Angelina Jolie’s Smart Decision

This week Angelina Jolie announced that she had preventative mastectomy surgery to reduce her risk of breast cancer.

People are debating her decision to have the surgery. Most seem be fully supporting the move.

She clearly made a smart decision in announcing it as she did; Angelina Jolie dramatically enhanced her personal brand.

By proactively announcing the news, Jolie emerges as a proactive, thoughtful spokesperson. She encourages other women to look into their individual situation and do what is best. Jolie is concerned for others.

Jolie also takes control of the message. While she had kept the procedure quiet, it would be impossible to ensure absolute secrecy long-term. If she didn’t announce it, the news would probably come out as some big secret, which would be bad in many ways

Importantly, the announcement came in the form of an editorial in the New York Times. This is perfect place to announce the news. The New York Times is perhaps the most respected media brand in the world. Jolie wrote an editorial, which suggests a level of seriousness. She explained her decision in-depth and she avoided the circus of a news conference.

You have to respect Angelina Jolie. She makes tough decisions. She also knows how to build a brand in good times and bad.

$40,000

I have a cousin battling ovarian cancer. It has been a long and difficult fight but she has done better than anyone could have imagined. She is amazing.

Last week I talked with her mother and learned that the family is rounding up funds to pay for a $40,000 oncology drug. My cousin lives in Germany and apparently the healthcare system there doesn’t cover the drug. So the only way she will receive it is if someone comes up with the money.

This all feels wrong. She only gets the drug if she comes up with $40,000? You can’t be serious.

But the more I think about it, the more it seems like a reasonable situation.

My cousin’s healthcare system decided the product wasn’t worth paying for. Germany is notoriously stingy when it comes to innovative pharmaceutical products, so this isn’t all that surprising. I suspect the product works in some patients but not others so the overall efficacy isn’t compelling.

It is difficult to get too mad at the healthcare system for this decision. Budgets are limited. A low-cost system can pay for some things but not everything. Healthcare isn’t free; if you want low prices you won’t get the latest therapies.

The pharmaceutical company decided to price the product at $40,000 per person. This is a lot of money, considering the production cost might be $100 or even less. But the company has a product that apparently works in some patients and gives everyone hope. A high price seems appropriate in this case.

The company probably invested hundreds of millions of dollars developing the molecule. This investment should have no bearing on the price; people don’t make purchase decision based on how much a company spent on R&D. But I don’t think the company is morally obligated to set a low price; doing so would limit future R&D spending and potentially slow the flow of new therapies benefitting other patients.

This leaves the decision with my cousin and her family. Should she be able to buy and have the drug? This is an easy question: of course. If she believes it is worth it and she has the resources, she should absolutely be able to move forward.

Ultimately, healthcare decisions should rest with the patient and family. Physicians can help patients understand the options and recommend a therapy. Insurance programs should cover some therapies but not all. There should be difficult options: one plan might cover only the most established treatments while another plan covers a broader range of options.

The people who see the benefit are the patient and the family. Ultimately they should make the tough decisions about treatments and costs.

So in the next few days my cousin will pay $40,000 and receive a new oncology therapy. And I hope it works.

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Spring semester is my busiest time for teaching; I have three MBA courses at Kellogg, plus a series of executive education seminars at Kellogg and a number of corporate projects. As a result, I’m posting a bit less than usual. I’ll be back to a weekly post in June.

A Long Shot

Last week Michigan furniture retailer Art Van Furniture announced it was entering the Chicago market. The company will apparently invest about $40 million in real estate and marketing as it opens up five new stores and a new distribution center. Art Van is planning to capture 10% of the Chicago furniture market.

I’ll paste the link to a recent article in the Chicago Tribune below.

Will the company succeed with its Chicago strategy? I suspect not.

Furniture is a tough market for new entrants. It is a mature industry with limited growth. The market isn’t changing much. Customers have many options and little motivation to learn about new alternatives. There are lots of established players who will defend their market share.

Art Van seems to be a very respectable retailer and quite successful in its core market in Michigan.

The problem is that Chicago is full of very respectable furniture stores. Walter E. Smithe is a strong local player. Crate & Barrel has terrific products. IKEA is inexpensive and practical. The list goes on and on.

Art Van will have to spend a ton to build awareness in Chicago; it is a huge city and an expensive media market. Share will build, but slowly. Repeat purchases will come but only with time. The company will lose significant money just getting off the ground.

Even established players have struggled in Chicago. John M. Smyth Homemakers failed, as did Wickes and Plunkett. Just recently Chiasso, a trendy retailer with stylish products, gave up and liquidated its Chicago store.

So why is Art Van making this move?

CEO Kim Yost explained it recently, noting “Our chairman made it clear to the leadership team that we needed to continue to build and grow the brand.”

Entering Chicago is a logical move and I am certain the opportunity looks good on paper. But breaking into an established category with an “attack the core” strategy is always a challenge.

I suspect this won’t end well.

 

http://articles.chicagotribune.com/2013-04-26/business/ct-biz-0426-artvan-furniture-20130426_1_art-van-furniture-outdoor-furniture-distribution-center

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This week I’m leading the Kellogg on Branding executive education course in Evanston. The class is an interesting mix of marketers from all around the world: Brazil, Peru, Germany, Belize and Mauritius. It should be a fun week.

A Branding Lesson from France

This week France provided a very important branding lesson: full disclosure is not the best way to build a strong brand.

After a rather embarrassing political scandal, France’s top political leaders released financial statements detailing all their assets. The reports are remarkable. You can read them here:

http://www.declarations-patrimoine.gouvernement.fr/

Stephane Le Foll, Minister of Agriculture, for example, reports that he has two houses, one with a value of 150,000 € and another with a value of 250,000 €. He also has a life insurance policy with a value of 29,000 €, a BMW motorcycle he bought in 2001 worth 300 € and a Renault Clio that he purchased in 1994 with no value at all.

Is this a best practice? Should we all follow suit and publish our financial information?

No.

This information damages everyone’s brand. It certainly won’t enhance the stature of government leaders in France. If you have a lot of money you seem out of touch. Why should some fat cat be setting policy for the country?

If you don’t have much money you look underpaid and unsuccessful. Why should someone who hasn’t managed their finances well be setting policy for the country?

You can’t win. Disclosing this information doesn’t enhance anyone’ brand.

Some things are better left unsaid.

For individuals, this is certainly true. You don’t want to reveal all your financial information. You also don’t want to air all your views on social policy or your siblings. Shedding all your clothes in public is not a good idea, either.

This is also true for brands; some information is best kept private. Should you publish all of your customer complaints? No. Should you release your latest competitive analysis? No. Should you tell people every time you change a product formulation to reduce costs? No. Must you announce every change to your pricing strategy? No.

Marketers have to walk a fine line. It is important to be open with customers; people like to feel connected with a brand. But this should only go so far.

As the French showed this week, more transparency is not always better.

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The sad events in Boston are tragic and puzzling. As a marketer, I’m always interested in behavior. Why do people act the way they do? What is the motivation? What are the benefits?

The odd part of the Boston tragedy is that the motivation is totally unclear at this point. Why would someone do that? What is the point? I hope we figure it out soon; the first step in preventing future attacks is uncovering the motivations.

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This Saturday I’m speaking on the topic of Super Bowl advertising at Northwestern University’s “Day with Northwestern.” The program is for Northwestern alumni and the general public. It should be an entertaining event.

Three Things We Can Learn from Ron Johnson

Ron Johnson is out at JC Penney. His seventeen month stint at the retail giant will go down in history as one of the great leadership fiascos of the decade.

We can learn a lot from Ron Johnson’s tenure at JC Penney. Here are three of the key lessons.

 

- It is easier to lose your existing customers than it is to gain new ones.

JC Penney proved that it is pretty easy to lose your customers. The company basically told people that the days of deep discounts were over and anyone looking big sales should go shop at Kohl’s.

They did.

It is very hard to attract new customers, especially to a well-established brand. JC Penney tried to bring in people who were younger, more stylish and less price sensitive. They made some progress, apparently, but not very much and certainly not enough.

This isn’t a surprise; getting someone to rethink a brand takes time. Repositioning is an enormous challenge. It takes time and money and success is never certain.

 

- Set low expectations.

People evaluate results by comparing them to expectations. Is profit of $500 million good? Well, if the goal was $400 million, a profit of $500 million is terrific. If the goal was $800 million, a profit of $500 million is a disaster.

Johnson failed to set low expectations at JC Penney. His plan was going to hurt sales and profit in the short run but he didn’t predict the size of the drop. When results were weak investors lost patience.

Meg Whitman at HP has embraced the idea of low expectations. As she began her tenure as CEO she basically said HP won’t make anything for many, many years to come, perhaps ever. This is a good approach; it gives her time to make changes and adjust course.

 

- Don’t get too confident.

Ron Johnson and his leadership team at JC Penney were very confident. After a successful stint at Apple, Johnson believed he knew the answers. Johnson and his team also apparently thought the people working at JC Penney were somewhat clueless and pathetic.

So Johnson fired many of the existing executives and rolled out a plan that was deeply flawed. Did anyone tell him the plan wasn’t going to work? I suspect so. Did he listen? No.

Assuming you know all the answers is dangerous.

The Switzerland Puzzle

In late March I spent several days over in Zurich leading a program for a global pharmaceutical company. I found Switzerland to be a surprising place.

The first surprise was that the prices are remarkably high in Switzerland. I had perhaps the most expensive cup of coffee of my life at Starbucks across from the central train station in Zurich; my small regular coffee was over $6. My hotel room was about $300 per night. I spent over $40 on a simple dinner with no salad or dessert. Real estate is expensive, too.

To compensate, salaries are high; according to the executives I met with people get paid much more in Switzerland than in Germany or the UK. Apparently the best approach is to work in Switzerland, live in France and shop in Germany.

The prices are not high simply due to exchange rates; the Swiss National Bank is working very hard to prevent the Swiss franc from soaring in value versus the Euro and other currencies.

The second surprise was that the economy seems to be booming. Restaurants and shops are full and there are construction cranes everywhere you look. Building projects are in full gear.

This is a bit of a puzzle. High prices usually lead to lower demand. But companies are investing heavily in Switzerland despite the cost. With Germany, France, Italy and other countries so close, why is pricey Switzerland booming?

The answer seems to be simple. People are nervous and Switzerland is safe.

I had an interesting conversation in London with a former Goldman Sachs banker. He is deeply concerned about what is happening in Europe; the economy is lurching from one crisis to the next but the core issues remain and just grow bigger and become more complicated. It is a bit like a pressure cooker with no release valve. The recent Cyprus deal is a new and unfortunate milestone. He doesn’t know when things will fall apart but he is quite convinced they will. I heard the same view from several other executives; people are generally concerned.

If you are nervous about the global economic situation there aren’t many great investment options. Where do you put your money?

One answer is pretty easy: Switzerland. The country is safe, orderly and secure. Assets in Switzerland are solid. Whatever happens in the Europe, Switzerland should be ok.

So investors and companies move funds to Zurich and Geneva and the result is that these cities boom even as prices soar. It is all impressive to watch. It is also a bit concerning.

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Last week Expert Marketer Magazine named my book Defending Your Brand: How Smart Companies Use Defensive Strategy to Deal with Competitive Attacks the 2013 Marketing Book of the Year.

There is still time to sign up for the next session of the Kellogg on Branding executive education program. It runs April 28 to May 3. I’m teaching in the program along with Greg Carpenter, Alice Tybout, Julie Hennessy and many other Kellogg professors. It is a terrific opportunity to learn about building and managing strong brands. You can learn more about the program here:

http://www.kellogg.northwestern.edu/execed/Programs/BRAND.aspx

Branding Kevin Ware

I suppose this isn’t the moment to be thinking about Kevin Ware’s personal brand.

After his spectacular and horrifying injury at yesterday’s NCAA game, the Louisville basketball player should focus on his recovery. I’ve had a little experience with orthopedic injuries myself and can only imagine the road ahead. Physical therapy, it turns out, is slow and painful.

Still, it is hard not to consider Kevin Ware’s branding opportunity.

Everyone is talking about him today. The injury was astonishing; the video of it is shocking. People are discussing the game, of course. But the interesting moment, the scene that sticks, is the injury.

The situation is terrible but is also is a remarkable opportunity. With thought, Kevin Ware can build a strong brand; he can emerge from this as an inspirational person that people want to hear from, associate with and hire.

My advice to Mr. Ware is simple. Don’t miss the opportunity. If you play things correctly over the next few days you can set yourself up for many years to come.

In particular, he should do three things.

First, focus on the team. He is off to a great start. As Coach Rick Pitino said after the game, “It was very difficult to look at and watch. But he’s a brave young man, because all he kept saying was ‘Win the game.’” The more Kevin talks about supporting the team, the stronger his brand will become.

Second, associate with the right people. Kevin can meet with anyone he wants. I’m pretty confident Barack Obama would happily fly down to see him. So would Oprah and Tiger. Lindsey Vonn might provide advice on dealing with recovery from traumatic sports injuries. People are probably lining up. Kevin should think about who he meets with and when. Great brands tend to partner with great brands.

Third, keep the story going. The risk for Kevin is that later this week people will focus on other things. He has to think about opportunities to extend the attention. So he should space out the celebrity visits and let people know about the milestones on his recovery.

Mr. Ware might play basketball again. I hope he does. But his bigger opportunity is building a brand that he can count on for years to come.

The Advertising Challenge

On Monday I flew back to the U.S. from Germany. On the Lufthansa flight I watched a short video called “World’s Best Commercials, 2012.” It featured winners of the New York Festivals International Advertising Awards. Apparently 430 senior advertising executives cast 430,000 votes and selected the finest advertising spots in the world.

My observation: heaven help us. If senior advertising executives think these are terrific spots then marketers have a huge problem.

The winning spots were certainly engaging. One featured spectacular scenes of nature. Another was a delightful spoof of the royal wedding that had all the participants dancing down the aisle, including the Queen. Yet another ad had thousands of exploding balloons. There were funny spots and sweet spots.

The problem is that the ads weren’t likely to do much for sales or brand building. Most had terrible branding; it wasn’t at all clear what the commercial was actually for. In many cases, the brand showed up in the last frame. Overall, the spots had terrible brand linkage, connecting the creative idea to the brand.

A number of advertising executives raved about a spot featuring a bear acting as a movie director. One after the other, these folks praised “the bear spot.” One observed, “Everyone love it when we saw the bear.” It seemed fairly unanimous.

Of course, praising “the bear spot” simply illustrates the problem; the commercial was about a bear. It wasn’t about a brand. What was the spot advertising? I have no idea. The creative idea came through but the brand didn’t

One reason people have trouble doing effective marketing is that they hire advertising executives more interested in creativity than brand building.

Here is a good piece of advice: remember that the creative team at your advertising agency wants to create engaging, award-winning commercials. These award-winning commercials don’t always drive sales or build brands.

I suppose it is no different from financial advisors. You want to believe that your investment manager always does what is best for you. But that is naïve. Your advisor wants to be successful and her success and your success are often two different things.

With advertising executives and financial advisors, be careful.

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Defending Your Brand is now one of the top five finalists for Expert Marketer Magazine’s Marketing Book of the Year. Many thanks for your support.

This week I head to Switzerland. On March 27 I’ll be in the UK talking about defensive strategy at an event organized by the Kellogg Alumni Club of London. Then back to Chicago to start the spring semester. And catch up on sleep.

Uber, New Product Strategy and the Critical Moment

Launching a new product isn’t easy. You have to come up with an idea, validate the concept, assemble a business model, develop a supply chain, create or break into a channel of distribution, begin production and get customers to notice you.

The most important thing, however, is creating a positive trial experience. Trial is the critical moment.

People have to be delighted when they try your product. This is the only way you will get repeat purchase. And to survive you need repeat.

Driving trial is costly; you often have to provide big incentives to motivate people. So trial purchases are rarely financially positive. The only way a new product will survive is if people make a second or third purchase without significant discounts.

People are usually curious and open-minded the first time they buy a new product; they recognize it as something new so they notice little things. If all goes well they will be delighted to have found something that will make their life a little better. If things go poorly, however, they will likely declare the item a disappointment. When this happens they won’t be back; getting someone to try a product for a second time is a challenge indeed.

You can do everything right on your new product but if the trial experience goes poorly you will fail. This is true even when you have a good product. A new pharmaceutical with excellent trial results, for example, won’t succeed if physicians have a bad experience when they first try it with a patient.

This week I tried Uber for the first time. Uber is an app that helps you find a taxi or car service. You type in your location and the app contacts nearby drivers. I was traveling this week so decided to give it a shot.

How did it go?

It was fabulous. I set up my account and asked for a cab. The driver pulled up in four minutes and I was off to the airport.

I like two things in particular. First, the interface is charming; it tells you exactly how long it will take to locate a car and shows you all the cars in your area. It is incredible. Second, the app gives you the name of your driver along with a photo. This is very comforting; it creates a feeling of security. And if I leave something behind I think there is a reasonable chance I might actually get it back.

So I’ll use Uber again. I’m sold. I might even tell other people about Uber.

If you are working on a new product launch, make sure people have a good trial experience. Everything else is secondary.

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Expert Marketer Magazine named Defending Your Brand one of the finalists for marketing book of the year. The next round is determined by vote; please cast your ballot this week at http://www.marketingbookoftheyear.org/

I’m just back from Colorado and Germany. I have several classes in Chicago this week, then I head back to Dusseldorf to teach for another two days in the Kellogg-WHU Executive MBA Program. Then I go to New York to lead a corporate seminar on building strong brands. I enjoy the travel but I’m happy I don’t do this every week.

Betting on the New York Times

Struggling companies often do better when they focus on their core brand.

There are good reasons to have many different brands. A broad portfolio lets you target different customers with unique brands. It also reduces risk; if one brand gets into trouble the other brands can help offset the declines.

The problem is that managing a big brand portfolio is difficult; each brand requires marketing investment and attention. Brands don’t thrive when you neglect them.

When an organization is having financial troubles, a large portfolio can be a major strategic issue. There is not much money for investment so some brands get neglected or, even worse, all the brands get little support.

This is why companies that get into trouble often prune brands and focus on the core. When McDonald’s stumbled, for example, the company ditched Chipotle and Boston Market and many other brands. General Motors made pruning the portfolio a key part of its turnaround plan. P&G rebounded under CEO A.G. Lafley by focusing on the big brands that mattered.

The New York Times Corporation is making a similar move. Last week the company announced that it was rebranding the International Herald-Tribune. The century-old paper would now be known as the International New York Times.

A week earlier, the New York Times announced it was seeking a buyer for The Boston Globe.

Last August, the New York Times sold the About Group, which includes About.com.

The New York Times Corporation, once a collection of media brands, will soon have just one main brand, the New York Times.

This makes perfect sense for two reasons. First, the company is struggling. The stock trades at less than $10 a share, down from over $45 a share back in 2004. Revenue is falling steadily. Profits have been inconsistent; the company made $160 million in 2012 but lost $40 million in 2011. With limited resources, the New York Times has to focus on the brand that matters; there just isn’t money or time to spend on other brands.

Second, the New York Times is a strong brand; it has high awareness and a loyal following. Readers value the product. The challenge is to turn this into financial returns. Perhaps the most encouraging sign in recent years is that readership held up better than expected when the paper eliminated free internet access and started asking people to pay.

The New York Times Corporation will succeed if it can ensure that the New York Times brand emerges as the most respected and trusted source of information and perspective in the world.

The other brands in the portfolio were distractions; the New York Times is making a smart bet.

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Expert Marketer Magazine named DefendingYour Brand one of the finalists for marketing book of the year. The next round is determined by vote; please cast your ballot at http://www.marketingbookoftheyear.org/

This week I am off to Colorado for an advisory board meeting (and some skiing). I then head to Germany to teach in the Kellogg-WHU Executive MBA program. That is always entertaining; the class is a mix of students from Europe, Asia and the Middle East which makes for some interesting discussions about branding and marketing strategy.