Brands versus the Customer Experience

For at least the past 5 years, the tried-and-true formulas to boost sales and market shares of brands have been become increasingly irrelevant and losing traction with customers.
(John Gerzema and Ed Lebar, The Trouble with Brands)

To understand what is relevant and does get traction with customers, it is critical to recognize that the pursuit of market share and commodity sales are not the same thing. Germane to this distinction are the two buying personalities I have discussed elsewhere. Here is the short version that makes it especially relevant to this differentiation.

When customers are not emotionally involved or indifferent they are usually seeking a means-to-an-end. For example, gasoline is gasoline to me. I go to the filling station that offers the best trade-off between price and convenience. I am loyal to this heuristic, not a brand name. Sure, there are people who seek out a name brand gas station and are willing to pay more per gallon. For them, the brand either has meaning or they are mindlessly hung up on an old habit. Both are proving to have a tenuous hold on loyalty and profitability.

In contrast, when customers are emotionally engaged in the experience enabled by the product they are much more willing to pay more and come back often. The message here it that it is the experience or outcome of the customer, not the label that has an impact on profitability and advocacy.

Recently, Geoffrey James blogged about this distinction. To bolster his case he referred to a New Yorker magazine article that cited the iPhone as a good example: “the iPhone generates as much profit for Apple as Noika’s entire cell phone business, even though Noika sells 20 times as many units.

Back to Gerzema and Lebar. Their research indicates that beginning in 2004, consumer attitudes about all sizes and segments of brands were in serious decline. Trust in brands had dropped from 52% in 1997 to 22% in 2008.

That was before the recession. A Nielsen survey (see James) now indicates more than 60% of consumers think that store brand products are equal in quality to brand name ones. The indifferent buying personality, not seeing any meaningful differentiation, is leading customers to switch to the lower prices generics.

The notion that the brand name and visibility will generate sales and profits is generally a pursuit of diminishing returns. It is not however, true for all brands. Gerzema and Lebar shed to light on this. According to their research, what sets successful brands apart is Energized Differentiation.

This energy comes from 3 sources ( I quote):

• the vision the brand presents to consumers, often originates from leadership, conviction and reputation of the company.
  was the invention consumers perceive in the brand through product or services innovation, design or content.
• The dynamism consumers feel – how the brand creates a persona, emotion, advocacy and evangelism among consumers through marketing and other forms of conversation with them.

Brands that rank high on the energy metric are: Adidas, iPhone, Nike, JetBlue and Virgin Atlantic. These brands don’t focus on logos and visibility – they do focus on communicating and delivering a differentiated experience that is meaningful to customers. Think of it as a focus on mindshare not market share.