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Scott Jeffrey

The Power of Cult Branding

Some called them brave—others, crazy. The American motorcycle manufacturer born in a Milwaukee shed in 1903 drifted out of greatness in 1965. Japanese motorcycle makers began churning out less expensive, superior quality bikes. Worse yet, unreliable engines were plaguing this great American legacy—the curse of any manufacturer.

Led by CEO Vaughn Beals on February 26, 1981, thirteen brave Harley-Davidson Motor Company executives decided to buyback their failing business in an $81.5-million leveraged buyout. Now, these thirteen strong had no choice: turnaround the company or let it die.

The Merchant Mindset

Most businesses focus primarily on generating the next transaction. Customer loyalty is perceived as unattainable to merchants who figure, “We might as well try to squeeze one more sale out of them.” But if you’re battling for the next transaction, over time, you’re destined to lose. Customers who choose you based on price will leave you for the same reason.

Businesses with passion and heart build relationships with their customers. There are decision-making factors that far exceed price, selection and location. A company like Wal-Mart is masterful at connecting with customers and offering them an intangible benefit they can’t get anywhere else. Do you think millions of people shop at Wal-Mart everyday because of price alone? If so, why do you think people drove 20 miles past their local K-Mart to shop at Wal-Mart? Both retailers had similar products with comparable prices. Wal-Mart made the customer its boss, an approach heralded by founder Sam Walton himself, and Walton’s loyal patrons felt it.

Cult Branding Defined

A rare few businesses go a monumental step further. A Cult Brand is born when a benign group of individuals rally around a brand’s lifestyle. Psychiatrist Carl Jung called it the participation mystique. These brands spark a magical participation with their customers; they embrace a certain way of being, aligned to a specific set of beliefs.

You can be a corporate attorney running frantically from meeting to meeting, but when you enter a Jimmy Buffett concert you morph into a Parrothead. Litigation, conference calls and the stress of daily life slide into shadow. Now, you’re all about burgers, cocktails and connecting with friends in the paradise of Margaritaville.

Cult Brands embrace what psychologist Abraham Maslow called B-values—values that inspire humans to grow and reach their potential. B-values include truth, goodness, beauty, wholeness, aliveness, uniqueness, perfection, completion, justice, simplicity, richness, effortless, playfulness and self-sufficiency. Within any Cult Brand you’ll find B-values being awakened in their beloved customers. Trekkie conventions and Mac User Groups embrace the value of uniqueness. Margaritaville personifies the values of aliveness and playfulness.

Unlike destructive cults that damage people and their surrounding communities, members of Cult Brands behave in constructive ways towards their communities. Here, people fulfill deeply-rooted human needs and enjoy the lifestyle the brand offers. Within these coveted communities, you get to be who you really are—you are allowed to be happy, to be yourself, to be weird together and feel weird no more.

Few authentic Cult Brands grace the business world, but we know who they are. Their customers make sure we do: Apple, Harley-Davidson, Oprah, Ikea, Southwest Airlines, Linux, Vans, Star Trek, Jimmy Buffett, WWE and VW Beetle—the list isn’t very long. Cult Brands have been in business for an average of over forty years, fueled by the people who love them the most.

Our decade of research and study of Cult Brands shows that great brands don’t happen by accident. Unequivocal customer loyalty—to be chosen over and over by a core group of customers who refuse to shop at your competitors—takes conscious effort.

Embracing Your Brand Lovers

Cult Brands don’t just foster casual relationships with their customers; they find ways to play an integral part in their lives. They embrace their customers like members of a loving family, providing a safe community for them to be who they really are. These brands are bold and courageous — often disliked by many, but loved by a precious few. We call these special few Brand Lovers.

These customers love their brand for reasons they probably don’t fully understand, but they love their brand nonetheless. A small legion of Brand Lovers will do more for the growth and sustainability of your business than all the transactional customers in the world. Not convinced? We’ve found that Pareto’s Law (the 80/20 Principle) holds: a small percentage of customers can drive over 80 percent of profitability. It costs five times more to acquire a new customer than keep an old one. Most importantly, the customers who love you the most—your Brand Lovers—spread the word and create new customers for you (just ask anyone who owns a Mac, an iPod, or an iPhone).

Are all of your customers contributing equally to your profits? It’s unlikely. There are certain customers who choose you more often. These precious few are the lifeblood of your business.

Do you know who your best customers are? Without this knowledge, you will take yourself out of business or your competitors will do it for you.

  • Does your company really listen to the feedback and suggestions of its most loyal followers? What are these customers saying?
  • Customers want to be appreciated. They want their suggestions to be heard and used. How do you reward your best customers? If you haven’t been rewarding them, do it quickly before someone else does.
  • Every company can do more to show its customers appreciation for their business. What are new ways you can show your customers that you “listen” and that you appreciate them?

Oh, and in case you’re wondering, those thirteen Harley-Davidson executives listened intently to their Brand Lovers the way only Cult Brands do. In 1984, they released a new engine called the Evolution that extinguished many of their quality concerns. More importantly, they worked hard to strengthen their relationship with their customers, forming the Harley Owners Group (HOG) in 1983 — an international customer club with over one million devoted owners. Did their $81.5-million buyout pay off? A $10 billion company valuation seems to answer that question quite nicely.

Discover Your Brand Lover

Apple-Cult-Brand-Lover

Five ways to tap into your most profitable customers

Marketing used to be fairly straightforward: Throw money at advertising in order to influence people to buy your products and services. If your advertising campaign was decent, the resulting sales outweighed the cost of advertising. If your campaign was excellent, your business grew like a wildflower.

Fast forward to today: The customer is now in control. Media fragmentation from hundreds of cable networks, millions of Web sites and new emerging delivery channels like the Apple iPhone makes it more difficult to reach the general market. And even if you do reach your potential customers, they don’t have to listen, and probably won’t. What’s an intelligent marketer to do?

1) Understand what branding is really all about.

Management guru Peter Drucker explained that the purpose of business is to create a customer. In contemporary marketing, your job is to create a repeat customer who is likely to build a relationship with you and buy from you year after year. In order to accomplish this magnificent feat, you must develop what’s called a brand. A brand is an association that a customer has with certain feelings and images represented by a company, not simply a company name or a logo. You cannot create a brand by yourself because branding is a co-authored experience between you and your customers.

When a group of customers has strong associations between your brand and a desired feeling, the brand has “equity” it can leverage in order to grow. Southwest Airlines offers warm, friendly service to its passengers in an industry notorious for a ubiquitous subpar customer experience. Southwest Airlines’ brand has become the “heart of the sky,” symbolized by a heart on the belly of its airplanes. In an industry where most airlines go bankrupt, Southwest remained profitable for over 30 years.

2) Focus on your best customers.

The secret ingredient to Southwest’s profitability and that of any sustainable enterprise is called Brand Lovers: The customers who love you the most. Brand Lovers emotionally connect with what you do and they want to celebrate who you are. Their connection with your brand is so strong that they often don’t consider doing business with anyone else. Apple’s Mac users, for example, don’t consider purchasing a PC. To them, there is no alternative.

At the very least, your Brand Lovers choose you more often than your competitors. For many companies, the best customers drive over 80% of the business’s profitability and yet, the business generally knows very little about them. Basic market research does not offer you insights into your best customers. The true drivers of choice for your best customers are emotional connections to your brand.

Certain brands have a legion of Brand Lovers – we call them Cult Brands. In a Cult Brand like Apple, CEO Steve Jobs knows he’s selling a unique way of life that’s intelligent, creative and special – he’s not just selling computers, digital music players and cell phones. The executives of Harley-Davidson know they are selling freedom of the open road and a special kind of family, not just a motorcycle. Oprah is far more than just another talk show host: Real, honest and loving, Oprah radiates hope and promise for a better tomorrow.

3) Identify your Brand Lovers.

Perhaps your enterprise doesn’t have Brand Lovers like Apple, Harley or Oprah, but you do have your best customers – customers who give you repeat business and who may tell their friends and colleagues about your brand.

So how do you find your best customers? Actually, they often find you. They congregate at your stores. They send you e-mails and call from time to time to tell you how great you’re doing. Some customers might even blog about your products or services, or create videos and post them on YouTube. These special customers might mention you on their personal Web pages on Facebook or MySpace.

On the financial side, if you maintain a customer database, you can sift through and determine who purchases from you with the greatest frequency – and for the longest time span.

What if none of the above helps you locate them? Then get creative. Carefully crafted surveys might point you in the right direction or you may need to hire a firm to help you identify who your best customers are.

4) Get to know your Brand Lovers.

Talk to them. Find out why they keep doing business with you. Don’t be afraid to ask. But listen carefully.

Look for the intangible clues that make you unique in your customers’ eyes. Uncover the emotional effect you have on them.

5) Serve your Brand Lovers better than anyone else.

There are always ways to grow your business by embracing your best customers. The answers don’t have to be complex. For World Wrestling Entertainment (WWE), offering free meatball subs before the show increased the love among participants. Skaters were ostracized by most businesses, but Vans listened to its customers and gave them what they wanted. Harley-Davidson developed leather jackets for its riders. Apple, listening to its Mac User Groups, through a long string of failures and innovations, created the iPhone specifically for its customers.

The role of marketing is to create the future today, which requires you to know what your customers will want tomorrow. The only way to anticipate the future needs of your customers is to understand who they are, talk to them and listen. Then, you can create the future together.

A final word of advice: Don’t try to be all things to all people. You don’t need everyone to like you. You only need your Brand Lovers who already love you. Remember, your best customers are the lifeblood for growing a sustainable business. By learning to understand their needs and serving them better than anyone else, you can build a legion of brand loyalists that catapult your business growth without throwing more money at directionless advertising campaigns.

Welcome to the New World of Marketing!

Why Brand Models Are Important

You have a big family reunion at your home next week. Big decision: Do you set up for a BBQ outdoors or plan for an in-house venue? An outdoors event makes life easier, but what if it rains? Should you invest the money in an outdoor canopy?

Although we don’t have crystal balls to predict the future, we have meteorological modeling to predict the weather. Looks like clear skies on Saturday. Does that mean it won’t rain? Of course not. Models are predictive, but they are not 100% accurate. The more advanced and effective the model, the more accurate its predictive capabilities.

Most mega-brands have their own way of modeling their brands. The purpose of a brand model is to predict consumer behavior. Without a brand model you’re left with major uncertainty on how your present decisions will affect your customers in the future.

There’s a staggering amount of information that crosses the average executive’s desk each day. A brand model helps you focus on what’s most important to the growth of your business, screening out the noise.

What does an effective brand model give you?

An effective brand model is a representation of the most important elements that drive your business. Modeling the brand offers your business four important benefits:

  • An effective brand model describes the consumer’s mindset, attitudes and behaviors toward your brand.
  • An effective brand model predicts the future, turning “what if” questions into observations to consider for future action.
  • An effective brand model provides you with information about what is needed to reach your goals with consistent standards.
  • An effective brand model offers a synthesis of everything your brand does and a quintessential framework for evaluating decisions.

If your chief competitor models their brand and you don’t, you will lose to your competitor over time. Alternatively, if you have a more effective model than your competitor, you will likely gain market share over time.

The benefits of an effective brand model

An effective brand model helps your leadership team:

  • Make better decisions. Better decisions leads to financial results.
  • Quickly pinpoint changes in trends and your “consumer ecosystem” and adjust your strategies in order to stay ahead of your competitors.
  • Uncover emerging consumer needs and highlight where to innovate.
  • Identify what strategic actions will have the greatest impact on your brand (based on the model’s descriptive and predictive power).
  • Solve challenging industry problems. Data without context leads to white noise. A brand model filters erroneous data to help you clarify the problem.
  • Clarify the role marketing, advertising, innovation and the rest of your brand’s assets play in the mind of the customer.
  • Organize and structure information that CEOs, CMOs and brand managers need right away.

The benefits of modeling your brand are plentiful. The potential drawback is that your model isn’t always going to be right. Plus, if your model doesn’t address the human element of your business you’ll end up making decisions that may produce short-term revenue by sacrificing long-term, sustainable profitability.

Of course, not all brand models are created equal.

A solid brand model provides five important advantages in growing your business:

  • Accurate predictions. A solid model gives you accurate predictions of consumer behavior. For example, Harley-Davidson tries to produce only one more motorcycle than they expect to sell—talk about tight inventory!
  • Details on execution. A solid brand model provides a description of the essential details needed to serve your best customers. Harley-Davidson’s brand model provides a structure of how Harley Owners Groups (HOGs) can best operate their chapters.
  • Solution indicators. A solid model provides accurate descriptions of the solution when the problem is solved. Because HOG has a model of what their groups look like at their best, they have a model to measure other groups against.
  • Clarity and direction. A customer-centric model shows you what actions will have the greatest impact on your core customers. If you know the emotional outcome that customers get from doing business with you, you can eliminate anything that doesn’t ladder up to that outcome.
  • Customer-centric innovations. An effective model decodes what your customers want. It will track how people feel about your brand and provide the insights necessary for new product and service innovations. If an auto parts shop knows that time is a major factor for its customers, it can focus on ways to make shopping faster and easier.

Executives often make up what they want to hear. Brand modeling helps you determine if what you’re doing is actually working. Instead of going exclusively with gut emotions—or with just doing what you’ve always done—an effective model can more accurately tell you what’s really going on with your business, with your customers, and in your industry.

Brand Model 3.0

The exclusive focus of the Cult Branding Company is the on-going development of the Brand Model 3.0 for major enterprises committed to serving their customers.

Brand Model 3.0 is the only brand model that focuses exclusively on the importance of decoding the psychological drivers of a brand’s best customers. Our research and experiences working with major corporations demonstrates that focusing on your best customers—your Brand Lovers—is the best way to drive long-term profitability, growth and sustainability for ANY business.

Learn more about Brand Model 3.0 here.

Ten Reasons to Focus on Your Best Customers

Your best customers are your Brand Lovers. Understanding the needs of your Brand Lovers and serving them better than anyone else is critical if you want to outmaneuver the competition and grow a long-term sustainable business.

Here are ten reasons why your Brand Lovers are so important:

1. Your Brand Lovers choose you more often than your competitors. To most Mac users, there’s no alternative competitor to choose from.

2. Your Brand Lovers spread the word about your brand and create new customers for you. Basically, your best customers are the source of your word-of-mouth stream.

3. Your Brand Lovers are by nature loyal customers. Customer loyalty is a better determinant of profitability than mass appeal. (Again, just ask Apple.)

4. Focusing on your Brand Lovers and cultivating customer loyalty can help you double your return on assets (ROA).

5. Similarly, serving your best customers can lead to explosive return on investment (ROI). Example: When Apple opened their retail stores they expected to generate $1,000/square foot. They actually generated $4,000/square foot.

Ultimately, your Brand Lovers drive the profitability of your business.

6. In The Loyalty Effect, Frederick Reichheld explains how a 5% increase in customer loyalty can increase a company’s profitability by 40 to 95%.

7. Think about what would happen if you turned just 10% of your occasional customers into Brand Lovers. For large enterprises, this shift represents billions in additional revenue and radically higher profit margins.

Need more reasons?

8. By focusing on your Brand Lovers, your cost of acquiring a new customer decreases.

9. Your marketing effectiveness soars as a result of building a stronger brand presence focused around the needs of your best customers.

10. By focusing on your Brand Lovers you can build a powerful brand that stands for something meaningful to your special customers. This gives you clear differentiation and helps you organically attract more of your most profitable customers.

The bottom line is that serving your best customers is the surest way to grow a profitable business—in any economic climate.

They Ain’t No Fools: Making the Case for The Motley Fools

Brothers Tom and David Gardner started writing a 16-page investment newsletter for their family and parents’ friends. In August of 1993, The Motley Fool was born. Embracing the power of the Web to harness a community, the Fools quickly established the largest financial community—first on AOL in 1994 and then on their own website in 1997.

Celebrating its 15th year anniversary this summer, the financial advice business created by these two financially-savvy yet playful brothers has evolved to serve and support the Fools community with 250 full-time employees. Their flagship monthly subscription investment newsletter, Motley Fool Stock Advisor, has become the largest investment newsletter of its kind with more than 100,000 subscribers (within five short years).

Taking a methodical approach, let’s see if The Motley Fool (TMF) deserves Cult-Brand status by evaluating the brand through the Seven Rules of Cult Brands. I must disclose that I’m a member of the TMF financial community; that’s part of the reason why I’m convinced they are nearing Cult-Brand status.

Applying the Seven Golden Rules to this “Foolish” Brand

Following the Golden Rule of Social Groups, TMF has one of the most vibrant communities on the Web with over two million monthly visitors and is starting to orchestrate live events around the world—both at investor-related locations and at Foolish headquarters in Alexandria, Virginia.

TMF goes head-to-head with Wall Street—calling out financial analysts and celebrity stock pickers who may be entertaining to watch, but are awful at picking winning stocks in the long run. Not courageous enough? They recently invested $1 million of their own cash with the mission of turning it into $1 billion (that’s right, I said one billion) over the next 50 years. Through their exclusive Million Dollar Portfolio service, Foolish subscribers can trade alongside TMF. This level of transparency demonstrates how TMF has put their money where their mouth is. Following the Golden Rule of Courage? Check.

One of the best qualities of TMF is that they’ve found a way to make investing and other financial matters fun. In fact, it’s part of their mission and even their tagline: to educate, amuse and enrich. Through witty commentary, playful jabs at each other, and comical writing, TMF is committed to helping their Brand Lovers save for retirement and entertaining them in the process. And, of course, the TMF internal culture propagates a similar level of freedom and fun: In a land of political bureaucracy, the Virginia-based headquarters was listed as one of the “Great Places to Work” by Washingtonian magazine.

One might argue that helping people improve their financial situation is linked to lower, survival needs on Maslow’s Hierarchy of Human Needs. But TMF is helping its customers save for their kids’ college tuitions and build towards their nest eggs for retirement. More importantly, TMF empowers millions of investors to take control of their own finances. This Cult Brand has “self-actualization” from the Golden Rule of Human Needs written all over it.

The doors at TMF are always open: Anyone is welcome to join the Foolish Community. The only criterion is the desire to take control of your own finances and to have some fun in the process. Over 50 TMF staffers monitor the forums, offerings insights and data not just as financial “experts,” but as additional members of the community.

As already stated above, TMF exudes freedom—freedom from having to put your hard-earned money with a mutual fund (where over 80% under-perform the market) and having to trust some celebrity stock pickers like Jim Cramer who are wrong 80% of the time over the long run. TMF draws power from the financial institutions at large and through their CAPS rating program. Launched in September 2006, CAPS is a free online stock-rating service that enables users to predict successfully which stocks are more likely to beat and lose to the market average. CAPS creates star ratings for over 5,500 stocks (at present), providing full transparency on how all the major financial players are performing. With this knowledge, you are in the driver’s seat.

A little too foolish, not Foolish enough

What’s keeping this powerful brand out of Cult Brand stardom? First, the long-form sales landing pages used to enroll new members into one of its dozen paid yearly newsletter services is off-putting. This Internet marketing tactic does not project the kind of quality and integrity aligned with the actual service. Communities like TMF grow by word-of-mouth and consumer education, not clever marketing copy. Second, do you want to cancel one of your yearly TMF newsletter subscriptions in order to focus on a different investment strategy? Surely you can cancel your online service online, right? Nope. They make you call to cancel your service over the phone, hoping that you won’t take the time to call—a similar tactic used by gyms that know you’ll procrastinate canceling your membership.

Will these oversights halt TMF’s rise to Cult Brand status? Only time will tell.

Overall, The Motley Fool is a powerful brand that listens to its customers, makes improvements, and serves its customers better than anyone else in its category. Other businesses can learn a lot from this Cult-Brand-in-the-making.