Apple has been capturing a lot of headlines lately. Some of the stories have been great news for Apple, detailing record profits, due in part to a sales spike after the iPhone’s new access to the Verizon network.

Other stories haven’t been as welcome. The latest version of the iPad made headlines all around the world when it arrived, when it was discovered that global positioning programming in iPhones and iPads were recording and transmitting data about the unit’s location. Privacy advocates were especially enraged, and lawsuits have been filed, when it was discovered that the transmission occurred without the owner’s knowledge or consent, even when the iPad itself was shut off.

How Big of a Problem is this for Apple?

This isn’t the first time that Apple has had high profile technical problems. The iPhone 4, for example, had a well-publicized design flaw with its antenna. But this issue is different.  This time, it’s personal.

Privacy occupies a place of particular importance in our culture, and that importance grows exponentially as we live more and more of our lives online.  We define ourselves by the choices we make about our personal information. We have a high expectation of control; we know what we want to share and what we choose to keep to ourselves.

The iPad incident reveals that that control was illusory at best. Consumers never had an opportunity to opt in or out of this iPad functionality. The decision was made for them.

How big of a problem is this for Apple? In large part, the answer to this question boils down to how deeply Apple’s best customers, their Brand Lovers, are invested in the idea of control over their personal information.

Brand Modeling: Knowing Your Customers

Brand Modeling is the art and science of predicting customer behavior in a dynamic environment.  Before you can accurately forecast how your customers will act in any given situation, however, you need to understand the factors and forces that go into their decision-making process.

Privacy is deeply and directly tied to our sense of trust.  There has to be a significant amount of trust in place before we’re willing to share the information that most closely defines us. We expect that information to be used only in specified ways and explicitly protected from all who would use it for ill gain. Violating that trust is enough to damage even the strongest relationship.

But is that true for Apple’s best customers? The question may not be entirely black and white.  Privacy can be viewed as a continuum. Realistically, Apple has long known that hard core privacy fanatics, the type of people who make sure they leave no footprints on the virtual landscape, are not their best customers.  Are Apple’s Brand Lovers as concerned with privacy? Time will tell.

If the iPad’s biggest enthusiasts accept the collection and transmission of geographic information as no big deal, then this moment will pass with barely a ripple.  Apple will emerge relatively unscathed, tasked to do better with the next version of the iPad.

J.M. Smucker recently announced that they’ve spent $360 million to acquire Rowland Coffee Roasters. The privately held company, based in Miami, produces the Cafe Bustelo and Cafe Pilon brands, as well as ready to drink coffee beverages.  Popular with Hispanic shoppers, the company sales were approximately $110 million last year.

Smucker’s already has a significant position in the coffee industry, with both the Folger’s and Dunkin Donuts brand. This existing infrastructure can explain part of the decision to expand; customer demand for coffee has proven remarkably strong even through tough economic times. Making the case for expansion isn’t difficult. The interesting part of the question lies in deciding which way to grow.

Brand Modeling as a Decision Making Tool

The greatest challenge business leaders face is uncertainty.  Smucker’s obviously has a desire for increased market share and greater profitability. The organization has more than 25 profitable brands in several different sectors. In addition to their coffee holdings, Smucker’s owns Pillsbury, Crisco, and a trio of jam and jelly companies. Growth opportunities exist in every sphere: why choose coffee?

The Brand Modeling approach to that question would begin with looking at Smucker’s existing customer base, paying particular attention to those customers who buy Smucker’s family products in quantity, perhaps exclusively in category, and who have a demonstrated strong emotional connection to the brand.  These customers are known as Brand Lovers. They’re the most profitable segment of any organization’s market. More importantly, these Brand Lovers play a pivotal role in identifying opportunities into the marketplace.

If you can identify, with a high degree of specificity, what your best customers value most and consistently expect from your brand, you can then consistently choose actions and campaigns that will delight and attract those customers. If you’re going to acquire another company, you should acquire a company that does things in a way that will appeal to your Brand Lovers. Smucker’s loyal customers are drawn to the brand’s messaging of tradition, quality, and a nostalgic-tinged insistence that good things take time.

Chances are that these customers are going to drink coffee. Most people do. Smucker’s might already have those customer’s business. It may be that the best Smucker’s customer is already committed to the Folger’s or Dunkin Donuts brands.  But it may also be true  that those coffee needs weren’t being met, or that they could be met better. Serving your best customer’s needs better than anyone else does is the route to profitability.

What Can Rowland Coffee Do for Smucker’s Brand Lovers?

Enter Rowlands Coffee Roasters. The Cafe Bustelo and Cafe Pilon brands have strong following in Florida and the Northeast among the Hispanic community. At first glance, Smucker’s acquisition seems like nothing more than participation in the burgeoning national trend to court the Hispanic consumer.

However, when you delve into Rowland’s history and discover that it, like Smucker’s flagship brand, is that quintessential American dream tale of a small-town entrepreneur who built a brand from nothing but a dream into a proud family business, the fit seems more natural.  The two companies share the same story; they have embraced the same myth as core to their identity. When we look at Smucker’s and we look at Rowland Coffee Roasters, we see key values in alignment. Tradition, pride in one’s heritage, the value of having a place in a community: all of these will resonate with Smucker’s customers and motivate them to buy.

Meanwhile, Smucker’s has an immediate opportunity to prove themselves to the Hispanic community. If they can continue to deliver on the Rowland Coffee Roaster’s established brand promise while leveraging the greater manufacturing and marketing resources they have at their disposal, the chances are very good indeed that the result will do more than ‘perk up’ Smucker’s bottom line.

Does this picture make you hungry?

If you answer yes, it’s a good sign that Duncan Hines is on the right track. According to this NY Times article, Duncan Hines, who has long occupied second place in the cake mix industry, is revamping its marketing message.

No longer is Duncan Hines focusing its marketing message on the industry’s traditional audience—stay-at-home mothers with one or more children to cater to.  Gone are the days when the cakes are showcased to appeal to people who still sign their name in crayon. Instead, the new campaign is geared to reach a psychographic target of people who love to bake—including men who love to bake and young singles who love to bake. In other words, Duncan Hines desserts are all grown up.

Why is Duncan Hines Changing its Strategy?

Occupying the #2 position in the cake mix industry is a lucrative place to be. The company controls nearly a third of a $382 million dollar market.  This shift reveals to us that Duncan Hines’ leadership believes that there is a place where they can enjoy greater profitability and increased revenue.  This belief is strong enough that the company is making the first major marketing message shift in decades.

Their new approach seems rooted in the tenets of Brand Modeling, which tell us that the point of ultimate success for any brand lies in identifying who loves your products and services the most. These customers, the Brand Lovers, buy from you more frequently and in greater quantity, recommend your products enthusiastically, and contribute more to your organization’s bottom line than any other portion of your customer base.

Focusing your company’s efforts on serving the needs of these customers as completely as possible is the sure route to success and marketplace dominance.

It’s vital for an organization to have as in-depth and complete an understanding of who their Brand Lovers are as possible. Duncan Hines articulates their vision of their ideal customer pretty well: they’re food enthusiasts, who watch Food Network, and scour cooking magazines for both inspiration and instruction, rather than “serious bakers” who would turn up their nose at using a cake mix in the first place.

More importantly, the understanding is there that the psychological motivators influencing their customer’s purchasing decisions is not the same as it is for the traditional cake mix market. The baker who creates Mexican chocolate cupcakes seasoned with just the right hint of cayenne pepper is not the same customer as the baker who needs a pink cake with pink frosting for a three-year-old’s birthday party. The goals are different, and more importantly, the customer expectations are different.

A Change in Consumer Needs Requires a Change in Brand Strategy

In some ways, this gives Duncan Hines a measure of freedom and latitude that their competitors just don’t have.  Delving into the history of cake-mix development reveals to us that the entire industry was born out of a desire to save time for the homemaker. The directions for any cake mix were kept intentionally simple; seldom did you have to do more than add eggs, oil, and water to the mix.

Duncan Hines is betting that their customers are craving a greater degree of difficulty, and don’t place such a premium on saving time. The needs that drove millions of women to buy cake mix rather than baking from scratch simply aren’t their needs. Instead, their customers are seeking a way to produce impressive desserts relatively easily. Their customers are willing to invest more time, but they want an end result that rewards the commitment.

Will it work out for Duncan Hines? The new campaign is set to roll out a few days ago, and we’ll be watching to see if there’s any change in Duncan Hines’ market share.  If it works—and we’d hazard that it  might—then Duncan Hines’ leadership will be able to savor the sweetest treat of all: success!

Ford Motor Company has just enjoyed their best first quarter on record. They’re leading the way as America’s auto industry inches its way toward recovery, outperforming their closest domestic competitors, Chevy and GM, significantly.

When asked to share the reasons why Ford is doing so well, CEO Alan Mulally cited, among other factors, the decision to simplify the company’s product mix. Ford needed to focus on its core offerings, producing a complete line in every size: small, midrange, and large. Gone from the picture? The numerous luxurious European brands that Ford had acquired over the years.

So far it appears to have been a good decision. Good enough, in fact, that we should step back and examine the thinking that went into it. How did Ford’s leadership know which of its many lines to embrace and develop further, and which ones to let go?

It’s easy to see where divesting of Jaguar, Land Rover, and Volvo clarified Ford’s brand message. But was that clarity achieved by needlessly sacrificing profitability?

Brand Modeling as a Decision Making Tool

The greatest challenge any business leadership team faces is one of uncertainty. The automobile industry was hit particularly hard by the economic downturn. Consumer confidence was in a near free-fall for many critical months, tightening the supply of cash and making mistakes a luxury no brand—including Ford—could afford.

The goal is to eliminate uncertainty. The ability to predict, with a reasonable degree of accuracy, how an organization’s customer base will react to any change is a tool that provides a real competitive advantage. Brand Modeling provides this forecasting ability, based on the behavioral and psychological traits of the most profitable portion of a company’s market.

Brand Modeling: Focus on Ford

If we were going to consider Ford’s choices from a Brand Modeling perspective, we’d want to know a few things. First and foremost, we’d need to have a concrete understanding of how Ford’s best customers connect with the brand, psychologically and emotionally.

When there’s a strong relationship in place, we see multiple points of connection between customer and brand. Some of these connections are more vital and important than others. Listening to Mulally, we hear him discuss Ford’s dependability and value. These are two traits that the CEO believes make the brand most appealing to Ford’s market. Ford’s customers buy Taurus and Focus and the F-series pickup truck line because they believe in that message of dependability and value. They’re critical components of the relationship.

Making any type of change to Ford’s operation that changes that customer belief in the brand’s dependability and value is a non-starter. On the other hand, changes that reinforce the customer’s perception of Ford vehicles as reliable and affordable will strengthen the brand.

Using this lens provided by Brand Modeling, we can see one possible route Ford’s leadership took when choosing to slash the luxury lines. While Volvo and Land Rover are certainly dependable, they’re not cars that appeal to Ford’s target market. Their connection to the Ford company did nothing to reinforce the message of durability and value. At best, they were irrelevant. In the case of the Jaguar, one could argue that there was at least a little cognitive dissonance involved: no one buys a Jaguar because they’re dependable. Brand Modeling uses historic data and in-depth psychological analysis of the customer base to create a level of parameters and filters that simplifies the decision making process.

So far, the numbers seem to support Mullaly’s decision. The impact of the hurricane, tsunami, and nuclear disaster related events in Japan are having an across-the-board effect on the auto industry, and so some softening is to be expected as unavoidable. That being said, if Ford’s confidence in their customers is well placed, the rest of the year could turn out pretty well for the auto manufacturer.

The New York Times recently decided to change their business model, at least where online content is concerned.  Web visitors will be able to see a limited number of articles each month for free. After that threshold number of articles has been read, viewers will be asked to log into a paid subscription account.  NY Times publisher Arthur Sulzberg has been savagely criticized for the move and touted as the genius who might just save journalism.

Which one is it? Is Sulzberg a visionary, clear eyed and sure about the best way to guide the NY Times forward in an era where print media is becoming increasingly irrelevant and digital media difficult to monetize? Or is this a Hail Mary pass—a last ditch, all-in effort to turn the tide in a game where not much has been going right?

What we have here is a rare opportunity to see a major brand, a dominant organization and established legacy brand, changing their model in real time. The tenets of Brand Modeling tell us that Sulzberg’s changes will be successful if:

• the Times continues to consistently deliver the content the paper’s best customers value the most.
• the introduction of the change does not irrevocably alter the emotional relationship the paper’s customers have with the Times.
• the changes strengthen and enhance the relationship that already exists with the Time’s loyalist, most active customers.
• the changes make the Times more appealing to people who are like the Time’s best customers, thereby increasing market share.

Brand Modeling is predicated on the belief that an organization’s surest, most effective way to grow and enjoy greater profitability is to identify the company’s very best customers (those customers who do a great deal of business, frequently, and are actively involved in promoting the brand to their circle of friends) and delve deeply into the quality of their relationship with the brand. Once we understand what makes the brand appealing to its best customers, we can create models that allow us to forecast, with a relatively high degree of accuracy, what will happen if we change the way we do business.

It is a tremendously valuable tool to be able to predict the outcome of changes ahead of time. Changes such as the Times is making do not come easily or overnight.  At some point, Sulzberg must have had access to information and data that gave him cause to have confidence in his decision. Although defensive, he still sounds committed to his position here,in this Daily Beast article.

It’s clear that Sulzberg has put some serious thought into who the Times’ best customers are, and aren’t. He counters charges that the pricing plan is too complex with evidence that the Times’ print subscribers have handily navigated a similar system for years. The readers he characterized as “high school kids and people who are out of work” aren’t the customers he’s worried about keeping. Will the rest of the Time’s readership—or at least a significant portion of it—value the Times enough to make the move to a subscription based model a good decision?

If they do, Sulzberg comes out a winner.

If they don’t, he may just wind up being yesterday’s news.

Maybe what you should be praying for is one good enemy…

Author Holly Lisle penned those words as advice for aspiring writers. Having someone to pit yourself against can inspire you to greatness. It worked for Lisle. Her determination to prove her ex-husband wrong resulted in many best selling novels.

In the corporate world, good enemies have another function. Having an adversary gives an organization a way to define itself in the public eye. Sierra Mist, maker of lemon lime soda, is trying to harness the power of one good enemy for themselves in their most recent advertising campaign. They’re pitting themselves head to head with Sprite, according to this article in Ad Age.

The confrontational approach is not one Sierra Mist would have undertaken without a reasonable degree of certainty that it would be effective.  Comparative advertising abounds in the beverage industry, capitalizing on people’s innate tendencies to categorize things in similar groups.  When you’re perilously close to being a commodity product, highlighting differences becomes non-negotiable. You need the right differentiation to secure a place in consumer consciousness, where your product becomes the definition of that category.

Which Way Do We Go?

When you don’t know where you’re going, any route will do, but when you have a fixed destination in mind, the map suddenly becomes much smaller.  Sierra Mist has a long list of potential differentiators that it can use to position itself within the lemon-lime beverage category.  Any organization that is trying to carve out its own place in the market does.  The question is which differentiators are important? Which ones are critical enough, appealing enough, powerful enough to build a brand upon?

One way to find the answer to this question is to turn to your Brand Lovers. Brand Lovers are your best customers. They purchase your products more often than any other offerings in the same category, they buy more of your products than the average customer, and they’re enthusiastic about promoting your products to their family and friends. Brand Lovers tend to be your most profitable customers. They’re also your guide to even more profitable positions, if you’re willing to listen to what they have to say.

Every company has Brand Lovers, although not every organization has them in the same quantity. The more successful and dominant an organization is, the more Brand Lovers they have. Dominant organizations place a premium of being aware of and responsive to the wants and needs of their Brand Lovers.

When selecting what kind of ammo to bring to the latest version of the Un-Cola Wars, Sierra Mist would be wise to listen to their Brand Lovers. Why do these customers select Sierra Mist, rather than Sprite? Why do they reach for a Sierra Mist instead of a Coke, Mountain Dew, or Barq’s Root Beer? Why choose Sierra Mist instead of apple juice, soy milk, or chai?

Understanding what makes Sierra Mist appealing to the people who love it the most will help Sierra Mist’s team craft a message that will resonate not only with their existing Brand Lovers but those customers who have the potential to become Brand Lovers.

Sierra Mist is emphasizing their natural ingredients and lack of high fructose corn syrup. Are these qualities important to their Brand Lovers? Time will tell. Right now, Sierra Mist controls 1% of the soda market. If the approach is effective, a year from now, those numbers could look very different.

On March 2, bloggers from all around the world participated in the “Spread the Word to End the Word” campaign.  It was a coordinated effort to discourage people from using the word “Retarded” as a casual insult, by pointing out the negative impact this word has on children with special needs or developmental delays.

One post in particular did more than share a heart-wrenching story. It taught a valuable business lesson that every brand manager needs to be aware of.

Titled “The Retard in the Next Booth,” this post shared one family’s tale of taking their autistic child Eli to an Outback restaurant. Like many busy chain restaurants, this one got a little behind on filling orders and delivering food in a timely fashion. This family waited over an hour for their meal: a wait that lead to Eli making some noises as he became frustrated and hungry. Eli’s family actually apologized to other diners nearby; the food eventually made it to the table, and it would seem like the situation was under control.

That was, at least, until Eli’s mother overheard a nearby diner complaining to the server that having to listen to “the retard in the next booth” had ruined the meal for them.

The server apologized and offered the woman a free dessert.

Eli’s mother was not impressed. This incident raises a lot of questions for Brand Managers: at that moment, Outbacks’ entire reputation in the eyes of this family hung upon the actions of that server. The young man, by going through the routine of “appease the complaining customer” likely did what he was trained to do—but at what cost?

Luckily, the story has a happy ending:

To their credit, when Outback found out about it, they responded quickly and decisively. They brought us back for several meals on them. They identified the woman who said those words and said she wouldn’t be welcome again in their restaurant. It was a joy to see a business take something so seriously. And it wasn’t just that the service was bad that night…they were furious a patron acted in the manner this woman acted toward us.

Outback, when it became aware of the situation, acted in a way that concretely demonstrated their Brand Values to Eli’s family. And, of course, by extension, to everyone who read Eli’s story, which was heavily promoted as part of the Spread the Word Campaign. They did what any responsible organization would have done.

But what would have happened if no one had brought the incident to Outback’s attention? Eli’s mother would have still had a story to tell, but Outback would have looked no better than the inconsiderate woman. That’s why it is essential that every member of an organization knows, understands, and most important of all, is empowered to act in a way consistent with the company’s values. Small moments matter, especially when the entire world is a Tweet away. Outback may not be responsible for their customers’ rude, inconsiderate behavior, but it certainly doesn’t have to reward it with a free dessert!

Outback knows that their customers value a family-friendly dining environment; kudos to them for acting so decisively for making sure that their offerings match what their customers expect. Could the situation have been handled better? Consider this and the experience your best customers can expect when they do business with you. Do your best customers know that they’re so important to you that you’ll turn other business away in order to keep them? That’s valuing your customer—and that’s how great brands are built.

What was your last job interview like?

Did you dance?

Did you sing?

Were you ready to be silly, playful, outgoing, and engaging?

If you answered “No” to any of these questions, chances are you weren’t interviewing with Six Flags. More than 1,000 people showed up for a recent job fair, hoping to be hired as ride attendants, ride operators, and support staff at the theme park. The interview experience wasn’t “business as usual.”  Interviewees were given the chance to perform in 60-second showcases, where they had to do something—anything—to entertain.

Julia Filz, the park’s spokeswoman, explained why. “We want people who aren’t shy.  In this business, you can’t be shy.”

Finding Your Way To The Top: Six Flag’s Approach

Six Flags is the largest regional theme park operator and second largest amusement park operator in the world. They lag behind Disney, the established industry leader. The recession hit all theme parks and amusement venues particularly hard, and Six Flags entered bankruptcy last May.  A recently announced $60 million dollar stock buy back can be taken as one sign that Six Flags intends to step up its efforts to achieve a more dominant market position and greater profitability. The innovative interview style is another.

To be successful, Six Flags cannot echo Disney’s efforts. Imitation may be the sincerest form of flattery, but it does little if anything to inspire enduring customer loyalty, brand strength, or enduring market share. No vacation destination wants to be known as “This is where you go when you can’t afford the best.”

Instead, Six Flags is busy establishing its own unique, appealing identity in the market. One important differentiator is Six Flag’s decision to market heavily to local residents; Disney, by contrast, markets to people around the world. Exclusive licensing agreements with Warner Brothers and DC allows Six Flag parks to feature Bugs Bunny, Batman, and other popular characters that are outside of the Disney pantheon. These characters walk the park, and serve as the theme for any park’s main attraction: rides.

Finally, the spontaneous, free, spur-of-the-moment entertainment that successful interviewees demonstrated would never fly at Disney, where cast members are supposed to stay on script, no matter what. It may seem a subtle point, but for many of Six Flag’s biggest fans, the interaction with park staffers and crew feels more authentic and less forced than the experience they have at Disney.

Brand Modeling provides the tools and insights that any company, even those facing Disney-sized competition, can use to identify those points of difference where they can forge a distinct, profitable opportunity.

Everyone wants to have fun, but not everyone wants to go to Disney. Six Flags shouldn’t be wasting their time or energy going after the Disney fanatic: there is nothing that they can do that will compete head to head in that arena. The point instead is to go after the legions of people who still want to have a great time in a theme park. Understanding what these customers want, and what they value most, is the key Six Flags needs to ensure this summer will be its best season yet.

And if that means interacting with friendly, engaging people, that means hiring people who will Dance the Dougie on command. It looks like Six Flags is on the right track … good news in the roller coaster business!

Here’s a marketing quandary you never hear about: what happens when it turns out your tag line turns out to be true? The Heart Attack Grill claims its offerings, which include triple bypass burgers and lard-fried flatliner fries, are a taste worth dying for.

And now Blair River, the 570-pound spokesman for the chain, has died. He was 29 years old, and the official cause of death was complications from pneumonia Rivers contracted after coming down with the flu. Morbid obesity is indicated as a cause of complications in recovering from the flu. Even if River’s fat didn’t kill him, it surely didn’t help him get better. Every item on the Heart Attack Grill menu can be considered a contributing factor to morbid obesity.

Will this be the end of the Heart Attack Grill’s operations? Or will Rivers have a place of honor on a morbid Wall of Fame, his passage marked by an annual ritualized consumption of Butterfat Shakes?

It could go either way. Jon Basso, owner of the Heart Attack Grill, has a unique understanding of a normally marginalized segment of the dining market. In many places, customers who weigh more than 350 pounds are hardly welcomed with open arms. At the Heart Attack Grill, after a celebratory, ceremonial weigh-in, these customers eat for free.

He’s the first to say nothing will change. “I hired him to promote my food. We are absolutely guilty of glorifying obesity. That’s what I do for a living: I make a mockery of heart-related issues in order to sell hamburgers,” Basso said in a recent interview with ABC.

Will that confidence continue? Basso has to know who his customers are. Is the loyalist, most profitable contingent of his market the super-sized?

Every business needs to have a concrete understanding of who their Brand Lovers, their most profitable, loyal, enthusiastic customers are. It’s not safe to assume. Examining the demographics of Basso’s customer base may reveal that the lion’s share of business comes from smaller diners. The appeal of indulgence and unabashed gluttony knows no weight limit, but there are far more people who enjoy the menu who tip the scales at under 350 pounds than over it.

The Heart Attack Grill’s Brand Lovers may have king sized appetites, but not necessarily for Triple Bypass burgers. Customers are seeking a specific emotional experience when they came to the Heart Attack Grill. Basso is selling rebellion. A non-stop litany of the warnings of cholesterol, alcohol, and nicotine have a certain segment of the public fed up. They’ve had enough of hearing about what they should eat. Every item on the Heart Attack Grill is a chance to thumb your nose in the face of nutritional authority, to say, “I’m going to do what I want to do, no matter what!”

The appeal of the guilty (yet, River’s death nonwithstanding, relatively harmless) indulgence is strong. Basso has already tried business from the other side of the fence: having hawked Jenny Craig and run a fitness franchise, he hasn’t been able to connect with the customers who place a high value on healthy eating and enduring health. Self-abnegation does nothing for his bottom line. Gluttony may be knocking them dead, but Basso knows he’s on to a formula his Brand Lovers can’t resist—even when they know they should.

From the world of high fashion comes the news that Bernard Arnault, the force behind the Moët Hennessy Louis Vuitton empire has his eyes on his next big acquisition: the world renowned luxury brand Hermès.

Hermès is reportedly not thrilled with Mr. Arnault’s attention. Hermès describes itself as a company that focuses on refinement and creating beautiful things: a vision that they believe is counter to the approach seen at other companies under Arnault’s control.

“We don’t want to be a part of this financial world which is ruining companies and dealing with people like they are goods or raw materials,” said Mr. Thomas, a Hermes chief executive quoted in the New York Times article earlier this month. “It’s not a financial fight, because we would lose that. It’s a cultural fight.”

Hermes’ leadership has expressed worries that while Arnault’s leadership could indeed make the company more profitable, his proposed changes would alter Hermes’ identity in the marketplace. Once that happens, Mr. Thomas said, “People will say that Hermes is not what it used to be.”

A sentence like that can indeed be the death knell for a successful established brand. Companies such as Volkswagen and Apple invest significant resources into ensuring that the public perception of their brand is one of continual improvement.

Harley Davidson, now a dominant organization, was once in peril of going out of business when the bikes they were delivering failed to meet their best customers’ expectations. The effort to cut costs and corners in order to ensure greater profitability is one that Hermes fears that Arnault—who is now a significant investor, but does not have majority control—will try to impose on the company, with the same result.

At the heart of this battle, we see a great conflict: traditional values and aesthetics going head to head with a more modern, financially-aware approach to the world of fashion. Hermes has thrived and achieved their respected position by focusing their efforts on those customers—and only those customers—who value and can afford the extravagant wonderfulness of their offerings. They’ve never tried to produce bags for everyone; after all, as a particularly catty fashionista was heard to say, that’s why there’s Coach.

Knowing who you are, as an organization, is critically important. That importance is matched by the essential imperative that your customers share that same vision of who you are. If Hermes’ perception of themselves as a purveyor of luxury goods to the most well-heeled customers is in alignment with their customer’s perception of the brand, everything’s good. Those customers will continue to support the brand in the accustomed fashion, and Hermes will be able to keep Arnault at arm’s length.

If, however, the two sets of vision aren’t in alignment, whether through Mr. Arnaults’ machinations or a shift in consumer tastes, then Hermes has a problem. In a world of luxury, no organization can afford to become divorced from the reality of what their best customers want and value the most.

Understanding the psychological drivers of consumer behavior is the only way we’ll be able to tell who has a better handle on the handbag situation: Hermes, which wants to stick with a proven formula of success, or Arnault, who insists you can offer the best to more buyers without impacting quality.