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Welcome to the growing community inside the Monkey Shack. The business and marketing landscape is changing dramatically each and everyday, and this is where we come to discuss anything and everything related to business and marketing trends, observations, and strategy.
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I currently work as the Director of Strategic Planning and Research at Richter7, the most creative and decorated agency in Salt Lake City, Utah.
Mar 30, 2009
Mar 25, 2009
Over the weekend, my wife and I spent a good part of our Saturday working outside in the front yard. Most of our time was spent "thatching," raking up the thick layer of matted and/or dead grass that accumulates below the top layer of the lawn, especially after a winter of heavy snowfalls. The thatch on a lawn can be the biggest hindrance in growing a vibrant and healthy lawn, preventing water and essential nutrients from reaching the soil.
As we spent hours raking (we have the blisters on our hands to prove it), I thought about how well the process of thatching a lawn after the winter works as a metaphor for the challenges we face both in life and in business.
Until last weekend, we had not thatched our lawn since moving into the home. It had gone through three winters of heavy snowfall and two summers of hot, dry temperatures. As a result, the lawn was really starting to struggle in some areas, literally choking itself and struggling to survive the Utah high mountain desert climate.
In many ways, the current recession is like my lawn rake, getting rid of the areas of inefficiency that are choking a business and preventing it from healthy, vibrant growth. The recession's "rake" removes unnecessary or wasteful spending, undesirable products and services, poorly performing employees and management, inefficient business processes and models, and underperforming departments and companies. Once the thatch of business is removed, growth can occur.
You don't have to thatch your lawn every year, but should do so occasionally in order to keep it healthy. Same thing with recessions. They are cyclical. They come and they go. The important thing to keep in mind is that, while painful, they are necessary and in a counter-intuitive way, even desirable.
Mar 24, 2009
Mar 23, 2009
The following is the text of a white paper I published recently, outlining the importance for marketers to maintain their brand-building and marketing activities in the recession. Enjoy!
THE IMPORTANCE OF BRANDING IN A RECESSION
By Thomas Nehren | Richter7 | March 2009
In recessions or other periods of slower economic performance, brand managers and marketers have to carefully consider how to wisely spend their valuable resources. In times of economic concern, one frequent response is to cut brand-building and marketing activities in an effort to better control costs. While it is in many respects the last thing a company should do, it is often the first thing they do.
Branding today has become more important than ever before. The current economic climate only heightens its importance, rather than diminishing it. Admittedly, a company’s executive and marketing management must have strong stomachs to follow a strategy that at times may seem counterintuitive and contrarian by investing funds in branding marketing while exacting tighter control over expenses in other areas.
Robert Frost once wrote in The Road Not Taken, “Two roads diverged in a wood, and I—I took the one less traveled by, and that has made all the difference.” This paper outlines four key points for marketers, brand managers, and business leaders to consider when facing the difficult decisions of why a brand should seize the opportunity created by today’s economic decline.
First, historical data and statistics show that companies that maintain or increase their marketing and advertising efforts in a recession do so to their significant advantage. Second, recessions brings about dramatic changes in consumer trends that only intensify the need for branding. Third, rational statements about product quality or superiority no longer provide sufficient room for differentiation. And fourth, advertising clutter can only be overcome by solid brand strategies based on emotional connections that embrace a consumer’s lifestyle. Unique plans based on alternative and/or guerilla media do not alone have the power to generate sufficient and lasting awareness and interest.
RECESSIONS CREATE OPPORTUNITIES FOR BRAND-BUILDING
During a recession, marketers are essentially faced with two options. One—cut back on advertising, hold on tight, try to ride out the storm, and promise that money will again be spent on branding once there’s extra to be found. Second— push forward with aggressive marketing to take advantage of a competitive landscape vacated by rivals.
It is an instinctive reaction for many to respond by cutting advertising and marketing expenditures along with other areas of discretionary spending. Such a reaction, however, often fails to distinguish between short-term operational and long-term strategic initiatives. Thus, long-term competitive advantage is sacrificed to instead meet short-term financial targets.
As stated by Robert S. Kaplan and David P. Norton of the Harvard Business Review, such attempts to play it safe or “cut fat and waste often slice into newly growing muscle, bone, and tendon.” Ironically, such a reaction to a slowing economy ends up only damaging the company’s most valuable asset: its brand. Another article from the publication states that "Advertising should be regarded not as a drain on profits but as a contributor to profits, not as an unavoidable expense but as a means of achieving objectives.”
Harvard Business School professor John Quelch, writing in The Financial Times of London, wrote that “instead of cutting the market research budget, you need to know more than ever how consumers are redefining value and responding to the recession.” He went on to say “It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times.”
The benefits to companies who continue, and in some cases expand, their marketing efforts during recessionary periods is widely documented. In the 1920’s, both the Kellogg’s and Post cereal companies raced neck and neck to dominate the emerging breakfast cereal category. During the Great Depression, Post cut back on their advertising while Kellogg’s maintained their strategies. By the time the Depression had come to a close, Kellogg’s had emerged as the clear leader in the category, a position they continue to maintain seven decades later.
Analyzing the recessions of the 1970’s, the research firm of Meldrum & Fewsmith showed that "sales and profits can be maintained and increased in recession years, and (in the years) immediately following, by those who are willing to maintain an aggressive marketing posture, while others adopt the philosophy of cutting back on promotional efforts when sales appear to be harder to get." Specific to the 1974-1975 recessions, the firm showed that companies which did not cut marketing expenditures experienced higher sales and net income during those two recessionary years and the two recovery years following than those companies which cut in either or both recession years.
Following the recession of 1981-1982, the McGraw-Hill Research's Laboratory of Advertising Performance analyzed the performance of some 600 industrial companies during that economic downturn. It found that "business-to-business firms that maintained or increased their marketing expenditures during the 1981-1982 recessions averaged significantly higher sales growth both during the recession and for the following three years than those which eliminated or decreased marketing.”
An additional study by Cahners and the Strategic Planning Institute found that businesses that increased media advertising expenditures during the recessionary period of the early 1980’s "gained an average of 1.5 points of market share." More recent studies of recessionary years during the 1990’s have showed similar results.
CONSUMERS CONSUME BASED ON EMOTIONAL REACTIONS TO BRANDS
Perhaps some of the reason for the response to cut marketing expenditures may be due to the fact that advertising, and more specifically branding, is often inaccurately interpreted to be nothing more than glorified awareness of a product or company. Such inwardly-focused branding efforts fail to capture the essence of what true branding is intended to be—an outreach to consumers in ways that are particularly relevant and motivating to the point of the driving sales, improving customer satisfaction, or supporting higher prices.
Each recession brings with it changes in consumer values and mindsets, which affect the purchase decisions they will make long after the recession is declared over. The current recession, which began in December 2007, brought about monumental changes in consumer values and behaviors. The crumbling of financial marketers worldwide resulted in a level of insecurity and angst unlike any other period in memory. Consumers awoke to a realization on our interdependence and vulnerability, longing for someone to provide reassurance, direction, guidance, and escape from daily worry.
We are social creatures and crave relationships that shape our identity. We develop strong personal relationships with family members and friends. Online social communities and neighborhoods are built to connect individuals who share common interests and passions. We develop connections with pets, to our country, to religion, to sports teams, celebrities, even to inanimate objects. And we develop connections to brands.
At the heart of these connections are our emotions. Dr. Gerald Zaltman, Joseph C. Wilson Professor of Business Administration Emeritus at the Harvard Business School and a former member of the Executive Committee of Harvard University's Mind, Brain, and Behavior Interfaculty Initiative, argues throughout his books that metaphors provide context for the often subconscious emotions that drive our behavior. These emotions are a lens through which we view the world. Feelings of attraction, desire, fear, and love among others cause us to act upon our thoughts.
The need for an emotional element in a brand’s persona extends to all categories. In 2005, the Workers Compensation Fund conducted extensive research which showed policyholders don’t believe their insurance providers truly understand the disruption and impact workplace accidents, fraudulent claims and inefficient claims handling have on their business. A traditional and more rational approach might be to educate the consumer about these disruptions.
However, research also learned how most workers do not actively think about safety, almost believing they are invincible. However, once reminded about the impact an injury might have on their family, they became more sensitive to safety messages. WCF worked with Salt Lake City-based Richter7 and infused emotion into their brand by having family members, particularly children, take the lead in reminding their loved ones to “Be Careful Out There.”
The campaign moved both customer and prospect favorability towards WCF, as well as existing customer satisfaction, to all-time highs. More importantly, workplace accidents among WCF clients dropped more than 40%, while remaining flat or edging slightly higher among their competitor’s clients. The campaign communicated the important message of workplace safety, but took it one step further by attaching that message to an emotion, the love that a provider feels towards his or her family. Appeals to the rational side of our brains without simultaneously making an emotional connection fail to incite the desired response from consumers.
As humans, we are first and foremost emotional beings, and our behavior is driven only when intellectual thought or reason intersects with our emotional side. As consumers, our consumption behavior is driven in the same manner. A brand’s image, its core message, its experience, and persona all work together to allow for a relationship to develop and some sort of action by consumers to take place.
In their new book Brand Immortality, authors Hamish Pringle and Peter Field studied 880 campaigns and found that emotional campaigns were almost twice as likely to generate large returns than rational campaigns. When at a time when the emotions, and even the logic, of many consumers has been thrown into a state of disarray, a brand that pulls back and fails to establish itself does so at its own peril.
BRANDS OVERCOME “THE DILEMMA OF SAMENESS”
Consider a recent study conducted by Consumer Reports. In the study, over fifty various kitchen ranges were tested and evaluated. The ranges were priced anywhere from $400 to over $5000. Of the ranges tested, forty-seven were rated as “very good” and four were considered “excellent.” Two models were considered “good,” and not one was rated as “fair” or “poor.” The trend is not limited to kitchen ranges. The ratings for smart phone devices, vacuum cleaners, digital cameras, and most other categories similarly yield a wealth of highly-rated products with virtually none falling into “fair” or “poor” territory.
A product manager for any of the fifty-one kitchen range models rated as “excellent” or “very good” may have been both pleased by their high score, and at the same time disheartened that their product did not immediately stand out amongst the crowd of competitive models. It can be considered a “Dilemma of Sameness.” Little differentiation in terms of overall quality takes away a marketer’s ability to continue what has long represented the majority of all marketing strategies, a selling proposition based primarily on rational benefits and logical arguments of product superiority.
Never before have there been so many quality products sold in America as is the case today. While business can be proud of their advancements in quality and performance, consumers are left to navigate a sea of products, with only the smallest of differences to help them distinguish and choose which products represents the best value for them. That is not to say there is nothing that can be done to further and improve products or services, or to make them “remarkable” as Seth Godin has said, but often such improvements aren’t enough to change perceptions and actions in the marketplace.
When consumers perceive little if any difference in tangible buying criteria, they will always defer to the most obvious difference: price. Again from the book Brand Immortality, reviews of previous national and international campaigns found that emotional campaigns generate a wider range of desirable business effects, most notably in their ability to reduce price sensitivity by an enduring sense of differentiation for the brand.
Consider the popularity of touch screen smart phone devices. RBC Capital Markets analyst Mike Abramsky suggests the number of iPhones sold in 2008 at 14 million, and estimates that an additional 24 million will be sold in 2009. The staggering sales figures come despite the fact that Consumer Reports currently rates six devices higher than the iPhone, most of which are also cheaper than the iPhone’s price tag of $299 for the most recent 16GB model.
Even more interesting are results from a recent survey by internet monitoring firm comScore, which showed that the iPhone is proving most popular among low income earners despite its high price tag. The survey found the strongest sales growth for the iPhone came from households earning between $25,000 to $50,000. Sales in this sector of the market grew forty-eight percent, compared with just sixteen percent among households earning more than $100,000. The staggering growth and popularity of the iPhone is being driven by an income bracket one would expect would have been hardest hit by the recent downturn in the economy.
Logically, the iPhone would not appear to the best value when it comes to touch screen smart phones, and certainly not for lower income and more vulnerable households. But that hasn’t stopped consumers from spending. The difference is Apple’s iconic brand and strong affinity among its consumers.
Using kitchen ranges again as another example, consider the case of The Viking Range Corporation. The company makes professional-quality stoves for homes. These products are priced around $4,000. Stuck in the middle of the ranges classified as “very good” by Consumer Reports, the line has grown into a $400 million business. Interestingly, in their book Trading Up, Michael J. Silverstein and Neil Fiske point out that “Some seventy-five percent of Viking cooktops installed are never used.”
It would seem illogical that one would spend so much on a cooktop, only to never use it. But Viking isn’t selling a cooktop. It is selling a brand that tells a powerful story that resonates with a targeted group of consumers who seek to express their sophisticated individual style and tastes and adventurous spirit in seeking out new culinary experiences. A brand based on emotion. An emotion that drives behavior.
MEANINGFUL BRANDS, NOT GUERILLA TACTICS, BREAK THROUGH CLUTTER
Providing further complexity to the problem faced by today’s brand managers is the case of what many marketers have referred to as “advertising clutter.” The more of it there is, the harder it becomes for any one advertisement to stand out.
Complaints about advertising clutter are nothing new, dating as far back as 1759 when English author Samuel Johnson wrote, “Advertisements are now so numerous that they are very negligently perused, and it is therefore become necessary to gain attention by magnificence of promises, and by eloquence sometimes sublime and sometimes pathetic.”
Certainly, a growth in available products and greater access to them makes today’s situation for both consumers and marketers much different than was the case in 1759. It’s even more difficult than was the case just forty years ago, when advertising executive David Ogilvy blamed the clutter problem for consumers having “acquired a talent for skipping advertisements in newspapers and magazines and going to the bathroom during television commercials.”
Recent estimates suggest consumers are exposed to over 5,000 advertising message each day. Media agency Mindshare reports that fifteen minutes of every hour is devoted to advertising and/or network promotions. TNS Media Intelligence further suggests that on top of the thirty-second commercials, viewers were also exposed on average to six minutes and twenty-two seconds of paid product placements during one typical hour of prime-time programming. During the third quarter of 2006, the CBS show Rock Band: Supernova contained over 1,600 product or brand shots within its episodes alone.
What makes clutter more challenging for marketers today is the increasing proliferation of advertising messaging, as well as the ease with which consumers can navigate around it. Armed years ago with a remote control to change the channel, ad blocking software for internet browsers, TiVo, and wireless devices now give consumers more ability to ignore marketing at the push of a button.
The change in the ways consumers consume media has brought about amazing new trends in communication and messaging strategies. Many of these new strategies and tactics provide a unique opportunity to develop relationships between brand and consumer like never before. Brands can engage consumers, walk with consumers, and become a welcomed and celebrated part of their lifestyle. In his book Buying In, columnist for the New York Times Rob Walker describes the phenomena of “murketing,” a description for the murky way in which relationships between brands and consumers have become “strangely interconnected, even reinforcing.”
The Toyota Scion branded itself as a car for the younger crowd they called “tuners,” a crowd who expressed their own unique style and personality through the way they customize their vehicle. The Scion’s marketing budget would have made even a mid-sized advertising agency scowl. Yet, the approach involved showing up at outsider and trendy parties, festivals, and events in urban centers. Scion hosted club events with DJs and gave away free copies of a Scion CD Sample Volume. They let editors of alternative publications test drive the vehicle for a week.
Scion embraced a lifestyle, reinforced that lifestyle, and gave consumers an outlet for their emotions. The car started wit a cult following to become now a mass-market success as the rest of the automobile industry questions its future.
Though an integral part of the campaign, it was not the creative use of alternative media and guerilla tactics that made the Scion a success story. It was the brand’s ability to understand the emotions and needs of a particular target audience. They embraced those need, and built a brand that didn’t just try to convey understanding through a cool logo and tagline and crazy marketing stunts, but through an entire philosophy surrounding everything about the brand.
The market is full of examples, from Tylenol to Red Bull, of companies who built a brand based on emotion, infused that emotion into their marketing, and provided experiences that reinforced that same emotional side of a consumer’s lifestyle.
THE CALL FOR BRANDING
The bottom line for any brand manager in a recession is this: one must aggressively, determinedly, tirelessly work to build the brand. It cannot be put on hold or placed on a back burner. Recessions come and go, and they will continue to do so. With the amount of competing messages vying for the slightest crack of attention, brands cannot expect to maintain or return to their position in the marketplace once brand-building and advertising is reduced. Once gone from the consumers mind, too often that brand is gone for good.
Instead, a brand must become even more diligent in its efforts to build a case for its own singularity and exceptionality. It must be built on emotion that is deeply relevant and resonant with a target audience in order for it to have the lasting power and be perceived as special enough to be worthy of not just a consumer’s limited pocketbook, but also their lifestyle. Brands have the unique opportunity often created by unpleasant economic environment to forge deeper relationships with consumers that are profitable for both the company and the consumer.
It isn’t consumers who fail to understand the meaning and importance of a brand. It is the failure of the marketer to communicate that to the consumer. When that occurs, and when money is tight and sentiment is weak, consumers will make the necessary and even unpleasant choice that many marketers are learning the hard way: They simply won’t buy it.
Mar 20, 2009
A recent AdAge article focused on settling the argument over "emotional messages" and "rational messages" and which ones are preferable in marketing. The authors reference data that shows that emotional campaigns are almost twice as likely to generate large profit gains than rational ones, with campaigns that use facts as well as emotions in equal measure fall somewhere between the two.
Even better than an emotional campaign is an emotional brand, which, in general, generate a wide range of desirable business effects in improving profitability. Emotional brands reduce the consumer's focus on rational features and benefits and have a substantial reduction on price sensitivity.
"Brand Equity" is the sum total of all associations, experiences, and perceptions consumers have over time with a company, including its products, services, marketing, employees, retail stores, etc. As companies seek to establish greater Brand Equity, its three components must be considered separately.
Unaided awareness is the foundation and first key measure of brand equity. Awareness comes from exposure, i.e. advertising, publicity, event sponsorship, store fronts and signage, email campaigns, direct mail campaigns, packaging, website, banner ads, etc. These things must be created with extraordinary style and creativity so they grab attention and have impact.
Understanding comes from what you say about yourself, and, more importantly, what others say about you. Do consumers think about you the same way you think about yourself? In the past, understanding was shaped largely by the news media and word of mouth, but now social media gives brands a tremendous opportunity to listen to what consumers are saying and engage them in actual conversation. Imagine for a moment that your target audience could only think of you in one single way. What would you want it to be, and how many would say that very thing about you?
Loyalty comes through positive interaction with a brand. The more positive the experience, the deeper consumer loyalty becomes. Branding is a business strategy not just a marketing strategy. It is a long-term commitment, not a short-term initiative. Develop a positive experience through product design, employee training, creating a great shopping experience, and customer-friendly corporate policies. From a marketing perspective, look at highly personalized data base driven marketing programs, i.e. preferred customer programs, cross-sell programs, and particularly the personalization of your website.
Mar 11, 2009
There is a reason we're supposed to slow down when we go around curves when we're driving. If we don't, our car's inertia becomes too strong to correct quickly enough and we end up driving off the road and over a cliff or into a tree.
On a recent road trip, we were coming over a mountain pass and around a corner that I misjudged and didn't slow down enough for. I never lost control of the vehicle (no I wasn't taking the photo above as I was driving), but the turn was sharp enough to wake up the passengers.
When developing brand positioning and marketing strategy, many business leaders, especially small business owners, take the corner too fast. Recently I consulted with several small business leaders on brand strategy, but once our brainstorm began they excitedly began discussing how they were going to talk to consumers and started brainstorming taglines.
Its natural. As humans we are impatient and want to get to our destination as quickly as possible.
But before you can talk tactics (how), you have to figure out what you are going to say and why anyone would care. Only once you have slowed down and done the first step can you begin taking the next step.
Otherwise you just might steer your business off the road.
The Monkey Shack has been on hiatus the past few weeks. Oddly enough, the number of visitors to the blog has increased since I last posted. Thanks to everyone in our growing community for stopping by. These are interesting times for business leaders and marketers, and we'll be jumping back into cyberspace shortly!