Making And Breaking Memory Structures

Quick Read: Generating awareness or influencing consideration, driving distinctiveness or establishing differentiation, the key is to effectively leverage memory structures.

Distinctiveness is said to be the key in driving penetration and hence growth. But what sort of distinctiveness is most effective? 

In other words, when a brand is launched/re-launched, how do you strike that elsuive balance –  between being rooted in the current to drive enough familiarity, yet bring in an element of newness to drive differentiation along a chosen set of dimensions to drive favorability. 

The key lies in memory structures. 

As this insightful paper says, while driving distinctiveness for a brand, a key consideration is how much of your mix should reflect the existing perceptions of your brand locked in consumers’ “memory structure”, and how much should break with this.

And why are memory structures important?

This is because, as per Phil Barden in Decoded, we are known to first process any new stimulus from a brand (advertising, packaging, activation) “implicitly”. This is a subconscious reaction based on our intuition & past experiences locked in our memory structures. And that’s where most of the heavy lifting is said to happen before the rational mind kicks in for decision making.

Blog Decision Making(Implict and Explicit processing of stimulus, Source)

So it must come as no surprise that some of the smartest techniques in creating awareness for new brands are those that do a great job at playing with our existing memory structures.

Two recent, notable (and slightly non traditional) examples.

Dumb Starbucks Coffee

Dumb Starbucks Coffee(The Dumb Starbucks Coffee store in LA. Source)

No it’s not a joke. This has been an actual store with everything from the signage, menu, the cup sizes, right till the music CDs sold by the cahsier looking exactly like that in a Starbucks Store, albeit with one small modifier – the word ‘DUMB’ as a prefix.

And why DUMB? Parody law. 

As this awesome FAQ reads: “Although we are a fully functioning coffee shop, for legal reasons Dumb Starbusks needs to be categorized as a work of parody art. So, in the eyes of the law, our “coffee shop” is actually an art gallery and the “coffee” you’re buying is considered the art. But that’s for our lawyers to worry about. All you need to do is enjoy our delicious coffee!”

Rated as one of smartest Guerrilla Marketing stunt by Comedy Central to generate buzz around their new show, this attempt created a social media sensation in just 2 days before it faced a ‘notice of closure’.

Despite being a shortlived ‘experiment’/art installation (or whatever we chose to call it), by playing smartly on our existing memory structures “Dumb Starbucks” proved itself to be an ingenuous idea from a venture that wanted a big bang for a small budget.

And boy did they get it!

CitizenM Hotels

Can you create awareness by challenging our existing memory structures of a category?

A new campaign from CitizenM hotels shows how. See the ad here

I liked how it evokes all the memories that we have of conventional hotels untill it just shatters them, thereby piquing our interest levels in the brand. In fact – depending upon the viewer’s context –  I would argue that it does a briliant job at more than just generating awareness.

All managed by neatly piggy backing on our existing memory structures of a category.

(H/T to L Bhat for the CitizenM film, and to Robert for this riff on Dumb Starbucks. Featured Image: source)

Nespresso – An Unsustainable Business Model?

 Single-serving coffee made at home.  That’s the category Nespresso operates in – a segment estimated to be 8 billion USD in 2012 (source).

Nespresso

Some laudable facts regarding Nespresso to start with:

  •  It took 30 years for Nespresso to get to where it is now.
  • Their first patent was registered in 1976 and it was launched internationally in 1991.
  • As of 2012,  their concept (machine, capsule, service) is subject to 1,700 patents.
  • Features celebrities, such as George Clooney and John Malkovich, as brand ambassadors.
  • At 55 cents for a 4-g capsule, Nespresso coffee works out to a nerve-jangling $62 per lb. ($137 per kg). And the hefty markup doesn’t seem to bother its fans.
  • Is rumored to command gross margins at about 85%, compared with 40% to 50% for regular drip-coffee brands.
  • The company confirmed that  Nespresso is targeting to grow sales by around half a billion francs in 2013.

(sources for the above information: 1, 2, 3, 4)

As a brand, Nespresso has been vaunted as the “Apple of coffee pods” riding high on the classic razor/razor-blade business model – otherwise called as the Vendor Lock In business model.  See an informative video here on the specifics of the Nespresso business model using the framework of Business Model Canvas.

Nespresso Business Model

Now the not so good news for Nespresso is the emergence of nearly 100 competitors around the world including 50 that claim compatibility with the Nespresso system (many of Nespresso’s patents have expired in 2012).  A more recent Reuters report on the latest threat to Nespresso from Mondelez…

Mondelez International, the world’s second-biggest coffee maker, is going head to head with larger rival Nestle by launching capsules compatible with its Nespresso system to steal a share of the premium coffee market.

The capsules will be sold under the Jacobs and Carte Noire brands in many EU markets in the second half of 2013 – the biggest challenge yet for the $4.4 billion (2.8 billion pounds) Nespresso brand that has sued many copycats.

These are just the warning bells for the company as many more brands jump onto the bandwagon of this fast growing coffee segment.

David Taylor on the brandgym blog posits that these moves can be in the larger interest of Nespresso as long as it ensures the following:

  • Benefit from market growth: Even if Nespresso’s share drops, sales can still increase if the market is growing.
  • Keep product quality up: Continue offering a better coffee experience through its select blend of coffee.
  • “Load” existing customers: Defend against the Mondelez launch by loading its existing customers with product, and so taking them out of the market.
  • Drive distribution: Drive distribution in new channels. e.g., store-within-store formats.
  • Tell a product story:  have a bit more product “sausage” to complement the emotional “sizzle”

I would however beg to disagree here, as I suspect if the current business model can be sustainable in the long term. And my argument is equally applicable to the Tassimo’s, Dolce Gusto’s, Keurig’s and Verismo’s of the world. Why?

Insight #1: Which business are the Nespresso’s of the world actually  into

These brands are not in the business of delivering convenient, barista like coffee at home. Instead they are in the business of making cup after cup of a consistent brew of coffee on demand with consistent being the operative word. Guardian reports

..while pod machines might not make great coffee, they do make a consistent cup. This is making them irresistible to high-end restaurants…. Nespresso machines can now be found in the kitchens of around 30% of the world’s 2,400 Michelin-starred restaurants. The appeal is obvious –they’re consistent, cheaper than hiring a barista and take up less space than a traditional espresso machine.

Insight #2: What can I learn from a cup of Starbucks coffee that bears my name? 

One thing I enjoy the most whenever I queue up at a Starbucks for my cuppa is eavesdropping on how different people want their coffee to be customized (a Quadriginoctuple Frappucino anyone?) and finally seeing them hold on to the cup with their name scribbled on it with an affection and warmth that comes out of familiarity and a sense of having co-created the cup coffee (by the sheer act of asking for a slightly personalized brew!)

The scribbled name on the cup just seals the deal in a magical way.  (speak about The IKEA Effect)

starbucks_cup

Now based on these 2 insights…

What if a ‘coffee pod’ sets up a unique proposition of designing a one of its kind, exclusive and a truly unique coffee blend concocted to your minutest specifications and delivered it to you as your own coffee pod  (like that cup of starbucks with your name on it) for you to be able to enjoy this very same cup of coffee day after day using the machine back home?

The benefits are obvious: enduring consumer relationships, deeper consumer insights, a treasure trove of data on how people love their coffee, a truly unique blend that only you can deliver, resulting in pods that consumers are willing to pay a premium for and finally pods that cannot be easily replicated by the “me too’s” of the world.

Speak about infusing authenticity to the  vendor lock in business model.