BRAND PULSE … Reinventing Web Brands (1 of 3)

> John Rotheray, 2009 MBA Candidate, Center for Brand and Product Management

Note: This is the second piece in what is now a regular and evolving serial feature on this blog -- MBA students in the Center for Brand and Product Management at the Wisconsin School of Business presenting timely perspectives on issues facing the brand world.


Crossing the 'brand canyon' on the Web.

Did you know that Google’s audience skews towards a fairly wealthy, older and more educated audience while Yahoo’s audience is younger and slightly female slanted?

A common misconception is that mainstream Web brands are intended to appeal to anyone and everyone, but in fact, every US Website in the top 100 list skews towards a particular demographic.

In an effort to set the record straight, this article will dispute the sustainability of ‘un-positioning’ strategies on the Web in light of competitive trends and increasingly ego-centric consumers. A secondary objective is to dispel the myth that capturing market share on the Web is largely a technical innovation issue.

Managing a Web brand today requires significant knowledge about who its visitors are and what they want. Cutting-edge technologies and innovations can be a great strategy for winning a motley party of early adopters, but once the launch party is over a community takes shape and brand associations form. The marketing challenge for an established Web brand is similar to brands representing physical products like Coke or Audi, with the twist that revenue generation is often from a continuous stream of repeat visits (frequency) and time spent (attention). So that brings us to our first question …


What are the key drivers behind the success of today’s Web brands?

Three powerful trends are requiring successful branding efforts on the Web to go beyond awareness and into developing deep brand associations and personal connections:

> Specialization

A major trend among Web brands is how the exponential growth in Internet content has caused one-size-fits-all strategies to burst at the seams.

As an example from the offline world, we turn to specialization in the take-out coffee industry – which has enabled independent coffee shops to compete in niches that Starbucks under serves. Most people feared Starbucks would kill indies, but Slate Magazine reporter Taylor Clark writes that Starbucks “offers a very limited menu; you'll never see discounts or punch cards at Starbucks, nor will you see unique, localized fare.” As a result “over the five-year period from 2000 to 2005—long after Starbucks supposedly obliterated indie cafes—the number of mom and pops grew 40 percent, from 9,800 to nearly 14,000 coffeehouses.”

While Google and Yahoo are still the kings of broad search, many Web brands are capitalizing on unmet needs in targeted search by provided better search capabilities in niche categories, ‘mashed-up’ with e-commerce, GIS data, reader comments and related capabilities. Specialized search now exist in categories as diverse as movies, jobs, people and homes. Even the job search category has sub-categories for technical jobs and executive positions. Specialization is a lucrative strategy for e-tailors and information providers alike. Specialized need based sites like Netrition that serve the nutritional needs of body builders and Healthyback that serve people with back pains, compete effectively against general e-commerce Web brands like Amazon.com through specialization.

Key Take-Away: As a result of increased content and competition, brands need to focus on building strong associations ... but within well-defined and manageable categories ... versus trying to be all things to all people.

> Service lifestyle

The Internet is now a bastion for instant gratifiers to fulfill their needs for status through technological empowerment. Care to wonder why the iPhone is such a phenomenon? It is because the iPhone works for me, by empowering me to listen to my music, stay in touch with my friends, check my email, and serve an endless variety of my real-life needs by having access to the Web.

Jennifer Steinhauer illustrates in her article, “When the Joneses wear Jeans,” that “the true measure of upper class today is in the personal services indulged in.” Technology has arguably enabled the average person to keep pace with the upper class by supplanting personal services like travel agents with brands like Expedia and social coordinators with sites like eVite, FaceBook and mySpace.

Tapping into the needs of service lifestyles is a key tactic for attracting and keeping attention, which is easily monetized through advertising and other means. Social interaction between community members further serves to amplify attention by pulling members in and increasing visitation through asynchronous interactions.

Key Take-Away: Websites that generate revenues from advertising need to align their brands with the fulfillment of a social need for status. Examples include the needs for fun, success, fashion and love.

> Personalization

Tom O’Guinn, Marketing Professor at the Wisconsin School of Business and Executive Director for the Center for Brand and Product Management, asserts that consumers also desire to carve out a place for themselves in society. “One thing modernity brought with it was all kinds of identities, the ability for people to choose who you want to be, how you want to decorate yourself, what kind of lifestyle you want, and what you consumer cannot be separated from that.”

The Web has created an environment for anyone to achieve the top of Maslow’s hierarchy of needs. Being a highly customizable environment, it is a primary place for self-actualization. Brands that are able to target these needs are able to define a better fit with consumers and form long lasting brand identities.

Key Take-Away: Websites that personalize satisfy the increasing role of Web brands to fulfill personal egos and to define individual identities.


So what should Web brands do to best position themselves given these market trends? Check back here for the next installment, which will examine positioning opportunities for Web brands in an envolving market …

BRAND PULSE … Luxury Brands in Transformation (2 of 4)

> Adam Needles, 2009 MBA Candidate, Center for Brand and Product Management

The first piece in this series introduced this topic and examined the drivers behind the current evolution – transformation – in the luxury brand market. It argued, in particular, that there are four, key drivers reshaping the current luxury brand environment. So what are the implications for luxury brand companies, and how should they respond? That brings us to our second strategic question …


What are the positioning opportunities and challenges for luxury brand companies in an evolving market?

> Bifurcation of the market category: What was once a singular luxury brand market is rapidly evolving into two, clearly-discernible macro customer segments, with very different demand and marketing characteristics. One is the lower-end and more income-elastic mass luxury segment – targeting the ‘working rich’ (primarily) and the middle class (secondarily) with aspirational and affordable luxury goods. The other is the higher-end, largely recession-proof and less income-elastic super luxury segment – targeting the ‘ultra rich’ and attempting to differentiate itself from anything that might be considered ‘mass market.’ Demand in these two segments is rapidly diverging. “Old luxury brands that depend on small numbers of very high ticket sales will continue to prosper, as they have in the US,” comments Mark Ritson in a recent piece in Marketing. He goes on to say, “When times are good, everybody loves luxury. But when the going gets tough, only the middle-classes get going. [Super luxury] consumers shrug, stick around and keep spending.”

In terms of segmentation, super luxury is also increasingly split – characterized on one hand by an old-world / ‘old-money’ orientation and on the other hand by an orientation toward the international, modernist ‘nouveau riche’ – reflecting the diversity of tastes and experiences in this segment (and the origins of their wealth and values).

In either case, super luxury is growing to new heights – focusing on customers who are not price sensitive in the least bit – meanwhile, mass luxury is finding itself struggling for direction.

> Increasingly-conservative consumer product preferences: There is an ongoing shift from a desire for the ‘exotic’ (and perhaps ostentatious) to that for products and fashions that are ‘classic’ and clean in design and colors. This is related, in part, to a subtle realization by many in the wealthier set that times of economic slowdown are not the time for overly-conspicuous consumption. "The rich are different than we are. But there comes a time that even the rich understand that there's some anxiety in the world," according to Peter Solomon, chairman of retail-focused investment bank Peter J. Solomon Co. in an article in The Wall Street Journal.

There is also a sense that, especially in the fashion arena, many designers are out of touch with the conservative and realistic sensibility of the times – especially in super luxury. Christina Binkly of The Wall Street Journal commented on this season’s business fashions from New York Fashion Week: “[A]ll too often, designers get so carried away with their art – this season it was ostrich, pheasant and peacock feathers in show after show – that they seem to forget the real women out there who want to buy clothes.” She urges simplicity and practicality – synced to an overall trend (noted in the previous post on this topic) that welcomes simplicity in design and that embraces social and environmental sustainability.

It should be noted that embracing classic and clean design and integrating a sense of conservative sustainability will also benefit brands as they grow their footprints in more-traditional parts of the world such as the Middle East.

> Emergence of experience and services as the driving component of what defines and differentiates luxury: The luxury brand market is returning to its roots. Whereas luxury goods retailers were once marked by superior customer experiences, global brand expansion by firms such as Gucci and Louis Vuitton have commoditized signature handbags, sold in unenthusiastic and ‘clinical’ environments. But there are indications that this trend is reversing itself.

Customers – especially those in the super-luxury segment – look to luxury brands for unique, non-replicable and high-quality services and experiences. They embrace retail as theater. (Even Louis Vuitton has responded with its newly-revamped Flagship stores over the past few years.) These customers also embrace new services as part of luxury brand-line extensions – such as luxury hotels by Bulgari and Armani and fractional vacation residences by hotel leaders such as The Ritz-Carlton Company.

The luxury brand of the future will be less about the products conferred and more about the relationship with and experience of the elite customer – in a brand community that compounds exclusive identity and excitement.

“For [today’s wealthy], interesting life experiences and sophisticated service matter more than pride of ownership,” notes Milton Pedraza, CEO of the Luxury Institute in New York in a BRANDWEEK Q&A.


So how have luxury brand companies responded to these positioning opportunities and threats? Who are the winners and losers, and over what horizon? Check back here for the next installment, which will dig into specific companies’ approach to a luxury brand market in transformation …

India - The Final Chapter
During our time in Delhi, we had an opportunity to visit with Coca-Cola and Motorola. These visits served as two more great opportunities to learn about business in India - both the similarities across these large companies and the differences that provided new insights with each stop.

Before these visits, though, we had a chance to catch an early morning train on our first day to the city of Agra, home to the Taj Mahal. With its imposing size and pale blue sky backdrop set against the white marble, it's safe to say this stop qualified as one of the highlights of the trip. That same day we had an opportunity to visit the Agra Fort, and then it was on the bus for a (lengthy) commute back to the hotel.

With the end in sight, we spent our remaining time in Delhi visiting several other forts and temples, as well as touring the city by bus to the President's quarters and other Parliament buildings. A nearby set of shops and restaurants offered one last chance for souvenirs and food, and after 11 days in India, we headed home.



This would seem a fitting end to the accounts of this trip, but (if only for the sake of including the picture) it's worth mentioning that a medical emergency (not anyone in our group) did require a stop in the chilly Canadian town of Iqaluit. After two weeks in the Indian heat, it was quite a contrast to land in the glacier-filled surroundings of the Arctic Circle.
Eventually, either by plane or by bus, we all made it back to Madison where the start of a new semester awaited us. A heartfelt thank you to everyone who took time out of their days to meet with us - we learned so much, and you were all gracious hosts. At the very least, we've all learned something from this trip that we'll be able to take with us into our future jobs.

First Years: Our Second Life as Professional Interviewees

The last two weeks have been busy for first-year students looking for summer internships. Between, after (and during) classes we've been polishing our star stories in preparation for a slew of on-campus interviews. Procter & Gamble, General Mills, Kraft, Johnson & Johnson, Nestle, ConAgra, Kimberly-Clark, Intuit, Land O'Lakes, Ecolab and SC Johnson (among others) have all been looking to put us to work for the summer. As the dust starts to settle, we start to learn where we'll be in a few short months. Congratulations to everyone for making it through these last few weeks and thanks to all our professors for understanding our absences - now I suppose it's time to catch up on all those missed classes...

BRAND PULSE … Luxury Brands in Transformation (1 of 4)

> Adam Needles, 2009 MBA Candidate, Center for Brand and Product Management

Note: This is the first in what will become a regular and evolving serial feature on this blog. MBA students in the Center for Brand and Product Management at the Wisconsin School of Business will present timely perspectives on issues facing the brand world. These topics will be delivered in installments – providing opportunities to comment and provide input into the overall analysis. Our hope is that the resulting discussion threads will advance the brand community’s collective thinking about some of the most important market issues of the day.


Trouble in luxury land has finally hit the front pages.

Recent headlines have included BRANDWEEK proclaiming “‘Mass affluents’ retreat en masse” and The Wall Street Journal editorializing “High-end sales are slowing down as ‘even the rich understand there’s some anxiety in the world.’” But do these headlines over-simplify the issue? Isn’t there more to the story than just a quarterly hiccup in demand?

In fact, the luxury brand market is rapidly evolving – transforming. Key drivers are re-shaping the luxury-brand category. They include a cooling North American economy (and it’s impact on the middle-class consumer), the growing cache of social and environmental awareness, increasing stratification between what will be termed the ‘working rich’ (with incomes between $100K and $1M per year) and the ‘ultra rich’ (with incomes greater than $1M per year) and a unifying, technology-driven ethic of simplicity in design. The end result is increasingly looking very different than today’s luxury environment.

Meanwhile, the concept of affordable luxury – after saturating the market with silver baubles, colorful ‘it’ handbags for every occasion and celebrity-branded fragrances – is losing much of its momentum. Milton Pedraza, CEO of the Luxury Institute in New York, argues in a BRANDWEEK Q&A: “Affordable luxury is a contradiction in terms. Those luxury brands racing to transform themselves into affordable luxury by making deals with mass retailers have forgotten that their business model is not just about stamping out more products.”

It is clear that to continue to be successful in the current and future market environment, luxury brand companies must shift their strategies. But how? And in response to what trends? This brings us to our first question …


What are the major marketplace drivers behind this evolution in the luxury brand market?

While newspapers are trumpeting a fall-off in demand for luxury goods, the recent, below-estimate financial results for luxury brand companies do not tell the whole story. Yes … these companies are struggling to maintain near-term quarterly growth in line with projections; however, something more subtle – but clearly market-shattering – is occurring.

There is a fundamental re-orientation of the luxury brand market that is occurring, and some of the key drivers that are emerging include:

> Cooling North American economy (and it’s impact on the middle-class consumer): Between 1996 and 2006, the luxury market doubled to $234B worldwide, according to Bain & Co. The major driver of this market expansion was the marketing of ‘affordable’ luxury to customers that had never purchased luxury goods before – so-called ‘mass’ luxury. And many of these new customers were in North America and, specifically, in the middle class. The products marketed to them were sold at lower price points, lower margins and lower quality than luxury goods companies had historically done – leading to the cultivation of an entirely new customer-goods segment outside the ‘upper crust’ of traditional wealth.

But nearly 18 months of a shaky economy in the US is strongly affecting demand from this segment. “... [T]he new luxury party is over,” proclaimed Mark Ritson in a recent piece in Marketing. “The middle-class consumer is under financial pressure and the first sacrifices are all the accessible luxury purchases that they made when times were good.” Ritson notes that many luxury goods companies, such as Coach and Tiffany, are experiencing very-different levels of success with their mass luxury customers as compared to traditional luxury customers. “The only bright spot [in its recent earnings announcement] for Coach was a 13% increase in sales of their [$400+] handbags,” noted Ritson. This was further echoed by Tiffany’s CEO, Michael J. Kowalski, in a recent interview with The New York Times, stating “The greatest amount of weakness was in the mid-tier luxury consumer.”

To respond to a cooling North American economy, companies in the luxury market must once again refocus their marketing portfolios on traditional, lower-risk, higher-margin customers, whose patronage has unconditionally funded luxury in both good times and in bad (a segment that will be defined in the next installment of this series as the ‘super luxury’ segment).

> Growing cache of social and environmental awareness: Led by standard bearers such as actor/activist Brad Pitt, entertainment-mogul Oprah Winfrey, Microsoft-founder Bill Gates and U2’s Bono, social and environmental awareness has caught on with luxury-goods customers.

ADWEEK Editor-at-large Mark Dolliver commented on this in a recent piece, titled “Resenting the Rich”:

Conspicuous consumption has been supplemented by conspicuously virtuous consumption, as the rich flaunt their devotion to the planet — say, by spending more on solar panels for a mansion than you spent on your entire house. Along those lines, a study by Scarborough Research "finds that almost half (42 percent) of the households in the U.S. that own or lease at least one hybrid vehicle have an annual income of $100,000 or more." The non-rich could mock the rich for the old style of ostentation. Because it does have real social utility, conspicuously virtuous consumption is harder to criticize — which makes it even more irksome.

> Increasing stratification between the working rich and the ultra rich: Much of the growth in patronage of the luxury market over the past decade is attributable to a segment often referred to as the ‘mass affluents’ or the working rich – sometimes characterized as the ‘upper’ middle class. “That broader audience … defined by having investable assets between $100,000 and $1 million, has emerged as 21st century marketers' demographic darlings,” commented Eric Newman in a recent BRANDWEEK piece. Yet this segment has very different characteristics from that of traditional wealth, a.k.a., the ultra rich. The working rich have often built their own fortunes as artists, entrepreneurs or professionals, and – for that reason – they are much more sensitive to protecting their own capital base; thus, in times of economic downturn, they are much more conscious of their spending habits and much more likely to value price versus quality.

> Unifying, technology-driven ethic of simplicity in design: Less is more – whether it is the home page of Google or the visage of an Apple iPod – and this concept has become infused into the consciousness of a society overwhelmed with media and information. As a result, luxury is increasingly defined by simple, clean lines and uncluttered execution. Nowhere is this more apparent than in the global makeover of The Ritz-Carlton brand, which is renovating nearly all of its properties to ascribe to more modern furnishings and displays.


So what should luxury brand companies do to ‘right’ their strategies? Check back here for the next installment, which will examine positioning opportunities in this evolving luxury brand market …

"BEST IN MARKETING"

The Financial Times just released MBA rankings, including schools which they deemed to be in "a league of their own" in certain categories. Scrolling down the list reveals a "best in marketing" category where UW-Madison is ranked #7 in the nation, right up there with schools like Kellogg, Kelley, Ross and Wharton - all institutions that seem to be top-of-mind when thinking about marketing.
This is awesome and much-deserved publicity for our program and confirms what all of us who are here already know - that when we leave with our degree, it will be as valuable as any other in the country.