Mindshare Marketing

For the past two holiday seasons, I’ve worked part time in a retail location to earn extra money for Christmas goodies.  Each year has been vastly different, highly impacted by the location I’ve been working and the company I’ve been working for.  Last year, for example, I worked for a shopping mall jewelry store which, despite its location, was relatively high end.  Most recently I’ve been working for a mid- to high-end clothing company.

Both experiences have taught me a great deal about customers, shopping behavior, and the overall mindset of “retail” on both sides of the counter.

Branded retail, specifically outlet stores, is something that most companies are getting into.  Rather than selling thier goods to another merchant, they are trying to sell directly to the end user.  This cuts out the middle man and raises margins, but can destroy your brand if you’re not careful!

Consider two different companies that both make t-shirts.  We’ll call the lower end company “Lows” and the higher end company “Highs” (hopefully the names are obvious).  They both start out selling through large, big-box clothing retailers like Sears and JC Penny’s.  Things are going well, but both companies want higher margins to support a push to global expansion.

In today’s world, it seems that both companies will open a branded store.  This is a bad decision for Lows.  While their product sells well when juxtaposed with higher-end, more expensive goods on the rack at Sears it will probably not sell well in isolation.  Competing on price does not work well when you don’t have the competition nearby to explain the differences.  A branded “Lows” store would not draw customers away from the branded big-box retailers elsewhere in town.  Lows can improve its bottom line by becoming more competitive on price - either by cutting costs or negotiating to increase sales volumes.

Highs, on the other hand, can strengthen their brand by developing a branded store.  People don’t have to wade through scores of lower-end goods to find the classy t-shirt they want, and might even be willing to pay a little bit more to experience the brand on its own turf.  The emotional story behind Highs’ brand can be fleshed out in a Highs-exclusive context and will strengthen its relationship with customers.  Highs can leave some of its product in the big-box world to remind less attentive customers who they are, but keeping products exclusive to their own locations will create a higher draw for their customers.

In reality, though, both companies will open retail stores.  Highs will even be enticed to compete directly with Lows on price and will open a branded “outlet” store for its factory seconds and outdated designs.  This is the absolutely worst thing Highs could do.  An outlet store, with markdowns between 40% and 90% of retail price raises questions in the customers’ minds.  ”Is this shirt that I bought really worth the $45 I paid last year?  Why didn’t I just wait until now and get it for $5?”

I’ve been talking a lot about habits lately.  Remember, you want the decision to buy your product to be automatic, not something the customer has to consider and debate each time.  By opening a branded outlet store, Highs is inviting loyal customers to question the value of their products.  Sales in the outlet might increase as customers become aware of the savings and competitiveness with Lows, but sales in the branded retail (first-quality product) store will decline and level off.  Highs’ brand will become associated more with the outlet model of shopping in a crowded space for discouts amidst other bargain hunters in a store so busy that “brand” becomes a distant afterthought.

Is your business more a Highs or a Lows?  Where on the development scale (selling through third parties — selling through branded retail stores) are you at now?  Are you moving in a direction that will strengthen your brand or weaken it?

One of my writing projects in high school was to write a letter to my future self.  I was supposed to grill myself on the to-do list of life, make sure I had stuck to my 15-yr old ideas of the world, and ask questions about what things looked like in the future.  I never managed to get a copy of that letter back from my freshman English teacher, but I can still remember a lot of things from it.  I used a really nonchalant tone, asked whether or not future-me had a girlfriend, quizzed him on his job and whether or not he was happy, and asked how fast his flying electric car went.

Well, it’s been a few years and I can finally start to see that “future” I was asking about come into focus.  I studied physics in college because I wanted to work for the design teams at either Honda or Toyota developing the next generation of hybrid cars.  No, not the electric ones.  After all … everyone keeps telling me how unfeasable electric cars are.  They have limited ranges, there is no convenient place to re-fuel, and they don’t have nearly as much power as their gas-guzzling ancestors.  Hybrids were the way of the future, according to the automakers’ spokesmen, and I wanted a piece of it.

Now it’s even a few years after college and I’ve moved on to other interests.  Yesterday, though, I took a walk down memory lane at OMSI.  Among other things, I got to wade through a sea of ten-year olds, play with water wheels, solve mindbending puzzles, and try to squeeze my way through the hatch of a submarine.  I relived the excitement of playing with science, and it was a blast.  Outside, though, I got another reminder of my past loves in life; I actually saw and electric car hooked up to a refueling station!

It might not be the most attractive tricycle in town, but it’s entirely electric and not a figment of my imagination.  I do stop to wonder, though, why I abandoned the concept of electric cars in the first place.  I bought into the message from Detroit that electricity was an unfeasible fuel source for transportation.  Now, here it sits, powering a real car.  Go figure.

Now switch gears and think about your business.  We live in a time of economic frustration, to put things midly.  Media analysts talk every day about the ups and downs of stock and financing.  The newspaper rarely shows us a ray of sunlight in the growing storm of both personal and business bank accounts.  But think, really think, about the situation your company is in.  Are you really as “bad off” as the rest of the market, or are you buying into the the brand the “experts” are trying to place on this decade?

Tomorrow marks the beginning of a new year.  This is a time for a general reevaluation of our positions and goals as things move forward.  I urge you, write a letter to your future self.  Ask him whether or not his life is still moving in the right direction.  Grill her about the reasons behind decisions that led her to where she’s at.  Ask him to explain what the future looks like and how it compares with your assumptions from today.

You might not get the opportunity to shake future-you’s hand, but hold on to the letter and it will be the next best thing.

I mentioned a few days ago that I’m reading a new marketing book about habits.  As I’ve moved through towards the end of the book, the author has started getting into branding.  His argues that branding is really just a way to identify habitual behavior (You pick the Apple computer not because of the brand story, but because of the Apple icon or the expected look and feel of the product).  I really think he’s on to something, but I want to take it a few steps further.

According to Neale Martin (the author of the book), you have two minds: the “executive” or conscious mind and the “habitual” or unconscious mind.  Branding, in my opinion, speaks to both minds.  The brand story and general positioning of your products speaks to the executive mind.  You connect with your customer on a personal level, creating a sense of comfort and companionship with them.  When they first buy your product (a conscious decision) it is up to your brand to deliver on your initial promise.

If you deliver consistently, the customer will eventually pass on the purchase decision to his or her habitual mind.  The purchase decision becomes an automated process.  At this point, your brand story isn’t as important as your product packaging or your ability to deliver on your brand promise.  You’re trying to retain a customer by keeping him or her operating out of the habitual mindspace.  

Buying your product is no longer a decision, but an automatic default choice.

This is why the protection of intellectual property is so vital.  A few years ago, a cafe in Japan (Excelsior Coffee) tried to copy the look and feel of the Starbucks logo on it’s similarly designed coffee shops.  Starbucks sued almost immediately.  While Excelsior’s logo was not identical to the well-known Starbucks image, it was similar enough to confuse customers.  Starbucks invested a great deal in building an automatic purchase habit into the market (You see the sign, you enter the store, you pay $4+ for a coffee, you go home, then you realize you just bought a coffee).  They established the customer base, programmed the habit, and built their company on an expected bottom line.

By copying their logo, Excelsior was tapping in to this automated behavior.  Customers would see their sign, enter the store, pay $4+ for a coffee, go home, then realize it wasn’t a Starbucks experience.  Disgruntled and unsatisfied, customers would begin to question their habit and start thinking about their morning coffee purchase.  This destroyed Starbucks’ well-built customer base in areas of Japan and, even though no one had directly copied them or attacked their business, Excelsior’s attempted coattail ride damaged the Starbucks brand.

So, is habit-forming essential to branding?  Absolutely!  Both when you build the brand and when you try to encourage repeat behavior, buying up habitual mindshare among your customers is vital to the success of your brand!