Jeanne Bliss, author of two groundbreaking books, Chief Customer Officer : Getting Past Lip Service to Passionate Action and “I Love You More Than My Dog”: Five Decisions That Drive Extreme Customer Loyalty in Good Times and Bad, took a few moments to speak with me about beloved companies — what are they, why are they so effective, how you become one.

Jeanne has been the Customer Leadership Executive for 5 large U.S. market leaders including Coldwell Banker, Microsoft, and Mazda.  She developed her passion for the customer at Lands’ End, Inc. where she reported to the  company’s founder, serving as leader for the brand’s customer experience — and we connected through our blogs.  Please take a listen:

I also encourage you to check Jeanne’s website, www.customerbliss.com, which is filled with all types of tools gratus for readers and their teams, including an electronic audit on your customer culture – how you make the five decisions of beloved and prosperous companies.

Check out my interviews with other luminaries:

• Scott Goodson on cultural movements
• Ben McConnell on employees as evangelists
• Andy Beal on the social web and brand-building

The series on brand value creation continues today with a look at how brands create value for companies in their Internal Business Processes.   Although a brand’s ability to create value from the Financial and Customer perspectives is probably the most important, its impact on Internal Business Processes is the most fundamental.

Let me back up a bit.  As a reminder, we’re using the Balanced Scorecard as a framework for identifying all the different ways brands create value for companies.  The Internal Business Processes section of the Balanced Scorecard is intended to help leaders evaluate how well their business is running and whether its products and services conform to customer requirements.

A brand lends itself to such an evaluation if the company has adopted the “brand as business^TM” management approach.

What is the “brand as business” management approach?  It is the deliberate and systematic management of the business around the brand — thinking of the brand as the business.  The “brand as business” management approach is based on using your brand as a management tool, not simply a marketing asset.  It’s about operationalizing your brand — integrating your brand and your core company’s operating system.  (The American Management Association recently published an article of mine which explains “brand as business” in more detail.)

OK.  So that was all to set up the discussion on Internal Business Process brand value creation.  When the “brand as business” management approach is employed, the brand impacts the three primary processes of any business:

• product development
• supply chain management, and
• customer relationship management

– and the resources that drive each.

Processes.  To the business processes themselves the “brand as business” management approach contributes focus, efficiency, and power.

• For example, in the product development process the brand focuses R&D on target requirements and value delivery as articulated in the brand platform.  And the brand is used as a filter at each juncture of the stage-gate process.  Evaluations of the fit and viability of new offerings happen faster and more easily with the brand providing a clear, consistent standard.

A strong brand also reduces the cost of new product introductions and improves the success rate of line extensions, cross-selling, and up-selling by stimulating trial and adoption among existing customers.  As noted in my post on Customer brand benefits, customers are more likely to try a new product if they already have a relationship with the brand.

• In the supply chain management process, a strong brand can give a business more negotiation power with suppliers, manufacturers, and distributors.  Having the upper hand in negotiating inventories, logistics, and payment terms is certainly a desired advantage in the constraints of the current business environment.

• Brands impact the third primary business process, customer relationship management, by helping the company to establish relationships with customers in the first place.  Over time strong brands engender trust, and when customers trust a company, they are willing to give the company information like personal data, insights about needs and preferences, and usage information which enables the company to create better customer contact and service strategies.

Those advantages then help businesses retain customers by fostering relationships which are valued by customers.  And instead of having to rely on instituting switching costs which deter existing customers from defecting to a competitor but which may also pose barriers to customer acquisition, companies with strong brands simply enjoy brand loyalty — which by definition prevents brand switching.

Brands also make customer relationships more profitable — an increase of 5% in loyal customers in some categories delivers 95% greater profitability over a customer’s lifetime, according to brand loyalty expert Robert Passikoff who founded and heads up Brand Keys, a research consultancy specializing in customer loyalty.

Furthermore, Passikoff’s research indicates it takes 7 to 10 times the cost to acquire a new customer as it does to keep an existing one.

Resources.  At the resource level of Internal Business Processes, a brand-driven management approach is about optimization.

• A strong brand optimizes your human resources, for example.  You can experience better results in recruiting because a strong brand attracts a larger and/or better applicant pool.   One fast food restaurant chain experienced a dramatic increase in responses to its help-wanted ads simply by adding visual elements from the brand identity to its advertising.

Companies which employ the “brand as business” management approach use the brand as a means for screening candidates, on-boarding new-hires, and training employees more quickly and effectively.  In “The IBM Way”, former IBM marketing executive Buck Rodgers explains the approach his company adopted, “IBM begins imbuing its employees with its…philosophy even before they’re hired, at the very first interview…Basically, anyone who wants to work for IBM is told:  ‘Look this is how we do business…We have some very specific ideas about what that means.’”

By using the brand to inform, inspire, and equip people, companies produce a workforce that is aligned, focused, and motivated.  In turn such a workforce produces more efficient operations, higher quality output, and increased employee retention.

• A strong brand also optimizes your technology resources and other tangible assets by facilitating relationships with other companies from whom you acquire or with whom you develop these resources.  The greater your brand equity, the more desirable your company is as a customer or partner to these other companies.

Internal business processes and the resources which they draw upon are beneficiaries of a brand that is well-established and well-leveraged.

Make sense?

My next post will be the last in the series — Brand Value Creation — Learning & Growth.  Stay tuned.

The branded vs. private label product debates of late had got me thinking about brand loyalty recently and then I came across a great post by a former colleague, David Murphy (David and I worked together when I headed up Brand & Strategy for Sony Electronics and David was the president of Y&R Irvine — he’s now got his own shop Barrie D’Rozario Murphy, the agency behind the new United Airlines work.)

David’s post turned the concept of brand loyalty on its head, asking, “Want brand loyalty?  Be loyal to customers.”  What a provocative concept!  Many companies have programs to foster customers’ loyalty to them, but what about actively fostering our own company’s loyalty to our customers?!

David goes on to applaud United’s Mileage Plus program for demonstrating loyalty to frequent flyers by fast tracking them through check-in and security lines and waiving baggage fees.  I don’t share David’s enthusiasm for  frequent flyer programs (perhaps because those Platinum handcuffs haven’t done much for me lately), but I do think we can look at customer loyalty programs and by doing a 180 on them, we can identify ways to be more loyal to our customers.

If we expect our customers to:

• go out of their way to buy from us
• pay more for what we offer, and
• continue choosing us even when faced with tempting offers from the competition

then perhaps we need to:

• go out of our way to do things for our customers — some ideas:

providing our services after hours so that we’re available whenever our customers need us

instituting “power hours” like Home Depot is now doing during which employees do nothing else (like stocking shelves or cleaning) besides serving customers

offering to hand-deliver or at least overnight ship products that are out of stock at no cost (notice I didn’t say no “additional” cost — that’s right, if we don’t have the product a customer wants, maybe we should give it to them for free as soon as it arrives in an attempt to make up for the inconvenience?)

• “pay” more for our customers — some ideas:

providing personalized service through a designated sales rep who knows me, helps me make better purchases, and customizes the products to my taste

comping “value-added” services — e.g., my car repair shop always does a 10-point inspection and a free car wash whenever they work on my car

biting the bullet and not increasing prices when our costs increase

• continue serving existing customers well even as we seek to acquire new customers – some ideas:
  

offering equivalent or better deals than the ones we run to promote trial by new customers

acknowledging and thanking them for their continued patronage (yes, I literally mean saying “thank you”)

doing follow-up’s on their purchases to ensure they’re satisfied with them

I realize we can’t do all of these things or do them for every customer, but I do think we should consider how we can demonstrate our loyalty to our most important customers (not always the most profitable or the highest sales drivers, mind you) .

Let’s make “customer relationship management” a two-way relationship — after all, mutual loyalty is what makes personal relationships so rewarding — a brand’s relationships with its customers should be no different!

(P.S. I found the image above on “Sonnie’s Porch — therefore, I’m noting that it’s  reprinted with permission from http://sesantos.com.ph © Copyright 2005-2009 by Sonnie Santos — however if this attribution is not correct, please let me know and I will fix it.)

Martin Bishop, author of the blog Brand Mix, recently posted about some new research on brand loyalty.  An implication from the research findings is that you can steal brand loyalists from the competition by focusing on the similarities between your product and theirs; and if you want to keep your fans loyal, you should focus on how you are different.  (Thanks to Tom Fishburne for the cartoon!)

As you will note in my comments to Martin, his post reminded me of something I was taught a long time ago about brand positioning (I can’t remember where I heard this, so if you know the source, I’d love to be reminded.)  It went something like this:

• the first step in positioning a new brand is to explain how you’re the same as existing choices;
• then the second step is to explain how you’re different.

If I recall correctly, the thinking behind this instruction was that your first goal is simply to get people to consider your new brand.  By explaining how you are the same as existing choices, de facto you’re saying you belong in the same consideration set.

Then once you’ve gotten in that set, your goal becomes getting people to purchase your new brand.  By explaining how you are different/better than existing choices, you make a case for why someone should buy your brand.

This seems particularly relevant to the war between private label and package-goods brands that is currently being waged at stores around the world today.

With the recession providing a strong tailwind, newer private label brands have been entering the market quite successfully.  Private-label market shares grew 0.8 percentage points to 21.9% of volume and 0.7 points to 17.1% of dollars in all package-goods categories and retail channels last year including Walmart, according to Information Resources Inc. And they’re gaining more momentum — private-label grew only 0.1 point in the first quarter of 2008 but 1.3 points in the fourth quarter among households earning more than $100,000 annually.

Most private label brands have achieved this level of penetration with the first step of positioning — they’ve put themselves in the consideration set by explaining how similar they are to existing branded goods (I ran a brief post about this last fall).  Meanwhile, established branded goods have been doing the second step of postioning for quite awhile — their marketing is focused on the product attributes, feature sets, or even in some cases the emotional resonance which makes them different (and presumably worth paying more for than private label goods.)

But now we’re seeing some private label brands with such strong positions in the consideration set, they’ve moved on to the second step of positioning and are focused on promoting their differentiation.  Examples:  Trader Joe’s house brand is the facilitator of discovering (or at least easily sourcing) interesting tastes and new foods/ingredients; messaging for Target’s Choxie chocolate brand says it’s, “Chocolate with Moxie.”

Branded goods have started to fight back (I wrote another post about packaging efforts to do so.)  But now that “value” has become the prevailing mindset for most shoppers, branded goods may find themselves in a quandary.  Their positioning efforts to differentiate may actually become a hindrance if consumers automatically associate those differences with higher prices — or simply decide those differences are not that important.

It almost seems the established brands may need to go back to the first positioning step and explain why they belong in the “value” consideration set with the private labels.  This may unfortunately lead some brands to adopt a price-based approach, but hopefully others can figure out how to make a more compelling value argument.  What do you think?  I’d love to hear more thoughts on this.

P.S.  In a sidebar in Ad Age’s piece about private labels this week, it’s reported that some barnded goods are finding ways to ways to work with — rather than against — private-label products, with store displays that showcase their offerings side by side.  Kudos to General Mills and Kraft!