Recession Redux? And What Does This Mean For Marketing?

Now that the stock market has taken a rather ugly turn, all of the talk has gone from “deficit, deficit” to “recession, recession”

When the 2008 recession came crashing down, marketing was one of the first things corporations cut.  And they cut marketing very steeply, far more steeply than almost any other part of their operations.  At that time I did a research study with Jupiter Research, in which we found an astonishing 89% of marketing executives said that their efforts were under greater C-level scrutiny than ever before.

No doubt it seemed self-serving at the time but all of the marketing executives, agencies and consultants screamed, “don’t stop marketing” and “don’t cut the budget so much”.

Here’s the big question — where they right?  Does cutting marketing during a downturn really hurt your long-term prospects?  Or were they wrong?

That’s an important question today, now that it looks like we are again on the cusp of a recession, if not already in one.

The evidence is pretty strong that the marketers were right.  People who invested in their brands generally out-performed those who cut marketing the most.  And the companies with the strongest brands were the ones who were not hit as hard by the stock-market plunge of 2008/09.

Here’s a chart put together in early 2010 by the very smart people of BrandZ.  They looked at both consumer companies and b2b companies, using survey data that reached back before the recession, to identify the strongest brands and the weakest brands.  Then they matched stock market performance.  Nobody was immune to the downturn (except, perhaps, the astonishing McDonald’s whose brand revitalization in 2004 continues to pay dividends today).

Will we remember the recent past?  Or are we going to find ourselves in another uncontrolled experiment of slashing marketing and watching companies falter because of it?

BrandZ Analysis: Brands in times of Recession

 

 

 

 

Who is Jack Trout and what’s he done for marketing lately?

Jack Trout has written a new book, that’s what he’s done!  Come and meet Jack in person and find out more next Wednesday, May 25th at the NYAMA’s “Meet The Author” breakfast series.

It starts at the ungodly hour of 8 am with a jolt of caffeine followed by a conversation with Jack Trout.  It will be held at the New York American Marketing Association offices on 116 East 27th Street, 6th floor, 1-212-687-3280.  You can sign up at nyama.org

Jack Trout is the co-author of Positioning.  And of Re-positioning.  And of many other well-know books on marketing.  If you’ve never heard him speaking about branding, you really should come.

So here’s one of my favorite Jack Trout stories.

In 2004 the CMO of McDonald’s, Larry Light, revealed the new branding strategy behind McDonald’s incredible turn-around story.  How incredible was the turn-around?  In less than a year his approach lifted the company to higher sales, revenues, margins and growth of a brand that many people had written off as just for young families.

Here’s Larry Light in a NYC speech to the heads of ad agencies and clients:

Beware of the so-called “positionistas.” They say that a brand can only stand for one thing in the mind of the market. This may make some sense for small brands. But for big bands – like McDonald’s – it’s nonsense.

Identifying one brand position, communicating it in a repetitive manner is old-fashioned, out-of-date, out-of-touch brand communication. Simplifying a brand to a single position is not simplification, it is simplistic. Simplistic marketing is marketing suicide.

Then Light introduced an entirely new approach to marketing, to advertising, to branding.  It is an approach to marketing with narrative and storytelling at the heart of it.  Here’s how Larry described it:

A brand is a multi-dimensional, multi-faceted, complex message, not a single-dimensional, single-positioned, simplistic message. Customers will not accept monotonous, repetition of the same simplistic message. They want a dynamic, creative chronicle.

And, big brands like McDonald’s are not uni-dimensional. We are a multi-dimensional, multi-faceted, multi-segmented, many-sided brand.  So, we changed from mass marketing a single message to multifaceted, multi-segmented, many-sided marketing.

We think of our new marketing approach as “Brand Journalism.”

In Ad Age Jack Trout responded.  Go back to the August 2004 and you’ll see the headline reads:

McD’s abandoning of positioning is “Lunacy”

Perhaps it was lunacy but it set the company on a path that has put it into the stratosphere.  McDonald’s was 1 of 2 DJIA companies in 2008 to end the year with their stock price higher!  Gold Effies in the US.  Global Gold Effie.  Record breaking sales.  That’s the kind of lunacy that I like!

Agree or disagree with Jack Trout….the point is you need to pay attention to him.  It is absolutely, entirely and certainly worth going and seeing him first hand next Wednesday, May 25, at the NYAMA.  nyama.org

Welcome to the Decade of Narrative Marketing

Marketing is undergoing a transformation.

Marketing is being re-invented.

The so-called “22 immutable laws of marketing” have mutated.  They’ve been broken.  Now they are being repealed.

Bold moves by companies such as Samsung, Apple, Google, Hyundai, Adidas, JetBlue and McDonald’s — to name some of the most visible ones — are re-writing the marketing playbook.

The innovation is coming from the corporate side and from bold thinkers .  To name just a few — Douglas Holt, Marc Gobé, Gerald Zaltman, Larry Light, Joan Kiddon, Joseph Plummer, Jae Hang Park.  There are many others.   We can all learn from the example of Philip Kotler, the father of modern marketing, who is continually seeking a better framework for marketing as the world evolves (Marketing 3.0 is his newest explanation of this third wave in reinventing marketing).

The future of marketing is built on a better understanding of how the human mind works.  The future of marketing is based on new learning into the sheer power of metaphors and story telling to shape the very way we understand the world.  It is based on the breakthroughs being made by neurologists who are able to study our brains in ways unimaginable 15 years ago.  fMRI and other technology are opening new windows into our brain, giving us a better view of what happens inside.   This is not a tale from a Avatar or some other 3-D science fiction film.  It is well-known from the work of Steven Pinker, Oliver Sacks and others.

The future of marketing is based on the simple principle of co-creation.  That means the consumer is central to the process. It recognizes the essential role consumers have in co-creating meaning and value.

The future of marketing includes that essential 4th dimension — time.   It will no longer look at the world in a 2 x 2 grid.  It is flexible, dynamic.   New marketing will replace old marketing the way that steel replaced iron; the way that LCD flat screen TVs replaced vacuum tube TVs

The future of marketing embraces technology as a strategy, not just an execution.  The new new thing –QR codes, social media, hyperlocal marketing — the technologies of the moment will continuously change.  Marketing will break down the internal silos that agencies & corporations erect around the digital world of online and mobile to separate them from the analog world of TV and Radio.  The future of marketing looks at the ways a story jumps from one medium to another, the way a book becomes a movie becomes a Broadway musical becomes a video game becomes a theme park attraction becomes an app, becomes an iPad iBook, becomes….

The past of marketing is static (position), focused on the competitor (different) and not the consumer, reductive, minimalist, simplistic to the point of trying to summarize everything into a single word.

The future of marketing is narrative.  It will:

A) Tap the power of metaphor and story telling

B) Co-create

C) Be alive, living in time

E) Embrace new technology to tell stories in new ways

1/1/11 is the start of the Decade of Narrative Marketing.  The future is an open book.  Go ahead, write the next chapter.

Best marketer of the year: Hyundai!

Ad Age has given all of us readers the opportunity to pick the marketer of the year.  My vote is for Hyundai.

The editors have done all of the hard work, sifting through all of the candidates and making a strong case for the finalists. The five finalists they are presenting are Amazon, Hyundai, Lego, McDonald’s and Walmart.

The two who really stand out are McDonald’s and Hyundai.

McDonald’s has been a perennial top marketer since their turn-around in 2004.  They won the marketer of the year award back then and continue keep up their momentum.  They just keep getting better and better at it.  Some people say that McDonald’s is doing well because of the bad economy.  Yes and no is my response.  Yes the economy makes people more interested in a lower cost alternative.  But no because McDonald’s is up far more than Burger King or other competitors.

So why don’t I vote for McDonald’s a marketer of the year?  Mostly because they’ve already been there.  It’s time for another Cinderella story to be given the prize.

My vote goes to Hyundai because they have an incredible story of moving the brand from a “me-too” car from Korea to a “me first” car for everyone concerned about the economy and the environment.  Hyundai is top of the charts in product quality and now the audacious buyer’s assurance marketing campaign has caught everyone’s attention.  They had a great story to tell and they had a great way to sell their story.

As they say in South Philly, “vote early and vote often”!

AdAge nominations

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.

Global branding panel

The following are just some of the smart points made by Nigel Hollis, Joseph Plummer and Trena Davis at the NYAMA panel discussion on global branding.

Nigel brought home the point that there are very few true global brands.  As measured in the BrandZ study, there are only handful of global brands, really, out of the thousands and thousands of brands around the world. 

The importance of cultural context cannot be underestimated.  The local brands often have advantages because they are rooted in the local lore and local customs and local tastes.  The global brands had advantages in financial scale and the ability to adapt ideas from one country to another.  At one time “global” brands were more trusted, more likely to be seen as leaders and innovators.  Those advantages seem to be eroding today and the playing field appears tilted toward local brands — at least in most categories.

He brought to life many of the superb points from his book The Global Brand.  I highly recommend the book for anyone who is working with a multinational brand.  While it is heavy on research and less so on the creative side of global branding, the book makes very sharp points that challenge the conventional wisdom about branding.  

Implicit in Nigel’s analysis is a rejection of the traditional brand positioning model — a single positioning for a brand everywhere.  A truly global brand is a fine balancing act between values that transcend cultures and the flexibility and adaptation necessary to work effectively within a local country. McDonald’s was held up as an exemplar of a global brand which manages that balance extraordinarily well.

Trena Blair provided an excellent example of the connection between a strong brand and a strong internal culture.  Too often branding is seen as synonymous with advertising. At American Express the brand is not something seen as a device for external marketing.  It is the lynchpin in their corporate culture.  And it comes directly from the top, from the CEO.  This strong hierarchical and centralized approach to branding reflects the organizational structure of American Express.  It would be nearly impossible for them to have such a coherent internal culture and external marketing without a strong, centralized, brand management organization.  

She also provided a wonderful example of how the American Express metaphor and story has evolved over time.  Did you know that their original logo was a bulldog?  I didn’t.

 

While they have moved on from the bulldog logo — the essential meaning of the watchdog is still expressed in the current centurion.  

At American Express there is a great deal of attention being given to the changing consumer mindset and preparing for the time when the economy comes out of the recession.  To me, the American Express actions and activity looks like a case study unfolding before our own eyes.  In five years we may all be looking back at this time and consider American Express as a benchmark for the importance of adapting branding to the changing market.

Professor Plummer of Columbia started with observation that business strategy needs to drive brand strategy.  They are not separate.  In practice most companies treat the brand as if it were separate from the business strategy, the company organization and other realities.  It may seem obvious but it gets lost in the day to day workings of companies.

Going beyond that he pointed out that companies are often mesmerized by the 15% of the world that is wealthy and ignore the great businesses to be created by focusing on the other 85%. Drawing on the work of C.K. Prahalad, Dr. Plummer made it clear that the focus on that top 15% of global consumers means that many companies are missing out on the bigger markets.  There will be far more people in the world driving a Tata Nano or a Hyundai than a Lexus or BMW.

He also drew on the importance of storytelling and metaphors as ways of making brands more universal than a collection of product attributes.  Within that framework, the importance of local adaptation and local innovation should never be underestimated.

One last fun fact of the evening.  There are more global brands from The Netherlands than any other country.  

A long post today.  It is a complex topic.  As our panelists made clear, global branding is not as simple as using the same name, positioning, design, product and advertising around the world.  Economies of global scale collide with local desires in most categories.

Turn the innovation lens on marketing itself

In Europe, or at least in the EU, this is the year of innovation.  The official EU slogan of 2009 is “Imagine. Create. Innovate.”  And they have a neat website to go with it.

The innovation lens has been placed on nearly aspect of corporations today.  Product innovations. Supply Chain innovations. Innovative ways to deliver services. Technical innovations.  Even the word  “Innovation” is baked into the attributes and values of so many companies. It is the rallying cry of internal communications. As marketers we often see ourselves as the champions of innovations, champions of that brave new product or service which will revolutionize the world!

Curiously there is one place inside of most corporations that has not been placed under the magnifying glass of the innovationers. (There, I just innovated by coining a new word!) And that one area is marketing itself.

The current models for marketing were developed over 30 years ago and polished during decades of relatively stable economic growth.  Now is the time to innovate marketing itself, to create new models of how marketing works. It is time for taking bold new approaches to marketing.

 The risks of experimenting with new models of marketing are now much lower than the risks of the status quo. Because who wants the status quo of today’s economy?

What would happen if we applied the EU slogan to marketing?  How could we imagine, create and innovate the very process of marketing?  What would it mean for increasing accountability?  What would it mean for having more flexible marketing programs?  What would it mean for giving marketing the tools to better integrate new media and traditional media? 

It would not mean putting up a corporate facebook page or spending money on creating new tribes.  It would not mean having everyone in marketing wear cool glasses and casual clothing.  It does not mean giving a spiffy new terminology to the same old stuff.

It would mean getting down the very theory of marketing and rebuilding it to fit today’s world.  It would mean having a new way of thinking about the marketing organization.  It would mean finding new ways to increase the productivity and accountability of marketing.

Some companies are doing this either deliberately or without recognizing that they are doing so.  Google. Apple. McDonald’s. Samsung. 

So let’s make 2009 the year that we imagine, create and innovate the very methods and models of marketing itself!

Zeitgeist and McDonald’s

Some words are just fun to say. Zeitgeist is one of them. It is also a wonderful word to use when talking about the mood of a particular time.  You buy your first MacBook and suddenly you notice all of these other people are carrying them around too.  There is something in the air. There was something magical about that place and time when several people in different places had the same idea.  It was uncanny.  It was the Zeitgeist!

Looking back to when Michael Thibodeau and I developed Narrative Branding, I can trace a couple of other people who were independently developing their own similar ideas about branding at that very same moment in time.  It was uncanny.  It was the Zeitgeist!

So I imagine that by now you are saying to yourself, what the heck does this have to do with McDonald’s?  

At the beginning of this decade McDonald’s was in very sorry shape.  Their business was falling apart and their brand was sliding down the slippery slope to irrelevance.  A few years later a remarkable turnaround had taken place.  Suddenly McDonald’s was a vigorous and profitable company with a strong brand.

We didn’t take much notice of it while it was happening.  Looking back I realize that about eight months after we publicly launched our Narrative Branding method to marketing, McDonald’s was making headlines by publicly launching their bold new approach to marketing which they called Brand Journalism.  It was uncanny.  It was the Zeitgeist!

Larry Light, who was the CMO of McDonald’s at the time, was the first chief marketing officer of a major corporation to publicly renounce the brand positioning approach to marketing. In the words of Larry Light and Joan Kiddon:

The “positionistas,” as I like to call them, are glued to the glory of an immutable, narrow, unidimensional view of a brand.  They believe that brands are simple, single-word ideas.  And once this idea is established, they believe that you cannot change people’s minds. This is wrong.  Brands are complex, multidimensional ideas, and you can change people’s minds.  McDonald’s is a good example.

This quote is taken from the new book that Light and Kiddon have written, “Six Rules for Brand Revitalization”.  It has just been published by Wharton School Publishing. It is essentially a book length case study of the McDonald’s story from the inside. And it is also persuasive evidence that companies can abandon brand positioning and actually perform much better.

Of course, it doesn’t take much detective work to see that Light and Kiddon are tweaking Trout and Ries by labeling them positionistas.  All I can say is that I wish I had come up with that word!

So there you have it.  Zeitgeist and McDonald’s.

The resilience of McDonald’s

McDonald’s is one of the few stocks that actually increased in value during 2008 — a year in which 95% of stocks fell.  Not only that, but sales have continued to grow.  The strength of McDonald’s is amazing! 

Is this simply because a lower cost restaurant will do better in a recession?  If we look at the last recession, the stock price of McDonald’s actually fell rather dramatically.  So it cannot be only the greater economy that is driving McDonald’s performance.

If we look back, we can see that McDonald’s actually began this decade in rather tarnished shape both as a business and a brand.  As a brand it had lost relevance and trust.  In the last recession McDonald’s was weak and in this one it is strong.  In fact, today McDonald’s is one of the strongest businesses and brands in the world.  Remarkable!

How did this happen?  

The changes began at the top, with new leadership.  One of the most important hires, and most counter-intuitive, was bringing Larry Light on as the Chief Marketing Officer.  Larry Light had a storied history working at the advertising agencies BBDO and Ted Bates.  Bringing in someone with that background was unconventional for McDonald’s.

To turn around the McDonald’s brand, Light jettisoned traditional brand positioning.  He was prescient in seeing the traditional brand marketing model as being broken.  In his own words, “We reject the outmoded view of the positionistas… declaring an end to the out-of-date, simplistic concept of brand positioning…”

Light’s great insight was that brand positioning was too limiting for the McDonald’s brand.  It narrowed the potential audience for the brand down to a single market segment.  For the brand to grow, it needed to appeal to many segments of the market, not just one.

He needed a new model for brand marketing.

Always resourceful, Light developed a narrative method for brand marketing.  He called it “Brand Journalism”  It was custom made for McDonald’s.  It was far, far more than just an advertising campaign.  It was the basis for rebuilding the internal culture of McDonald’s, for shaping the company’s business strategy, for changing menus and for redirecting their overall marketing efforts.  Because it was a new model, it also required developing new market research tools and metrics.  Existing market research was designed to assess the key elements of brand positioning.  It was not appropriate for assessing a brand based on the principles of  brand journalism.

“McD’s Abandoning of Positioning is ‘Lunacy'” screamed the headlines in AdAge.

Less than a year later the magazine changed their mind.  AdAge awarded McDonald’s “marketer of the year.”  A turn around indeed! 

Brand Journalism is, at its heart, a narrative method for creating and managing a brand.  The full story of it and McDonald’s turn around remains to be written.

This narrative method is part of the reason why McDonald’s continues to be so resilient today as both a brand and a business.