Convergence and causes
In this country we are blessed with the opportunities of the free enterprise system that can richly reward the hard work and singular focus of driven entrepreneurs. However, the free enterprise economic model can be a fickle lover. It is devoid of emotion and will turn on the unwary. Today’s success is tomorrow’s Rubicon for those adverse to change and adaption.
Take banking for example. There are more than 9,000 banks in this country, and with very few exceptions they are all exactly the same. Oh sure, B of A, JP Morgan, Wells, Citi and a few others have the lion’s share of branches and ATMs out there, but they are really no different than each other or smaller banks at their core. They have the same products — basically loans and deposit accounts; they are priced the same — the overnight Federal Funds borrowing rate is virtually the same for all of them, and none can charge more interest on their loans or pay more interest on their deposits for very long before competition eats their lunch. So how do you survive? How about convenience — a branch network in a lot of great locations! Nope, not any more — better and better mobile platforms and apps as well as remote capture/deposit and automated tellers have a lot of branch managers dusting off their resumes. And it’s getting easier and easier for customer-facing folks at banks to remember your name and birthday, because branch traffic in the U.S. is plummeting.
So, what to do when there is a convergence of products, pricing and promotional approaches in an industry that’s overpopulated with players — how do you stand apart? You find another way to distinguish yourself; you pick what Arkadi Kuhlmann, former CEO of ING DIRECT, refers to as a cause. ING came out of Canada to the U.S. in 1996 with the mantra “Save your money,” and delivered on the cause with an online, no-branch business model that enabled them to pay more interest on deposits and charge cheaper loan rates due to lower overhead. In a country of folks living paycheck to paycheck, it worked. Big-time.
In the auto industry during the ’60s, Ed McCabe, the legendary co-founder of Scali, McCabe, Sloves deftly promoted the Volvo brand as tough Scandinavian cars, built to withstand the harsh winters and rough roads of Sweden. That positioning of toughness and longevity for Volvos set them up perfectly when the U.S. government started pushing for greater automotive safety standards such as crash testing and airbags, etc. Volvos did so well in the testing that they were quickly associated with the cause of safety.
VW did the same thing with the cause of economy in their iconic “Think Small” campaign in the late ’50s and ’60s. At a time when all their competitors were slugging it out to be bigger, faster, flashier and heavier, VW positioned itself as the sensible alternative. They owned small and economical as a car category. Ironically, if they hadn’t gotten restless and come out with a series of increasingly larger and more luxurious models, like the Golf, Rabbit, Jetta, Scirocco and Passat to name a few, they just might have dominated the small/economy position so well that Soichiro Honda and his friends at Toyota, Nissan and Mitsubishi would have taken a pass on building small economy cars for the American market.
So, what’s the punch line here? If you are in a business category where you have to compete with foes that have the same bag of tricks as you, it might be a good idea to brainstorm about what your company really brings to the marketplace. And a hint — it ain’t customer service. That opportunity dried up about 10 years ago. Everyone has great customer service now. You even get great service from Home Depot and Lowe’s. No, it’s something that supersedes products, price and service. It’s why some people always choose the red-and-white can in the soup aisle, why someone says they’re a “Chevy guy” or why we buy an iPhone — or for that matter, an i-anything, when there are cheaper or arguably better alternatives out there.
It’s brand: the unique personality of a company that is virtually impossible to duplicate. Sure, this is easily said, and serious branding takes a lot of hard work. But a well-built, well-maintained brand image trumps margin pressure and the choppy seas of fads and trends. Most important, it gives your company a face in the crowd.