2010: THE YEAR OF EXPERIENCE BRANDS /12010: THE YEAR OF EXPERIENCE BRANDS

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amidst a proliferation of new ideas and opportunities, we believe marketers can set their course guided by one overarching principle: that the brands that lead in the 21st century will be experience brands. The more that marketers can build experience brands, the more they will succeed.

This begs the question: what exactly is an experience brand?

This article is the first in a series on experience brands to be published by Jack Morton in 2010.

We start with the essentials on the pages that follow:

* Definitions: What makes an experience brand an experience brand?

* Examples: What are notable experience brands today?

* The business case: What do companies stand to gain by becoming experience brands?

Liz Bigham Director of Brand Marketing Jack Morton Worldwide

At the dawn of a new decade,

The brands that lead in the 21st century will be experience brands.

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THE 5 FuNDAmENTALS OF EXPERIENCE BRANDS

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EXPERIENCE BRAND?WHAT’S THAT? Defined literally, a brand is the identifying marks, names and words that distinguish one company’s product or service from another’s.

But more meaningfully, a brand is a promise—a distinct value offered.

And in the most meaningful sense, a brand is a promise kept—through experiences that deliver on that promise at every point of interaction with the brand.

Following are five fundamental truths about experience brands.

The first fundamental of being an experience brand? Delivering on your brand promise at every point of interaction.

Because you can talk all you want, you can spend all you want on carefully crafted messages, but at the end of the day, what people remember is what they actually experience.

The first fundamental of being an experience brand? Delivering on your brand promise at every point of interaction.

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Your brand is formed primarily, not by what your company says about itself, but what the company does.Jeff Bezos, Amazon

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You’re defined by what you do—not what you say. So…

* If you say customers are your top priority, but your call center can’t answer their questions, that’s an experience that defines your brand as the opposite of “customer-focused.”

* If you say you value customer loyalty, but you haven’t made it easy for your customer community to connect with each other and influence your next generation of prospects? Again, your experience contradicts your promise—and your brand will suffer.

Every interaction is an opportunity: those aspiring to be experience brands should holistically assess all the touchpoints that comprise their brand for stakeholders. In theory, no experience is too small to qualify, but different companies will weigh touchpoints depending on needs, resources and whether they’re a product or service-based brand, B2C or B2B.

Every interaction is an opportunity.

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The second fundamental of experience brands: they’re true “people brands.”

Experience brands don’t just say that people matter—they take a “brand2everyone” approach that puts that commitment into action, at every level in the organization. Think of US apparel retailer Patagonia. The passions that motivated founder (and Let My People Go Surfing author) Yvon Chouinard—outdoor sport, environmentalism, global good citizenship—are authentic to its staff and proved out in its HR, operations and CSR practices. Or online retailer Zappos, whose CEO Tony Hsieh is the “cheerleader in chief” behind its zealous customer service ethos. According to a New Yorker profile, “He talks about being the architect of a movement to spread happiness, or ‘Zappiness’,” and inspires that in employees.

The third fundamental of experience brands: they build relationships based on values of authenticity and the “three R’s”—what’s real, right and relevant when the brand comes together with its communities.

That authenticity really comes through because experience brands promise values that are truthfully delivered by people across the organization, from the CEO on down. They feel authentic to customers and end-users because they are core to the brands at the level of corporate and cultural DNA.

The belief this inspires is one reason why you’ll find, among the ranks of experience brands, so many that you’d also describe as fan brands, community brands, tribal brands, brands that have and are embraced by communities that not only buy, but also talk, promote and share their experiences with others.

The second fundamental of experience brands: they’re people brands. The third: they value authenticity and the “3 Rs”---what’s real, right and relevant for their brand and its people.

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That’s a great set-up for the fourth fundamental of experience brands: they aggressively seek out the participation of their stakeholders.

Experience brands invite participation in three key ways:

* they welcome ideas from the outside

* they empower people to adapt the brand to their needs

* they’re truly engaged with the social web

They think of social media not as the channels—Twitter versus Facebook—but as a strategy of interaction where their people (even c-level people) both talk and listen. Above and beyond their digital footprint, they invite customers, users and staff across functional areas to share their input and ideas as part of a cultural commitment to innovation. Google is an exemplar: the very first of their famous “9 Notions of Innovation” is: “Ideas come from everywhere.”

And finally, experience brands are not afraid to empower users to adapt and play with the brand. NIKEiD and Vans customized shoes are familiar examples of how this plays out thanks to the power of mass customization; Google invites users to create fan logos; and more recently, following the devastating earthquake in Haiti, CNN.com gave site visitors the ability to control camera angles as online footage was playing.

The fourth fundamental of experience brands: they aggressively seek out participation.

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EXPERIENCE BRANDS RECOgNIzE: IDEAS COmE FROm EvERYWHERE.

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An important complement to all this active participation and outside thinking: experience brands are famously good at inventing new ways for people to interact with them, above and beyond the products and services they sell.

So that’s the fifth fundamental of experience brands: they invent new experiences beyond their core offering that differentiate them from their competition.

In some instances, companies can add new revenue streams by going into the experience business, creating physical destinations or transactional happenings that are so great, so different, people will pay for them.

Yet incremental experiences do not have to fit this literal interpretation; there are robust opportunities to create new experiences that aren’t dependent on a physical destination or so costly to undertake. For example, smart companies transform corporate social responsibility (CSR) initiatives into new experiences—think of Nike+ Human Race or Google.org’s PowerMeter.

Ultimately, every experience brand is unique—and they’ll tailor these incremental experiences accordingly.

The fifth fundamental of experience brands: they invent new experiences, new ways to interact.

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Experience brands are not all B2C, lifestyle-driven brands—they’re B2C and B2B, product-based and service-based. Truly, any brand can be an experience brand.

That said, there are overarching principles that hold true for all experience brands. Every experience brand must optimize the following core elements:

* The discovery experience (how people learn about you)

* The digital experience (since mobile devices and computer screens are today’s default shopping mall and town square)

* The customer experience (what happens in store or when customers are in market)

* The user experience (what happens after the sale)

* The community experience (how stakeholders connect with you and one another beyond what you sell)

* The employee experience (how staff and potential recruits align around core values, culture and vision)

So what does that look like, in action? Sketched out on the pages that follow are three exemplary experience brands. Radically different in their business models, they’ve all transformed experience from a marketing channel to a point of differentiation. The experience they create around their products or services is as carefully thought through as their products and services.

This isn’t a ranking of top experience brands, but an effort to define by example. We’ve purposely left off some of the more obvious experience brands—like Apple and Starbucks. Look for our experience brands ranking in a future article.

3 gREAT EXPERIENCE BRANDS

The experience they create around their products or services is as carefully thought through as their products and services.

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EXPERIENCE BRANDS uNDERSTAND AND OPTImIzE

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Tiny compared to the other experience brands cited here, Zipcar introduced car sharing to the US with its 2000 launch—and has built an hourly car rental brand so distinctive that giants like Avis and Hertz are moving into its core market. Still, Zipcar’s CEO told CNNmoney.com they’ll be a $1 billion company in under five years; they’re growing at about 30% a year. Here’s what makes them an experience brand:

*Zipcar is crystal clear that what they are selling is an experience: it’s convenient, web-enabled and so simple it can be expressed in four simple steps. Fortune calls it Netflix for cars.

*Zipcar is flawless at the first fundamental of experience brands: delivering on its brand promise at every point of interaction. Its voice threads through everything from the reservation process to its iPhone app to the emails users get if they return a car late. Voice and personality are so strong that customers are made to feel they’re part of a community of like-minded people—despite the fact that it’s possible to be a frequent customer without ever seeing a Zipcar employee or another customer (rentals are handled online and pick up is self-service).

*Zipcar has consistently added new experiences to its business—expanding from its initial presence in heavily urban US markets to universities and programs for business, and more recently leasing its proprietary technology to city governments that need it to better manage their sizable car fleets. Others are looking to Zipcar to help prepare for a future of plug-ins and electric car grids. Even big car brands like Toyota and Ford are talking to Zipcar about how the experiences they create might be complementary.

zIPCAR

zipcar is crystal clear: it’s selling an experience.

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One of the most respected companies in the world, IBM is ranked among the most powerful brands in the world by BusinessWeek and Interbrand—one of just three B2B brands that consistently number among the top 10 (the other two being Intel and GE). What’s truly exemplary about IBM is how it has maintained that brand and its core promise even as it has continuously evolved its business. Behind this evolution lies great experience brand thinking:

* IBM staff—“IBMers”—are its front-line brand advocates. Its culture is famous: according to its Chairman & CEO, Sam Palmisano, “[IBM’s] revolutionary idea was to define and run a company by a set of strongly held beliefs.” It is consistently ranked high on Fortune’s Best Places to Start a Career and has an authentic commitment to social media as part of its corporate culture and communications.

* IBM’s “Smarter” campaign takes a core idea—“welcome to the decade of smart”—and extends that to create “a global conversation about how the planet is becoming smarter” across an array of industry sectors and communities. What IBM can do to make cities smarter, or healthcare smarter, or energy smarter—conversations this compelling are hallmarks of an experience brand. IBM has also done a great job of extending them through high-level events like its Smarter Cities conferences around the world.

* IBM has consistently innovated the platforms through which it hosts conversations with its communities—resulting in new experiences that may counter conventional wisdom. It has been called a “pioneer in what today might be called open or crowd-sourced employee innovation” for a staff innovation program it founded in 1928. It made an early stake in Second Life with its IBM Briefing Center, a virtual presence it has maintained.

IBm

Conversations like IBm’s are hallmarks of an experience brand.

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Children around the world spend 5 billion hours a year playing with LEGO’s trademark plastic bricks, famously dubbed the “toy of the century” (the last one). After some rough years, LEGO is being hailed by the Harvard Business Review for a comeback that’s (arguably) fueled by experience brand thinking and that sets it up for great success in the years to come. Here are some of the reasons LEGO wins our vote as a great experience brand:

*LEGO sees a strong link between its brand and employees. Job seekers are advised that no matter the role they’re seeking, they should understand and embrace its vision—because it’s “values that make the LEGO brand unique—and give us an edge on all the others.”

*LEGO constantly innovates how its passionates (kids) can connect with the brand and each other. They’ve created a vibrant social networking site for kids as well as LEGO Universe, a multiplayer online game environment, all while maintaining their most robust model and game products, not to mention Legoland theme parks and destinations.

*LEGO has innovated new experiences that invite consumers to become creators—like LEGO Design byME, where consumers create their own LEGO design online and then receive a custom kit (right down to the box and building manual) in the mail.

*LEGO is commited to kids as future innovators, not just customers. It’s a title sponsor of The FIRST LEGO League, an international organization that gets kids engaged in robotics. Over 150,000 kids in scores of countries solve hands-on competitive challenges that empower their creativity and inspire them to careers in engineering and technology.

LEgO

LEgO constantly innovates how its passionates can connect with the brand and each other.

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$ ImPROvED EmPLOYEE PERFORmANCE AND RETENTION

mORE EFFICIENT uSE OF mARkETINg SPEND SPEEDIER CuSTOmER ACquISITION AND mORE LASTINg LOYALTY

INCREASED REvENuE FROm BETTER EDuCATED CuSTOmERS

THE BuSINESS CASE: BEINg AN EXPERIENCE BRAND PAYS OFF

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WHAT’S THE ROI OF BEINg AN EXPERIENCE BRAND?There are a lot of ways that being an experience brand can pay off for the companies that achieve this status. Here are four core metrics:

1. Employee performance and retention

Because experience brands understand and leverage the impact employees have on customers, they invest in employee engagement that creates better alignment and performance in support of brand and business goals. Because employees feel valued and engaged, they want to stick around. The combination of these two factors increases staff impact while lowering costs due to attrition and retraining.

2. Efficiency of marketing spend

Experience brands do things that people talk about and share. They provoke conversation. They have stories that people want to spread. And when they make an investment in creating an experience for the people who matter most to them, those experiences may be experienced by few, but they are witnessed by many.

3. Customer acquisition and loyaltyBecause they promise and deliver a great experience, experience brands win customers more quickly and keep them long-term. Because they invite interaction and engagement, they are able to take people on a journey from relative indifference to commitment and advocacy more quickly than other brands.

Experiences may be experienced by few, but they are witnessed and talked about by many.

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4. Customer revenue Because experience brands do a good job of inviting participation and sharing information, their customer communities are better educated—making them better and higher-value customers.

Experience brands can measure impact both ways: what happens when they improve their experience, and what happens when their experience declines.

BusinessWeek has reported that Best Buy’s improvements in employee engagement are directly tied to store profits.

Starbucks, which innovated a “third space” experience brand but suffered from over-expansion and extensions that weakened its core brand promise, has recently achieved a comeback that Forrester customer experience guru Bruce Temkin has described as follows: “Nearly two years ago I wrote that Starbucks had lost its soul. That’s why Schultz returned to his role as CEO in January 2008. Shortly after his return, Shultz took the unprecedented action of closing 7,100 stores for three hours to ”retrain” employees on the Starbucks experience.”

Imagine a CEO shutting down the business to retrain employees on the brand experience. That sums up just how much ROI he feels Starbucks can win (or lose) on the basis of their experience brand.

Not every brand is Starbucks. But every brand can be or become an experience brand—and reap the benefits.

“For every one tenth of a point increase in employee engagement, each Best Buy store increased profits by $100,000 a year.” (BusinessWeek)

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We believe that this year will mark a new ascendancy for brands that are or seek to be experience brands.

We’re committed to doing our part to contribute to the conversation about experience brands in a series of forthcoming articles that expand on key topics.

Look for upcoming articles including:

* Experience brands are people brands: Engaging and leveraging employees

* Experience brands and the social web

* Back from the dead: How experience brand thinking could reanimate a dormant brand

* Gotta love it: Experience brands and their passionates

* The experience brand index: ranking top performers

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Jack Morton Worldwide is a global brand experience agency. We create experiences that strengthen relationships between brands and the people who matter most to them—thereby helping our clients become talked-about experience brands. Rated among the top marketing service agencies worldwide, we integrate live and online experiences, digital and social media, and branded 3D environments that engage and inspire consumers, business partners and employees. Our staff work across the US, Europe and Asia-Pacific as part of an idea-led agency culture.

© Jack Morton Worldwide 2010