New formats of existing retail brands seem to be popping up all over the place.  Best Buy Mobile was introduced a couple of years ago as a store-within-a-store concept — the company then launched standalone Best Buy Mobiles and recently announced plans to open 40 more this year. 

Petco just launched Unleashed (with more personalized service and “hipper attitude” than the original format) and Baskin-Robbins has been testing Cafe BR (featuring a make-your-own-sundae bar and higher-end desserts such as fondue) and BR Express (a smaller store focusing on soft-serve ice cream.)

These new formats seem to be a great way for retailers to appeal to more shopper need-states.  A need-state is defined by a group of consumers who seek similar product benefits and attributes in a particular usage occasion.  Need-state segmentation overlays usage occasions onto attitudinal classifications.

For example, in the snack foods category, there might be some consumers who are looking for a snack to tie them over between meals, while others are looking for something to eat post-workout (two different usage occasions) — but they share a desire for healthy alternative (same attitude).   Unlike attitudinal or demographic segmentation approaches which classify consumers into discrete groups, with need-state targeting, a single consumer can experience different need states over time — and thus be reached in multiple ways.

Typically need-states have been used by manufacturers to drive product development.  By understanding different purchase drivers, manufacturers develop different product variations and brand extensions — e.g., a healthy snack food that’s packaged in portable packaging might fulfill one need-state while a more traditional pack lends itself to another.

What’s interesting is that more retailers are getting in to the game.  Best Buy Mobile is targeted specifically to people shopping for cell phones and services.  These consumers may be the same ones who browse the aisles of the big box retailers’ regular stores in search of the latest gadget, but when they are specifically looking for a mobile solution, Best Buy wants Best Buy Mobile to be their go-to store.

Likewise, Petco’s Unleashed boasts a smaller format, is located in high-traffic locations, and emphasizes community — perfect for the pet parent who is already passing by the store and needs to drop in for a quick purchase or some friendly advice.  Baskin-Robbins’ Cafe BR concept seems more like a destination (a great post-movie date place), while BR Express’s name makes its target need-state clear.

With these new formats, these brands expand their appeal, giving existing customers more options and reaching new customers who previously hadn’t found the brand relevant or convenient.

New formats also provides other benefits:

• emphasizes select brand attributes — Best Buy Mobile is described as having “one of the largest selections of carriers, handsets and accessories available anywhere, as well as a highly-trained staff to help customers make the most of their mobile phones…Employees undergo at least 80 hours of intensive training, as well as continuing education on mobile phone technology and trends.“  As such, the new concept shores up Best Buy’s credentials in wide selection and knowledgeable staff.
• reinvigorates the brand image — Unleashed has a more urban contemporary feel than its master Petco brand.  By embodying these attributes, Unleashed helps update and improve Petco’s brand image.
• opens the brand to new opportunities — Jimmy Fitzgerald, VP of concept innovations for Baskin Robins’ parent company explains the chain’s new formats by saying: “This allows us to open doors and go into places we really don’t fit — upper-scale malls and downtown locations.“

So it seems these new retail formats hold a lot of potential for their parent brands.  It will be interesting to see how well they do — and who else jumps on the new retail format bandwagon.

Today my series on brand value creation comes to a close with a look at companies’ Learning and Growth.  Previous posts have examined how brands create value for companies from the Customer, Financial (2 posts) ,  and Internal Business Process perspectives.

The Learning and Growth quadrant of the Balanced Scorecard asks, “To achieve our vision, how will we sustain our ability to change and improve?”  The results produced by a strong brand relative to this quadrant may be the most difficult to quantify, but they are perhaps the most significant.   Here are 3 ways a brand creates value by impacting an organization’s Learning and Growth:

1.  When the “brand as business” management approach is engaged, the purpose and values of the organization are clarified.   Using the brand as the North Star for the business, your company not only adapts to outside changes appropriately but also create its own changes and use them to its advantage.

• Patagonia provides an example of a company which uses its brand — their “philosophies” — to be prepared for change. Yvon Chouinard, the company’s founder and owner, says, “What good does having a fixed set of written philosophies accomplish when everything else in the business world is so dynamic?…The answer is that our philosophies aren’t rules; they’re guidelines.  They’re the keystones of our approach to any project, and although they are ‘set in stone,’ their application to a situation isn’t…We have made many mistakes during the past decade, but at no point have we lost our way for very long.  We have the philosophies for a rough map, the only kind that’s useful in a business world whose contours, unlike those of the mountains, change constantly and without much warning.” (emphasis mine)

2.  Your brand can help you actually change the way business is done if you adopt a bold and differentiated brand platform.  Jim Collins, in his book Built to Last, describes how “Bill Hewlett and David Packard envisioned HP as a role-model corporation, known for progressive personnel practices, innovative and entrepreneurial culture, and an unbroken string of products that make a technical contribution.”  So they instituted many practices to manifest this bold vision – for example:

• HP introduced a profit-sharing plan which paid out the same percentage to the janitor as to the CEO and created a catastrophic medical insurance plan at a time when such actions were virtually unheard of.
• Beginning in the 1950’s, HP forsook the hiring of engineers from industry and recruited less experienced but more talented graduating seniors from respected engineering schools.
• Self-imposed rigorous standards led HP to bypass high-volume markets like IBM-compatible personal computers for a period of time because of its commitment to reject me-too or copycat new products in favor of those representing a technological contribution.

Clearly the “HP Way,” as the brand’s tenets became known, drove that organization’s learning and growth.

3.  Your brand can fuel the development of a robust organizational culture, by explaining why you do what you do in a way that gives more meaning to your relationships with customers and stakeholders alike.   After dissecting the factors that have driven the success of some of greatest organizations in recent history, including Apple and the Walt Disney studio, management author Warren Bennis concludes in his book Organizing Genius, “[They] think they are on a mission from God…they believe they are doing something vital, even holy…their clear, collective purpose makes everything they do seem meaningful and valuable.”  Your employee’s work can be transformed into more than churning out products; stakeholders can see themselves are more than functional cogs in the company wheel.  Rather, they can see themselves as contributing to something that has more substantive and lasting impact.

This motivates them embrace and execute change more effectively.  As the consultants who contributed to the late 1990’s turnaround of Best Buy explain, continuous improvement and growth flow naturally out of an emotionally satisfying culture:  “’Why is this important?   What’s in it for me?  Can I be successful?’ To be ready for change, people must develop a compelling conviction that there are positive answers to these questions,” they state.

So a strong brand increases an organization’s ability to change and improve — thus creating long-lasting and far-reaching value.

I hope this series on Brand Value Creation has been a good one for you.  By running it, my intent has been to make the case that brands produce substantial positive results for business.  And, perhaps more importantly, to present a different point of view on what a brand is:  what a company does and how it does it.

In the ongoing war that wages between retailers and manufacturers, manufacturers often threaten to abandon (or at least de-emphasize) the existing channel and open their own direct business.  Liz Claiborne, the mid-tier womens fashion label, is the latest company to announce such a plan.

In a recent interview, Liz Claiborne Inc.‘s Chief Executive William McComb said the business is considering opening its own full-priced stores to sell its namesake clothing brand (it already operates outlets to liquidate old merchandise.)  McComb justified the move explaining that selling Liz Claiborne clothes in its own stores could be an alternative strategy if it becomes unhappy with the treatment the brand (which is scheduled to re-launch next month) receives at department stores.

Claiborne, and really any fashion company, has plenty of reason to be skeptical about department stores’ ability to promote brands well.  The mass-targeted, fragmented format of most department stores puts individual manufacturers’ brands at a disadvantage.

But I wonder whether business leaders who say they want to open their own retail stores understand what it really takes to be successful in retail.  In considering — or even just threatening — the move to direct selling, manufacturers need to be as ready as Annie Oakley‘s character in Annie Get Your Gun, who sang “anything you can do, I can do better.”

They can need to be better at either (or ideally, both) of the two fundamental ways retailers create competitive advantage.  (I owe much of this post to Peter Taylor, an e-commerce expert advisor whom I had the pleasure of working with when he was at Road Runner Sports — Peter inspired these thoughts over lunch today.)

First, there’s customer information.  Retailers are at an advantage because they have direct interaction with customers which gives them direct access to customer information.  Whether it be transactional purchase data or traffic analyses or salesperson conversations, customer information can be used to generate critical insights to improve product, merchandising, assortment, service, marketing, store layout, etc.

However most retailers aren’t doing this.  And it’s usually because they lack the technology to gather, synthesize, and analyze it into meaningful insights.  (I recently attended a presentation by the SVP of SPSS on this very topic — you can read a summary at http://tinyurl.com/bbftp9 .)  Those retailers who have mastered the customer intimacy discipline (Zara and Best Buy come to mind) have established a clear advantage and have succeeded where similar concepts have failed.

So, if a manufacturer wanted to do retail better, it should start with building a customer intimacy infrastructure.

The second fundamental competitive advantage in retail is value-added services — services like renting equipment (REI), stringing tennis rackets (Sports Chalet), and fixing your hardware (Best Buy).  Given the open access of today’s market, it’s not enough for retailers to rely on their product mix alone to drive business.   Services generate incremental traffic, initiate sales opportunities, produce higher margins — and most importantly, differentiate the retailer.

So, any aspiring retailer should build value-added services into their model.  Problem is, manufacturers usually don’t do services well.  They see labor as a cost, not a profit center; their service objective is maximum efficiency, not optimal customer experience; they don’t know how to market service.  In fact, a colleague who works for a large consumer electronics manufacturer was recently lamenting to me about the difficulties the company was experiencing introducing a new service concept — practically everything that has made the company a successful product maker makes them a terrible service provider.

Claiborne’s McComb, and his manufacturing peers who think taking over retail maybe their brand’s best chance, would do well to realize that retail is different — very different.  And any foray into the space must be done with a clear strategy for one-upping existing retailers through superior customer intimacy and value-added services.

P.S. I realize I’ve been posting a lot on the retail industry lately — I guess the dismal state of its affairs has kept it on my mind.  If there are other industries or topics you’d like me to address, please let me know — I’m always open to suggestions.

With its latest business news (acquiring Napster), Best Buy continues pursuing its brand mission, “to make technology deliver on its promises.”

Depending on your perspective, that Best Buy is buying Napster, a former competitor in the digital music subscription business, may be as remarkable as Best Buy having a brand mission that doesn’t mention consumer electronics.  In fact, these two facts really point to an important one — the integration of business growth and brand mission.

First the business growth.  The Napster acquisition is the latest in a series of bold moves the company has made to grow its portfolio of businesses.  Starting back as far as 2000, Best Buy recognized the value of specialty brands that focus on specific market segments or services and so it began a deliberate march toward acquisition-based growth.  It purchased Magnolia Hi-Fi and built store-within-a-store home theater concepts with it.  In 2002 it acquired Geek Squad, a 24-hour computer support taskforce, gaining instant credibility through a proven player in the fragmented small business IT service business.  More recently its acquisition of CarPhone Warehouse‘s retail division gave the company access to the lucrative mobile business in Europe.

Along the way they’ve also plotted other business growth moves like installing vending kiosks inside eight major airports across the country as part of a new pilot program called “Best Buy Express,” reaching an agreement with Apple to be the only retailer outside of Apple stores and AT&T to sell its newest iPhone, and entering the musical instrument business in select stores.

All of this is being done in pursuit of a rather aggressive business goal — double annual sales to $80 billion over the next five years.

The brand mission side of the story is similarly bold.  The company’s website asserts, “Technology makes a lot of promises, and we’re here to make it live it up to those promises. For people.”

The letter from Brad Anderson, the firm’s CEO, in the company’s latest annual report explains:  “We believe that to realize the many potential benefits of [the transformative changes of today's age], our customers will need a friend who can help them enable their dreams of digital connectivity—and that we will be that friend, through the talents of our employees.”  So Best Buy is first and foremost about helping customers get what technology can do for them — not about having the coolest products or the best stores.

In fact, in a separate video, Anderson says, “We’re trying to provide for our customers a solution for how they individually enter the digital age.  One of the best methods we use today is we run retail stores – whether that’s true 10 years from now, even 5 years from now, is it a fundamental way we operate?  I don’t know — the fundamental thing is are we actually aligned with our customers needs?”

I find this stance refreshing.  The company isn’t defining their brand by the current competitive landscape or by one-size-fits-all distribution model or by a product platform that will prove difficult to sustain.  They’re thinking about the intimate and influential role they can play for customers and building their brand — and their business — around that vision.

Indeed Best Buy has a lot of balls in the air and it will take an extreme focus on execution in order to manage its aggressive growth — but I’m optimistic about the future of a company that aligns integrates its business growth and brand mission so well.

And current indicators look good.  Despite a depressing consumer sentiment and economic pressures that have felled some of retails’ giants lately, Best Buy was able to report strong 2nd quarter results today — total quarterly revenue increased 12 percent to $9.8 billion, driven by gains from new store openings and a comparable store sales increase of 4.2 percent.