Blackberry’s Astonishing Fall

Classes started this week at Kellogg; Northwestern is on the quarter system so things get going rather slowly in the fall.

I began my two marketing strategy classes with a round of introductions: I had each student go through their background and then mention one of their favorite brands.

This is always an interesting exercise; it provides a glimpse of the brands people are thinking about. The most frequently mentioned brands were Google and Apple, which isn’t a big surprise. But Jiffy Lube and Olive Garden made the list, along with about one hundred others.

One brand was conspicuously absent: Blackberry. Out of more than 140 MBA students, not one mentioned it.

While this isn’t a scientific study, it is one indicator of how far Blackberry has fallen.

Four years ago, Blackberry was an incredibly hot brand. President Obama was apparently a loyal user. Oprah, too, along with almost everyone who was someone. The company’s revenues more than doubled in 2009 and net income increased in a similarly remarkable fashion. RIM, Blackberry’s parent, had a market capitalization of more than $75 billion in 2008.

Today Blackberry is in significant trouble. Revenue is falling. Net income tumbled in the company’s 2012 fiscal year. The company lost money in the three most recent quarters. The brand is quickly losing ground to competitors. More important, perhaps, the Blackberry brand is developing negative associations: old, out of touch and inflexible.

Not surprisingly, the stock has crashed; the company now has a market capitalization of less than $4 billion.

Blackberry is a wonderful, and tragic, example of a business that failed to defend. Competitors attacked and the brand was not able to respond effectively.

Defensive strategy is incredibly important. Indeed, as I argue in my new book, Defending Your Brand: How Smart Companies Use Defensive Strategy to Deal with Competitive Attacks, protecting the core business must be a manager’s top priority. Growth is good but as Blackberry shows, defense matters more.

A Remarkable Political Ad

The 2012 presidential campaign is in full swing as Mitt Romney and Barack Obama battle for voters. Unfortunately, I don’t get to see much of it since Obama will almost certainly win Illinois. Romney is fighting elsewhere.

Political campaigns are marketing battles; the candidates are fighting for votes, not sales. The challenge is to win votes by promising benefits and attacking the opponent.

It all gets very nasty because elections are one-time events. There is no need to maintain cordial relations with a competitor. You don’t have to worry about your opponent coming back and attacking you in a few months; if you win, the battle is over. So candidates fight hard and things get ugly.

This year Obama clearly has the momentum. Incumbents start with many advantages, so it is up to the challenger to put forth a compelling case. So far Romney hasn’t managed to own a benefit or present a compelling reason to change.

But the campaign isn’t over and a powerful marketing effort could swing things.

My favorite political ad is “Ashley’s Story.” This spot, produced by the Progress for America Voter Fund, pushed George Bush over the top in 2004. It is a brilliant piece of marketing. The branding is strong and the benefit is both important and clear. Why elect Bush? The ad provides a simple answer: to feel safe.

This spot came out in October, 2004. With over $14 million media behind it, the commercial ran heavily in key swing states. Many people believe it was the reason Bush won.

Great marketing can swing elections. The next few weeks will be fun to watch.

 

 

Calling Your Customer an Idiot

Michael O’Leary, CEO of Ryanair, is in a bit of hot water.

According to the Irish Independent, O’Leary recently called Ryanair passenger Suzy McLeod an “idiot” and “stupid.” When asked about this odd approach to customer service, O’Leary did not back down. He explained, “I had not been intemperate, I had not lost my temper and it was not a tirade.”

The story began when Suzy showed up at the airport for her Ryanair flight without printed boarding passes. As a result, she had to pay fees totaling €298, about €60 per ticket. Outraged, she went on Twitter and complained, asking for a refund as a gesture of goodwill.

The normal response in a situation like this is for the company to apologize and refund the money. But Ryanair didn’t take this approach. Instead, the CEO observed that Suzy was stupid. O’Leary explained the response, “…we have replied, politely but firmly, thank you Mrs. McLeod but it was your f***-up and if you screw up, you compensate us and you send us a gesture of goodwill.”

Most people would call this an example of terrible customer management.

I disagree; I think this is an example of a brand wisely sticking with its strategy.

Ryanair is an exceptionally low-cost airline. The brand’s positioning is clear: Ryanair has low prices, poor service and high fees. It is hard to beat Ryanair on price but there are tradeoffs for passengers. Traditional airlines struggle to compete with Ryanair; they just can’t match the fares while delivering a generally acceptable level of service.

By strictly enforcing rules, Ryanair clarifies its positioning. It isn’t a luxury airline. It isn’t a gentle or kind airline. It doesn’t really care about goodwill. It is a cheap airline, arguably the best cheap airline in the world.

Ryanair was smart to deny Suzy’s request. The wording wasn’t perfect; the CEO shouldn’t have called her an idiot. But standing up for the brand was the right move.

A few pages after this article in the Irish Independent there was an ad from Ryanair advertising flights from Dublin to Rome for just €26. The brand’s proposition is clear: low prices and little service.