Martha Stewart - Extending the Brand
The Martha Stewart brand, synonymous with the notion of raising the quality of living in and around the home, drives diverse and complementary publishing, television, branded merchandise and retail businesses.
The largest selection of Martha Stewart-branded merchandise—more than 3,000 products—can be found exclusively at Kmart in the United States and Zellers in Canada. About 1,200 products are featured in the company's retail businesses: its catalog, Martha by Mail, and the Internet site, marthastewart.com. The largest segment of its business, representing more than 60 percent of the revenue base, is publishing: magazines; books; the syndicated "askMartha" newspaper columns appearing in 225 U.S. and Canadian publications weekly; and the radio show, broadcast on 285 stations in the United States, covering 93 percent of the total U.S. market.
To be sure, these businesses are diverse, but the Martha Stewart brand is the string that ties them all together.
Martha Stewart Omnimedia is one in an emerging category of companies characterized by:
• multiple customer contact points;
• complex product, service and content offerings; and
• multi-layered advertising and margin-based revenue structures.
Included in this category are a number of traditional direct mailers: catalog-retail-Web companies, as well as financial institutions and publishers using multiple customer touchpoints. All these companies require new practices in how they develop and manage their most strategic assets—their brand and customer base.
Martha Stewart's success largely is due to an understanding that growing the brand's value involves more than extending that brand through the addition of products and services or through maximizing delivery channels. It also reflects an understanding that successful brand-extensions require creating, maintaining and growing underlying associations—which imply a promise to customers from the organization as a whole.
But even for such brand giants as Martha Stewart, optimizing brand value means more than putting a name, face or logo all over the product, catalog, Web site or magazine. For a brand to be worth anything, it has to have an impact on the customer's experience with the company or organization.
What more could marketers be doing to extend their brands and make the most of customer relationships across these distinct delivery channels and other customer touchpoints? Let's explore the power of the brand on the customer relationship, and then discuss some of the tools for making the most of the interplay between the two.
Why Extend Your Brand?
The best companies managing brands today recognize that branding—and what it represents—drives almost two-thirds of most customer purchases, impacting nearly every functional area within an organization.
This translates into what our company, Prophet, calls the brand-customer relationship. Building and preserving this relationship is a crucial strategic motivator among those corporations whose leaders understand its value. Brand is, in fact, a true asset of the total business and not merely a marketing communications icon. And stewardship of the brand should be the underlying rationale behind the decision-making processes—including the analysis that should go into brand extensions.
Brand extensions—or extending the equity of your brand—are crucial to both fuel growth and outpace competitors. Once the brand has been accepted and proven in the marketplace through existing products and services, new offerings are stamped with instant credibility and a built-in endorsement from the underlying brand.
However, David Aaker, author of 11 books on brand and considered by many as the modern-day "father of branding," cautions in his book "Brand Leadership" (Free Press): "When a product is tied closely to a product class, its potential to extend is limited. … Brands that have credibility in intangible associations—such as weight control (Weight Watchers), healthy eating (Healthy Choice)—are more able to extend to new categories because those intangibles work in a wide variety of contexts."
Extensions Should Support Brand Positioning
Extensions are even more powerful when linked back to the customer relationship and how it has been used as a basis for brand positioning. This means ensuring that the extension builds off one or more of the following positioning components:
• It extends your target market. Gillette's Sensor for Women leveraged the definition of the company's business and its brand benefit of the "clean shave," effectively extending its target market from only men to all adults who shave.
• It extends your business definition. In launching IBM Consulting, IBM changed the definition of the business it was in from technology-based products to technology-based solutions.
• It extends your point of difference. By introducing the benefit of guaranteed videos in stock, Blockbuster increased its points of differentiation. So has Federal Express by establishing a new drop-off time of midnight for packages in some locations.
• Extending the entire positioning. This usually occurs when a business is trying to enter a new market for the first time with a brand whose strengths are recognized beyond its current target market and positioning. The introduction of Caterpillar Footwear extended Caterpillar's reputation and brand strength from the heavy equipment market. This can be risky, but if done right, it allows a company to diversify its range of branded products and take a true portfolio approach to managing its brand.
Deepening the Customer Relationship
Clearly, the proposition of extending a brand and its equity is closely tied with the customer relationship and how you'd like it to develop. Defining and acting on that relationship, however, is more problematic today than ever before.
Evolving business models involve:
• multiple customer touchpoints;
• an increasingly complex range of products, services and content; and
• multi-layered advertising, commission and margin-based revenue structures.
These demand new practices in managing and optimizing the customer relationship. To achieve customer relationship optimization (CRO), a more holistic and enterprise-level understanding of the brand as the amalgamation of all customer experiences is needed, along with a strategy for managing multi-faceted relationships. Further, it requires a clear understanding of the value the customer wants to derive from the enterprise—and the value the enterprise derives from the customer.
Let's apply this CRO perspective to Martha Stewart Omnimedia. Each business segment and delivery channel has a distinct and separate revenue structure and customer base. Licensing fees drive branded merchandise; the catalog/Web business is a gross margin-based business, and the media business is an advertising model.
Assume there's a finite number of targeted outbound contacts/marketing impressions to which the consumer could cost effectively be pushed. Should Martha Stewart Omnimedia "spend" those contacts with a primary call to action to visit the Martha Stewart collection at Kmart, to touch and feel its branded merchandise? Should it spend them to drive consumers to its Web site? Or should it spend them on a primary call to action to subscribe to Martha Stewart Living, or to watch the TV show to maximize viewership and thereby advertising revenue?
Most likely the targeted contact and content strategy involves a combination of these approaches. But how are these decisions made?
Tools Push the Strategy
Traditional direct marketing tools rely on a customer database that's populated with purchase and non-purchase interactions and appended data, anchored in a comprehensive, consolidated customer record. In this situation, it's not enough to use key variables such as RFM (recency, frequency, monetary) value used in segmentation driven by transaction behavior.
Rather, applying CRO principles would combine a strategic view of the entire organization's business drivers with principles and models from traditional and retail marketing, defining new tools to make more of its total customer base—and effectively help extend the brand.
Thus, these are the questions a company could be asking, and how Martha Stewart Omnimedia might apply them to its business:
• What is the value to the enterprise of each customer interaction (touchpoint)? For instance, what is the hard revenue Martha Stewart realizes when a consumer buys a branded product at Kmart?
Based on analysis/research, how does the value of a customer who has a Kmart transaction in her/his purchasing history compare to those who haven't? Because Kmart sales can't be directly captured and stored in the Martha Stewart Omnimedia customer database, sampling and projections must be done, which isn't a core activity of many direct marketing efforts. One also might look at the revenue potential of a customer who has purchased through Martha Stewart by Mail, and has subscribed to Martha Stewart Living. How does this customer's revenue potential compare to that of one who has both of these transactions, but also has made a purchase from Bluelight.com?
• What customer actions best drive value in the enterprise? Traditional direct marketing maximizes transactional value (response rate and average order) for each promotion/offer. A holistic view serves better here. If a subscriber to Martha Stewart Living delivered more value over time to the franchise, wouldn't you want to aggressively market subscriptions to Martha Stewart Living, even if the "transaction" has a lower immediate value than a $100 purchase online?
• What customer action would best strengthen the brand-customer relationship? Example: Martha Stewart executives would analyze their data to understand key trigger activities, after which a deeper relationship with the customer is realized.
For example, a customer need should be recognized when an address change is registered with Martha Stewart Living. Given the organization's range of offerings, this would be the time to draw on the content and merchandise most relevant to the consumer during this important life event—moving—to cement a long-lasting customer relationship.
• What company action is most likely to lead to the desired customer action? Response testing is the tool to deploy. Given the customer's trigger activities and the desired activities that add value to the enterprise, contact, content, offer and vehicle are tested to learn what drives the optimal business result. Using the earlier example, if a Martha Stewart Living subscriber drives the most value in the enterprise, and the trigger event is his/her registering on the Web site, should an outbound call be made, a subscription offer be mailed, an e-mail be sent, or a copy of the catalog with a subscription blow-in card be mailed? Should a promotion be offered to increase conversion rates? Does the conversion rate increase pay for the cost of promotion?
These are the questions that would be answered during response testing. Martha Stewart Omnimedia would then:
• know its customer model;
• know the desired customer actions to deliver value to the franchise;
• know what actions best strengthen the relationship with the brand;
• have tested contact, content, offer and vehicle activities.
It could then devise strategies that optimize and leverage the customer base and extend the brand across the entire franchise, not solely divisions within it.
The evolution of new and increasingly complex business models has increased the challenge to organizations to consider the brand-customer relationship in a new light. To better leverage and extend the value of its brand, a company must carefully examine what it represents and how it's represented throughout the organization as a whole—and use strategies and tools that go beyond yesterday's approaches.
Scott Davis is managing partner of the Chicago office of Prophet and Cathy Halligan is a director with its San Francisco office. Prophet is a strategic professional services firm specializing in brand leadership and brand-driven growth. For more information, visit www.prophet.com.