Eating Humble American Pie

The blogs are clogged with the news of GM issuing a memo to its employees to use the name “Chevrolet” and not “Chevy” when referring to the brand. Songs by the dozens that refer to the car are being dusted off, getting play on YouTube and, despite the painful reminder of how our hair looked, making some nostalgic for an America that they associate with the brand.

Our interest is not to debate the pros and cons of the internal decision at Chevrolet to create continuity with the brand name across countries. We are far more interested when these sorts of “field experiments” happen: when a brand does something that seems like a good idea at the time, only to find that the consumer has an entirely different idea.
To us as researchers of consumer engagement and loyalty to brands, the power of a brand name is no surprise—especially a brand name so steeped in American culture. But it is a critical to remember that the brand scrap-yard is littered with brands that thought they could live off their past. But for the bailout by Americans, GM would be one of the most obvious examples.

A brand is more than name alone, as evidenced by Chevrolet’s weak performance in our predictive metrics, where it trails other brands when it comes to how consumers will buy, because both Chevrolet and consumers know the truth: people will refer to the brand however they like, as they have done with other brands, using “Coke” for Coca Cola, and the mock French pronunciation for Target—Tar Je’—which speaks volumes about its high design offerings.

The danger here is that GM will interpret the passionate response about the name with the success of the brand. Many brands with a strong legacy factor—like Chevy—can misinterpret the fervor of a few for an indicator of the many. And it will take the behavior of many to drive GM out of its past and into the future—a consumer decision far more subtle than any song lyric.

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War Does Not Determine Who’s Right. Only Who’s Left.

It used to be that the worth of a book was measured by what the reader could carry away from it. Now, it seems, worth is being measured in how the books are actually carried. And what that’s worth has started a war – the price war of the e-readers.

Barnes & Noble reduced the price of its Nook e-reader from $259 to $199 this week and also said that they would release a lower-priced, WiFi-only version for $149, making it the first under-$200, full-featured e-reader that offers free 3G and WiFi connectivity. Not to be undersold, Amazon cut Kindle prices by 30%, from $259 to $189.

As to others in the e-book reader marketplace, the Sony Pocket Edition is priced at $169 with no wireless connection, but their Daily Edition does have Internet access, but that costs $349. At least until Sony announces a price cut. Borders offers up the Kobo. It’s $150, but it lacks wireless access too.

Amazon was, of course, the early leader in the small but growing market for portable reading devices. Now they’re facing growing competition with Apple's iPad, Sony's Reader, and an array of other handheld tablets and mobile devices. The escalating price war reflects the growing popularity of e-readers as well as Amazon’s and Barnes & Noble's desire to offer a lower-priced alternative to the Apple iPad. That retails beginning at $499 but does other things besides holding e-books.

But all e-book readers are not the same, having different e-book formats. Apple and Amazon don’t allow other manufacturers to use their copy protected e-book formats, but Barnes & Noble's ePub is available on different devices, including Sony's e-reader and Borders' Kobo. And as to who’ll be left, at least one e-reader maker has only made it to Chapter 11. IRex Technologies recently sought bankruptcy protection. Other brands, like Plastic Logic, have encountered delays as well entering the growing marketplace.

The advent of multi-featured tablet devices and “MID” devices (mobile Internet devices), aka “tweeners,” or something ‘between technologies,’ has driven the prices for single-feature devices lower and lower and lower. Amazon and Barnes & Noble are expected to introduce new models as early as this summer, which means prices of e-readers are likely to come down even further. One industry expert thought that most devices would end up being priced around $100 by the end of the year.

The e-book reader price war is far from over, so stay tuned. Because this marketing and technology war is bound to turn into a real page-turner!

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Beer Buyer Belts Backslide

Part-time philosopher and full-time drinker, Homer Simpson, once noted “beer is the cause and solution to all of life's problems,” and it seems he’s right on both counts – at least when it comes to the US brewing industry this summer. The $100 billion industry is staggering into the critical selling season with the industry in its weakest position in years. Sales for the 11 biggest brands are down and only 4 of the top 30 are posting any gains at all.

Despite massive media support, the big brewers have seen their leading “lights” – Bud Light, Coors Light and Miller Lite – shares decline. Bud Light is down nearly 6%, the first negative year in the brand's 28-year history. MillerCoors’ Coors Light and Miller Lite, down 0.5% and 8% respectively.

Brewers are trying everything this summer from juiced-up spending to line extensions to special bottles, hoping to somehow engage consumers and slow the declines. And returning their brands to growth mode might just drive the brand managers themselves to drink. Unemployment levels are correlating with consumers (mostly younger and minorities) drinking less beer and, thus, the industry shipping less beer (-4%). And in many cases, consumers are opting for bargain brews, or saving their money to splurging on “craft” beers.

Leveraging loyalty – and achieving real engagement – could help ease some of the pain. Loyal customers are six times more likely to buy more of your products and rebuff competitive offers – especially price-based offers – and interesting packaging. According to our Customer Loyalty Engagement Index, currently, the top-3 Light Beers are Keystone Light, Busch Light, and Coors Light. The top-3 Regular Beers are Pabst Blue Ribbon, Sam Adams, and Corona, so brewers can at least raise a glass to them.

And if you can get the loyalty part of the equation right, you don’t necessarily have to spend as much money playing consumer ‘catch-up.’ When you have engaged consumers, you have consumers in active mode where, and while they may believe a beer can be judged with only one sip, they also feel it’s better to be thoroughly sure!

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Being a Father Means You Always Need Another Tie!

A day born in a daughter’s memory and gratitude for her father looks to be turning into a $10 billion dollar retail holiday this year. OK, not quite as much money is spent on Father’s Day as it is on Mother’s Day. That’s the usual pattern, and anyway, Mother’s Day comes first. But this year’s average spend is up 5%, about $115.00 to recognize Dad. Where will that money be spent? Our survey found the following:

Gift cards 30%
Clothing 26%
Electronics 20%
Tools/Automotive 17%
Wine/Alcohol 5%
DVDs 2%

The biggest change from last year is that more consumers report they will be buying electronics (up +12%). That includes phones and would seem to indicate that people are feeling more secure about the economy and are willing to spend a bit more. Sales of wine and alcohol are down slightly, but that was never a really good indicator about consumer economic expectations no matter how many people said that the economy was driving them to drink! And anticipated clothing purchases are up, but retailers could always count on the perennial Father’s Day tie.

There’s a fairly even distribution in terms of where consumers will be shopping for dad’s gift, although – perhaps reflecting more confidence in the economy and a willingness to spend a bit more on Dad – Discount Stores as location-of-choice is down, but Department Stores are up:

Discount Stores 35% (down 4%)
Department Stores 30% (up 10%)
Specialty Outlets 15% (down 5%)
Online 18% (about even with last year)
Catalog sales 2% (down 6%)

The concept for Father’s Day began in 1909 in Spokane when Sonora Dodd, held a Father's Day celebration on June 19, 1910. By 1956, Father's Day had been recognized by a Joint Resolution of Congress and in 1972 President Nixon established a permanent national observance, held on the third Sunday of June.

There’s an old saying that a father carries pictures of his children where his money used to be. This year year’s spending seems to indicate families are trying to acknowledge precisely that particular circumstance!

Happy Father’s Day to all!

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It’s A Capital Mistake To Theorize Before One Has Data. And Sometimes When You Do!

The first part of today’s blog title comes courtesy of Sherlock Holmes. The second part comes from Brand Keys. We’ve been warning clients for years about the enormous difference between what consumers think and what they say they think, because today, just asking them isn’t enough.

Consumers are smart. And clever, And complex. Very, very complex. Decision-making is more emotionally-based than rational, and you need to be attentive to the difference when you ask the questions, or you end up paying for that mistake by ending up with erroneous theories. You know, excellent answers to meaningless questions.

For example, about a month ago when BP’s Deepwater Horizon oilrig exploded our Brand Keys metrics predicted the negative change in consumer loyalty and engagement to the brand. This was via our predictive fusion of emotional and rational assessments, and the finding that the BP brand moved from #1 to last in the loyalty rankings. We predicted that move would significantly harm BP’s bottom line. Moves like that always do. And yet other’s data didn’t quite line up with that.

YouGov’s BrandIndex polls 5,000 consumers daily about brand preferences and provides rational brand insights. They didn’t believe BP would suffer at the pump. In fact, YouGov’s data shows that consumers’ general impression of BP was still positive.

The “Chief Ideonista” at Ideon, thought that enduring faith was a sign that BP’s “Beyond Petroleum” campaign equity would protect in a crisis. Their assumption was that there was still a reservoir of consumer goodwill left for the BP brand. Perhaps, someone should have pointed out that those reserves had already been burned up. The Ideonistas either forgot or didn’t factor in any measures of enduring faith erosion related to BP’s Alaskan pipeline leak or the Texas refinery explosion that killed 15 people. Faith may reflect confidence, but it doesn’t always reflect reality.

But here’s one brand reality: if you talk the talk, you can’t blow up an oilrig, be unable to stop the leak, and still expect consumers to have “faith” in the brand’s positioning that they “support” the environment. Saying it, doing it, and doing it believably are three entirely different things. Especially when face validity comes in the form of killing off fragile eco-systems, marine and wildlife, as well as decimating livelihoods.

We’re the first to acknowledge that retail sales make up only a fraction of BP's revenue, but pump boycotts – and the attendant bad PR – are likely to undermine the brand more than the immediate bottom line. And while loyal customers are willing to give a brand the benefit of the doubt (6 times more), that pool of forgiveness is not a bottomless well. And consumer emotions (remember the emotional aspects you need to factor in?) lean much more towards oil-coated pelicans than green-and-yellow sun logos. Researchers can disagree about the brand insights from their data, but it’s always the bottom line that’s the ultimate arbitrator of whether the insights were right or wrong.

Last week BP shares nosedived. BP stock dropped 16%, the worst it has been since the drilling rig exploded setting off the oil spill. In seven weeks the company has lost half its market value, or about $100 billion. BP is now valued less than its assets. Laments, lawsuits and restrictive legislation abound. And while not currently at risk of bankruptcy, the crisis could turn BP into a takeover target. And then the brand and its once-sunny logo will sink quickly into an oil-slicked sunset.

And – it will come as no surprise – BP is still ranked last in our Customer Loyalty Engagement Index.

The brand loyalty bottom line: If you’re an oil company, avoid blowing up oilrigs. And if you do, get the brand insights right. Or the wrong insights will get your brand.

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Leveraging Loyalty Creatively

On Tuesday we published the US sales for new vehicles in May. (For details see the blog entry below this one.)

And as loyalty metrics are always leading-indicators, we were interested in seeing how sales correlated with our Customer Loyalty Engagement rankings for the category.

We came up with a 0.70 correlation. (And, as we noted for those of you without any statistical apps on your phone, that’s very, very high.) But even with very, very high correlations, having metrics and leveraging them are two different things.

That acknowledged, we thought you might enjoy seeing Hyundai – ranked #1 in our loyalty assessments – creatively leveraging their own very, very high levels of customer loyalty. Just click here to watch.

As always, the best creative comes from the ability to see relationships. And, as we’ve discovered, loyalty very, very, much defines the most powerful relationship of all.

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A Handful of Patience is Worth More Than a Bushel of Brands

It’s been said that patience is something you admire in the driver behind you and disparage in the one ahead of you. One can argue that, in spite of the difficulties auto manufacturers have faced in the past year, patience – and no-interest financing promotions – has paid off, with new-vehicle sales rising more than expected in May.

Total industry sales have risen 19.1%, the average selling rate is at about 11.3 million, up from last year’s sales of 10.4 million. But as we specialize in loyalty and engagement metrics – leading-indicators of positive behavior towards brands and, axiomatically, sales and profitability – we took a look at how consumers currently rank automobile manufacturers in terms of engagement and loyalty. (Numbers in parentheses indicate the change in sales for May 2010.)

1. Hyundai (33%)
2. Ford (33%)
3. Subaru (35%)
4. Nissan (24%)
5. General Motors (18%)
6. Chrysler (33%)
7. Volkswagen (21%)
8. Kia (8%)
9. Honda (9%)
10. Toyota (7%)

For those of you still without a correlation calculator app on your phone, the correlation between our loyalty-engagement rankings and actual sales is 0.70, which is – for those of you without any statistics app on your phone either – a correlation powerful enough to have social scientists dancing on their desktops!

Auto manufacturers have been patient with their brands, but that patience is beginning to feel much like that of the driver ahead of you (or in this case, the auto manufacturer who is currently leading the pack) and is fast coming to an end. Only last week Ford announced it was sending the Mercury brand to that big auto junkyard in the sky where it joins Plymouth, Pontiac, and Saturn, with more likely to come. Manufacturers are, not surprisingly, hard-pressed to maintain brands that don’t deliver the goods.

According to St. Augustine, patience is a virtue. But when it comes to commerce, as virtue has never been respected as much as money, we’ll stick with loyalty – a driving engine of sales.

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Hungry to Show Team Support

So, Yogi Berra goes out to eat and orders a pizza. The waitress asks him, “How many pieces do you want your pie cut into?” And Yogi replies, “Four. I’m not that hungry so I don't think I could eat eight.”

That old joke came to us when we heard that the NBA believes that basketball fans, who they assume are always hungry to show their support for their local teams, would be willing to pay an additional $5 to have an edible NBA team logo put on their pizzas. The NBA – really hungry to make up lost revenue because licensed apparel sales are down – is currently in mode to plaster NBA logos on anything that will have them including candy, coffee, and toasters. Oh, yes, and pizzas.

We’ve known for a long time that fan loyalty correlates very highly with licensed merchandise sales and viewership, but were totally unaware of the loyalty-link-to-pizza consumption, although we’d be the first to admit that it’s the take-out/order in food of choice on Game night, but it’s also fair to say that that trend is pretty much league neutral. Fans, however, are not neutral when it comes to which league they support most. According to our Sports Fan Loyalty Index, this year the major leagues rank as follows:

1. NFL/MLB
2. NBA
3. NHL

The NBA has been the perennial 3rd or 2nd ranked league for a long time now so we were a little surprised at this particular tactic. The paper-thin logos (made of sugar, starch, and food coloring) are going to be sold to independent pizza parlors nationwide. The image is placed on top of the pizza (after it’s been fully baked and sliced) and the logo then melts into the cheese. Mmmmm-mmm. As mentioned, adding the logo will add about $5 to your bill, which seems a bit much given the cost of pizza in today’s market. So come Game Night, those of you who hunger to show even more team spirit can check your local pizza providers for logo availability.

Because despite all the attitudinal, behavioral, and financial benefits derived from fan loyalty, nothing says "Go Team" like eating a reasonable facsimile of your favorite team's logo replicated in sugar, starch, and food coloring and melted into your cheese. At least according to the NBA.

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Tweener Technology

Yesterday Apple posted iPad sales of 2 million+ since its launch. The iPad can send emails, draw pictures, play games, and is an electronic reader. With more and more apps available, it’s blurred the lines between smart phones and tablets and computers. Competitors have not been waiting to see how things shake out.

Dell has an android-powered piece of technology called the “Streak” coming out this summer. They call it a “tablet.” Except this one has a 5-inch screen, half the size of the iPad, and it can make calls. So while larger than the expected smart phone, it’s small enough to hold up to your ear to make a call.

OK, it’s smart but not specifically a phone. Or a computer. More specifically it’s a data-centric device that can download Web pages in full width that can be used as a GPS device and once upgraded to the Android 2.2 operating system, it will support Flash 10.1 and with a fast 1-GHz Snapdragon processor and two cameras (front and rear) video chats would be possible. One could safely call it a “MID” – a mobile Internet device, aka a “tweener," something between technologies.

The “tablet” category is too new and too small for us to track it in our Customer Loyalty Engagement Index. The way things are going, perhaps next year. Or maybe a MID category in 2011. But in the meantime, here’s how customers rank their Smart Phone brands (where Dell does not currently show up):

1. Apple
2. Samsung
3. Blackberry
4. Nokia
5. LG
6. Palm
7. Motorola

“Tweener," technology has come and gone, but up till now the concept hasn’t been able to successfully embody consumer’s increased technological expectations and increased technology in a one-size-fits-all device. That’s because if you rely on traditional category and new-product metrics it’s hard to get consumers to meaningfully articulate size and technology combinations.

Dell's brand recognition might help differentiate the device from the dozens of other upcoming Android devices, but as everyone knows, brand awareness is no leading-indicator of consumer engagement or sales (Dell ranks 2nd after Apple in the Laptop Computer category and 5th in the Netbook category). And with the potential loss of iPhone exclusivity, the rumor is that AT&T will carry the Streak, although Dell has been closed-mouthed about both potential carriers and pricing.

Questions abound: Will the Streak be positioned as a smart phone, a tablet, or a MID? Will it be hard for consumers to grasp the concept of a smart phone- tablet-like device? Will it produce significant volume? Can the Dell brand successfully compete against entrenched smart phone brands, particularly Apple, even in a newly rejuvenated MID category? Is it a category at all?

Three sure things though: First, consumer expectations will continue to grow, especially about technology. Second, predictive loyalty and engagement assessments can help to answer some of those questions. And third, technology often presumes there's just one right way to do things.

There never is.


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