Biznik Blog

Biznik Live connects you with nationally recognized authors whose powerful ideas will help you make successful choices for your business.  And today, we have the honor of speaking with John Gerzema, the Brand Bubble author, which is about the looming crisis in brand value and how to avoid it.  This book has some bad news, and it has some good news.  For us entrepreneurs who are early in our development, it is mostly good news, I would think.  We’ll be diving into that soon.

But they have discovered something new, a brand energy that we’re going to get to talk about some, that we can take advantage of to counter some of these trends right now.

So, John, are you there?

John Gerzema:  I am, Leif.  How are you doing?

John Gerzema is Chief Insights Officer for Young & Rubicam Group.  He is one of the early founders of account planning in American advertising.  He has guided brand strategists to global businesses and creative acclaim.  Previously, John ran Fallon’s international network and founded offices in Tokyo, Singapore, Hong Kong, and Sao Paulo.  He holds a master’s degree in integrated marketing from the Medill School of Journalism at Northwestern University and a B.S. in marketing from The Ohio State University.  There’s a much longer and impressive bio that I’m not going to be able to jump into now.

So how was the night for you last night, John?

It’s interesting.  We studied both of the brands, the John McCain brand and the Barack Obama brand.  In Brand Asset Valuator, I did a posting in our blog today.  But we found some really interesting sort of distinctions between the brand personalities of the two candidates that might have suggested maybe the path of where the election was heading.  But we talked a little bit about on the blog.

So we talked a little bit about that.  It was just interesting to look at how consumers were looking at the perceptions of the two candidates.

Leif Hansen:  When you make those associations between the candidates and the products, what is that process?  How do you make those correlations?

But basically, with BAV, it studies consumer perceptions of brands, how different they are, how creative they are, how relevant.  And we can also correlate clusters of imagery around any brand so you can understand what imagery you have that’s leveraged or underleveraged, for example.  And it’s quite a simple process ultimately but it’s just consumers doing what we do as regular shoppers just commenting and discussing their perceptions of various brands that they come across.

So it allows us a really robust data because we go back to 1993 and we can track how brand perceptions have all been changed over time.

John Gerzema:  Yes, Leif.  That was a really thorough overview; you’ve been out in the road with me.

What we did is we started looking at this trend data back over 13 or 14 years and what we found was really surprising because while brand value, which essentially means the value that sits inside companies in terms of their operating value that’s associated with brand, that has risen almost 80% in three decades and it’s now about a third of the average value of a company inside the S&P 500.  Talking big, big bucks.

Leif Hansen:  That’s a lot of money.

So the basic thrust of the book is to understand that there’s actually a smaller basket of brands that consumers are really attracted to and other ones they hold their passion toward.  And the rest of them are essentially on the bubble.

John Gerzema:  A massive effect, Leif.  I think what I kind of posed in the book is that brand management has kind of become brand maintenance and it has assumed that brand equity is going to stay more or less current over time, repeating the same things with the past will allow you to maintain the position that you’re in the market whether you’re a large brand or a small brand.

What we’ve actually found is that these forces, social media, obviously, and the fragmentation of channels and contents, the rise of search, the ability for content to be portable, even things as far-field as data storage, all of these sorts of forces, I think, have aligned to really create a perfect storm whereby they create an environment where brands have nowhere to hide.  And then suddenly, you’re in an environment where brand equity is actually decaying at an accelerated rate.

John Gerzema:  The first thing we’ve got to acknowledge is the rise of broadband penetration in the United States has just unleashed consumer creativity not only in the U.S. but around the world.  There are some excellent studies that show, Mediaedge:cia, for example, that said that 68% of consumers trust each other versus 15% now for advertising.  And across the board, you are just seeing tremendous rise in terms of the influence of social media and it’s not just in the U.S.  China is one of the largest per capita blogging markets in the world, and then if you start to factor that in with the fact that something like 70% of internet users have reported that they write a review online or that they look at reviews as key to making purchase decisions on products, what you’re having basically is the consumer cutting through or disintermediating traditional messages obviously and making decisions based on what appears in their networks.

John Gerzema:  Yes.  There are a few excellent sources.  I don’t have them quite at hand but there’s a University of McCann study I just came across a couple of days ago that was really proving that point to the contrary that was just saying that across mass consumers in the major developed markets, you are seeing a three-way rise in use of social media where there is something like 78% of people now using a social media in some form, whether it’s just posting photos and sharing them on Flicker or the more aggressively blogging and participating in consumer rating sites like Epinions or going to those as well.

So it’s definitely a mainstream phenomenon and it’s not something that’s just left to the -

John Gerzema:  Yes, the Technorati, exactly.

Leif Hansen:  At one time, that might have been true but often, I guess the Technorati does lead the way to where the rest of us are going.  So this is good news for those of us like biznik.com and my business, Spark Social Media, that are in this world because more and more people are using it.  We’ve seen a sharp increase of Biznik members in these last couple of months, I think, partly because of the economy and people are wanting to network more in a business sense and connect, but I think it’s also these other trends we’re talking about.

Just out of curiosity on that note, is LinkedIn one of the companies you guys are tracking, branding?  Any online services?

Leif Hansen:  I’m only one more year within your demographic.  I’m an oldie.

John Gerzema:  Me too.  Suddenly irrelevant surely, I guess.

John Gerzema:  Yes, it’s interesting.  I’d be curious to know what your listeners think and the other experts.  They may know more about this than me but what we’re seeing even in our advertising communications, marketing world that FaceBook is really expanding and you go into the user groups, you’re seeing lots of really interesting user groups have developed.

I’ve got relationships with the APD Spain through FaceBook and some really interesting creative festivals in Argentina and a couple of research companies in Bangladesh.  I guess that’s Chris Anderson’s long-tail personified.

But LinkedIn in and of itself is actually evolving quite quickly and moving beyond the business directory, I think, into much more of a…

John Gerzema:  Absolutely.

Leif Hansen:  Any chance, just of curiosity, are you guys looking at meetup.com?

John Gerzema:  Yes, we’ve got some relationships there with some folks; Douglas Atkin I know who has really written a really excellent book, The Culting of Brands.  I think it’s with that group.

Leif Hansen:  That would be interesting with the fact they are so high in the face to face realm, what kind of experiences and trust people associate with Meetup and their brand.  I’ve noticed they actually had a whole campaign recently focused on getting away from your screen.  Did you see that?

John Gerzema:  No, I didn’t.

So I’m going to ask one general but very relevant question and then we’ll open it up to some questions from our audience.  With this idea of brand energy, what advice would you give those of us who are in the early stage or we’re just going through a rebranding stage from these findings?  How do we reenergize our brands from what you found?

In that, there was this idea of energized differentiation, short-hand, I guess, brand energy, but this idea that it’s not just enough for a brand to be different; it’s actually going to keep being different.  And this is very much up the alley of your business and your listeners’ but this idea of fluidity is something that clearly the technocratis of the world have truly embraced.  But that has been really difficult for traditional brands and traditional brand management that tends to think of a brand or in terms of its size rather than its velocity.

Vision is all about corporate leadership, the ability of the company behind the brand, a company has excellent culture or responsible practices.  Are they into corporate social responsibility?  Do they have a strong set of core values?  Are they leading their category?  Are they doing something interesting beyond selling stuff?

Invention was the second dimension.  That’s all about the tangible product and customer experience, and that can obviously be impacted in so many different ways from the customer call center to the retail experience to customer relationship marketing and ways in which the customer really feels like they’re having a tangible experience with the brand.

So we looked at those three things and we found that brands that were really strong on all three were really driving energy and improving in the marketplace.  Vision-driven brands are brands like Ikea, Lego, Pixar and Zappos with other innovative business models or cool cultures or doing really breakout innovative ideas.  Some of the culture brands were like that; Method which is nothing more than a soap but very strongly driven with a purpose.  One of my favorites is Simple Human.  Simple Human has a blog on the guide toward healthy living.  Essentially, what Simple Human does is they sell really expensive trash cans.  There are all kinds of ways that vision plays out.

And then dynamism, we see all kinds of great examples.  Still of great dynamic brands out there like Geico and Burger King and FaceBook and those others that are doing really interesting forms of communicating.

I’d just say to your audience is to find what you want to focus on in terms of your difference in your brand or in your product and then find ways to constantly innovate around it.  So we provide in the book some thinking tools and some examples of ways in which you can apply some of the principles of some of these brands that are doing really well in the market.

John Gerzema:  As I said earlier, Leif, clearly, you have to have a point of difference in this market because otherwise, you’re going to become a commodity.  And that’s one of the biggest mistakes that brands make in terms of either positioning or deciding, what is it truly about the brand that’s going to be different, that’s going to be better and special?

That could come in a lot of ways.  It could come out of the product, out of the company, out of simply the innovation of the idea.  Or it may just come out in conversations.  There have been timeless examples of brands that simply out-executed somebody else on what’s a parity benefit.  I’d go back to the ‘90s in Energizer Bunny.  I don’t think Energizer endured over that difference.  It just had a big idea.

I think what the consumer is telling us in this vision, invention and dynamism feedback they were giving us is that they want creativity and they want lots of it.  That would be my big take.

John Gerzema:  Yes.  Leif, one of the things that we found is lots of brands breaking away from very commoditized categories.  So we saw, as I mentioned, Geico which is car insurance, it’s about as exciting as going to the dentist.  At the same time, Geico has done a tremendous job layering their communications and really breaking out.  The data proves it.  There are brands like Zappos that has a really innovative business model around simply selling shoes on the internet.  Method soap as I mentioned, Dove soap, Subway, which has really reframed the marketplace for fast food with the big idea toward health.

The second thing is that the consumer is just thirsting for creativity and they’ll jump on board and get excited by a new brand or even a restaged brand, a brand like Puma or Adidas or even McDonald’s that came back from the shadows of commoditization.

Leif Hansen:  Well, I’ve got a couple of questions already coming up, but for those of you who don’t have the information on how you can ask a question, you can go ahead and call (347) 884-8009.  To ask John a question, you can also use the Blog Talk Radio Chat feature or email me a question at biznikcatalyst@gmail.com.

So our first question here, musical backup there, is from Michelle in Chicago.  She is asking: How has the big crunch affected your original predictions?

But what I think the credit crunch is telling us now is clearly intangible assets are easily and irrefutably wiped out quickly if there isn’t real value behind something.  So what we believe now is that the bubble is continuing to expand even though companies have started to try to deal with adjustments.  This for me is like the next big place that business needs to focus.

And again, if you think about brands as a sector, you’re talking about the top 250 most valuable brands are bigger than the GDP of France.  So it’s a massive part of most companies, 30% on average, and yet at the same time, my view is that marketing isn’t necessarily treated with the same esteem and urgency from the C-suite that it really deserves.

That is my focus, Michelle.  It’s how to think through in these times.  The best way to recession-proof your brand is really to get business behind it and to focus on driving creativity and driving marketing and energy in the brand.

John Gerzema:  Yes.  We don’t feel the bubble has burst.  We’re still very concerned about the state of marketing in today’s average company.  Marketing in the best companies, the companies the consumers have allotted this high energy brands and high energy companies, that marketing is handled at the highest levels of the company.  So the best CEOs think like CMOs, the names that you could rattle off like Branson and Jobs and Dyson and those types.  They really treat marketing with incredible importance.

At the same time, as we talked earlier about all these touch points, this is a tremendous opportunity now to understand that marketing is everywhere inside the company.  You could build a point of difference on your call center.  You could build a point of difference on your use of social media or on some sort of even minor aspect of your brand.  But how does marketing really get the permission to access and organize those other parts of the business function?  Too often, in many companies, marketing is still a department and focus just on communications.

John Gerzema:  I haven’t seen that review but all we’re trying to do is raise the level of debate on creativity in the company.  And I think what’s powerful about what we found is it comes from the consumer and it’s their most direct validation of creativity that they’re looking for momentum and constant innovation in a brand.

What we were able to do that helped us correlate the value to business of creativity is that we have designed very specific metrics to show that when your energy goes up, your pricing power goes up, your loyalty goes, your usage and preference.  And actually, we can isolate the brand movement, the contribution that it creates on sales and financial return.

I guess to be really practical too in this discussion, we think there’s a lot of new thinking that has come up but at the same time, there are some definite parallels to really great thinking that’s already happened.  Michael Porter’s thesis on sustainable competitive advantage, I definitely think is inside this thinking and scope on that.  But our important view is it comes from the consumer.

Leif Hansen:  Great.  Thank you.  By the way, I misquoted.  Did I say Seattle Times?  It actually is an L.A. Times article.

John Gerzema:  Right.  Okay.

We have time for one more question.  It looks like there’s a call although the number is a little vague here.  I’m going to open it up.  Hello, caller, from area code zero.  Are you there?  All right.  So we’ll move on from that.

A question that I was wondering about, this really goes back, John, to something I think you’ve been saying all along.  But is it fair to say that transparency is almost being forced upon companies through social media?  If you’re not covering your butt, if you’re not out there really responding to people and engaging them, if you’re not talking and being transparent about your weaknesses and where you want to grow and improve, other people are going to.  Is that fair to say?

So my view really is that it has opened up a conversation for brands to stop doing anything other than being themselves, just operating with pure integrity.  So the requirement for that is for a brand to actively listen, to obviously co-create with consumers and allow a dialogue to happen, and the highest energy brands are doing that.

Leif Hansen:  Just a really quick one because this is important to me, would you say that consumers are more interested in issues of sustainability and environment?  Is that part of vision that people are thinking about the larger system with their company?  Is that important to enough people now?

Leif Hansen:  Excellent.  We have just a few seconds left, so I want to say a couple of things.  I want to say first and foremost, thank you so much, John, for taking this time today.  You can find out more information, you can check out Brand Bubble at Amazon, and I believe also the brandbubble.com, right?

John Gerzema:  That’s right, Leif.  Thank you.

Leif Hansen:  We will continue our show next week.  You can hear about previous archive shows if you go to biznik.com/about/live or subscribe to the iTunes show.  You can search for Biznik there and you can find this show and other ones.

John, even though we are still recorded, we’re not streaming, are there any last minute words that you’d like to share with people?  Any last minute self promotion?

Leif Hansen:  Congratulations.  I wish I had seen that earlier.

John Gerzema:  We’re excited, but most importantly for your listeners is to go to the brandbubble.com and check on the brand asset valuator explore tool and do their own research.

Leif Hansen:  Excellent.  Thank you again, John.  I look forward to talking with you some more in the future and hopefully seeing you and others at biznik.com and we’ll look forward to talking to you next week.

John Gerzema:  Will do.  Thanks, man.

Leif Hansen:  All right.  Take care, guys.  Bye.