The perils of positioning – or – Verizon is reliable, reliable, reliable

Verizon is an excellent example of a company that has been following the brand positioning method very consistently.  For years now they have been very focused on a single attribute: reliable.  They’ve coined their wireless network as “America’s most reliable network.”  

In fact, Nielsen has recently published a study which commends Verizon for this single-minded approach of differentiation through a single attribute.

 

A testament to the success of its consistent advertising message, the number of

consumers who perceive Verizon Wireless as having the best mobile network has shot up over the last

two years and it leads its closest competitor now by an almost 2:1 margin.

 

And what is the benefit to Verizon of this singular focus on reliability?  Well, having a reliable network fell from being the second most important factor to 7th place.  The more Verizon has been focusing on reliable, the more they have been missing out on the biggest shift in the market to the “unlimited” brands such as MetroPCS.

When Choosing a Carrier, Does “Reliability” Really Matter?

This raises the wisdom of the narrow positioning model for brand marketing — at least for major brands who are trying to reach multiple audiences.  

On the other side is AT&T.  They are having a tremendous boost from the exclusive arrangement to carry the Apple iPhone.  This has become more important on an absolute level — although not by rank.  More importantly is that iPhone users tend to use more services and driver higher ARPU (which is industry slang for Average Revenues Per Unit).  That means the new people AT&T attracts will be generally more profitable.

It is ironic that the actual article appears to argue that the iPhone doesn’t really matter.  It does matter, to one small but very influential audience.  For a brand to become mass, it needs to appeal to multiple audiences with different aspects of their narrative.  All these aspects of the narrative need to come together into a coherent whole.  But they  are not narrow, rigid and repetitive attributes.

If the brand positioning model is right, then Verizon will become strongly associated with the attribute “reliable”, an attribute which is falling in importance.  Fortunately for Verizon, there are other models for branding that recognize the reality that people do change their minds about brands.  The challenge will be for Verizon to drop the traditional brand positioning approach and move to a more effective branding model.  It is hard to shake a brand model that has been dominant for decades — it becomes ingrained.   That leaves the door open to newer companies looking for breakthrough approaches to compensate for lower budgets.  And also for AT&T which has a lifetime of brand associations.

 

Business Strategy = Brand Strategy, or Verizon redux

A colleague challenged me on the recent post about Verizon’s business being strong but not their brand.  “How can you have a strong business but not a strong brand?  Doesn’t that contradict the theory that business strategy = brand strategy?”

Excellent question.  I was not clear enough on that point.

So here it goes:

If you business strategy is to operate in a category where there is limited or no competition, then your brand strategy is to downplay branding.

Branding has relatively little benefit if you are in a business that is highly regulated, a monopoly, a commodity or a utility.  Of course it does matter when dealing with the regulators, employees, prospective employees and business partners.  But those are still very small audiences.  Verizon is in a category with very limited competition.  It is a category that is capital intensive, with no single technical standard, so there are very big barriers to new competitors.  And it remains highly regulated.  

The wireless business is slightly more competitive than wireline.  But it still has a limited number of competitors and is capital intensive . Most importantly, the category is growing.  Only a business in poor shape would decline in a growing category.  

Compare this with many countries in Europe where there is a more competitive market.  There is a single standard across the countries, so networks are not a competitive advantage.  There we see some truly outstanding brands such as Orange and O2.  

Now compare this to mobile handsets.  That is a category where branding is tremendously important.  Samsung, Apple, Nokia, Motorola, Sony Ericsson, Blackberry — even LG and HTC.  Those companies really understand the importance of branding and try hard to get it right.  Samsung is getting it right, Motorola has lost its way.  And who can doubt that Apple is getting it right?

In fact, it is the Apple brand that is attracting people to AT&T.  And the problem is made worse by the bad feelings people have about the Verizon brand.  Arguably the Verizon brand is pushing people away.  The AT&T brand has a residual good will from its long relationship with people.  Verizon has size.  AT&T has stature.

Here’s an example of where brand strategy drives business strategy.  The example comes from Larry Light and Joan Kiddon in their new book, Six Rules for Brand Revitalization.  McDonald’s lost faith in their brand’s ability to reach beyond a limited audience, limiting their growth potential.  Growth meant reaching teens and young adults, so the company decided to invest in many other brands such as Chipotle, Pret and Boston Market. That is where the “brand positioning” theory led them.  Brand strategy of one brand to one segment led to a business strategy of buying other brands. 

But it wasn’t working because the core McDonald’s brand continued to decline.  In a reversal of their branding strategy, they adopted a multi-segment approach to branding marketing.  In other words, a single brand appealing to multiple target audiences (but still not absolutely everyone).  The new branding approach (brand journalism) worked, driving organic growth in the McDonald’s franchise.  Eventually the company sold off those other brands and investments.   Brand strategy of one branding to multiple segments led to a business strategy of selling off other brands.

Organic growth?  One of only 2 companies in the Dow Jones Industrial Average to rise last year?  Hey, I’m lovin’ it!

Perhaps illustrates the important relationship between business strategy and brand strategy.  If not, let me know and I’ll try to give other examples or ways to look at the issue.

Verizon Wireless vs. AT&T

Here’s a bit of interesting news — the iPhone has helped AT&T sign up more than 1 million new customers in the past quarter.  Reports in the NY Times have AT&T thanking the iPhone for keeping their profits from falling further.

Not bad for a company that is often credited with having the worst data network in the country!

On the other hand, it’s getting rather difficult to avoid the one note “Reliable” advertising of Verizon Wireless. America’s most reliable advertising campaign?  The attribute focused advertising is not having the same draw as the beauty and status of a phone with great apps.

This is a case of “Positioning” vs. “Product” — and a product that has a wonderful image from a brand with a wonderful image.  Beats positioning every time.  It’s time for Verizon Wireless to re-invent their marketing campaign based on stronger insights into their audiences.  That will mean going beyond the typical market research and typical new ad campaign. In the long run it will be more effective and save money.