Browsing Tag

Brand Modeling

Check Out the New Book: Customers First: Dominate Your Market By Winning Them Over Where It Counts The Most

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Customers are skeptical. They’ve been lied to by just about everyone who’s had the opportunity to do so. From role models who can’t keep extramarital affairs from wrecking their golf game to behemoth corporations betting against their own customers’ investments to politicians regularly resigning for engaging in the very activities they legislated against, no one has been telling the truth. You need an element of trust to get genuine customer buy-in, but we’ve spent a generation and a half teaching the
public to trust nobody.

This creates a problem for today’s business leaders. How do you connect with these empowered, educated, skeptical consumers?

This is a question of some urgency. Industry analysts highlight that platforms like gigadat casinos are revolutionizing how businesses engage with their customers by offering innovative betting options and enhanced user experiences. If you don’t have the answer, you have to figure it out now, and you have to keep your business thriving at the same time. There’s absolutely no time to hesitate. If you cannot connect with your customers in a meaningful way, you will become irrelevant to them. When you’re irrelevant, you’re replaceable, and your customers will inevitably replace you with a brand that they do feel connected to.

Irrelevancy arrives in those still moments when an organization is facing uncertainty. These are the times when the
company is trying to figure out what to do. Choosing the right course is difficult: if you opt for the wrong direction, you’ll saddle your company with the burden of invisibility when you’re least prepared to bear it.

Customers First: How To Choose The Right Course Consistently

Choosing the right course is difficult, but it’s not impossible. Dominant organizations—companies like Nike, Apple, Harley-Davidson, and Ikea—seem to consistently pick the right course. They seem to know what the customer wants, even before the customers know they want it. They enjoy unparalleled customer loyalty, and that’s not all.  Dominant organizations seem to make fewer mistakes than their competitors. They make better decisions and enjoy greater profitability.

As a business leader, don’t you want to know how that happens? Don’t you want to be able to do it too? It’s possible when you have the right tools. That’s where Brand Modeling comes in. We’ve been doing exciting work, helping leading companies delve into the unconscious psychological factors that drive customer behavior, pinpointing those places where brand and consumer can form strong, lasting, and profitable bonds.

When you’re equipped with a comprehensive, multi-dimensional understanding of your customer, you can consistently choose the right course for your company.

That’s the topic of the new book, which is now available for pre-order on Amazon. I have to say, we’re pretty excited about this book. We worked hard to create the most complete, accessible explanation of the combination of complex psychological factors that control consumer behavior and what they mean to good companies striving to become great companies. Brand Modeling can provide your company with an unbeatable competitive advantage. You might want to check it out!

March 26, 2012 by

Ace Hardware: Putting Customers First in a Quest to Double Market Share

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Normally, when we talk about watching paint dry, we’re referring to something tedious or boring. But for the leadership at Ace Hardware, paint is pretty exciting.  According to this New York Times article, a new product line (coupled with an insightful marketing approach) may be what it takes to allow the 4,300+ hardware and home improvement store chain to double their share of the domestic paint market.

Brand Modeling and the Search for a New Growth Strategy

Dominant organizations are engaged in a continual search for growth opportunities. What are the best ways to increase market share, raise a brand’s visibility, and connect more effectively with their customers? Many companies, particularly those in the gaming sector, are targeting international markets by adapting to local preferences. For instance, identifying the beste online casino for norske spillere has become essential for casinos aiming to attract Norwegian players, as catering to specific preferences and regulations can significantly boost engagement. While it’s easy to generate potential strategies that should create growth, it’s remarkably difficult to assess ahead of time which strategies will succeed, especially in a competitive landscape.

Which brings us to Ace Hardware.  This well-established brand has numerous options available to it. Ace Hardware has the resources and ability to pursue growth in any of several directions.  We think that Ace’s leadership team has made a smart decision by focusing on the paint portion of their business. Their approach shows that there’s been a concerted effort to understand and better serve their customer.

Know Your Customer To Build Your Brand

What is the power of paint? Some analysts have compared painting the house to the famous lipstick effect—a quick and affordable way to lift the spirits when it’s not economically feasible to make larger, more indulgent purchases.  Ace Hardware’s customers may not be in a position to renovate the entire kitchen or do over the bathroom. Yet they’re still driven by the need to make positive changes in their environment.

Painting a room delivers a powerful visual and emotional impact for a relatively small financial investment. Ace is demonstrating superior customer knowledge by providing a way to fill a significant emotional need while being sensitive to the current economic tensions and challenges their customer base is facing.

At the same time, Ace has used a very gender-specific, romance-oriented approach to marketing their new line of paint. Color choices are overwhelmingly made by women, according to Dana Larsen, an Ace Brand manager. The new campaign is based around the need for strong, satisfying, loving relationships—finding the perfect shade, color, or hue is referred to as finding your “soul paint.”

This recognizes and capitalizes on the biological driver that urges us to form lasting bonds. Couple it with some visual humor (after all, there’s something inherently funny about a line-up of 8 purple people) and you have a message that appeals to Ace’s customers on a number of levels.

Will Ace be able to meet their goal of doubling their market share by 2015? Appealing to their customers through multiple psychologically-appealing channels is not a bad start.  Understanding the tensions and pressures facing their customer base, providing an economical means to satisfying compelling emotional needs, and honoring the underlying unconscious drivers of customer behavior are all steps dominant organizations use when they want to grow.  That’s the value of putting customers first.

March 19, 2012 by

The Sweet Smell of Success: How Understanding Your Customer’s Unconscious Motivations Can Help Build Your Brand

There is a great article in Forbes discussing how P&G revived the Febreze brand, bringing it back from near-death status to one of the company’s leading money makers.  It illustrates very well how critical it is to understand the unconscious factors that motivate customer behavior.

Febreze, if you’re not familiar, is a specific kind of air freshener that can be used to treat upholstery, carpeting, and other items that can’t be washed.  P&G tried to market Febreze as an odor eliminator. That effort failed, in part because there were not many customers who thought that their lives were all that smelly.

When P&G changed their efforts and marketed using Febreze as a rewarding experience after you’d cleaned a room, sales went through the roof.  When we stop to think about it, this makes a lot of sense.  Who are P&G’s best customers? (The people we call Brand Lovers?)  By and large, they’re people who do a lot of cleaning. A clean, tidy home is important to them. They’re not people who are going to eagerly proclaim  that they have bad smells in their home—in fact, many would find that type of admission very shameful.

Positioning Febreze as a reward for something that P&G’s best customer’s were already doing (cleaning the room) was a transformative exercise.  No longer was using Febreze a tacit admission that your housekeeping efforts just didn’t cut the mustard.  Instead, using Febreze was a sign of a job well done; a pleasant sensory experience that you could enjoy as a reward for your efforts.

Unconscious Factors That Guide Customer Behavior

If we were going to reduce the Febreze situation to it’s simplest terms, we have this: in one mode, using Febreze made the customer feel like a failure. In the other situation, the customer feels good about using Febreze—it’s a treat to be enjoyed and savored. The emotional impact of the two scenarios are very different.

We gravitate toward emotional experiences that make us feel good.  We want to be happy. We like to be rewarded. To be told we’re doing a good job—especially in scent form, for olfactory cues are some of the strongest emotional triggers—is a powerful thing.

Identifying the Emotional Experience

It’s essential to identify the emotional experience that your customers are seeking. P&G initially marketed Febreze in a way that provoked a negative emotional reaction: no one enjoys feeling shamed and inadequate. By leveraging this crash guide, they were able to shift their strategy to identify a different emotional reaction that aligns with what P&G customers were seeking—a feeling of pride, satisfaction in a job well done, and the sense of being rewarded. This approach made it possible for the customer to enthusiastically embrace the brand.

Up to 90% of customer behavior is unconsciously motivated. Many times, customers are oblivious to what leads them to choose one product over another.

You’re not going to see people standing in the cleaning product aisle saying, “Hmm, this provokes deep, uncomfortable feelings of shame in me, while this one makes me feel good about myself, virtuous, and hard-working.”  But that conversation is happening on some level in your customer’s mind.  Companies that understand that can position their products to occupy the more desirable position, and that’s why they win.

March 6, 2012 by

Rotten at the Core? Apple’s Alignment Problem

Work hard on the job today or work hard to find a job tomorrow.

That isn’t the message most of Apple’s Brand Lovers would expect to find hanging on the wall of their favorite tech company’s manufacturing facility. It seems a little too Dickensian in sentiment, a world removed from the sleek gadgets tailor made to empower and encourage the creative spirit.

But there it is, right in the middle of a NY Times investigative report: In China, Human Costs are Built into an iPad.  Reading this, we learn how Apple’s supply chain is fraught with difficulties. Safety and environmental concerns top the list. People have died. There have been multiple explosions at manufacturing facilities—blasts, experts say, that were completely avoidable. Toxic materials were used in the production of iPhones, driven by what Supply Chain Digest calls “aggressive procurement practices.” Allegations of child labor, punitive practices in the workplace, and high rates of suicide round out the list.

There is a culture of secrecy and silence around Apple’s manufacturing practices; vendors sign confidentially agreements so sweeping that they’re barred from disclosing they’re working for Apple at all.

Customers First: Understanding the Pillars of Belief

Of all of the challenges that Apple has faced over the years, this situation holds the most potential to break the brand.  There is an obvious and fundamental disconnect between the way Apple is conducting business and the way that Apple’s Brand Lovers would expect Apple to do business.

Now, until this point, it’s probably fair to say that the vast majority of people who use and enjoy Apple products never once thought about how all of that iTech was actually made.  But if those same people were asked asked about how they thought their iPhone or iPad was made, we’d hear a range of responses based on the beliefs and assumptions that those customers have about Apple as an organization.

The Pillars of Belief articulate the beliefs that our best customers have about our company. This can be a simple but all important question, such as “Are they honest and fair? Are they the type of company I want to do business with?” Questions like these can help uncover the beliefs customers hold about your company that influences their buying decisions.

Brand Lovers strongly prefer to do business with companies whom they believe reflect their own personal belief system. They’re seeking those points of familiarity, of personal resonance, where their perception of your brand meshes closely with the cultural stories they hold most dear.

Problems arise when an organization’s performance, in any sphere of operations, gets out of alignment with the Pillars of Belief.  The Apple Brand Lover has expectations based upon their belief that Apple is a company that empowers and elevates people’s existence. The discovery that this product is made in a nightmarish sweatshop environment is out of alignment with that belief.  This disconnect introduces a tension into the customer-brand relationship; a tension that customers may resolve by abandoning their once-beloved iGear.

Apple has been making moves to remedy the supply chain issue, but as both the NY Times and Supply Chain Journal have noted, those efforts have been perceived as lacking and entirely secondary to the need to produce the new iGear as quickly and profitably as possible. Bringing Apple back into alignment with their Brand Lover’s expectations will require greater efforts to remedy existing problems, as well as increased visibility and transparency.  Only then will Apple be acting in a fashion that their Brand Lovers expect. That’s what it means to put Customers First.

February 15, 2012 by

Ringing in the New: Champagne, Brand Modeling, and Looking Ahead to 2012

There’s never a bad time to be a winemaker—or so we have been assured by vineyard owners—but some years are better than others. Champagne, in particular, has been enjoying a great year, with sales up a reported 5.2% over the first half of 2011.

That’s an awful lot of bubbly! Champagne is the beverage of choice for festive events, essential for wedding toasts and, of course, New Year’s Eve celebrations.  Now that the ball has officially dropped, and we’ve embarked, for better or worse, into 2012. It’s a good time to look at this CNN Fortune story about legacy Champagne brand Piper-Heidsieck and their efforts to remain relevant in a crowded, confusing marketplace.

We have to admit that our curiosity was piqued by new CEO Cecile Bonneford’s comment, “Market research tells me what the average consumer wants and I’m not interested in the average consumer.”  Bonneford’s reported plans center on positioning Piper-Heidsieck as a luxury brand for younger, affluent drinkers.

Before these plans can be implemented, however, it’s essential that Piper-Heidsieck has a deep, nuanced understanding of how her prospective market views luxury.  What are the essential traits that a brand must embody in order to qualify as a luxury brand in her customer’s eyes?

Brand Modeling: Finding A Path Forward

There are tangible and intangible answers to that question. We can talk about the physical qualities of the product. Piper-Heidsieck is actually produced in the Champagne region of France; a meaningful distinction for oenophiles.

What iconography and imagery comes to mind when her audience hears the word “luxury”?  Does Piper-Heidsieck look like, smell like, and most importantly taste like a luxury Champagne? It’s essential that the customer expectations are understood, met, and whenever possible, surpassed.

The conversation goes on from there. The intangible qualities that define luxury are in many ways more critical than the tangible. Piper-Heidsieck has several great cards in their hand. They’ve been in existence for more than 100 years; longevity is the hallmark of a luxury brand. It’s hard to beat a celebrity endorsement list that boasts both Marie Antoinette and Marilyn Monroe.

Identifying these and other similar factors begins the exploration of the values and narratives that this audience associates with luxury. This process lies at the heart of discovering a Brand’s DNA, one of the key steps in Brand Modeling. Through this discovery, dominant organizations learn the best ways to connect with their existing customer base, attract new customer interest, and convert the casual fan into a devoted afficionado.

Bonnefeld’s definition of luxury is fascinating. “Luxury is about tension,” she said in the article, “tension about history and tension about today.” There’s certainly a lot of room for interpretation there, but if Bonnefeld’s interpretation is in alignment with her market’s, she’s in a good position to succeed.  Understanding what critical points of tension a customer faces and providing a proven, reliable, enjoyable way to resolve those tensions is how dominant organizations put customers first.

We’ll be keeping an eye on Piper-Heidsieck. We think that they may find themselves with something to celebrate!

January 3, 2012 by

Is Wendy’s Winning or Burger King Losing?

All of a sudden, everyone is talking about the Burger Wars again.  Nothing’s actually changed yet—McDonald’s is still the undisputed leader of the pack, with Burger King in the number two spot.  But things are about to change.

The Wall Street Journal revealed that Wendy’s is poised to knock the King off his throne. This is big news, and lots of people have theories about how it happened. A lot has been said about menu revamps: Wendy’s was both timely and well-executed, while Burger King’s lacks both cohesion and relevance, especially in terms of healthier offerings.

While Wendy’s has gone after the upscale end of the fast food market, Burger King is routinely slammed for the poor quality of their food.  Wendy’s has capitalized on its legacy relationship with their Brand Lovers by running campaigns featuring the chain’s namesake, Wendy Thomas. Burger King, on the other hand, only recently stopped an off-putting and unsettling campaign featuring a creepy cartoon version of the King that alienated more customers than it attracted.

There’s a lot of wisdom here.  Every theory captures part of the reason Wendy’s star is on the rise, while Burger King is declining. If we want more than a partial understanding, we need to combine these theories with the type of deeper understanding that Brand Modeling provides.

Connecting With Your Customer

To achieve and maintain the number two position in the massive fast food market is a huge challenge. Brand Modeling teaches us that the only way an organization could be successful in such an endeavor is to develop a deep understanding of who their best customers are. Armed with this understanding, companies can then successfully anticipate their customer’s needs and meet them in a way that surpasses expectations.  This process strengthens the relationship between the customer and the brand.

From the Wall Street Journal, we hear how Wendy’s has tried to deepen its understanding of its customer base. Wendy’s spent 18 months interviewing 10,000 consumers. “They told us they liked the idea of fresh foods with as little processing as possible and ingredients they were familiar with,” said Denny Lynch, Wendy’s spokesman. This understanding prompted Wendy’s to change their trademark square burger shape, rounding the corners to create a less-processed look.  Understanding the value of freshness and familiarity certainly influenced the creation of a familiar tagline: You know when it’s real.

The chain clearly understands that the public is hungry for more than a burger. They have deeper needs to be met, emotional and subconscious needs. We see Wendy’s meeting the need for reassurance and tradition. The emphasis on fresh and familiar ingredients is more than a food-wish-list; the deeper message is about safety and home.

In a time when its best customers are facing economic upheaval and financial uncertainty (albeit to a lesser degree than Burger King’s best customers, the young men who are suffering disproportionate rates of unemployment), Wendy’s is telling a story of family and continuity, honoring tradition while embracing innovation. Wendy’s is winning because it’s telling its Brand Lovers the story they want to hear.  There’s sea salt on the fries, and it comes with a side order of hope and optimism.

For Burger King, this is another in a string of wake-up calls.  Will it work? If BK can reconnect with their Brand Lovers successfully, hope remains. But time is of the essence. The fast food giant will have to move quickly indeed.

December 28, 2011 by

Flushing Your Brand Goodbye: Starbucks and the Public Bathroom Question

Talk about a tidal wave of change!

Starbucks recently made headlines with its decision to close the public restrooms in many of their New York locations.  Too many people are using the Starbucks’ bathrooms, not all of whom are paying customers, and this makes it difficult for Starbucks’ employees to take bathroom breaks in a timely fashion. Add in the not-insignificant expense of keeping public restrooms clean and operational in New York City, factor in the fact that the chain is not by law required to provide restrooms in shops that seat less than 20 people, and it seems that switching to employees-only facilities is a sensible, straightforward business decision.

That is, of course, until you stop and think about what Starbucks sells.

Starbucks sells coffee.  Coffee contains caffeine, and caffeine is a diuretic, especially when consumed in large amounts.  Diuretics cause the body to produce increased amounts of urine.  In other words, if you drink caffeinated coffee, sooner or later, you’re going to need a bathroom.

Coffee isn’t all Starbucks sells. In fact, coffee isn’t even Starbucks’ primary offering.  What Starbucks sells is the experience.  People choose Starbucks because of the coffee shop’s atmosphere, community, and unique culture. Starbucks is the hipster’s home away from home; a place to relax, read the paper, cruise the internet, and connect with like-minded friends. Enjoying the coffee is secondary entirely to the experience, but it still an essential element of the customer-brand interaction.

This cycle only works one way.  When we drink coffee, we develop a need to use the bathroom. There’s only one way to resolve the tension we’re feeling. By removing the public restrooms from their facilities, Starbucks has introduced a biological limitation on their customer’s experience.  People are free, of course, to continue to come in, order coffee, hang out, and enjoy the atmosphere and community—as long as their bladders hold out.

Once that threshold has been reached, and the need to visit the bathroom is one that can no longer be ignored, it doesn’t matter how compelling the community and ambiance may be. When you’ve gotta go, you’ve gotta go! If there are no bathrooms in  Starbucks, you have to leave the coffee shop and go somewhere else.

Brand Modeling: Predicting the Impact of Organizational Change

How quickly will you return? Brand Modeling tells us that success lies in understanding the wants and needs of your best customers, and fulfilling those needs better than anyone else does.  Starbucks won valuable market share by being the coffee shop that provided a certain self-aware, self-congratulatory atmosphere for its patrons. They clearly understand the psychological and emotional needs of their clientele. But what about their physical needs?

It will only take one distressing experience for a Starbucks’ consumer to decide that they’ll get their next coffee at a shop that delivers less in the way of ambiance and community and more in the way of bathroom facilities.  In the interest of saving a few dollars and some employee time, Starbucks is introducing an unnecessary tension into their operation that can damage the customer relationship.  There are already rumbles about Starbucks failing to be a good corporate citizen; customers sense the disconnect when an organization has a millionaire CEO and can’t afford to fund basic bathroom maintenance.

Small resentments can create large problems, even for the world’s best brands. We’re really not sure that closing the bathrooms is a great move on Starbucks’ part.  What do you think?

November 29, 2011 by

ESPN & Hank Williams Jr: Is It A Smart Bet To Keep The Change?

In case there’s any confusion, let’s handle one thing right from the start. Adolf Hitler is the short genocidal maniac whose name is synonymous with evil, responsible for the deaths of millions of people. Barack Obama is the President of the United States.

Hank Williams Jr. compared the two men in a recent interview, which led to ESPN letting the singer go from his long standing Monday Night Football gig.  The nearly iconic “Are you ready for some football?” is no more.

Was ESPN right to let Hank Williams Jr. go? Most would say they had no choice.  The ESPN and NFL brands are valuable, highly protected brands. The last thing either organization wants is controversy—especially political controversy.  These are organizations that have become highly successful by being highly aware of and responsive to what their most ardent, loyal customers and fans (a group we would call Brand Lovers) value most.

What does that mean for Hank Williams Jr.?

Keeping Hank Williams Jr. on board would have created controversy.  Letting him go created controversy.  Which controversy was less problematic?  This is the type of decision that business leaders need to face all of the time.  In an ideal world, ESPN’s leadership would never have to face this issue, but since they did, they made a smart move by making the choice that reinforces most what fans of Monday Night Football value about the show.

No one watches Monday Night Football for political commentary, insightful or otherwise. No one tunes in to see pundits argue their positions or to discuss the socio-economic state of the nation.  That’s not why 10.8 million viewers turned on the Bears-Lions game.  Those viewers were in search of excitement, a good time, and some measure of escape from a stressful world.  Would the Lions continue their winning streak, becoming only the second team in the league to go 5-0? In the larger scale of things, the answer to that question doesn’t really matter and that’s exactly why people are watching ESPN rather than CSPAN on Monday nights.

After the split, Hank Williams Jr. released a song called “Keep the Change.” While it’s not exactly his most compelling work musically to date, the song is a masterpiece when it comes to articulating the fears, frustrations, and feelings of Hank Williams Jr’s biggest fans.  When we talk about connecting with our customers, understanding what drives their decision making, knowing what anxieties keep them up at night and what experiences give them profound and lasting joy, we do so because we know that this is the type of knowledge that will allow us to understand, anticipate, and meet customer wants and needs better than anyone else.

The Hank Williams Jr. fan who has by now already downloaded “Keep the Change” (and shared it on Facebook, and made it their ringtone) heard that song and loved it, because it spoke to them.  The bond between Hank Williams Jr. and his fans has been strengthened by this incident.  He may have gained a few fans in the process.  While Williams lost a valuable gig and relationship, he has strengthened his individual brand.

October 19, 2011 by

Take Two for Netflix? Brand Modeling and Recovering From Mistakes

“There is a difference between moving too quickly—which Netflix has done very well for years—and moving too fast, which is what we did in this case.”  With those words, Netflix has backed away from its controversial plan to split the company into two parts. The DVD rental-by-mail business, which was going to be called Qwikster, will remain part of the Netflix business.  It’s a reversal that makes sense.

You Lost Me At Hello: Why Qwikster Wouldn’t Work

When Reed Hastings announced the plan to split Netflix into two discrete companies, he violated one of the principal tenets of Brand Modeling: Know what your customers value most about doing business with your organization.  In the days and weeks that followed the initial announcement, one thing became clear: Netflix’s customers did not want two services providing what they used to get in a single location.  They were strongly opposed to the idea.

Imagine the headaches, stress, and damaged investor relations that could have been spared had Netflix’s leadership known ahead of time what their customer base’s reaction to the change would have been.  Let’s make no mistake.  Reed Hastings is not a stupid man.  Had he known the magnitude of the fallout from what he saw (and from the tone of Netflix’s communications to their members, continues to see) as a simple and necessary change, things would have been handled differently.

Eliminating Uncertainty: The Role of Brand Modeling

Every business has growing pains.  When you’re an industry leader like Netflix, those growing pains are going to be more visible, studied, and scrutinized by everyone: your customers, your critics, the business press, the investment community.

Growing pains occur because businesses exist in an environment of perpetual uncertainty.  We lack an absolute, definitive way to predict the outcome of our choices and actions ahead of time.  We’re in a position where we must make choices and take action and then see what happens.

However, the lack of perfect, absolute knowledge about consumer reactions and behavior doesn’t mean we’re completely clueless, either.  Brand Modeling provides us with the tools to delve deeply and intensely into the psychological factors that motivate customer behavior.  The more we know and understand about our customer base, the more accurately we can predict how they will respond to any change in operations.

It’s unfortunately easy to mistake what may seem to be the obvious right decision for your business for what your customers actually want.  This disconnect can have catastrophic consequences. It’s easy to see that Reed Hastings believes that streaming media is the future of his company.  There may be good, logical, strategic reasons to split off the DVD rental business.  However, Netflix’s customers don’t want the good, logical, strategic reasons.  They want what they’ve always wanted: a simple, enjoyable way to watch movies.

Can Netflix recover? We think they can. Reed Hasting’s emails is a small first step.  Listening to their customers, especially their most fervent, loyal customers (folks we call Brand Lovers) would be a great next step.

October 12, 2011 by

Does Netflix Know What It Is Doing?

PhotobucketAt first, we thought it was a joke—and not a particularly funny one at that.  Surely Netflix, one of the most successful and dominant brands in the world, wouldn’t make a bunch of boneheaded moves seemingly tailor made to alienate their customers. Not Netflix. We’re talking about the company that broke Blockbuster, the savvy, smart, forward looking firm that changed the way we consume media.

And yet here we are. Here we are with Reed Hastings’ shamefaced apology email, sent to millions of customers, explaining that the changes in pricing that had upset so many was only the beginning.  Going forward, the DVD rental business would be split off from Netflix, which would continue to provide streaming content.

It’s clear, reading Hastings’ words, that streaming content is central to his vision of Netflix’s future going forward. He’s not alone in believing that eventually, the lion’s share of all entertainment media we consume will be available online. We respect his vision for his industry’s future.  What we’re not so sure about is his grasp on the industry’s present.

Customers First: Valuing the Brand/Customer Relationship

We all come hardwired with deep, powerful, unconscious psychological motivators that influence our behavior—as individuals and as consumers. Our company calls these forces Humanistic Drivers. One of the most powerful Humanistic Drivers is the desire to belong to a group or community.

For a long time, we filled the need to belong by participating in community groups, social organizations, faith communities, and the like.  Increasingly, though, cultural changes have taught us to switch our attention and our affiliation away from these institutions. Instead, we’re placing a higher premium on the relationship we have with brands.

Netflix became successful because they made it easy for consumers to build a trusting relationship with them.  A high level of commitment to superior customer service, a deep and wide ranging product selection, and customized suggestions made customers feel cared about and valued. There was a sense of community: both consumer and Netflix were united in the search for something good to watch on a rainy Sunday night.

That sense of community took a serious hit with Hastings’ latest communications.  Surveying recent consumer sentiment reveals that consumers—including some of Netflix’s most devoted fans—feel deceived and lied to.  The claim that separating the DVD rental and streaming content will provide better service to customers falls flat.  The fragmentation is confusing, and there’s no tangible benefit immediately apparent to the customer.

Netflix built a successful community.  Now customers are seriously questioning whether they want to remain members of that community. The service that initially attracted them—renting DVDs by mail without late fees—is now, somehow, no longer relevant to the community they joined? Before making a change to the fundamental operations of your company, it is a good idea to forecast how those changes will be received by your Brand Lovers—those most fervent, loyal customers who contribute the most to your company’s profitability. We’re not getting a sense that this was done here.

Can Netflix recover? Perhaps.  But rebuilding damaged relationships takes time and skill.  Hastings and the rest of the Netflix leadership team need to begin the rebuilding process by taking a look at why they went so far off the rails in the first place.  The damage starts when you stop putting customers first.

September 26, 2011 by