best buy won’t out-amazon, amazon

Best Buy isn’t happy. It knows that consumer behavior has changed over the course of the past few years, and that the brick-and-mortar, big-box stores have given way to a growing trend of online shopping. Hoping to reverse a one-year drop of $18 in the price of their stock, Best Buy is looking to make some changes before it becomes the next Circuit City.

According to The Motley Fool writer Rick Aristotle Munarriz, Best Buy’s “road map” to success in the coming years involves targeting mobile customers with smaller stores, growing its global market in China, focusing on video gaming and appliances, and expanding its online sales in order to compete with Internet retailers like Amazon.com. As Munarriz says, all of these steps sound great on paper, but they don’t address Best Buy’s real branding problem: What is “Best Buy,” and how are they different from their competitors?

It’s an identity crisis, and one that its new business plan fails to address. By expanding its product line into video games and mobile, Best Buy will be faced with niche competitors (such as Game Stop for video games, and the wireless carriers themselves for mobile) that have the luxury of having to only focus on one consumer sector. Does Best Buy think it can offer consumers better, or cheaper, offerings than these niche retailers?

And for online retail, Best Buy can’t do what Amazon does. For one thing, its brick-and-mortar footprint ties it to the physical world. So long as Best Buy maintains stores, it is obligated to variables that online retailers can avoid (utilities, in-store employees, limited retail space, etc.). Avoiding these costs and restrictions are what gives Amazon its edge over competitors.

It’s something Walmart figured out years ago. “You can’t out-Amazon Amazon,” says marketer Seth Godin, who saw this marketing maxim a decade ago on a banner hanging in Walmart’s corporate headquarters. “If Walmart has said 'We will not be able to win the race for selection, shipping, and price,' then why do you think you’ll be able to?” says Godin. Walmart knew they would never be able to compete with Amazon on an online playing field. They accepted the defeat early on, and instead focused on retail in physical locations. This saved them millions of dollars in what would have been a futile, online battle.

Best Buy should accept the same, and instead leverage one asset Amazon doesn’t have: its employees. Even though online consumerism is a growing trend, there is still a segment of the market that feels more comfortable purchasing goods the old fashioned way: in-store. Best Buy could put more focus in online retailing, where it will always be outmatched by online competitors; or, it could invest that capital in making itself the best physical retailer of electronics.

Having well-staffed stores with expertly trained employees able to assist consumers with questions and product recommendations, Best Buy could service consumers in a way that no online retailer can. With this strategy, it could differentiate itself from competitors like Amazon, and own the category of consumer electronics in brick-and-mortar stores. Best Buy could define itself as “the” place to go to for electronics because consumers would know they would be making informed decisions based on the advice of “experts” rather than just product reviews. If Best Buy can win consumers on expertise, it doesn’t have to win them on price.

It seems to be a much more worthwhile effort than making the mistake of trying to do battle with both online and offline competitors. After all, a servant can’t serve two masters. It’s a multi-front war that Best Buy cannot, and will not, win.

when do discount programs begin to undermine brand value?

We live in a new era of brand engagement. The Internet has opened up a floodgate of channels in which to target consumers. A growing trend among these marketing channels is location-based services (LBS) like Google Places, Facebook Places, and Foursquare. These services use GPS location via smartphones, allowing customers to “check-in” at local businesses. Sometimes users can even check-in to receive discounts, which is also another growing trend for marketers.

Sites like Groupon, LivingSocial, and ScoutMob all offer coupons and discounts for local businesses. In theory, the idea is that obscure, local businesses with limited advertising budgets can generate business by offering discounts through these sites. And, after these customers visit retailers, they will return again in the future.

Branding maven Al Ries disagrees with the strategy, saying discounting hurts brand value.

“You see the same phenomenon happening across the retail spectrum,” Ries wrote in his February column at AdAge.com. “Macy's, Kohl's and most department stores seem to have ditched the idea of positioning their brands, instead relying on discounts, sales and coupons to keep consumers coming back into their stores.” Ries says this is especially dangerous when social media makes it easier for coupons to fall into the hands of regulars, rather than first-time customers.

Ries’ point is especially apposite when it comes to discount programs for regular customers offered through LBS when they check-in. The question then becomes: Are consumers coming to a business because of brand loyalty, or because of discounts? And, will they stop coming if the discounts go away?

There is definite value into sites like Groupon generating new business for local retailers. And, the coupon rotation on the site makes it next to impossible for consumers to align their purchasing decisions based on a prediction of upcoming deals. However, discount programs in general—especially those offered through LBS or other marketing channels—do raise a good debate about when discounts begin to undermine the overall brand value.

Instead of drawing any conclusions on this topic, I would like to open it up for discussion in the comment section at BeneathTheBrand.com to get the opinions of people across the industry. Do discount programs ultimately undermine the value of a brand, as Ries suggests? Or, does discounting generate enough new business where the overall net is a positive for retailers?

kia revisited

I was told this week that one of my colleagues BeneathTheBrand.com is going to be challenging an article I wrote there. I went back and looked at my portfolio, trying to decide what he might be looking to counter. The most controversial of the articles I've written so far was the one on Kia's offering of a $26,000+ trim of their Optima model.

In the piece, I asserted that this was yet another sign of a possible move into the middle of the market by the Korean manufacturer. And, I stated it was a mistake for Kia to abandon their brand position as a maker of economically priced vehicles. Many commenters balked at the idea of offering a handful of “expensive” (by comparison to their other models and trims) is indicative of a move into the middle of the market.

Of course, that’s another point altogether. And, for the sake of the article, I assumed that they are.

To get back to the main thrust of the article, that Kia would be mistaken in leaving its current position, one has to only ask themselves: “What is a Kia?”

The answer is an affordable, small economy car. This is the position that Kia holds, and holds securely. Every car that it produces that does not fit this brand image undermines their hold on the position. And, as (or, if) they move to the middle of the market, they’re going to completely lose the identity customer’s use to define their brand.

End of story.

lessons from leo burnett

"We, over and over again, stress this so-called inherent drama of things," Leo Burnett told Denis Higgins in an interview years ago. "There’s usually something there, almost always something there, if you can find the thing about that product that keeps it in the marketplace." Illustrating this point in his work, Burnett once slapped a piece of red, uncooked meat onto a red background. The ad campaign worked, with wild success. "This was inherent drama in its purest form," Burnett said.

Burnett’s point is that in every brand, there is a single factor that separates it from all other brands. And, if there isn’t, then it won’t be on the market for very long. Good advertising teams know how to bring that inherent drama to life. They are like sculptures who can bring a masterpiece out of a solid piece of stone, as if that figure was inside the stone all along. Unfortunately, many ad campaigns try to artificially manufacture this inherent drama, leaving the audience with superficial, forced feeling about a about a brand rather than what naturally should occur.

TalentZoo.com writer Kaitlin T. Gallucci has written the past few weeks on what she calls "lazy marketing" when it comes to developing creative for brands. "When brand messages can apply to almost any brand in a given industry, rather than focusing on individual differentiators or unique selling propositions, the messages become unclear, unremarkable, and unconvincing," she writes.

Gallucci highlights a significant problem with today’s marketing: a lack of differentiation. Without differentiation, products in a category blend together and lose their unique identity. A part of the problem has to do with an overabundance of products in a single category, but a larger portion of the responsibility falls on the shoulders of creative teams who are substituting "advertising tricks" for true brand development. The ads they develop are certainly creative, sometimes funny, and usually good for getting attention. Their fatal flaw is that they’re all show and no substance. So, while they may get the audience attention, they do nothing to sell the brand.

Attention is important, without question. And many of the techniques used to get attention are certainly with merit. The problem emerges when tricks are the sole technique used, and the "inherent drama" of the brand is completely ignored. It’s much easier to get attention than to sell a brand. But, advertising is not simply about getting the most attention. It’s about selling the most product. "Sheer visibility is important with today’s rising advertising costs; if you don’t get noticed, you don’t have anything," says Burnett. "But the art is in getting noticed naturally without screaming or without tricks…"

Many on creative teams will say today’s consumers are too difficult to reach without these tricks. And, if you want to get their attention, you have to use humor, or flashy graphics, or other advertising "tricks." This is a cop-out. Consumers are flooded with more advertisements now than they were during Leo Burnett’s time, but it is no excuse for bad advertising. It simply means working harder to find the brand differentiation — this inherent drama — and bringing it to life.

the brand experience

Brands, beware. Consumers are learning. Thanks to the rise of the digital age, an exponentially increasing level of data is available to consumers. As a result, they are more knowledgeable about their purchase and demand more from brands than ever before. The digital age has tipped the market in favor of consumers.

This has created a consumer culture based around “brand experience,” especially for younger consumers more accustomed to a full, “360-degree” brand package. One company that has mastered the art of the brand experience is coffee titan Starbucks, who less than five years ago was trying to get a hold on falling stock prices and nationwide store closures. Much of the success for Starbucks’ brand rejuvenation can be credited to Chief Marketing Officer Annie Young-Scrivner. Young-Scrivner, who joined Starbucks in September 2009, retooled the company’s marketing efforts to align the brand with its once youthful and innovative image.

"If there was knock on Starbucks, it's that they lost their cool factor,” Stifel Nicolaus, Vice President and analyst Steve West recently told DMNews. "What I have seen them do a lot more of is really connect with the consumer through social media and with loyalty cards.” West believes by reaching out to what he calls the “Apple or the Facebook digital generation,” Starbucks will be able to recapture its mojo.

In December 2009, Starbucks launched their “My Starbucks Rewards” program and enabled customers to “reload” their cards online. The rewards program is also reinforced with postal and email marketing announcements. In May 2010, Starbucks launched the sleek and highly interactive frappuccino.com in coordination with the “Frappuccino Happy Hour” promotion. In July 2010, they began hosting free WiFi connections. And, in January of this year, Starbucks announced a mobile payment system where customers could make in-store purchases using applications on select smartphones.

Each one of these programs has a unique benefit to the brand. The rewards program creates loyalty. The multi-channel marketing generates sales. The interactive project site launched a new product. The free WiFi improves consumer relations. The mobile payment system increases the speed of transactions. Yet, all of these programs feed into the Starbucks brand experience, one that has been masterfully re-crafted to reflect the innovative, youthful brand that many thought Starbucks had lost in its meteoric growth.

Starbucks is coffee, but its brand is more than that. It’s the Starbucks experience. It’s what sets it apart from other coffee chains, and why people are willing to pay $4.00 for a drip coffee. And, the brand saw what happened when it forgot what made it Starbucks.

Other brands should look to Starbucks as a model for how every detail of its brand plays into a larger concept of the brand experience. Starbucks wanted to portray a savvy image and regain the “cool” factor, so it aligned its brand signals to reflect this image. For brands that want to project a particular idea, they should look to every detail to ensure they are in line with promoting that idea. Otherwise, the brand experience will be inconsistent and flawed and consumers will take notice.

For example, if a brand wanted to project an image of “quality,” it will ensure that not only is its manufacturing process designed to maximize durability, but that it has a customer service department that quickly resolves any issue relating to defects or under-performance. Every detail of the brand should be aligned to reinforce the total brand experience of “quality.” This will create brand loyalty among existing customers, and it will generate positive feedback in social media and online reviews, which can lead to new customers.

Today’s consumers love to share their interactions with brands. It’s why sites like Angie’s List have become so popular. And, it’s why any Google Map search yields results for businesses with consumer reviews pulled from sources like Yelp, Zagat, and Yahoo. If consumers are talking — and, they most definitely are — it’s important that they only have good things to say about your brand. That’s why the total brand experience is so crucial.