Amazon released its Kindle Fire HD last November and this week it slashed the price by $30. That’s a bad sign. Yet Kindle Business President Dave Limp cheerily explained that cost efficiencies in manufacturing were simply being passed along to Amazon customers.

Limp’s excuse sounds nice, but this is really about brand preference.

The Kindle Fire HD was already one of the most inexpensive eReaders on the market. This price reduction is a sign of poor sales.

Kindle’s main competition, of course, is the pricier Apple iPad. It’s odd that even a $100 difference between the iPad and the Fire was not a large enough price incentive to trigger Kindle sales.

Clearly, Kindle is thinking that $130 will drive customers to the cheaper alternative.

The Kindle brand is relatively successful but the dramatic price cut is a troubling sign of problems. Customers will almost always pay more for brands with meaning.

Amazon’s Kindle Fire is experiencing difficulties that probably have nothing at all to do with cost.

Over the past month, two pieces of news have caught my attention. The first was Sony’s purchase of Gaikai, a cloud-based video game site that allows big-named game titles to be played through an Internet browser. The second was that Ouya, an inexpensive game console that runs the Android operating system and Android-based games, is teaming up with OnLive to allow cloud gaming of some AAA content.

These moves have exciting and curious implications for the market. It’s exciting to see the industry rumbling towards digital, which will lead to the instant ability to play and be simple to use.

But how will the existing brands transition?

It will be interesting to see what, if any, integration Sony has planned between Gaikai and its next Playstation. Sony puts a lot of weight behind its high-priced hardware, using it to push new technologies. But streaming services, like Gaikai, don’t require much in the way of hardware. The Ouya is set to sell for $109 and that includes the processor chips, storage, etc.,needed to run Android-based games that would be downloaded to the unit. That $109 ticket price is quite a bit less then the $599 pricetag Sony slapped on the original 60GB PS3 in 2006.

Because of Ouya’s marriage with OnLive, Sony will have to think very strategically about how it utilizes Gaikai. If the company is too soft in its approach, Ouya has an opportunity to take market share. Sony needs to be aggressive, which means stepping out of its comfort zone and leaning more towards software than hardware.

There is a happy medium. Sony can achieve profits for its system and still retain preference for its brand, but if OnLive is successful at acquiring larger amounts of AAA content, Ouya’s existence will eat away at Sony’s margins.

Sony’s best bet is to champion the digital change rather than react to it.

I hate to harp on Best Buy yet again, but boy, when it rains it pours. Best Buy CEO Brian Dunn unexpectedly resigned due to a personal conduct investigation underway and all I could think was what a lucky break it is for Best Buy.

Not lucky in the sense that he was bad at corporate management or that he was a bad person (I guess the personal conduct investigation will clarify that). No, the only way I can evaluate Mr. Dunn is through the perspective of brand. From that perspective, Dunn was failing.

When Stealing Share rebrands companies, as much effort is put into the internal corporate culture of the brand as into the customer facing portion. If they do not occur in tandem, the customer sees the brand as hollow and fake. Before a brand can become important it must first be believed.

As I’ve said in recent blogs, Best Buy confuses its awareness with brand equity. The detriment of this confusion is that brand provides clarity and, in the absence of it, Best Buy suffered. Dunn focused too heavily on best practices and, as such, the brand of Best Buy became only as valuable as the lowest common denominator. Importance flows like a river, high to low. What a CEO believes is important becomes important at the ground floor. Brand must be the driver for the new CEO or Best Buy will continue to hit the same obstacles it is currently trying to clear.

A new CEO focused on brand also ushers in a new corporate culture. A big problem with promoting best practices (beyond their lack of meaning with the customer) is that they are not emotional and are the table stakes in which you must have just to play. But they do not create preference. They also give employees little reason to care because they are difficult to take personal ownership of.  As a cooperate culture, it is much easier to live something like “Think Different” than it is to live “best price.”

Best Buy’s Board of Directors should look at this resignation as a fresh start. Wipe the slate clean and take a new approach. Recognize that what Best Buy is missing does not center on operations, but rather on brand. Best Buy is down, but with some meaning it will not be out.

Things are not looking very good for Best Buy. Its last quarter, which ended March 3, had it down by $1.7 billion, a figure even more disheartening when you consider that the loss included an additional week of sales to help soften it. Best Buy’s answer to the poor performance is a shift toward fewer big-box locations and an increased amount of mobile locations. There is one problem with the strategy however. Whatever issues it has with the big-box stores will be the same for mobile stores. Neither has a clearly stated reason for being nor a compelling enough message to establish brand loyalty.

The problem with Best Buy’s current big-box stores is that you can get everything they carry elsewhere. Its brand is not special nor are the products it sells, making it just a store rather than a destination.

Sure, it has a large selection that lets you get all your electronics/appliance shopping done. But how many people go out to buy a TV and a fridge on the same outing? Typically, you either go for one or the other. (Or you go to Costco.) If you are in the market for a fridge, Best Buy just joins a long list of stores whose value is also simply “a means to an end.”

On the other hand, if you want IKEA furniture, you go to IKEA. If you want a MacBook, you go to the Apple Store. There is value in IKEA and the Apple Store because of the experience, the focus and, most of all, having brands that offer something of greater value to the consumer than price. Best Buy is not a very pleasant shopping experience. Nothing it sells is particularly special, and it uses the rather emotionless value of price as its brand.

So are mobile stores going to be any different?

The problem with transitioning to more mobile stores is that too many mobile stores exist and Best Buy’s brand of price is not meaningful enough to increase usage beyond their stores’ proximity to consumers. AT&T, Verizon, RadioShack, the list goes on. Mobile stores already saturate the market.

Best Buy’s success does not rest in adjusting the size of its stores. It rest in adjusting its brand. Downsizing the stores is just addressing a symptom. It’s not addressing the cause.

Instead, Best Buy must decide who is it for and who is it not for. What does the brand promise? Best Buy is confusing its brand awareness as being meaningful when it is preference that signifies brand equity. The reason Best Buy is closing stores, laying off employees and switching to a mobile store model is because it hasn’t redefined its brand and used that to dictate structural changes.

Otherwise, it will soon become as irrelevant as RadioShack or, gulp, Circuit City.

In a recent blog about Pepsi, I mentioned that only brands with different values than the competition can steal market share. Brand works in collaboration with this value by providing a meaningful context so its meanings become more intensive then the claims of the competition. I have, for a very long time, been very critical of RadioShack, or “The Shack” (which it is only using sparingly anymore). I could never pinpoint RadioShack’s differentiator, nor could I find brand meaning to help me overlook the absence of it.

The biggest problem for RadioShack is that it has identity issues. “Radio” is just a wee bit antiquated and I have yet to meet someone who conjured up a positive image when they thought of a “shack.” Now that we live in a different technological age, RadioShack just does not know what it wants to be when it grows up.

The in-store setup of RadioShack, in theory, reminds me of a boutique because of its relatively small size, which usually means focus and speciality. My wife is fond of shoe boutiques because she can get special and hard to find pairs of shoes. Some of those small boutiques even get early runs of an item so that the same design found at a Neiman Marcus might actually be made with a slight nuance.The point being, a boutique experience feels special.

RadioShack however does not feel special. In fact, almost all of RadioShack’s selection is lackluster. Sure, it has TVs, but it carries only about five of them. Need a videogame? Don’t go to RadioShack, it only has a handful to choose from. Its selection might increase when you look online. But if you are an online shopper looking for best price and biggest selection, wouldn’t you just use Amazon or someone else?

RadioShack has not put a stake in the ground, either from a brand perspective or product perspective. With so much left undefined by the company, it forces the consumer to create meaning and value (or in this case a lack of it) on their own.

RadioShack is not completely doomed. It just needs focus and a reason for consumers to choose it. It needs a better understanding of the consumer. If its recent “the shack” campaign is telling of anything, it is that a change needs to be drastic and needs to happen urgently.

I am pretty sure that grocery stores have never viewed their rewards programs as a way to attract customers, but just to keep them.

Because, for the most part, preference in grocery stores is based on location, especially in the absence of meaningful brands. Oh, there are exceptions. Wegmans, Earth Fare, Fresh Market and Whole Foods have something close to brands. But, for most, your grocery store of choice is based on what is closest or most familiar. There are few people willing to drive across town to shop at Kroger when there is a Harris Teeter only a few minutes away.

Grocery store chains understand this. They also understand that margins are small and shrinking. So, the “rewards program” was born. The chains understood that the only way to remain profitable was to keep their current customers coming back.

For most chains, the rewards programs work on the idea that, if you shop enough, there is some benefit — be it a discount on your next order or some kind of rewards gift. But what happens when the “rewards” go away?

The strategic offices of Stealing Share are located in Greensboro, North Carolina. One of the local North Carolina grocery stores, Lowe’s Foods, has recently changed its “rewards” program to give its shoppers money off gas purchases. Previously, it had given customers a $5 coupon once their purchases of certain store brand items had reached a certain level.

Now it is graciously giving customers five cents off per gallon of gasoline for every $100 they spend, with a 25 gallon max. For all of us non-math majors, that is a benefit of only $1.25. What’s worse is that the savings is only good at Wilco/Hess gas stations (two miles away from my nearest Lowe’s Foods).

I contacted Lowe’s about how stupid I thought this new rewards program was, saying that the previous reward program had now turned into a big zero as I will never get gasoline at Wilco/Hess because I can get the same discout at nearby Costco or Sheetz.

The response I got was troubling. To paraphrase, I was told the reason Lowe’s decided to go to the new “rewards” program was because it had gotten such positive feedback from customers where it tested this program. In all of the test locations, Lowe’s had a gas station on the same footprint. Meaning, customers could shop and then go to the gas station in the same parking lot and redeem their savings.

It does not take a scientist to figure out why the test program was met with such positive feedback. These folks were getting rewarded for something they already do: shop, then fill up their tank. For the remainder of the 90+ stores Lowe’s has, their customers must inconvenience themselves for a $1.25 benefit (which may not even cover the cost in gas it takes to redeem it). Therefore, the “loyalty reward” for shopping has been completely removed.

I have a couple of grocery stores that are equal distance from my home. Both carry the same items and, in all honesty, there is not a lot of difference in price from one to the other. Though the “rewards” program was never a conscious reason for choosing one over the other, the removal of a benefit I had taken for granted has prompted me to reconsider which store I will do my grocery shopping in the future.

As a brand guy, I have to ask myself why it matters to me where I buy groceries. The answer is it really does not matter me. Grocery store brands, for the most part, do not matter and even fewer rebrand with any meaningful purpose.

Like most families, mine tends to get the same things each week – deli meat and cheese, milk, bread, bottled water, etc. As I think about it, I have no brand loyalty to any particular store. It is purely a matter of habit.

Grocery stores, in general, have done a poor job of investing in their brands. It’s no accident that those that have made an investment in their brands – such as Wegmans, Whole Foods, etc – have actually built preference, have higher margins and customers will drive across town to shop there.

Was the reason I used Lowes only because of the $5 off coupon I got?

As margins shrink, the only way to perserve and increase preference is through investing in brand. The brand, not the rewards program, needs to be the reason a shopper chooses a particular store. Rewards programs are nice, but are they only noticed when they are gone?

It is deja vous all over again.

The Wall Street Journal had a story almost a year ago about manufacturers of high-speed rail that were furious China “stole ”the intellectual property needed to build these trains.

QINGDAO, China—When the Japanese and European companies that pioneered high-speed rail agreed to build trains for China, they thought they’d be getting access to a booming new market, billions of dollars worth of contracts and the cachet of creating the most ambitious rapid rail system in history.

What they didn’t count on was having to compete with Chinese firms who adapted their technology and turned it against them just a few years later.

Well today I heard that GM (you remember GM, the US automaker that US taxpayers own) is entering into a joint agreement to build electronic cars in China. This article just appeared in the Boston Globe.

HONG KONG – General Motors said yesterday that it would develop electric cars in China through a joint venture with a Chinese automaker, and would transfer battery and other electric car technology to the venture.

Yesterday’s announcement was being made as the Chinese government was putting heavy pressure on foreign automakers to transfer electric car technology to joint ventures in China. But GM took pains to say that its joint-venture agreement was not connected to its plans to begin importing its new US-made Chevrolet Volt electric car to China this year.

So, the Heartbeat of America has decided that it makes great short-term financial sense to enter into a joint agreement with a Chinese manufacturer. It can’t be a long-term decision considering China’s track record, can it?

I guess GM knows best. It is not knowhow and innovation that sets the US apart from the rest of the world, it must be the ability to manufacture. So GM, feel free to give our expertise away. At the end of the day, the Heart Beat of America is a brand as real and as valued as Budweiser, the King of Belgian InBev Beer.

A letter sent Sunday evening by Netflix’s CEO Reed Hastings begins with an apology, followed by an explanation of the future of Netflix. Or should I say, the future of Netflix and the beginning of Qwikster.

The current shape of Netflix and its future uncertainty is in fact a case study in what happens if companies only focus on the business of their business, and never develop the business of their brand.

In the letter, Hastings writes, “So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.”

The idea that the two services exist in a realm so separate from one another that they warrant two separate companies is only reinforced because Netflix has never told us what its brand represents and who as consumers we were when we chose Netflix.

The focus of Netflix has always focused to heavily on its process. Its business is streaming movies and sending DVDs by mail. But its brand could have represented, and could still represent, much more than that. The power of brand is that brand creates the deeper level by which products and services become connected. Netflix DVD and Netflix streaming did not work together because Netflix never told us the “why.”

Take Apple, for example, and its long-running “Think Different” campaign. It was not about a technology. It was about its brand. Apple even changed its name to Apple Inc from Apple Computers to avoid limiting itself by the the products it could sell. Why be limited in the products you can offer if brand permissions can allow for so much more? Netflix has never recognized this and it is why, if you ask someone what the brand of Netflix represents, the response is rarely more than “movies” or “DVDs.” If you represent “movies” or “DVDs” than you have diminished your value to the consumer to the likes of Vudu, Hulu, Amazon, Crackle, Redbox or any other distributor of “movies” and “DVDs”.

The recent split by Netflix is not the solution to the problem. In fact, if past performance dictates future results, all Netflix has accomplished is creating more market confusion and hurdles for preference with two companies lacking brand instead of one.

I always liked Netlfix, primarily for its streaming. But, like most first movers of a technology, if value is created simply because of that technology, then the value is lost when the competition arrives.

Again, I reference Apple and its iPad. Value for the iPad was built through the Apple brand. It is why tablet sales outside of the iPad have been failures in comparison and why if you buy a tablet you either buy an “iPad” or a “tablet”.

Hastings’s letter closes, “Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.”  

The fastest way to gain that trust is talking about what is emotionally intensive to consumers. For anything Netflix says to be resonate, it means it has to be said by the brand itself.

In blogging about brands I tend to pull regularly from a batch of default “good” brands— Apple, Ikea, Nike, as well as default “bad” ones— US Air, US Air, US Air (they deserve all three mentions). However this week one of the “good” brands, Nike, is in an ambiguous middle ground—enter the Marty McFly “back to the future” MAG shoe.

I say ambiguous middle ground because the shoe itself is only a limited run shoe for charity and when it comes to promoting a good cause I would feel a bit soiled scrutinizing such a move too heavily—but it just doesn’t quite fit.

The shoe originally was seen in 1989 in “Back to the Future II” and to be fair the “Just Do It” campaign began before that in 1988, but the Nike brand since that time has been so steadily and consistently reinforced that the “Just Do It” of Nike today doesn’t allow for the MAG shoe pairing like it once did.

My initial reaction to the shoe was one of interest; it seemed fun, nostalgic, and almost humorous. When I first searched online for the shoe and was directed to the Nike.com this blog was created—It just looked so out of place. On the Nike homepage there was an athletic person in slim fit exercise clothing, a SHOXTURBO+12 sneaker, and a GPS sportwatch… and then a Delorian with a pair of light-up shoes sitting on it?

When I think of what “Just Do It” represents it is not fun, nostalgic and humorous, it is serious, in your face and a bit cocky. I would wager that the bidding currently underway for the 150 pairs of shoes is primarily being done by fans of “Back to the future” rather than of “Nike”. In fact, when I first heard the shoe was being produced I knew the shoe precisely, but until my recent search for them led me to Nike, I did not know they were originally Nike branded.

I do not discount Nike for the decision; the shoe was a Nike shoe originally, so for a charity like this, selling this, it needed to be through Nike if at all. The shoe itself brings light to a good cause, as well as attention and positive press to Nike as a company, but to their brand of “Just Do It” has lost some of its intensity because of it. This lost intensity is not something that is detrimental or even lost entirely, but one of the most important aspects of a brand is consistency and the MAG shoe cost Nike a sliver of theirs.

In a spirit of full disclosure, I want to preface this opinion by stating that I am a non-smoker and lost my Mother years ago to lung cancer.

Most of the recent turmoil over the package warning labels on cigarette packaging has died down — and has certainly dropped off of the first page of the news. All of the controversy and media sound bites really got me to thinking… what is all the fuss about?

Let’s take a journey down memory lane for just a bit, because most of the controversy over the graphic warning labels is coming from the tobacco industry itself. I think I understand their perspective. Oh, not the protestations about regulating commercial packaging or first amendment rights. I’m not a lawyer and profess to have no expertise in the law. What I am is a brand strategist and I think what the tobacco companies are doing is BRILLIANT. From my perspective, it is a perfect example of slight of hand.

The tobacco companies are pretending to be furious over the packaging warnings. They want us to believe that these graphic images will hurt their business. That way we will not spend any resources on actually developing a campaign to stop the adoption of tobacco among the young. We believe their protestations. To paraphrase Shakespeare “The tobacco lawyers doth protest too much, methinks.”

Stealing Share is expert at changing behavior. That also means we have deep understanding of what will not change behavior. When I look at the proposed imaging, I am looking at the later not the former. If I were a tobacco industry exec, I would love all of this diversion. As a matter of fact, I believe it might just encourage trial, usage and subsequent addiction. Why? Glad you asked.

Kids start smoking to impress their peers with their own desire to look grown up and flirt with the forbidden. In other words, they like to think they look grown up by taking chances, by living dangerously. Shoot, it would not surprise me if these images became trading cards amongst the most impressionable.

If you want to discourage tobacco use, go right to the source. Attack the very belief that early tobacco use signifies — being grown up, mature and rebellious. Instead of showing the long-term effects of tobacco use, just tell the young smoker the truth — that they simply look insecure and immature when they light up a cigarette. That everyone knows they are just an insecure baby. It is the highest emotional intensity for the age group. Take away the payoff (look how grown up I am) and isolate the habit as an example of insecurity. Watch how fast the trial drops off. We don’t need labels for that. We just need to be smarter then the tobacco lobby believes we are.