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Coke-Zero... The latest Loser from The World's Most Valuable Brand. By Stefan Paul Jaworski

It seems like history is repeating itself, or simply someone is not learning from past mistakes. Enter Coca-Cola's newest line extension blunder "Coke Zero."

After the Vanilla Coke fiasco who could possibly believe that the gang from Atlanta and their beloved ad agencies would creatively do it again? Well, as the adage goes: some people never learn. Even the world's most valuable brand according to Interbrand (valuing it at about $89 billion USD).

This time, the mistake borders more on the hilarious than on the sad: who would name a product "Zero"?  Let's see what Webster's Dictionary defines "Zero" as:

Main Entry: ¹ze·ro
Pronunciation: 'zE-(")rO, 'zir-(")O
Function: noun
1 a : the arithmetical symbol 0 or <null> denoting the absence of all magnitude or quantity

4 : an insignificant person or thing : NONENTITY
5 a : a state of total absence or neutrality b : the lowest point

In other words, from looking at the above definition of 'Zero,' Coca-Cola has created for itself a brand and product of nothing, insignificance, absence of anything, or in simple American terms a "loser"... Amazing.  Atlanta finally has gone off the Marketing deep end and created yet another line extension of the most world's most valuable brand—but this time dubbed it "loser." Hence, before the brand and marketing game even begins, Coca-Cola has literally dug a hole for the product as well as its core brand—and thus the company itself. And at the same time provided arch rival Pepsi with an unmatched opportunity to gain valuable ground in the never-ending brand cola war.  At this juncture, I can only think of the wisdom that Al Ries gave us long ago that holds true throughout time (paraphrased): "big brands often get hurt because usually through their arrogance think they can make no mistakes and thus get away with anything" .

Like people, brands are watched, listened to, and judged- and the Coke Zero goof looks to both the public and media like a really stupid mistake has been made by the brand world's "golden child". Indeed, a mistake that could quickly take the luster off of the fabled Coke brand wizardry and mystique—especially to investors and shareholders who must be wondering what is going on marketing-wise after the Vanilla Coke fiasco.

For the last several decades, marketers and brand experts such as Al Ries, Phil Kotler, and Paul Temporal have demonstrated beyond doubt that there is very much a "science" regarding marketing and brand building with consistent laws operating—a key concept being/involving positioning. A brand, before even entering a market, must carefully define and carve out for itself a unique identity and position to occupy (especially in the mind) that resonates positively with targeted customers and their society—and try and keep it at all costs. In extending the brand via new products (line extensions) or into new markets, this same carefully constructed position must be considered, maintained, as well as guarded—the extensions must not be allowed to damage, dilute, or negatively effect the core brand or its position at any cost. With Coke Zero, it seems that all marketing and brand logic has purposely been thrown out the door and an almost "anti -brand, anti-marketing" (let's damage the core brand Coke at all cost) rationale been adopted—as no seriously managed brand in this day and age would make such a significant error in judgment.

Of course, Pepsi are making the best of it—reveling in the Coke Zero mistake. Any opportunity to have an arch rival self-inflict damage to their core brand is a wonderful opportunity to take advantage of. Case in point: in London UK, the famed red, double decker buses everywhere are carrying ads re-positioning Coca-Cola (via Coke Zero) as old news, not with it, worthless, a loser, a joke..."a zero." The same for New York and most global centers. And there is nothing Coke can do about it. The Pepsi attack ads are basic, but very effective in the message they are conveying: showing an "uncool" image such as a moose labeled "Zero" on the one end of a thermometer with the other end having a "cool/hip" image of a fox, beautiful girl, etc. labeled "Max"(Pepsi's Product) with Pepsi's logo.  In other words: "Coke Zero is Zero, a loser, nothing, uncool... move over to the Pepsi Max end which is cool, great, hot, hip, a winner!"  Not good for a product line extension that is so close to its corporate core brand: carrying the famed Coca-Cola or Coke brand name.      

For myself, the Coke Zero problem also lies in the nature of the product itself as there is confusion: why have Coke Zero, a product created to remove the negatives of sugar, when already such a product exists in the form of Diet Coke?  There may be some males that may view Diet Coke as a female drink, but they are a minority; and besides, what male would switch to a brand for losers? On the surface, what is the difference between Coke Zero and Diet Coke? None really. Hence, here we have a product released without any real basis of difference—except semantics maybe—causing serious market and consumer confusion. In essence, to me, Coke Zero is literally a baseless line extension product that also makes a literal fool out of the core brand (Coca-Cola) whose name it is using for extension credibility. A vicious brand damaging circle in reality.

Finally, I also want to point out the damage in regards to the "internal organization" that brand mistakes such as Vanilla Coke and Coke Zero have, which is rarely spoken about. All successful brands are as much about "Internal Branding" (especially identity, personality, emotions, perceptions, image, and associations) and bonding as their more visible external aspects (such as advertising, PR, promotions, etc.). With brands literally being "living things," the Internal brand aspect is indeed as much a creature of "self fulfilling prophesy" as it is skill. If brand workers perceive the brand as a winner, they act that way—the same if it's a loser. Hence, the result of a company launching or experiencing even a single "brand loser" can have very real, even devastating, effects on the company and most importantly its people. No one likes to be on a losing team- real or perceived—and the more losses, the deeper the team digs itself into negativity spiritually, emotionally, and ultimately in terms of reality (self-fulfilling prophesy). Experience a series of very embarrassing, global scale brand errors such as team Coke and become the butt of industry jokes, the Press, and every major marketing publication possible, and the negative consequences on your internal brand culture (and team) can be enormous. Possibly enough to demoralize and damage the brand seriously in terms of morale, performance, and ultimately brand pride. The same can be said for the brand position: too many losing games can demoralize your audience and change their perception of you forever, as well as future generations through story-telling and passing-down of perception ("we are Pepsi People as Coke has been a loser for years") . Ultimately, brands are about relationships and at the core of these are Identities—carefully established, tested and tried personalities that constitute the bulk of the intangible brand equity and value that can make up to 90% of a brand's market value (usually judged via market capitalization). Creating brand value is a highly skilled, timely, painstaking, and effort intensive endeavor that does not always pay off—as so many things can de-rail the entire process.  It can also be a very fickle thing, in the sense that one large mistake or miscalculation occurring just once, or several smaller ones in a row, can wreak havoc and bring down the whole house of cards as Perrier, EXXON, Firestone, Calvin Klein, and Benneton have found out before... and Coke is finding out, again.   

Stefan Paul Jaworski, Masters Degree Marketing, is Partner & Global Brand Officer for Studio X-Temporal Global Brand Consulting—a multinational Brand and Marketing Strategy leader whose clients have included Anheuser-Busch, Monsanto, Kraft, Nabisco, Sea World, FCB, Citibank, Burger King, Jack Daniel’s, Ralston Purina, TWA, Hewlett Packard, Apple, Bosch, Jordache, John Deere, JBL, Exxon, Polar Wave, Energizer, and the nations of the UK, Dubai, Malaysia, and many others. SXTC is responsible for 16 industry-leading Brand and Marketing books published globally. Mr. Jaworski is the author of 2 regarded Brand Strategy books, 22 Brand Strategy articles, and a speaker on Brand Marketing and Brand Management Strategy.

www.sxtcbrand.com

Reviews:

Dear Stefan:

Great article. It’s sad. Coke spends all its time on line extensions while the cola category keeps sinking.

All the best.

Al Ries (Feb 19, 2007)

Eaton’s- A Case For The Value Of Skilful Brand Strategy. Stefan Paul Jaworski

(Dec. 2002. St. Louis, MO). I am often confronted by business leaders and managers, especially in Canada, concerning the value of Brand Strategy. Or, as many of these businesspeople like to suggest, “the perceived lack of value in it”. Brand Strategy to some is just ‘hocus-pocus”- there is no real proof as to its merits or effectiveness. End of story. Of course, as a Brand Strategist, I pull out my case studies, theories, and ideas from greats like Kotler, Aacker, and Ries, etc. - but only to polite smiles. The names of huge multinationals and US gurus just seem too far away and on a scale that just does not seem applicable to many Canadian business leaders- especially small and b to b companies. So, I needed an example they can understand, relate to, and put into perspective: Eaton’s. For Brand Strategists, like astronomers, Brand failures are like supernovas- their collapse full of information and data about the past, significant events, and the recipe for failure. Eaton’s and its failure, twice, is a great and rare specimen to examine- Brand wise.

Eaton’s, in business since 1856, and at one time employing 64,000 workers in 64 stores nationwide, is an excellent example of Brand re-positioning disasterbefalling one of Canada’s prime retailers. The company, in response to challenges from terrible internal management and strong competition, decided with advice from its ad agency to re-position itself from its traditional image as a middle-class department store for families to an upscale fashion item retailer ala Bloomingdales, Nordstrom’s, etc. Many non-Branders and Marketing novices argue that Eaton’s was repositioned as an upscale clothes seller- this naive view fails to see in reality that what started with upscale clothes could not be contained Brand-wise and naturally spread to encompass all aspects of Eaton’s and what it sold (fashion-based products - not just clothes - in consumers’ minds). Combine this with Eaton’s traditional role as a general retailer, and we see no upscale clothes retailer is Eaton’s- just ask consumers. This sort of contamination is why Brand Strategy and planning is so vital, as things spiral out of control quickly. The repositioning’s effect on Eaton’s was that it alienated its traditional customer base and failed to attract the “younger, more trendy” upscale market- in essence becoming irrelevant to its core consumer and not becoming relevant to its desired new market.1( 1. http://www.canoe.ca/MoneyGrowthNews/eatons.htmlhttp://www.canoe.ca/MoneyGrowthNews/eatons.html http://www.canoe.ca/MoneyGrowthNews/eatons.html )

The re-positioning put the Eaton’s Brand into a no-win, lose only situation, severely diluted and damaged the Brand’s identity built up over the previous 100 years, and left the consumer market confused as to the real Eaton Brand identity. Eaton’s is a rare example of what I call a “Brand Split”– its Brand identity was basically fractured with the repositioning that occurred, as we said, making it become irrelevant (alienating it) to its historical consumer base and not relevant to its targeted market. Brand splits are almost always damaging to the Brand identity, and as we can see with the rare Eaton’s example, often fatal- they destroy the established central Brand identity by creating confusion. Within less than 2 years (1997- 1999) after its initial/first re-positioning, Eaton’s was bankrupt and sold off to Sears.

Skilled Brand experts know that re-positioning is a very risky business under the best of conditions and should be avoided at all cost- position evolution is the way to go. Only rare instances and situations arise where a flat-out repositioning is beneficial- and these involve a myriad of factors coming together at the right time and place; serious analysis; and sometimes years of both planning and waiting for the optimum conditions to appear. Remember, the repositioning must be planned to work both short and long-term or else your Brand could be sunk.

One of the rare cases of a successful re-positioning is that of Mountain Dew which did not occur overnight- but, in fact, took decades of patient waiting for the right circumstances to arise. Originally positioned as a “Hillbilly”/”Hoosier” drink in the late 1950’s (Pepsi bought it in 1964), the Brand drifted into oblivion/the background as an unsupported tertiary Brand over the years- a no name, nobody Brand (ala Tab). But, Pepsi, knowing that no Brand that has had any type of exposure ever really dies (they stubbornly keep chugging away in the back of people’s minds no matter what…just ask Allante or Hawaiian Punch or Tahiti Treat), kept Mountain Dew alive for the opportune time when it could prove useful. Enter the early 1990’s and GenX. The time had come to create a unique beverage that stood out (it is a very bright yellow), had a “bite” taste-wise, bold sweetness, fed the GenX desire for caffeine rush, and just rebelled- enter repositioned “Dew”. “Do the Dew” had re-positioned hillbilly, laid back Mountain Dew into GenX, daring, different, trendy ‘Dew”- the drink of new age rebellion, danger, trail blazing, snow and skate boarding, mountain biking, and dare devils. The result: short term sales exploded as did awareness, hipness, Brand equity, and popularity. But, seasoned Brand Strategists question how long can Dew be hip? We see the Brand naturally being pigeon holed into a GenX product which begs us to ask what happens when they have moved on/evolved and there is no original core market left (which, too, is only a natural phenomenon when a Brand is largely built on trend)? Another re-positioning? Not likely. Pepsi, say in 5 or 10 years, could be left with a “Dew” dilemma. Hence, the unknown long-term aspects of radical Brand repositioning- it is difficult to know where it can take the Brand. Eaton’s and its agency seemed void of this knowledge and skilland to this day there has been huge distance placed between these two groups and the disaster they initiated.

One of the most interesting facts about Eaton’s is that it had a second chance. The second time around, with Sears ownership (1999) and deep pockets, Eaton’s was resurrected again as an upscale fashion retailer with a splashy ad campaign on a 1930’s art deco/or 1950’s? theme “uberge” and a very expensive, high end makeover for all stores. The result? Again, Eaton’s bankrupted within 2 years for the same reason it failed the first time…the core values established and reinforced over 100 years while being in business could not be buried over with a quick make-over and re-positioning(s). Eaton’s Brand identity (and position) was and is as a Canadian, middle-class, family department store for the masses- a place for pensioners, workers, and “normal” Canada! Simple!!! It was not, is not, nor will ever be about “uberge”, Gucci, Hillfiger, Polo, Chanel, etc. Eaton’s is not a “high class”, elite fashion store a-la Nordstrom’s, Neiman Marcus, Bloomies- and in the Canadian consumer’s, market’s, and society’s minds it will never be! If Sears, and its Canadian ad agencies, had known their Branding laws and done their homework/market research properly, they would have found this out (and not even on the second attempt?). Embarrassing- first the Eaton’s family tried an upscale reposition that failed, now the same mistake under world famous retailer Sears for the same reason. The common denominator/reason? Canadian ad agencies and marketers not knowing what they were doing! Brand Strategy law, at least here in the US, tells us changing such a long-term, established Brand in the mind is like changing an aircraft carrier into a schooner- it’s not very likely. If Sears and its agencies had done their research, they would have not only found a Brand identity carved in stone, but also the fact that Canada does not have the base of wealthy consumers to buy from a so-called fashion based, upscale retailer- just ask struggling Holt Renfrew that has specifically catered fashion-wise to Canada’s few wealthy elite for decades. Add to this the fact that Eaton’s was not consistent in that its stock wasn’t all that premium in quality or Brand name to help reinforce its desired identity and position as a true upscale retailer- it was premium in price only (a death trap in value-savvy Canada). Brand Strategy skills clearly were lacking on all sides (company and agency) and through all aspects of the Eaton’s organization- a guaranteed recipe for disaster.

What should Eaton’s have done? Easy- go back to its greatest Brand asset and a basic law of Brand Strategy: its historical position in the mind built up for over 100 years as Canada’s Department store and reinforced through culture, consumer interaction, and just decades of awareness. What was Eaton’s historical position in the consumer’s mind? …a place for families, of Canadian retailing history, of value…Eaton’s is Canada’s Middle of the Road Department Store! Get rid of the new, failed policy experiments of “everyday low pricing” (it failed even for mighty Sears), and later premium ticketing, and bring back to life the famous national sales Eaton’s was built upon and famed for (they were legendary events much waited for by Canadians). Reinstate the famous dark blue Brand colors of Eaton’s and its original, unique Brand culture through every contact point; and service…reinstate the famed service and politeness Eaton’s and Canadian retailing is famed for- all largely started by Eaton’s. In other words, go back to the original Brand past (position and identity) in Canadian’s minds for the future. Would it have worked? Simply examine Sears Canada and Canadian Tire- both having experienced surges in marketshare, profits, and growth by embracing, and taking advantage of, their historical positions and identities in Canadian’s minds (and thus strong Brand-consumer emotional bonds) and reinforcing them to the extreme. Just look at arch rival Hudson’s Bay- Eaton’s nemesis from day one. By sticking with their Brand heritage (even revelling in it), historical position (carefully evolved not re-positioned!), original Brand identity and style, the Bay has since Eaton’s fall had record growth, expansion and sales! I argue that the Bay is very much lacking in skilful Brand and Marketing Strategy, but it did realize one vital aspect of building a Brandrepositioning is a very risky business and simply/quickly dumping a longestablished Brand identity, position, and image is reckless and a mark of amateurs.

Is there real value in world-class Brand Marketing Strategy? Eaton’s I believe is a prime example of “YES”.

Stefan Paul Jaworski, Masters Degree Marketing, is Partner & Global Brand Officer for Studio X-Temporal Global Brand Consulting- a multinational Brand and Marketing Strategy leader whose clients have included Anheuser-Busch, Monsanto, CP Rail, Kraft, Nabisco, Sea World, FCB, Citibank, Burger King, Jack Daniel’s, Ralston Purina, TWA, Hewlett Packard, Apple, Bosch, Jordache, John Deere, JBL, Exxon, Polar Wave, and Energizer. SXTC is responsible for 16 industry-leading Brand and Marketing books published globally. Mr. Jaworski is the author of 2 regarded Brand Strategy books, numerous Brand Strategy articles, and a speaker on Brand Marketing Strategy.

www.sxtcbrand.com

Reviews:

“Dear Stefan: I think it's great (Eaton’s Paper/Article). I wouldn't change anything. All the best.” -Al Ries (Dec. 2002)

“Stefan: Just looking at your Eaton’s article I agree. The difference between most brand consultants and ourselves is that we are not afraid to tell the truth as we see it.” -Dr. Paul Temporal (Asia’s top brand strategist).

Channel Strategy and Its Long-Term Effect on Brand Identity. Krispy-Kreme- The Undoing of a Brand.

By: Stefan Paul Jaworski, Director North America, Brand Strategy Officer.

(November 1, 2004). In today’s world hyper-focused on brand, at least hyper-focused on “brand surface issues,” one of the most important lessons which keeps getting ignored is that involving the intricate relationship between channel strategy and brand identity. It seems that outside of the superlatives of “advertising,” pretty pictures, and “killer-style,” which are thought by many to compose the “brand kingdom,” the world of the channel and its effect on building or destroying any brand are simply not even thought about. They don’t even appear on the radar screen. In fact, the channel is seen almost as a necessary evil, to be “put up with”, a crude “operations tool” to be kept out of sight- as opposed to a strategic pillar of a brand’s success. Hence, the lack of skill possessed by most advertisers to even consider using it, or its effects on brand: a “where there are no pretty pictures, trendy words, or “killer creative” there certainly is no brand building” mentality. Come into play the new, “trendy brand juggernaut” of the South: Krispy Kreme Doughnuts.

Established in 1937, by Vernon Rudolph who bought the rights to a yeast raised doughnut from a French Chef in New Orleans, Krispy Kreme was a brand that slowly established itself on two key personality traits that became crucial to its brand: hot doughnuts, and a slow growth cycle (scarcity of locations) that made it seem a “rarity”. Combined correctly, they have proven to be the catalyst to a brand icon- the stuff of legend. Until now.

The problem? Krispy Kreme in its desperate rush over the last decade to “grow” the brand into new markets and “capitalize” on the pent up, trend-based hysteria for its offerings forgot to factor into its strategic planning the “channel’s” effect on “brand”. The whole strategy was simply to get the brand name and its offerings into consumers’ hands ASAP- product, locations, and awareness en masse as fast as possible “while demand was hot”. The brand would be built by a combination of “blanketing awareness” via PR and news stories (often of consumer hysteria concerning a new location opening…i.e. “customers slept in line for two days to be served”), and simply ensuring that consumers had access to purchase product. For Krispy Kreme, there was little examination of the more deeper aspects of brand building including the strategic use of the channel and its impact on brand identity. The channel, and how it is used, has a very powerful impact on a brand’s identity and on the success of brand building efforts. Just ask Miller Brewing. “Ads by Bob” was an ad campaign created by Fallon McKelligot (now Fallon Advertising) nearly a decade ago for Miller to revitalize sales. The campaign was a good one, but failed miserably because of failure to incorporate channel realities into its strategic planning. Miller never sought buy in or input from vital channel members such as Mom and Pop stores, bars and clubs, or even major chains that sold its product and directly interacted with its customers. Hence, when the campaign was launched, there was immediate alienation of, and revolt from, a powerful pillar of Miller’s brand building efforts: its channel members. Channel members just did not “get it”- and thus neither did customers that entered their stores in terms of promotional pieces, supporting materials, point of sales displays, referrals, etc. Negative brand advocacy is a powerful thing and the campaign folded within weeks. No channel consideration and strategic planning= no brand success.

Kripsy Kreme’s problem was not simply about alienating channel members (bad enough as this is), but was equally if not more serious: it simply never thought about the reality that “how it used its channel would affect its brand identity.” In its rush to get product into contact with consumers, such as via counter-space in grocery stores, Krispy Kreme would be breaking one of the key founding principles of its brand identity and success: hot doughnuts. As I mentioned, and consumers have testified to from day one, “hot doughnuts” are key to the love affair with Krispy Kreme’s product and brand effecting taste, position, identity, and overall brand experience: hot and thus “fresh,” “just made” doughnuts. It is also the founding aspect of the brand promise. Hence, by distributing and selling doughnuts on grocery store shelves that are cold and sometimes hours to a day-old, Krispy Kreme is directly damaging its established brand identity: including its position, brand experience and brand promise. It is also damaging and jeopardizing its relationship with customers as no serious brand would ever allow its product to be sold in less than optimum (or “substandard”) condition. Would Coca-Cola allow its products to be sold “flat” on store shelves? Anheuser-Busch, always channel savvy to the extreme, has invested untold hundreds of millions in guaranteeing its product being “always fresh”. In fact, the “Born on Date” campaign is a supremely powerful pillar in Budweiser’s brand promise, differentiation strategy, and customer experience—and thus brand identity.

Remember, also, that the unique branded environment Krispy Kreme locations have traditionally offered (you can watch through glass the doughnuts being made and eat them right off of the conveyer belt) is a very important aspect of the entire “brand identity package.” Many customers, especially those with families, come to see “doughnuts being made” and “eat a hot one right off the line.” By selling product in grocery chains and commercially, Krispy Kreme is losing such vital brand associations and experiences that are gained by having customers purchase and enjoy its products within a carefully designed (unique) and controlled branded environment. By extending its channel (making it longer) Krispy Kreme is also giving up “vital brand control” to retailers. Such loss of control almost always guarantees “substandard” brand presentation and customer experience—at least without stringent agreements, guarantees, training and enforcement programs in place. Would McDonald’s allow the Big Mac to be sold in a dirty roadhouse without its trademark consistent quality, taste, Arches, uniformed employees, child play area, booths, and brand colors? Of course not. Yet, from what I have personally witnessed in many grocery stores where Krispy Kreme is selling its product, it seems they are allowing just that.

Especially, for a brand whose identity, differentiation, and brand-customer experience success from day one were based on “hot doughnuts,” one would think that Krispy Kreme would be making its first priority discovering ways to ensure only “hot doughnuts” be sold in an officially branded environment— and not purposely propagating the sale of inferior quality product in inferior, non-branded environments for the sake of “getting product out there.” All of the locations, shelf space amounts, PR stories, and initial sales volume achieved will only dig a deeper grave for Krispy Kreme as a brand if it continues to ignore the reality that its dedication to them, at the expense of keeping a key aspect of its brand identity, is continuing to damage that brand identity, position, brand-customer experience and brand promise. Let us also not forget that the vital “rarity” aspect of the brand identity that helped to generate the “mystique” of the Krispy Kreme legend is also not being done a service by opening locations at a tremendous pace in many places—overexposure. Suddenly, with locations sprouting up everywhere, Krispy Kreme has lost much of its initial luster, exclusivity, and “specialness” that was attached to the “hard to get” cache. And, the more locations and distribution points are increased, the more the brand will lose these “vitals,” eventually becoming “common” and possibly a “commodity.” The results are already being seen with sales and stock prices decreasing; as well as dilution of the icon “Krispy Kreme” brand identity.

Where once people waited in long lines to buy Krispy Kreme’s doughnuts by the dozen, it is not unusual now to walk into a store and see no customers. In fact, some stores are surviving not from in-store customer sales but from corporate, special occasion and commercial sales- just look at the Fargo North Dakota location. In fact, in May 2004, Krispy Kreme stock fell 18% in one day with Wall Street’s best analysts putting the company on watch. The company of course blames the Atkins (low carb) and South Beach Diet fads, but analysts correctly are not buying it.

"This [low-carb] phenomenon has affected us (Krispy Kreme) most heavily in our off-premises sales channels, in particular sales of packaged doughnuts to grocery store customers," CEO Scott Livengood said in a statement. However, on a conference call Friday morning, some analysts were skeptical about how much the low-carb craze was to blame for the shortcoming. When an analyst asked why the Atkins and South Beach inspired diets should affect demand now, when doughnuts have never been a part of any diet, the company said "our intention is to give you the facts as we know them...this is not an unraveling... the jury is out. This could be a new way of eating, even though it is not supported by nutritionists. 1"

Note from the quote above that Krispy Kreme’s CEO indicates openly that the damage has been done in the “off premises” sales channel—exactly where the problem of cold/old doughnuts and thus brand damage started and continues! Hence, Krispy Kreme has empirical evidence that something is going wrong in the channel—yet, it prefers to focus on the lame excuse of the Atkins and South Beach diets! The firm’s CEO in my opinion is very fortunate as he is getting a very clear warning sign (a clear and present danger sign), and an early one, that something is wrong in the channel and thus brand. In my opinion, he should discover and isolate it now before it spreads like wildfire to the ‘outside” world of consumer perception where real brand damage that can cause brand failure occurs. Thankfully, top Wall Street Analysts are not buying into the Atkins and South Beach fallacy and seem to see a more long term problem at hand:

“Morningstar's analyst Carl Sibilski said he placed the stock under review after the company's release. ‘The Atkins thing surprised me,’ he said. ‘That's something I expected to hear last year. The Atkins diet won't be their downfall, it will be their strategy of trying to sell doughnuts wholesale.2 "

Indeed, we are seeing the bonafied results from damaging a brand identity and position, as well as directly breaking a key brand promise: things that would not have happened if Krispy Kreme had properly used brand strategy in the first place to grow its brand. A complete and expert brand analysis and strategy would have factored in detailed channel analysis, scenarios and planning, as well as any effect(s) on the brand, its identity, and position- in isolation as well as in regard to the other multiple brand factors. Remember, brand strategy leads business, advertising, promotional, and any other kind of brand activity and efforts. The result of ignoring this reality?

“Shares of Krispy Kreme soared after going public in early 2000, but they have dropped 13 percent this year as investors have become more skeptical about the company's long-term growth prospects. In addition, Krispy Kreme said it will dispose of its Montana Mills bread unit, close six factory stores and shut three underperforming coffee-and-doughnut shops. 3”

As noted earlier, all of the locations and grocery stores in the world will be of no use whatsoever, and in fact will directly damage the Kripsy Kreme brand (especially its identity), if they are allowed to continue to contribute to the breaking of the key core brand value and brand promise via not providing hot doughnuts. The above injury does not include the long term intangible damage to Kripsy Kreme’s brand identity, position, brand promise, customer relationships and loyalty, as well as place in the market. These damages when tallied up will be in the many multiples of any capital and stock losses- and if left unresolved they could prove fatal brand and corporate wise.

Time and time again our firm tells companies, marketers, PR and ad agencies that brands are not just about logos, pretty pictures, and clever play on words—they involve deep strategic and tactical consideration and mastery of multiple factors, aspects, forces, dynamics, resources, skills, and relationships. Just a few of these include market dynamics, market/industry evolution realities, channel realities and forces, brand management and architecture realities (and effects), competitor challenges and consumer evolution—all having the potential to be both tangible and intangible. Indeed, a very complicated array of things that must be considered when building and managing a brand. Sadly, for the Krispy Kreme brand, the channel is one of the most important. A channel when planned with strategic excellence, and implemented tactically the same way, is one of the most powerful and effective ways to propagate, enhance, support, and defend a brand long-term: including its identity, promise, customer experience, brand-customer-market-society relationships, and position.

-STEFAN PAUL JAWORSKI, DIRECTOR NORTH AMERICA, STUDIO X-TEMPORAL GLOBAL BRAND CONSULTING

Studio X-Temporal Global Brand Consulting(SXTC) is a Multinational Brand Consultancy that leads the marketing world in both practical application and ideation generation in brand management and strategy. Clients have included many of Asia’s and the World’s top brands of all sizes and across all segments such as Coca-Cola, Microsoft, Kao Cosmetics, Motorola, Panasonic, Apple, Budweiser, EXXON, TDK, Tsingtao Beer, Heineken, Malaysian Telecom, The Hard Rock Café, as well as governments such as New Zealand, China, the UK, Malaysia, and Dubai. The firm is responsible for 16 industry-leading globally published books, as well as many highly regarded white papers, articles, and case studies appearing in prestigious publications from the Financial Times of London to the Multinational Business Review. The firm has offices across Asia, in the EU, and North America.

www.sxtcbrand.com

[1,2, 3] Stein, Andrew. CNN/Money staff writer. CNN/Money. Krispy Kreme: Diets hurt doughnuts. 

May 7, 2004:

By: Stefan Paul Jaworski, Director North America, Brand Strategy Officer.

(November 1, 2004). In today’s world hyper-focused on brand, at least hyper-focused on “brand surface issues,” one of the most important lessons which keeps getting ignored is that involving the intricate relationship between channel strategy and brand identity. It seems that outside of the superlatives of “advertising,” pretty pictures, and “killer-style,” which are thought by many to compose the “brand kingdom,” the world of the channel and its effect on building or destroying any brand are simply not even thought about. They don’t even appear on the radar screen. In fact, the channel is seen almost as a necessary evil, to be “put up with”, a crude “operations tool” to be kept out of sight- as opposed to a strategic pillar of a brand’s success. Hence, the lack of skill possessed by most advertisers to even consider using it, or its effects on brand: a “where there are no pretty pictures, trendy words, or “killer creative” there certainly is no brand building” mentality. Come into play the new, “trendy brand juggernaut” of the South: Krispy Kreme Doughnuts.

Established in 1937, by Vernon Rudolph who bought the rights to a yeast raised doughnut from a French Chef in New Orleans, Krispy Kreme was a brand that slowly established itself on two key personality traits that became crucial to its brand: hot doughnuts, and a slow growth cycle (scarcity of locations) that made it seem a “rarity”. Combined correctly, they have proven to be the catalyst to a brand icon- the stuff of legend. Until now.

The problem? Krispy Kreme in its desperate rush over the last decade to “grow” the brand into new markets and “capitalize” on the pent up, trend-based hysteria for its offerings forgot to factor into its strategic planning the “channel’s” effect on “brand”. The whole strategy was simply to get the brand name and its offerings into consumers’ hands ASAP- product, locations, and awareness en masse as fast as possible “while demand was hot”. The brand would be built by a combination of “blanketing awareness” via PR and news stories (often of consumer hysteria concerning a new location opening…i.e. “customers slept in line for two days to be served”), and simply ensuring that consumers had access to purchase product. For Krispy Kreme, there was little examination of the more deeper aspects of brand building including the strategic use of the channel and its impact on brand identity. The channel, and how it is used, has a very powerful impact on a brand’s identity and on the success of brand building efforts. Just ask Miller Brewing. “Ads by Bob” was an ad campaign created by Fallon McKelligot (now Fallon Advertising) nearly a decade ago for Miller to revitalize sales. The campaign was a good one, but failed miserably because of failure to incorporate channel realities into its strategic planning. Miller never sought buy in or input from vital channel members such as Mom and Pop stores, bars and clubs, or even major chains that sold its product and directly interacted with its customers. Hence, when the campaign was launched, there was immediate alienation of, and revolt from, a powerful pillar of Miller’s brand building efforts: its channel members. Channel members just did not “get it”- and thus neither did customers that entered their stores in terms of promotional pieces, supporting materials, point of sales displays, referrals, etc. Negative brand advocacy is a powerful thing and the campaign folded within weeks. No channel consideration and strategic planning= no brand success.

Kripsy Kreme’s problem was not simply about alienating channel members (bad enough as this is), but was equally if not more serious: it simply never thought about the reality that “how it used its channel would affect its brand identity.” In its rush to get product into contact with consumers, such as via counter-space in grocery stores, Krispy Kreme would be breaking one of the key founding principles of its brand identity and success: hot doughnuts. As I mentioned, and consumers have testified to from day one, “hot doughnuts” are key to the love affair with Krispy Kreme’s product and brand effecting taste, position, identity, and overall brand experience: hot and thus “fresh,” “just made” doughnuts. It is also the founding aspect of the brand promise. Hence, by distributing and selling doughnuts on grocery store shelves that are cold and sometimes hours to a day-old, Krispy Kreme is directly damaging its established brand identity: including its position, brand experience and brand promise. It is also damaging and jeopardizing its relationship with customers as no serious brand would ever allow its product to be sold in less than optimum (or “substandard”) condition. Would Coca-Cola allow its products to be sold “flat” on store shelves? Anheuser-Busch, always channel savvy to the extreme, has invested untold hundreds of millions in guaranteeing its product being “always fresh”. In fact, the “Born on Date” campaign is a supremely powerful pillar in Budweiser’s brand promise, differentiation strategy, and customer experience—and thus brand identity.

Remember, also, that the unique branded environment Krispy Kreme locations have traditionally offered (you can watch through glass the doughnuts being made and eat them right off of the conveyer belt) is a very important aspect of the entire “brand identity package.” Many customers, especially those with families, come to see “doughnuts being made” and “eat a hot one right off the line.” By selling product in grocery chains and commercially, Krispy Kreme is losing such vital brand associations and experiences that are gained by having customers purchase and enjoy its products within a carefully designed (unique) and controlled branded environment. By extending its channel (making it longer) Krispy Kreme is also giving up “vital brand control” to retailers. Such loss of control almost always guarantees “substandard” brand presentation and customer experience—at least without stringent agreements, guarantees, training and enforcement programs in place. Would McDonald’s allow the Big Mac to be sold in a dirty roadhouse without its trademark consistent quality, taste, Arches, uniformed employees, child play area, booths, and brand colors? Of course not. Yet, from what I have personally witnessed in many grocery stores where Krispy Kreme is selling its product, it seems they are allowing just that.

Especially, for a brand whose identity, differentiation, and brand-customer experience success from day one were based on “hot doughnuts,” one would think that Krispy Kreme would be making its first priority discovering ways to ensure only “hot doughnuts” be sold in an officially branded environment— and not purposely propagating the sale of inferior quality product in inferior, non-branded environments for the sake of “getting product out there.” All of the locations, shelf space amounts, PR stories, and initial sales volume achieved will only dig a deeper grave for Krispy Kreme as a brand if it continues to ignore the reality that its dedication to them, at the expense of keeping a key aspect of its brand identity, is continuing to damage that brand identity, position, brand-customer experience and brand promise. Let us also not forget that the vital “rarity” aspect of the brand identity that helped to generate the “mystique” of the Krispy Kreme legend is also not being done a service by opening locations at a tremendous pace in many places—overexposure. Suddenly, with locations sprouting up everywhere, Krispy Kreme has lost much of its initial luster, exclusivity, and “specialness” that was attached to the “hard to get” cache. And, the more locations and distribution points are increased, the more the brand will lose these “vitals,” eventually becoming “common” and possibly a “commodity.” The results are already being seen with sales and stock prices decreasing; as well as dilution of the icon “Krispy Kreme” brand identity.

Where once people waited in long lines to buy Krispy Kreme’s doughnuts by the dozen, it is not unusual now to walk into a store and see no customers. In fact, some stores are surviving not from in-store customer sales but from corporate, special occasion and commercial sales- just look at the Fargo North Dakota location. In fact, in May 2004, Krispy Kreme stock fell 18% in one day with Wall Street’s best analysts putting the company on watch. The company of course blames the Atkins (low carb) and South Beach Diet fads, but analysts correctly are not buying it.

"This [low-carb] phenomenon has affected us (Krispy Kreme) most heavily in our off-premises sales channels, in particular sales of packaged doughnuts to grocery store customers," CEO Scott Livengood said in a statement. However, on a conference call Friday morning, some analysts were skeptical about how much the low-carb craze was to blame for the shortcoming. When an analyst asked why the Atkins and South Beach inspired diets should affect demand now, when doughnuts have never been a part of any diet, the company said "our intention is to give you the facts as we know them...this is not an unraveling... the jury is out. This could be a new way of eating, even though it is not supported by nutritionists. 1"

Note from the quote above that Krispy Kreme’s CEO indicates openly that the damage has been done in the “off premises” sales channel—exactly where the problem of cold/old doughnuts and thus brand damage started and continues! Hence, Krispy Kreme has empirical evidence that something is going wrong in the channel—yet, it prefers to focus on the lame excuse of the Atkins and South Beach diets! The firm’s CEO in my opinion is very fortunate as he is getting a very clear warning sign (a clear and present danger sign), and an early one, that something is wrong in the channel and thus brand. In my opinion, he should discover and isolate it now before it spreads like wildfire to the ‘outside” world of consumer perception where real brand damage that can cause brand failure occurs. Thankfully, top Wall Street Analysts are not buying into the Atkins and South Beach fallacy and seem to see a more long term problem at hand:

“Morningstar's analyst Carl Sibilski said he placed the stock under review after the company's release. ‘The Atkins thing surprised me,’ he said. ‘That's something I expected to hear last year. The Atkins diet won't be their downfall, it will be their strategy of trying to sell doughnuts wholesale.2 "

Indeed, we are seeing the bonafied results from damaging a brand identity and position, as well as directly breaking a key brand promise: things that would not have happened if Krispy Kreme had properly used brand strategy in the first place to grow its brand. A complete and expert brand analysis and strategy would have factored in detailed channel analysis, scenarios and planning, as well as any effect(s) on the brand, its identity, and position- in isolation as well as in regard to the other multiple brand factors. Remember, brand strategy leads business, advertising, promotional, and any other kind of brand activity and efforts. The result of ignoring this reality?

“Shares of Krispy Kreme soared after going public in early 2000, but they have dropped 13 percent this year as investors have become more skeptical about the company's long-term growth prospects. In addition, Krispy Kreme said it will dispose of its Montana Mills bread unit, close six factory stores and shut three underperforming coffee-and-doughnut shops. 3”

As noted earlier, all of the locations and grocery stores in the world will be of no use whatsoever, and in fact will directly damage the Kripsy Kreme brand (especially its identity), if they are allowed to continue to contribute to the breaking of the key core brand value and brand promise via not providing hot doughnuts. The above injury does not include the long term intangible damage to Kripsy Kreme’s brand identity, position, brand promise, customer relationships and loyalty, as well as place in the market. These damages when tallied up will be in the many multiples of any capital and stock losses- and if left unresolved they could prove fatal brand and corporate wise.

Time and time again our firm tells companies, marketers, PR and ad agencies that brands are not just about logos, pretty pictures, and clever play on words—they involve deep strategic and tactical consideration and mastery of multiple factors, aspects, forces, dynamics, resources, skills, and relationships. Just a few of these include market dynamics, market/industry evolution realities, channel realities and forces, brand management and architecture realities (and effects), competitor challenges and consumer evolution—all having the potential to be both tangible and intangible. Indeed, a very complicated array of things that must be considered when building and managing a brand. Sadly, for the Krispy Kreme brand, the channel is one of the most important. A channel when planned with strategic excellence, and implemented tactically the same way, is one of the most powerful and effective ways to propagate, enhance, support, and defend a brand long-term: including its identity, promise, customer experience, brand-customer-market-society relationships, and position.

-STEFAN PAUL JAWORSKI, DIRECTOR NORTH AMERICA, STUDIO X-TEMPORAL GLOBAL BRAND CONSULTING

Studio X-Temporal Global Brand Consulting(SXTC) is a Multinational Brand Consultancy that leads the marketing world in both practical application and ideation generation in brand management and strategy. Clients have included many of Asia’s and the World’s top brands of all sizes and across all segments such as Coca-Cola, Microsoft, Kao Cosmetics, Motorola, Panasonic, Apple, Budweiser, EXXON, TDK, Tsingtao Beer, Heineken, Malaysian Telecom, The Hard Rock Café, as well as governments such as New Zealand, China, the UK, Malaysia, and Dubai. The firm is responsible for 16 industry-leading globally published books, as well as many highly regarded white papers, articles, and case studies appearing in prestigious publications from the Financial Times of London to the Multinational Business Review. The firm has offices across Asia, in the EU, and North America.

www.sxtcbrand.com

[1,2, 3] Stein, Andrew. CNN/Money staff writer. CNN/Money. Krispy Kreme: Diets hurt doughnuts. 

May 7, 2004:

The “New Luxury”: Stefan Paul Jaworski

 

Epilogue: SXTC's Stefan Paul Jaworski predicts "Mass Luxury" branding’s Failure three years before it occurs--how, why, and where it would happen. Global Brand Consulting at its best... Here below is the original article.

"Stefan. Good thoughts about the New Luxury concept.  One of the most important conceptual issues is timing. Sometimes a downscale move works in the short term, but not in the long term."

-Al Ries, Legendary Marking Guru and inventor of "Positioning"

 

The “New Luxury”—Bringing the Myth to the Flame

(Sept 2006) For Marketers, a vital component and reality of their job is to keep abreast of new happenings in both the market and in Marketing as a field in general. From brand building to advertising changes, to new consumer groups on the rise, to demographic changes (current and future) and trends (taste, style, cultural, emotional), to marketing ideation, professional marketers are finding it ever more important to “keep their ear to the ground and their eyes open.” Yet, such activity is “vital” to ensure that they stay ahead of the pack. One such trendy “happening” involving a hypothesis concept that is getting very much attention and “buzz” lately is that of “The New Luxury.”

Indeed, companies and consultants like the management consulting firm Boston Consulting Group (BCG) and major ad agencies have propagated the New Luxury idea in articles, papers, and seminars. All play to an eager audience wanting a constant “heads up” in terms of what’s going on in the market and future trends. The popular, accepted definition of the New Luxury concept is, “as mass consumers become increasingly affluent, more sophisticated, better educated, and brand-oriented, their purchases are becoming increasingly upscale (price-point and brand wise).” This is a very simple concept, straightforward in thought, and yet DANGEROUSLY wrong in my opinion.

For a year or so, as word has spread about the “New Luxury” concept, some companies have been creating strategies, brands, products, and architectures (line extensions) to take advantage of the myth of a so called major new luxury segment. Billions have been reinvested and re-directed in gearing up for a concept that is simply more misguided myth than reality. First, let us look at the assumption that there is a huge, new wealthy population (outside of Asia) that is able to afford large amounts of new luxury products (let us call them “natural customers”).  From economic research, the New Luxury concept does not stand up because over the last several years incomes have risen slowly, debt levels of consumers have reached record highs, their savings are at record lows, and unemployment is at a decade high. The economic picture of the U.S. and many Western nations clearly has not been good for the past four years, even seeing such upscale brands as Lincoln, Calvin Klein, The Gap, and Guess having trouble. Hence, the claim that a “New Luxury” class and market are exploding is open for questioning and debate (except for possibly new high-growth markets like China and India).  

From my perspective, I see another side of the New Luxury claim—one based on brand mistakes that have created a false perception and not a new, upscale-mass category as claimed by non-brand strategy firms like BCG. What has confused and misguided firms like BCG into thinking a new luxury class has evolved is the ”surface purchasing” and “increasing presence” of luxury brand names and their products. Today, it seems everywhere one looks once exclusive and rarely seen luxury brands and their products are much more visible— to the point of being ubiquitous.  Fifteen years ago, how many BMW’s, Gucci watches, and Lexus cars could be readily seen in your local area or shopping mall? Not many. In fact, not nearly as many as today. To see a Gucci watch at a local shopping mall in the mid 1980’s could take a few days. The same is true for Lexus sightings. But, attempt the same scouting task today and the result would be far different. Gucci watches, Armani suits, BMW’s and Lexus cars are everywhere, now in the possession of the brands’ new “non traditional/natural customers,” as opposed to the original wealthy clientele. Does this mean that wealthy populations have skyrocketed over the last 15 years? Have disposable incomes gone through the roof? Of course not. Statistics tell us just the opposite—incomes are polarizing, mostly with the middle class going downward.

So, what has happened to dramatically increase the preponderance of “exclusive” brand names and their products over the last decade-and-a-half? Simple, downward line extensions by luxury brand names. To be more precise, the literal flooding of the middle “mass” market with downward line extensions by many luxury brands. Indeed, with less and less income coming from top end sales that have often been sluggish, combined with greed, exclusive brand makers have been eyeing the much larger and thus possibly more lucrative middle market into which their brands could be extended downward. Hence, the fallacy of the New Luxury concept. BMW launched the 3, and later, M economy series. Now, possibly a further step down is being taken with the 1 series. Mercedes did the same with its 190 series. Lincoln launched the “baby Lincoln,” and Cadillac the CTS. All of these luxury brands are dropping products into ever-lower price points and increasingly larger markets all artificially buoyed by credit. Thus, each is artificially expanding the proliferation of their brand names and branded products, creating the “appearance” of what seems to be the rise of luxury brand dominance— in turn establishing the so- called “New Luxury” concept. Brand-wise, this constant downward movement by luxury brands via line extensions is a dangerous occurrence as there are numerous long-term negative consequences, despite the perceived short term success and benefits.

An excellent example is that of Lexus, whose recent foray into the mid market (via downward line extensions) has increased visibility, sales, and accessibility for the brand. It has also caused dilution of the luxury brand identity built up over years, as well being a brand architecture nightmare. Lexus has overlapped its Toyota brand in terms of price and market segment targeted. Indeed, both Lexus (at the low end) and Toyota (at its high end) are now sharing an overlapping client base. Finally, the reality of “de-focusing” is a result of this trend downward for Lexus and many other luxury brands. Such brands simply get caught up in the problematic cycle of being pulled away from their original focused clientele and path to trying to be different things to multiple audiences (in other words becoming de-focused). Indeed, a common scenario involves a luxury brand that after going “down” finds its brand identity and efforts now split between “original premium” and “low premium/mediocre.” The result is that the entire brand identity gets pulled downward, and the original/natural, high-end customers go elsewhere in search of “uncommon” premium-ness.  If you purposely want to de-focus and bring down a luxury brand, losing the original premium/natural clients, simply release line extensions downward towards mid-market values and wait. Let us not forget that as luxury brands become more common and adopted by the masses as a result of this stretching down, their original/natural wealthy clients abandon them in search of more expensive and elitist replacements which verify their own personal “justified” status. In other words, as luxury brands go down the wealthy go up—or, better yet, elsewhere.

“Affordable Luxury”

One of the most dangerous, misguided and simply erroneous aspects of the New Luxury fad that has evolved is that of prestige brands “down pricing” and thus “downgrading” their products. In my opinion, the proud “machination” of ad agency guided claims of “Affordable Luxury” is probably the single, greatest catastrophe that awaits to fully play out a devastating result for many if not most prestige brands. Despite all we have witnessed and learned from history and case study analysis regarding price cutting in any way or shape, it astounds me to see the process alive and well in disguised forms with euphemistic names such as “Affordable Luxury” and “New Luxury.” But, this is exactly what has happened, and is currently happening, to many once leading prestige brands—they simply abandoned their natural client bases and focus and followed the blind into price cutting oblivion usually via downward line extensions. A good example is that of Cross pens once known as “the pen to have if you could afford it”; the Cross pen is now nothing more than an expensive “Bic” with its reach down into the fourteen dollar ($14) market. The once exclusive Cross can now be seen everywhere from Office Depot to Staples to mall key chain kiosks, leading to the reality of: “I want a prestige pen, but not Cross as even my mailman carries one. Mont Blanc, please!” The same with Seiko—once the Japanese prestige watch to have. But, after cutting price levels with a vengeance, selling product in every big box discount retailer for under sixty dollars ($60), lacking in innovation, and failing to engage in any serious prestige brand building activities, Seiko is no longer the prestige brand it was. In fact, it is far from it and its brand identity and price points have never recovered.

Probably the most damaged brand I have seen has been that of Lincoln: a malnourished, mismanaged, and eager victim of “Affordable Luxury” as there is. And a luxury flagship brand of Ford, no less! Of course, Ford’s dedication to Mazda has been no help to Lincoln, but the greatest damage has been from following the likes of BMW into the quagmire of “Affordable Luxury” via its LS. The results have been disastrous to the point that Lincoln’s very future may be in doubt. Indeed, the downward LS line has many asking the Al Ries-like question of “what’s a Lincoln? The answer being: a less expensive, big, small, American, Euro, boxy, low end luxury, BMW copy car!!!” As the saying goes “what’s definite about Lincoln is its indefiniteness!” Or, in other words, Lincoln is defocused but with a tangent downwards (price and image wise). Indeed, within two (2) generations, Lincoln has gone from being the super American prestige car moniker the world over to being a cheap luxury knock off of Euro and Asian downward line extensions (a cheap copy of foreign “bottom of the barrel” luxury offerings). All of this from significant brand mismanagement—most of which is “New Luxury” based with “Affordable Luxury” thinking and doing.

In reality, “New Luxury” and “Affordable Luxury” thinking are simply the death blow to many prestige brands if they decide to wrongly follow their straight and wide path downward (literally with line extensions). All of the pretty pictures, ads, and tricks of those that over-promote these misguided and erroneous fads will never begin to repair the damage they have done already, and are yet to wreak, on many of the world’s most valuable tangible and intangible assets: the true luxury brands. New Luxury? Beware!

Stefan Paul Jaworski, Masters Degree Marketing

Stefan Paul Jaworski, Masters Degree Marketing, is Partner and Director of North America with Studio X Branding-Temporal Global Brand Consulting—a 20 year old, leading global/multinational Brand Marketing Consultancy. Clients have included Coca-Cola, Anheuser-Busch(Budweiser), Motorola, Panasonic, Kao Cosmetics, Intel, TDK, The Hard Rock Café, Hewlett Packard, Apple Computers, Bosch, Exxon, and Microsoft, as well as governments including New Zealand, The UK, China, Malaysia, and Dubai. The firm is responsible for industry-leading articles, cases, white papers, and 16 of the Marketing world’s most respected brand strategy books.

www.sxtcbrand.com

(Sept 2006) For Marketers, a vital component and reality of their job is to keep abreast of new happenings in both the market and in Marketing as a field in general. From brand building to advertising changes, to new consumer groups on the rise, to demographic changes (current and future) and trends (taste, style, cultural, emotional), to marketing ideation, professional marketers are finding it ever more important to “keep their ear to the ground and their eyes open.” Yet, such activity is “vital” to ensure that they stay ahead of the pack. One such trendy “happening” involving a hypothesis concept that is getting very much attention and “buzz” lately is that of “The New Luxury.”

Indeed, companies and consultants like the management consulting firm Boston Consulting Group (BCG) and major ad agencies have propagated the New Luxury idea in articles, papers, and seminars. All play to an eager audience wanting a constant “heads up” in terms of what’s going on in the market and future trends. The popular, accepted definition of the New Luxury concept is, “as mass consumers become increasingly affluent, more sophisticated, better educated, and brand-oriented, their purchases are becoming increasingly upscale (price-point and brand wise).” This is a very simple concept, straightforward in thought, and yet DANGEROUSLY wrong in my opinion.

For a year or so, as word has spread about the “New Luxury” concept, some companies have been creating strategies, brands, products, and architectures (line extensions) to take advantage of the myth of a so called major new luxury segment. Billions have been reinvested and re-directed in gearing up for a concept that is simply more misguided myth than reality. First, let us look at the assumption that there is a huge, new wealthy population (outside of Asia) that is able to afford large amounts of new luxury products (let us call them “natural customers”).  From economic research, the New Luxury concept does not stand up because over the last several years incomes have risen slowly, debt levels of consumers have reached record highs, their savings are at record lows, and unemployment is at a decade high. The economic picture of the U.S. and many Western nations clearly has not been good for the past four years, even seeing such upscale brands as Lincoln, Calvin Klein, The Gap, and Guess having trouble. Hence, the claim that a “New Luxury” class and market are exploding is open for questioning and debate (except for possibly new high-growth markets like China and India).  

From my perspective, I see another side of the New Luxury claim—one based on brand mistakes that have created a false perception and not a new, upscale-mass category as claimed by non-brand strategy firms like BCG. What has confused and misguided firms like BCG into thinking a new luxury class has evolved is the ”surface purchasing” and “increasing presence” of luxury brand names and their products. Today, it seems everywhere one looks once exclusive and rarely seen luxury brands and their products are much more visible— to the point of being ubiquitous.  Fifteen years ago, how many BMW’s, Gucci watches, and Lexus cars could be readily seen in your local area or shopping mall? Not many. In fact, not nearly as many as today. To see a Gucci watch at a local shopping mall in the mid 1980’s could take a few days. The same is true for Lexus sightings. But, attempt the same scouting task today and the result would be far different. Gucci watches, Armani suits, BMW’s and Lexus cars are everywhere, now in the possession of the brands’ new “non traditional/natural customers,” as opposed to the original wealthy clientele. Does this mean that wealthy populations have skyrocketed over the last 15 years? Have disposable incomes gone through the roof? Of course not. Statistics tell us just the opposite—incomes are polarizing, mostly with the middle class going downward.

So, what has happened to dramatically increase the preponderance of “exclusive” brand names and their products over the last decade-and-a-half? Simple, downward line extensions by luxury brand names. To be more precise, the literal flooding of the middle “mass” market with downward line extensions by many luxury brands. Indeed, with less and less income coming from top end sales that have often been sluggish, combined with greed, exclusive brand makers have been eyeing the much larger and thus possibly more lucrative middle market into which their brands could be extended downward. Hence, the fallacy of the New Luxury concept. BMW launched the 3, and later, M economy series. Now, possibly a further step down is being taken with the 1 series. Mercedes did the same with its 190 series. Lincoln launched the “baby Lincoln,” and Cadillac the CTS. All of these luxury brands are dropping products into ever-lower price points and increasingly larger markets all artificially buoyed by credit. Thus, each is artificially expanding the proliferation of their brand names and branded products, creating the “appearance” of what seems to be the rise of luxury brand dominance— in turn establishing the so- called “New Luxury” concept. Brand-wise, this constant downward movement by luxury brands via line extensions is a dangerous occurrence as there are numerous long-term negative consequences, despite the perceived short term success and benefits.

An excellent example is that of Lexus, whose recent foray into the mid market (via downward line extensions) has increased visibility, sales, and accessibility for the brand. It has also caused dilution of the luxury brand identity built up over years, as well being a brand architecture nightmare. Lexus has overlapped its Toyota brand in terms of price and market segment targeted. Indeed, both Lexus (at the low end) and Toyota (at its high end) are now sharing an overlapping client base. Finally, the reality of “de-focusing” is a result of this trend downward for Lexus and many other luxury brands. Such brands simply get caught up in the problematic cycle of being pulled away from their original focused clientele and path to trying to be different things to multiple audiences (in other words becoming de-focused). Indeed, a common scenario involves a luxury brand that after going “down” finds its brand identity and efforts now split between “original premium” and “low premium/mediocre.” The result is that the entire brand identity gets pulled downward, and the original/natural, high-end customers go elsewhere in search of “uncommon” premium-ness.  If you purposely want to de-focus and bring down a luxury brand, losing the original premium/natural clients, simply release line extensions downward towards mid-market values and wait. Let us not forget that as luxury brands become more common and adopted by the masses as a result of this stretching down, their original/natural wealthy clients abandon them in search of more expensive and elitist replacements which verify their own personal “justified” status. In other words, as luxury brands go down the wealthy go up—or, better yet, elsewhere.

“Affordable Luxury”

One of the most dangerous, misguided and simply erroneous aspects of the New Luxury fad that has evolved is that of prestige brands “down pricing” and thus “downgrading” their products. In my opinion, the proud “machination” of ad agency guided claims of “Affordable Luxury” is probably the single, greatest catastrophe that awaits to fully play out a devastating result for many if not most prestige brands. Despite all we have witnessed and learned from history and case study analysis regarding price cutting in any way or shape, it astounds me to see the process alive and well in disguised forms with euphemistic names such as “Affordable Luxury” and “New Luxury.” But, this is exactly what has happened, and is currently happening, to many once leading prestige brands—they simply abandoned their natural client bases and focus and followed the blind into price cutting oblivion usually via downward line extensions. A good example is that of Cross pens once known as “the pen to have if you could afford it”; the Cross pen is now nothing more than an expensive “Bic” with its reach down into the fourteen dollar ($14) market. The once exclusive Cross can now be seen everywhere from Office Depot to Staples to mall key chain kiosks, leading to the reality of: “I want a prestige pen, but not Cross as even my mailman carries one. Mont Blanc, please!” The same with Seiko—once the Japanese prestige watch to have. But, after cutting price levels with a vengeance, selling product in every big box discount retailer for under sixty dollars ($60), lacking in innovation, and failing to engage in any serious prestige brand building activities, Seiko is no longer the prestige brand it was. In fact, it is far from it and its brand identity and price points have never recovered.

Probably the most damaged brand I have seen has been that of Lincoln: a malnourished, mismanaged, and eager victim of “Affordable Luxury” as there is. And a luxury flagship brand of Ford, no less! Of course, Ford’s dedication to Mazda has been no help to Lincoln, but the greatest damage has been from following the likes of BMW into the quagmire of “Affordable Luxury” via its LS. The results have been disastrous to the point that Lincoln’s very future may be in doubt. Indeed, the downward LS line has many asking the Al Ries-like question of “what’s a Lincoln? The answer being: a less expensive, big, small, American, Euro, boxy, low end luxury, BMW copy car!!!” As the saying goes “what’s definite about Lincoln is its indefiniteness!” Or, in other words, Lincoln is defocused but with a tangent downwards (price and image wise). Indeed, within two (2) generations, Lincoln has gone from being the super American prestige car moniker the world over to being a cheap luxury knock off of Euro and Asian downward line extensions (a cheap copy of foreign “bottom of the barrel” luxury offerings). All of this from significant brand mismanagement—most of which is “New Luxury” based with “Affordable Luxury” thinking and doing.

In reality, “New Luxury” and “Affordable Luxury” thinking are simply the death blow to many prestige brands if they decide to wrongly follow their straight and wide path downward (literally with line extensions). All of the pretty pictures, ads, and tricks of those that over-promote these misguided and erroneous fads will never begin to repair the damage they have done already, and are yet to wreak, on many of the world’s most valuable tangible and intangible assets: the true luxury brands. New Luxury? Beware!

Stefan Paul Jaworski, Masters Degree Marketing

Stefan Paul Jaworski, Masters Degree Marketing, is Partner and Director of North America with Studio X Branding-Temporal Global Brand Consulting—a 20 year old, leading global/multinational Brand Marketing Consultancy. Clients have included Coca-Cola, Anheuser-Busch(Budweiser), Motorola, Panasonic, Kao Cosmetics, Intel, TDK, The Hard Rock Café, Hewlett Packard, Apple Computers, Bosch, Exxon, and Microsoft, as well as governments including New Zealand, The UK, China, Malaysia, and Dubai. The firm is responsible for industry-leading articles, cases, white papers, and 16 of the Marketing world’s most respected brand strategy books.

www.sxtcbrand.com

The New Power of the Private Label Brand- “No Name- No More”. Stefan Paul Jaworski

Just looking at the many challenges that the US has encountered over the last several years including the dot com bust, Wall Street’s meltdown, corporate scandals, recession and layoffs, SARS, trade wars, wars in Afghanistan and Iraq, government budget deficits, and tensions with EU countries, one can begin to realize the pressures that have been exerted on its leading national brands. From Coca-Cola to Tide to Bounty and even Johnson and Johnson, the biggest and most respected category leading brands have been feeling the pinch of a highly interconnected, rapidly changing and volatile competitive landscape. Literally no major brand is immune. Even mighty P&G has had taken the unprecedented step of reducing its brand portfolio by up to 25% to help it deal with the new market realities. But, with the turbulent competitive landscape finally looking manageable, another, possibly more significant, challenge is on the horizon that could change the nature of the “brandscape’ completely: the rise of private label brands. Known as “house brands”, “no-name”, “generic”, or “retailer’s own”, these brands have been around for decades- usually eeking out an existence with their poor packaging, no marketing support, basic quality, and reliance on price competition. They were commodities- no real competition for the mighty national brands with their sophisticated marketing campaigns, brand management systems, advertising budgets, and fancy packaging. The key word here is “were” commodities. Not any more. And this is the hurricane on the horizon, or the paradigm shift, that could be the single biggest challenge national brands have ever come up against. And the signs are everywhere that this reality is well under way.

Already, for the last decade or so, successful private brands have been turning to brand marketing and management as the key tools to elevate their products to the next level- and it has been working. In Canada, Supervalue’s President’s Choice house brand has taken category leadership away from some of the mightiest brands there are in everything from biscuits to orange juice to cola to salty snacks (chips, peanuts, etc.) to candy and chocolate. How? By a focus on brand marketing, quality and innovation. The packaging is not the black and white, cheap-looking “no name style”, but is high quality, message and personality intense, integrated with the marketing platform (usually innovation and quality), and core value based. Strategic use of integrated communications has also been used with great effectiveness including image and informational advertising, relationship marketing programs (in–store cooking schools, demonstrations, taste testings, samplings, mailings), PR (including a President’s Choice Magazine), in store promotions, tie-ins, and couponing. The results have been significant- yet, entirely predictable for brand marketers. What surprises me is that after a decade of warnings, many national brand CEO’s suddenly seem shocked. But why should they be? It has been known for decades by leading brand managers that brand marketing actually works- apply the principles correctly, with skill and diligence, and the brand becomes successful. No surprises.

For me, the reaction of the leading national brands is like being surprised by the fact that a plant sprouted after someone planted some seeds in dirt and regularly applied some water. The fact is that private brands, after watching the bounds of success and benefits experienced by many national brands over the decades (including higher prices, profits, guaranteed marketshare, strong customer loyalty, and “power”), also want their piece of the pie. And have realized, like any smart brand builder, that price alone is not the way to achieve it- a brand marketing orientation is. Thus, we are now seeing the en-masse equipping of private label brands with brand management systems, brand managers, and marketing strategists- and the national brands getting ready for the possible fight for their lives over the long term. For me, the scariest thing about this whole situation is not just the private labels’ adoption of a brand marketing orientation, but the integration of this tool with the many other advantages they already possess and intend to continue to use. What are these other advantages? Knowledge of their markets; guaranteed, low/no cost, premium shelf space; powerful, low cost and established distribution channels; large financial resources; known corporate brand names to leverage off of; and the ability to “shut out” national brands from their shelves if they decide to. Private brands have learned their lessons the hard way over the decades- mostly by losing ground to the “branded product”. But this has also been a blessing, as by watching and learning from the sidelines one can see where mistakes are made and what forces are at play. For instance, without the national brands’ budgets, private labels have been unable to use the “fire tool” their branded competitors have relied exclusively on for so long- massive national advertising campaigns. In theory, if P&G wanted to sell more Bounce, they would just go out and spend $100 million on a new ad campaign. And viola! They would sell a million- at least that’s how they would interpret things. So, without this “magic fire tool” at their disposal, private labels had to find another way to sell product- usually price. And that’s where a big part of the learning curve was developed- private labels came to understand the price game (both its great limitations, dangers, and benefits) better than anyone else (especially the national brands). At the same time, the few private labels that focused on early forms of relationship marketing (like Supervalue) got to learn its powerful advantages and became experts in its skilful usage. Better, yet, is the fact that all private labels have witnessed the common fallacy of “advertising cures all”- without using their own money. Private labels like Wal-Mart’s Sam’s Club and President’s Choice have watched the likes of Tide, Purina, McCain’s, Tropicana, Nescafe, and Kleenex pour mountains of money into ads that seemed to do less and less for their brands every day. And they quietly noticed from their privileged perch that this reality seemed to be getting worse. And they were right. The mighty, magic “fire tool” that the national brands have depended on for so long has in reality been weakening by the hour due in part to: the increasing segmentation of media vehicles (more channels with less reach) CAUSING “SPLINTERING” OF REACH & FREQUENCY; the cluttering of messages with so many vehicles; the fact that advertising’s credibility is very low; and the reliance on and proliferation of creative gimmicks and “look” that has both numbed/de-sensitized the consumer and done little to build brands and brand-consumer relationships of substance.

With this reality, and the implications it has in regards to removing from national brands a historical key competitive advantage, it is safe to say that “the playing field has become close to being levelled”. With the news that private labels are en masse taking on a brand marketing orientation clearly tells us that the playing field is levelled. Taking into consideration the assets and competitive advantages that many private labels have in terms of knowledge (industry, market, and consumer), price, guaranteed shelf space, channel advantages, finances and resources, etc. and some would be tempted to say they may eventually have the playing field tilted in their favour. Especially with the news that many of the top national brands, to stay in business, now often produce the products for the private labels they compete against. That’s right- the private label taco chips just may be the same ones in the Doritos or Old Dutch bag! The same with batteries- the Sam’s batteries just may be off of the Energizer or Duracell lines, but at half the cost. The result of all of this? The national brands are worried and have been for some time- if they are smart. The new brandscape reads very clearly: “No-Name- No More!”

Does this mean that the mighty Tide, Energizer, Dove and Coca-Cola are done for? No, not at all, but it does mean that more than ever the successful brands will be the ones with the best brand strategy behind them (with the “givens” of operational efficiency and innovation assumed) and strongest brand-consumer relationships. For P&G, and the like, to guarantee having strong brands against the new private label onslaught will involve understanding more than ever the key drivers of their brands and brand-consumer-market and society relationships. And brand evolution. Instead of just throwing out an ad campaign to build relationships with consumers, brands like Tide will have to go far deeper into consumer behaviour to the point of understanding how they learn about the brand, think about it, emotionally relate to it, incorporate it into their lifestyles, and interact with it. They will have to discover where the complex patterns of brand-consumer-market-and society interaction occur. Literally, where the actual brand contact points exist across multiple dimensions and how they work both individually and together to create the desired brand identity, experience, promise and emotional bonds. National brands will also have to discover how they address key goals of consumers; and how they are used by them to achieve these goals. For instance, a large part of Starbucks’ success is due to it realizing from day one that its brand and products were not just solving consumption needs…but in fact had a far deeper role in the lives of their consumers. In an age of stressed-out, on the go, over-communicated, time-short, dual working families, the two biggest goals are for “decompress” or “recovery” time and a chance for “self pampering” for “me”. Starbucks exactly manages to allow its customers to fulfill both of these goals with incredible convenience and with little time required. In reality, Starbucks is sort of a “pampering” and “decompress” “pit-stop”. And does so with complete differentiation, a unique personality, and a great sense of style that are all matched by the innovation and quality of their products. Not to mention the usual pleasantness of their staff. Starbucks truly is a functioning brand that has achieved great benefits - without even so much as a single advertisement - that the national consumer product brands should learn from. With the right skills (brand marketing wise) anything is possible.

As for the private labels? Achieving any great victories against the entrenched national brands will be no cake-walk. It is one thing to have a big stick- and another to know how to use it effectively. I akin them to being like a small child with a “hand grenade”- without the proper guidance and skill to show them how to handle their new advantages and marketing technologies, they could not only take themselves out but others in the vicinity. For a good case study, one only has to look at the infamous “Marlboro Friday” back in 1993 when Phillip Morris foolishly slashed prices on its cigarettes 40% (in an attempt to fight off encroaching generics and smaller brands) and the resulting chaos, financial losses, category destruction, and general market instability this created. The same scenario could be waiting with the private labels if they do not understand their proper place in the market and their obligation to create well placed/positioned brands that add stability and balance to categories, as opposed to all-out brand and price war instigation. Phillip Morris now realizes that its outrageous price slashing was the reaction of an amateur desperately lashing out at the enemy- a primal, reactionary, commodity-oriented and non strategic act of desperation –as opposed to the skilful “moves” of a brand strategy leader. In retrospect, what PM should have done is first address the price-based competitive inroads of the generics and private labels via brand architecture as RJR so successfully did…launch non-associated (non PM branded) attacker brands in the same price range (just slightly below the generics’ price) to go head to head with them on price. Such a strategy would remove their price sensitive customers, financially marginalize them, and would seal their fate by positioning/dragging them further into the “commodity abyss” from which there is no return. Sort of like what Sergio Zyman at Coke did when he used Tab Light to take down Crystal Pepsi.

I, personally, would go a step further and attack them on a front where they have no resources whatsoever and is probably where both their greatest weakness and PM’s greatest strength lies: the emotional and relationship aspect. This is where brands ultimately have their greatest power over commodities. Hence, I would simultaneously launch strategically designed brand marketing campaigns and initiatives (within the constrains of the tobacco advertising laws) for my key core brands like Marlboro. These campaigns would involve relationship marketing, geographic marketing, pr programs, strategic communications, etc. that would only strengthen the most valuable core brands’ status as:

-essence and core value based personalities, thus being unique and highly differentiated

- serious, focused and original branded products (as opposed to imitations) with strong emotional aspects at every touchpoint

- literal promises of quality, innovation, and trust

- lifestyles and a way of life

- vehicles to achieve personal goals with

- standard setters

- being the basis for/at the very heart of quality and rewarding relationships

The marketing initiatives most importantly would make the brands more deeply emotionally attached to their consumers, and vice versa- the real power of the brand. In reality, Marlboro does not get its power from price, attributes, or quality, but from its unique and differentiated personality, emotionally based relationships at every contact point, brand promises, and lifestyle offered- based on the “wide open spaces”, “cowboy lifestyle” and “freedom”. It should never have allowed the generics to trick it into “giving all of this up” (abandoning its very basis for success and key brand assets) in favour of a trench price war that commoditized it. It’s sort of like blowing up your home to get rid of a mouse problem; and Marlboro has never been the same brand since. Indeed, brand strategy skill would have stopped this from happening and the generic and private label cigarette brands would be long gone by now- or at least regulated to being in the “clearance bin”. Most importantly, the destabilization of the entire industry and the significant consequences financially, brand wise, and in terms of competition would have been minimized and the fallout no where near as destructive.

The private labels must also be prepared to actively engage and conquer the other main traps awaiting them as brands including:

- too much reliance on product attributes, innovations, and price which can easily be copied as opposed to emotionally based brand-consumer relationships

- not developing strong consumer insight capability

- dismissing essence and core value basing

- failure to create strong emotional ties at every brand contact point

- inconsistency of tactical and strategic applications

- arrogance

- settling into a “status quo” and “path of least resistance” thought mode (brand wise)

- over-use of line extensions

- falling into reliance on advertising

- failure to brand plan

- lack of dedication to brand evolution

- failure to continue to generate and evolve deep brand-consumer, market and society relationships

- making marketing change for change’s sake

- flooding the shelves with unfocused and non core-value based product in too many categories

- failure to constantly ask themselves “what business” they are really in

…these are only a few of many traps.

But, probably, the most important trap they must avoid is: not progressing and continually updating their brand marketing knowledge, skill, and capabilities. Even the mighty Kellogg School, in its marketing consulting practice which has worked with some industry leading brands, warns that all of the brand building and marketing firepower that it can equip a firm with are no guarantee of success when the firm is examined over the years. In a study of numerous clients, Kellogg reported that the results were “variable” and the main reasons for this revolve around the correct and dedicated implementation of the brand marketing knowledge, and the continuous dedication to marketing excellence. Companies that did not possess this simply did not generate the benefits and success rates that could have been expected and readily achieved. A main quote that sticks in my mind from Kellogg on the relentless pursuit of marketing and brand building skill, that sums up what the private labels must strive for, is: “The better you are at Marketing, the better you have to be” .

If the private labels truly dedicate themselves to an educated brand strategy orientation, and its continued implementation, generation and evolution, then for sure the new mantra for the next brandscape saga will surely be “No-Name- No More”…

-Stefan Paul Jaworski, Masters Degree Marketing, is Partner and Brand Officer with Studio X Branding-Temporal Global Brand Consulting- a 20 year old, leading global/multinational Brand Marketing Consultancy serving the USA, EU, Canada & Asia. Clients have included Coca-Cola, Anheuser- Busch, FCB, CP Rail, Citibank, Burger King, Motorola, Panasonic, Ralston Purina, Hewlett Packard, Apple Computers, Bosch, John Deere, JBL, Exxon, and Microsoft.

www.sxtcbrand.com

Just looking at the many challenges that the US has encountered over the last several years including the dot com bust, Wall Street’s meltdown, corporate scandals, recession and layoffs, SARS, trade wars, wars in Afghanistan and Iraq, government budget deficits, and tensions with EU countries, one can begin to realize the pressures that have been exerted on its leading national brands. From Coca-Cola to Tide to Bounty and even Johnson and Johnson, the biggest and most respected category leading brands have been feeling the pinch of a highly interconnected, rapidly changing and volatile competitive landscape. Literally no major brand is immune. Even mighty P&G has had taken the unprecedented step of reducing its brand portfolio by up to 25% to help it deal with the new market realities. But, with the turbulent competitive landscape finally looking manageable, another, possibly more significant, challenge is on the horizon that could change the nature of the “brandscape’ completely: the rise of private label brands. Known as “house brands”, “no-name”, “generic”, or “retailer’s own”, these brands have been around for decades- usually eeking out an existence with their poor packaging, no marketing support, basic quality, and reliance on price competition. They were commodities- no real competition for the mighty national brands with their sophisticated marketing campaigns, brand management systems, advertising budgets, and fancy packaging. The key word here is “were” commodities. Not any more. And this is the hurricane on the horizon, or the paradigm shift, that could be the single biggest challenge national brands have ever come up against. And the signs are everywhere that this reality is well under way.

Already, for the last decade or so, successful private brands have been turning to brand marketing and management as the key tools to elevate their products to the next level- and it has been working. In Canada, Supervalue’s President’s Choice house brand has taken category leadership away from some of the mightiest brands there are in everything from biscuits to orange juice to cola to salty snacks (chips, peanuts, etc.) to candy and chocolate. How? By a focus on brand marketing, quality and innovation. The packaging is not the black and white, cheap-looking “no name style”, but is high quality, message and personality intense, integrated with the marketing platform (usually innovation and quality), and core value based. Strategic use of integrated communications has also been used with great effectiveness including image and informational advertising, relationship marketing programs (in–store cooking schools, demonstrations, taste testings, samplings, mailings), PR (including a President’s Choice Magazine), in store promotions, tie-ins, and couponing. The results have been significant- yet, entirely predictable for brand marketers. What surprises me is that after a decade of warnings, many national brand CEO’s suddenly seem shocked. But why should they be? It has been known for decades by leading brand managers that brand marketing actually works- apply the principles correctly, with skill and diligence, and the brand becomes successful. No surprises.

For me, the reaction of the leading national brands is like being surprised by the fact that a plant sprouted after someone planted some seeds in dirt and regularly applied some water. The fact is that private brands, after watching the bounds of success and benefits experienced by many national brands over the decades (including higher prices, profits, guaranteed marketshare, strong customer loyalty, and “power”), also want their piece of the pie. And have realized, like any smart brand builder, that price alone is not the way to achieve it- a brand marketing orientation is. Thus, we are now seeing the en-masse equipping of private label brands with brand management systems, brand managers, and marketing strategists- and the national brands getting ready for the possible fight for their lives over the long term. For me, the scariest thing about this whole situation is not just the private labels’ adoption of a brand marketing orientation, but the integration of this tool with the many other advantages they already possess and intend to continue to use. What are these other advantages? Knowledge of their markets; guaranteed, low/no cost, premium shelf space; powerful, low cost and established distribution channels; large financial resources; known corporate brand names to leverage off of; and the ability to “shut out” national brands from their shelves if they decide to. Private brands have learned their lessons the hard way over the decades- mostly by losing ground to the “branded product”. But this has also been a blessing, as by watching and learning from the sidelines one can see where mistakes are made and what forces are at play. For instance, without the national brands’ budgets, private labels have been unable to use the “fire tool” their branded competitors have relied exclusively on for so long- massive national advertising campaigns. In theory, if P&G wanted to sell more Bounce, they would just go out and spend $100 million on a new ad campaign. And viola! They would sell a million- at least that’s how they would interpret things. So, without this “magic fire tool” at their disposal, private labels had to find another way to sell product- usually price. And that’s where a big part of the learning curve was developed- private labels came to understand the price game (both its great limitations, dangers, and benefits) better than anyone else (especially the national brands). At the same time, the few private labels that focused on early forms of relationship marketing (like Supervalue) got to learn its powerful advantages and became experts in its skilful usage. Better, yet, is the fact that all private labels have witnessed the common fallacy of “advertising cures all”- without using their own money. Private labels like Wal-Mart’s Sam’s Club and President’s Choice have watched the likes of Tide, Purina, McCain’s, Tropicana, Nescafe, and Kleenex pour mountains of money into ads that seemed to do less and less for their brands every day. And they quietly noticed from their privileged perch that this reality seemed to be getting worse. And they were right. The mighty, magic “fire tool” that the national brands have depended on for so long has in reality been weakening by the hour due in part to: the increasing segmentation of media vehicles (more channels with less reach) CAUSING “SPLINTERING” OF REACH & FREQUENCY; the cluttering of messages with so many vehicles; the fact that advertising’s credibility is very low; and the reliance on and proliferation of creative gimmicks and “look” that has both numbed/de-sensitized the consumer and done little to build brands and brand-consumer relationships of substance.

With this reality, and the implications it has in regards to removing from national brands a historical key competitive advantage, it is safe to say that “the playing field has become close to being levelled”. With the news that private labels are en masse taking on a brand marketing orientation clearly tells us that the playing field is levelled. Taking into consideration the assets and competitive advantages that many private labels have in terms of knowledge (industry, market, and consumer), price, guaranteed shelf space, channel advantages, finances and resources, etc. and some would be tempted to say they may eventually have the playing field tilted in their favour. Especially with the news that many of the top national brands, to stay in business, now often produce the products for the private labels they compete against. That’s right- the private label taco chips just may be the same ones in the Doritos or Old Dutch bag! The same with batteries- the Sam’s batteries just may be off of the Energizer or Duracell lines, but at half the cost. The result of all of this? The national brands are worried and have been for some time- if they are smart. The new brandscape reads very clearly: “No-Name- No More!”

Does this mean that the mighty Tide, Energizer, Dove and Coca-Cola are done for? No, not at all, but it does mean that more than ever the successful brands will be the ones with the best brand strategy behind them (with the “givens” of operational efficiency and innovation assumed) and strongest brand-consumer relationships. For P&G, and the like, to guarantee having strong brands against the new private label onslaught will involve understanding more than ever the key drivers of their brands and brand-consumer-market and society relationships. And brand evolution. Instead of just throwing out an ad campaign to build relationships with consumers, brands like Tide will have to go far deeper into consumer behaviour to the point of understanding how they learn about the brand, think about it, emotionally relate to it, incorporate it into their lifestyles, and interact with it. They will have to discover where the complex patterns of brand-consumer-market-and society interaction occur. Literally, where the actual brand contact points exist across multiple dimensions and how they work both individually and together to create the desired brand identity, experience, promise and emotional bonds. National brands will also have to discover how they address key goals of consumers; and how they are used by them to achieve these goals. For instance, a large part of Starbucks’ success is due to it realizing from day one that its brand and products were not just solving consumption needs…but in fact had a far deeper role in the lives of their consumers. In an age of stressed-out, on the go, over-communicated, time-short, dual working families, the two biggest goals are for “decompress” or “recovery” time and a chance for “self pampering” for “me”. Starbucks exactly manages to allow its customers to fulfill both of these goals with incredible convenience and with little time required. In reality, Starbucks is sort of a “pampering” and “decompress” “pit-stop”. And does so with complete differentiation, a unique personality, and a great sense of style that are all matched by the innovation and quality of their products. Not to mention the usual pleasantness of their staff. Starbucks truly is a functioning brand that has achieved great benefits - without even so much as a single advertisement - that the national consumer product brands should learn from. With the right skills (brand marketing wise) anything is possible.

As for the private labels? Achieving any great victories against the entrenched national brands will be no cake-walk. It is one thing to have a big stick- and another to know how to use it effectively. I akin them to being like a small child with a “hand grenade”- without the proper guidance and skill to show them how to handle their new advantages and marketing technologies, they could not only take themselves out but others in the vicinity. For a good case study, one only has to look at the infamous “Marlboro Friday” back in 1993 when Phillip Morris foolishly slashed prices on its cigarettes 40% (in an attempt to fight off encroaching generics and smaller brands) and the resulting chaos, financial losses, category destruction, and general market instability this created. The same scenario could be waiting with the private labels if they do not understand their proper place in the market and their obligation to create well placed/positioned brands that add stability and balance to categories, as opposed to all-out brand and price war instigation. Phillip Morris now realizes that its outrageous price slashing was the reaction of an amateur desperately lashing out at the enemy- a primal, reactionary, commodity-oriented and non strategic act of desperation –as opposed to the skilful “moves” of a brand strategy leader. In retrospect, what PM should have done is first address the price-based competitive inroads of the generics and private labels via brand architecture as RJR so successfully did…launch non-associated (non PM branded) attacker brands in the same price range (just slightly below the generics’ price) to go head to head with them on price. Such a strategy would remove their price sensitive customers, financially marginalize them, and would seal their fate by positioning/dragging them further into the “commodity abyss” from which there is no return. Sort of like what Sergio Zyman at Coke did when he used Tab Light to take down Crystal Pepsi.

I, personally, would go a step further and attack them on a front where they have no resources whatsoever and is probably where both their greatest weakness and PM’s greatest strength lies: the emotional and relationship aspect. This is where brands ultimately have their greatest power over commodities. Hence, I would simultaneously launch strategically designed brand marketing campaigns and initiatives (within the constrains of the tobacco advertising laws) for my key core brands like Marlboro. These campaigns would involve relationship marketing, geographic marketing, pr programs, strategic communications, etc. that would only strengthen the most valuable core brands’ status as:

-essence and core value based personalities, thus being unique and highly differentiated

- serious, focused and original branded products (as opposed to imitations) with strong emotional aspects at every touchpoint

- literal promises of quality, innovation, and trust

- lifestyles and a way of life

- vehicles to achieve personal goals with

- standard setters

- being the basis for/at the very heart of quality and rewarding relationships

The marketing initiatives most importantly would make the brands more deeply emotionally attached to their consumers, and vice versa- the real power of the brand. In reality, Marlboro does not get its power from price, attributes, or quality, but from its unique and differentiated personality, emotionally based relationships at every contact point, brand promises, and lifestyle offered- based on the “wide open spaces”, “cowboy lifestyle” and “freedom”. It should never have allowed the generics to trick it into “giving all of this up” (abandoning its very basis for success and key brand assets) in favour of a trench price war that commoditized it. It’s sort of like blowing up your home to get rid of a mouse problem; and Marlboro has never been the same brand since. Indeed, brand strategy skill would have stopped this from happening and the generic and private label cigarette brands would be long gone by now- or at least regulated to being in the “clearance bin”. Most importantly, the destabilization of the entire industry and the significant consequences financially, brand wise, and in terms of competition would have been minimized and the fallout no where near as destructive.

The private labels must also be prepared to actively engage and conquer the other main traps awaiting them as brands including:

- too much reliance on product attributes, innovations, and price which can easily be copied as opposed to emotionally based brand-consumer relationships

- not developing strong consumer insight capability

- dismissing essence and core value basing

- failure to create strong emotional ties at every brand contact point

- inconsistency of tactical and strategic applications

- arrogance

- settling into a “status quo” and “path of least resistance” thought mode (brand wise)

- over-use of line extensions

- falling into reliance on advertising

- failure to brand plan

- lack of dedication to brand evolution

- failure to continue to generate and evolve deep brand-consumer, market and society relationships

- making marketing change for change’s sake

- flooding the shelves with unfocused and non core-value based product in too many categories

- failure to constantly ask themselves “what business” they are really in

…these are only a few of many traps.

But, probably, the most important trap they must avoid is: not progressing and continually updating their brand marketing knowledge, skill, and capabilities. Even the mighty Kellogg School, in its marketing consulting practice which has worked with some industry leading brands, warns that all of the brand building and marketing firepower that it can equip a firm with are no guarantee of success when the firm is examined over the years. In a study of numerous clients, Kellogg reported that the results were “variable” and the main reasons for this revolve around the correct and dedicated implementation of the brand marketing knowledge, and the continuous dedication to marketing excellence. Companies that did not possess this simply did not generate the benefits and success rates that could have been expected and readily achieved. A main quote that sticks in my mind from Kellogg on the relentless pursuit of marketing and brand building skill, that sums up what the private labels must strive for, is: “The better you are at Marketing, the better you have to be” .

If the private labels truly dedicate themselves to an educated brand strategy orientation, and its continued implementation, generation and evolution, then for sure the new mantra for the next brandscape saga will surely be “No-Name- No More”…

-Stefan Paul Jaworski, Masters Degree Marketing, is Partner and Brand Officer with Studio X Branding-Temporal Global Brand Consulting- a 20 year old, leading global/multinational Brand Marketing Consultancy serving the USA, EU, Canada & Asia. Clients have included Coca-Cola, Anheuser- Busch, FCB, CP Rail, Citibank, Burger King, Motorola, Panasonic, Ralston Purina, Hewlett Packard, Apple Computers, Bosch, John Deere, JBL, Exxon, and Microsoft.

www.sxtcbrand.com

Michelob Ultra: “The Ultra Brand Mistake”- Stefan Jaworski

Saying Goodbye to a Brand and Brand Strategy

 

Stefan Paul Jaworski with Al Ries

(July 15, 2004. St. Louis, MO) There was a time when a brand was a very special thing- seen as a measure of a good relationship with the customer and the world around it. A brand was something singular that was straightforward, and above all it was focused. The whole idea was to make a brand stand for something (usually wholesomeness, family, and quality) and stay very focused on one issue, facet, skill, promise, and /or offering as much as possible- and never stray. For instance, Kentucky Fried Chicken (not KFC) was about the Colonel and good southern fried chicken…and that’s it. Long before Wal-Mart, Sears stood for middle-American value, home products, and great seasonal sales. There were two, maybe three, types of toothpaste based on brand like Crest, Colgate, and Pepsident; and GM and Ford were all about affordable cars that were basic and clearly organized according to price segment and usage. Everything seemed to be focused for the first 5 or six decades of brands in America; and then all heck broke lose. Why? Mostly because America discovered the line extension and perfected its overuse- and nothing has ever been the same or as good since.

Extensions, strategically used, can be a very good thing to stretch a brand and make it more “well rounded” in usage, usefulness, and robustness to its consumers. For instance, potato chips vastly increased their market size by moving beyond the plain variety and introducing many different flavors from Salt & Vinegar to Barbeque to Smokey Bacon. But, sadly, many brands simply have gone overboard often creating extensions without strategic thought that do not leverage the brand wisely, but instead take away from the brand’s offerings, core values, position, and even identity. The result is “brand dilution” that has significant ramifications across every aspect of the brand including equity, sales, market share, brand-consumer relationship, identity, position, and even existence. Today, go into a Wal-Mart and one sees an unholy array of so many different kinds of toothpaste that it boggles the mind- and remember these are often of the same brand! Rule in the many different brands and their extensions, and you get literally dozens if not hundreds of types of fundamentally the same thing: a paste to help keep your teeth clean. Most are separated at best by minutiae- ambiguity at the least.

Especially conspicuous in the proliferation of non-strategically based extensions is the reality of “fads” and “trends”. For me a “fad” is a very short term, novelty creative expression (music, fashion, art, thought, style, etc.) that diffuses quickly throughout a very select part of the population; a “trend” is a mid-term (length) creative expression that diffuses throughout the more general population and usually takes longer to do so than a fad. Both are not permanent to any great extent.

Sadly, a reality in the modern brand world is that every time a fad or trend appears along comes another line extension to try and benefit from it. For instance, from the high fiber health/diet craze several years ago came extensions like cereals (most of which already had fiber) with now “extra fiber”, and breads with “more fiber”, and cookies and cakes with “extra fiber”, to finally laxatives with “more fiber”- often too much fiber and in usages that really offered little additional benefit. Indeed, every second word on television during the middle and late 19990’s was “high fiber” to the point of the term becoming colloquial, ubiquitous, and finally ambiguous due to over use/”burnout”. This is what happens when there is no-strategic basis behind extensions; and today the word “high fiber” is barely mentioned. Another short term “trend” and extension nightmare was in the beer industry: “dry beer”. Indeed, the product originating from Asia was seen in America as the “next big thing”, and beer leader Anheuser-Busch with its portfolio of Budweiser, Michelob, and Busch was more than willing to “bet the farm” on a completely unfamiliar taste trend from a world away. Hence, we saw the creation of Michelob Dry and then Bud Dry. Within a few years all AB Dry beers were history and the deletion of two well known extensions from two of the world’s largest beer brands all over everyone’s lips- although Anheuser believed it was done in “stealth” and no one would notice. Sure, near billion dollar brand deletions happen all the time and they can easily be swept under a carpet as if nothing happened. And if anyone believes that then they also believe that Supernovae make a small, inconspicuous explosion that has little effect- a little blip. The outcome to Bud and Michelob in terms of core brand damage, resource damage, brand equity loss, and consumer as well as marketing credibility was staggering and still not recovered from to this day in my opinion.

Most recently, the newest fad that with the help of the media became a trend for the short term is the “Low Carb” (low carbohydrate) diet which completely ignores the fact that the human body vitally needs carbohydrates to give us energy and help keep us alive. No doubt that the Low Carb diet trend will have a short lifespan. We can already see signs that this diet fad (in reality it should be only a fad) which has pretty much swept the nation is on its last lap before finally getting extinguished. It was great at first, as all media induced trends go, but then the problems came. First, long-time skeptics came forward with credible concerns, its founder died (and was claimed obese), test results showed followers having weight lost but health problems gained, and finally studies from prestigious medical sources from around the world blaming the diet on everything from birth defects, to cancer, to heart attacks, caused the halo of perfection to suddenly start to leave its head. From the start of the Low Carb trend, our firm stated that it was something to keep away from for any type of brand, and especially as a line extension for an existing well known one- at least until the jury came in concerning its health benefits and strategic analysis was done to determine all negatives and benefits brand-wise. As with any line extension, the dangers of “transference” of negativity from the extension to the core brand are very real and dangerous- and I and our staff have had such a feeling regarding the Low Carb diet.

Sadly, a brand that from the start had to be first in line with a Low Carb extension had to be Anheuser-Busch with Michelob- a brand that has been challenged over the last few years to say the least. Whether parent AB saw the Low Carb trend as a way to pump sales and some life into Michelob, or whether they really saw what they thought was a long-term new market arising, no one knows, but it could prove to be the brand’s undoing.

There are many news briefs and tidbits that AB proudly touts as the great success of “Michelob Ultra”- including news headlines like “greatest selling beer launch in history”, “fastest growing beer ever”, “most successful launch of a beer in history”, etc. However, behind these brave headlines is a much more dark reality: the success is only temporary at best, and the long term is bleak for Ultra and possibly Michelob and AB knows it. Indeed, from early on, even days after launch, there are accurate accounts of vendors, distributors, and even AB management noticing that something was wrong and questioning Ultra: regular Michelob sales were decreasing significantly (up to 50% almost immediately) which clearly demonstrates cannibalization, and the fact that Miller Light was almost as low in carbohydrates as Ultra. In fact, AB executives were stunned and openly wondering as to why Miller was not marketing its low carb benefit; they finally came to the arrogant guess that Miller had just dropped the ball. However, maybe Miller and its new South African parent were better marketers, strategic brand planners, and simply were just smarter- not wanting to gamble the fate of their brands to a “ trend or fad”. Maybe, Miller management were biding their time, and waiting for AB to make one of the biggest marketing blunders in beer and product management history- and then benefit from it.

As the news comes in from around the world on the negatives of the Low Carb diet, and the luster peels off of its gilding, the long term for the trend is very much in question. So much so that analysts are now asking “how much longer can it last?” The foundation at Michelob Ultra is starting to crack, significantly and very fast, as AB executives and planners now see the damage it has caused even beyond its core Michelob brand- all the way across the Brand Architecture to vital core brand Budweiser! In a recent speech at Webster University in St. Louis Missouri, Anheuser-Busch President Patrick Stokes publicly admitted that Michelob Ultra has very much had a negative effect on Budweiser Light sales- to the tune of 50% of its near 3 million barrel sales coming from Bud Light with no doubt more on the way! An incredible admission from AB’s leader, as to have a temporary “trend” brand such as Ultra remove a significant amount of clients from a cornerstone brand such as Bud Light (a long-term extension and pillar of AB) is akin to exchanging a good today for a lifetime. The admission very much tells us that AB’s marketers as strategic planners are clueless and warns shareholders of things to come. To have an extension such as Michelob Ultra be conceived of, let alone generated, without hypothesizing its consequences on brand architecture realities (as well as many other vital brand aspects) is simply unthinkable at AB’s level. To have Ultra’s negative effects reaching beyond an entire brand line and into the corporation’s largest core/key brand’s territory is simply a disaster. And, on top it, to have a short-term “fad brand” like Ultra remove customers from a long-term, stable brand such as Bud Light is quite frankly amazing.

The damage to AB? First, when Ultra falls (gets deleted) most likely in the next 16 to 30 months, Michelob will be like Budweiser with Bud Dry, losing vast numbers of customers as well as credibility in the marketplace. But, this is not the greatest problem coming AB’s way. Much more devastating is the reality currently happening with Bud Light getting damaged beyond repair. With 50% of its customer based “moved” to Ultra, where will they go when Ultra dies? Back to Bud Light? I don’t think so as remember Miller is wisely marketing its product as having half the carbs of Bud and better taste from Bud drinker taste tests. Ultra customers will scatter with many ending up in arch rival Miller’s stable. This brings us to another reality for Anheuser: Miller (and its new ownership) has possibly seen this happening and is attacking the very vulnerable Bud Light and Ultra with a vengeance. I predict that as Ultra starts to fail and so many of its customers “jump ship”, Miller will only heat up the warfare against wounded Bud Light to try and “take it out”, as well as stop Ultra’s customers from “going back” to where they came from (Bud Light) and increasingly try and draw them to Miller brands (already Low Carb beer). To make matters worse, AB out of desperation has even been indirectly undermining its Michelob Ultra beer with a nationwide series of Bud Light billboard ads, literally plastered on every street corner from New Jersey to San Francisco, claiming “All Beers Are Naturally Low in Carbs”. In other words, AB is using Bud Light of all brands to say: “Michelob Ultra is a sham as you get the same thing (Low Carbs) in any beer!”

The above situation for any brand marketer is as incredible as a new supernova explosion in real time is to a cosmologist (almost an impossibility): another AB brand action that has negative consequences across the architecture within months that may also result in the damage to, and possible collapse of, not one but 2 major brand(s). But, desperation forces desperate acts and with two major brands (one very short and one long term) on the hook, Anheuser-Busch, its market credibility, a large chunk of its consumer base, and its future are very much in desperation- and in question. Billions are at stake here, in a high stakes brand poker match where AB entered the game wrongly betting on a hand of low cards (or pardon the pun Carbs!).

There is no doubt knowing AB’s past that some “creative” solution will be tried as a last ditch attempt to “right” things using funny ads, talking animals, a new hip saying, or a combination of all, but there is no humor deep inside the boardroom at One Busch Place. Maybe wringing of hands at the visibility of the world’s largest brewery making such huge mistakes with key brands like Budweiser and Michelob with the results seeming so potentially disastrous. In our opinion, Ultra should never have been a Michelob extension in the first place for more than one reason. First, the fact that a “bad” extension can destroy a core brand is well known, and to base an extension on such a flimsy and short lived “fad/trend” as the Low Carb diet craze is simply reckless. Long before the time of launch (around the time of concept construct), AB should have seen the great debate and skepticism from the medical community over the use of the Low Carb diet that has been raised for years since its start. Secondly, Michelob is a “Super-Premium” beer, according to its positioning and the tens of millions spent on creating that position, and anything that means “less” of ingredients, calories, taste/flavor, richness, or even carbohydrates indicates “less than premium”. “Something is missing” or “taken out” does not indicate premium. As an example, marketing reduced carbohydrate Michelob (Ultra) is equivalent to proclaiming fat free Godiva chocolate: you are skimping on the ingredients. Hence, reduced carbohydrate Michelob Ultra helps to reposition the entire Michelob brand in the customer’s mind as a “watered-down” premium beer brand- less than Super Premium. Finally, in today’s modern world of brand marketing, no major global brand with a portfolio around it should be making decisions without considering their effect on a myriad of brand factors, aspects, and realities- especially brand architecture. To do so is simply careless. Michelob Ultra from the start could readily be seen as a beer that would attract a large female and active lifestyle customer base- exactly the same as for Budweiser Light. Hence, cannibalism and crossover were guaranteed from day one! And this is exactly what happened- with Bud Light (a long term key brand for AB) losing approximately half of its client base to short term/temporary Ultra. So why launch Ultra in the first place?

My feeling from the start was that if AB was going to cash in on the Low Carb craze, it should just have created an entirely new brand positioned far away from the core brands of Michelob and Budweiser. And it should not go head to head against either brand in terms of targeting, identity, price, lifestyle, attributes, brand promise, or messages. It may cost more, but the risks and damage would have been eliminated and AB would not be in the mess it is currently in. Even more uncertain is that AB may not be revealing the true extent of any other brand architecture damage Ultra may be causing to even Budweiser, itself, or a host of other brands in its portfolio- or the impact on long term brand functioning across the depth and breadth of its holdings. Even more scary is the possibility that AB may not know. Indeed, Anheuser-Busch may be playing with fire and not have an extinguisher big enough to put out the flames arising.

When it comes to line extensions, a smart brand does not count its carbs, instead it counts its core brands as vital assets and tries at all cost to understand both strategic and tactical decisions regarding them- and their implications (short and long term). Michelob Ultra may be the “Ultra Brand Mistake” of the century for a company that cannot make too many more brand- wise.

-STEFAN PAUL JAWORSKI, DIRECTOR, NORTH AMERICA STUDIOX-TEMPORAL GLOBAL BRAND CONSULTING www.sxtcbrand.com

Studio X-Temporal Global Brand Consulting is a Multinational Brand Consultancy that leads the marketing world in both practical application and ideation generation in brand management and strategy. Clients have included many of Asia’s and the World’s top brands of all sizes and across all segments such as Coca-Cola, Microsoft, Motorola, Panasonic, Apple, Budweiser, EXXON, TDK, Tsingtao Beer, Heineken, Malaysian Telecom, The Hard Rock Café, as well as governments such as New Zealand, China, the UK, and Malaysia. The firm is responsible for 11 industry- leading globally published books, as well as many highly regarded white papers, articles, and case studies appearing in prestigious publications from the Financial Times of London to the Multinational Business Review. The firm has offices across Asia, in the EU, Australia, and North America. www.studioxbranding.com

Reviews:

“Dear Stefan: Your Michelob Ultra article- I think it’s a great piece.” - Al Ries, Famed brand strategist, inventor of positioning, and author of best selling brand marketing books including The 22 Immutable Laws of Marketing, Positioning The Battle For Your Mind”, and The Fall Of Advertising And The Rise Of PR .

“Stefan- The article (Michelob Ultra) is great.” -Dr. Paul Temporal, One of the World’s top Brand Gurus- author of numerous books and strategist to many of the world’s top/leading brands, countries, and corporations.

Saying Goodbye to a Brand and Brand Strategy

 

Stefan Paul Jaworski with Al Ries

(July 15, 2004. St. Louis, MO) There was a time when a brand was a very special thing- seen as a measure of a good relationship with the customer and the world around it. A brand was something singular that was straightforward, and above all it was focused. The whole idea was to make a brand stand for something (usually wholesomeness, family, and quality) and stay very focused on one issue, facet, skill, promise, and /or offering as much as possible- and never stray. For instance, Kentucky Fried Chicken (not KFC) was about the Colonel and good southern fried chicken…and that’s it. Long before Wal-Mart, Sears stood for middle-American value, home products, and great seasonal sales. There were two, maybe three, types of toothpaste based on brand like Crest, Colgate, and Pepsident; and GM and Ford were all about affordable cars that were basic and clearly organized according to price segment and usage. Everything seemed to be focused for the first 5 or six decades of brands in America; and then all heck broke lose. Why? Mostly because America discovered the line extension and perfected its overuse- and nothing has ever been the same or as good since.

Extensions, strategically used, can be a very good thing to stretch a brand and make it more “well rounded” in usage, usefulness, and robustness to its consumers. For instance, potato chips vastly increased their market size by moving beyond the plain variety and introducing many different flavors from Salt & Vinegar to Barbeque to Smokey Bacon. But, sadly, many brands simply have gone overboard often creating extensions without strategic thought that do not leverage the brand wisely, but instead take away from the brand’s offerings, core values, position, and even identity. The result is “brand dilution” that has significant ramifications across every aspect of the brand including equity, sales, market share, brand-consumer relationship, identity, position, and even existence. Today, go into a Wal-Mart and one sees an unholy array of so many different kinds of toothpaste that it boggles the mind- and remember these are often of the same brand! Rule in the many different brands and their extensions, and you get literally dozens if not hundreds of types of fundamentally the same thing: a paste to help keep your teeth clean. Most are separated at best by minutiae- ambiguity at the least.

Especially conspicuous in the proliferation of non-strategically based extensions is the reality of “fads” and “trends”. For me a “fad” is a very short term, novelty creative expression (music, fashion, art, thought, style, etc.) that diffuses quickly throughout a very select part of the population; a “trend” is a mid-term (length) creative expression that diffuses throughout the more general population and usually takes longer to do so than a fad. Both are not permanent to any great extent.

Sadly, a reality in the modern brand world is that every time a fad or trend appears along comes another line extension to try and benefit from it. For instance, from the high fiber health/diet craze several years ago came extensions like cereals (most of which already had fiber) with now “extra fiber”, and breads with “more fiber”, and cookies and cakes with “extra fiber”, to finally laxatives with “more fiber”- often too much fiber and in usages that really offered little additional benefit. Indeed, every second word on television during the middle and late 19990’s was “high fiber” to the point of the term becoming colloquial, ubiquitous, and finally ambiguous due to over use/”burnout”. This is what happens when there is no-strategic basis behind extensions; and today the word “high fiber” is barely mentioned. Another short term “trend” and extension nightmare was in the beer industry: “dry beer”. Indeed, the product originating from Asia was seen in America as the “next big thing”, and beer leader Anheuser-Busch with its portfolio of Budweiser, Michelob, and Busch was more than willing to “bet the farm” on a completely unfamiliar taste trend from a world away. Hence, we saw the creation of Michelob Dry and then Bud Dry. Within a few years all AB Dry beers were history and the deletion of two well known extensions from two of the world’s largest beer brands all over everyone’s lips- although Anheuser believed it was done in “stealth” and no one would notice. Sure, near billion dollar brand deletions happen all the time and they can easily be swept under a carpet as if nothing happened. And if anyone believes that then they also believe that Supernovae make a small, inconspicuous explosion that has little effect- a little blip. The outcome to Bud and Michelob in terms of core brand damage, resource damage, brand equity loss, and consumer as well as marketing credibility was staggering and still not recovered from to this day in my opinion.

Most recently, the newest fad that with the help of the media became a trend for the short term is the “Low Carb” (low carbohydrate) diet which completely ignores the fact that the human body vitally needs carbohydrates to give us energy and help keep us alive. No doubt that the Low Carb diet trend will have a short lifespan. We can already see signs that this diet fad (in reality it should be only a fad) which has pretty much swept the nation is on its last lap before finally getting extinguished. It was great at first, as all media induced trends go, but then the problems came. First, long-time skeptics came forward with credible concerns, its founder died (and was claimed obese), test results showed followers having weight lost but health problems gained, and finally studies from prestigious medical sources from around the world blaming the diet on everything from birth defects, to cancer, to heart attacks, caused the halo of perfection to suddenly start to leave its head. From the start of the Low Carb trend, our firm stated that it was something to keep away from for any type of brand, and especially as a line extension for an existing well known one- at least until the jury came in concerning its health benefits and strategic analysis was done to determine all negatives and benefits brand-wise. As with any line extension, the dangers of “transference” of negativity from the extension to the core brand are very real and dangerous- and I and our staff have had such a feeling regarding the Low Carb diet.

Sadly, a brand that from the start had to be first in line with a Low Carb extension had to be Anheuser-Busch with Michelob- a brand that has been challenged over the last few years to say the least. Whether parent AB saw the Low Carb trend as a way to pump sales and some life into Michelob, or whether they really saw what they thought was a long-term new market arising, no one knows, but it could prove to be the brand’s undoing.

There are many news briefs and tidbits that AB proudly touts as the great success of “Michelob Ultra”- including news headlines like “greatest selling beer launch in history”, “fastest growing beer ever”, “most successful launch of a beer in history”, etc. However, behind these brave headlines is a much more dark reality: the success is only temporary at best, and the long term is bleak for Ultra and possibly Michelob and AB knows it. Indeed, from early on, even days after launch, there are accurate accounts of vendors, distributors, and even AB management noticing that something was wrong and questioning Ultra: regular Michelob sales were decreasing significantly (up to 50% almost immediately) which clearly demonstrates cannibalization, and the fact that Miller Light was almost as low in carbohydrates as Ultra. In fact, AB executives were stunned and openly wondering as to why Miller was not marketing its low carb benefit; they finally came to the arrogant guess that Miller had just dropped the ball. However, maybe Miller and its new South African parent were better marketers, strategic brand planners, and simply were just smarter- not wanting to gamble the fate of their brands to a “ trend or fad”. Maybe, Miller management were biding their time, and waiting for AB to make one of the biggest marketing blunders in beer and product management history- and then benefit from it.

As the news comes in from around the world on the negatives of the Low Carb diet, and the luster peels off of its gilding, the long term for the trend is very much in question. So much so that analysts are now asking “how much longer can it last?” The foundation at Michelob Ultra is starting to crack, significantly and very fast, as AB executives and planners now see the damage it has caused even beyond its core Michelob brand- all the way across the Brand Architecture to vital core brand Budweiser! In a recent speech at Webster University in St. Louis Missouri, Anheuser-Busch President Patrick Stokes publicly admitted that Michelob Ultra has very much had a negative effect on Budweiser Light sales- to the tune of 50% of its near 3 million barrel sales coming from Bud Light with no doubt more on the way! An incredible admission from AB’s leader, as to have a temporary “trend” brand such as Ultra remove a significant amount of clients from a cornerstone brand such as Bud Light (a long-term extension and pillar of AB) is akin to exchanging a good today for a lifetime. The admission very much tells us that AB’s marketers as strategic planners are clueless and warns shareholders of things to come. To have an extension such as Michelob Ultra be conceived of, let alone generated, without hypothesizing its consequences on brand architecture realities (as well as many other vital brand aspects) is simply unthinkable at AB’s level. To have Ultra’s negative effects reaching beyond an entire brand line and into the corporation’s largest core/key brand’s territory is simply a disaster. And, on top it, to have a short-term “fad brand” like Ultra remove customers from a long-term, stable brand such as Bud Light is quite frankly amazing.

The damage to AB? First, when Ultra falls (gets deleted) most likely in the next 16 to 30 months, Michelob will be like Budweiser with Bud Dry, losing vast numbers of customers as well as credibility in the marketplace. But, this is not the greatest problem coming AB’s way. Much more devastating is the reality currently happening with Bud Light getting damaged beyond repair. With 50% of its customer based “moved” to Ultra, where will they go when Ultra dies? Back to Bud Light? I don’t think so as remember Miller is wisely marketing its product as having half the carbs of Bud and better taste from Bud drinker taste tests. Ultra customers will scatter with many ending up in arch rival Miller’s stable. This brings us to another reality for Anheuser: Miller (and its new ownership) has possibly seen this happening and is attacking the very vulnerable Bud Light and Ultra with a vengeance. I predict that as Ultra starts to fail and so many of its customers “jump ship”, Miller will only heat up the warfare against wounded Bud Light to try and “take it out”, as well as stop Ultra’s customers from “going back” to where they came from (Bud Light) and increasingly try and draw them to Miller brands (already Low Carb beer). To make matters worse, AB out of desperation has even been indirectly undermining its Michelob Ultra beer with a nationwide series of Bud Light billboard ads, literally plastered on every street corner from New Jersey to San Francisco, claiming “All Beers Are Naturally Low in Carbs”. In other words, AB is using Bud Light of all brands to say: “Michelob Ultra is a sham as you get the same thing (Low Carbs) in any beer!”

The above situation for any brand marketer is as incredible as a new supernova explosion in real time is to a cosmologist (almost an impossibility): another AB brand action that has negative consequences across the architecture within months that may also result in the damage to, and possible collapse of, not one but 2 major brand(s). But, desperation forces desperate acts and with two major brands (one very short and one long term) on the hook, Anheuser-Busch, its market credibility, a large chunk of its consumer base, and its future are very much in desperation- and in question. Billions are at stake here, in a high stakes brand poker match where AB entered the game wrongly betting on a hand of low cards (or pardon the pun Carbs!).

There is no doubt knowing AB’s past that some “creative” solution will be tried as a last ditch attempt to “right” things using funny ads, talking animals, a new hip saying, or a combination of all, but there is no humor deep inside the boardroom at One Busch Place. Maybe wringing of hands at the visibility of the world’s largest brewery making such huge mistakes with key brands like Budweiser and Michelob with the results seeming so potentially disastrous. In our opinion, Ultra should never have been a Michelob extension in the first place for more than one reason. First, the fact that a “bad” extension can destroy a core brand is well known, and to base an extension on such a flimsy and short lived “fad/trend” as the Low Carb diet craze is simply reckless. Long before the time of launch (around the time of concept construct), AB should have seen the great debate and skepticism from the medical community over the use of the Low Carb diet that has been raised for years since its start. Secondly, Michelob is a “Super-Premium” beer, according to its positioning and the tens of millions spent on creating that position, and anything that means “less” of ingredients, calories, taste/flavor, richness, or even carbohydrates indicates “less than premium”. “Something is missing” or “taken out” does not indicate premium. As an example, marketing reduced carbohydrate Michelob (Ultra) is equivalent to proclaiming fat free Godiva chocolate: you are skimping on the ingredients. Hence, reduced carbohydrate Michelob Ultra helps to reposition the entire Michelob brand in the customer’s mind as a “watered-down” premium beer brand- less than Super Premium. Finally, in today’s modern world of brand marketing, no major global brand with a portfolio around it should be making decisions without considering their effect on a myriad of brand factors, aspects, and realities- especially brand architecture. To do so is simply careless. Michelob Ultra from the start could readily be seen as a beer that would attract a large female and active lifestyle customer base- exactly the same as for Budweiser Light. Hence, cannibalism and crossover were guaranteed from day one! And this is exactly what happened- with Bud Light (a long term key brand for AB) losing approximately half of its client base to short term/temporary Ultra. So why launch Ultra in the first place?

My feeling from the start was that if AB was going to cash in on the Low Carb craze, it should just have created an entirely new brand positioned far away from the core brands of Michelob and Budweiser. And it should not go head to head against either brand in terms of targeting, identity, price, lifestyle, attributes, brand promise, or messages. It may cost more, but the risks and damage would have been eliminated and AB would not be in the mess it is currently in. Even more uncertain is that AB may not be revealing the true extent of any other brand architecture damage Ultra may be causing to even Budweiser, itself, or a host of other brands in its portfolio- or the impact on long term brand functioning across the depth and breadth of its holdings. Even more scary is the possibility that AB may not know. Indeed, Anheuser-Busch may be playing with fire and not have an extinguisher big enough to put out the flames arising.

When it comes to line extensions, a smart brand does not count its carbs, instead it counts its core brands as vital assets and tries at all cost to understand both strategic and tactical decisions regarding them- and their implications (short and long term). Michelob Ultra may be the “Ultra Brand Mistake” of the century for a company that cannot make too many more brand- wise.

-STEFAN PAUL JAWORSKI, DIRECTOR, NORTH AMERICA STUDIOX-TEMPORAL GLOBAL BRAND CONSULTING www.sxtcbrand.com

Studio X-Temporal Global Brand Consulting is a Multinational Brand Consultancy that leads the marketing world in both practical application and ideation generation in brand management and strategy. Clients have included many of Asia’s and the World’s top brands of all sizes and across all segments such as Coca-Cola, Microsoft, Motorola, Panasonic, Apple, Budweiser, EXXON, TDK, Tsingtao Beer, Heineken, Malaysian Telecom, The Hard Rock Café, as well as governments such as New Zealand, China, the UK, and Malaysia. The firm is responsible for 11 industry- leading globally published books, as well as many highly regarded white papers, articles, and case studies appearing in prestigious publications from the Financial Times of London to the Multinational Business Review. The firm has offices across Asia, in the EU, Australia, and North America. www.studioxbranding.com

Reviews:

“Dear Stefan: Your Michelob Ultra article- I think it’s a great piece.” - Al Ries, Famed brand strategist, inventor of positioning, and author of best selling brand marketing books including The 22 Immutable Laws of Marketing, Positioning The Battle For Your Mind”, and The Fall Of Advertising And The Rise Of PR .

“Stefan- The article (Michelob Ultra) is great.” -Dr. Paul Temporal, One of the World’s top Brand Gurus- author of numerous books and strategist to many of the world’s top/leading brands, countries, and corporations.

The Killing of a Brand: McDonald’s Brand Future Comes into Question at the Hands of Advertisers.

  Stefan Paul Jaworski, Director North America & Chief Brand Strategist. Masters Degree Marketing.

Walking across the cold, dark, and almost surreal battlegrounds, one sadly cannot help but step over the lifeless corpses and shallow graves of the combatants, as well as appreciate and even feel the dreams they had, efforts they gave, and the causes they were fighting for. Heartbeats racing, adrenaline rushing, people scurrying, orders being given, strategy and tactics changing, and all hands fighting for success. Yet, the battle lost and heartbreak. I might sound like someone speaking about walking across Waterloo or Normandy, but I am talking about the Marketplace and the corpses of which I speak are those of brands and their employees.

Almost like wallpaper, we never seem to notice the many firms and products (mostly new and some old) that fail- it is about 80%. Of course, the reasons are many: most being due to lack of capital, inexperience of management, mismanagement, a “wrong product or service” offered, paradigm shift (like roller skates being wiped out by roller blades), overpowering competition, or just plain bad timing and/or bad luck. However, few look at another, possibly more prevalent reason for company and/or product failure: poor strategic (and tactical) brand marketing and management. In an era where it is now accepted as fact that a paradigm shift has occurred forcing the reality that “Brand Strategy leads Business Strategy”, we must focus on the fact that many failures of companies, brands, and products are due to poor brand strategy (and thus brand management).

Looking carefully at the battlefield from this new frame of vision, a whole new landscape starts to appear and we see better explanations for the failure of the likes of Molson Brewing, IZOD, Kmart, New Coke, Oldsmobile, Crystal Pepsi, Digital Equipment, and many others. One such example in the making is that of McDonalds, which is on a collision course with disaster- a course entirely of its own making, with the help of its ad agency Leo Burnett. In business of building an American brand icon since the 1930’s, and a global symbol of American success and brand power, McDonald’s has for the last decade or so been under severe pressure as both a brand and a corporation. Basically, the argument for the ails of McDonalds has been that “fear of heart disease”, cancer, and now “low carb” have successively culled the rise of the “Burger and Fries joint”- first in America and now globally. In other words, that a paradigm shift has happened which has moved the traditional burger culture in a new direction- even though no such data has completely proven this hypothesis. Burgers are still a big, and even growing, business. However, from lawsuits to documentary films like “Supersize Me”, the damage just keeps coming: the predictable fall-out from a society that is obese, sick, and becoming more so, and one that blames corporations and their products for this problem (as opposed to themselves). Hence, many analysts and the media argue that the world is now on a health food “kick” that is part of a trend that cannot be stopped- and that past culprits like McDonald’s, Frito-Lay, etc. will have to change radically or become extinct. Therefore, radical decisions are being made by brands like McDonalds (with the less than sound advice of the trendy ad agencies like Burnett) to do radical things, fast, all in the name of “staying alive” and avoiding the predicted “extinction”.

As McDonalds agency Leo Burnett has said, “The fact that McDonald's is brave enough to even contemplate a creative idea that doesn't carry the arches shows its desire to shake up perceptions of the brand”. In my opinion, the step Burnett and McDonalds are taking is not brave- it is simply stupid and reckless. This “step” will ironically not achieve the goal of avoiding “extinction” as Burnett so confidently suggests, but in my opinion will accelerate the “destruction” of the McDonalds’ brand culminating in fifty years of hard work going down the drain. What is the step? In a world where the McDonalds ‘Golden Arches’ is the brand’s icon, logo, brand association key/point, and literally SYMBOLIZES everything the brand stands for- as well as being a leading icon of American nostalgia- Leo Burnett believes they should go (at least in the UK for now). And be replaced by what? None other than a question mark! …And the equally ambiguous tagline: "McDonald's. But not as you know it." Yes, a question mark (?)- of all things! In other words, replacing a decades-old, definite, powerful, closed-ended, confident, core value based icon and brand association point with a totally indefinite, undefine-able, open-ended, unconfident, questionable punctuation mark! Incredible! In other words, throwing out everything that is known, definite, differentiated, core value and lifestyle based for literally “nothing of meaning” as that is what precisely a question mark represents: nothing of meaning in itself, indefinite, open-ended, undefinable, and open to any and all kinds of interpretation. With their question mark logo for client McDonalds, Leo Burnett is forgetting the most basic of brand laws that even amateurs abide by: ALWAYS define yourself and never let anyone define you as 1). they will never be as merciful 2). you lose all control of every aspect of your identity. Never leave a brand and its identity open for definition and interpretation- and a question mark is simply pure open space! The “Arches” also are clearly associated with nearly every aspect of McDonalds’ brand history and core values, most of which (contrary to McDonalds’ and Leo Burnett’s belief) are positive.

It seems while being under pressure key decision makers have completely forgotten what a brand really is: a differentiated/unique personality, identity, belief system, “relationship central”, and a lifestyle. Over the last 5 decades, McDonalds has achieved brand milestones on a global scale that few even dream of including: an icon name and logo, well defined identity and position, literal ownership of their market (fast food), innovation leadership (drive in window, complete consistency, child play areas, etc.), and powerful brand-consumer lifestyle and emotional bonds. The Golden Arches are the literal embodiment of all of these vital brand aspects and literally represent the “gateway” into the McDonalds’ brand both emotionally and physically. Indeed, so powerful an icon McDonalds has become that the Golden Arches are recognized as a part of Americana globally- a literal embodiment of American culture, lifestyle, style, core values, power and influence that is ingrained into multiple generations. Hence, remove the Golden Arches as Leo Burnett is doing and you remove all of these hard earned, invested in, and vital brand associations. Replace them with of all things an ambiguous “question mark” and you literally kill the brand! Issues such as “changing diets”, socioeconomic trends, etc. have always been a part of brands doing business, so they are no big deal- or at least should not be- seen as a “given” which are naturally expected. How a brand’s managers (and their skill level) deal with such market realities is the ultimate mark and demonstration of their competency and thus value to the brand.

A smart brand evolves with such issues strategically and with great thought based on consumer and market insight (both qualitative and quantitative) with an eye to the past, present, and future (short and long-term). A smart brand remembers that what a market wants today may well not be what they want tomorrow- hence the adage “don’t sell next month for a good this afternoon”. A well managed brand even goes so far as to take advantage of such realities, turning challenges into future opportunities- but always using core values as the guiding light (as opposed to throwing them away as McDonalds and Leo Burnett are doing). Pepsi-Cola has weathered the significant challenges aimed at it from the “lower sugar” and “caffeine robbing bones of vitamins” trends very successfully via the use of line extensions Diet Pepsi and Caffeine Free Pepsi.

Currently, Frito-Lay, another global icon brand that makes “fast” and “fat” food snack products, is in exactly the same battle as McDonalds- probably even more so as its products are literally on every convenience shelf in America and beyond. The difference: does Frito-Lay dump its entire brand logo, icon, and history because of a dietary trend and replace it with something as ridiculous as a question mark (maybe a semi colon)? Of course not! Wisely, Frito-Lay has decided on a well thought out, strategic, “evolutionary” path (as opposed to “revolutionary” idiocy) creating a new direction of regular and healthy lines of its products with the help of famed dietary expert Dr. Kenneth Cooper, MD, MPH, one of the world's foremost experts on health, nutrition and exercise and founder of The Cooper Aerobics Center. Lays’ brilliant evolution path is very simple and to the point: they keep regular products unchanged for those who want to eat original/classic full fat products in moderation, while also offering the same products in a baked or light fat, trans fat free form for those wanting and needing a low fat alternative.

Wisely, the healthier snacks will carry identifier “Smart Snack Ribbon Label” to show this evolutionary and innovative path that will benefit many customers and bring new ones in. But the core values, Lays heritage, packaging, logos, messages, and brand identities stay essentially the same- and in fact become energized and even empowered to their customers and the market by responding to their desires, needs, and wants…by predicting and answering to their requests and needs as a good friend and brand should. Hence, the Frito Lay brand goes up a notch brand success-wise and its history, pedigree, and identity become even more relevant, respected, trusted, and internalized by consumers, the market, and society as positive (and thus become even stronger).

McDonalds, via its own weak marketing skills and wrong advisement from its ad agency, is sadly viewing its problems solely as a brand identity problem- as opposed to a product offering one. If the problem is that diets are changing (going less fatty) causing rebuke/backlash against unhealthy fast-food in general and thus its leader McDonalds, then McDonalds should address the problem from where it originates. In other words, like Frito-Lay, offer alternative healthier products alongside the traditional Burgers and Fries that the brand’s success and identity have been based on. Note, McDonalds has attempted to do this with a “healthy options menu” for several years consisting of salads, etc., but efforts are not as successful as they should be as often these “healthy option foods” have nearly as much fat as a standard burger when you factor in salad dressings, etc. Also, instead of a chemically-based milkshake that contains mostly artificial flavors, stabilizers, and ingredients, focus should be on offering a “real milkshake” made of milk, ice cream, and fruit” like in the old days. Instead of artificial cheese, fillers, and fries high in saturated and trans fat oils that clog arteries, McDonalds some time ago should have offered healthier alternatives across its product offerings- instead of waiting for pressure to come upon it (in other words, be “proactive” as opposed to “reactive” product wise). Most importantly, like any successful, multi-decade brand icon, McDonalds is way beyond being just about its products as we witnessed with the “New Coke” fiasco/ disaster- it is about a core value based identity and lifestyle that connect emotionally with people. And the Golden arches are a powerful part of that connection.

A smart brand strategy would be to discover from the “outside in” (from consumers, the market, and society) what the real problems are whether product, service, operations, delivery/channel, or brand, and then generate a solution that not only fixes the problem(s) but does so in such a way that it further endears and evolves the brand to the world around it- especially to its customers. I personally believe via research and my own experience that a large chunk of McDonald’s problem lies in a widespread “lack of consistency of cleanliness” among its thousands of locations. Indeed, ask any consumer who has been in a McDonalds and most will have a “dirty/filthy McDonalds story” to tell (backed by fact with some locations having been closed by health authorities). It is not unusual to see un-swept and aging floors, garbage like napkins, old French Fries, and used ketchup packets littered on the floor below your table, and bathrooms that are simply sickening with un-flushed toilets, filthy soap dispensers, cracked sinks, etc. Hence, the question immediately comes to patrons’ minds: “if this is what the public part of the restaurant looks like, what is the kitchen where they handle and make my food like?” The answer: in some cases, even worse! Indeed, with the franchise getting bigger and now thousands of independent owners stretched over a massive globe, it has become harder to keep vital brand standards- especially in terms of cleanliness and staffing. This is one of the biggest problems facing a global franchise in any segment, and hence the reason why legendary coffee seller Starbucks has kept every store corporate- allowing for strict control over (and thus consistency regarding) everything from brand identity, overall presentation, to staff training, cleanliness, branded environment, to quality of product made and delivered/sold to the customer. For Starbucks it has worked wonders with a brand almost as prevalent, if not more so, in global societies as McDonalds. Starbucks also keeps in close contact with the world around it at all times (“outside in approach”) whereby everything from its drink innovations to its branded décor, its choice of music, prices, to its locations being directed largely by what consumers want and need- as opposed to what ad agencies “think” is needed. Hence, Starbucks (and Frito-Lay) is about “evolution by strategy” as opposed to “revolutionary risk by untested hypothesis” (or “I Think” syndrome).

McDonalds is the reverse. In a world where brand means everything for success, McDonalds may be literally throwing out the baby with the bathwater and discarding its most valuable brand asset (its icon, identity, and heritage) which is a definite known for the unknown and indefinite symbolized by of all things a quite literal question mark (?). If a question mark logo is being used purposely to allow us make our own personal definition of McDonalds and its brand identity, I will take my lesson learned from the musician Prince and his fight with Sony and opt for “the chain formerly known as McDonalds”. Indeed, for us, McDonalds’ and Leo Burnett’s question mark logo replacing the famed Golden Arches icon is a supreme, revolutionary, misguided, and radical act as ever seen in the history of advertising and brand marketing- and probably the most foolish. Replacing the known, accepted, iconic, and legendary with the unknown (and thus open for negative definition) is simply the most effective way to kill a brand- even a legendary one like McDonalds.

-STEFAN PAUL JAWORSKI, DIRECTOR NORTH AMERICA & GLOBAL BRAND STRATEGIST, STUDIO X-TEMPORAL GLOBAL BRAND CONSULTING

Studio X-Temporal Global Brand Consulting is a Multinational Brand Consultancy that leads the marketing world in both practical application and ideation generation in brand management and strategy. Clients have included many of Asia’s and the World’s top brands of all sizes and across all segments such as Coca-Cola, Microsoft, Motorola, Panasonic, Apple, Budweiser, EXXON, TDK, Tsingtao Beer, Heineken, Human Talent PLC, Malaysian Telecom, The Hard Rock Café, as well as governments such as New Zealand, China, the UK, Dubai, and Malaysia. The firm is responsible for 14 industry- leading globally published books, as well as many highly regarded white papers, articles, and case studies appearing in prestigious publications from the Financial Times of London to the Multinational Business Review. The firm has offices across Asia, in the EU, and North America.

www.sxtcbrand.com