliver both value and values.  John pointed to BMW which has adopted a strategy of “design in the context of modesty” and GoreTex which operates a very flat organization – both are producing products that are more in line with today’s consumers’ expectations of authenticity and integrity.

•    Marketing legend and Kellogg professor Phil Kotler introduced “Marketing 3.0” aka Value-Based Marketing and the following grid that outlines how a company engages customers on all levels (mind, heart, and spirit) through its mission, vision, and values.

He used S. C. Johnson as an example of a company who has transitioned to this more meaningful approach, wherein their mission of “Contributing to the community well–being as well as sustaining and protecting the environment” is more than the corporate social responsibility platform — the “soul of the company is concerned with the shape of our world,” explained Kotler.

•    Even Guy Kawasaki’s presentation on intrapreneurship touched on the importance of Substance.  Guy advanced the notion that companies that want to make “meaning” are more successful than those that only want to make money.

Results
To complement the qualitative “Substance” topics of the conference, several speakers covered the more quantitative theme of Results – that is, how to measure and manage brand development in order to produce quantifiable results:

•    Kevin Clancy, of Copernicus Marketing Consulting, started things off with a great soundbite:  “The way to reset business is not to change tactics (e.g. going from traditional media to digital); we must change return on marketing investment and change brand strategy.”

•    Jonathan Salem Baskin, author of Branding Only Works on Cattle and the Dim Bulb blog, advocated for a behaviorally-driven approach to brand development.  He spoke of brands as transactions of reality – after all, consumers live in reality and decide what to buy/do/make/etc. in reality – and argued that brand equity should be measured transactionally.

A couple of his 10 Rules for Branding in a Post-Brand World:

• Understand ‘What’ Before ‘Why’ – that is, understand what makes consumers act.  Instead of promoting “virtual consumption” (a term coined by former Coke leader Sergio Zyman to describe a shift in consumer attitude but not behavior), a marketer’s approach should be to understand the things that lead people to buy the product and then to do more of those things.

• Conversation Needs a Purpose — despite all the hype about the conversations that social networking tools make possible, conversations themselves are agnostic – it’s how we use them that makes them valuable.  We should use them to drive behavior – and we should measure their value by how they impact behavior.

Jonathan ended with the call to action: “Doing is the new thinking.”

•    Prophet CEO and Chairman Michael Dunn shared principles for measuring results from his new book, The Marketing Accountability Imperative.  He explained that marketers must establish clear, logical, and increasingly defensible  financial linkages between marketing investment and two outcomes:

• in period sales response – the incremental sales driven by a particular marketing activity

• brand/customer equity impact – a reservoir of perceptions and beliefs to draw from to grow sales and/or to stem a sales decline

As such, we need to:

• measure what matters – which requires us to deeply and fully understand what drives sales

• focus on decision-making – change the conversation between marketing and finance – replace the typical silo-based view of investments with the tools and language to allow all senior players across functions to engage in the debate about marketing investment.

Michael advocated being disciplined about articulating a clear path to value – from marketing  intent to value creating behaviors to present and future business results – and briefly described approaches for doing so.  I’m sure his book provides great advice and instruction on this, so I can’t wait to read it.

Hopefully that gives you a good sampling of the great content from the Brand Managecamp conference.  I encourage you to listen to the podcast below to hear actual excerpts from these presentations.  I’m still processing all that I learned so you’ll probably see the themes of Innovation, Substance, and Results in future posts — but for now, comments are open for feedback and questions.

related post:

• fresh thinking from brand managecamp

Congratulations to Jon Galloway, the winner of the “vote for the best blogpost” celebration I held to mark the 1-year anniversary of my blog!

Jon voted for “don’t go changin’ to try to please them,” a post I had written about why brands shouldn’t go chasing after customers.  Jon explains his choice:

This really resonated with me since I’ve seen this mistake made so many times from a product development point of view:  “let’s add a splash of social media, a dash of what’s trendy this week, and a little bit of what the boss read about in an airplane magazine last week…”  Eventually you end up with an incoherent mix that doesn’t make anyone happy. Your post really summed this up well – rather than trying to be all coffee shops to all people, it makes more sense for Starbucks to focus on the core of their brand, and then to make sure that they always do that well.

To explain, I wrote in the post that if Starbucks were to heed the advice of a recent Harvard Business Review article, they would try to steal some of my visits to a local independent coffee shop, Mystic Mocha— but it would be a fruitless and senseless effort.  Fruitless because I like visiting Mystic Mocha regularly and don’t want to stop going there; senseless because Mystic Mocha meets a very different need from Starbucks and I value each brand for fulfilling each unique need.  Instead, I advised, Starbucks — and all companies really — should focus on the elements that are at the core of their brand and invest in excelling at those.

Interestingly, in the time that has transpired since when the post was published back in early April, Starbucks has indeed gone “changin’ to try to please them.”  The company’s debut of 15th Avenue Coffee and Tea features equipment, product, and design changes to give the stores a locally-themed and less uniform look.  By serving wine and beer and to hosting live music and poetry readings, the new stores are intended to attract an older, more upscale, and perhaps more elite customer.  The change has been critiqued and criticized by many, including me.

In my mind, the reasons why this latest move from Starbucks’ doesn’t make sense all boil down to the thinking I shared in the post our winner Jon selected.  So, thanks, Jon, for drawing our attention back to the post, and congratulations once again.

Jon is Senior Software Engineer with Vertigo Software.  He works with cutting edge technologies, like Silverlight and Microsoft‘s latest web frameworks.   Check out Jon’s blog and podcast for a full immersion into the world of programming.

Jon’s favorite brand is StackOverflow (a programming Q&A website) — because, he says, “they’ve got such a clear focus on making their customers successful.  I think they do a great job of saying who they are and what they’re trying to do, then really delivering.“  Sounds like my kind of brand (if I were a programmer!)

Thanks to everyone who participated in the contest.  (The winning vote was selected at random; the post that actually garnered the most votes was “brand inspiration” — more on this to come.)  I’ve enjoyed hearing from all of you — I so value your readership and our connection.

I’m looking forward to a great Year 2!

Why should stockholders care about a company’s brand? That’s the subject of today’s post, the 3rd in a series on the many ways a brand creates value for a company.

I’ve discussed brand value creation from the Customer perspective and from the Financial perspective of  immediate revenue generation.  I also want to describe brand-driven Financial value creation in terms of market valuation.  Specifically, does a brand impact shareholder value and how?

The market share and margin benefits produced by a strong brand (explained in my previous post) certainly impact earnings, which in turn deliver dividends or distributions for shareholders.   A strong brand also increases the market value of the business to Wall Street and investors.

The evidence

Research from Interbrand, Brand Finance, and other respected brand valuation firms, as well as academics from Columbia University Business School, Cornell University’s Johnson Graduate School of Management, and Dartmouth College, has proven the power of a brand to increase share price and stock valuations.

One particularly compelling example:  An investigation by Harvard University Business School and Boston University School of Management professors Thomas Madden, Frank Fehle, and Susan Fournier provides empirical evidence of the value to stockholders of a firm’s brand-building activities.

Examining monthly stockholder returns data for the period 1994 to 2001, they found that a portfolio of brands identified as strong (based on a well-known, widely-accepted methodology by Interbrand and used by BusinessWeek for its annual Best Global Brands report) displayed statistically- and economically-significant performance advantages such as stock returns and returns on equity versus the overall market. Commenting on the findings, Fournier wrote, “The effects of brands on shareholder values were powerful and dominant and far outweighed commonly acknowledged factors such as market share and firm size.”

The research even goes one step further, finding that firms which had developed strong brands created shareholder value with less exposure to risk.  The professors conclude that their results “support the role of the brand in reducing the volatility and vulnerability of cash flows.”

So it’s clear a strong brand makes a business robust for shareholders — but why?

The explanation

Brands produce higher market valuations due to:

• stronger customer equity (defined as the total lifetime values of all of the company’s customers) — brands are the primary conduits through which loyal customer relationships are formed, nurtured, and maintained
• development of intangibles — brands drive differentiation and perceived value to customers beyond that which a company’s tangible product or service produces
• more efficient business processes — brands optimize the 3 primary processes of any business (product development, supply chain management, and customer relationship management) and the resources that drive each (this will be discussed in more detail in my next post — I’m using the Balanced Scorecard as an organizing framework for this series and am making my way through the 4 quadrants, in case you’re wondering.)

Questions?  Comments?  Please share.

One of Harvard Business Review‘s pieces on marketing in these tough economic times left me feeling ambivalent.  In “Five Rules for Retailing in a Recession,” the authors outline how retailers can discover that “a larger universe of growth and productivity opportunities is open to them than they might believe.”

Some of the points in the article make so much common sense, it’s hard to argue with them.  For example, “Go After Bad Costs.”  Defined as costs that add nothing to what the customers are willing to pay for (e.g., expenditures to improve something that is merely table stakes in the category), “bad costs” should be the first cuts to offset declining margins.

But underlying most of the authors’ advice was a principle that I’m just not sure I agree with.  To explain, the article makes the case for focusing on “Switcher” customers.  Switchers are customers who spend only a portion of their category share of requirements with you.  Using Starbucks as an example, the authors’ research revealed that about half of Starbucks’ customers are spend an average of only 40% of their coffee-related dollars at the firm’s coffeehouses.

The article goes on to advise retailers to understand the gaps between what Switchers are looking for and what the chain is offering and then close them by changing their merchandise assortment and shifting strategic planning, budgeting, and other core processes to better serve them.  This all sounds very logical on one level — after all, you want to focus your efforts on meeting customers’ needs, right?

Well, not exactly.  I fear that adopting such an approach may not make sense if so-called Switchers are not the kinds of customers you want to invest in.   “Switchers” may actually be “Swingers” — people who like to frequent a variety of outlets.  Heavy category users in particular tend to “shop around” simply because they are in the category so frequently and would be bored if they went to one place all the time.

Or the total category spending of switching customers may not be significant enough to make trying to get a larger share a worthwhile endeavor.  Or they may simply be people who are looking for something that you don’t offer and that you shouldn’t offer.

Take me, for example (it’s all about me, right?! )  According to the HBR definition, I would be classified as a Starbucks Switcher.  That is, of every 10 coffeeshop visits I make, approximately 4-5 are to Starbucks, 4-5 are to a neighborhood independent shop Mystic Mocha, and the remaining 1-2 are to other random places.  I go to the Starbucks when I’m outside my neighborhood, when I need a clean, comfortable place to meet clients and colleagues, and when I’m traveling and want to ensure I’m going to get a product that I know and like.  I usually go to Mystic Mocha when I’m craving one of their products (peanut butter mocha — yum!) and I only go there when I’m by myself or with a close friend because it’s a small place in a hard-to-find location with an earthy-crunchy vibe that I love but others may not.

If Starbucks were to heed the advice of the HBR article, they would try to steal some of my visits to Mystic Mocha — but it would be a fruitless and senseless effort.  Fruitless because I like visiting Mystic Mocha regularly and don’t want to stop going there; senseless because Mystic Mocha meets a very different need from Starbucks and I value each brand for fulfilling each unique need.

Part of Starbucks’ brand equity lies in their in-store environment  which makes the chain appropriate for business coffee meetings and in the consistency of their products and customer experience across their 16,000+ units.  I wouldn’t want them to try to fill the role Mystic Mocha plays in my coffee life — it would be inconsistent with the Starbucks brand and it would detract from what I like about them.

Instead I would advise them to focus on the elements that are at the core of their brand and invest in excelling at those.  To grow, they should increase the perceived value of those essential equities to get existing customers like me to pay more and promote the brand to others, and to appeal to new or lapsed customers who are looking for what Starbucks has to offer.

Which brings me to my point.  Instead of changing to try to please switching customers, I would suggest that retailers — and all companies, for that matter — first define what they want their brand to stand for and the types of customers they want to serve. In fact, as heretical as it might sound, I would say that customer-driven strategies are doomed to fail.  That’s because it is not financially and/or operationally feasible for a scaled enterprise to satisfy all desires of all customers.   Today’s customers are too diverse and too demanding.

A company that tries to service all the different requirements of its category’s user base operates with an organizational form of ADD, chasing new offerings and benefits like dogs chase squirrels –- that is, a lot of action but little success.  Instead companies must prioritize which customers to satisfy and how to satisfy them.  They do this by putting their brand in the driver’s seat of their organization — and then using it as a filter for every decision they make.

I’m curious to hear people’s reactions to this — please share your thoughts.

Why do brands that have a strong point of differentiation not position themselves on it??  Quizno’s serves a case in point.

The sub sandwich chain has just launched a new campaign to promote its new line of Toasty Torpedos.

In the ads a raspy-voiced toaster asks the employee to “put it in me” (the sandwich, that is.)  The double entendre comes off as goofy, but the stupid joke is only a small part of why the campaign is completely off-target.

The bigger issue is that the ad doesn’t say what should be said about the brand — that is, toasting makes its subs taste better than Subway‘s.  I fully admit to being biased because I do indeed believe Quizno’s products are better than Subway’s, but don’t take my word for it.

Brand Tags, Noah Brier‘s nifty web site which catalogs the top-of-mind responses of people who have been  shown a brand’s logo, confirms that Quizno’s has a better and distinct positioning relative to its 3,000  lb. gorilla competitor.  The top 10 word associations with Quizno’s are:

• toasted
  toasty
  sandwich
  sub
  food
  sandwiches
  tasty
  yummy
  subs
  hot

Compare the list to Subway’s top 10 brand associations:

• delicious
  good
  yummy
  sandwich
  yuck
  diet
  bland
  shit
  tuna
  hungry

I’m baffled by Quizno’s decision not to leverage its strongest differentiator — “toasted.”  Many brands long for a clear, easy-to-understand reason-to-believe why their product or service is different/better than competitors’.  Especially in the commoditized price-oriented QSR industry, companies struggle against the pull of deals and promotions to develop a brand position that’s grounded in a sustainable competitive advantage.  Quizno’s has a powerful point of differentiation in “toasted” (Subway may offer toasting, but they’re not known for it — it doesn’t inform the brand’s position) — and yet, their brand communications don’t leverage it.

Sure the ad features a talking toaster and the new product line’s moniker includes the word “Toasted,” but that’s not enough — the core idea of the campaign should focus on it and its benefit (better taste, that is.)  Furthermore, it seems the chain has dropped its subline “mmm…TOASTY.”

This isn’t the first time the brand has gotten off track — remember the sponge monkeys campaign?  or the ads about the man raised by wolves?  Understandably the company’s ads must be bold enough to compensate for its huge share of voice deficit vs. Subway — TNS Media Intelligence estimates Subway’s 2008 ad spending at $369MM, while Quizno’s logged in at about a fourth of that at $90MM.

But it seems in its effort to breakthrough and be memorable, Quizno’s has allowed gimmicks and the pursuit of creativity to overshadow the key brand message.  Burger King has fallen into this trap from time to time.  That chain enjoys two strong brand differentiators, Have It Your Way and flamebroiling — both of which make their products taste better.  In the past when BK took its eye off the ball and moved away from promoting their differentiation, the chain’s performance suffered.  Today the brand enjoys enough brand equity to sustain their position even when their communications meander (for now).

Unfortunately Quizno’s is not in a position to wander.  The company is in the midst of a turnaround — after struggling with franchisee profitability and closing 300 restaurants last year, founder Rick Schaden has returned to the helm and is helping get the business back on track.  I hope the organization’s turnaround efforts will include a re-assessment of their brand position and advertising strategy.

With such great differentiation, I hope they don’t leave their brand half-baked — or half-toasted, as the case may be.