> MARSHA LINDSAY, PRESIDENT Keynote presentation at: Brandworks University ® May 2004 The Genesis of Profitable Growth (Lights dim. Marsha walks to center stage and opens a great big book and speaks in a serious tone of voice.) A reading from the book of marketing success: Genesis, Chapter One: In the beginning, the stockholders and the stakeholders said, “Let us be profitable and grow.” But the way was without form and darkness was upon the business plan. Then senior management said, “Let us create profitable growth by developing and launching new products. For successful new products can: > strengthen our existing brand, > keep competitors from stealing our customers, > and bring new customers to our company.” And the stockholders and stakeholders saw that it was good. The VP of marketing said, “Let there be a BIG idea! Let us launch it in the marketplace.” The head of NPD said, “Let this idea bring forth growth.” The CFO said, “Let this big new product multiply profits!” > > > 1 But on the sixth day, the consumer said, “Behold, I don’t like your new product and I won’t buy it.” So on the seventh day, when the board of directors had expected to be sipping champagne, they instead demanded to know what went wrong. And the Devil confessed, “It’s in the details.” Thus saith senior management, “We will study our mistakes, define best practices, and not sin again.” So ends today’s reading. And so begins two days of learning that can separate the saints from the sinners. As most of us know, the Book of Genesis doesn’t just tell the story of creation, it also tells the Garden of Eden story – our struggle with temptation. > The Genesis of Profitable Growth M . L I N D S AY In the business world today, there are lots of temptations, especially when it comes to the various strategies by which to grow. So as we examine the genesis of profitable growth here at Brandworks University, we’ll visit not the Garden of Eden, but the Garden of Education. It may not look like paradise, but you’ll find some of the trappings. Here we’ve got the tree, apples, and just like the story of old, some uncomfortable truths to confront, like: Having downsized for 15 years, having focused on just-in-time, reducing cycle time, cutting costs and raising quality, marketers have exhausted most operational options for growing the bottom line. The only option now left to grow the bottom line is to grow the top line. That’s not easy… > For as Ram Charan, one of tomorrow’s speakers, notes: “No company playing the established game can hope to grow much faster than the broad economic growth rates in its markets.” > And there is little natural growth in the marketplace: With baby boomers aging, and the birth rate declining, growth will only come from creating new categories, or share stolen from competitors through superior new products. > Trouble is – what most of us are selling is already “good enough” for our target’s needs. And even if you were to invent something exceptional, people pretty much have all that they want. It’s not just that a person can’t justify a second Harley – it’s not just that they don’t need more running shoes – it’s that the choices already out there are overwhelming. > And then there is your competition. It’s bad enough that they’re coming over from Europe and Japan, and springing up all over China. It’s also that retailers, once the lowly peddlers of your brands, are now full fledged competitors: Wal-Mart’s own “Ol’ Roy” brand of dog food has quietly surpassed Purina as the world’s top seller. 7-Eleven has launched its own beer. Home Depot, Whole Foods, Office Depot, and Costco not only have built-in distribution, they have their own advertising media IN the store. And they have new product development teams to rival yours. > Even when these channel partners do business with you, they seem to want their growth at the expense of your profit. > Their power is daunting: The high percentage of sales many of you already have with channel partners like Wal-Mart – is likely to reach 50-60-70% as they expand world wide. Even now, their dominance puts them in a position to essentially tell you how to run your business. Your only hope? Go over their heads and win the hearts of the consumers through big new product ideas, marketed under brands with a high degree of competitive differentiation and relevance. While growing the top line may never have been harder, concepting new products and building powerful brands has never been more important. Why, it’s practically the “Holy Grail” of anyone in the C-suite. But are these things the most uncomfortable truths we all have to confront? I think not. The most uncomfortable is that, to achieve profitable growth, we have to stop doing things the way we are used to doing them. Do things we’ve never done before. > > > 2 And if the way to do this seems without form – and darkness is upon your strategic plan – don’t panic. Here in the Garden of Education we’ll give you some answers. In fact, my task is to give you a mental framework to help you unlearn some past practices and learn some new ones. A point of view by which you can absorb, organize and apply all you hear the next two days. Of course, just like in the story of the Garden of Eden – in the Garden of Education we’ll come face to face with our old nemesis – TEMPTATION. > The Genesis of Profitable Growth M . L I N D S AY Snake: That’s me. Ha ha. Why if it isn’t my old friend Marsha. I’ve missed you my dear. Haven’t seen you since, hmmm when was it? February of aught two! (Marsha walks to the eight-foot tree that is covered with apples on stage. From the tree she takes a live six-foot bull python who speaks to the audience throughout Marsha’s presentation.) AHHHHH, Temptation – the traditions, the out-of-date practices that get in the way of our seeing with new eyes. Temptation, I assume you know most of our guests? Snake: You bet I do. Hi Frank. Hey Judy. Charles! I’ve seen too much of YOU lately. For any of you that want to see less of this guy, the mental framework I’m about to present can help. Snake: Oooh, hey, Stan! Good to see ya old buddy! Now what I’m offering up are NOT commandments. Snake: Yeah, you’ll be getting plenty of those from other speakers – Mike, Bob, Ram. Hey, is the president of Linux here yet? Bill Gates asked me to have a word with that guy. The framework I’m offering is a point of view by which to resist temptation when he whispers seductively in your ear, to… (Snake whispers something, to which Marsha is shocked.) You want me to WHAT? Snake: hisses with warning. Hey, if you don’t behave I’ll have to ask you to leave the room. Snake: You just try, I have a starring role here! That’s what you think. Will someone please take temptation away from me? Will you? Will you? (Audience members shy away from taking the live bull python from Marsha’s hands. Finally, someone comes to the rescue, walking out of the room and appearing to remove the snake – or Temptation that is – from the discussion.) Snake: Hee hee hee, you watch. I’ll be back… Now, where were we? Oh yes, a framework to help you recognize the temptations that inhibit new product development, new product launches, that inhibit us from doing our best. For in truth, it’s not really new products that fail, not their launch that fails, but we ourselves who fail by listening to the Snake. > > > 3 Snake: Yeah, you THINK you can get rid of me, but I ALWAYS find a way to slip back into your mind. I’m NEVER far away… (Snake has apparently slithered back in the room and is lurking somewhere…) Great… well, moving right along: Of the TOP TEN temptations we need to resist, the first is – trying to see the future through the lens of our current reality. > The Genesis of Profitable Growth M . L I N D S AY Temptation #1: Build from your current reality. It’s Business 101 to build a strategic plan by first assessing your current strengths, weaknesses, opportunities and threats. How many times have you done a SWOT analysis? How many times has it been unenlightening? Designing a future through the lens of your current reality actually sets you up for underachievement from the start. It creates a future that is a reflection of the present – resulting in “me too” products, incremental growth and short term solutions. This – when what you are looking for is just the opposite. Instead… Snake: HEY! DON’T TELL ‘EM! Begin by framing a NEW reality. New Perspective #1: Seek to frame a new reality. When seen through the lens of a NEW vision, your current strengths and weaknesses are cast in a new light. The gaps you have to close to achieve profitable growth are illuminated. Framing a new reality helps your team let go of their current prejudices – defined as they are by the status quo, habit, turfdoms, routines, known competitors, and known worlds. Here are five possible ways to do it – as exemplified by Andy Grove, Jeff Bezos, Steve Jobs, Howard Schultz and Roberto Goizueta. A) First, Andy Grove’s way. In his early days as Intel president he faced declining profits from being in a commodity business. So Grove fired his whole management team, himself included. He then led them out of their headquarters. And, when down in the street, he told them, “You’ve all been hired as the NEW team. Our mandate? Transforming Intel from the ground up.” As they say, the rest is history. If you and your colleagues could start your company and your brand over from scratch, what would the ideal look like? If you could develop a value proposition without restraints, what would it be? How would it manifest itself in a portfolio of products and services? Armed with this perspective, wouldn’t the SWOT analyses of your current reality take on new meaning? B) The second way to frame a new reality is Jeff Bezos’ way. It’s done by challenging the rules that define the category in which you compete. For example, with Amazon.com, Jeff challenged that the only way to sell books was in retail stores. > > > 4 Linux also challenged category conventions. In fact, Linux challenged two: The “rule” that says operating systems always have to be sold. (Linux is offered for free.) And the rule of how an operating system is distributed. (Linux is available on the Internet.) As you’ll hear when the head of Linux speaks later today, inventing guerrilla rules pays off when you are David fighting a Goliath like Microsoft. > The Genesis of Profitable Growth M . L I N D S AY < “Take me fishing because I miss my boy. Take me fishing like I used to take you.” Raising the bar of the category benefit can also change the rules of your category. As this ad showcases, the Recreational Boating and Fishing Association is doing this by positioning their pastime as being about far more than the sport. They’re touting an emotional benefit with a strong emotional pull to baby boomers. What opportunities for growth and profit could you find by challenging the so-called “defining rules” of your category? C) A third way to frame a new reality is to CHANGE the category in which you compete. Right now, it’s Steve Jobs’ way to growth and profit. For by stretching Apple’s brand from computers to iPod music players, Apple found a billion dollars in new revenue in only two years. They’re now making more money in the electronics category than in computers! Oranges are also seeking opportunity in an ad campaign that takes them from the fruit category, to that of candy. As candy, their sweetness delivers on the category benefit, but their healthiness makes them both relevant to the customer AND truly differentiated from the competition. D) A fourth way to frame a new reality? Invent a NEW category. It worked for Howard Schultz, the guy responsible for launching Starbucks. His eureka moment came in Milan while observing people in the cafes there. Of course, had he done market research, it would have told him that no one in the U.S. would ever wait in line for five minutes for a cup of coffee, much less pay three dollars for it. That Americans would never seek a sense of community or status through coffee of all things! A typical entrepreneur, Shultz just went with his gut and persevered. But one doesn’t have to be an entrepreneur to be inventive. One of Procter & Gamble’s most recent inventions is the new category of “at-home dental whitening.” With this invention, Crest Whitestrips immediately found 10 million users and $300 million in sales. Snake: I don’t get it. I find yellow teeth attractive. E) The fifth way to frame a new reality is Roberto Goizueta’s way. Goizueta was the CEO of Coke in the ‘80s. At the time, Coke was a leader in the soft drink market but spending huge amounts of money trying to defend tenths of a percent in market share – all at a huge cost to their bottom line. > > > 5 Goizueta’s brilliance was to reframe Coke in the mind of his management team – from that of industry leader – to that of a real underdog. How? He pointed out that the average, daily, per capita consumption of Coke worldwide was two ounces, while the world’s daily per capita consumption of all fluids was 64 ounces. In other words, Goizueta framed a harsh reality that ultimately became the mother of invention and acquisition for Coke. > The Genesis of Profitable Growth M . L I N D S AY To find opportunity areas for profitable growth, you might try any or all of these five ways. The important thing is to RESIST the temptation to frame your future from the point of view of your current reality. Instead, frame your current reality from the point of view of a vision for the future. But as exciting a path as this may seem, beware – for the Snake will continue to tempt you to think small. Snake: YES! Invest in your current products! Tweak them! Milk them! Temptation #2: Search for opportunities based on current products. It’s tempting to say, “We know how to make this, so what more can we do to make money with it?” From your current products it’s easy to deduce line extensions. From current customers it’s easy to assume a market for a new product. This is only natural. Snake: Yeah, it’s security. Comfort. Go ahead – build on the old, the tangible, what you know. Sort of like this model suggests – does it look familiar? We’ve all probably used it. But it has some limitations if you’re looking for expansive growth. Products you already make sold the way you like to sell New products and line extensions sold in the same channels Just because you can make new versions of existing products doesn’t mean channel partners will carry them or people will buy them. Growing evidence says this explosion of choice is turning people off: It makes their buying decisions more complicated when they want them made easier. I mean, do YOU want to choose between jeans that are western cut, slim cut, relaxed cut, traditional cut, trouser cut, boot cut, stretch, low rise, high rise, prewashed, unwashed… The choices can be overwhelming! Also, incrementalism can be an addiction, keeping you from seeing larger trends. We need only look at Oldsmobile to see that incrementalism does not a future make. For no matter what Oldsmobile’s product improvements, to most current car buyers the brand remained their “father’s car.” This kind of reaction may NOT have been rational. But as we learned at Brandworks last year, you can’t count on customers to make rational decisions. University of Chicago behavioral economist Richard Thaler makes it his business to study buying decisions. And he’s discovered we’re even more irrational than we think. His research shows we’ll go out of our way to avoid a $100 loss but do little to make a $100 gain. He says our brains see patterns where none exist. For example, if a stock goes up for three days our brains reason it will continue to go up. I apologize if this surprises you, but we humans are not evolved for the logical assessment of marketplace choice. Evolutionary selection instead developed us for quick, pattern-based, emotionally-based decision making. > > > 6 Which is why – what consumers TELL us they’ll buy is often not what they actually DO buy. They can’t help it! So much of our decision making is subconsciously driven – by emotions, attitudes and a search for meaning. Well, if THIS is the case, why not take advantage of it? > The Genesis of Profitable Growth M . L I N D S AY New Perspective #2: Search for opportunities based on values, attitudes, behaviors. Search for growth opportunities in the values, attitudes and behaviors of your consumers. Concept new products or services that deliver the meaning consumers seek. Here are four places you can start your search: A) First, there is database mining, perhaps more appropriately called “behavior-based profiling.” It’s when you collect data on past behaviors, analyze it, and use it to predict future behaviors. It’s essentially marketing intelligence – like: > The tracking of transactions – purchase patterns. Who buys what, where, when and how. Who pays full price or buys only when incented. > From this behavioral data you can create predictive models to find more prospects like your ideal. You can also calculate where and when new products should be rolled out, and new research says you can even predict the degree and timing of the consumer response. Behavior-based profiling is a starting point in your search for opportunity, but what if there is no data to assess? B) That’s where behavioral OBSERVATION comes in. Anthropology. Ethnography. Many of you are already observing or videotaping customers in their offices and homes. You assess what problems they are dealing with, what solutions they themselves are inventing – and use your observations to come up with new products or services. But like behavior-based profiling, it doesn’t usually reveal WHY people are behaving as they are. And the WHY is often the genesis of REAL opportunity. C) So the THIRD place to search for opportunity from attitudes and values is your consumer’s subconscious. More and more marketers are using psychoanalysis to uncover the meaning consumers seek in products and services. The insights you can discover in consumers’ subconscious can be very helpful: Our own work for tourism marketers has revealed that weekend getaways are not really about play, but about the subconscious longing to be what you can’t be at work – your real self. Psychoanalysis for one of our clients in the home products industry revealed that a fireplace is not a fireplace at all. In a Freudian sense it’s really – well, I can’t tell you because it’s proprietary information. But the resulting insights have the potential to redefine a whole portfolio of products, drive new product opportunities and even a national retail strategy. D) The FOURTH place to find opportunity is in what’s called the COLLECTIVE subconscious – the universal and timeless desires hard-wired into all mankind. The psychologist Carl Jung and the anthropologist Joseph Campbell made it their life’s work to understand the role of these desires that cut across gender, culture and generations. > > > 7 You can personally identify with their appeal. And you’ll recognize their personification – which we usually call “archetypes.” In fact, for years you’ve been drawn to them in stories, literature, movies, and even brands. < The universal and timeless desires hard wired into us all include: Nurturing… Individualism… Belonging… Achieving… Rebelling… Wisdom… Happiness Joseph Campbell Carl Jung > The Genesis of Profitable Growth M . L I N D S AY Archetypes are personifications of universal desires Hero Serve the Common Good Ruler Power/Authority Innocent Purity/Virture Creator Explorer Invention/ Newness Individualism/ Self-Fulfillment Regular Guy/Gal Mentor Loyality/ Dependability Continuity/ Heritage Rebel Jester Rebellious/ Anti-Authority Fun/Spontaneity Lover Attraction/ Seduction Caregiver Care/ Nurturing As personifications of universally held desires, research shows that archetypal brands connect more with consumers. They can give FOCUS to the expression of what a brand stands for. Why, if you know your archetype, you can concept products and services and a “style” of delivering them that leverages its motivational power. Magician Transforming/ Change Archetypal approach could drive profitable growth: Y&R, Stern Stewart Margaret Mark/Carol Pearson: The Hero and the Outlaw Archetypes help teach values through storytelling Brands closely aligned with one archetype FRODO Ruler Serve the Common Good Innocent Power/Authority 97% Creator Explorer Invention/ Newness Individualism/ Self-Fulfillment Regular Guy/Gal Mentor Loyality/ Dependability Continuity/ Heritage Rebel PIPPEN Rebellious/ Anti-Authority Fun/Spontaneity Lover Attraction/ Seduction GANDOLF SAMWISE Care/ Nurturing Transforming/ Change Archetypes provide focus and differentiation – motivating to consumers Microsoft® Nike ® Creator Innocent Coca-Cola® Explorer Apple® Jeep® Mentor Regular Guy/Gal The New York Times® ® Rebel Jester Pepsi® Lover Victoria's Caregiver Secret® Kraft® Virgin® Magician Olay® Market Value Economic Value Compared to confused brands – 6 year period As research done by Y&R and Stern Stewart shows – brands closely aligned with an archetype have a greater market value and a higher economic value than brands which are less focused in their values and meaning. So, companies and brands that seek profitable growth may want to start NOT with their current products, but with what is already subconsciously driving their consumer – their values, attitudes and a search for meaning. Snake: Hey, don’t listen to her! It’s NOT about meaning. It’s about PRODUCTS. START with the product. Then add on FEATURES. FUNCTIONALITY! Hero Ruler Wendy's 66% Purity/Virture > The Genesis of Profitable Growth M . L I N D S AY Temptation #3: Concept new products. The liability with the Snake’s approach is that in today’s world, most any feature or function can be quickly matched by a competitor. Or worse, your competitor can come out with a better feature or function, putting you behind. It eats time and resources without ever giving you the long term competitive advantage you seek. It becomes an exhausting treadmill of one-upmanship. Snake: TREADMILLS? I hate treadmills. Does your strategy look like… Old Way New Way Products you already make sold the way you like to sell them Vision/values/attitudes that are relevant and differentiating New products and line extensions sold in the same channels Platforms of products, sales practices and communications that manifest them One of our afternoon speakers, John Sherry, is an anthropologist and professor at the Kellogg School of Business at Northwestern. He points out that today “We live in a world of functional parity – where functional benefits are just the ante to get INTO the game.” So while functional innovation is appealing and incremental improvements are necessary to keep up with the competition, we can’t let it keep us so busy that we never get to concepting something MORE preemptive, MORE profitable. And what might that be? A scaleable PLATFORM based on the values, attitudes or universal desires already IN the subconscious of the consumer. New Perspective #3: Concept new platforms. A platform is a concept based on a singular value proposition – some call it a brand position. It is a foundation that allows you to deliver to your customer something RELEVANT to them, but in a way DIFFERENT than competitive choices. When smartly designed, a brand platform is SCALABLE, allowing you to build on it multiple product lines, multiple REVENUE streams. Concept new platforms based on meaning: For the creator in you > > > 9 The marketplace is full of great examples. There’s Apple’s platform of creativity – now being leveraged into consumer electronics. There’s Virgin – with its platform built on the “rebel” archetype, which they’ve scaled from an airline to cola, to record stores and now, to bridal wear. Another great example is the brand platform of “gracious American living” created by Ralph Lauren. ® For the rebel – via airlines, cola, ® record stores, bridal wear “Gracious American Style” ® Like all great brand platforms, Ralph Lauren is not about features or function, but higher level emotional and social benefits. In this case, casual sophistication and class. These benefits can stretch to most any category – clothes, housewares, paint, perfume. Such higher order benefits often command a premium price for a brand. And preempt the competition if you can claim them – be famous for them – first. Have you defined the brand platform by which to differentiate yourself from YOUR competition? Do you use it to concept relevant new products and services? Do you know how far your > The Genesis of Profitable Growth M . L I N D S AY brand can stretch? (Have you based your answers to these questions on your current reality or a newly framed vision?) Answering these questions may require help. One aid we’ve developed at Lindsay, Stone & Briggs is the Brand Genetics® Profile. It itemizes several areas which are potential “dig sites” for differentiation, relevance, stretch and competitive advantage: > The uses, users, and physique of your category and product line. > The functional, emotional and social benefits that are motivating to the targeted consumer. > The “persona” of the brand, that is, the distinctiveness and relevance of its heritage, its symbolism and its personality. All are ripe areas for exploration through anthropological or psychological research and archetypal comparisons. Snake: HEY, the people here are supposed to be marketing PRODUCTS! You’re telling them to market, WHAT? MEANING? That’s right, Snake. The wisdom of this was made clear at Brandworks University 2003 (which focused on the latest neurological, psychological and anthropological research findings on branding) when we learned that pretty much ALL human decision making IS emotionally and socially driven. Snake: But every philosopher for 500 years has told us rational and emotional decision making are separate and sequential acts! Well, the latest research has proved them wrong. In fact, we now know that the emotional coding of a marketer’s message is what gets the brain to even pay attention to any logical arguments. Snake: Folks, this is all just conjecture. Well, a lot of famous brands have proven the rule. And a recent research study for WPP conducted by Millward Brown confirms it, concluding: “Brands founded on broader values are more elastic than others – easier to extend to new categories, new frames of references, new usage situations and new products… Brand elasticity is affected by the brand’s ability to deliver on broader values rather than just category specific benefits.” From platforms and scalability comes marketing efficiency, Snake. And armed with that, the next step is… Temptation #4: Create a marketing plan for your products. Snake: Create a marketing plan of the product, pricing, places of distribution, promotion, positioning, packaging… > > > 10 You’re pretty smart for a serpent, but you’re a little out of date. Your way of thinking about a marketing plan leads people to see each “P” as a separate act. It fights the integration and brand alignment necessary for scalability, efficiency and profitability. Snake: Next you’ll argue that my way sets up silos organizationally. And operationally. It sets up silos organizationally and operationally. Snake: But it’s TRADITION! > The Genesis of Profitable Growth M . L I N D S AY Well, organizational best practices have changed. The marketplace has changed. Over the years, what has given a company competitive advantage has evolved – from access to raw materials to the production method, from the production method to sales, from sales to marketing – to today, the integration of what your brand stands for. Your ability to communicate it in all you do. < In order to compete and survive, businesses have had to keep up with the evolution of the marketplace: what gives companies an advantage has changed. Access to raw materials 40’s-50’s production methods 60’s-70’s sales 80’s-90’s marketing Now communications After all, they don’t call it the Communications Age for nothing: Hundreds of cable channels, thousands of magazines, Internet banner ads, direct mail, mobile phones, text messaging, email that speeds word-of-mouth in a “viral” way. The commercial buzz is constant! To survive much less thrive in this cluttered environment, a company, its marketing mix, its leadership all must excel at creating more buzz than their competition. In fact, the most successful new product marketers try to BUILD marketing buzz right INTO their products. New Perspective #4: Create products with the marketing buzz built right in. You’ll see this in many of the successful brands of today. They’ve developed a buzz that appeals to early adopters. They use the buzz to get the ear of the news media. Create products with the marketing buzz built right in. > One great example is Sub-Zero. A few years ago they launched a refrigerator/freezer in a drawer. It could go anywhere in your kitchen, your rec room, your study. It was THE buzz at the biggest home trade show of the year. The consumer press covered it over and over again. > > > 11 Another great example came this spring when Pringles launched chips that have trivia questions printed right on them. With this new product, they’ve doubled the fun factor – making a snack food an edible game. When you build the marketing buzz INTO the product, you provide talk value among consumers, news value to the media and subject matter to fuel bigger ad concepts with which to persuade your target to buy. > The Genesis of Profitable Growth M . L I N D S AY Here are three ways you, too, can create brand platforms and products with the marketing buzz built right in… > The first: Defy the conventional rules of the category, like books can only be sold in stores or “toothpaste has to be white.” Reframe reality for your consumer like – telling them to think of oranges as healthy candy. > The second way? Build into your product or service an unprecedented degree of differentiation and relevance. Not just something incrementally different, or moderately relevant. But dramatically so. Like a refrigerator/freezer in a drawer. > The third way you can build the buzz right into your platform and product is by combining two formerly separate things which – now linked – solve a clear consumer need. Band-Aid is a classic example, invented when a man applied gauze to his wife’s injured hand, then taped it on. A recent example? Toyota’s Prius, able to combine gas and electrical fuel systems for better efficiency and environmentalism. Snake: But big ideas fail more often! How to tell if your big idea is big enough: No opinion Hate it! Love it! Evidently not, Snake. An IRI study examined all new brands and line extensions introduced over a two-year period across 21 categories of business. They found that big ideas fail at the same rate as incremental ones. And of course, they found the gain from the big ideas is far greater. Snake: But there is NO way to tell if an idea is GOING to be big. Au contraire, Snake. A BIG idea is polarizing. Some colleagues and consumers will love it, some will hate it. Many will say “it will never sell” – as they did with microwave ovens. Snake: But what if a brand CAN’T build a lot of buzz into their products? What do THEY do for buzz, Ms. Smarty Pants? For them, the opportunity lies with differentiated communications. Making the communications so relevant and disruptive that their point of sale, PR or ads create buzz. No less than J. Walter Smith, president of Yankelovich, concluded from their latest consumer research that in today’s marketplace, marketing communications are now THE new source of competitive advantage for companies and for brands. > > > 12 Given this, anyone launching a new product will want to build buzz right into their marcom plan: How many of you are willing to consider DISRUPTIVE media strategies, like this “out of home” one for Mini Cooper? > The Genesis of Profitable Growth M . L I N D S AY To get publicity, how many of you are willing to challenge the defining rules of your merchandising, your events, your symbols? The Chicago Bulls challenged the convention that pom-pom squads were always young, beautiful women: Their male, middle aged, plump and bare-chested replacements got them tons of buzz across the country. Unconventional advertising can create buzz too. How many of you saw the Quizno’s TV campaign featuring the “spongmonkeys?” It was still creating buzz in The New York Times four mounths after its launch. Photo by Bill Smith Regardless of whether or not you can build buzz into your product, it makes sense to build more disruptive value into your communications. People’s lives are more and more cluttered. It takes disruptive ideas to get their attention. To NOT ratchet up your ad’s disruptiveness is to underutilize one of your most powerful launch tools. To NOT maximize the buzz in your ads and PR is tantamount to dismissing your communication as just a MINOR step in the launch process. Snake: Hey! I’ve worked hard to get people to see communication as just a minor step!! Temptation #5: The communication launch is just another step in the effort to achieve profitable growth. I know. In talking to marketing leaders around the nation these last few months, I’ve been surprised to find how little is known about best practices in launch communication. Sure, many companies do their own research on launch communication. But amazingly little has been done or published on best practices or across categories. Sure, there are things like IRI and Nielsen reports on ideal media weights and creative wear out, but most of what is published is only for packaged goods. Even after weeks of searching at the Marketing Sciences Institute, on the Internet – even with the help of the Association of National Advertisers and the Advertising Research Foundation in New York – I found little on launch communication “best practices.” Snake: Aha, a victory! No, a call to action for us all. Because: New Perspective #5: The communication launch is a major initiative in and of itself, deserving the same thoughtful process and allocation of resources as the development of a new product. Snake: YECH. Sounds like a bunch of integration and synergy to me. > > > 13 Precisely. > The Genesis of Profitable Growth M . L I N D S AY A launch really requires the highest form of “brand alignment.” Those of you who attended Brandworks University in 2002 learned about the benefits of brand alignment and the costs of unalignment. And the steps necessary to “get your ducks in a row.” < Benefits of brand alignment or “getting your ducks in a row.” • Employees are more focused and efficient • Resources are allocated more wisely • Products sell well for they manifest “drivers” of customer decision making • Sales communications are more focused, more powerful, more cost efficient • People manage to that which they are incented and measured – how well they deliver on brand promise The ultimate in integration and synergy suggests that you involve your communication launch team in the new product research and development – from the start. One rare study, from Boston University, analyzed 91 consumer product launches between 1998 and 2000. It concluded that what the most successful launches had in common was this: > Brand or product managers ran them, not VPs of marketing or the CEO. > They started with consumer publicity – to build early awareness and buzz. > PR was followed by advertising to control the message and its delivery at the frequency needed to engrain it into people’s minds. > Communications focused on the end user not the trade. > Of the launch budget, on average 78% was devoted to consumer spending. And of this, 51% was spent on advertising. > The more successful introductions had higher on average launch budgets – sustained over two years – the estimated time needed for the product to mainstream. You might also appreciate what a study from Hebrew University in Jerusalem found to be the most effective “creative strategies” – used in 89% of winning new product launches: > The most common was the “Replacement” strategy – where an analogy for the benefit is replaced with the new product. For example, puffy clouds are replaced with footwear that is comfortable and soft. > “Extreme Situation” is where unrealistic situations are used to showcase the key attributes of a new product or service: A Jeep driving underneath the snow to demonstrate its allweather driving capability. > “Consequences” showcase what happens if you DON’T use the new product. Your inability > > > 14 to get out of bed if you don’t take the vitamin. Turning ugly and alone in old age if you don’t whiten your teeth. > “Competition” is when the user of a new product can’t be distracted by other temptations. > “Uncommon Use” uses the product to solve something in a totally new context, thus exaggerating the benefits of its intended use. For example, a car being towed by a pair of tough wearing jeans. > The Genesis of Profitable Growth M . L I N D S AY > “Interactive Experiment” invites prospective users to diagnose their own need for a product – like the all black ad inviting the reader to rub his head over it – and note the dandruff that falls. > “Dimensionality Alteration” showcases the product benefit by altering reality – like an ad that demonstrated the speed of a new aircraft by reducing the size of the ocean. Or a wife arguing to her husband over their need for life insurance but doing it at a séance after his death. But the biggest predictor of launch communication success? Likability – defined as “the extent to which the communication delivers entertainment value (defined as disruptiveness, humor, music, celebrities, animals), empathy or relevancy without confusion, alienation or boredom.” Research also shows that likability and persuasiveness are highly correlated. Hmmm, likability, disruptiveness, humor, feelings of empathy. If THIS is key to persuasive launch communication, why do we try so hard to persuade with explicit, rational arguments – cognitive learning? Temptation #6: Persuade with cognitive learning. Snake: Hey, all the standard textbooks say cognitive learning works! Hmmm, let me see if I understand. Those who have a vested interest in cognitive learning (like text book publishers) are the ones recommending it as THE method to use. It does work, of course. But perhaps not to the degree implied. For recent research notes that only 20% of our learning about a brand or product tends to come from explicit learning. That leaves 80% to be learned outside of our conscious control. This learning comes from our normal radar which gathers tiny bits and pieces of information – often too small to notice or even show up in testing quarterly or yearly. Snake: Ooooh – it’s subliminal. I can make trouble with that. Well, “subliminal” is a loaded word. “Implicit communication” is a more accurate term for it. And research shows that the little things we are subconsciously exposed to can and do influence which brands we use. So we should harness the power of implicit learning to our advantage. New Perspective #6: Persuade with implicit learning. There are many ways to do this. The first of which is: A) Make sure your products truly DO illustrate what your brand stands for. That isn’t tough to do – as you are about to demonstrate. All of you here are going to build a mousetrap – under the Sony brand. > > > 15 Tell me, what does the Sony brand stand for? Electronics, a sleek style, miniaturization, music. And what are typical names in their brand platform of miniaturization? Walkman, Discman. Now if we were to deliver the Sony brand in a mousetrap – what would it look like? First of all, it would be an electronic trap, sleek, miniature. And when it caught a mouse – it might sound a musical alert. What would it be called? Mouseman. And it might look something like this. > The Genesis of Profitable Growth M . L I N D S AY < Sony Mousetrap. In this same way, your new products should implicitly deliver what makes your brand different and relevant. For if a picture is worth a thousand words, a product true to a brand’s focus is worth millions. Literally! B) The second way to harness implicit learning? Communicate your brand through your socalled product advertising. Because to your customer’s brain, “product advertising” is seen as no different than “brand advertising.” To your customer’s brain, products are not separate from their brands, they are ILLUSTRATIONS of them. Proof of the brand’s positioning. C) A third way to harness implicit learning? Play to the five senses. Learning from sight, smell, touch, taste and sound is what the human brain specializes in – perfected as it was to help us survive and thrive for the hundreds of thousands of years before language even existed. The brain of early man > developed to gather and process info from the five senses. Playing to the senses takes inference, emotion, the right casting, music and artistry. Burger King is a great example of bringing “smell” to TV advertising with a TV spot where an office worker is caught obsessively sniffing a Burger King wrapper left behind by a co-worker. > > > 16 D) A fourth way to drive implicit learning is through frequency. All the new “media” available today are rich in their potential to drive frequency of implicit learning – shopping carts, floor mats at retail, cars and buses now used as mobile billboards, T-shirts, product placement in movies or video games. Implicit media strategies are an explicit strategy for many advertisers today. I always have to laugh when I hear people say that advertising is dead. Far from it. It’s everywhere, just redefined as “touchpoint communication.” And you can use it at every opportunity to get your consumer to subconsciously absorb something about your product – before purchase, during purchase situations, and after purchase – where the customer needs reinforcement for their decision. Or encouragement to repeat it. > The Genesis of Profitable Growth M . L I N D S AY Take advantage of all touchpoints Pre-purchase • Print and television advertising • Coupons or special offers • Web site • Viral marketing • Direct mail • New product launches • Public relations • Consumer reports • Sponsorships • Partners like Procter & Gamble • Whirlpool customers • Home builders, contractors, architects Purchase • Retail partners • In-store displays • In-store ads • In-store demos • Sales force • Financing plans Post-purchase • Installation technicians • Customer service agents • Customer service representatives • Service technicians • Inspired cooking class • Customer satisfaction survey • Bill • Community work Example: Possible Whirlpool Brand Touchpoints From “Building the Brand Driven Business” by Scott Davis Even the venerable Procter & Gamble now commissions from its agency not a media plan, but a $2.5 billion “touchpoint” plan. It includes opportunities for explicit and implicit persuasion across the board. E) That includes the most powerful tool you can use for implicit persuasion – the branded experience. This is when a consumer experiences what a brand stands for – first hand – through an event, rally, tour, ceremony, transaction or virtual reality. Branded experiences offered by Ford and Crayola were recently featured in a Business Week article. Maybe you also saw the front-page story in the Sunday New York Times recently – heralding the American Girl experience strategy. As most of you know, American Girl is a Mattel brand of books, dolls and play accessories that stress certain values. A hot product with 7-12 year-old girls, they make pilgrimages to the American Girl retail stores in Chicago and New York, to experience via a restaurant and a mini Broadway show the values the educational toy brand stands for. As a marketing strategy, experiences ingrain your brand characteristics in a customer’s memory. The ROI of this includes the user repeating the story of his or her experience. From this, the marketer gets “media” frequency and the most persuasive of all communications, the word-ofmouth endorsement. Experiences may be the ultimate way to building the marketing buzz right into your product and its delivery system. So, Instead of preparing a typical plan for marketing communications… > > > 17 Temptation #7: Prepare a plan for marketing communications. Prepare a plan for the delivery of a branded experience at every touchpoint. Even have your NPD team concept new brand experiences. Snake: She’s trying to put me out of business. > The Genesis of Profitable Growth M . L I N D S AY New Perspective #7: Prepare a plan for the delivery of a branded experience at every touchpoint. Anthropologists Joe Pine and cultural observer Jim Twitchell – both speakers at Brandworks University in the past couple of years – note that many brand experiences can themselves become sources of revenue. They argue that in a society where most of us have pretty much all we need, we are starting to seek meaning through experiences. The offering of great experiences can give marketers a competitive advantage. The “experience economy” is even redefining our task as marketers – from “one way communications” – to the interactive task of shaping the customer or consumer’s entire decision-making experience. Whether you call this 360-degree marketing or brand alignment, it really means that the ROI we’ll soon be measuring is the “return on involvement” of the customer. How well you are at engaging them. Sound like a tall order? Snake: Well, we’ll just SEE if it gets any results. We’ll measure things at year end! Temptation #8: Develop a new product/communication launch process and measure the results at the end. I’ve no problem with that, Snake. Because measurement of sales, share and profit is the meaning of life for business. But new research shows that the single characteristic that differentiates the most successful marketers from others is that they focus people on measuring – NOT the end results – but the completion of the individual steps it takes to achieve them. Snake: WHAT? Well I never… New Perspective #8: Develop a new product/communication launch process and measure execution along the way. Measuring results at the end of the process doesn’t lead them to be achieved. But evidently, measuring execution along the way dramatically does. The thing that separates the winners from the losers, the saints from the sinners, is the discipline to execute according to the strategy and process every step of the way. Well, we’ve now put eight temptations behind us, and illuminated eight new perspectives for profitable growth. Only two more temptations to resist – one of which is – “Believing that opportunities best lie in commonalties.” Temptation #9: Opportunities lie in commonalties. Snake: Well, I firmly believe that opportunity lies in focusing on the MASS market. That opportunity lies in capitalizing on the BIG trends. > > > 18 All good things to consider. But by the time trends are adopted by the masses, your competitors will also be hot on their trail. When things become common, they offer you no competitive advantage, no opportunities for differentiated new products or the invention of new categories. No buzz. For real opportunity, look to the paradoxes – the oddities, the anomalies, and being first to capitalize on them. > The Genesis of Profitable Growth M . L I N D S AY New Perspective #9: Opportunities lie in paradoxes. Many of you may remember the compelling case Ryan Mathews made for this last year at Brandworks University. In his book “The Deviant’s Advantage” he and coauthor Watts Wacker argue that opportunity comes from the fringes of society. The fringes define what is cool, edgy, disruptive to the mainstream and what is full of buzz and intrigue. If you can be the first to discover and capitalize on what’s happening at the fringes, you can be a market maker and preempt your competition. The examples Mathews cites range from the founding of Las Vegas, to the World Wrestling Federation, from Virgin to the soft drink SoBe, from Post-it Notes to Playboy, Linux to Palm Pilots. Each targeted the early adopter and leveraged a contradiction. Or defied what, by conventional wisdom, was thought to define the category. And the ultimate paradox in which your opportunity for profitable growth lies? < The ultimate paradox? The things that will lead us to growth – are the very things we are afraid to embrace. That all these new perspectives that comprise our framework for growth – are the very things we will be afraid to embrace. Instead of applying them – we’ll cling to the commonplace, be tempted by the traditional. We’ll find a way to drift back to doing things as we’ve always done them, yet hope for different results than the past. And then, when we once again don’t achieve profitable growth, when our new product fails, what will we say to ourselves? Snake: It was EVE’s fault. And Adam! HE really blew it! Go on, point your finger at THEM! THEY made bad decisions! THEY didn’t listen to the boss. THEY didn’t follow the process! They made a (gasp) big mistake! Temptation #10: The problem lies with other people. The real mistake Adam and Eve made was listening to the Snake in the first place. Their sin was a lack of willpower to resist temptation. > > > 19 And as each of us examines our own role in trying to achieve profitable growth through more effective new product launches, it is time to confront the single most uncomfortable truth we can face here in the Garden of Education: You can’t point the finger at others – only at yourself. New Perspective #10: The problem lies within me. It is human nature for all of us to whine about the things we can’t control – like the actions of others – yet do little about what we can control – our own behavior. > The Genesis of Profitable Growth M . L I N D S AY The Snake tempts us to get off the hook by pointing at others. But the first step to profitable growth is to acknowledge “improving the odds starts with me.” Yes, if you do things a new way, you might fail. But the risk of failure exists whether you listen to the Snake OR try a new perspective. So let’s take risk and failure off the table as the things we’re trying to avoid. And let’s talk candidly about what the problem really is within us all. It’s fear. Snake: FEAR!!! My specialty. The Nobel winning behavioral economist Daniel Kahneman explains, “Whenever we are expected to make a big decision, we feel afraid. Fear distorts the perception of risk. No matter how minimal the risk felt, fear introduces error into decision making. The fear of what might happen overshadows what probably will.” By allowing fear to creep in, we are literally ENSURING that people will make bad decisions. So the first step to having profitable growth through more effective new product launches is really to face the fears within. And overcome them. How? Change our expectations. Successful new product launches are, like a lot in life, a self fulfilling prophecy. If you think you can, you will. If you think you can’t it’s a sure thing you won’t. Be like the entrepreneurs who succeed because they don’t consider failure an option. Redesign your new product launch processes away from the intention to NOT make a mistake. IMBUE your process with positive intent – like asking, “In what way CAN we make this work?” Accept the fact that to be more effective at new product launches you’ll have to UNlearn some things. Accept that while you unlearn the old and practice the new you are likely to be worse at your job for awhile! Ahhh, the paradox: Becoming worse in order to become better. Being more afraid before you can become more confident. Another key to overcoming fear? Reframe it as a leading indicator of personal growth. A sign that you are about to demonstrate what we all most admire in legendary business leaders – courage. In your head, change your job title, from whatever it is now to “Chief Courage Officer.” Then: > Be famous for your courage. > Be famous for building it in others. (That will immediately help people make better, bigger decisions, for the right reasons.) > Foster optimism. As Chief Courage Officer, the ONLY fear you’ll want to instill in others is the fear which research shows to be the only kind that motivates people to do better new product work – the fear of obsolescence. > > > 20 And that brings me to the last secret to overcoming our fear. Finding a NEW basis by which to make your decisions. Business school models teach us that decision making is best when based on logic, collected data and alternative scenarios when assessed in a calculated way that plays to the cognitive in our consumer. > The Genesis of Profitable Growth M . L I N D S AY But tell me: If that model is so smart, why isn’t it producing more of the profitable growth and effective launches we seek? The answer? Today’s rapidly changing marketplace doesn’t allow the time for sifting, winnowing and alternative scenario building. The decision making model for today’s world is: When in doubt – go with your gut. Harvard professor and psychologist Howard Garner says, “Gut instinct tends to be more informed and even better than deductive reasoning.” Behavioral economists that study the most successful leaders tell us that, “their most brilliant decisions come from the gut.” Researchers explain that gut decisions are based on implicit learning. Implicit learning of real and valuable knowledge. Subconscious pattern recognition. Things hard to articulate, but often “right on.” So Mr. or Ms. Chief Courage officer, what does your gut tell you? To listen to the Snake? Or to adopt some new perspectives? Snake: Hiss... Hey, Snake, what are you doing back up on the stage? Snake: Hee hee hee. You can’t resist me. None of you can. Ha. We’ve all come to realize that profitable growth comes down to having the willpower to ignore your temptations and having the courage to lead from a new perspective. But since temptation will always be lurking… (Marsha picks up Don’t listen to the snake the snake and places him back on the tree.) We’re immediately promoting all of you here to the position of Chief Courage Officer. You may not yet have all the tools to do the job, but before you leave Brandworks’ Garden of Education tomorrow (she plucks from the tree – not an apple – but a large olympic-sized medal on a ribbon that reads “For Outstanding Courage”), you’ll know enough to earn a medal. Marsha Lindsay is president and CEO of Lindsay, Stone & Briggs, a brand development firm based in Madison, Wisconsin, USA. Her firm specializes in helping marketers define their brand’s relevance and differentiation, then create new revenue streams by driving it into new products/services and their launch. She is the immediate past secretary-treasurer of the American Association of Advertising Agencies and teaches the MBA course in brand strategy and management at the University of Wisconsin-Madison. > > > 21 © Lindsay, Stone & Briggs 2004. All rights reserved. This document may not, in whole or in part, be distributed, adapted, displayed, incorporated into other material, reproduced, translated, or reduced to any electronic medium or machine readable form for any purpose without prior written consent from Lindsay, Stone & Briggs. For information about LSB or for additional copies of this speech, please contact Stephanie O’Neal at: soneal@lsb.com or call 608-251-7070. 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