Life Style Marketing

Aligning Organizational Culture and Brand Identity

Senior Executives of companies providing products and services know that their company's brand is a core asset. They know that their organization's "culture" should reflect (enact) the brand. How do they convey this imperative to the people they lead?

Clearly the executive's personal behavior is an essential demonstration. If a brand attribute is being "customer-centric" then how much time do they spend asking about customer-related information (other than revnues and costs)? How often do they interact with customers.

If "passion" is a brand attribute, how do they display the appropriate level if intensity in caring about the product and its delivery? Since "passion" is about unsatisfied desires, how much time do they have the organization spend identiying latent customer desires?

These are simple questions intended to illustrate how senior managers can and in many cases do use their personal behavior to enact their brand throughout their organization.

But what if the brand is not clear? What if it is not clear how to enact the brand's attributes? What if it is not clear to an employee how he/she can maintain their individual identity (key to knowledge workers) and also be an active part of a corporate "brand personality?"

Based on our research these 'gaps" will erode the customer's loyalty. Brand is very important to the most loyal customers. Your brand, by their choice, is part of their personal identity. If the organization blurs its brand personality it has a similar and disturbing effet on the consumer's person. There is a price to be paid.

What is the solution? Organizations must articulate how their brand's personality translates (literally) into behavior. That is the organization must articulate the thought process that enables a person to generate the translation from "attribute" to "behavior." This thought process is a useful tool for employees.

So, what exactly is the process? Please check back for our next entry, or, as always, contact us at info@premiumknowledge.net.

Consumer Spending is Key

http://www.nytimes.com/2011/10/26/opinion/its-consumer-spending-stupid.html?nl=todaysheadlines&emc=tha212

In the Op-ed in the link, above, James Livingston of Rutgers points out that consumer spending is the key to economic growth. But where will this spending come from? It must first come from the top 25% of the U.S. households that account for over 50% of consumer spending. http://www.nytimes.com/2011/10/26/us/politics/top-earners-doubled-share-of-nations-income-cbo-says.html?ref=us.

But this does not mean that it should come from the top 1%. As we pointed out in an earlier blog entry (Underconsumption and Underemployment) the top 1% simply (physically) cannot spend enough of their earnings to have a meaningful impact. The spending must come from the remainder of the more affluent. Unfortunately they are either nervous about losing their job (and therefore are saving) or are experiencing declines in revenues in their small businesses or professional practices. The key will be to increase confidence in the government (and perhaps increase its spending) so that the overall population resume it normal practices.

And as Professor Livingston writes, we collectively need to stop "bashing" the fact that our economy is a consumer-driven economy. This is the positive result of the post-industrial period.

Customer Experience Management: Imagining the Customer's Point of View

There is a famous study of the affluent classes of France (http://en.wikipedia.org/wiki/La_Distinction) which provides great detail into affluent consumers' motives for the acquisition of disretionary goods and services. Distinction is a wonderful demonstration of how to present the point of view and behavior of different segments of the affluent market.

The point is made that each affluent consumer has an internal process, formed over time (a "habitus"), that guides their selection of activities and possessions. This "habit" forms the consumer's taste. The consumer's objective is to consistently add to their social capital in a manner they consider tasteful. There are significantly different "tastes" which produce different life styles.

Bourdieu (the author) points out that it is important for marketers to understand these habitual workings of the consumer's "mind" and the resulting life styles in order to present goods or services in a meaningful way.

Distinction not only reinforces the validity of our research capturing the LifeStyles of affluent U.S. consumers. It also sets the standard for writing up the results. This will be our objective in updating Material Differences.In the meantime, you will really enjoy Distinction.

Customer Experience Management: Loyalty of the Best Customer

Our data indicates the customer who is currently spending the most in apparel is probably the LEAST likely to change brands. Is this loyalty an effect of how they are being treated? Or, is it the result of their knowledge, experience and care in selecting brands in the first place?

The phenomenon of loyalty is so closely related to the amount of spending (in fact the tendency to be loyal INCREASES with spending) and to the number of channels used (in fact tends to INCREASE with the number of channels shopped) that we are inclined to give credit to the customer rather than to the brand or the merchant.

The best customer has educated herself through shopping (both the amount of spending and the variety of channels shopped) and knows what they want. What are the implications for CEM?

First, we would suggest, is the importance of not underestimating the best customer's sophistication. Do not attempt to sell them inferior merchandise or provide them less than perfect service. When they want to return something, accept it with a smile and learn from them what caused the problem. Fix the problem and let them know you fixed it. Learn from their learning.

Second, we recommend letting them be the first to know when one of their favorite brands has introduced a new item or has a new promotion. Do not risk them learning about it from some other channel (or see an equivalent offering first from another brand).

Third, of course, invite your best customers to be part of your learning. And reciprocate by sharing what you know. Ask for their feedback and, in trade, give them highest priority in your CEM system. Remember their loyalty is their educated decision. They can revoke it when provoked.

For more information on statistics that relate to CEM, contact info@premiumknowledge.net.

 

Is Express Checkout A Failure of Customer Experience Management?

Think you it. You have $150 of groceries in your basket and the line you stand in at checkout is 10 deep, all customers like you who are buying a lot of groceries.

You look to your left and see a sign "Express Check-out Limit 15 items." That line is short and moves fast. What's wrong with this picture? You guessed it. The customer who is spending less is bring rewarded with a better (faster) experience than the customer who is spending more. And it is highlighted by the signage!

We recognize that airlines are not models of customer satisfaction but if they operated this way they would expedite processing of coach customers and make the First and Business Class passengers cool their heels. And they would put signs up to that effect.

Customer Experience Management (CEM) for the Affluent

Customer Experience Management (CEM) is the application of familiar concepts (process control, quality management, etc.) to the experience a customer has when doing business with an organization.

There are two different ways to think about CEM.

One way is to standardize processes so that all customers have a similar and consistent experience. The objective is to eliminate error (from the customer's perspective) and waste (from the company's perspective). In the best cases the result of a this application is that overall customer satisfaction increases and overall business costs decrease. This approach is very relevant in mass market applications where companies dealing in commodities that allow little customizing and competition is based primarily on cost.

Another way to think about CEM is to tailor processes to meet the differing expectations of different customers. In this view there are different requirements for satisfying different customers. The objective is to personalize the system so it responds appropriately to each customer segment.

The definition of "appropriate for each segment" is critical. Segmentation of the customer base includes consideration of a customer's value to the company as well as the customer's expectations of the company. In this approach the business objective is to allocate resources in a way that recognizes that different customers have different value. Overall satisfaction scores are a by-product of the real emphasis: The retention of customers relative to their value. This approach is very relevant in markets in which companies compete on the basis of differentiation and personalization rather than efficiency and price.

For this reason we think companies focused on the afluent market will choose different approaches to CEM than companies serving the mass market.

The End of Financial Services?

The occupation of Wall Street seems to be a protest unfocused on a specific issue. As a result news commentators are describing it as a fad, a lark, a passing fancy of Michael Moore . http://www.washingtonpost.com/blogs/ezra-klein/post/wonkbook-what-does-occupy-wall-street-want/2011/10/03/gIQAgCLgHL_blog.html

In fact the very breadth of the resentment is a significant fact. As a society we have gone from industrialism to "financialism." At one time the financial services sector's purpose was to facilitate the production and consumption of goods. The sector made loans to companies to finance equipment and work-in-process. It made loans to consumers to finance the acquisition of goods and services. And, yes, homes.

But it has morphed into an industry that is focused on making and selling financial instruments unrelated to the primary production or consumption of goods and services. Its products are now aimed at generating profits for itself no matter what the risk to the rest of the system. There are two recent pieces of evidence. First the derivatives which increased systemic risk rather than mitigating it. The second example is the fact that the banks are witholding funds from circulation during periods when economic stimulus is required. They are protecting themselves at the expense of the system. This is the behavior that Tyler Cowen http://www.slate.com/articles/arts/books/2011/02/dontworry_be_unhappy.html (in the spirit of Adam Smith) refers to as rent-seeking behavior. At best it is not productive. At worst it is destructive.

So what we see happening in #Occupy Wall Street is the productive classes beginning to turn against the unproductive classes. We see people concerned that their government is siding with the financial sector against the manufacturing sector much like the English government sided with landed aristocracy versus the industrialists in the 18th and 19th centuries. We need a generation of leaders who will speak out.

Underconsumption and Underemployment

We are having difficulty getting our economy growing. One way to describe this phenomenon is "under consumption," an idea espoused by John A. Hobson, the English economist. (http://en.wikipedia.org/wiki/Underconsumption). His is an observation worth reviewing today in light of the increasingly unequal distribution of income and the concurrent out-sourcing of jobs to other economies.

Hobson points out that even when the rich have more money than they know what to do with, they physically cannot consume enough to replace the demand that would have been created by several other people with lesser incomes. A family with an income of $10M does not consume (i.e., spend) as much as one hundred families with $100,000 income each. Take automobiles as an example. The average $10M household may have 5-6 vehicles. One hundred families with $100,000 income would have an average of 2.5 vehicles each, or a total of 250 vehicles. That's a fifty-times increase in consumption based on the same total income.

As a result Hobson pointed out that the increasing disparity of wealth in a capitalistic system would, ironically, end up decreasing demand and initiating a down (read recession) business cycle. It appears this is where we are. The executives have earned their $10M salaries and bonuses by outsourcing or eliminating middle management and skilled positions. As a result they have fewer customers to serve in the US and have even more reason to focus on international markets for growth. They executives will point out they are required to do this by shareholders' relentless pressure to generate profits (potential dividends), or growth or both. This is today's Hobson's choice.

Marketing to Gen X: The Importance of Authenticity

Recently an automotive manufacturer asked what trends would have the greatest
influence on the premium-priced market in the next decade. Our response was (a)
the shift from the Boomer Generation to Gen X and (b) the increasing importance
of authenticity as a brand attrbute.

In many ways the two trends are correlated. Gen X places great importance on
authenticity. I think it is related to their need to validate trust they place
(sparingly) in anyone or anything. Being authentic inherently requires a
consistency between a person's inner character and external behavior. The same
could be said of a brand: It must walk it own talk. And it should not attempt
to "put on airs" or pretend to be capable of something it cannot do
really well.

In the automotive sector than have been a few classic cases of a brand not
being authentic. The experience of the Jaguar brand under Ford Motor Company
specifically comes to mind. (Hopefully this can be overcome under Tatta.) Or
what General Motors did to Cadillac a decade ago. A current question is how
Mercedes is handling SMART. Or maybe that question has already been answered.

Toyota was very intelligent when it launched the Lexus brand. It knew that
"Toyota" as a brand at the product level would never see seen as
authentic luxury. It also knew that for "Lexus" to be an authentic
luxury brand it would have to "walk the talk" at every step in the
business process, from product design through distribution, sales and service.
It set up an entirely new franchise next work of very limited (i.e., exclusive)
scope and has held its dealers to the highest standards of performance.

But Lexus was for Boomers. We are waiting to see if Toyota is as successful
with brands it is launching aimed directly at Gen X.

Critical Success Factors for the Luxury Market

What are the factors critical to success in the luxury market? How does a luxury brand different itself from a "mass" brand? What does a "mass manufacturer" trying to move up-market need to worry about? This one-pager summarizes key factors to which senior management should attend.(http://www.premiumknowledge.net/assets/files/pdf/Luxury_Market_From_an_economist_POV.pdf)