Lessons on Brand Equity: Toyota

When a company wants to launch a brand - what the brand equity is or what the brand will stand for is a big decision. For example you likely won't want to stand for the same thing as your competitor because you will then be fighting over the same consumers. That's why there are so many brands out there as consumers want different things.

Volvo stands for safety, BMW for performance, and Toyota stood for reliability. As you can see not all equities are created equal. When Tiger Woods stood for wholesome, trustworthy competitor - he suffered a major financial set back. When Charles Barkley stands for funny athlete - he's still in a super bowl commercial even after his sex scandals.

So you can see - in addition to actually delivering on your equity - perhaps the toughest challenge is MAINTAINING it. Tiger obviously made more than Sir Charles, but Charles Barkley has a lot more margin for error built in to his personal equity. And Toyota's equity of reliability demands a lot more from their company than BMW continuing to deliver horsepower. And when it rains on Toyota's reliability equity it pours!

In addition to hours of TV dedicated to the fear of run-away Toyotas and tips on what to do if your Toyota goes crazy on you... you get these stories:



(A joke in poor taste is that the only thing worse for Toyota's image than the fatalities of their run-away cars are the survivors of their run-away cars!)

I haven't seen a story where every day you hear something worse like the Toyota one since the John Edwards story. And I think part of the reason is because even though other companies have plenty of recalls - this one cut to the core of what they stood for. Also it was a recall of some freaky run-away car scenario which is as scary a scenario we have seen since the Firestone tires. Now Toyota is the #1 car manufacturer in the world - so I am NOT criticizing their equity position in terms of obtaining market share - but rather for degree of difficulty to maintain it.

I'm just saying there are some brands who become market leaders with more attainable equities like Tide standing for cleaning or Kleenex standing for whatever it is a paper product stands for (hygienic way to blow your nose?) and it's easier to be one of those in many ways. You are just better off standing for the cheapest hotel than standing for the cleanest hotel - because when those reports come out about what fecal bacteria is found where with a black light - at least you can still be a cheap hotel but it's hard to still be a clean hotel in the minds of consumers.

Other equity mistakes are creating a brand around a person. I mentioned Tiger Woods, but think of Martha Stewart. Once your celebrity has a scandal - the entire brand is damaged or destroyed. This is much worse than just having this person as a spokesperson. For example - Gillette is doing fine without Tiger - they will just get the next star (Drew Brees?) and they will continue their performance equity. But Tiger Woods as a brand is in a rough place. That's not to say he couldn't bounce back - but it wouldn't be the same.

If I were launching a cell phone company - I'd much rather stand for cool or cheap phones or fun apps than try to be the most reliable network. My customers will cut me more slack when the reliability isn't perfect because they will take the trade off to get the coolest looking T-Pain phone. Now reliability may be a key seller for people in this market, and the "reliable" brand may have a greater market share - but the day Verizon has a Blackberry-like outage for a day or two - all of their marketing dollars spent to create that brand equity are decimated. You are better off picking an equity you can control more tightly than to be the company that "never makes a mistake".

It's also a little bit like investing in Apple. If they continue to sell the idea that Steve Jobs is the genius behind all of this - then you can see what happens to the stock price when Steve Jobs gets very sick - or what will happen when he retires. Some equities have a short sighted time frame to them - or aren't something you can control well. Many fashion fads rely on the equity of being "in style" but as soon as the fad passes - brands like hyper color or jams etc almost disappear.

What do you think happened to NetZero (free internet) and Napster (free music - though illegal) when these brands started charging for their products after advertising that they were meant to be free? Even if they are still around in some capacity - they lose all credibility and thus - market share. NetZero was also short sighted as their model was built on showing ads while people surfed over the modem, when ad rates plummeted AND people were willing to pay for highspeed - the "free internet" equity bit them in the behind. We all know why Napster's equity was short sighted, though a revolution none the less - but not a sustainable business or brand.

Another equity mistake is of course having too narrow a brand equity. Think of the train companies who went out of business when airplanes came along because they really thought they were train companies instead of Travel companies who could have been investing in developing planes!

I'm all for capturing the most market share - my caution is some equities you can control - like BMW in my opinion - just crank out the next engine - but in Toyota's case they have been banking on consumer perception of reliability - which for a long time scored them some big points, but it will be interesting to see how damaged the brand becomes because of these issues. When the core thing you stand for is where your company has problems - you are in big trouble.

Shocking Commercial + Business

I saw this commercial on TV tonight.

Watch the 30 second commercial before reading any further.



So the version I saw at the end said "When divorce isn't an option" so I actually thought for a second that this was an ad for hit men. But it turns out instead it is an ad for a social networking site for cheaters.

Apparently this company caused quite a stir with a billboard in Times Square with their slogan - "Life is short - have an affair".

Here's the founder of this site on the View


For what it's worth, approximately 135,000 people in the US visit this site every day, and 3.86 million members.

Maybe the market needs MORE bad news?

As a follow up to Dale's blog about how they try to over simplify why the stock market went up or down on a given day (when the reasons a market moves are not only multi-variable but partly irrationally and emotionally based) - I took this screenshot today:

A Few Quick Hot Topics

I could probably write a blog on each of these but they are piling up too fast. So here's some flotsam and jetsam from the top of my head.

1) Giants WR Plaxico Burress shot himself in the leg at a NY night club while carrying a concealed weapon. Apparently he used to have a permit for this weapon in Florida (I thought I heard it had expired) AND NY doesn't allow concealed weapons so he is facing 2 felony weapons charges. Apparently NY also passed what they call the "P. Diddy" law which carries a mandatory 3.5 year sentence for felony weapons charges (I guess P. Diddy got out of serving time for similar charges and NY wasn't about to let it happen again). Now here's where I have a problem. Michael Vick was sentenced to almost 2 years for executing and torturing numerous dogs, not to mention the abuse to the remaining 47 dogs who were rescued (and he was at this for years). Vick was intentionally and purposefully torturing these animals for his sick pleasure - and he may serve 1/2 as much time as Plaxico Burress who is - in my opinion - just an idiot. I am much less concerned about having Plaxico Burress roaming the streets than I am about Vick. I think Michael Vick is sick in the head and unfeeling people like that are dangerous. Plaxico on the other hand probably isn't the sharpest knife in the drawer - but I believe he is less a menace to be roaming the streets.

2) From a great debate I heard on the way home on the radio - A 24 year single old woman was denied a prescription for birth control from her doctor because he ethically disagreed with her choice to engage in sex before marriage (never mind all of the other reasons to be on birth control including regulating periods and acne but that's not the point). The doctor actually went so far as to lecture her about her morals. Now I don't have an issue with the Doctor having a religious opinion on the matter but I do object to the patient not receiving LEGAL medical options available today because her Doctor disagreed with it. In fact - I think it is in some ways discrimination. I think it is fine for the Doctor NOT to chose that for himself, but his job is to provide care for his patients and I was surprised to hear that it was possible for him to basically be the judge on whether or not you should be allowed to use contraception. In fact - this month Bush is pushing for a bill in congress which would give Doctors MORE authority to be selective in their care of patients based on religious beliefs. Now you can see things get murky - I actually don't have an issue with a doctor choosing not to perform an abortion based on the Doctor's views - but to leave that off the table for a patient who is relying on a Doctor to understand all of their medical options seems wrong. I was unaware how much of an issue this was in doctors offices today. In fact - apparently doctors are not giving patients all of their possible legal choices for health care based on their religious beliefs, and as you can guess this includes not informing patients on their options for birth control, abortion, and end of life issues such as being removed from a ventilator etc. I think if a Doctor doesn't want to perform a vasectomy that's fine - but if they are actually knowingly withholding medical information about LEGAL options from their patients then they have gone too far and probably shouldn't be doctors. Imagine if someone refused to sell you a house because they disagreed with your country of origin. There are laws in place in real estate to prevent discrimination and it should be similar in medicine. If you are in a profession but disagree with available and LEGAL options I don't think you should be able to impose your views on others who are relying on you as a resource. What if your Doctor witheld chemotherapy options from your inoperable cancer and you didn't even know it was an option until it was too late and your Doctor let you die because their religion (maybe scientology) didn't believe in chemical fixes? It's maddness.

3) Big 3 Bailout. I say no. Here's why - it's an entire industry in the US that is not competitive because of cost structure and the only way to get out of archaic union contracts is in bankruptcy. By keeping the existing companies afloat as is - it only prolongs the misery. In fact - the only people the current employees of the Big 3 should be pissed at are all of the previous generations of big 3 employees who retired on fat pensions and were paid above market values for labor that was locked up in union contracts. If you see an industry with gross amounts of waste - people working less than market hours for guaranteed salaries and contracts retiring with huge benefits (that are now crippling the companies) - RUN, don't walk, away from that industry as a profession.

Sneak Peak into Windows Mojave

You've heard how much Vista stinks right? (I actually am blogging on Vista as we speak!) So it's no wonder Microsoft is releasing Windows Mojave so soon! This is what I call a clever and brilliant marketing campaign after the cows have already fled because you left the barn door open. Basically a great marketing idea but it's too late. The damage has been done.

Take a peak at Windows Mojave

5 Secrets to Success, Wealth, and Happiness

One man's road to Success, wealth and happiness was created by studying the Book of Proverbs, the proverbs of King Solomon (who knew). Anyways instead of a book review (I'll skip the part about how this guy makes his millions) I thought I'd save you some time and give you the gist of the book.

So here are the 5 Secrets to Success, Wealth, and Happiness. I have expanded upon the 1st two in detail because they really stuck out to me.

"Secret" #1 - Be Diligent
This Author states that it is pretty much human nature to take the path of least resistance, to do the minimum, and to just get by. He argues that in order for people to aspire to be more, all the success, wealth and happiness in the world is reserved as a reward for being diligent versus lazy.

He states that being diligent is to be:
a) Persistent towards your goal or in refining your craft (not in a stubborn way but with an openness to continuing to alter your course when needed to overcome obstacles).
b) Hard working
c) Well planned
d) Perform with speed, efficiency, and excellence so you will be sought out for your work.

The rewards of this diligence are:
i) True fulfillment without the want or need of material possessions
ii) Respect and admiration from society for your work
iii) Satisfaction and success
iv) Great wealth (everyone is happy to pay someone who does great work)

The author states that pretty much by being lazy you can assure yourself of having the opposite of each of the things above.

Most interesting was his beliefs around the root causes of laziness:
1) Self-centeredness - those who are open see the world around them will find an abundance of opportunity to make a difference with their own unique skills
2) Conceit or arrogance - those who are humble will be open to learn much from the world around them. Those who are arrogant know it all already and continue to takes the actions they want to take without improvement in approach or aspiration.
3) Ignorance and Irresponsibility (Foolishness) - The ignorant act without regard to the consequence of their actions. It is easier to be ignorant than to be educated because it takes time and effort to become something.

I won't be able to comment in as much detail as I would like on each of these without losing some readers, but this is one of two that I will comment on. At times I think you can go through the motions and do just enough to get by in this world because you haven't spent the time or the soul-searching effort to decide what you want to do. If you are going to do or study something, do it as best you can. If you are half-assing it - then you probably don't know what you want to do (or you may know it's not to become that which you are studying to become) so do something else.

"Secret" #2 - Eliminate Your Sense of Entitlement
A sense of Entitlement in any area of your life is an enemy that will keep you bound to unhappiness. This author argues that you will continuously be looking to others with unrealistic expectations and no control over what they actually are willing to give you. The only way to break loose of this unhappy and bitter cycle of entitlement is to release all unrealistic expectations you may have of others, including the government, your spouse, your employer, friends and your relatives.

This is the other topic I feel compelled to comment on. After spending 2 years studying Gen-Y (also known as generation debt) I have talked with many teenagers and people in their early twenties and I have seen this first hand. I am not sure what compels people to constantly keep score of what others owe them without thinking about what they have contributed in order to justify their "ransom". And too often you will find that the people who feel they are entitled to something are those who are desperate for that hand-out because they do not give enough of themselves to earn it. Once these people figure out how to earn what it is they desire (money, respect, etc) they will quickly break free of the chains of relying on others as they figure out how to rely on themselves.

In a business context the story goes as follows. Most people don't know how to make money. They don't know what they should do to have someone offer them compensation, so they look to an employer to tell them what to to to generate money for the company, and the company gladly gives them a wage which will be less than their output for the company. One famous business quote is that all of the enormous profits of the Fortune 500 companies are from excess output of the employees that they are not being paid fairly for. Once you learn how to earn money (or create money) without needing a company to tell you what to do, you will have "job security" for the rest of your life because you will always be able to rely an yourself versus needing a job from someone else.

But quickly back to the Gen-Yers. The sense of entitlement is alive and well as many people just starting out and working full time believe their standard of living should be as high as is was when living at home with mom and dad. They forget that it took their parents 20+ years to get to that level in their lives. This is a rude awakening for many Gen-Yers and a big reason why they prefer to live at home with their parents until they can save up for a higher starting standard of living. I still support Gen-Yers who chose to live at home with their parents because I think it is more responsible than starting out buying a home or a new car too soon while living lavishly. Far too many Gen-Yers start out with enormous college debt to let alone then add to their debt by spending beyond their means with no thoughts of saving for the future or retirement.

This section really struck me as I feel our nation becoming more of an entitlement nation than a boot-strapping nation of hard-working achievers which I believe is what built this nation.

"Secret" #3 - Be Grateful
If you are not grateful, DEVELOP a grateful heart. We all start with different levels of difficult situations in our lives, so this Author recommends if you currently don't feel that grateful, "treasure hunt" for things in your life that you could be grateful for already. In addition to warming you heart and those around you, you will begin to see joy in your life that is consistent, persistent, and lasting.

"Secret" #4 - Root out the weeds of Envy
Envy is a bottomless pit with no end. It is in opposition to feeling fulfilled. Envy is a misbelief that the things others have makes them happy or would make you happy. I think research has shown that by achieving a new level of possessions, we quickly recalibrate and would then desire what's next. When you know what you want in life, you can then know when enough is enough for you. Until you do that soul-searching, you will envy out of fear because you don't know enough about yourself to measure when you will have enough and be fulfilled.

"Secret" #5 - Live Wisely
The author states that Wisdom is not just about knowing what is right but acting on it. Living wisely involves DOING the right things, for yourself and for other around you. It is not enough to say "I know I should appreciate the people in my life" if you are actually being cold or bitter. It is an emptiness inside that fosters an external chill. Probably everyone knows someone who is curt or rude, and I also believe most people know that those people aren't happy with themselves more than they are unhappy with the masses they aim to irritate. Wisdom is about continual learning and self-improvement, and then putting those learnings into action. My takeaway from this point is not to just talk the talk but walk the walk. Another point that comes to mind with the live wisely point is that inner peace is not enough. I think everyone must then work to spread that peace.

So that's my long-winded summary. If you made it to the end congratulations. By no means do I pretend to be an expert on any of this, but I can now say that this book has brought it more top of mind as something I strive to be conscious of. And now - hopefully you will too because then in some small and indirect way maybe I can pass along some success, wealth and happiness to your life. That is your reward for being diligent enough to finish this blog!

$4 per gallon gas

Today I filled up my car for $3.99 and 9/10 per gallon (thats $3.999). Not quite $4 but close enough. And I felt just fine about it. My car uses premium unleaded, but I get noticeably better mileage and more HP. Plus it's amazing on a percentage basis how much of a bargain premium gas is nowadays, you only need to get 3-6% better mileage for it to pay out (and your car likely will!). But the bigger picture is the fact that we pay relatively little for our gas compared to the rest of the world (especially the developed markets). We could have cheaper gas since the US is sitting on $1.3 trillion dollars worth of oil, but we won't drill in ANWR, which is fine with me but you can't have your cake and eat it too. So we pay higher gas prices, but not that high as the chart below details (Updated last month).

Gas Prices Around The World



As a quick aside: Rising energy prices is going to be a good thing for the future. We aren't too far away from making "green energy" more viable on a cost basis. As traditional means of energy become more expensive, we will be able to invest in solar or wind energy without requiring government subsidies to make them pay out. Once an alternative enery becomes profitable - it will tip.

The (Internet) Year in Review

Basically Facebook grew 12 fold and passed MySpace. Not bad for a site now valued in the $10-15 Billion dollar range. Can I just write a check for $15,000,000,000.00, how about an IOU? As a side note, Facebook reportedly made $150 million in revenue this year, which doesn't justify the valuation in my opinion, though Facebook is very light on advertising so it must be based on increased monetization as well as furutre growth in users. Has a social networking site lasted long enough to justify that kind of investment (see Bolt.com).

A Note From Starbucks

As a follow-up to Dave's post against public companies and their misdirected focus to please the street, I have found a great letter written by Howard Schultz, Chairman of Starbucks, to Jim Donald the CEO. While this letter is seen as something of a coup where a private letter has become public in which they are admitting their weaknesses, I see it as an amazing departure from the strategy of a public company looking back to thinking more like a private company. Building a business for the sake of the business (either service or product) verus always working for Wall Street. In my opinion this is not the sign of a weak company but the sign of a great company, maybe even one that will rise above the world of Publicly Traded Stocks (but probably not).

I am not yet sure how, but the future of great companies is different than today's version of the public company.

Starbucks chairman warns of "the commoditization of the Starbucks experience"

Starbucks chairman Howard Schultz wrote this to CEO Jim Donald earlier this month. The memo's authenticity has been confirmed by Starbucks.

From: Howard Schultz
Sent: Wednesday, February 14, 2007 10:39 AM Pacific Standard Time
To: Jim Donald
Cc: Anne Saunders; Dave Pace; Dorothy Kim; Gerry Lopez; Jim Alling; Ken Lombard; Martin Coles; Michael Casey; Michelle Gass; Paula Boggs; Sandra Taylor

Subject: The Commoditization of the Starbucks Experience

As you prepare for the FY 08 strategic planning process, I want to share some of my thoughts with you.

Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.

Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces. For example, when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines. This specific decision became even more damaging when the height of the machines, which are now in thousands of stores, blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista. This, coupled with the need for fresh roasted coffee in every North America city and every international market, moved us toward the decision and the need for flavor locked packaging. Again, the right decision at the right time, and once again I believe we overlooked the cause and the affect of flavor lock in our stores. We achieved fresh roasted bagged coffee, but at what cost? The loss of aroma -- perhaps the most powerful non-verbal signal we had in our stores; the loss of our people scooping fresh coffee from the bins and grinding it fresh in front of the customer, and once again stripping the store of tradition and our heritage? Then we moved to store design. Clearly we have had to streamline store design to gain efficiencies of scale and to make sure we had the ROI on sales to investment ratios that would satisfy the financial side of our business. However, one of the results has been stores that no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store. Some people even call our stores sterile, cookie cutter, no longer reflecting the passion our partners feel about our coffee. In fact, I am not sure people today even know we are roasting coffee. You certainly can't get the message from being in our stores. The merchandise, more art than science, is far removed from being the merchant that I believe we can be and certainly at a minimum should support the foundation of our coffee heritage. Some stores don't have coffee grinders, French presses from Bodum, or even coffee filters.

Now that I have provided you with a list of some of the underlying issues that I believe we need to solve, let me say at the outset that we have all been part of these decisions. I take full responsibility myself, but we desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience. While the current state of affairs for the most part is self induced, that has lead to competitors of all kinds, small and large coffee companies, fast food operators, and mom and pops, to position themselves in a way that creates awareness, trial and loyalty of people who previously have been Starbucks customers. This must be eradicated.

I have said for 20 years that our success is not an entitlement and now it's proving to be a reality. Let's be smarter about how we are spending our time, money and resources. Let's get back to the core. Push for innovation and do the things necessary to once again differentiate Starbucks from all others. We source and buy the highest quality coffee. We have built the most trusted brand in coffee in the world, and we have an enormous responsibility to both the people who have come before us and the 150,000 partners and their families who are relying on our stewardship.

Finally, I would like to acknowledge all that you do for Starbucks. Without your passion and commitment, we would not be where we are today.

Onward…

Who Moved My Tax Dollars?

In case you are curious about taxes like me, here is a great article on the breakdown of your tax dollars by Yahoo! Finance

Linked In

As you probably know, linked in is a "social networking" site for professions. Basically a formal place to network for your career. It's like 6 degrees of separation but for work.

Here's an example, I have 9 friends on linkedin, they each know ~9 people who each know ~9 people. Before you knot it I could be introduced to over 6,000 people through a friend of a friend.


That's kind of neat, especially if I were looking to change jobs etc. However in searching through this network I found my original boss at P&G when I was an intern in 1998. The best part was I found that I am connected to Dale in 3 steps. They are as follows:

1) I know Dale
2) Dale knows some one else
3) That some one else seems to also know Dale

If that seems confusing let me show you the diagram linked in gave me:


Someone needs to work on their algorithm.

PS - I also found that some friends of mine who are married are both on linked in but not linked to each other, they are 2 steps away from each other. Maybe I'll tell them at softball practice tomorrow :)

Cable Doesn't Do This

I came home and had a package waiting for me. Since I wasn't expecting one I was pretty excited to see what it would be. When I opened it I thought that maybe it was a late Christmas present I got for my nieces that accidentally came to me, especially when it said "Welcome Aboard - Enjoy your new spongebob skateboard!"

Notice the sheet of stickers so I can "Pimp my Nicktoons Ride"

I recently upgraded my DirecTV package paying $5 per month more for the Science channel. Apparently I got a bunch of nickelodeon channels too. Here's the letter:

"Thank you for your recent upgrade to the TOTAL CHOICE PLUS package. To show our appreciation, we would like to present you with the enclosed SpongeBob Skateboard, courtesy of Nicktoons Network. - Sincerely DirecTV Inc."

What a riot!

PS - I also heard that DirecTV and MLB are reaching a deal that would make DirecTV the exclusive provider of MLB Extra Innings, meaning the NFL Sunday Ticket and MLB would only be on DirecTV.

Pet peeve

Please chime in on this if you hate it too. First of all no one wants to call any company that has an automated menu. I have listening through the choices and navigating the maze. I hate worse having to respond with words and have them try to decipher what I am saying. Especially bad is when there is no short cut to talk to an operator.

But all of that I can live with if these companies would correct one problem. I hate having to type in my skymiles number, or my credit card number and pressing pound, but worse is as soon as you actually get someone on the phone THEY ASK YOU FOR YOUR NUMBER AGAIN. I entered it into your computer!!! Look at your screen. If it's not there then I propose they hire Dale to fix their database because I think it would be a few lines of code. Why am I typing it in if these operators don't get the info. Man, that pisses me off.

A Black Hole in mySpace

Props to MySpace. No, not because the were sold for $570,000,000.00 a year ago, and not because today they have 100,000,000 registered users. I wanted to give a shout out to the #1 most trafficked site because they are having some downtime (apparently due to power outages, I guess it can happen to anyone). If you tried to access MySpace during this time initially you got some errors, but now they have a friendly message explaining the issue, with the bonus: A Pac-Man simulation!



And no, I do not have a MySpace page.

PS - I spell checked "trafficked".