Strategies

ALF NUCIFORA A recent cover story in Fortune profiling Coca-Cola’s new CEO, Doug Ivester, got me thinking about a developing trend toward the quiet evisceration of brands. Two brands in my hometown of Atlanta can be submitted as Exhibit “A” in this regard. At Delta Airlines, brand deterioration has been in evidence for some time, beginning with ousted CEO Ron Allen’s infamous, but necessary, austerity drive. Delta was never a marketer in the traditional sense of the term. Standard brand-building practices, advertising for example, were known for their conservatism, if not their mediocrity. Historically, Delta built the strength of its brand through product performance, as well as an implied social contract of concern and care for the customer and employee. That’s no longer the case. Today, the regular Delta customer is subjected to a litany of indignities including an overworked and increasingly indifferent staff, antiquated equipment, out-of-date, poorly maintained interiors, marginal food quality in spite of longstanding promises to the contrary, a dismal on-time performance record and a predatory, rapacious pricing policy, particularly in hub markets. Let’s face it, Delta is fast becoming the Eastern Air Lines of the new millennium. We, the regular Delta customers, now fly the airline because we have to, not because we want to. Brand loyalty has been replaced by necessity (hub market control) and bribery (addiction to the frequent flyer program). Which brings us to an interesting, soon to be published, book entitled “Brandicide” authored by Stephen Arbeit, partner at Coopers & Lybrand Consulting. Arbeit has coined the term Brandicide to describe the crime committed by management that allows great brands to be killed off. Examples cited include Levi’s (share in the U.S. has dropped from 30 percent to 19 percent in five years), Kodak, McDonald’s, Apple and Campbell’s, to name but a few. Says Arbeit, “The crime rate for Brandicide is actually accelerating in all categories as the number of competitors increase and as brand differentiation and customer loyalty decrease. The victims of Brandicide have become commodities.” It is critical to differentiate between a true brand and a trademark. A brand is the product in a given category that a consumer prefers to buy, based on criteria other than price alone. Consumer loyalty is the property of a brand. A trademark is a well-known product name which may do no more than merely identify one commodity product from another (normally products bought mainly for a price advantage). Consumers are not loyal to commodities. So what about one of the world’s acknowledged great brands, Coca-Cola? Admittedly, the company’s recent financial performance can only be described as awesome. With a market value of $147 billion, The Coca-Cola Co. has seen its stock price increase by more than 50 to 1 in the last two decades. But an under the waterline investigation reveals an alarming scenario from the brand’s, not the company’s, point of view. Most of the success has been driven by sound financial and operational judgment. Eighty percent of profits come from overseas and the fractious bottler network is finally being brought into line through acquisition. But, while the stock does well, the brand suffers. Brand advertising has gone from best in the world to average at best. Coke’s advertising agency system has grown pell mell. Where McCann-Ericksen once acted as the de facto global brand Ayatollah, now multiple agencies vie for a place at the table. The current strategic direction toward activation (siting the brand close to point-of-sale) and distribution exclusivity (locking up fountain sales) have resulted in a Microsoft strategy where clout and heft are used as customer crowd control, replacing brand loyalty and consumer seduction. Let’s face it, Coca-Cola no longer represents brand consistency. Even its once-sacrosanct product quality is slipping (it’s hard to get a consistent taste experience at the fountain tap) and the variety of consumer messages from its growing stable of ad agencies convey an impression that is both confusing and uninspiring. This from a company that once claimed the world’s finest advertising. Coca-Cola management has forgotten the lesson that made them what they are that success was built on brand awareness, brand value and brand heritage. For most of us, Coca-Cola was an indistinguishable part of growing up. The brand represented something that was special and relevant to our lives. Leadership was more than share-of-market gains in the supermarket aisle. Leadership was occupying that special place in the customer’s mind that, in turn, manifested itself as pride in, and devotion to, the brand. It took decades to establish that legacy. Its erosion is happening by the minute. Coca-Cola, as a brand, is losing is empathy for the customer. While its stock symbol excites the investor, it’s slowly losing its connection to the psyche and the heart of the soft drink consumer. Today, it’s companies like Nike and Disney that are capitalizing on the lessons that Coca-Cola no longer follows. By Arbeit’s criteria, Coca-Cola is a trademark, not a true brand. Why? Soft drinks are the most deal-driven category in the supermarket. Today, Coke outsells Pepsi only when it is cheaper or commands overwhelming shelf space. Ironically, at a time when, as many surveys indicate, Coke is the most respected, desired and liked product name in the world, it can’t outsell Pepsi when priced at parity or higher. Interestingly, when premium, private-label colas (like Sam’s Choice at Wal-Mart) were introduced, two-liter bottles of Coke and Pepsi were selling for $1. Today, they’re at 59 cents. A can of Coke or Pepsi was 75 cents from a Wal-Mart vending machine, while Sam’s Choice cola was 25 cents. Coke and Pepsi both dropped their price to 35 cents to stay alive. “When we read that the incursion of private labels into the soft drink category was halted, we should realize that it was done at the expense of drastic price-cutting. If Coke and Pepsi were true brands, the consumer would not see them as fungible or as interchangeable with price-driven options.” says Arbeit. “Given that the consumer is smarter than a polar bear, hundreds of millions of dollars worth of advertising haven’t convinced the American consumer to pay a premium for Coke. Management in the case of Coca-Cola is guilty of Brandicide.” I know that The Coca-Cola Co. can rationalize its recent strategy in a number of well-meaning ways. CEO Ivester himself is quoted as saying, “What we’re trying to do are things that connect with consumers and, the way we read the data, our bonds are just getting stronger and stronger.” Unfortunately, they may be interpreting that data the same way they interpreted the data that lead to New Coke. Alf Nucifora is an Atlanta-based marketing consultant. He can be contacted through his Web site at www.nucifora.com, via e-mail at [email protected] or by fax at 770-952-7834.