Why Brand Teams Need to Stop Pushing Brand Equity as an Asset

Most brand teams are constantly fighting for investment. Their lives would be much easier if they stopped pushing brand equity as a long-term asset when it is becoming more like the cost of goods sold.

Most brand teams are constantly fighting for investment. Their lives would be much easier if they stopped pushing brand equity as a long-term asset when it is becoming more like the cost of goods sold.

It’s almost Independence Day 2019, and I conducted a small consumer focus group session. Actually, it was a small group of friends, gathering to celebrate America, and we ended up talking about old brands.

Brand Equity and ‘Whatever Happened to … ‘

The topic began with WHT, or “whatever happened to … ?”

My candidate for WHT was Fruit Stripe gum; which, it turns out, is still alive and undergoing a small revival. As the conversation drifted toward more recent times, we started talking about the more recent troubles of iconic retail brands, like Barnes and Noble, Sports Authority, and Toys”R”Us.

Because the group consisted mostly of GenXers, there was strong nostalgia associated with these brands, with many happy firsts: first soccer ball, first video game system, first flirtation with a stranger over coffee while trying to look intellectual. There were such emotions and nostalgia, it made me wonder why these businesses had to close or severely reduce their footprint.

Yes, Amazon is the direct reason, in most cases, and there is a new trend to vilify it for killing these now-nostalgic brands. Let’s not forget, however, that B&N and Borders were once considered villains, running the local bookstore out of town. We also rarely hear about the villainy of Walmart and how it destroys local business. In fact, I was surprised to see that Walmart was now listed as a highly trusted brand by GenZers (18 to 21 years old). It is hard to Imagine the day when we will be nostalgic for Amazon; but if history is any indicator, that day will come.

Why Good Brands Go Bad

It is important to understand why we miss some brands when they are gone, but do not come to their aid when they are dying.

I believe the answer is that positive brand associations have a diminishing effect on brand survival. For example, there was a fast food joint I used to frequent and think of fondly when I was a child. Hoping to share that moment with my kids, I took them there. To put it mildly, they were less than impressed. Our family has been trying to eat fresh and healthier food for some time now, and we are part of a growing trend. Simply put, my kids could not relate to the greasy, yummy, and cheap goodness of my youth. I expressed shock, disappointment and called them bourgeois food elitists. This got me sympathy and pity, but not an ounce of guilt on their end. Later, once I got over the hurt, I, too, had to admit it was pretty bad food. This was my last trip to this joint.

Good brands solve current problems, delight customers, and address unmet needs, which build positive associations and create brand affection. However, like any relationship, fond memories do not guarantee that the relationship survives. Brands that survive can no longer rest on brand equity; rather, they are constantly investing in building and maintaining it.

This has implications for how marketers position the brand as an asset in the company.

How Brand Teams Position the Brand as an Asset

Most companies think of brand equity as a long-term asset. While brand equity is not a recognized asset under GAAP rules, brand proxies such as goodwill, brandmark, and trademarks are recognized as long term assets. Long-term assets are investments a company makes which benefit the company over the long term such as property, plant, and equipment and include other assets such as patents, licensing agreements and bonds. This classification makes sense since strong brands used to stand the test of time and had equity with staying power.

However, the new business environment sees new brands come and go and once esteemed brands die off every day. In this environment, there seems limited long-term value to brand associations and positive memories.  More and more, brand equity is reflecting the characteristics of short-term assets, like inventory or working capital, which needs to be constantly replenished. When a company fails to adequately invest in inventory, sales drop quickly. It seems like the brand is drifting in that same short-term direction.

When making the case for brand development, perhaps we marketers need to change our perspective. Generally, the marketing narrative placed brand as a long-term investment because the costs are so high, and the return was measured over a long period. At one point, this argument seemed appropriate. However, today it seems like there is very little long-term component to brand equity. Especially as branding is becoming more aligned with experience and operations and less with advertising. As a critical component of every customer interaction, we may need to understand that brand is becoming part of the cost of goods sold. This means companies should invest in branding frequently like they invest to have enough inventory or working capital. Only then will brand receive the investment flows it needs to survive in today’s market.

CMO Accountability: What’s the Time Horizon?

What are CMOs held accountable for at the end of the year? Let’s say we invest 5 percent of revenues in a given year in marketing, what do the CEO and the board of directors expect in return?

What are CMOs held accountable for at the end of the year? Let’s say we invest 5 percent of revenues in a given year in marketing, what do the CEO and the board of directors expect in return?

  1. Incremental sales to the tune of 20x their investment?
  2. Incremental market share or new market penetration?
  3. Incremental profits?
  4. Incremental customer loyalty, customer satisfaction and customer value?
  5. Increasing shareholder value?
  6. All of the above?

Whereas sales representatives may have a one quarter horizon, can the CMO afford to invest in marketing functions with such a short time horizon in mind? In our post last month, we discussed these six major functions for which marketing is responsible, presumably so that they can deliver on the list above:

  1. Gather customer requirements, defining markets and the product/service sets
  2. Help create and retain customers with demand generation programs, content marketing, events, social, etc.
  3. Increase brand equity
  4. Channel marketing and technology partner management
  5. Empower the sales channels with market data, prospect data, competitive data and sales tools & collateral
  6. Participate in the support and delivery of the “whole product” to customers

Reconciling the investments in each of the latter six functions with the results described in the former list of six outcomes is a herculean task. So, let’s focus on just one aspect: Which marketing functions require the CMO to have a longer time horizon than one year?

  1. Defining the markets, and defining the products/services required to successfully penetrate those markets are tasks usually associated with product management (PMM). But the final decision-making requires participation from representatives in nearly every function in the company. The ROI period for these efforts could be three to five years or more. What share of the marketing budget should go to PMM knowing that it is a long-term investment? Most firms tie this to market share changes and revenue/profits that the PMM forecasts over a multi-year period.
  2. If the sales cycle is six months or less, it is conceivable that the ROI for demand generation could be viewed as a near-term investment. As a result, many marketing organizations focus their ROI reporting solely on their promotion and content budgets and ignore ROI calculations on many of the other marketing investments.
  3. Increases in brand equity can be measured, but it is definitely a long-term investment. The benefits are obvious to most: increased brand awareness, brand loyalty, perceived quality, and clearly defined brand attributes improve lead acquisition, increased loyalty, and lower cost of acquiring new business.
  4. In many cases the management and nurturing of channel partners, resellers and VARs lean on marketing to support these players with educational materials, training, and product information. Ie the Partner Managers are in marketing. Additionally, if products or services from an OEM are an integral part of the product or solution sold, those relationships are also managed in marketing by product marketing managers. The ROI for investments in these relationships is near term and can be measured.
  5. Sales enablement with tools, content, templates, training, competitive data target, customer and prospect data and market data is a requirement, and in most cases the ROI is both near and long term. The return is an increase in productivity in the sales teams and sales channels. It is easy to measure, but difficult to allocate how much credit falls to marketing initiatives. Also, much of the tools and content (but not all) will be accounted for in No. 2 above.
  6. How do you do an ROI on marketing’s role as part of the product or service delivery? If marketing is doing follow-up communications with new customers to ensure adoption and satisfaction how are the benefits measured? If marketing owns the e-commerce platform an ROI is easy. How about marketing communications around support contract renewals?

The long-term investments for marketing, at a minimum, are product marketing/management, brand equity and of course any infrastructure investments (technology, data and process). Brand equity investments are usually rolled up under promotion and demand generation efforts as if they were near-term investments. Investing in infrastructure is usually accounted for by tying it to increasing marketing productivity, enabling marketing to be more competitive, or improving customer experience (leading to greater acquisition and loyalty presumably).

The conclusion here is that the CMO is accountable for a portfolio of investments, related to different functions and with both near and long-term return horizons. The methods for measuring these returns vary, and the outcomes for the business from these investments also vary. The CMO has to rebalance the portfolio quarterly and they must adopt an “agile” approach without taking their eyes off the goals. Although for sales, this may be the most important quarter in the company’s history, the CMO has too many long-term investments to have a short time horizon.

Brand Equity vs. Economics 101

The law of supply and demand: the only thing many people remember from Economics 101. When demand goes up, prices increase. When demand goes down, prices decrease.

Branding
“Branding,” Creative Commons license. | Credit: Flickr by Limelight Leads

The law of supply and demand: the only thing many people remember from Economics 101.

When demand goes up, prices increase. When demand goes down, prices decrease.

But according to the recent New York Times article, “Why Surge Prices Make Us So Mad: What Springsteen, Home Depot and a Nobel Winner Know,” strict adherence to this economic principle can be detrimental to a brand. Playing the long-game of building and maintaining brand equity is often more important than maximizing short-term gain.

Bruce Springsteen priced tickets for his one-man show on Broadway at $75 to $850 and implemented a system to thwart scalpers from buying up and reselling tickets at a profit. Lottery-winning ticket buyers-turned-opportunists priced their show tickets at $1,200 to $9,999 on StubHub. So Bruce could have made a lot more money by following the simple law of supply and demand, selling tickets at the price the market would bear, and filling the theater with his wealthiest fans. But at what cost to his brand?

One of my colleagues used to say, “You can always get tickets. It just depends on how much you’re willing to pay.” The aftermarket for sold-out concert tickets and sporting events can exceed 10 times the face value of the tickets, especially for premium seats. Yet hot acts and championship teams are reluctant to be viewed as price gougers in order to maintain the goodwill of their fan base.

“A good rule of thumb is we shouldn’t impose a set of rules that will create moral outrage, even if that moral outrage seems stupid to economists,” says Richard Thaler, a recent Nobel Laureate in Economics, as quoted in the Times on Oct. 15. Stories of bottled water selling for $24 in Puerto Rico after Hurricane Irma certainly produced universal moral outrage.

Contrast that with how mega-brand Home Depot responds to hurricanes. The chain has a corporate policy against price-gouging following a disaster, and it deploys emergency logistics to meet the demand of its customers in a disaster area with additional supplies of plywood, tape, etc. This approach meets demand by increasing supply, maintains stable pricing and boosts revenue. More importantly, it creates goodwill and trust in the brand.

So the economic law of supply and demand is not universal when it comes to brand equity.

“If you treat people in a way they think is unfair, then it will come back and bite you,” Mr. Thaler said.

Score one for the Brand.

10-Point Repositioning Checklist for 2017

The start of a new year is a good time to pause and reflect about your organization’s 2016 revenue performance. At least once annually, it’s smart to step back and consider if it’s time to reposition your brand, story and unique selling proposition — especially if sales are off.

The start of a new year is a good time to pause and reflect about your organization’s 2016 revenue performance. At least once annually, it’s smart to step back and consider if it’s time to consider repositioning your brand, story and unique selling proposition — especially if sales are off.

Of course, there are multiple reasons impacting sales outcomes, such as competition, pricing, the economy, and even distraction caused by the election. But my observation is that it’s rarely just one thing that contributes to an off year. The reality is that several individual reasons — that when added together — play a cumulative role in affecting your success.

My recommendation? Evaluate this 10-point repositioning checklist that, when combined, embody your position, and can have a direct impact on 2017 sales.

Repositioning Checklist

1. Brand Name: Is it easy to pronounce and remember? Does it sound current with the times?

2. Brand Equity: Brand equity, by definition, is the real value of a brand name for an organization’s products or services. Establishing brand equity is essential because brands are known to be strong influencers of critical business outcomes. Does your brand convey value? How long has your brand been around?

3. Tagline: Do you have two or three words that pay off your brand name? If you don’t have a tagline, you should create one. Sometimes, just refreshing your tagline will be enough to breathe new life into your brand.

4. Logo: Is it modern? Are you using colors that bring out the desired emotion of your customer? (Refer to my past column, Stimulating Action with Color, for specific color recommendations).

5. One Word: What is the one word that describes the essence of your product or brand? It’s tough to distill your personality to just one word, but the exercise is helpful.

6. Brand Emotion: Does your brand reflect what you are known for, or would like to be known for? Click here for five steps to shed light on creating a solid branding statement.

7. USP: What is your unique selling proposition? Have you reduced it to a short paragraph that everyone in your organization can refer to when developing new marketing materials? If you need ideas, here are my five proven ways to create a blockbuster unique selling proposition.

8. Your Story: Stories differentiate you from your competitors in today’s culture now more than ever. If you need proof, I recommend reading Seth Godin’s book, All Marketers are Liars (which, by the way, was repositioned with a cover change. The word “Liars” is crossed out and replaced with “Tell Stories.”)

9. Golden Thread: Your story — your position — should have a Golden Thread that weaves throughout your message. What are the two or three words (or a brief concept) that you can continually use to bring your customer back to your core message?

10. Positioning Alignment: Is your positioning aligned with the personality — the persona — of your customer? A persona goes beyond demographic and behavior information. It gets to the intuition and core thinking of the fears, hopes, dreams, and values of an individual. (Much more about personas, and the twelve I’ve observed most in my direct marketing career in my book, Crack the Customer Mind Code available at the DirectMarketingIQ bookstore).

Dive into this checklist with your team, and I can assure you the conversation will be lively, and could produce a new breakthrough for you in 2017.

How to Hire a Social Media Manager Who Can Sell

Need to hire a social media manager, freelancer or agency … or get your current resource focused on sales? Here’s a quick way to get everyone aimed at the goal: engagement that creates leads, referrals and sales, not just shares, comments and followers.

Need to hire a social media manager, freelancer or agency … or get your current resource focused on sales? Here’s a quick way to get everyone aimed at the goal: engagement that creates leads, referrals and sales, not just shares, comments and followers.

3 Phrases to Watch Out For
There are three “red flag” phrases to watch out for in the interview process, during weekly meetings or in performance reviews. These are:

1. “People are not on social media to be sold.” If your social media manager or candidate tells you this, it’s a warning sign. Pay attention! I’ll show you why this belief is so dangerous in detail below.

2. “Marketing and advertising are long-term, not instant.” In short, any good seller or marketer (you) already understands and appreciates this. The statement is a hedge.

3. “Social media marketing is mostly about building brand equity (as opposed to selling).” Indeed, but this presumes getting and maintaining brand equity is not about selling.

“You don’t sell someone something by engagement, conversation and relationship. You create engagement, conversation and relationships by selling them something,” says Bob Hoffman, CEO at Hoffman Lewis.

In many cases, any one (or all) of these phrases can be signs of a belief system that does not take responsibility for strategies like blogging for lead generation. Tactics supporting this viewpoint are often made by social media managers who don’t know how (or don’t want) to take responsibility for generating sales.

To be clear, this exercise is not about judging your social media manager personally. I’m sure he or she is a great person. This is about making sure you know how to hire a social media manager who can sell.

“People Are Not on Social Media to Be Sold”
This one is the most dangerous. It sounds totally rational and a little part of each of us can relate to this claim—until you think about it for a minute.

For the sake of argument, let’s say it IS true. People don’t go to social media to be sold. But do they turn to social media to solve problems? Have you? Or have you ever turned to Facebook to discover short-cuts to doing something really important to you?

Do people ever turn to blogs or YouTube to discover new ways to achieve goals?

Sure they do. As people do these things they often end up meeting businesses that can help them. Some people end up being courted by those businesses via social media or email lead nurturing. Some prospects even convert to customers—they purchase!

Many of us are selling on social media every day.

Consider the millions of people each day that:

  • query Google about a problem they need solved or a goal they want to reach;
  • end up at a blog;
  • sign up for an ebook or educational video series;
  • end up buying from the blog owner a few months later.

Sandy Isaacs, owner of events company, Break Away Moments, said to me recently, “Why would one opt to become part of (social media) sites if you are not wanting to either promote yourself with what you have to offer or, in turn, wish to gain as information from others especially, based on your own interests as well?”

You Better Watch Out, You Better Not Cry
You’d better not pout about the in-effectiveness of your social media execution. I’m tellin’ you why. Saying that people are not on social media to be sold ignores both reality and the central tenant of effective online lead generation:

Helping customers (who are hungry for solutions) problem—solve in ways that give them enough confidence to buy.

Bottom line on how to hire a social media manager: Don’t hire anyone who tells you that marketing isn’t responsible for generating sales in directly or indirectly … in some way, shape or form. Watch out for the above phrases exiting the mouths of your interviewees or employees.

Also, remember to focus on the questions your social media manager asks YOU … not just answers they offer to questions you ask them.

That’s how to hire a social media manager who’s focused on leads and sales.

Good luck!

Wanted: Data-Driven, Digital CMOs

There was a time, not so long ago, that the firm’s CMO basically acted as the chief brand steward, running a marketing department that focused on maintaining brand equity and making sure the company was sending out the right message to the masses. Data and analytics? They were usually scoffed at … That was the purview of the down-and-dirty world of the direct marketer, right? Direct marketers were the ones who obsessed over response rates, cost per order, lifetime value and so on.

There was a time, not so long ago, that the firm’s CMO basically acted as the chief brand steward, running a marketing department that focused on maintaining brand equity and making sure the company was sending out the right message to the masses. Data and analytics? They were usually scoffed at … That was the purview of the down-and-dirty world of the direct marketer, right? Direct marketers were the ones who obsessed over response rates, cost per order, lifetime value and so on.

Well, suffice it to say that those days are over—marketing in today’s multichannel environment is about much more than just cute creatives and killer copy. Today’s marketing is increasingly digital and data-centric. A recent article appearing in Ad Age explained that “real-time data-driven decisions, enabled by technology, have made the marketer’s job much more measureable and accountable.” Interestingly, the same article also points out that the average tenure of a CMO is a meager 28 months. No coincidence.

What it boils down to is that today’s CMO is expected, de rigueur, to be a pro when it comes to all things digital. We have two important trends to thank for this fact. The first one of these trends is the general transition to digital. Look, it’s no secret that over the past few years there’s been an incredible shift of marketing spend from traditional over to digital media. It’s the scale and speed of this transition that’s so breathtaking.

According to a June 2012 survey by RSW/U.S., 44 percent of marketers report that they are now spending at least half of their budgets on social and digital media. This represents a 42 percent increase from 2009 alone! And this is not the end of the process. I think it’s safe to say now that the proverbial tipping point has been reached—this trend will only accelerate in coming years.

Anyone who’s worked in the digital marketing arena knows that success in the space all really boils down to data: Impressions, clicks, conversions, opens—this is the vocabulary of the digital world. Well, guess what? Today’s CMO needs to have a deep understanding of these terms, what they mean and how the underlying technologies work—at least on a high level—and be generally comfortable playing in the digital space. Think about it: without a significant digital background, how on Earth can a CMO possibly be expected to run a marketing machine where at least half of the marketing dollars are being spent in the digital space? Not happening.

The other major trend is the inexorable fragmentation of the IT infrastructure within enterprise firms. Basically, what’s happening is that because technology has evolved radically over the past 10 years, it’s giving different stakeholders at companies the ability to purchase and use technology outside of their organization’s firewall, and often without IT’s involvement. Very often, in fact, IT is even without IT’s knowledge!

This is huge shift. Just a few short years ago, mind you, software was what you ran on your computer or on the company mainframe, and it was pretty much always purchased and managed by IT. Well, those days are most definitely over. What’s happened is that the emergence of the SaaS/Cloud model of software delivery has turned that world on its head.

Today, any marketer with a credit card can sign up for, say, a CRM tool or a marketing automation tool and be off to the races in seconds flat. Ask any marketer and they’ll explain how this has been a huge boon to their departments, liberating them forever from the clutches of IT.

Now, of course, a big reason for this excitement is the oftentimes frosty relationship between marketing and IT. Personality types side, in its essence this rocky relationship actually has a lot to do with conflicting mandates. It’s the IT department’s mandate to act as the stewards of the firm’s information and technology infrastructure. Essentially, it’s their job to keep internal systems running and make sure they’re secure. That’s about it. No, it’s not their job to build you a new landing page, or set up a new email campaign for this fall’s reactivation campaign.

Today’s marketing department, on the other hand, is much more focused on operations than anything else. Today marketing is about creating, testing and launching numerous marketing campaigns across various channels using different tools, and evaluating their performance using real-time analytics. And running an operationally focused marketing team requires the ability to build, dispatch and analyze lots of campaigns in rapid succession. Until recently, this heaped loads of pressure on the IT folks, who groaned under the strain. So you can see why marketers have cheered and embraced the emergence of Web-based SaaS marketing tools.

Okay, I got a little sidetracked there, so I’ll get back to the central point, which is that because marketing is rapidly becoming the de facto owners of their own IT infrastructure, this mean that they now control the technology itself and the data contained therein. It’s a big responsibility, requiring marketers to manage and safeguard this vital corporate infrastructure and information, taking on the dual roles of chief marketing technologist and data steward. But with this responsibility comes great power—to use these awesome tools and information to really, truly understand who customers and prospects are, and send out highly personalized and effective marketing campaigns with demonstrable ROI.

But evaluating performance in this environment means not only using new marketing tools and digging through mountains of data. Just as importantly, it also means understanding what it all means. In other words, just because you’re a CMO does not mean you don’t need to know how many opt-ins you have in your company database, or how many fans on Facebook.

And guess what? It’s hard to be comfortable with digital if you’ve never played in the space. But how many CMOs are also digital pros? Not too many. So not surprisingly, firms are finding that it’s incredibly difficult to find leaders with the hard-to-find combination of senior management leadership and digital marketing experience. Given this reality, it’s not too surprising to discover that many companies are running through CMOs in a conveyor belt-like fashion.

Do you know any data-driven digital pros with senior marketing leadership experience?? If so, bet your bottom dollar these executives will be cashing in big time in coming years.

—Rio