Is iPhone Made of Teflon?

The iPhone continues to be the hottest phone around. With 17% of the consumer market, classic brand strategy suggests iPhone should be a powerful co-brand partner. Its appeal among early adopters, Millennials and now business people, and its cool lineage, make iPhone aspirational for brands that want or need to recruit these attractive audiences.

Big brands like AT&T and Walmart, as well as small ones, have vied for the opportunity to link to the juggernaut in hopes of having it rub off on them, making them cooler by association. But it just hasn’t happened. AT&T and Walmart have made boatloads of money in the US market from their exclusive iPhone deals. But that’s not the same as transferring brand equity from iPhone to either of these business behemoths.

In an April 15 article, Amol Sharma in the WSJ claimed that “The blockbuster device (iPhone) has reeled in millions of new customers and helped revitalize the telecom giant's brand.”

We would challenge the second half of that contention.

The data suggests that the AT&T brand is still not cool. As this rant on Yelp by Elite Squad Member, Aaron, in August 2008 shows, AT&T has a long way to go:

“…First off, who thought that the brand AT&T had positive associations with the American public? I think the branding AT&T was about as popular as the Taliban or the forgotten TV show COP Rock. The fact that someone actually thought AT&T was a more attractive branding then Cingular tells you everything that you need to know about this company. This review will consist of two parts.....a general overview of AT&T wireless and specific information about this specific outhouse of an AT&T store…”

In fact, AT&T has so far to go that last month the company launched a TV campaign promoting the fact that the founder of TOMs Shoes – a favorite Millennial do-good consumer brand – lives by his iPhone and swears by his AT&T global wireless phone service to orchestrate his shoe-giveaway trips to impoverished kids in South America. This campaign, featured on American Idol last month, arguably is doing more for the AT&T campaign than its iPhone deal!

iPhone is not having the desired halo. All this demand may have gone to the heads of the folks at iPhone. Apple is running an entire campaign based on having Apps for just about anything anyone would want to use an iPhone to do. And according to an April 30 story on Techcrunch, “Apple owes a lot to iPhone app developers-the App store just reached 1 billion app downloads thanks to … savvy developers who have created useful and creative apps.”

However, at the same time, Apple business practices are alienating the iPhone developer base. The same Techcrunch article reported disgruntled “partner” complaints about iPhone being a slow-payer and threats to sue Apple for breach of contract.

This is a glaring and rare example of Apple taking advantage of – rather than supporting - the little guy. While it is hugely uncool, even this doesn’t seem to stick to the iPhone brand. Perhaps iPhone really is made of Teflon?

Resonance Scanning: How to Right Size Your Brand Portfolio

Brand Resonance Scanning, April 09

View more presentations from Carol Phillips.

Brand architecture is one of the least sexy topics in branding, but one of the most important. Having too many or too few brands can cause marketing inefficiencies, customer confusion and waste valuable retail or web space. Brand extensions are often too easy to implement - got a new feature, give it a name! Left unsupported, these orphan brands collect like kudzu.

Over the past few months we have been helping several companies 'right size' their portfolios. Usually this means culling underperformers, but on one occasion it also meant finding some overlooked jewels, opportunities for fighter brands and new subbrands.

Optimizing the brand portfolio should begin with an outside in look at your business. How does the customer view your offering? What stands out? What is invisible? How do they see the competition?

Brand resonance scanning is one way to get that critical customer perspective.

The Case for Tracking Research

Managing brand equity requires consistent metrics. Without a sense of where a brand has been, it's difficult to make good decisions about where to take it. Our first step when we have a new client is to audit their existing customer and brand information, often only to find sporadic and inconsistent brand measurement. The best analogy is a doctor's annual physical. would be for a doctor to make a diagnosis prescription without understanding trends in temperature, blood chemistry or blood pressure.

With the advent of online surveys, and high penetration of Internet in most households, tracking research does not have to be expensive. Here are some of the questions tracking research can help to answer:

1. How is my brand doing versus competition?

2. Where does my offering stand in relation to what the customer wants?

3. How are loyal customers defined? What behaviors need to be encouraged for the brand to become ‘healthier’?

4. What is the contribution of loyal customers to creating revenue and profits for my brand and for the category as a whole?

5. What elements of the marketing mix will make my brand stronger?

6. What are the leading indicators for problems with my brand?

7. How can I optimize my positioning and other strategic marketing decisions?

Our approach to brand tracking is highly customized for each client. But we are guided by best practices and a few overriding principles. To learn more about what we consider the 'essentials' of brand tracking, see our whitepaper, "Brand Vitals: Essential Principles for Monitoring Brand Health".

Do's & Don'ts of Stretching a Brand in a Down Market

Hooters Airlines. Harley cakes. And who can forget Maxim Haircolor?

Even in the best of times, the relationship between branding and innovation can be tricky. Generally speaking, they work together, with the brand strategy providing the ‘face’ of the business’s growth strategy. Brand strategy helps companies bring innovation to the market. Innovation returns the favor by enhancing brand reputation.

It sounds simple in theory, but in practice the partnership can be an uneasy one. The difficult choices imposed by hard times forces managers to confront the challenge of ‘brand stretch’ even more acutely. Balancing the need for brand focus with the need for innovation is the essence of the dilemma. Staying inside the confines of existing brand boundaries risks missing opportunities to meet emerging market needs. At the other extreme, stepping too far outside the brand’s comfort zone risks dilution of brand meaning -- the dreaded “everything-to-everyone syndrome”.

Every company aspires to a brand extension success, but at the same time they also fear the warning provided by brands that expanded too aggressively.

Among the many reasons for conflict between innovation and branding, two stand out:

• The goals of innovation and branding can be contradictory. Branding is about establishing trust through consistency; a brand is built by giving customers what they expect. Brands that change their messages too frequently, or extend too far into unrelated businesses risk confusing their customers and diluting their meaning. Innovation is about giving customers what they don’t expect. Innovation builds excitement and interest by delivering something new.

• Both innovation and branding demand resources. Unlike Apple and Virgin, most brands find it difficult to sustain a reputation for continuous innovation. Instead they build a brand by doing one or two things really well. For these brands a tension often exists between the desire to extend the brand beyond its expected horizons and maintaining brand focus. Innovation puts pressure on both branding budgets and brand architecture. Should the new brand be given a separate name, or sub-brand name? In our current economic climate, the answer to this question is likely to be “no”.

Finding and maintaining the right balance can be tough. It requires constant vigilance. As Lucas Conley pointed out in his book, “Obsessive Branding Disorder”, the branding path can be seductive. Innovation is difficult and doesn’t always line-up neatly with branding’s first commandment of ‘consistency’.

Our experience with firms that understand the need for balance, during good times as well as bad, is that they adhere to several best practices:

1. Don’t Take What Customers Say Too Literally. While carefully listening to the voice of the customer is key, it is even more important to reach into the mind of the customer, by looking for the motivations that underlie their behaviors and expressions. Good innovation decisions are unlikely to come from what consumers can articulate about their immediate rational needs. They are more likely to originate from their emotional desires or future needs. ‘Rear window syndrome’ can lead to preoccupation with solving today’s or even yesterday’s obvious problems and limits innovation to the incremental variety. When Apple introduced the iPod, Virgin launched Virgin Atlantic Airways and Amazon introduced the Kindle, these companies reached outside their existing brand competencies to address new markets and unfulfilled customer needs.

2. Don’t Be Overly Protective of the Brand: Fear of tarnishing brand reputation with customers, or employees and suppliers can suppress the desire to pursue ideas that promise to ‘stretch’ the brand. Most brands can stretch; the real question is whether it makes business sense, not whether stakeholders will accept it. ‘Brand stretch’ research can be misleading since customers are only able to answer questions based on what they already know. When marketers rely on customers to tell them whether a new offering can fit within their understanding of the brand, we again fail to see what is possible and limit ourselves to what is probable.

There are many examples of unlikely brand stretches that succeeded (at least from a market acceptance standpoint). BIC moved from pens to lighters to razors and Jeep from cars to strollers. We don’t know if Starbucks and Tide did ‘stretch’ research before moving their brands into new categories, or if they did what consumers thought of the ideas. If we had been working with them, we may have argued against the research, or at least against listening too closely to what consumers had to say about the ideas. Both companies no doubt already had ample evidence that the moves made business sense (licensing in the case of Starbucks, and superior product performance in the case of Tide-to-Go). Whether consumers would embrace the idea was probably a matter more of spending and awareness than brand ‘fit’.

3. Don’t Think of Brand Stretch as an All-or-Nothing Gamble: Sometimes we are reluctant to stretch the brand too far because we imagine a calamitous reaction from brand loyalists that permanently dilutes brand meaning, destroys our brand equity and erodes hard-earned market share. In fact, this risk can be managed through in-market experiments.

Best Buy’s expansion into musical instruments and music training provides a useful example. Recently, Best Buy announced it is opening six 2,500 square foot store-within-a-stores in South Florida. It is a stretch for Best Buy to deliver an artsy, high-touch service like music training, and they no doubt have research that suggests the market is unlikely to already believe that Best Buy can deliver high quality music instruction. Some of this is reality -- there is an internal capability gap that will need to be addressed. To Best Buy’s credit, though, they have decided to move forward. Whether or not this ‘innovation’ is ultimately successful will depend more on how much investment they make than any predetermined level of ‘brand fit’ or misfit. The key for Best Buy is that it is a relatively low risk experiment that will not broadly impact their national brand equity.

We have developed a simple grid for helping companies weigh the trade offs of stretching the brand or sticking to what the brand does best. To learn more, read our whitepaper, "Innovation and Branding in a Down Market". Note: This post was co-written with Brian Christian, Daso Innovation Consulting.

The Brand Bubble? Why Brands May Still Be Overvalued by Wall Street

So far, brands have not been called into question for their role in the stock market meltdown of 2008, but I suspect it won't be long. Who can look at the GM bankruptcy option and not see it, at least partly, as a failure of brand management? In my Brand Strategy MBA class last semester we discussed Al Reis' contention (GM=General Misery, Ad Age 2.2.08) that GM tried to support too many undifferentiated brands and ended up straining its resources and confusing its customers. With the recession now at full tilt, many companies are heeding the lesson and trimming underperforming brands.

Several articles in the Spring 2009 edition of the AMA's Marketing Research magazine (not yet online) provide further evidence that brand strategy is contributing to our economic woes. They link inflated stock market valuations to data on brand value and conclude that the stock market is overvaluing brands' contributions to company valuations relative to more tangible assets. Many companies have models designed to quantify the contribution of brand value to market capitalization, most notably Interbrand, Y&R, and CoreBrand. Each has consistently shown that while the relationship is generally small and varies by industry, it is nonetheless real. So real, in fact, that CoreBrand this month is launching an investment fund that based on its model, in conjunction with BelRay Investments.

In the article by John Gerzema, Chief insights officer at Y&R and author of 'The Brand Bubble: The Looming Crisis in Brand Value', there is a comprehensive look at all three brand valuation models using data in the U.S. as well as globally. Looking at all the data, he reaches the conclusion that the stock market has valued brands more highly than consumers do, leading to an acceleration of decay of brands. Here's a key passage:

"Emboldened by the tools of the new digital world, consumerism is drastically and profoundly changing, which is rapidly accelerating the decay of brnad. Fragmentation, social media and digital acceleration are causing a widespread attack on brand value. Consumers are quicker to punish uninteresting and undifferentiated brands. Today, brand equity is decaying in compressed periods of time. Brand equity is not the protective insulation it once was. After all, brand equity is only what a brand has achieved up until this point. What consumers are telling us is that past reputation seems to mean very little. Consumers are fatigued more quickly with brands that can't adapt and evolve. The clutter of the marketplace combined with the "old models" for brand management that strive to build awareness and reputation are actually backfiring in that they are slowing a brand's ability to keep pace with a consumer who is moving faster than their marketing strategies. And the emergence of a new digital consumer only amplifies the "d" problem: differentiation in a brand (or lack thereof)."

I've lived long enough in my career to know that the imminent death of brands has been forecast many times, but the concept of brand equity has proven more endurable than each subsequent challenge. There is always a place for brands since a brand is simply a contract between a company and its customers. That will never change. But I do agree with Gerzema that the pace of change among consumers may not be matched by changes in perceptions of the stock market investors. If true, that means the recovery may be longer than we thought, and that the skills involved in brand building in a digital world will be even more important.