Marketing Basics 101

Customer-Centered Brand Management

In a future set of blogs, I'd like to discuss how brand management can help agents and small brokerages compete in a world of consistent change and down markets. For now, here's an article from the Harvard Business Review for your edification.

Key ideas from the Harvard Business Review article by Roland T. Rust, Valarie A. Zeithaml, and Katherine N. Lemon

The Idea

We all know that to boost profits, we must grow customer equity—by building loyalty and broadening our offerings to fulfill our customers’ emerging needs. But though we “talk” customer focus, we don’t “walk” it. Instead, we strive to build brand equity—assuming sales will follow.

Consider General Motors’ Oldsmobile brand. As Olds buyers aged, GM created ad campaigns intended to lure younger buyers to the existing brand, instead of focusing young buyers’ attention on a different GM car or launching a new brand geared to their tastes. Despite GM’s costly efforts to refurbish the brand, Oldsmobile’s market share sputtered from 6.9% to 1.6% during 1985 to 2000.

How to avoid such scenarios? View your brands in a new light: They’re not your raisons d’être you must defend at all costs. Rather, they’re tools for creating and cultivating profitable, long-term relationships with customers.

To put your brands in their proper place, organize your business in new ways: Assign people to manage customer segments, not brands—then give them the strings to the marketing purse. Create brands that satisfy increasingly narrow customer segments. (Think men’s and women’s vitamins.) And retire ineffective brands.

Brands come and go, but your customers must remain. When you put brands in service of your customers, your customer equity and profits soar.

The Idea in Practice

To put your brands in service of your customers:

Create the Role of Customer Segment Manager

When brand managers control your company’s marketing resources, they may persist too long with a brand that has lost its punch. To ensure that decisions based on customer relationships trump brand-based decisions, create or strengthen the role of customer segment manager and allocate resources to that function rather than to traditional brand managers.

Build Brands Around Customer Segments, not Vice Versa

Differentiate your brands by target customer segment more than by product features.

Example: At Liz Claiborne, the world’s largest women’s clothing company, each customer segment has its own named brand and personality—such as Dana Buchman for professional women, Ellen Tracy for sophisticated but casual women, and Elizabeth for plus-size women. The lines are so strongly differentiated by brand, fit, and style that few consumers know they’re made by the same company.

Make Brands as Narrow as Possible

Use advances in technology and customer information to tighten each brand’s focus on increasingly narrow customer segments. Witness the television channels geared specifically to Latinos, golfers, senior citizens, African-Americans, women, and gays. Tighter focus enhances a brand’s clarity and value—in customers’ eyes.

Know When to Hand Off Customers to Other Brands

Don’t spend disproportionately to hold on to a brand’s customer relationship if customers fit more naturally with another brand in your portfolio.

Example: If a longtime customer of Fairfield Inn—Marriot’s budget hotel brand—begins traveling more frequently, Marriott might use special deals to invite him to switch to its higher-priced Marriott brand. The company would forfeit the Fairfield Inn brand relationship for the higher-value customer relationship with the Marriott brand—understanding that future profits aren’t driven by repeat business at Fairfield Inn but by customers’ purchases across all Marriott brands.

Retire Ineffective Brands

Sometimes a brand becomes very unattractive to a customer segment. Reversing that impression might be prohibitively difficult. Instead, retire brands that no longer have avid customers—even if overly aggressive brand managers want to protect their fiefdom. Nabisco, for instance, phased out its Mr. Salty brand when the public became concerned about the ill effects of too much sodium.