Why Habits Build Business And Brands

Habits are good for business. In fact, many industries could not survive without them. The incentive systems and business models of the companies that make habit-forming products require someone gets hooked. Without consumer habits, these habit-forming businesses would go bust.

While most of us think of cigarettes or gambling as habit-forming products, the fact is, a much wider swath of industries rely on consumer’s using their products without thought or deliberation. These habit-forming businesses have no secret agenda or nefarious ambitions. They are in business to give people what they want, even if at times, what the consumer wants isn’t necessarily good for them. But like every other company, habit-forming businesses are run by well-intentioned people. Hard-working folks with families and dreams of their own. So how then can these two realities coexist? How can companies seek to hook their customers, while also being run by decent people who have just as visceral of an aversion to manipulation as the rest of us?

The Habit Business

The answer lies in the business imperative. An enterprises’ worth is the sum of the future profits it will generate. MBAs are taught to calculate the value of an enterprise this way and it is the benchmark investors use to determine the fair price of a company’s shares. CEOs and their management teams are evaluated by their ability to increase the value of their stock. Their job is to implement strategies to grow future cash flow by some combination of increasing revenues and decreasing expenses.

Creating consumer habits is an effective way to drive share price by increasing what companies call “customer lifetime value.” CLTV is the amount of money made from a customer before they switch to a competitor, stop using the product, or die. Some products have a very high CLTV. Credit card customers for example, tend to stay loyal for a very long time and are worth a bundle.

Someone Must Get Hooked

Acquiring customers is expensive and time consuming. Ensuring customers are habituated to using a product decreases these expenses, thereby increasing enterprise value.

It’s worth noting that a surprising number of businesses follow a negative binomial distribution, also known as a Pareto concentration. Typically thought of as the 80/20 rule, the phenomenon occurs wherever a few buyers account for the vast majority of revenue. However, at times that split can be much more skewed than one might think.

While for most consumer goods, the concentration tends to be 60/20, for online gaming companies like Zynga, 100% of the revenue comes from just 2% of players.

In most consumer-facing businesses the Pareto Law applies. These customers are obviously very important to the company because without them, the enterprise could not survive, their profit margins simply would not allow it.

The combination of a business imperative to drive shareholder value by increasing CLTV along with the identification of the most loyal customers, means companies spend significant resources competing for a small set of “heavy users.” Habit-forming businesses are therefore highly motivated to hook customers – and keep them using their products for as long as possible.

Contributed to Branding Strategy Insider by Nir Eyal. Excerpted from his book Hooked: How to Build Habit-Forming Products

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The Blake Project can help you identify and develop your brand purpose.

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The Adblockalypse

Fed up with the flood of ads getting between them and the content they seek, consumers have turned to ad blocking to clean up their online experience. Not only are they banishing the ads that annoy them, thanks to ad blockers, they’re hardly seeing any ads at all — it’s the adblockalypse.

25 Marketing Articles For A Changing World

What will the new year bring brands? From our perspective of the marketing world, at least 365 opportunities.

Opportunities to know your customer better, build stronger bonds, create value only you can deliver, forge new relationships and accelerate growth. Opportunities as large as the future you seek for your brand.

As we surge forward into a new year we thank you Branding Strategy Insider readers for offering your ideas, questions, suggestions, opinions and sometimes opposing views. You have given us the opportunity to grow as authors, educators and brand consultants, and have helped make Branding Strategy Insider the leading resource for marketing oriented leaders and professionals.

Now a look back on the 25 most read thought pieces of 2016 on Branding Strategy Insider. From first person accounts of iconic brand strategy to dramatic shifts in how brands are built and the disruptive marketing trends responsible to what brands need to do to stay relevant, we kept our focus on preparing marketers for what’s now and what’s next and for the journey every brand must take to earn a place in the future.

1. Twenty Motivations That Drive Brand Loyalty: Why do consumers keep brands in their lives? For all the talk that consumers don’t care about brands anymore and that loyalty is a thing of the past, the fact remains that branded goods account for huge swathes of the purchased economy. So what is it that people are attracted to? Here are 20 motivations, in no particular order, for why consumers might not choose the many alternatives being offered them.

2. Ten Disruptive Marketing Trends: Ten disruptive marketing trends that are shaping the future of brand leadership.

3. Ten Uniquely Powerful Brand Strategy Concepts: There are no shortcuts to building successful brands but there are many pathways. Here are ten you may not have considered.

4. The Business Model Of Luxury Brands: Luxury is a business model. This has been empirically fine tuned through time by those luxury brands that dominate the pantheon worldwide: Louis Vuitton, Chanel, Gucci, Hermès, Ferrari, Rolex and so on. These companies, many of which are still family owned, have crafted a unique common business model, a pillar of their resilience and profitability. It’s a business model that runs contrary to most present business models in any sector.

5. The Four Most Powerful Brand Codes: How do we recognize a brand? What do consumers see, and how different is that from the ways brands are structured? The most powerful brand codes seem to take these four forms.

6. Eight Marketing Beliefs That Are Hurting Brands: What could possibly be leading marketers astray today? Here are eight beliefs that are hurting brands.

7. The Measures Of Brand Equity: Every established brand should have a clear understanding of its brand equity.

8. Confusing Brand Strategy With Creative Strategy: Brand strategy and creative strategy are both necessary but the terms are not synonyms. Brand strategy is the business case for change at a brand level. It envisages the future position of a brand in the marketplace, based on the company’s wider business aspirations and its ability to deliver and market brands that align with that desired position.

9. How Brand Perceptions Are Formed In The Mind: Compelling research offers good news for brand managers because it reaffirms the importance of branding. It’s not just about the product inside. The brand matters because it tells consumers what to expect and influences how they evaluate a product. A strong brand gets the prefrontal cortex on your side.

10. Lies And The Declining Trust In Brands: Here are four factors that may be driving some brands to disregard consumer trust as a license to operate.

11. What Brands Need To Do To Stay Relevant: Brands come alive for people when they encapsulate ideas that consumers want to have in their lives. That’s partly what makes brands distinctive and desirable. So what do you do when your core idea is no longer as attractive as it used to be?

12. How Nike Shifted From A Sales To Marketing Mindset: When I stepped into the role of planning director inside Nike in the spring of 1986 marketing was a dirty word. At that time a marketing department didn’t exist and Nike had never written an annual marketing plan. There were three main obstacles preventing Nike from adopting a brand planning process.

13. Ten Guiding Principles For Effective Brand Building: At the heart of brand building is the search for more meaningful ways to connect with customers or end consumers. Getting good at connecting with consumers and building strong and relevant brands requires an end consumer orientation regarding how you frame problems and ask questions.

14. Seven Customer Experience Mistakes Brands Make: It’s widely known, and too often forgotten that brands stand or fall based on the customer experiences they create. If your customer experience is in free fall, one or more of these seven mistakes are most likely to blame.

15. Five Ways To Keep Your Brand Current: One of the hardest judgment calls for brand managers is currency. Brands must change to stay consistent yet they must also remain recognizable in order to preserve brand equity. So what should you change, and when?

16. The New Era Of Strategic Brand Partnerships: Partnership is about bringing brands together in arrangements that consumers want to have bundled in their lives. To be successful, brands will need to “plot” their position in consumers’ lives much more exactly.

17. Brands Grow With Empathy: The more empathy, the more validation. The more validation, the deeper the relationship. The deeper the relationship, the more commercial success of the brand through the return of repeated purchase, loyalty, advocacy, and ultimately cult status. Brands often fall short of establishing this chain reaction because, from the outset, brands fail to do a number of things.

18. Seven Insights For Emotional Branding: Leading brands have long studied the minds of their target customers, leveraging advances in psychology and behavioral science to gain competitive advantage and accelerate growth through strong emotional connections. For these brands no leadership ‘buy in’ is necessary. They are well past the ‘why’ and are perpetually interested in the ‘how’.

19. Two Powerful Lessons In Brand Pricing And Value: Two short stories illuminate powerful lessons in pricing and value for marketers and the brands they serve.

20. Five Brand Positioning Models: The P-A-S-P model (Purpose, Ambition, Strategy, Proposition) will be new to some as the expression ‘proposition’ rather than ‘positioning’ is used.

21. Eight Ways To Create Powerful Brand Rituals: Call them rituals, ceremonies, habits … associating a brand with a set behavior can have a powerful effect on loyalty and enjoyment.

22. Twenty Five Questions Every Startup-Brand Must Ask: Some searching questions, by way of a guide, for the leaders of companies expecting to build lucrative brands in the years ahead.

23. Brands Are Missing The Point Of Content Marketing: The intention of content marketing is to create stronger bonds with consumers. Sadly, that is not what is happening.

24. The Business Case For Building Brands: The next time you are asked to make a case for building a strong brand refer to the following eight fact-based insights.

25. How Disruptive Marketing Is Shaping Our Future: We know that the brands of the future will look a lot different from the brands of today. However, many brands are taking a long time to figure out exactly what they will look like. And all the while, the clocks are ticking and the business models are being burned to the ground.

*26. (Honorable Mention) Ten Characteristics Of The Modern Marketer: Today it is no longer enough to say you have digital “experts” or that you are data-driven. What does that mean in a perpetually changing world? So what will help marketers go above and beyond in the 21st Century? A well-rounded person who has these 10 skillsets.

Build A More Valuable Future For Your Brand. Join us in Hollywood, California for Brand Leadership in the Age of Disruption, our 5th annual competitive-learning event designed around brand strategy.

The Blake Project Can Help: The Brand Positioning Workshop

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

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By Vanessa DiMauro It’s that time of year again – holiday lights, sleigh bells and, of course, predictions for how the year ahead will unfold. This is what I see when I look into the snow globe of digital transformation. There will be a huge shift toward selective customer intimacy With the rise of digital […]

Director Terry Rayment depicts the transformational power of love and happiness with his 35mm spot “Understanding.” Cinematographer Kate Arizmendi helps Rayment display the power of visual storytelling at its best, capturing all the emotions beautifully on KODAK VISION3 500T 5219.

Kodak’s affiliation with the piece, which chronicles the relationship between a teenaged boy and his father as he struggles to accept his son’s homosexuality, speaks to the brand’s willingness to share socially relevant stories that have the power to spark change. Captured as a powerful and poignant slice of life, “Understanding” communicates the values of acceptance and equality that the Kodak brand holds close.

With minimal dialogue, the spot illustrates the struggle of a parent’s expectations weighed against the needs of the heart. The journey from misunderstanding and judgment ultimately comes to a point of full support, influenced by the discovery of a cherished moment caught in a photograph. The underlying message is delivered with a sense of realism and nuance: when seen through the eyes of those who love us, all who we choose to love are fully embraced.

Inspired to pay homage to the iconic Kodak brand, Terry Rayment set out to create a snapshot of family life that felt as if it could exist in any time period, in any town. Shepherded by Eskimo Executive Producer Kristofer Barton, “Understanding” was shot in rural Pennsylvania over the course of three days. Together with cinematographer Kate Arizmendi, they forewent stylized trends of contemporary filmmaking, instead opting to strip the compositions, the blocking and the camera direction down to their most fundamental forms. Then they reconstructed the scenes from the remaining raw building blocks of cinema, making sure that each moment had a clear narrative beat, which propelled the story forward. The creative approach paid off, the resulting spot has a timeless look and feel to it that will endure repeat viewings and remain culturally relevant for years after its release.

Director Terry Rayment began his career in Chicago’s agency world as an art director before literally moving across the street to become an Autodesk Flame apprentice. There he uncovered a deep love for the detail-driven world of post production. Soon Terry relocated to Detroit, where he launched Eskimo, specializing in editorial and finishing.

Terry’s human-driven directorial style quickly became in high demand. Notable work includes global campaigns for Wolverine and Cadillac and PSA story content for the University of Florida, as well as the popular short form documentary “Wonderland.”

CREATIVE CREDITS:
Nolan: Jaz Goodreau
Father: Adam Harper
Dylan: Taylor Turner
Mother: Andrea Marino
Claire: Reiley Trombetta

Production Company: Eskimo
Executive Producer: Kris Barton
Head of Production: David Martinez
Director: Terry Rayment
Producer: Christian Luedke
Art Director: Timothy Barker
Coordinator: Ryan Komorowski
Director of Photography: Kate Arizmendi
1st AC: Gino Varisano
2nd AC: Mike Toland
Loader: Will Dejessa
Camera House: Panavision NY
Gaffer: Geoff Taylor
Best Boy: Lorenzo Pace
Key Grip: Mike Fares
Best Boy Grip: Shane Moore
Production House: Expressway Grip, Philadelphia
Art Director: Timothy W. Stevens
Props: Mikael Simpson
Set Decorator: Michael Mizrahi
Casting: House Casting NY
Location Scout: Staci Hagenbaugh
Sound Mixer: Paul Aife
VTR: Chris Murphy
Script Supervisor: Charlie Rowe
HMU: Katie McGregor
Wardrobe: Deborah Artaza
Editor: Scott Hanson
Color House: The Mill – Chicago
Colorist: Luke Morrison
Composer: AJ Hochhalter
Special Thanks: Caleb Slain, Brooks Malberg, Lauren Martinez
Film Processing – Fotokem LA
Film Scanning – Cinelicious

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