Interact with Your Customers

Once you have identified your customers and differentiated them by their value to your company, your next step, say Peppers and Rogers, is to interact with your customers to learn more about their needs, interests, and priorities. Your major objective in this step is to initiate an ongoing dialogue with your customers through all communication channels available to you including

• Promotional offers.
• Collections/invoices.
• Web-site contacts.
• Complaint handling.
• Orders/purchases.
• Customer inquiries.
• Direct sales calls.
• E-mail.
• Faxes.
• Telephone calls (inbound and outbound).

In respect to these and other opportunities you might have to interact with your customer, Peppers and Rogers say you should ask yourself whether your employees are taking advantage of these exchanges to learn more about the customer and his/her particular needs, engage the customer in a dialogue, and use the experience and understanding acquired from the exchanges to develop a stronger and more long-lasting relationship with the customer. They add that during all of these exchanges, you should keep three things in mind:
1.The interaction should be accomplished in a way that minimizes the customer’s inconvenience.
2. The exchange should result in some outcome that has real benefit to the customer.
3. The results of the exchange should influence your company’s specific behavior toward that customer in the future.
Seth Godin adds that you should seek the customer’s permission before attempting to start such a dialogue. In the past, says Godin, when mass marketers communicated with customers or potential customers, they engaged in what could be called “interruption marketing.” They interrupted what the customer was doing—“Now a word from our sponsor”— and asked them to take some action—“Buy Super-Duper Dog Food.” In contrast, CRM insists that you stop interrupting and start asking permission. Godin uses an analogy of getting married to explain the difference:

The Interruption Marketer buys an extremely expensive suit. New shoes.
Fashionable accessories.Then,working with the best database and marketing
strategists, selects the demographically ideal singles bar.
Walking into the singles bar, the Interruption Marketer marches up to
the nearest person and proposes marriage. If turned down, the Interruption
Marketer repeats this process on every person in the bar.
If the Interruption Marketer comes up empty-handed after spending the
entire evening proposing, it is obvious that the blame should be placed on
the suit and the shoes.The tailor is fired.The strategy expert who picked
the bar is fired.And the Interruption Marketer tries again at a different singles
bar.
If this sounds familiar, it should. It’s the way most large marketers look at
the world.They hire an agency They build fancy ads.They “research” the
ideal place to run the ads.They interrupt people and hope that one in a
hundred will go ahead and buy something.Then, when they fail, they fire
their agency! The other way to get married is a lot more fun, a lot more rational,
and a lot more successful. It’s called dating.
A Permission Marketer goes on a date. If it goes well, the two of them
go on another date.And then another. Until, after ten or twelve dates, both
sides can really communicate with each other about their needs and desires.
After twenty dates they meet each other’s families. Finally, after three
or four months of dating, the Permission Marketer proposes marriage.
Permission Marketing is just like dating. It turns strangers into friends
and friends into lifetime customers. Many of the rules of dating apply, and
so do many of the benefits.

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Differentiating Idea—Simplicity

Here is one more differentiating idea that Trout does not mention. It was suggested by Steven Cristol and Peter Sealey in their book Simplicity Marketing. What’s interesting here is that while Cristol and Sealey begin with the same observation that Trout made about the proliferation of choice, they come to some very different conclusions. Rather than seeing positioning as an answer to the consumers’ and brand builders’ problem with the tyranny of choice, they see positioning, at least as it has been traditionally done, as the cause of the problem. They write:

Like capitalism itself, contemporary marketing has been based on an unflagging
belief in giving customers more and more choices.The choice curve
ramped up in the post–World War II economy, when packaged goods manufacturers
set in motion a relentless juggernaut of product proliferation
and line extensions.The cumulative result of a half century of bombarding
customers with an overload of options is that their mental circuit breakers
are beginning to trip—in both the consumer and business worlds. In a
pressure-packed buying and selling environment, the line between choice
and overchoice has become increasingly fine.
By the early 1970s, marketers were already desperately hungry for
ways to ensure that their brands could stand out amidst the swelling
marketing noise created by more choices and more media pervasiveness.
It was then that the concept of positioning rippled through the
marketing world. Positioning focused on the importance of differen
tiating a product, service, or company from its competition. It brought
to the marketing planning process a new sense of focus on carving out
a proprietary space in the customer’s mind. During the three decades
since, sustained success has come to those brands with a unique,
relevant, and credible positioning consistently supported by aggressive
marketing.
But many such successes are now threatened by overchoice.A new imperative
for the positioning discipline has emerged: that marketers look for
ways to connect their brands to simplicity. The interaction of two forceful
tides—extreme choice proliferation and an exponentially increasing pace of
change—creates a combustible combination that at once brings customers
unprecedented opportunities and unprecedented anxiety . . . [In] the most
developed economies of the twenty-first century, the next generation of positioning
successes will belong to those brands that relieve customer stress. That
means simplifying customers’ lives or businesses in ways that are inextricably
tied to brand and product positioning. It means becoming the customer’s
partner in stress relief.
Brands that do this will be the customer’s heroes. Brands that don’t will
be nuisances.

If you want to position your brand as a relief from stress, say Cristol and Sealey, there are four ways you can do so—Replace, Repackage, Reposition, and Replenish.

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Choosing a Brand Name

Here is a list of what works and what doesn’t work when it comes to brand names according to Frank Delano, author of The Omnipowerful Brand.
What Works

• Beginning and ending the brand name with the same letter—Delano says that makes the name easy to remember. Examples include Nissan’s Altima car, Ortho chemicals, and Elle women’s magazine.
• Adding a vowel to the end of a word, transforming a common word into a proprietary trademark—An example is Lyrica, the name of a drug used to treat psychotropic conditions.
• 
  Ending a brand name with the letter “a”—Delano says the letter “a” makes the name sound friendly, like Humana.
• 
  Ending a brand name with the syllable “va,” particularly if the brand needs to have an international feel—Delano says “va” means “to go forward” in Latin-based languages. Some examples include IBM’s Aptiva PC and Polaroid’s Captiva instant camera. Delano cautions that you should be careful about the prefix or stem syllable that is linked with the “va” suffix. For example, Chevy Nova means “no go” in some languages.
• 
  Starting a brand name with the letters “ch”—Delano says brands beginning with the letters “ch” mirror such familiar words as church, charity, cheerfulness, and children, thus bringing to mind thoughts ofjoy, goodness, and fulfillment. An example is Cheerios.
• Ending the brand name with the vowel “o,” particularly if you want the brand to appeal to men—Words ending with the vowel “o” are more masculine sounding, according to Delano. One example is the name Terrano for Nissan’ s 4 x 4 sport utility vehicle.
• Beginning the brand name with the letters “Q” or “J”—These letters are supposed to convey the image that the brand is something special, for example Infiniti’s Q45 and J30 lines of cars.
• Beginning the brand name with the letters “se,” particularly if you want the brand to sound sexy—Delano says the letters “se” carry a sensual overtone as in the examples of Gillette’s Sensor razor and Secret deodorant.
• Incorporating the letter “z” in the name—Delano maintains that the letter “z” conveys the image of advanced technology, scientific breakthrough, or superior performance. An example is Zantac, the antiulcer drug.
• Using only one syllable and three or four letters—Shorter names like Fab and Tide detergents are easier to remember. However, adds Delano, a name with multiple syllables and nine or more letters, such as Primerica or Microsoft, can convey stature and importance.
• Combining two words—For example, FedEx is a better name than Federal Express.
• Using a name that sounds like the product’s generic name—Examples include Duracell for a battery cell and Ziploc for a plastic storage bag.

What Doesn’t Work

• Using a syllable in a brand name that can be spelled in more than one way—For example, sym can be spelled sim, cim, or cym.
  
• Ending the name with the letters ”is”—Delano notes that the names of most illnesses end with these letters. If you don’t want your product associated with such things as syphilis, gingivitis, halitosis, and so on, then don’t end the name with “is.”
• Names that sound like a curse word—Delano notes that the makers of a brand of jams and jellies faced this problem head on with an inventive ad campaign that went, “With a name like Smucker’s, it has to be good.” However, it is preferable to avoid this problem if possible.
• Names that try to be cute—Examples include names like Cow Chip Cookies or Dog Poo Shampoo.
• Overused words and symbols—Delano notes that names of over 1,600 banks in the United States begin with the words “First National” and another 584 start with the word “Farmers.”

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The Mating Dance: Searching for the Right Joint-Venture Partner

Embarking on a search for a joint-venture partner is a bit like the search for an appropriate spouse. You should carefully and thoroughly review prospective candidates and conduct extensive due diligence on the final few whom you are considering. Develop a list of key objectives and goals to be achieved by the joint venture or licensing relationship, and compare this list with those of your final candidates. Take the time to understand the corporate culture and decision-making process within each company. Consider some of the following issues: How does this fit with your own processes? What about each prospective partner’s previous experiences and track record with other joint-venture relationships? Why did these previous relationships succeed or fail?

In many cases, smaller companies looking for joint-venture partners wind up selecting a much larger Goliath that offers a wide range of financial and nonfinancial resources that will allow the smaller company to achieve its growth plans. The motivating factor under these circumstances for the larger company is to get access and distribution rights to new technologies, products, and services. In turn, the larger company offers access to pools of capital, research and development, personnel, distribution channels, and general contacts that the small company desperately needs.
But proceed carefully. Be sensitive to the politics, red tape, and different management practices that may be in place at a larger company but will be foreign to your company. Try to distinguish
between what is being promised and what will actually be delivered. If your primary motivating force is really only capital, consider exploring alternative (and perhaps less costly) sources of money. Ideally, the larger joint-venture partner will offer a lot more than money. If your primary motivating force is access to technical personnel, consider purchasing these resources separately rather than entering into a partnership in which you give up a certain measure of control. Also, consider whether strategic relationships or extended- payment terms with vendors and consultants can be arranged in lieu of the legal structure of a joint venture.

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Business-Format Franchising

Franchising can be viewed as an alternative growth strategy because the original founders of a company avoid dilution of their ownership and are no longer directly responsible for the financial investment needed to fuel growth and expansion. Instead, this financial responsibility is shifted to third-party franchisees and area developers who pay the franchisor for the right to use its trademarks and systems in exchange for initial franchise fees and royalties. Over time, this income stream can be a very valuable and lucrative asset around which an estate plan can be built.
Over the past three decades, franchising has emerged as a popular expansion strategy for a variety of product and service companies. Retail sales from franchised outlets make up about half of all retail sales in the United States (estimated at more than $1.5 trillion) and employ nearly 16 million people. (See sidebar.) You don’t have to have the ambition to become a national or multinational corporation to consider franchising, which can be an especially effective option for smaller businesses that cannot afford to finance internal growth. But franchising as a method of marketing and distributing products and services is appropriate only for certain kinds
of companies. A host of legal and business prerequisites must be satisfied before any company can seriously consider franchising as a method for rapid expansion.
Many companies prematurely choose franchising as a growth alternative or exit strategy, then haphazardly assemble and launch the franchising program. Other companies are urged to franchise by unqualified consultants or advisers who may be more interested in professional fees than in the long-term success of the franchising program. This has caused financial distress and failure for both the growing company and the franchisee, usually resulting in litigation.
Current and future members of the franchising community must be urged to take a responsible view toward the creation and development of their franchising programs.

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Values and the Concept of a Preferred Life Vision

One way to conceptualize a system of values is through the concept of a preferred life vision. Levi-Strauss points out that people are sensitive to contrasts in the human condition.5 Examples are seeking excitement versus being bored, being rich versus being poor, or being healthy versus being ill, and so on. People seek the life that captures the more preferred polar extreme. But, as all aspects of the good life cannot be pursued with equal vigor, the consumer’s value system reflects the particular weightings he or she attaches to various components of the preferred life vision. These weightings have some stability but can change with circumstances and cultural drift. Indiference to any contrast is equivalent to giving equal weighting to the polar extremes: a possibility that can be dismissed for all practical purposes. Rokeach spoke of both terminal and instrumental values, though this distinction has not caught on, presumably because values, as the concept is being used here, are usually viewed as terminal by definition. If we were to tie values to consumer buying, they might look like the following for many people:

• Preference for a less-pressured over a fast-paced lifestyle
• Preference for an environment less threatening to health over a more technologically driven way of life
• Preference for a more meaningful, simpler life over a more materialistic one
• Preference for more solidarity, face-to-face communication, and sense of sharing with others over mere luxurious isolation (bowling alone is not pleasurable)
• Preference for more to be preserved from the past than overthrown in the name of progress
• Preference for staying young-looking rather than old-looking

There is no complete homogeneity of values, consumer or otherwise, within a culture—simply a family resemblance. Consumers attach diferent weights to various values; hence psychographic segmentation, which is based on diferent values and lifestyles. Values difer among social classes and difer among people of diferent generations within the same class, depending how refined our categories of values are. Sharp diferences in values between generations have led to “generational marketing” and “cohort marketing” in segmentation. 6 While diferent generations are separated by about 25 years, cohorts are formed by common defining experiences in their history. As a consequence, cohort groups are assumed to be “value-bonded” by similar preferences. Thus the “postwar cohort” came of age between 1946 and 1963, experiencing a time of family togetherness, economic growth, and social tranquility. In spite of the Korean conflict, it was an experience of security and stability. Marketing campaigns to cohort members exploit nostalgia with symbols of the experiences behind the bonding. Such symbols can incite a good deal of nostalgic emotion.
Accepting that early emotional experiences are most involved in molding the consumer’s system of values, the question becomes: How influential are common cohort experiences in shaping values? Are they suficient to direct preferences? Values can be poor predictors of buying until or unless beliefs are taken into account. Consumers can have the same set of values but show diferent buying patterns because they have diferent sets of beliefs about the appropriate means for promoting their values. Values operate like goals for the individual, but the paths to goal attainment are many. Thus a consumer may place a high value on buying the “best tennis racquet money can buy,” but this depends on beliefs about the criteria that reflect “bestness,” while other beliefs about personal finances and buying opportunity will also play a role in what tennis racquet is bought.

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Convertible Options in Term Insurance

If you purchase a convertible policy, you are allowed to convert to a different type of policy — one that builds a cash value, such as whole life or universal life, sampling is the medical insurance, without having to pass another medical exam. Again, because your health is more likely to deteriorate as you age, this feature may be important if you think that you may want to keep buying life insurance later in life.

,

Most people don’t continue to insure themselves after theyreach retirement age, usually because they no longer have anyone dependent upon them, but there are exceptions. For example, take a look at a family of four in which the father is 56, the mother is 43, and the two children are both under 10. The younger child won’t start college for another 15 years, and the parents want to make sure the children have sufficient money even if the father dies. These parents may want to keep insuring the father after he reaches the age of 70, the age at which his policy specifies that he can no longer renew his term insurance policy. To them, therefore, convertibility is an important option.

Another reason you may want to be able to convert your term insurance is if your family has a history of heart disease, cancer, or other serious illness. If your family history makes you more likely to become sick later in life, you may want to ensure that you don’t have to pass a medical exam later, even after term insurance is not available. Because buying life insurance is, basically, eliminating as much risk as possible, many people think that this provision is an important one.
A third reason to keep the convertible option has to do with the price of term policies versus cash-value policies. Term policies generally cost considerably less than other types of life insurance because the others also build value while paying for the insurance. Convertibility may be important to you if you’re on a limited budget but want a cash-value policy. You know that you can convert later, when you have greater financial strength.

Keeping the option to convert means that your policy will likely cost you more.

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The Economics of Your Life : Your uninsured medical costs

Uninsured medical costs are one of the biggest potential drains on a family budget. Including uninsured medical costs in your family budget is crucial because health insurance terms, benefits, and regulations change so quickly.
Moreover, because life insurance protection is related to your health, by definition you want to be certain that your survivors can pay for your medical costs should you die. So after completing the budget worksheet, add a flat amount at the bottom to pay for these unexpected and uninsured medical costs.
How much to add? Good question. The figure you decide on will vary depending on what kind of health insurance you have now. If you belong to an HMO, most of your medical expenses are covered. On the other hand, if you have a private plan in which you pay 20 percent of the costs, your portion is likely to be far greater. Only you can really estimate this amount. However, most experts say that you should always maintain approximately three months worth of living expenses available, so try adding that amount to the bottom of the worksheet as your emergency fund to cover these uninsured medical costs.

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The Economics of Your Life : Your cost of living

The economic value of your life is not only how much you will be earning but also the cost of living that is, how much you actually need to live on. More importantly, the cost of living you and your family have set up is really the amount of life insurance income protection you need to purchase especially because most people tend to spend a bit more than they bring in.
In addition, part of your living costs are more than likely going into some sort of savings — to pay college expenses when your children are old enough, to go toward your retirement, to cover a big vacation, and so on. You still want your survivors to be able to save for some of these items (college expenses, for example). But clearly, saving for your retirement isn’t something you have to be concerned about if you die.
The budget worksheet that follows can help you determine your cost of living. Note that most of your expenses increase over the years due to inflation, if nothing else. On the other hand, some expenses may decrease or be eliminated because they are no longer necessary. One of these, of course, is the life insurance premium. But some other examples of unnecessary costs are clothing, food, and other expenses for children who will eventually be out on their own and paying their own expenses.
Note also that this budget doesn’t include unusual expenses, either planned (such as college expenses or weddings, unless your budget includes saving for them) or unexpected (such as medical emergencies or funerals).
And note, finally, that the budget worksheet doesn’t include paying off any large debts which you’re currently paying over time. If you want your life insurance to pay off some or all of these debts, make sure that you increase the death benefit to cover these amounts so that your survivors no longer have to include the debt payments in their budgets.

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Organize Based on What’s Left After Taxes

Once you have filed important documents in your home so that they can be easily located, it is important to go one step further by organizing all your financial assets into a system based on the following four criteria:
1. Organizing an investment based on its risks.
2. Organizing based on the liquidity of the asset, that is, how easily can I sell this investment?
3. Organizing based on timing, i.e., when will it be wise to sell this investment?
4. Organizing based on valuation, or in other words, based on a dollar value.
In addition to these criteria, we have found the most successful way to get organized is based on a fifth and most critical criteria:

5. Organize based on the taxation of investments.

While each individual’s situation may vary according to risk, liquidity, timing, and so on, everyone’s situation is universal when it comes to taxation. All people are subject to tax. Unlike the other criteria, taxation does not vary greatly depending on your individual situation. Taxation is definable and absolute.
The taxes we pay are demanded of us before we do anything else. That’s why we teach our clients to organize their finances around what they get to keep after paying taxes. By doing so, it becomes easier to understand what you need to do to plan because you know what’s absolutely going to be left over. If you organize based on risk, for instance, you may never be quite sure what you have to work with because that risk will always vary. But taxes are sure. By organizing based on taxation, you can know either how to keep taxes to a minimum, thus keeping more of your wealth, or know how much money you will have left after paying taxes so you can feel free to work with the balance in order to create additional wealth.
Important documents should be organized in what we call “Tax Drawers.” Because there are only five ways you can be taxed, financial affairs should be organized based on the following five
dimensions of taxation:

• Drawer #1: Taxed—savings accounts, checking accounts, reserve funds, and so on.

• Drawer #2: Tax Free—municipal bonds, Roth IRAs, and so on.

• Drawer #3: Tax Deferred—401(k)s, IRAs, and so on.

• Drawer #4: Life Insurance—life insurance can be taxed in a variety of ways, and most often is not taxed until the benefit is received in cash while you are living. If you die, then the income is tax-free. How you receive the money determines whether it will be taxed or not.
• Drawer #5: Capital Gains—real estate, mutual funds, or stocks that appreciate in value. There will be a loss or gain depending on tax rules at the time.
  

Organizing your financial assets into these five “Tax Drawers” will help you find a lot of extra money you didn’t know you had. How is this possible?
1. It makes it easier for you to visualize your assets and in terms of what you get to keep for retirement.
2. It provides a basis for calculating and projecting the accumulation of your wealth.
3. It helps you understand the impact taxes have on your longterm savings.
The following example illustrates the importance of organizing into “Tax Drawers.”
Suppose you put all your money in a 401(k) program for retirement.
This money will grow because you will be able to defer paying taxes on it all those years you are working. However, when you begin withdrawing this money, 100 percent of it will be subject to income tax. If you organize your assets into five “Tax Drawers” and use a forecasting tool such as the Master Plan software you will be able to play “what if” scenarios with your money. “What if” you put this money into a tax-free municipal bond rather than a 401(k) or capital gains account? “What if” you took your money and put it into a Roth IRA, or “what if” you put it elsewhere? Of all the tools available to get and keep oneself organized financially, being able to project your debt, income, and assets over time is among the most valuable. Staying organized is a function of being able to sweep all financial elements (spending, borrowing, and saving) out to a future date and look at the results. By doing this, it is easy to play “what if” so that you can test how a financial decision made today will impact your future. Using organizational tools such as the Master Plan software can help you determine the best way to accumulate money so that you can maximize your assets. And because there are no future decisions, only decisions made today that affect the future, this knowledge allows you to make much better choices. You can make the necessary changes today and not get down the road and have to look back and say, “Oh, I wish I had known!”

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Emotional Sentiment and Brand Loyalty

To have an emotional sentiment toward a brand or product is to have a strong positive feeling of liking for that brand. Strong brand loyalty involves emotional sentiment. Having a choice makes for the expression of loyalty, as it provides an opportunity to be against alternatives disliked. If the product has attributes that are unique and of central importance to the consumer, together with risks attached to buying, the product is termed a “high-involvement product,” as being most likely to engage the consumer in deliberations when choosing. This is because high-involvement products are those that generate the most consumer concern.

Trust and sentiment are the ingredients of brand loyalty. In contrast to moods (but in line with emotions), sentiments are not persistent conscious states but are dormant until aroused by the object of the sentiment. Emotional sentiment ties into emotional memory, in that memories have sentimental content. Every firm catering to the consumer should seek to develop an emotional sentiment for the firm’s brand by fixing it in the consumer’s memory as part of a valued way of life. It is the vestiges of emotional sentiment that allow the successful resurrection of old brand names, such as the revival of the name Buggatti. It is ignorance of the emotional sentiment that can attach to eminent brand names that leads to many such brands being dismissed as worthless assets. The emotion still attached to the name Pan Am is not simply that arising from the Lockerbie air bomb atrocity.
Loyalty is not just a matter of habitually buying the same brand, since all habitual buys are not grounded in trust and sentiment. Yet this combination of trust and sentiment (loyalty) is the best barrier to brand switching by customers, while it facilitates brand extensions and word-of-mouth recommendations. Of course, there may be no loyalty to any particular brand when the various brands in the market are perceived as mere tokens of each other with diferences that are marginal and of no significance to the consumer. This is not to suggest that meaningful diferences will always be confined to the product itself, since things like brand image and distribution can be crucial. In any case, being a loyal customer does not imply just buying the one brand. Brands in diferent segments of the market may be bought simultaneously by the
buyer for diferent use-occasions or for diferent family members. Thus a woman might want a fresh light perfume during the day and a strong sophisticated scent for the evening.

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Using life insurance as part of your estate planning

In addition to serving as a tax shelter for you and your survivors, life insurance can also be an important part of estate planning — that is, dealing with how to distribute your wealth after you die.
Currently, the federal tax laws state that the first $650,000 in inheritance is federally tax-exempt (that amount increases over the next few years). Most states allow the same amount or they have no inheritance tax at all. Realistically, most people don’t need to worry much about taxes eating away their estate. Furthermore, most couples own their property and assets jointly, so surviving spouses or owners don’t have to pay inheritance taxes, even if the estate is greater than the amount allowed under the law.
But if your estate is worth more than the law allows, how doyou ensure that your wealth goes to your survivors and not to the government? That’s where life insurance and life insurance trusts come in.
To do this sort of estate planning, consult an expert who can both counsel you and set up the appropriate vehicles. Briefly, here’s how it works:

• You set up an irrevocable life insurance trust, to which you contribute annually. The trust is, in effect, a life insurance policy, which goes to your children or survivors taxfree. You can’t withdraw that money for any reason (hence the term irrevocable).
• You and your spouse each leave to your children whatever the law allows at the time, so that money is also taxfree.
• You will the remaining amount to a qualified charity of your choice, which, by definition, is exempt from inheritance taxes. If you don’t will the remaining amount to a charity, it is considered part of your estate, and your heirs have to pay taxes on it.

In this situation, you take the IRS out of this picture. Using some of your estate, you buy a tax-free life insurance policy so that your heirs get the same amount they would have before any estate taxes — the amount equivalent to your estate. Plus, you donate a large portion of your estate to a charity rather than to the government. The only party that loses is the IRS (and another party wins — the life insurance company, which charges you a significant amount for that policy over a period of years). But your heirs lose nothing! Isn’t that the goal of estate planning?
Don’t try to wade through this complicated process by yourself. A qualified professional can help you sort through the fine details and prevent you from making a costly mistake.

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The Purposes of Life Insurance

The number one reason to have life insurance is, obviously, to protect your beneficiaries if you die prematurely. That’s clear. Every other reason is secondary — although for some
people, the other purposes can take on greater importance in certain situations.
Providing protection for beneficiaries
Protecting your survivors means replacing the income you bring in if you die prematurely. If you have children, you probably spend your earnings on the costs of bringing them up. If you die, your life insurance death benefit replaces those earnings so that they won’t have to suffer financially. If you have a mortgage on your house, a life insurance death benefit can help your family stay in their home if you die.
Life insurance can help you overcome the difficulty of having to totally change your way of life because you lose half or more of your income.
Lastly, if you are part-owner in a business, the business may purchase a life insurance policy on you so that if you die, your partner can use that death benefit to buy out your share of the business from your heirs.
Using life insurance as an investment
A second purpose of having life insurance is to use it as part of your investment portfolio. Most financial advisors encourage you to balance your investments so that if one kind of investment goes down (the stock market, for example), another one will likely go up (bonds or real estate, perhaps). By balancing your portfolio and diversifying your investments, you can weather storms in one area by having some assets in the other areas that go up or stay level.
Some life insurance policies are actually long-term investments, which you can contribute to and withdraw funds from before you die. These so-called cash-value policies —whole life and universal life insurance are actually savings accounts that accrue a cash value over time and also pay for your protection. Although these policies don’t command the highest interest rates you can find, they are untaxed earnings, so you get a higher return
than simply putting your money in a savings account on which you must pay taxes.

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How Universal Life Insurance Works

Universal life insurance is a form of whole life insurance — but with much greater flexibility. Like whole life, you have two components: a term insurance policy and an investment account from which the term insurance premiums are paid. But with universal life, you get to choose your options, and the choices are generally laid out in front of you. You know how the premiums may change the death benefit and cash value, and it’s much clearer how much of the premiums go toward your insurance protection, how much toward your cash value, and how much toward administrative expense (including commissions).
Start with a planned death benefit that you work out with your agent. You determine your planned premium, based on how much you can afford and the cost of the insurance. The company subtracts an expense charge based on its fees, usually a fixed percentage of the premiums. You’re left with a cash value that generates interest.
But understanding universal life insurance doesn’t end there. From the cash value, the company subtracts the current cost of insurance (the mortality charge), including the charges for any options (or riders), and monthly administrative expenses. Then the company adds in interest that your investment money earns. Your ending cash value is the accumulated value that belongs to you when you cash out (or to your beneficiary when you die).
Often, companies charge you a surrender charge to cash out, leaving you with the surrender value. The surrender charge is usually a small percentage of the total cash value.
Other aspects of universal life to consider include:

•  All the earnings in your investment account are taxdeferred.
• If you stop paying premiums, the company continues to pay the premium for you by deducting from your policy’s cash value. The company does so until no cash value is left. This is one way to continue coverage without paying premiums.
• The interest rate is a fixed rate, although it may be a tiered interest rate, in which part is paid at one rate while the balance is paid at a higher rate. For example, your interest rate may be 4 percent for the first $500 and 7 percent for the balance.
• You can withdraw money that has accumulated in your cash value. If you do, your death benefit decreases because it depends partially upon the accumulated cash value.
• You can borrow against the cash value of your policy at a fixed rate, generally below market rates.
• If you increase your coverage, you may have to requalify by taking a medical exam.
  
• You probably have to pay a termination fee or surrender charge (backloading). This fee decreases each year you have the policy, but it does lower the amount of your cash value.
  

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Handling Employee Complaints

How you handle employee complaints is central to how your business is viewed by employees and ultimately the public, which hears about how you treat them. Creating a positive way to encourage and deal with complaints is a sign to your employees that you care about them and that they are appreciated. Again, the idea is simple. If employees truly feel that their concerns are taken seriously, they will walk an extra mile (or maybe even ten) for your business because they will regard it as their business too.
Perhaps the best example of the value of a procedure for handling employee complaints is a company with one of the worst records: the United States Postal Service (USPS), a semi-private organization that was partially separated from the U.S. government in the late 1960s. Because the USPS was originally a government bureaucracy it retained a rigid structure that was inappropriate for the type of employee relations that prevails in the commercial market. The consequence became evident in the late 1980s and well into the 1990s when several USPS employees killed their supervisors and other employees in the workplace. The American public became greatly alarmed as the horrors of workplace homicide spread to other industries. During this time the phrase “going postal” was commonly used to mean workplace homicide. TV comedians suggested that when a flag flew at half mast over a Post Office this was a sign that it was hiring new personnel.
All of this changed when the USPS introduced employee mediation services in the late 1990s. Throughout the United States, in hundreds of cases per week, postal employees are offered free mediation services, with paid time off to mediate all disputes and disagreements with managers,
supervisors and fellow employees. The consequences have been very positive and as the success becomes recognized, similar commercial enterprises have copied the Postal Service.
In most small businesses, there is an informal complaint structure. An employee who doesn’t like something tells the boss or a supervisor face-to-face. This process is generally workable as long as the problems are minor and the business small. However, when a business employs more than five or six people, a formal process, including personnel reviews, makes it easier to deal with a wide array of problems that are not so minor.
Even in very small businesses, a formal employee grievance process should be written, posted and given to each employee to sign. The grievance procedure should specify where and how to complain about all types of potential problems. It should discuss in detail how the complaint will be investigated and, if necessary, be formally considered and resolved.
Finally, a tight procedure to keep complaints confidential is obviously a crucial part of any formal complaint procedure. In the best circumstances, an employee complaint process should also include an appels process for serious matters where management’s judgment may warrant a second opinion.
If you don’t have a good grievance procedure, an employee who feels there is no internal structure to deal with a problem about termination, demotion or salary may seek help outside the business. This can often mean either that employees will sue you, or try to organize a union. For example, we know a small wholesale business which recently—unilaterally and without consultation—changed a series of employee rights and benefits. In the view of management, the benefits conferred on the employees by the change were much greater than what the employees lost in perks. So when the employees turned to the Teamsters Union, management was initially both flabbergasted and angry. It never occurred to them that the employees, suddenly facing a whole new set of work rules, some of which they thought were very unfair (for example, loss of pay for lunch hour), went outside the company for help because there was no fair grievance and appeal procedure or, for that matter, any process that allowed them to communicate their position to management.

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Informal Networks—The Company behind the Chart

Many executives invest considerable resources in restructuring their companies, drawing and redrawing organizational charts only to be disappointed by the results. That's because much of the real work of companies happens despite the formal organization. Often what needs attention is the informal organization, the networks of relationships that employees form across functions and divisions to accomplish tasks fast. These informal networks can cut through formal reporting procedures to jump start stalled initiatives and meet extraordinary deadlines. But informal networks can just as easily sabotage companies' best laid plans by blocking communication and fomenting opposition to change unless managers know how to identify and direct them. Learning how to map these social links can help managers harness the real power in their companies and revamp their formal organizations to let the informal ones thrive.

If the formal organization is the skeleton of a company, the informal is the central nervous system driving the collective thought processes, actions, and reactions of its business units. Designed to facilitate standard modes of production, the formal organization is set up to handle easily anticipated problems. But when unexpected problems arise, the informal organization kicks in. Its complex webs of social ties form every time colleagues communicate and solidify over time into surprisingly stable networks. Highly adaptive, informal networks move diagonally and elliptically, skipping entire functions to get work done.

Managers often pride themselves on understanding how these networks operate. They will readily tell you who confers on technical matters and who discusses office politics over lunch. What's startling is how often they are wrong. Although they may be able to diagram accurately the social links of the five or six people closest to them, their assumptions about employees outside their immediate circle are usually off the mark. Even the most psychologically shrewd managers lack critical information about how employees spend their days and how they feel about their peers. Managers simply can't be everywhere at once, nor can they read people's minds. So they're left to draw conclusions based on superficial observations, without the tools to test their perceptions

Armed with faulty information, managers often rely on traditional techniques to control these networks. Some managers hope that the authority inherent in their titles will override the power of informal links. Fearful of any groups they can't command, they create rigid rules that will hamper the work of the informal networks. Other managers try to recruit "moles" to provide intelligence. More enlightened managers run focus groups and host retreats to "get in touch" with their employees. But such approaches won't rein in these freewheeling networks, nor will they give managers an accurate picture of what they look like.

Using network analysis, however, managers can translate a myriad of relationship ties into maps that show how the informal organization gets work done. Managers can get a good overall picture by diagramming three types of relationship networks:

• The advice network shows the prominent players in an organization on whom others depend to solve problems and provide technical information.

• The trust network tells which employees share delicate political information and back one another in a crisis.

• The communication network reveals the employees who talk about work-related matters on a regular basis.

Maps of these relationships can help managers understand the networks that once eluded them and leverage these networks to solve organizational problems. Case studies using fictional names, based on companies with which we have worked, show how managers can bring out the strengths in their networks, restructure their formal organizations to complement the informal, and "rewire" faulty networks to work with company goals.

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Designing the Brand Architecture

Once you have decided upon the relationship that you want to convey between your master and subbrands, say Aaker and Joachimsthaler, you are then ready to design your brand architecture. You do so by completing five steps:
Step #1: Identify the Brands in Your Portfolio
Your brand portfolio, say our gurus, is all of the brands and subbrands you have in your product/service offerings, including those that you have cobranded with other firms. While the process of identifying your brands may seem simple, Aaker and Joachimsthaler caution that this may be a daunting task since you may have brands that are obscure or dormant. Nevertheless,
your task here is to compile a complete list and to decide if you need to add some new brands to strengthen your portfolio.
Step #2: Specify the Role of Each of Your Brands
Aaker and Joachimsthaler tell us that each brand in a portfolio should be assigned one or more of the following roles:
Strategic Role—the brand is an important source of future profits. Linchpin Role—the brand provides a key basis for customer loyalty. For example, Hilton Rewards is a linchpin brand for Hilton Hotels. Silver Bullet—the brand positively influences the image of another brand. For example, IBM’s Thinkpad brand boosted public perceptions of IBM. Cash Cow—the brand has a significant customer base and does not require the level of investment of other brands, therefore it can be used to generate funds that can be invested in strategic, linchpin, and silver-bullet brands.
Step #3: Specify the Product-Market Context of Each of Your Brands
Aaker and Joachimsthaler note that a set of brands taken together comprise a product/service offering in a particular product-market context. For example, the Cadillac Seville and Northstar system brands work together in the following way:
The Cadillac Seville with the Northstar system . . . is a particular offering for which Cadillac is the master brand with the primary driver role; Seville plays a subbrand role, and Northstar a branded component role.1 In this step, you identify endorser and subbrands (see our previous discussion), benefit brands (branded features, components, or services that augment the brand offering such as Ziploc’s ColorLoc Zipper), and any cobrands in your offering. (Cobrands are arrangement you have to combine your brand with one or more brands from a different organization to create a unique offering. For example, Pillsbury cobranded with Nestlé to create
Pillsbury’s Brownies with Nestlé’s chocolate.) Aaker and Joachimsthaler note that cobranding can be particularly powerful. For example, they cite a research study in which 20 percent of prospects said they would buy a fictional entertainment device if it carried the Kodak name, and 20 percent said they would buy it if it carried the Sony name. In contrast, fully 80 percent said they would buy the device if it carried both the Kodak and Sony name, that is, was a cobrand.
Step #4: Develop Your Brand Portfolio Structure
The brand portfolio structure provides a way of grouping brands to clarify their logical relationships. For example, if you are a hotel chain, such as Marriott, you might group your various brands by segment (business vs. leisure travelers), product (overnight vs. extended stay), quality (luxury vs. economy), and so on. Alternatively, say Aaker and Joachimsthaler, you
might find it helpful to clarify the relationships among your brands by drawing a “brand family tree” or hierarchical chart.
Step #5: Design Your Portfolio Graphics
Finally, say Aaker and Joachimsthaler, you need to take a look at the visual representations that you use across your portfolio of brands, the logos, packaging, symbols, product design, layout of print advertisements, taglines—everything that has to do with the look and feel of the presentation of each of your brands. The key question here is, What kinds of signals are these visual representations sending about the relationships between the brands in your brand portfolio and are they the right signals? An illuminating exercise, say our gurus, is to take all of the graphic representations of your brands (logos and such) and put them on a large wall. Look at them together and ask yourself if they convey a consistent message and support your brand portfolio’s structure.

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Fred Wiersema’s New Realities

In his book The New Market Leaders, Fred Wiersema offers six new realities that he says are causing a supply glut and customer shortage in most markets.

• Competitors proliferate—Like George Day,Wiersema notes that most companies are facing increased competition. He adds that this competition often comes from unexpected sources. For example, Boeing is now loaning money to customers to buy its planes, thus making Boeing a competitor of banks. In turn, banks are selling stock and
  stockbrokers are becoming financial advisors.
• All secrets are open secrets—Don’t expect your best practices to remain proprietary very long.Your competitors are becoming more adept at learning your secrets and adapting them for their own purposes. Everybody is imitating everybody else shamelessly.
• Innovation is universal—Product life cycles keep getting shorter and innovation is now
  commonplace.Wiersema says it has gotten so frantic that customers are inundated with
  products (twenty-three thousand new packaged goods last year alone) and suppliers are
  dizzy from pursuit of the next best thing.
• Information overwhelms and depreciates—We are all swamped with information, writes Wiersema.“Junk mail fills mailboxes; magazines stuffed with ads run as long as five hundred pages. . . . Advertisers stamp their logos on every conceivable surface, from
  cruising blimps and ski-lift towers to e-mail screens and bus roofs. Some television markets offer two hundred cable channels.An Internet surfer discovers a Milky Way or random data,much of it conflicting and some of it stupefying.” Our problem today isn’t how
  to generate information, it is how to digest it and make sense of it.
• Easy growth makes hard times—Carmakers produce 30 to 40 percent more cars than can be sold.Airlines keep adding seats and packing more passengers on planes.The telecommunications industry invests frantically in network infrastructure to such an extent that bandwidth vastly exceeds demand. In industry after industry, technology makes it possible to make more things faster. In business today, writes Wiersema, growth is sacred. It also leads to overcapacity, a shortage of customers, fewer sales, lower prices, and falling margins.
• Customers have less time than ever—“Of all the realities,” writes Wiersema,“this may
  be the most important.” After working, sleeping, eating, and doing chores people just have
  very little time left for such things as listening to your ad or even shopping for your product. Your biggest competitor, says Wiersema, might not be your rival but the demands on your customers’ time. Pressed for time and overstimulated by too many choices, people cope by tuning out.Your marketing message has to catch their attention in a nanosecond because that’s all the time they will give you.They are not paying attention.They are scanning.

Source: Fred Wiersema, The New Market Leaders:Who’s Winning and How in the Battle for Customers (New York: Free Press, 2001), pp. 48–58.

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The Social Structure of Competition : Access, Timing, and Referrals

Information benefits occur in three forms: access, timing, and referrals. Access refers to receiving a valuable piece of information and knowing who can use it. Information does not spread evenly across the competitive arena. It isn't that players are secretive, although that too can be an issue. The issue is that players are unevenly connected with one another, are attentive to the information pertinent to themselves and their friends, and are all overwhelmed by the flow of information. There are limits to the volume of information you can use intelligently. You can keep up with only so many books, articles, memos, and news services. Given a limit to the volume of information that anyone can process, the network becomes an important screening device. It is an army of people processing information who can call your attention to key bits—keeping you up-to-date on developing opportunities, warning you of impending disasters. This second-hand information is often fuzzy or inaccurate, but it serves to signal something to be looked into more carefully.

Related to knowing about an opportunity is knowing whom to bring into it. Given a limit to the financing and skills that we possess individually, most complex projects will require coordination with other people as staff, colleagues, or clients. The manager asks, "Whom do I know with the skills to do a good job with that part of the project?" The capitalist asks, "Whom do I know who would be interested in acquiring this product or a piece of the project?" The department head asks, "Who are the key players needed to strengthen the department's position?" Add to each of these the more common question, "Whom do I know who is most likely to know the kind of person I need?"

Timing is a significant feature of the information received by the network. Beyond making sure that you are informed, personal contacts can make you one of the people who is informed early. It is one thing to find out that the stock market is crashing today. It is another to discover that the price of your stocks will plummet tomorrow. It is one thing to learn the names of the two people referred to the board for the new vice-presidency. It is another to discover that the job will be created and that your credentials could make you a serious candidate for the position. Personal contacts get significant information to you before the average person receives it. That early warning is an opportunity to act on the information yourself or to invest it back into the network by passing it on to a friend who could benefit from it.

These benefits involve information flowing from contacts. There are also benefits in the opposite flow. The network that filters information coming to you also directs, concentrates, and legitimates information about you going to others.

In part, this network does no more than alleviate a logistics problem. You can be in only a limited number of places within a limited amount of time. Personal contacts get your name mentioned at the right time in the right place so that opportunities are presented to you. Their referrals are a positive force for future opportunities. They are the motor expanding the third category of people in your network, the players you don't know who are aware of you. Consider the remark so often heard in recruitment deliberations: "I don't know her personally, but several people whose opinion I trust have spoken well of her."

Beyond logistics, there is the issue of legitimacy. Even if you know about an opportunity and can present a solid case for why you should get it, you are a suspect source of information. The same information has more legitimacy when it comes from someone inside the decision-making process who can speak to your virtues. Candidates offered the university positions with the greatest opportunity, for example, are people who have a strong personal advocate in the decision-making process, a person in touch with the candidate to ensure that both favorable information and responses to any negative information get distributed during the decision.

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Human Capital and Social Capital

Probably the most important and most original development in the economics of education in the past 30 years has been the idea that the concept of physical capital as embodied in tools, machines, and other productive equipment can be extended to include human capital as well (see Schultz 1961; Becker 1964). Just as physical capital is created by changes in materials to form tools that facilitate production, human capital is created by changes in persons that bring about skills and capabilities that make them able to act in new ways.

Social capital, however, comes about through changes in the relations among persons that facilitate action. If physical capital is wholly tangible, being embodied in observable material form, and human capital is less tangible, being embodied in the skills and knowledge acquired by an individual, social capital is less tangible yet, for it exists in the relations among persons. Just as physical capital and human capital facilitate productive activity, social capital does as well. For example, a group within which there is extensive trustworthiness and extensive trust is able to accomplish much more than a comparable group without that trustworthiness and trust.

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Public Goods Aspects of Social Capital

Physical capital is ordinarily a private good, and property rights make it possible for the person who invests in physical capital to capture the benefits it produces. Thus, the incentive to invest in physical capital is not depressed; there is not a suboptimal investment in physical capital because those who invest in it are able to capture the benefits of their investments. For human capital also—at least human capital of the sort that is produced in schools—the person who invests the time and resources in building up this capital reaps its benefits in the form of a higher paying job, more satisfying or higher status work, or even the pleasure of greater understanding of the surrounding world—in short, all the benefits that schooling brings to a person.

But most forms of social capital are not like this. For example, the kinds of social structures that make possible social norms and the sanctions that enforce them do not benefit primarily the person or persons whose efforts would be necessary to bring them about but benefit all those who are part of such a structure. For example, in some schools where there exists a dense set of associations among some parents, these are the result of a small number of persons, ordinarily mothers who do not hold full-time jobs outside the home. Yet these mothers themselves experience only a subset of the benefits of this social capital surrounding the school. If one of them decides to abandon these activities—for example, to take a full-time job—this may be an entirely reasonable action from a personal point of view and even from the point of view of that household with its children. The benefits of the new activity may far outweigh the losses that arise from the decline in associations with other parents whose children are in the school. But the withdrawal of these activities constitutes a loss to all those other parents whose associations and contacts were dependent on them.

Similarly, the decision to move from a community so that the father, for example, can take a better job may be entirely correct from the point of view of that family. But, because social capital consists of relations among persons, other persons may experience extensive losses by the severance of those relations, a severance over which they had no control. A part of those losses is the weakening of norms and sanctions that aid the school in its task. For each family, the total cost it experiences as a consequence of the decisions it and other families make may outweigh the benefits of those few decisions it has control over. Yet the beneficial consequences to the family of those decisions made by the family may far outweigh the minor losses it experiences from them alone.

It is not merely voluntary associations, such as a PTA, in which underinvestment of this sort occurs. When an individual asks a favor from another, thus incurring an obligation, he does so because it brings him a needed benefit; he does not consider that it does the other a benefit as well by adding to a drawing fund of social capital available in a time of need. If the first individual can satisfy his need through self-sufficiency, or through aid from some official source without incurring an obligation, he will do so—and thus fail to add to the social capital outstanding in the community.

Similar statements can be made with respect to trustworthiness as social capital. An actor choosing to keep trust or not (or choosing whether to devote resources to an attempt to keep trust) is doing so on the basis of costs and benefits he himself will experience. That his trustworthiness will facilitate others' actions or that his lack of trustworthiness will inhibit others' actions does not enter into his decision. A similar but more qualified statement can be made for information as a form of social capital. An individual who serves as a source of information for another because he is well informed ordinarily acquires that information for his own benefit, not for the others who make use of him. (This is not always true. As Katz and Lazarsfeld [1955] show, "opinion leaders" in an area acquire information in part to maintain their positions as opinion leaders.)

For norms also, the statement must be qualified. Norms are intentionally established, indeed as means of reducing externalities, and their benefits are ordinarily captured by those who are responsible for establishing them. But the capability of establishing and maintaining effective norms depends on properties of the social structure (such as closure) over which one actor does not have control yet are affected by one actor's action. These are properties that affect the structure's capacity to sustain effective norms yet ordinarily do not enter into an individual's decision that affects them.

Some forms of social capital have the property that their benefits can be captured by those who invest in them; consequently, rational actors will not underinvest in this type of social capital. Organizations that produce a private good constitute the outstanding example. The result is that there will be in society an imbalance in the relative investment in organizations that produce private goods for a market and those associations and relationships in which the benefits are not captured—an imbalance in the sense that if the positive externalities created by the latter form of social capital could be internalized, it would come to exist in greater quantity.

The public goods quality of most social capital means that it is in a fundamentally different position with respect to purposive action than are most other forms of capital. It is an important resource for individuals and may affect greatly their ability to act and their perceived quality of life. They have the capability of bringing it into being. Yet, because the benefits of actions that bring social capital into being are largely experienced by persons other than the actor, it is often not in his interest to bring it into being. The result is that most forms of social capital are created or destroyed as by-products of other activities. This social capital arises or disappears without anyone's willing it into or out of being and is thus even less recognized and taken account of in social action than its already intangible character would warrant.

There are important implications of this public goods aspect of social capital that play a part in the development of children and youth. Because the social structural conditions that overcome the problems of supplying these public goods—that is, strong families and strong communities—are much less often present now than in the past, and promise to be even less present in the future, we can expect that, ceteris paribus, we confront a declining quantity of human capital embodied in each successive generation. The obvious solution appears to be to attempt to find ways of overcoming the problem of supply of these public goods, that is, social capital employed for the benefit of children and youth. This very likely means the substitution of some kind of formal organization for the voluntary and spontaneous social organization that has in the past been the major source of social capital available to the young.

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Omnipowerful Brand Names

Frank Delano provides the following examples of what he says are brand names that catapulted their products to global marketing stardom:

Nissan’s Pathfinder—believable because the vehicle is built for off-road exploration.

Sony’s Walkman—simple and captures both the product’s essence and consumer attention.

Planet Hollywood—projects the image of an exciting dining experience inspired by the worlds of film and television.

Ford’sTaurus—the astrological sign Taurus suggests power, durability, and reliability.

Intel’s Pentium—captures the uniqueness of the product and consumer attention.

Absolut Vodka—suggests the “ultimate” and captures the consumer’s attention.

Procter & Gamble’s Ivory Soap—suggests the product’s essence (clean smelling and white).

Volkswagen’s Beetle—unique, attention getting, and believable.
Source: Frank Delano, The Omnipowerful Brand:America’s #1 Brand Specialist Shares His Secrets for Catapulting Your Brand to Marketing Stardom (New York:AMACOM, 1999), pp. 61–64.

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David Aaker’s Brand Identity System for Building Brands

Aaker argues that to build your brand you must develop a brand identity to provide direction, purpose, and meaning for your brand.“Brand identity,” he writes,“is a unique set of brand associations that the brand strategist aspires to create or maintain.These associations represent what the brand stands for and imply a promise to customers from the organization members.” In order to develop an identity for your brand,Aaker says you should consider how your brand could be portrayed from four perspectives: (1) as a product, (2) as an organization, (3) as a person, and (4) as a symbol.
Product Perspective
Product scope—with what product or products is the brand associated? For example,Visa

credit cards.
Product attributes—functional/emotional benefits.
Quality/value—is the brand a Mercedes, Buick or Ford?
Use or application—can the brand “own” a particular application? For example, Clorox bleach “owns” an association with whitening clothing and Gatorade “owns” an association with athletics and high performance.
Users—Gerber
babies;Weight Watchers
weight control and nutrition.
Country or region—Chanel
French, Swatch watches
Swiss, Mercedes
German.
Organization Perspective
Organization attributes—characteristics such as innovation, drive for quality, concern for the environment, and so on that result from the people, culture, values, and programs of the company.Aaker notes that organization attributes such as reputation for innovation and so on can be extremely valuable in building a brand because they are hard for competitors to copy.
Local vs. global.
Person Perspective
Personality—the humanlike qualities people attribute to the brand or should attribute to it
such as competent, impressive, trustworthy, fun, active, humorous, casual, formal, youthful,
intellectual, and so on.
Brand/customer relationship—how people view the relationship. For example, Saturn

friend, Levi Strauss - rugged outdoor companion, Hallmark - warm, emotional relative.
Symbol Perspective
Visual imagery and metaphors—Transamerica pyramid, Nike “swoosh,” McDonald’s Golden Arches, Quaker Oats man.
Brand heritage—U.S. Marines
the few, the proud;Amtrak
the heritage of first-class travel by rail.
Aaker says that by considering your brand from these four perspectives you should be able to arrive at both a “core” identity and an “extended” identity for your brand.The core identity is the essence of your brand; the associations that are essential to the meaning and success of your brand and that are likely to remain constant as you enter new markets and launch new products.Your brand’s extended identity includes elements that provide completeness and texture to your brand’s identity.These are the elements that flesh out the details of your brand. For example, Saturn’s core identity, says Aaker, is that of a world-class car delivered by a company that treats customers with respect and as friends. Its extended identity is as a U.S. subcompact, a no-pressure/friendly buying experience with no-haggle pricing, and a personality that is thoughtful, friendly, down-to-earth, reliable, youthful, humorous, lively, and thoroughly American.

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Kevin Clancy and Peter Krieg: Steps to Creating a Compelling Position

Here are the steps that Clancy and Krieg recommend following in developing a positioning for your brand.They begin with the assumption that you have clearly identified your target customers and that you have conducted research to determine your target customer’s desires and problems and your competitors’ strengths and weaknesses.
Step #1: Make a list of at least 200 tangible and intangible attributes and benefits that might motivate your target customers and thereby serve as the basis for a powerful positioning.
Step #2: Prioritize the list and combine redundant items to get the list down to between 50 and 100 items.
Step #3: Survey at least 200 and preferably 500 or more target customers on these 50 to 100 items on three dimensions: (1) how desirable each item is to them (dream detection),
(2) the extent to which the product/service they are currently using contains that attribute or benefit (problem detection), and (3) the likelihood they would buy a product or service that had that attribute or benefit (brand preference detection).
Step #4: Average each respondent’s scores for each item across the three dimensions to get the motivating power of each attribute or benefit. (Note: Clancy and Krieg say you may want to give more weight to the first dimension if the product is new and more weight to the second dimension if the product/service is an established one.)
Step #5: Examine the results of step four to identify highly motivating attributes and benefits that your brand enjoys relative to competing brands.
Step #6: Write three to seven different positioning statements and test them with 150 or more target customers to determine which is most powerful in terms of purchase interest, uniqueness, and product/brand superiority. Pick the winning positioning strategy.
Source:Adapted from Kevin J. Clancy and Peter C. Krieg, Counterintuitive marketing:Achieve Great Results Using Uncommon Sense (New York: Free Press, 2000), pp. 121–129.

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Business Forcasting, More Art Than Science

Business forecasting is not a pure science. It is more likely to be a matter of common sense, patience, research, and educated guessing than statistical analysis or higher mathematics.
Consider the weather forecast: it’s one of the best forecasts available anywhere.
Meteorologists study wind patterns, satellite pictures, air pressure, and years of past trends. Each forecast is based on careful analysis of what’s going on, why it’s going on, and why it might lead to something else tomorrow. If a storm is over the ocean and is headed toward the coast, then the probability of rain or sunshine is a professional guess, based on a wealth of knowledge, some good judgment, and common sense. Computers, satellites, and other tools increase the store of knowledge, but they can’t do it all alone.
The same general idea applies to many other good forecasts. Market researchers, stock brokers, and even political analysts base their guesses on huge volumes of carefully analyzed information. They might use computerized econometric or simulation models or
complicated trends analysis. But even the most sophisticated computerized forecasting models do little more than pull equations out of the past and spread them into the future. This is a good way of considering alternatives and a valuable check on the thinking process. But there is still no substitute for consideration of trends and alternatives: the famous “what if” we hear so much about.
There are no magic forecasting methods that always work, let alone a computer program that will forecast by itself. The heart of forecasting is good guessing and the best guess is an educated guess. So use common sense, judgment and as much information as
possible. Look at as many angles as you can and consider past trends, new developments, anticipated cycles, and anything else that gives you a hint of what is to come.

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Your Competitive Edge

What is your competitive edge? How is your company different from all others? In what way does it stand out? Is there sustainable value that you can maintain and develop over time?
The most classic of the competitive edges are those based on proprietary technology and protected by patents. A patent, an algorithm, even deeply entrenched know-how, can be a solid
competitive edge. In services, however, the edge can be as simple as having the phone number 1 (800) SOFTWARE, which is an actual case. A successful company was built around that phone
number. Sometimes market share and brand acceptance are just as important. Knowhow does not have to be protected by patent to offer a competitive edge. For example, for years Apple Computer used its proprietary operating system as a competitive edge, while Microsoft used its market share and market dominance to overcome Apple’s earlier advantage. Several manufacturers used proprietary compression to enhance video and photographic software, looking for a competitive edge.
The competitive edge might be different for any given company, even between one company and another in the same industry. You don’t have to have a competitive edge to run a successful
business - hard work, integrity, and customer satisfaction can substitute for it, to name just a few examples - but an edge will certainly give you a head start if you need to bring in new investment. Maybe it’s your customer base, as in the case with Hewlett-Packard’s traditional relationship with engineers and technicians, or it’s image and awareness, such as with Compaq. Maybe your competitive edge is quality control and consistency like that of IBM.

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Keys to Success

The idea of keys to success is based on the need for focus. You can't focus efforts on a few priorities unless you limit the number of priorities. In practice, lists of more than three or four priorities are usually less effective. The more the priorities (beyond three or four), the less chance of implementation.
Virtually every marketing plan has different keys to success. These are a few key factors that make the difference between success and failure. This depends on who you are and what services you offer. In a manufacturing business, for example, quality control and manufacturing resources might be keys to success for one strategy, and economy of scale for another. In another example, the keys might include low cost of assembly, or assembly technology in packaging kits. The channels of distribution are often critical to manufacturers. You might also depend on the brand or the franchise.
Think about the keys to success for your marketing plan. This is a good topic for a discussion with your management team. What elements are most important? This discussion will help you focus on priorities and improve your business plan.

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The Essential Contents of a Marketing Plan

Every marketing plan has to fit the need and the situation. Even so, there are standard components you just can't do without. A marketing plan should always have a situation analysis, marketing strategy, sales forecast, and expense budget.

• Situation Analysis: Normally this will include a market analysis, a SWOT analysis (strengths, weaknesses, opportunities, and threats), and a competitive analysis. The market analysis will include market forecast, segmentation, customer information, and market needs analysis.
• Marketing Strategy: This should include at least a mission statement, objectives, and focused strategy including market segment focus and product positioning.
• Sales Forecast: This would include enough detail to track sales month by month and follow up on plan-vs.- actual analysis. Normally a plan will also include specific sales by product, region, or market segment, by channels, manager responsibilities, and other elements. The forecast alone is a bare minimum.
• Expense Budget: This ought to include enough detail to track expenses month by month and follow up on plan-vs.-actual analysis. Normally a plan will also include specific sales tactics, programs by management responsibilities, promotion, and other elements. The expense budget is also a bare minimum.
  

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Do You Really Need a Business Plan?

Some members of the business and academic communities challenge whether an entrepreneur really needs a business plan. They claim that preparing one is a waste of time because the marketplace moves so rapidly. This is like asking a pilot to fly without navigation equipment, or a ship’s captain to set sail without a nautical map—it’s a bad idea. Business plans provide vision and accountability and can be tools for recruitment, motivation, and the benchmarking of performance. There are many reasons to prepare a business plan, including,

• To explain—to yourself and others—why a viable opportunity exists

• To provide a road map for the future direction of the business

• To hold the founders accountable for performance goals and to demonstrate that you have put together a capable and balanced management team that is able to execute the strategy and implement the business plan

• To provide a schedule and a time frame for meeting key milestones

• To identify what resources will be needed to accomplish objectives and when they will be needed
  

• To mitigate the risks of future business failure by identifying potential bottlenecks and problems that will affect the growth of the company and offering possible solutions
  

• To provide internal financial controls and direction

• To provide a channel for communication between you and the outside investors
• To provide an analysis of what your company does “faster, better, and cheaper” than its competitors
  
• To provide an analysis to demonstrate that you have both a sustainable revenue model and a sustainable competitive advantage
  
• To educate and motivate key employees as well as reward their performance and serve as a recruitment tool for new employees
  
• To prevent litigation with investors by providing disclosures on potential risks and challenges faced by the company
  
• To determine the feasibility and viability of the business and to identify the “fatal flaws” in the assumptions underlying your business model (don’t wear rose-colored glasses—deal with the problems head on!)
  
• To analyze the marketplace to determine what extent you enjoy the advantage of being first with your idea (“first mover advantage” analysis)
  
• For technology or netcentric businesses, to identify how and why your technology or application of the Internet solves problems or cures market inefficiencies

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The Art and Science of Due Diligence

Due diligence is usually divided into two parts and handled by separate teams: the financial and strategic part, handled by the venture investor’s accountants and management; and the legal part, conducted by the venture investor’s counsel. Both teams compare notes throughout the process on open issues and potential risks and problems. Business due diligence focuses on the strategic and financial issues surrounding the deal, such as confirmation of your past financial performance and the future potential of your business plan; confirmation of the operating, production, and distribution synergies; and economies of scale to be achieved by the acquisition and gathering of information necessary for financing the transaction. Legal due diligence focuses on the potential legal problems that may serve as impediments to the transaction and outlines how the documents should be structured.
Effective due diligence from the investor’s perspective is both an art and a science. The art is the style and experience to know which questions to ask, and how and when to ask them, and the ability to create feelings of both trust and fear in you and our
team. (This encourages full and complete disclosure.) In this sense, the due-diligence team is on a “search and destroy” mission, looking for potential problems and liabilities (the search) and finding ways to resolve these problems prior to closing (destroy) or to ensure that risks are allocated fairly and openly among the parties after closing.
The science is preparing comprehensive and customized checklists of the specific questions that will be presented to you, maintaining a methodical system to organize and analyze the documents and data you provide, and being in a position to quantitatively assess the risks raised by the problems that the advisers to the
prospective investor or source of capital uncover.
In business due diligence, venture investors will be on the lookout for issues commonly found in an early-stage company. These typically include undervaluation of inventories, overdue tax liabilities, inadequate management information systems, related-party transactions (especially in small, closely held companies), an unhealthy reliance on a few key customers or suppliers, aging accounts receivable, unrecorded liabilities (for example, warranty claims, vacation pay, and sales returns and allowances), and an immediate need for significant expenditures as a result of obsolete equipment, inventory, or computer systems. Each of these problems poses different risks and costs for the venture investor, which must be weighed against the benefits to be gained from the transaction.
Due diligence must be a cooperative and patient process between you and the venture investor and your respective teams. Attempts to hide or manipulate key data will only lead to problems for you down the road. Material misrepresentations or omissions
can (and often do) lead to post-closing litigation, which is expensive and time-consuming for both parties. It’s also common for entrepreneurs to neglect the human element of due diligence. I can remember working on deals where the lawyers were sent into a dark room in the corner of the building without any support or even
coffee. In other cases we were treated like royalty, with full access to support staff, computers, telephones, food, and beverages. It is only human for the investor’s counsel to be a little more cooperative in the negotiations when the entrepreneur was helpful and allowed counsel to do the job at hand.

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Understanding the Different Types of Investors

Most investors fall into at least one of three categories: emotional investors, who invest in you out of love or a relationship; strategic investors, who invest in the synergies offered by your business (based primarily on some nonfinancial objective, such as access to research and development, or a vendor-customer relationship— though financial return may still be a factor); and financial investors, whose primary or exclusive motivation is a return on capital and who invest in the financial rewards that your business plan (if properly executed) will produce. Your approach, plan, and deal terms may vary depending on the type of investor you’re dealing with, so it’s important for you to understand the investor and his or her objectives well in advance. Then your goal is to meet those objectives without compromising the long-term best interests of
your company and its current shareholders. Achieving that goal is challenging, but it can be easier than you might think if your team of advisers has extensive experience in meeting everyone’s objectives to get deals done properly and fairly. The more preparation,creativity, and pragmatism your team shows, the more likely that the deal will get done on a timely and affordable basis.

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Organizing your finances enables the creation of additional wealth

What does it mean to organize your finances in order to create more wealth? As you have gained greater control of your spending and borrowing, and have begun planning and saving for the future, you have naturally been led towards more opportunities to create wealth. As this new wealth accumulates, your overall financial picture, though perhaps better understood by you now, is also becoming more complex.
Without organization, it is impossible to continue painting that picture because you will not understand how to order and control some of the complex issues that can surround wealth creation and retention within that big picture. The image on the right of a “junk” drawer helps further illustrate why Principle 8 is so important in light of everything else you have learned thus far. If you’re like most people, you probably have a “junk” drawer in your home where you keep odds and ends. You most likely store items in this drawer because you haven’t decided where an item really belongs and figuring out where to put some things is overwhelming and time-consuming. Consequently, nothing in the drawer ever gets properly organized.Most people have a “financial junk drawer” as well, like the one illustrated here. If you were to examine your own financial junk drawer what would it look like? Perhaps it would resemble this picture where a mishmash of important financial and legal documents have been tossed. Like the junk drawer in your home, this drawer only exists because you haven’t taken the time to order and arrange your important financial documents or
to sort and review them as necessary.

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Six Tips for Establishing Good Credit

Even if you're a confirmed rebel, try to be as "normal" as possible in your consumer credit habits, especially if you expect to borrow for a house some day. Instead, channel all your anti-establishment efforts towards clothes, music, and body piercings. Here are six small ways to keep your credit record clean:

1. Pay your bills on time, especially mortgage or rent payments. Apart from extreme circumstances like bankruptcy or tax liens, nothing has as big of an impact on your credithistory as late payments.
2. Establish credit early. Having clean, active charge accounts established many years ago will boost your score. If you are averse to credit, on principle, consider setting up automatic monthly payments for, say, utilities and phone on a credit card account and locking the card away where it's not a temptation.
3. Don't max out available credit on credit card accounts. Lenders won't be impressed. Instead, they are much more likely to assume that you have trouble managing your finances. Beyond one or two credit cards, it starts to get complicated.
4. Don't apply for too much credit in a short amount of time. Multiple requests for your credit history (not including requests by you to check your file) will reduce your score. If you are hunting around for good loan rates, assume that every time you give your Social Security number to a lender or credit card company, they will order a credit history.
5. Be neat and consistent when filling out credit applications. This will insure that all your good deeds get recorded in a single file, as opposed to multiple files or, worse, someone else's file. Watch out for inconsistencies in use of "Jr." and "Sr." If it gets ugly, remind dad that he already has his house.
6. Check your credit history for errors, especially if you will soon be requesting a imedependent loan, like a mortgage.

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Basing Your Marketing Plan on Personal Recommendations

Once you have decided to base your marketing plan on personal recommendations, your next job is to understand why people go out of their way to recommend certain goods and services and not others. What gets them motivated to sing the praises of a business they think highly of? Have you told a friend about a particular business—perhaps a seamstress, gardener, dentist or cheese store—in the last six months? What were the things about each of these businesses that caused you to recommend them?

Most of this book is devoted to analyzing these kinds of questions. But the answers can be summed up as follows: If your business is truly worthy of being recommended, you will be able to answer all or most of the following questions in the affirmative:
• Is your business running smoothly on a day-to-day basis?
• Are your financial records in order and up-to-date?
• Are your employees knowledgeable about your product or service and enthusiastic about working for you?
• Do you offer top-quality goods or services?
• Do your customers have confidence that if something goes wrong with the products or services you sell, you stand behind them?
• Is your website being kept up-todate?
Just the simple exercise of asking and answering these few questions may prompt you to make changes in your business. The rest of this book should help you implement changes that will really allow you to take advantage of personal recommendations. Before we deal with the many practical techniques you can use to encourage customers to recommend your goods and services, it’s important to understand the elements that go into a positive recommendation. To succeed in the long run, a marketing campaign based on personal recommendation must be in tune with all of them.

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How to Let Customers Know Your Bussines is excellent

we’ve just talked about the need to decide which groups of customers and friends to focus your marketing efforts on. This chapter discusses the best ways to give those people enough information about your business so that they will know why it is good and be able to communicate this to others. The point of doing this is obvious. To really become effective missionaries on your behalf, your customers, potential customers and friends need to know specifically what sets you apart from others in your field. How do you make sure your customers have enough information about you to spread the word knowledgeably? One way is to tell them yourself. The way you run your business, of course, makes a strong statement. However, you should also make an effort to give your customers information that lets them judge the quality of your business for themselves. For example, a plumber might say, “I’m glad you let me install 3/4-inch copper pipe instead of plastic, because I feel confident it will last two generations without giving you any problems. Also, it works so well that the pressure in your shower is now good enough that you can take a shower while washing the clothes and running the dishwasher, without loss in pressure.” Or, if you tell a customer in your boutique that the half-Dacron, half-cotton jumpsuit she is considering buying to bring on a trip will dry on a hanger in two hours without any wrinkles, and it does, that person has clear evidence that you and your business can be trusted. Or, if a respected financial columnist states that for a certain type of investment, a 15% return is excellent, and your personal finance advising service has just done substantially better than that, you will want to be sure your clients are aware of how you compare. New Balance bases their marketing on the concept that high quality athletic shoes can be made in America at competitive prices. They include a hang tag with every purchase explaining their commitment to providing jobs for American workers and to support domestic manufacturers and suppliers where possible.
A second way to ensure that your customers have information is to have someone they trust tell them how good your business is. Positive validation by a trusted person can be extremely effective. For instance, think about how good you would feel if a fashion designer told you the suit you were wearing was beautifully tailored, or if your uncle who is a dentist looked into your mouth and assured you that your regular dentist did excellent work or if an award-winning architect remarked positively about the remodeling job you had just done on your kitchen. You can and should, of course, use both of these methods to let your customers know that you run an excellent business. Once they know this, they will not only tend to patronize you more themselves, but will also surely recommend your business to others.

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Possible Sources of Specific Positioning

Philip Kotler suggests that you consider the following as possible sources of specific positioning for your brand:

• 
  Attribute positioning: The company positions itself on some attribute or feature.A beer company asserts that it is the oldest beer maker; a hotel describes itself as the city’s tallest hotel. Positioning by a feature is normally a weak choice since no benefit is explicitly claimed.
  

• Benefit positioning: The product promises a benefit.Tide claims that it cleans better, Volvo claims that its cars are safer. Marketers primarily work with benefit positioning. Use/application positioning: The product is positioned as the best in a certain application. Nike might describe one of its shoes as the best to wear for racing and another as the best to wear for playing basketball.
  

• User positioning: The product is positioned in terms of a target user group.Apple Computer describes its computers and software as the best for graphic designers; Sun Microsystems describes its workstation computers as the best for design engineers.
  

• 
  Competitor positioning: The product suggests its superiority or difference from a competitor’s product.Avis described itself as a company “that tries harder” (than Hertz,by implication); 7 UP called itself the Uncola.
  

• Category positioning: The company may describe itself as the category leader. Kodak means film; Xerox means copy machines.

• Quality/price positioning: The product is positioned at a certain quality and price level. Chanel No. 5 is positioned as a very high-quality, high-price perfume;Taco Bell represents its tacos as giving the most value for the money.

Source: Philip Kotler, Kotler on Marketing: How to Create,Win, and Dominate Markets (New York: Free Press, 1999), p. 58.

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WHAT IS A BRAND?

David Aaker, author of Managing Brand Equity:
▫ A brand is a distinguishing name and/or symbol (such as a logo, trademark, or package design) intended to identify the goods or services of either one seller or a group of sellers, and to differentiate those goods or services from those of competitors.A brand thus signals to the customer the source of the product, and protects both the customer and the producer from competitors who would attempt to provide products that appear to be identical.
Scott Davis, author of Brand Asset Management:
▫ Brand [is] an intangible but critical component an organization “owns” that represents a contract with the customer, relative to the level of quality and value delivered tied to a product or service.A customer cannot have a relationship with a product or a service, but may with a brand.
▫ A brand is a set of consistent promises. It implies trust, consistency, and a defined set of expectations.A brand helps customers feel more confident about their purchase decision.A brand is an asset and, next to your people, no asset is more importan.
Duane Knapp, coauthor of The Brand Mindset:
▫ [A brand is] the internalized sum of all impressions received by customers and consumers resulting in a distinctive position in their “mind’s eye” based on perceived emotional and functional benefits.
Adam Morgan, author of Eating the Big Fish:
1. Something that has a buyer and a seller—the Spice Girls, but not the queen.
2. Something that has a differentiating name, symbol, or trademark— Tide, but not sugar or bleach—but also something that is seen as being differentiated from other like products around it for reasons other than its name or trademark—the Los Angeles Police Department, but not the Fourteenth Infantry Division.
3. Something that has positive and/or negative opinions about it in consumers’ minds for reasons other than its literal product characteristics—Cirque du Soleil, but not Concrete.
4. Something that is created, rather than naturally occurring— The X-Files and Las Vegas, but not Adam Morgan or the Blue Grass of Kentucky.
Daryl Travis, author of Emotional Branding:
▫ A brand is an unwritten contract of intrinsic value.
▫ A brand is an expectation of performance.
▫ A brand is a covenant of goodness with its users.
▫ A brand is predictable.
▫ A brand is an unwritten warrantee.
▫ A brand is a presentation of credentials.
▫ A brand is a mark of trust and reduced risks.
▫ A brand is a reputation.
▫ A brand is a collection of memories.
▫ A brand can be—must be—more than the sum of all these parts...
Perhaps the simplest way to think of a brand is to use the metaphor of a handshake.A brand represents the handshake that has been used by generation after generation of ordinary people as the sign of a deal well done.

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