Harvard Business Review. MARKETING. Customer-Centered Brand Management

Harvard Business Review
MARKETING
Customer-Centered Brand Management
Roland T. Rust Valarie A. Zeithaml Katherine N. Lemon
FROM THE SEPTEMBER 2004 ISSUE
Most managers today agree with the notion that they should focus on growing the lifetime value of their customer relationships. Building loyalty and retention, cross selling related goods and services, broadening offerings to fulfill more of customers’ needs—all are ways of adding to overall customer equity. Indeed, given the cost of winning new customers (much higher than that of keeping current ones), and the ultimately finite universe of buyers out there, a mature business would be hard-pressed to increase profits otherwise.
The problem is, for all that managers buy into this long-term customer focus, most have not bought into its logical implications. Listen to them talk, and you may hear customer, customer, customer. But watch them act, and you’ll see the truth: It’s all about the brand. Brand management still trumps customer management in most large companies, and that focus is increasingly incompatible with growth.
Consider the story of Oldsmobile, an American car brand launched earlier than any other in existence today. In the 1980s, it enjoyed outstanding brand equity with many customers. But as the century wore on, the people who loved the Olds were getting downright old. The managers that parent company General Motors put in charge of the brand realized that maintaining market share meant appealing to younger buyers, who unfortunately tended to see the brand as old-fashioned. We all know what came next: the memorable 1988 ad campaign featuring the slogan, “This is not your father’s Oldsmobile.” In 1990, less memorably but in the same vein, the company’s marketers unveiled its next message: “A New Generation of Olds.” Catchy or not, neither campaign turned back the clock. By 2000, Oldsmobile’s market share had sputtered to 1.6%, from 6.9% in 1985. And in December 2000, General Motors announced that the Oldsmobile brand would be phased out.
Car aficionados might have shed a tear at the passing of a proud old marque, but we see the tragedy differently. Why did General Motors spend so many years and so much money trying to reposition and refurbish such a tired image? Why not instead move younger buyers along a path of less resistance, toward another of the brands in GM’s stable—or even launch a wholly new brand geared to their tastes? Cultivating the customers, even at the expense of the brand, would surely have been the path to profits.
We know why not, of course. It’s because, in large consumer-goods companies like General Motors, brands are the raison d’être. They are the focus of decision making and the basis of accountability. They are the fiefdoms, run by the managers with the biggest jobs and the biggest budgets. And never have those managers been rewarded for shrinking their turfs.
We propose a reinvention of brand management that puts the brand in the service of the larger goal: growing customer equity. This doesn’t mean that brand becomes unimportant. Compelling brand images remain essential to winning and keeping customers’ trade. But it...