Simply Speaking

Marketers who can’t earn customer loyalty declare that it is dead. [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] Brands earn loyalty by distinguishing themselves with their actions. The decline and death of brands has been predicted with every disruption whether private labels, ecommerce or near perfect information availability. Instead we find top brands are strengthening their positions across industries. Loyalty is not dead, only the ability to create loyalists is wanting, writes our columnist in this week’s Simply Speaking. (Representational image: Artem Beliaikin via Unsplash) Corporate growth strategy has increasingly been accented towards new business acquisition and not as much on continuing business, cross selling and upselling. Loyalty has been seen as a ‘good to have’ aspiration at best. In the past few years, I have published numerous articles on brand sociology, tribal affiliation, fandom and the brand cult. My work allowed me to see the consumer- brand connect from the loyalty perspective across categories, managing and working with power brands such as Axe, Lakme, Smirnoff, Johnnie Walker and Royal Enfield. I studied reward programs closely when I handled Marketing for Visa for South Asia with more than 100 issuer banks on board. As CMO at Star sports, I created properties such as Pro Kabaddi that brought fans of a sport into limelight for the first time and created millions more. I know that every marketer knows it is easier to retain a customer than to acquire one. It is also more profitable to do so. Beyond doing away with acquisition costs, loyalists become allies to marketing. Consumer apathy to advocacy is the royal road to marketing nirvana. If you don’t believe in loyalty, you question the very basis for a brand to exist. Is a brand not an abiding preference that rises above commoditisation and builds deep, lasting associations? The growth of new age business was earlier declared as having risen above loyalty. Amazon, Facebook, Google or YouTube were seen as near monopolies. How could anyone be anything but loyal? Now Big Tech is in crisis mode and the Code Red call for action is loyalist retention. Ask Meta or Snap about the relentless growth of TikTok. Brand loyalty is often attacked as being not about loyalty but gratification. Rewards, schemes, discounts hold on to customers not emotion, so goes the argument. The scientific evidence on correlations between loyalty rewards and brand esteem is tentative at best. Certainly, it changes across categories. In some places, it has become currency as in the case of CPG wholesale trade, Airline frequent fliers and retail ‘earn and burn’ rewards. Can you deem a brand loyalty programme special if every player in the category has the same plan? Often what seems like loyalty is not loyalty but mere process adherence. The hassles of change are too painful and inherent inertia battles the urge to judge rationally and act accordingly. I may want to change my phone, house, car or bank but I stay on, nevertheless. Brand loyalty is now hard earned. But brand loyalty still exists, and it still pays. We don’t need evidence that brand loyalty exists. Each of us, in our capacities as consumers, have a sense of moderate to deep loyalty born out of a positive bias for a brand. I am privileged to work at the Tata group, revered as a national icon and institution. Our customers acknowledge the massive role Tata continues to play in nation building. This loyalty is genuine and such a loyalist core has had a disproportionate role in the development of brands. Brand loyalty is hard to achieve, probably harder now than ever because it requires an enterprise-wide focus on delivering a consistent brand image and experience. Kurt Lewin said, ‘there is nothing so practical as a good theory’. That cannot be said about our understanding of loyalty. There theories crumble in the face of practical considerations. Across leading brands, the prevalent practise is to measure a Net Promoter Score , a simple metric to assess traction with customers. Customers rank on a scale of 1 to 10 how satisfied they are with a brand overall or with a specific experience of that brand. Endorsers score at 9 or 10 ; detractors are those who rate it at 6 and under. Subtracting the detractors from the endorsers, you arrive at a net score . It is a direct measure of how many promote a brand and are likely to recommend it. That is seen as a good proxy for brand loyalty. As a customer I am bombarded by emails or text messages asking me to rate how satisfied I am with almost every interaction I have had with a company. My bank, airline, hotel, restaurant, dentist, mobile phone network, car company and grocery store all want my vote of loyalty. So, what is it about loyalty that marketers fail to grasp? The secret is that we are loyal to brands we truly like The Meaningful Brands Index by Havas with a sample size of more than thirty thousand consumers globally does a correlation between brand loyalty and importance to consumers. Consumers have no real loyalty to three-fourths of the brands they buy. But there are brands which are very important to consumers. These are brands with whom they have affinity, shared or common values and consider indispensable in their lives. These are the ‘meaningful’ brands. Loyalty can’t literally be bought. Fan following in sports, as loyalty with brands, must be earned. But while it’s difficult to put a price on acquiring the loyalty of any given customer, brand loyalty is certainly big business. Dawn Lerman, a professor at Fordham university wrote a book ‘The Language of Branding’ in which she explained how iconic brands can get followers to use a special lexicon that creates a sense of belonging and community. Consumers want an ongoing interaction with a brand that does something special for them and for the world in which they live. These are brands with ‘purpose’ and have acquired a stature to own it. Apple, Lego, Nike, Harley-Davison and Patagonia are such

Being a ‘conglomerate’ is again the name of the game. The sprawling new tech conglomerates in a hydra-headed structure will bring up fundamentals pertaining to the brand for a fresh application or re-evaluation. [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] Jeff Bezos’s Amazon is driven on the vector of ‘efficiency via disruptive technology’ and is investing in server farms and drones. He owns the Washington Post in his personal capacity. Mark Zuckerberg’s Facebook became Meta and he bet the shop on creating its Metaverse. Elon Musk, is not only the boss of Tesla, the electric-car maker and Twitter but also a huge investor in space travel and solar-energy systems. One of the constantly in and out of fashion constructs in brand marketing is the concept of the conglomerate. In the last 50 years they have been on a see-saw where brand esteem is concerned. Storied names such as GE, ITT, Hanson Trust of Britain, the Japanese Zaibatsu and Korean Chaebols got feted as the highest branded manifestations of capitalism. Then they were rubbished as inefficient, defocused, bloated relics. Gold framed MBAs at Wall Street claimed that companies should focus relentlessly. They opined that it was investor dharma to minimise risk by choosing sector specific companies rather than backing corporate pachyderms. It came to pass that ‘diversification’ itself was reason enough to attract a “conglomerate discount”. Brands were seen as stretching irrationally when crossing sectoral boundary lines. Warren Buffett – the sage of Omaha – must get credit for steadily resurrecting the stature of conglomerates. His investment vehicle, Berkshire Hathaway is a textbook conglomerate. When he bought Precision Castparts, a maker of aerospace components, for $37 billion, it was the biggest deal in Berkshire’s 50-year history. His method is focused on chasing growth and value over the longer term, and this knows no boundaries of vertical, category or industry. It seems that the pendulum of guru opinion is shifting back again to the other extreme and ‘being a conglomerate’ is again the name of the game. What is surprising is that the leaders of the current pack are the pioneering and focused digital Tech leaders of the world – Google, Microsoft, Apple and Amazon. Google’s evolution as Alphabet goes well beyond its mammoth original, core business – internet search and advertising. It has birthed several subsidiaries from commercialising driverless cars to extending human lifespans, each a potential standalone company within the group. In effect, it is on course to become an increasingly diversified company. This kind of metamorphosis is facilitated by two enablers – technology and secure cash flow. Information technology is transforming established industries, from mobility to education to manufacturing. Google – with the collective brain power its talent pool possesses and the cash pile its business generates – is well placed to pursue all sorts of projects, even as unrelated as creating artificial meat. Jeff Bezos’s Amazon is driven on the vector of ‘efficiency via disruptive technology’ and is investing in server farms and drones. He owns the Washington Post in his personal capacity. Mark Zuckerberg’s Facebook became Meta and he bet the shop on creating its Metaverse. Elon Musk, is not only the boss of Tesla, the electric-car maker and Twitter but also a huge investor in space travel and solar-energy systems. This is surprising but not a first time occurrence. In its own era, General Electric grew into a conglomerate as Thomas Edison imagined electricity’s capacity to transform the everyday world. Many Japanese players began with microelectronics or miniaturisation as a core competence and extended far and beyond. Berkshire’s steady evolution into a conglomerate shows us why conglomerates are always around. Success lies in sound management and acute capital allocation. Conglomerates neutralise risk by diversification. They can cross pollinate talent and leverage a strong market position to their advantage. When GE went far beyond appliances, power and aviation engines into broadcasting and financial services, its ability to select, train and promote general managers was the enabler. Break-ups, divestments and spin-offs shook up the older established conglomerates such as General Electric, United Technologies Corp, DowDuPont, Honeywell, ThyssenKrupp, ABB, and Siemens. But the ‘Big Tech to conglomerate’ phenomenon is led by an entirely new breed of top performing, multi-talented entrepreneurs with the proven ability to revolutionise old industries by applying new technologies. Berkshire’s steady evolution into a conglomerate shows us why conglomerates are always around. Success lies in sound management and acute capital allocation. Conglomerates neutralise risk by diversification. They can cross pollinate talent and leverage a strong market position to their advantage. In the Developing & Emerging markets, this has always been the norm. There conglomerates outperformed more focused pure-play firms, because of better access to raw materials, regulatory leverage and better brains. Once again, in all parts of the world M&A activity is dominated by deals taking firms into new lines of business, rather than ones to build scale, which generate synergies. As walls go up across the world and globalisation takes a backseat, large multi-industry conglomerates will emerge in all major economies. This expansion by Tech giants is well researched and planned. Think of Amazon buying PillPack, an online pharmacy and making it a part of Amazon Pharmacy. Amazon’s venture in healthcare is an audacious one because it ties up so much of what it can potentially offer. Many tech firms have health care ambitions. Apple has tied up wellbeing to its iPhone. Alphabet sells wearable devices and is pumping money into biotech research. Amazon has an online service – the Amazon Clinic that offers virtual health care across most states in the United States. It acts as a virtual storefront connecting users with third-party health providers. Amazon’s Halo band is a wearable device that monitors the user’s health status. The move into primary care, disrupts the role of the General physician and is a big step in a market worth trillions of dollars worldwide. Valuing the brand when conglomerates own traditional hard assets was better understood but it’s not well established when it comes to estimating the worth of nascent digital ones. Big Tech has the staying power and is desperately looking for white spaces to avoid hitting the growth plateau. Amazon’s move into logistics flustered incumbents such as XPO Logistics, FedEx and UPS. There

How the multibillion dollar sportswear industry wrote the rulebook on influencer marketing.   [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] The rise of sneakerdom is a wonderful example of what a magical world marketing can make. (Representational image via Unsplash) Fashion should be a form of escapism, and not a form of imprisonment. It’s time to let loose a bit. [People] don’t want to look at a two-piece suit with a wide belt. They want to see something that takes them away.” – Alexander McQueen Sportswear is now mainstream casual-wear across the world. Sneakers, track-jackets and pants have become haute ‘cool’. This story is an important one. It is most representative of how brand building will work for most categories in the future. The role that superstar celebrities – in particular musicians and athletes – play is worthy of detailed examination. The emergence of sportswear as a multibillion dollar industry wrote the rulebook on influencer marketing along the way. Not all is well in the sportswear fashion world on this count. In a succession of terminations, the industry has chosen to bleed away revenue and profits rather than tolerate racism, bigotry or xenophobia by those who are otherwise acknowledged as super achievers. Nike stopped its relationship with Kyrie Irving, a basketball player and will no longer release his new shoe slated for launch this month. He was suspended by the Nets for publicising an antisemitic film on social media. Nike is facing challenges and business is hardly the usual. Its stock has fallen 41 percent in the past year. Kyrie Irving, was due to launch his new shoe, the Kyrie 8, which was supposed to hit the market now. Just the last month, ‘rapper – designer’ Kanye West, who now goes by Ye, made a series of antisemitic remarks and wore a shirt with a slogan associated with white supremacists. Major brands such as Balenciaga and the Creative Artists Agency cut ties with the artist despite his proven commercial success. Adidas also pulled the plug on its relationship with Ye, at an enormous cost. At Adidas, an entire division was devoted to selling Yeezy merchandise. Estimated revenue loss is of the order of $250 million. There are other, longer lasting relationships which continue to lay the golden eggs. Nike and its association with Michael Jordan selling a line of sneakers and other athletic wear — amounted to $5 billion of Nike’s $44.5 billion in total revenue. Going beyond, Nike has LA Lakers superstar LeBron James and Kevin Durant of the Nets in its platoon of influencers acting as designers for their signature merchandise. Using celebrities and athletes to design, develop, merchandise and market sportswear is not a new phenomenon. Nike, Adidas, Puma and Under Armour have all actively nurtured ties to entertainment stars and top athletes. Now, in the age of social media, the risks are just as real as the rewards. When a face was an endorser in the past, the brand was making the advertising campaign more resonant with what the celebrity stood for. The attributes, products, brand values were in a straight line. Then the world got more chaotic, and the chaos moved faster around all stakeholders. Nike boldly embraced disruptive advocates and pushed what was seen as bold but polarising content in the areas of equity values. It has been signalling to consumers since partnering with the former N.F.L. quarterback Colin Kaepernick in 2018. [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] But Irving’s antisemitic remarks were an outrageous foul which merited action. He posted a link on social media to the film “Hebrews to Negroes: Wake Up Black America,” clearly seen to be antisemitic including Holocaust denial. A well regarded sneakerhead, besides his sporting stardom, many of the shoes Irving designed for Nike like his “I Love You Mom” series of shoes were not linked to sporting imagery. This is the age of the sneaker. A rubber-soled, simply uppered footwear has been magically transformed by marketers into a product of fantastic urges. It is a class of product which ‘everyone wants even if not needed’. A vastly profitable category worth billions of dollars with a brand velocity uniquely uniform across most of the world. Like Blue Jeans, the sneaker has come to be an emblem of cool. For the uninitiated, initially there is a casual relationship and Nike, Puma, Adidas and Reebok – are all “same same but different”. But as you get into the ‘sneaker mindset’ it becomes a deeply evocative subject and a pair of shoes transforms to a most valuable asset. I learned much from “The Ultimate Sneaker Book” published by Taschen. It’s a history of sneakerdom. From Jeremy Scott at Adidas to Kanye West with Reebok, Nike, Louis Vuitton and Adidas, it chronicles the change in sneaker marketing. Like a mountain river that floods the plains, a niche has expanded to a universe all its own. The yet to be initiated may do well to peruse the content of Sneaker Freaker, a website that, since 2002, has become the be all and end all of sneaker wisdom. Coming back to the “track pants”, Ermenegildo Zegna has a cashmere-wool mix with buttoned snaps at the ankle. Giorgio Armani has them in checked mohair. Hermès sells one that is technically treated silk. The likes of Lemaire, Berluti, Louis Vuitton, Paul Smith, Brioni have many more of their own. The revolution has reached main street. The “joggers”, go with a tuxedo jacket and sneakers. Elasticised pants are not only in vogue, they are gripping on to global fashion. Back in 2009, at the Paris Fashion Week, Kanye West designed three sneakers in collaboration with Louis Vuitton. The resulting shoes each retailed at $1,000 a pair. It was an all-red colourway titled the ‘Don’. In time Ye, then going by Kanye West, got called Kan, the Louis Vuitton Don. These shoes, precious as they are, now retail between $6000 to $18,000 on auction and merchandise sites, where available. Simon “Woody” Wood, Sneaker Freaker’s founder and editor of “The Ultimate Sneaker Book” makes the point well in his foreword: “Strange, isn’t it, that a few bits of leather and suede sewn onto a slab of rubber and wrapped in nylon thread could mean so much to so many.”