Monthly Archives: January 2009

2 Super Sales vs. Super Brands.

It’s discount days in the retail world right now. Everywhere you turn there’s a super sale, an inventory reduction, a clearance event or other equally banal form of discount.

Sign of the times, I suppose. Store owners are desperate to get people in the door, even if it causes long-term damage to the brand.

But does discounting really hurt your brand?

That’s a good question… one that often leads to blazing debates between ad agency folks and their clients. The creatives are quick to condemn anything that involves a price point. But the client wants to “move the needle” and “get an immediate ROI” on every  advertising dollar. He feels that any sort of “image” advertising is a waste of time. Then there’s the agency Account Executive, trying desperately to bring the two sides together in a sort of middle-east accord that will save the account for another year.

Not a good scenario for a lasting client-agency relationship. But I digress. The question is, does it hurt a brand to run a half-off sale?

It depends on the brand.

Before you hire that sign painter to emblazon your front window with “Everything Must Go!”  ask yourself two questions:

  1. Does the promotion complement your brand promise or contradict it?
  2. Who would the sale appeal to? Will you ever see those people again?

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Nordstrom has the right answer to both those questions. When it comes to brand integrity, Nordstrom is the bellwether for the retail industry. It’s a chain known for high prices and bend-over-backward customer service. Bargains are NOT part of the Nordstrom brand ethos. So yes, frequent discounting would definitely hurt that brand. 

If Nordstrom had a Super Bowl sale and a Valentines Day sale and an Easter sale and a Mother’s Day sale like most department stores, consumers would slowly but surely begin to question the entire premise of the business. They’d begin to doubt Nordstrom’s stature as the industry’s service leader and wonder if the chain compromised the quality of the merchandise.

Might as well go to Macy’s.

So here’s how Nordstrom handles discounting without compromising their brand promise: They only have one store-wide sale a year, plus twice-yearly sales in specific departments. They don’t do cheesy newspaper inserts to support the events, just big, tasteful announcements and direct mail to all their devoted customers. Anything more would be off brand. Not Nordstrom worthy. 

To manage the inevitable department store inventory challenges, they opened The Nordstrom Rack. If you don’t want the impeccable service but like Nordstrom’s outstanding merchandise, go to the Rack. It’s like a sale all the time. Same stuff, but a totally different experience.

So here’s the final answer: If you have a high-end brand that emphasizes customer service and outstanding quality, use discounts sparingly. Because every sale will send mixed messages to an already skeptical audience.

Contrast that with Wal-Mart. Wal-Mart shoppers aren’t going to Nordstrom for the twice-yearly men’s sale. They’re going to Wal-Mart every Saturday where a constant barrage of markdowns is always expected, and perfectly “on brand.” Wal-Mart’s corporate culture takes frugality to an entirely new level, and it shows up on every isle in every store. Wal-Mart’s brand promise demands big, loud sales, or at least the perception of sale prices all the time. That’s why they have spend more than $600 million a year on advertising… it’s a constant state of “Sale.”

For both Wal-Mart and Nordstrom, the corporate promotional strategy delivers on the brand promise. Their sales appeal to core customers as well as those who are looking for a bargain. And there’s a good change they’ll come back again after the sale.

Unfortunately, most business owners can’t answer the question, “is this sale consistent with your brand promise” because they don’t know what their brand promise is. When pressed, they can’t pinpoint what their business is really all about, beyond making their quarterly numbers.

They’ve never thought about it. They’ve never articulated it. And they certainly haven’t communicated it to the public in a clear, compelling, consistent manner. They’re too busy advertising “value.”

The Gallup Organization has done extensive research regarding brand promises and have found that the vast majority are poorly defined and poorly communicated. “Rather than attempting to convince a skeptical audience that their brand offers something truly meaningful and distinct, some companies have found it easier just to bribe their prospects… Repeat purchases that are driven solely by brand bribery, however, are not the same thing as a brand relationship.”

Successful brands like Nordstrom have lasting relationships with their customers, not one-night stands. So think twice about your promotional strategy. If your brand’s promise is to consistently deliver the cheapest goods and services in your category, then go ahead. Run some sales. But if your brand promise is to deliver value or service or anything else, then find another way to drive traffic. Your brand will be better for it.

 

2 Restaurant Brands — A Recipe For Failure.

In a town the size of Bend, Oregon, three top restaurants closing within weeks of each other is big news. It’s a story that goes way beyond water cooler banter. Beyond the blogosphere. Beyond the business section of the local paper and into the annals of business school curriculum everywhere.

These are lessons worthy of any MBA program in the country.

The obituaries sounded all too familiar for this town, at this time: “Merenda’s demise was hastened by prevailing economic conditions.” “The bottom dropped out of the restaurant business. Everyone’s feeling the pinch.” “The seasonal nature of business in this town makes it very difficult…”

But the story goes way beyond recessionary economics and touches on many of the fundamental principles of branding. The restaurant business is littered with cases of meteoric success and dramatic failure. For whatever reason, it’s an inherently volatile business.

Prior to 2000, the culinary scene in downtown Bend wasn’t much to write home about. Some would say, non existent. So when Merenda opened in 2002 it generated more buzz than Steve Jobs with a doctor’s appointment.

As the Bend Bulletin reported, “Chef Jody Denton pioneered a renaissance in fine dining in Central Oregon.” But the Merenda brand wasn’t about the cuisine. It was about partying. The brand promise seemed to boil down to “good friends, good times.” It was a loud, raucous place where groups would gather and drink generously from an outstanding wine list. The vibe was more urban, the energy level more electric, than anything previously. Many nights you couldn’t hear yourself think.

Lesson # 1: Trendiness seldom translates into a lasting brand.  Many of Merenda’s customers were only there because it was THE place to be. It was a superficial relationship, not a genuine bond. Success by association. When new restaurants opened the crowds thinned out.

Trendiness is a common problem in the restaurant business, fashion and high tech. The next big thing or hot spot is always right around the corner. So successful brand managers have to find ways to stay relevant with their past customers, or become relevant to a whole new group.

After five years Chef Denton got distracted. Just when Merenda neeed a little extra attention he opened another restaurant less than a block away. And his place called Deep never got above water.

Lesson #2. Brands need constant attention. This seems like a no-brainer, but many people dream of having a business that runs on autopilot and generates an endless flow of effortless revenue. That doesn’t work in any industry, much less the restaurant business. You have to mind the store.

In 2005 Cornell University published a seminal study on why restaurants fail. One of the surprising contributors was simply a lack of attention, time and effort by the owners. “Failure seemed to stem from an inability or unwillingness to give the business sufficient attention… The immense time commitment was mentioned by all of the survey respondents who had failed.”

At Deep, Denton was determined to create something completely different. As he told The Bulletin: “That’s been kind of my business model: finding what Bend doesn’t have and filling that void. I’ve always enjoyed the environment of a sushi bar. It’s always been something appealing, both from the restaurant’s and the chef’s standpoint.”

What he failed to consider was the customer point of view.

Lesson # 3: Differentiation doesn’t guarantee success. Being different from the competition is certainly important, but it’s not as crucial as being appealing. Tiny morsels of Kobe beef served on a hot rock for eight dollars a bite… That’s different! “Angry Lobster,” Monkfish pté, grilled yuzu and marinated, chopped maguro tataki were all impressively different. But not appealing enough to inspire repeat business by a large group of people in a relatively small market.

Bottom line: Deep was a high-end sushi place in a meat and potato town.

Lesson #4: All successful brands have a clear, well-defined concept that goes beyond the product. The Cornell study proved that clarity of concept is essential to restaurant success. “Perhaps the key finding was the focus on a clear concept that drives all activities… Successful restaurant owners all had a well-defined concept which encompassed an operating philosophy and business operation issues. Failed owners, when asked about their concept, discussed only their food product.”

Denton certainly had vision beyond food for both his restaurants. But the concepts behind Merenda and Deep were based more on Denton’s past experience and personal preference than on the realities of the local market.

There’s an old saying… “If you want to live with the classes, sell to the masses.” In Denton’s case, his restaurants served the classes. His high-end brands only resonated with a small segment of the population, and he didn’t reinvent Merenda when he needed to.

In the end, Denton’s concept for Merenda was not clear enough to sustain the business over the long haul. (Being first in the market isn’t a sustainable brand strategy for a single restaurant.) And the concept for Deep never had a chance. So both restaurants were shuttered, his investors came away empty handed, and there are two more empty storefronts in downtown Bend. Hopefully, the next restaurateur who comes along can learn a lesson from Merenda.

4 Truth & Transparency — How one ski area is managing customer’s expectations.

By John Furgurson

Ski area managers live and die by the whims of Mother Nature. Already this winter high winds and heavy ice have toppled trees and wrecked havoc at Mt. Bachelor. Flooded roads cut access to Crystal Mountain. A lift tower at Whistler snapped. A landslide took out a lift at Snoqualmie Pass. And some poor guy at Vail found himself hanging upside down and naked from a chairlift. 

So how do you keep your customers happy through all the drama and mayhem? How do you handle those days that don’t qualify for the chamber of commerce brochure? As Mt. Bachelor has discovered, it’s a matter of managing expectations by educating skiers about mountain operations and reporting the truth in a timely, credible manner. A significant departure from the industry norm.

Ten years ago they could get away with little white lies on the morning ski report. But now cell phones make it hard to pull one over on anyone. The lift ride is plenty of time for skiers to Twitter or send simple, pointed text messages to their friends down in town that either confirm or deny the morning report.

“Is sucks, stay home.”  “It’s Epic. Get up here.” “Fogged in. Can’t see two feet.” With minute-by-minute updates like that, sugar-coated reports from the marketing department just don’t cut it any more.

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Last season Mt. Bachelor suffered a string of PR problems… Unexplained lift closures, safety violations and some questionable policy decisions by the new parent company caused a lot of grumbling in the skiing community. And quite frankly, the Mt. Bachelor brand took a hit. For the first season in 30 years, it slipped to # 2 among Oregon’s ski areas.

So this year a new management team is working hard to improve the overall experience, and that starts by managing expectations.

From what I’ve seen so far, they’re using their website pretty effectively to paint a realistic picture of what it takes to operate a modern ski area on a 9,000-foot Pacific Northwest Volcano. And it’s a lot harder than I ever imagined.

Since the latest storm, they’ve been uploading videos that show what the lift crews are faced with. It’s harder to complain about a lift not opening promptly on time when you’ve seen the manual labor required to do the job… Time lapse photography of an employee climbing up a 40-foot lift tower, tentatively chipping away at ice two feet thick.  Loggers and snow-cat drivers working together to clear 60-foot fir trees from the middle of a run. That’s powerful stuff that I haven’t seen on any other web site or in any other industry.

 

www.youtube.com/watch?v=wlYZUlHzby4

The daily conditions report has also improved dramatically. It’s now updated several times every morning, and it’s written in a first-person, man-on-the-slopes tone. Not only that,  it’s refreshingly truthful. Last week, in the midst of the worst ice storm in 30 years, the author said, “I walked around the base area, and it’s not the kind of day you don’t want to set foot outside. It’s raining hard and it’s below freezing.”

And I love this one from a day in early December when everyone was still praying for the season’s first big dump: “We had nine inches overnight, with high winds. It’s deep in some places, and other spots look just like they did two days ago.”

Now that’s authentic!

The amusement park industry should take note. There’s nothing worse than arriving at a park, with your kids all jacked-up and ready for the latest, greatest roller coaster, only to find the ride closed for some unknown reason.

The golf industry would also benefit from such frank assessments. A detailed superintendant’s report would be tremendously useful in a country club environment where guys have been known to complain about the fairways being TOO perfect. If you show members all the work that goes into keeping all 18 greens rolling at 11 on the stimpmeter, they might not complain as much about miniscule variations in the height of the rough.

But honesty isn’t about shutting up your biggest critics. It’s about cementing a relationship with your best customers and maintaining the goodwill of your brand. Because every time you leave out important information, fudge a bit in a press release, or overstate a marketing claim, you’re chipping away at your credibility. Like ice on a lift tower, eventually it’ll all come crashing down on your head.

 

Curiousity got the best of you? See the unlikely lift ride here: 

www.huffingtonpost.com/2009/01/06/vail-chairlift-accident-l_n_155578.html