A case study in exclusivity & more: Costco

Costco might be my favorite place to shop, ever.

Sure, I’ve rattled on about Ikea, have praised the store concepts of Verizon and I believe retailers can copy the atmosphere of the Apple Store. But none of them hold a candle to Costco.

Please, tell me if I am alone with this. But I think not.

There is a rush with Costco like none other. The excitement comes with pulling out your membership card to be clicked into the warehouse, for instance. That rush, if you’re like me, is a little like the anticipation I had as a child Christmas morning. There is always something new (albeit, a lot of items I don’t really need) to pique my interest – and that thill of discovery is indeed just like getting a gift from Santa.

Costco and its model.

Costco
Costco membership has its advantages, both rational and emotional.

It begins with the membership. Actually, we should look at it differently than a membership. What we are really paying for is a kind of exclusivity. Membership can be a hurdle in some cases (like credit unions, but that’s because of other factors). Mostly, however, an emotional driver is being part of an exclusive club.

In this case, Costco promises lower prices (especially in bulk) but members have found that it offers loss leaders that give it some pizzaz.

Consider this from investopida.com:

“The biggest Costco loss leaders in America right now are rotisserie chicken, the hot dog & soda combo and gas. A Bloomberg article has calculated that Costco earns only $14 million in profit a year on its sale of 70 million chickens…These chickens, placed deep into the store along with the cheap fruits and vegetables, mean that customers have to walk through lots of merchandise to pick one up – and hopefully, along the way, they’ll grab some other products to make their trip to Costco worthwhile.”

It’s true. Every time I venture to Costco I normally have one product in mind that I need to pick-up. To find that in the warehouse takes time. In that time, there is much space to cover; space filled with unique goods and samples and odds and ends. Consequentially, by the time I hit the checkout line, I have a full cart. I’m also considering grabbing a slice of pizza or a hot dog on the way out.

Of course I go with the hot dog. I mean, who can beat a large soda and hot dog for a buck fifty?

Personal branding forms unbreakable bonds

Personal Branding

Personal BrandingPersonal branding is the most overused and most misunderstood of all the branding jargon I come across in my job title (Brand Strategist).

Luckily I have never been asked to work on a personal brand in my professional career.

The whole idea of personal branding caused Google to reconfigure the search engine dynamics of my branding category about four years ago.

Too many of the so called brand companies that specialized in personal branding were practicing what the industry calls black hat SEO.

This means they were using less than respectable practices to score higher in Google searches.

Like the snake-oil salesman of years ago, these personal branding charlatans took peoples hard earned cash for little or no return.

However, the idea of personal branding is not completely stupid

I try to help companies understand their brand equities by using VERY personal examples. I have been known to ask CEOs of fortune 100 companies to “pretend for just a moment that your brand was a person and not a corporation. How would you describe that person?”

Personal brandingIt is an important realization exercise because I want business executives to understand the emotional fabric of their brands.

When you bring a person to mind, it is not just a list of attributes that define that image in your mind’s eye. It is mostly a rag-tag conglomeration of feelings that color and form that memory.

Go ahead for just a moment and visualize your grandmother. When her image comes to mind do you FEEL more or THINK more? Proves my point.

Brand is an emotional connection that defies dissection in a rational manner. Personal branding, as it turns out, is the foundation of all branding. It is how we feel about everything in our lives.

The picture of personal branding is an intricate oil painting

The painting is created by a renaissance master. You.

So many corporate and product brands fail to see this that my work docket is always full. Sure, we talk to our clients about stealing market share and how their brand is the permission-switch that persuades the target audience that their brand is important (and therefore takes and grows market share).

Personal brandingBut, while we all are able to tap our imagination when thinking about personal branding we remain relatively blind when thinking about product and corporate branding.

Corporations are so sold on the rational benefits of their product or service that they can’t get out of their own way. When asked to talk about their own mother Chief Marketing Officers will freely admit that their moms are angels of love.

They describe them as beautiful (even if they were as ugly as a barn door). They attribute to her emotional ideas like caring, loving, considerate, gentle, self-sacrificing and tender. Even if they jokingly speak about her shortcomings they are emotional attributes like angry or formidable.

They NEVER list rational attributes like height, weight, eye color or dress size.

Corporate Brands

Personal brandingBut, contrast that with their business brands and most times all they can list is product attributes and measurable words.

Words like effective, better, new, revolutionary and the new term of the day— disruptive technology is about all they can think of.

So I remind them that the people, music, ideas, books, thoughts, beliefs and even loves in their life are ALL emotional connections. They are NEVER rational.

You might be willing to switch soap powders (read about packaged goods here), even if you are convinced that your first choice cleans better, for another cheaper brand.

But you would NEVER be willing to switch families no matter how dysfunctional yours might be. Emotional bonds are forever.

Emotional brand bonds last forever and can be stretched and contorted beyond belief but they seem never to break. They are self-healing and eternal because we don’t EVER need to think about them. We just KNOW them.

Personal Experiences Recalls Personal Branding

Personal experiences often give us glimpses into personal branding. When I heard that Leonard Cohen had died at age 82 on November 10th 2016 I was sad. Like all of his fans. Was I sad because I knew I would never have the pleasure of hearing his songs again for the first time?

Personal brandingNope. I was sad for me because someone and something I loved had passed away (you can read my blog on Leonard Cohen’s death here). He was not a songwriter and singer to me. He was a part of me. He was a part of my personal brand. His death was personal to me.

When we think about personal branding we envision a world not unlike our solar system (read an interesting article on Ptolemy here— and alternative theory on the universe).

We are the SUN and everything we hold as important revolves around us. It is the gravity of our nuclear furnace that provides the energy to keep the solar system alive and functioning.

But the SUN as metaphor is greater than the description provided to us through physics.

Personal brandingThe Sun, according to science is just a mass of gasses imploding and creating immense power and light through nuclear fusion.

It is, when described in this way, nothing more than a nuclear power plant like the one at Three Mile Island or Chernobyl. Very inspiring don’t you agree?

But, when you think about the Sun (yourself in my metaphor) How it works is not as important as what it represents. It is the source of life, warmth, and light. It is the promise of a new day and awakening. It IS life.

Rebranding as science

When branding or rebranding a company or product we distill its essence down to those emotional values that are in fact the only immutable values you can ever own.

They form for us the basis of our attachment to things, ideas and people. They defy rational understanding and never ask us to consider the basis for that affection because it is in so many ways unknowable.

We just feel it to be so. That’s plenty enough by the way.

When rebranding is needed. We will remind you that all branding, at the end of the day, is personal branding.

 

 

Cree LED lightbulbs have lost brand power

Cree LED lightbulbs. An Example of surrendering initiative.

Cree LED Lightbulbs
Cree was a growth stock

For Stealing Share, Cree LED lightbulbs is in our backyard. I follow the company because it is great to see a local company innovate and win.

I remember a few short years ago, Cree was the darling of Wall Street. Charles Swoboda, Cree CEO and President, seemed to be interviewed and featured everywhere.

2012 was a heady time for Cree. In 2013, Cree LED lightbulbs were King of the Hill.

Innovating its way to the top of the class and the news promoting LED bulbs as an eco-friendly and promising technology turned the incandescent bulb market on its head.

Cree LED LighbulbsLED bulbs have low heat, low comparative wattage, long life and more energy efficiency than the florescent bulbs that heretofore dominated the eco section of the market.

Cost and quality of light were the only downsides to LED bulbs. Often as not, they had a white-blue brightness that lacked the warmth of the incandescent bulbs that take history all the way back to Edison.

LED lightbulbs have become mainstream

Cree LED Lightbulbs The holiday lighting market transitioned from incandescent mini bulbs to the eerie, almost alien looking, LED strings of holiday lights just a few Christmas seasons ago.

They caught on despite the cost because of a longer lifetime and the ability to connect so many strings together that Clark Griswold would have lit the entire city without an electrical drain.

The transition to LED Christmas lights is almost complete. It is hard to find the old style mini lights today. The price is still steep, but it is more manageable.

You would think this is all good news for Cree LED lightbulbs. First movers have an advantage and the market now embraces LED lighting.

Just look at the displays at the big box do-it-yourself stores. The LED bulbs are featured more than the rest.

Cree LED lightbulbs have a retailer problem

One huge problem stands in the way of Cree however. Its bulbs are NOT featured at retailers. They are lost among the crowded competitive LED offerings.

What happened?

Cree LED Lightbulbs stock chart
Cree has been in rapid decline since 2014

I quote Mr. Wonderful from Shark Tank as if he was speaking to the engineers who pushed the envelope for Cree LED lightbulbs. “What’s to stop one of the big guys from waking up and crushing you like the cockroach you are?”

It is a fair question to ask in 2013. Today, with the current marketing, you can ask if it is too late?

The Cree advertising is top shelf. Well-produced spots featuring Lance Redick (you might remember Lance as the very deliberate Lieutenant Cedric Daniels from the HBO series The Wire). The problem is that the advertising campaign is fixing the wrong problem.

Watch the above advertisement and ask yourself what the advertising is intending to accomplish? The commercial obviously intends to laud the category transition Cree led. It informs the customer that the Cree LED lightbulbs were on the forefront of this movement.

They want us to know— borrowing from the copy, that the humble LED turns the lighting category on its head and that they (Cree) – told us so a while ago.

Nice clean TV spot. It might even work if being first in the category mattered a jot to the shopper today.

Cree LED lightbulbs need a new rebrand strategy

Stealing Share would not have created this strategy. It is an inside-out view of the market. Looking outside-in is the foundation of most of our business. Companies look at their own stories, decide what they feel is important about their own brands and then force fit that idea into the marketing and advertising.

Cree LED Lightbulbs
Where should Cree position the brand in this crowded space?

It is too late for Cree LED lightbulbs to regain preference? Is it too late for Cree to be doing this? The market is mature. Innovation in LED brightness, longevity or eco-friendly claims do not drive the market. PRICE drives it. Cree needs to rebrand (read a an example of a rebranding strategy for another troubled category here).

The current campaign only helps build the category. It sells the viability of LED lightbulbs. Anyone who has studied advertising communications knows that, in communications that builds the category, the advantage ALWAYS goes to the market leader. Sadly, for Cree, it is not the market leader. Not anymore.

The retail space is full of competitors to Cree LED lightbulbs

Look below at the offerings in LED bulbs from Home Depot and Lowes.  Cree LED lightbulbs is an afterthought. Giants in the industry like GE, Sylvania, and Phillips dominate the shelves. These behemoths not only control the shelf space, they also control the price point.

Cree LED Lightbulbs
Cree is lost in the big box stores

As a consumer decides to choose an LED bulb as a viable replacement item, does Cree believe the customer will have second thoughts about trusting any of the BIG BOY brands? Is there any chance that these name brands are seen as an inferior product? Do consumers care who brought the first viable LED bulb to the market?

Cree LED LightbulbsThe entire Cree LED lightbulbs advertising campaign has only one hope. You must feel so guilty about your preference that you want to switch to Cree.

The campaign asks you to reward the brand that first brought you the LED idea.

Even if the retailer has a smaller selection of Cree products and they might be a few pennies more expensive. Even though the original idea was expensive and the light was blueish.

Any brand named Edison would be an instant winner if that train of thought was correct. There is heritage for you. I’m not claiming to be the smartest guy in the room (research corrects that failing). I don’t know yet what the highest emotional intensity in the category is. I am not sure what incites a shopper to change and prefer the Cree LED lightbulbs.

But I know that the answer is knowable. The entire Stealing Share process aims to discover that trigger and position the brand to own that value. It is HOW you steal market share.

Real lessons here for us all

The lesson here is to not let your engineers dictate marketing and brand strategy. Don’t drink your own Kool-Aid. Don’t take an inside-out view of the market (navel gazing) and never leave the strategic brand point of view to the advertising agency (no matter how talented).

Even if they are good at what they do (and I believe Baldwin& is very good) agencies create advertisements and they don’t create robust brand strategy.

Cree LED LighbulbsThis market is mature and yet is growing at a blazing pace

The sheer power of the competitive set and the gravitational pull of lower pricing outweighs first mover advantage.

An upstart and innovative company is not a place for this strategy. The Cree brand is now outmanned and outgunned.

Today, Cree LED lightbulbs need a message that overcomes those barriers.

Cree. Light a better way (is NOT the answer).

As a symbol of all that is wrong, the theme is clever in its double entendre and  FEELS like an advertising theme-line. As such, it lacks powerful meaning and authority.

Cleverness always seems contrived and cliché.

Powerful brand themes are often a bit awkward because they strike the prospect as important and direct. They are about the customer, not the product. They seem authentic, not clever.

Maybe one of the most powerful brand themes of all time is great advice for Cree. Think different.

Another retail casualty: the CEO of Stein Mart

The retail industry is under siege, if you haven’t already noticed. Stores are closing, CEOs are leaving (being either fired or retired) and few know what to do in the battle against Amazon.

I have written plenty about this issue, maybe even more than you know. I am a regular contributor to RetailWire, which you can read about here. The single biggest question asked is, “Where do retailers go from here?”

Stein Mart
The resignation of the Stein Mart CEO is another demonstration that retail is dying.

The latest shoe to drop is the resignation of Stein Mart CEO Dawn Robertson, who left after same-stores sales declined 4% this past quarter. You sense a trend here. Office Depot and Staples, once thought to be merger partners, are looking for new CEOs. Macy’s is closing stores even though it promoted a national holiday hiring day.

It’s a mess out there for retailers.

The problems facing Stein Mart and others

The problems are two-fold for retailers, such as Stein Mart. First, they have never gotten the basic strategies of creating preference right. Secondly, they are behind the curve when it comes to online retailing.

Retailers were once powerful, thriving during the days when malls took over the marketplace. Malls were a community of stores, aping a downtown marketplace. Shopping at a mall was efficient and easy for buyers. Retailers reaped the rewards of shoppers buying more than they intended. (Think the Sam’s Club model. You go for a great deal, but stroll up to the checkout counter with loads of merchandise.)

In good times, brands often get lazy. They live off their success, thinking that there’s nothing they need to do to prepare for change. So few, if any, actually built brand preference. Instead, retailers fought over price, some adopting the Walmart model of always having a low price with others holding sales every week (that’s what has gotten Stein Mart in trouble). When you do that, you teach audiences to shop on price because you haven’t given them any other reason to choose.

So shoppers choose Amazon.

That second issue, failing to be a strong presence online, caught retailers with their pants down. They were slow to prepare and any preference they did have disappeared. In essence, retailers have reaped what they sowed.

What do retailers do now? They have to go back to the basics. Build a brand that actually stands for something, one that is different and better. That better part is difficult, but the different part is what has befuddled them. The retail choices all look, sound and, frankly, are the same. There’s not a squat of difference between Stein Mart and Kohl’s from the point of view of the customer.

No wonder we all shop on Amazon. At least we know what’s different there.

What bank leaders can learn from Wells Fargo

The Wells Fargo cross-selling scandal will affect more than just it and its customers. The scandal will affect the entire banking industry, which means banking leaders must be beware of simmering anger with banks and know what to do going forward.

There are already reports that other banks are being investigated by regulators. Stories have also emerged of employees at those banks saying the sales culture is just as intense there. That is, a culture that could produce the same over-reaching employees that worked at Wells Fargo.

Wells FargoConsumers have always had love-hate relationships with banks. To them, a bank is both important and irrelevant. Few enjoy going into a branch anymore, making branches into very expensive billboards. In fact, most people don’t even want to hear from their bank because any notice just means bad news. That’s what makes banking both low intensive and low involvement – except at that point of failure.

We’ve conducted proprietary research for banking clients and there is one constant throughout: At any given time, a customer has considered leaving that bank. It doesn’t matter the demographic involved. In fact, about 7% of the market is seriously thinking about changing their primary financial institution at any given time.

Therefore, will that percentage increase for Wells Fargo and will more people leave?

Probably not. The thought of switching feels too complex for many bank customers and, with the lack of differentiation among all banks, there is very little reason to switch.

How Wells Fargo affects all banks.

But here’s the thing. Rising distrust of the banking industry will rise and cross selling will be less accepted. This is akin to the financial crisis in 2008 because the general public blamed banks for that – and this can feel more personal.

If you think it’s difficult to reach those goals now, just hold tight through the rest of the year (and beyond).

So what are bank presidents to do? How do they keep high margins when faced with higher regulatory costs and low interest rates?

Consider this. Most customers do not switch because they don’t see any other bank as being much different. They see the banking industry as a whole, not a collection of its parts. It’s one big glob to them without any differentiating brands. The question asked is, “Will it be any different over there?”

Wells FargoDuring the recession, credit unions blew a perfect opportunity to steal market share from banks because anger was so high. Credit unions had the high ground but it only exploited it by using the same messaging about how they are not beholden to stakeholders.

That is not an emotional thought, just a logical one. It is hard for potential customers to see how no stockholders give them a personal advantage. Humans, by our very nature, generally only act when events directly affect us. The ones most likely to leave Wells Fargo, for instance, are the ones who were financially hurt by the scandal. Credit unions were just lumped into the banking industry as its little sibling. In the end, customers believed credit unions were also banks but with sign-up restrictions. So few of them joined up.

A similar situation is threatening to brew here, although not as severe but more pointed. The anger will result in weariness of banks doing any cross selling or accepting any new offer from a bank. (“They’re just going to screw me over!”) Want more customers to sign up for a credit card? Good luck.

Where the opportunity lies

But there is opportunity for the right bank (or credit union) to take advantage. Like in 2008, customers will see all banks in the Wells Fargo glow and will only prefer a new one that’s truly different and better.

The knee jerk reaction by most banks is to reassure customers (and, hopefully, new ones) that they have integrity and would never do that. Banks will say that there are safeguards in place to prevent any wrongdoing and that, we the banks, are always focused on you, the customer.

It won’t be believed or move the needle. No, instead a bank that takes ahold of the current opportunity must drop all the trite messaging that exists in the banking industry.

Wells FargoNow is the time to be truly different. A brand message that taps into the distrust and is truly emotional will win the day. Tone is key because banks never adopt an edgy tone that gets noticed.

In fact, tone can prompt the switch because the right one would align with the attitudes of the target audience. Telling them to switch because it’s time to take action would be a stronger message than what banks are promoting now.

To convince audiences to switch their primary financial institution is extremely hard. To get people to switch doing what they are doing now in any thing is nearly impossible.

But the door is ajar for the moment. The bank that steps in will become the leader.