From the September 2001 issue of Entrepreneur

Brand. The hip, catch-all word of the New Economy. It suggested all a company needed to succeed was awareness. Image, as they say, was everything.

Pat Harpell saw it up close as the CEO of Harpell Inc., an integrated marketing firm in Maynard, Massachusetts. Over the past few years, many entrepreneurs have called on her to create branding programs, and she could see that old-fashioned branding strategies had gone astray. "That's not a branding program; that's a logo," she says. "Basic business principles fell apart."


Branding turned into a game of being seen for the sake of being seen, without giving consumers a reason to buy.

What ultimately fell apart was the connection between companies and consumers. Branding turned into a game of being seen for the sake of being seen, without giving consumers a reason to buy. "There's been a tremendous abuse of branding," says Jeff Dufresne, managing director of BrandStorm, a brand consulting group in Cincinnati. "I think people got confused and thought branding was just throwing some ill-conceived advertising out there to gain awareness."

With the dotcom fallout, companies are relearning the basic lessons of what makes a successful brand-mainly, that you can't live on image alone. Eyeballs don't equal sales, and logos don't create loyalty. Consumers want to know what you're all about and why they should trust you enough to purchase your product. This will never change, no matter how much technology alters our lives.

Remember Me? I'm the Customer

Many companies today are refocusing on something they'd all but forgotten: their relationships with customers. After all, if you had a lot of venture capital and a plan to take your company public and sell it in six months, did you really need to spend time figuring out your product's value to consumers? The answer was no for the dotcoms-and the consultants they hired to create their brands-that never did in-depth market analyses.

"There are a tremendous number of brand experts and consultants in the world now who know nothing about the product, nothing about the development of information technology that allows you to interact with customers in the marketplace," says Regis McKenna. Chair of The McKenna Group, a Silicon Valley-based international consulting firm that works with technology companies, McKenna helped Intel launch the first microprocessor and worked with Apple to get the first PC to market. He even designed Apple's famous logo. "When brand becomes abstracted from what [your company does] from day to day, it loses meaning," he says.

Of course, building a brand is still as important as ever. Brands simplify and add comfort to consumers' purchasing decisions. Good brands deliver on a promise. (See "Case Study: Trader Joe's" below.) In fact, it's rare to succeed long term without branding, Dufresne says. "[Brand is] your fundamental relationship with an end user, who is buying your service and creating revenue," he says. "It's what sustains you."

THE QUIET BRANDER
CASE STUDY: TRADER JOE'S

When Trader Joe's opened a few stores around the Washington, DC, area last year, it was overwhelmed with customers. This specialty retail grocery store has nearly 159 stores and is expanding rapidly. Its Monrovia, California, headquarters regularly receives calls from relocating customers who want a list of the company's locations so they can move near one.

Relocating to be near a grocery store? What gives? How does Trader Joe's earn that kind of loyalty? Consider the fact that the company does little advertising and relies mainly on its newsletter, The Fearless Flyer, to promote its products, new and old.

Pat St. John, Trader Joe's vice president of marketing, sums it up this way: "We keep our promise." That promise is delivering interesting, high-quality foods at very good prices. But St. John says the Trader Joe's "brand" isn't about the products; it's about the customer experience. The company's employees, decked out in Hawaiian shirts, are a friendly and knowledgeable presence for customers navigating aisles stocked with unique products. "No amount of advertising can create what we want to create with our customers. [Advertising] can remind people, but it can't create an experience," she says. "It's the personal relationship with these people that builds loyalty."

We Just Don't Talk Anymore

Nancy Koehn, a business historian at Harvard Business School, researched the lives of six famous entrepreneurs for her new book, Brand New: How Entrepreneurs Earned Consumers' Trust From Wedgwood to Dell (Harvard Business School Press). She learned that those entrepreneurs were obsessed not only with an idea, but with meeting a consumer need. Consider Josiah Wedgwood, an 18th century British potter who saw the average Briton yearning for social status. He positioned his products by targeting the aristocracy, knowing this would attract customers from lower economic brackets as well. His strategy worked, and still works today.

The entrepreneurs also kept their ears to the ground. Estée Lauder constantly updated her skin-care formulas based on what customers told her. Though Howard Schultz of Starbucks initially resisted using skim milk in the company's authentic Italian lattes, he finally gave in after spending time in a Starbucks location listening to customers repeatedly ask for it.

What those entrepreneurs did so well, Koehn says, was create ongoing, two-way dialogues with consumers-and alter their products based on what they heard. Wedgwood met a need for status, Lauder played into the post-war 1940s glamour boom, and Schultz tapped into the need for community in a disconnected world. Along the way, consumers got the branding message: This product is unique, and therefore better. Advertising didn't buy consumers' loyalty. Instead, long-term loyalty came from consistently fulfilling a promise and creating a great customer experience.


Branding has become a monologue instead of a dialogue. Entrepreneurs need to leave their ivory office towers and talk to people.

It's that dialogue that's been missing lately, Koehn says, and it's essential to any branding strategy. Branding has become a monologue instead of a dialogue. Entrepreneurs need to leave their ivory office towers and talk to people. They need to be responsive to their customers. (See "Case Study: Krispy Kreme" below.) They have to make sure their branding messages are understood by everyone inside the company. "Over the last few years, people [didn't realize] how hard branding really is," Koehn says. "But its rewards are equal to its difficulty."

Harpell recently studied a group of new companies to see how ingrained their branding messages were inside those companies. She found that many employees weren't aware of their companies' branding messages at all. "There was no brand connection, no teaching of employees and no communicating with consumers," Harpell says.

The Web's a problem, too. When management and technology consulting firm Accenture and technology research company Online Insight surveyed 2,000 online consumers last year, they found that a lot of the givens about the Web that marketers operate under are false. While most marketing is aimed at youth, the average online shopper is 35 to 44. Entrepreneurs also assumed that ads drew consumers to their sites while customers surveyed relied on search engines. And the low prices companies touted weren't what customers were looking for: They wanted a satisfying customer encounter that was fast and convenient.

"[Branding] is about more than the sock puppet. It's about the total customer experience," says Kelly Dixon, co-author of the study and director of e-branding at Accenture in Chicago. "Companies haven't focused on the entire package."

Consumers developed a love-hate relationship with late-'90s branding strategies, observes David Schumann, consumer psychologist and associate dean at the University of Tennessee in Knoxville. On one hand, seeing logos invade every inch of public space has left U.S. consumers over-exposed to branding. On the other hand, consumers are paying attention, if only briefly, to discover whether you'll reveal that one clear benefit your product or service offers that'll make them try it. The problem is, this "one clear benefit" has been missing in plenty of branding campaigns, and Schumann sees companies facing the fallout: consumers sticking with the products they've trusted for a long time instead of taking a chance on products they don't really understand. When the value proposition is missing, Schumann says, risk-averse consumers will go with what they know.

THE TOUCHY-FEELY BRANDER
CASE STUDY: KRISPY KREME

This Winston-Salem, North Carolina, company produces more than 3 million doughnuts a day. When it opened its first Denver location in March, doughnut fans camped out the night before, and lines extended out the door for days. Customers who want Krispy Kremes in their area or just want to say how much they like the doughnuts send 5,000 e-mails a month.

But Krispy Kreme relies on word-of-mouth and doesn't advertise outside of the occasional billboard. So why is it such a successful brand?

"We look at every touch point with consumers as an opportunity to brand," says Stan Parker, Krispy Kreme's senior vice president of marketing. When the "Hot Doughnuts Now" neon sign is on, customers come running. You can peer through glass windows as doughnuts make their way along the conveyor belt, and the smell is irresistible. "You can eat them hot," Parker says. "That's a huge brand-building asset for us."

Back to Basics

Suddenly, branding isn't as much about generating buzz as it is about fundamentals. When Harpell surveyed marketing professionals and CEOs in February, she found generating leads, making sales and developing new channels were the new priorities, not branding. Only 19 percent listed branding among their top challenges. "People are starting to get it that it's not enough to get out and bang a gong as loudly as you can," Harpell says. "You have to have some meat behind the sizzle."

Companies are rediscovering direct mail, focus groups and customer surveys as ways to tap into customer tastes. But in a slowing economy, they need to connect with consumers on an emotional level, says Marc Gobé, CEO of New York City-based international brand consulting firm D/G* New York and author of Emotional Branding: The New Paradigm for Connecting Brands to People. "People are going to be more selective in what they buy, where they buy it and how they buy it," Gobé says. "There's a tremendous opportunity for [businesses] to stand out and demonstrate that they have a strong commitment to people."

Better hurry...your customers are waiting.


THE ÜBERBRANDER
CASE STUDY: NIKE
What's it like when everyone sees your logo and instantly knows who you are? Just ask Nike. The Nike Swoosh is immediately recognizable, and the company's slogan, "Just Do It," has become a part of the American lexicon. The power of its branding helped Nike sprint past the competition in the 1970s and '80s.

But even überbranders can stumble. Nike started losing its brand edge when it changed its focus in the 1990s from traditional athletics to more outdoorsy activities like hiking. Adidas and Reebok grabbed greater market share. Lesson #1: Be careful in changing brand identity.

Lesson #2: In the process of rebranding, Nike overbranded and seemed more focused on trendy celebrity marketing than on creating good, affordable shoes-and, consequently, priced shoes too high for most buyers.

Lesson #3: A well-known brand often becomes a target for consumer protest, as Nike found out a few years ago when it faced allegations regarding its foreign labor practices. "They've weathered it pretty well, but it's left a stain on their reputation," says Sheri Bridges, an associate professor of marketing at Wake Forest University in Winston-Salem, North Carolina. It may have affected Nike's bottom line, too. Nike announced in February that it wouldn't meet its latest sales projections, and it's refocusing on what it once did best: midpriced footwear.


Chris Penttila is Entrepreneur's "Staff Smarts" columnist.