Citibank sees $40billion upside in corporate marketing

I read in this week's Fortune, that Citi's shareprice has risen just 3% since Q3 2003, compared to rival bank of America's 22%. The discrepancy, on a market cap' of $250billion is a figure a little north of $40bn. Ouch. CEO Chuck Prince acknowledges the discrepancy is largely attributable to a spate of governance failures in 2003/4. The most visible failures relate to persistent regulatory breaches at Citibank's Japanese private banking arm, plus July's notorious Eurobond incident in London, when the bank created market havoc by some over-zealous, profit hungry traders dumping $11bn of bonds onto the market, creating an ultra-profitable downward pricing spiral, subseuqnetly investigated by the FSA. Added to this are mysterious employee suspensions in China, for 'lying to regulators'. The total cost in hard cash is trivial - a drop in the ocean compared to the relationship and reputational capital lost. The company will still make nearly $18bn profit this year. But Prince is clearly desperate to make amends. One senses his personal pride and a sense of duty are at stake here. Prince now talks of his priority as protecting 'the franchise'. He means the corporate brand, of course. Or certainly its reputation. He believes he can rebuild the value through more effective expression of the dormant brand values. The company is taking substantive action to remove the cultural monomania around profits, which is seen as the root cause of the aberrance. He publicly admits: "One of the things we're putting into place, starting in 2005, is a series of activities - training, communications, performance approaisals - that will lend a little more balance to the aggressive financial culture that we have always celebrated...I believe the celebration of financial results causes people at the edges to act in ways that are singular." I'm not sure if 'singular' means or here, and just individualistic, but the message is quite startling for the world's largest bank. "Culture is a set of shared, unspoken assumptions. And when we were a smaller company, thise unspoken assumptions had great weight... The larger the company has become, the more we need to speak about those unspoken assumptions." Prince is embracing the import of corporate marketing here - articulating a dormant value-set, and translating it into demonstrable processes and policies, in an attempt to recover value with its most critical stakeholders. What is really ironic here, though, is that Citibank can still lay claim to be the world's 13th 'best' brand, according to Prince. This exposes the meaningless nature of those brand surveys which look only at the external face of the brand, and not at its internal health. Its coherence and consistency. Enterprise-wide, and for all stakeholders. It's great to see CEOs increasingly recognise the power, and fragility of 'the franchise' they enjoy with stakeholders. And equally reassuring to see the market reacting way before customers, to recognise the erosion of value. In embracing a corporate marketing approach, Prince implictly points to the emptiness of brand measures which ignore the impact of reputational transparency.


Benefits of Blogging

As always, the US is way ahead of us Brits in adapting social tools to commercial purposes. Many organisations are experimenting with ways to turn personal publishing into a managed medium:Blogging & PR Much of this is antithetical to the ethos of the medium, of course. But actually, blogs have been perverted from the outset, a bizarre fusion of personal, commercial and ethical agendas. This makes them a super-rich medium for story-telling, and appealing targets for influence. The beauty of blogs as a medium of influence is that they are just dripping in context. They are SO authentic. You can easily see who's commercial and who isn't. What's corporate and what's not. And blogrolls are a pretty good guide to the integrity and consistency of someone's opinions. The difference is that the blogosphere is a loose-knit community of (more or less) equals. Blogs are conversations. And they are, or should be, completely transparent. The opportunity they present is for 'Public Public Relations'. Any scumbag who perverts this ethic should be fed to the foxes.


Jelly bean joy

I've culled this extractfrom the archives at blogger itself to illustrate Surowiecki's smartness, and some of the emerging theory which surrounds collective action. Very relevant to all modern marketing. And critical to those of us trying to herd communities of stakeholders into a consensus - for example around the perservation of biodiversity. "The Amazing Jelly Bean Experiment Treynor asked his class to estimate how many jelly beans there were in a jar. When added together and averaged, the group's estimate was 871— there were 850 beans contained within the jar. Only one student had made a better guess (a rogue genius, if you will). The now historic jelly-beans-in-the-jar experiment showed invariably that a group estimate is superior to the vast majority of individual guesses on a consistent basis. Granted, there are limited situations in which knowing the amount of jelly beans in a jar is a significant accomplishment. Or even mildly amusing, come to think of it. Nevertheless, this example can be found along with 320 pages of other examples in a new book by James Surowiecki called The Wisdom of Crowds. In his book, Surowiecki demonstrates myriad situations where the many are smarter than the few. "If four basic conditions are met, a crowd's 'collective intelligence' will produce better outcomes than a small group of experts, Surowiecki says, even if members of the crowd don't know all the facts or choose, individually, to act irrationally. 'Wise crowds' need (1) diversity of opinion; (2) independence of members from one another; (3) decentralization; and (4) a good method for aggregating opinions." —Publisher's Weekly " Anyone for blogging?


What's Beyond Branding: Substance over Style?

I hear today that Kogan Page are to lauch a paperback edition of 'Beyond Branding', the first book of The Medinge Group. Simultaneously, I read a piece from James Surowiecki (He of Wisdom of Crowds fame) in Wired magazine proclaiming the decline of brands. Of course we heard this before in 1994, when the Economist proclaimed the death of branding as Marlboro dropped its prices. It's a contradictory story. The number of new brands is exploding. The exposure of those brands is exploding (up 60% since 1990). According to Interbrand, 99.5% of consumers say they would be willing to pay more for a Sony. But they would say that...wouldn't they. And more than what? In many ways brands are less and less effective. The truth is that all forms of value are increasingly subject to independent scrutiny. The premium for Sony DVD players has fallen from 44% in 1999 to 16% today compare to the average. Consumers are much more inclined to make their own judgements of product performance. Most compellingly for me, Surowiecki points to a survey from NPD group in the US which shows that almost 50% of consumers who describe themselves as 'very loyal' to a brand, are no longer loyal one year later! Loyalty Schmoyalty. All the 'brand' kudos in the world wouldn't persuade punters to buy Nokia phones when they buried their heads in the sand over the demand for clam-shells. If it ain't stylish, the label doesn't matter. But it's not just style or performance issues that undermine brands. Political issues hold sway too. Brands such as Coca Cola, Marboro and McDonalds are just not selling in Europe right now. According to a survey from GMI, reported in Newsweek, 18% of consumers said they were less likely to buy American products since the start of the Iraq war. The proliferation of factual information and rising standards of quality across the board make brands less and less important as guarantees of quality. Brands must therefore migrate to a different competitive arena...offering different benefits beyond the product per se: leveraging service benefits, knowledge, emotion, ethics and empowerment... Difficult territory. These forms of value do not and cannot reside within branded PVC packages, stacked on shelves. They are mush more complex - the net effect of corporate AND product performance. The effect of behaviour, as well as value-delivery. However in these areas too, transparency will out the truth. Customers and other stakeholders share anecdotes and experiences; pundits comment, media speculate, analysts interpret... The truth will out. In all these competitive arenas, whether brands are trying to become 'lovemarks', 'dreamcasts', or even 'anti-brands', what matters is consistency. It is critical that the driving organisational purpose is felt and reaffirmed in every stakeholder's experience. Vapid story-telling has had its moment. Organisations must take their organisational principles to the front line - and into their products. Glasshouse believes that Corporate Marketing is the new battleground, turning organisational truths into compelling stakeholder benefits. In the age of transparency, Value-chain Information Management will become the new advertising. It many not be glamorous, but it is sexy. The final example of Surowiecki's is a gem. "In 2003, Fortune magazine described Krispy Kreme doughnuts as America's 'hottest brand'. Then, in 2004, came Atkins." So much for branding. PS. Krispy Kreme, have just arrived in the UK, and it's impressive. Dedicated, branded in-store dispensers, branded bags and take-out boxes. And, most crucially, a taste that's a genuine revelation, soft, light and very more-ish. This isn't a victory for branding, it's just the smart and effective exploitation of a dough recipe, and a production process which produces seriously yummy doughnuts. For god's sake don't start any brand extensions.


Marketing Awakes

Thanks to a prompt from my old colleague Jennifer Kirkby, CRM strategy editor of BT Insight Exec, I read on Peppers & Rogers site that The American Marketing Association, has changed its definition of marketing. Many in the industry see this definition leading to new standards for marketing practices and education. It certainly begs some interesting questions of current marketers. The previous AMA definition of marketing, active since 1985, was: "Marketing is the process of planning and executing conception, pricing, promotion and distribution of goods, ideas and services to create exchanges that satisfy individual and organizational goals." The new definition of marketing, unveiled at the AMA's Summer Educator's Conference in August is: "Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders." The central point is intact. Marketing connects one sets of demands against another. So that's clear! However, we can see several important shifts here: 1. From a process, to a function - acknowledging the centrality of this needs-matching process at the heart of organisational operation, not just as a bolt on process to design sales strategies. 2. A shift from transactions to value as the focus - and the consequent realisation that value is not held within transactions, but is created and delivered in various forms, many of which are long-lasting and relationship dependent. Hence the inclusion of relationship management as part of the definition. 3. A move from satisfying organisational goals, to meeting stakeholder and organisational needs - a clear acknowledgement that multiple stakeholders have demands that require fulfilment. Although the definition moves us on it still doesn't really grasp the nettle of the new reality. Firstly, marketing is more than just a function. It is closer to a 'discipline' in my book. As the adage goes, if marketing were left to marketers we all be in a very sorry state. Secondly, the separation of value-creation from relationship management seems like a devisive and destructive distinction to me. The point is that value is created through transactions AND relationships. But the role of marketing is not to manage these as separate disciplines, but to unite them - to create transactions which build relationships and vice versa. Finally, the definition now implies a one-way flow of value from customers to stakeholders. This potentially undermines the very core of the 'marketing as matching' ethos. Sure we create customer value to fulfil customer needs. But true marketers also create stakeholder value to match customer needs. The crucial lesson is that value is commonly created, and commonly shared. Marketing is the management of this network of stakeholder relationships (SRM if you like) in order to create mutual value. This is the essence of Corporate Marketing which Glasshouse is actively campaigning. The stark and simple reality is that marketing is a process of sustaining MUTUAL satisfaction for investors and customers, by managing all stakeholder experiences in their totality - both at a transactional level and through relationship management. Or something like that. Rigid definitions are always a bit of a minefield! It's multi-functional, multi-stakeholder and multi-faceted. It's hard. But in a world where product brands and corporate brands are mutually reliant, it must be embraced. What holds all this together, are strong organisational brands and the competencies, processes, and the assets which comprise them, whether animate or inanimate. In many ways it's just the natural consequence of embracing the new reality beyond branding.


Killing me Softly

Given what I've written elsewhere about the necessity of Product Social Responsibility, it was interesting to see the apparently diametrically opposite view, espoused here: Fags & Fiction. According to David Davies, VP of Philip Morris: "The product can't be the determinant of whether your company is socially responsible. It is whether your behaviour is responsible which is key." The same presumably applies to porn, guns, alcohol and gambling...among other things. And you know what...on one level he's right. If society dictates that these things have a right to exist, the most it can demand is that they are responsibly produced and sold, and that a framework of social damage limitation exists around them on which we are commonly agreed. However, there is a very real nuance that is being missed here. It is that many CSR issues are migrating to product brands. Corporate brands and product brands cannot be isolated. Philip Morris understand this. Davies himself suggests that the company would like to produce a fair trade tobacco. And in my view they should - despite the public guffaws. The trouble, for Philip Morris, is that its extremely assertive and thorough efforts at CSR have more or less invisible to customers. Its activities have very successfully persuaded government that it merits a continued license to operate. But its customers have historically needed no such persuasion. Now they do. Now the situation is changing. Those customers are suddenly are suddenly exercised about ethical marketing. And the landscape is changing further. Its customers themselves, are beginning to demand evidence of ethical sourcing too. In order to meet this value-demand, the more ethical information Philip Morris can embed at the point of consumption the better. By suggesting Fair Trade, as a 'CSR' activity, the company has unwittingly take the first step towards genuine customer accountability. A path that leads quickly, and desirably, to full supply-chain traceability and product transparency... Only by embracing this can they build genuine trust. My contention, explained at length here, is that human beings decode 4 layers of brands, (however subliminally) when deciding whether to trust corporate brands. We decode the brand promise and assess how it fits our needs. We interpret the brand's implication and assess its relevance. We infer the relationship the brand intends to build, and determine how honestly it acts towards us. We look at the brand's motivation, and ask ourselves how authentically it acts towards others. In short, we look for clarity, consistency and coherence in its reputation management. Philip Morris would like us to believe: Desired Promise - "We tell you the truth about the effects of this product." Desired Implication - "It's your responsibility not ours." Desired Intention - "We want an adult-to-adult relationship. We are here to serve." Desired Motivation - "We aim satisfy a demand for responsible consumption based upon open dialogue, which we believe is a basic human right." As a libertarian, one can only agree. However history is not on its side on this one... Inferred Promise: "We consistently lie and obfuscate the effects of our product." Inferred Implication: "We have a lot to hide and an economical approach to truth." Inferred Intention: "We want you to be dependent upon us. A child to wicked uncle relationship." Inferred Motivation: "We want to make more cash from more product, whatever it takes." In these circumstances, Phillip Morris has only one course of action open to it. Embrace product social responsibility -wholesale. Root and branch reform. It cannot change the fact that its product kills its customers, and probably their friends as well... But it can and must change the way it produces and markets the product, to be more socially and environmentally responsible. The area the company is moving into now is a brave new world. Few have yet ventured there. PSR is a high risk/high gain environment where real organisational alignment is required; not just window dressing. Issues like fair trade, or country of origin labelling, or biodiversity impact, have a life of their own. They are potentially directly attibutable to individual batches, crates, cases, and ultimately packets. With only a short and thin track record of trustworthiness, the onus is on the tobacco manufacturers to prove the behaviours they would have us believe. This will be the next battleground for the tobacco industry, and they are wise begin the process of stakeholder re-education now. They should be applauded for the vision. Others will surely follow. PSR is a great leap forward, but it needs careful long-term planning.