Brand Winners... And Losers: Pirates and Citigroup
The Marketing Doctor says:
This week’s brand winner —please take with a grain of (sea) salt— and loser:
Well maties, you know it’s been a bad week for the modern economy when the Marketing Doctor has to travel to the Gulf of Aden to find his winner. But he has found them: a rare bunch whose marketing plan actually seems to be working these days. Unfortunately, they are also criminals and the scourge of the seas.
Aargh. I’m talking about pirates of course.
With their capture this week of the Sirius Star, almost five hundred miles off the coast of Somalia with her $100 million dollars worth of cargo, and their brazen attack on the Indian Navy, pirates have proclaimed a brand comeback.
Turns out that the Somalian pirates have been quietly making a lot of money in 2008 (according to the BBC they’ve raked in over 150 million dollars this year in the form of ransoms), and now we all know about it.
What can we marketers learn from a band of brigands?
Given that as far as we know they’re not actually organized in any corporate way, the biggest lesson for the marketer is that sticking to a successful business model can serve as a powerful promotional force.
How? The pirate brand is built on repeat performances and the assumptions and expectations of their Target Market. (In the case of the pirates, “Target Market” can be shortened to “Target”).
Basically, these pirates might be fierce, but more importantly they have established a standard set of expectations in their victims: 1) they can capture huge ships successfully, and no crew is impervious; and 2) once aboard they take charge but remain relatively humane and can be counted on to turn the ship, cargo and crew over for cash. This means that their repeat performances have trained crews to surrender and for ship owners to pay up.
Call this a negative feedback loop for the maritime world, but what’s essentially happening to the pirate brand (same thing happened centuries ago) is that it’s rapidly growing because these expectations have made their work easier and dependably profitable. This recalls how just the fear of Blackbeard and his ilk would lead to easy captures centuries ago.
Of course, as sometimes happens in marketing —especially with criminal enterprises— too much (visible) success can prove deadly for a brand.
I suspect that this will happen with the pirates. Now, because of all the media coverage, the world beyond maritime professionals is becoming aware of the scope of the pirates’ profit margins, and some action will probably be taken.
For a hint at what kind of action, see this fascinating history from the Wall Street Journal on piracy and how bold intervention by the United States brought a major piracy operation to an end in the 19th century.
Citigroup. Citigroup is in deep trouble. A closing price of $3.77 (from a 52-week high of $55) is enough for them to earn this week’s loser category.
Part of the problem, though, goes way back and has to do with not applying the marketing concept to their growth.
History repeats itself, and that’s what we’re seeing with Citibank and other huge companies that grew through acquisitions and mergers, which created unwieldy brands that easily lost focus on their core businesses.
If marketing reality had been applied, it is unlikely that we would have seen the unsustainable growth and subsequent collapse of this company.
Because marketing reality would have asked the central question: what was the marketing advantage of putting two big companies like these (i.e., Citibank and Travelers) together?
Decades ago, the business world was gulled by the Wall Street rage to create huge conglomerates —hulking companies with unrelated businesses that were cobbled together and then discredited as business models.
Citigroup might not have been as bad as these, but somehow the same thing has basically happened again in this case and with other companies in recent years.
We don’t really call them conglomerates anymore, and we talked about “synergies,” but the basic idea was the same: create massive companies with hundreds of thousands of employees, which would supposedly save bottom-line costs and create one-stop shopping for consumers and companies.
Leading with marketing rather than deal finance would have shown that the basic natures of a bank and an insurance company are very different, and combining them would only dilute both. If only marketing were understood to be a leading indicator and guide in business!
And it wasn’t just the insurance business that hurt Citigroup; it was the financial adventurism into big time leverage and away from its brand’s consumer banking history. (Here’s that history, by the way). Again, real marketing would have curbed this behavior.
The bank that invented compound interest accounts, consumer checking and certificates of deposit, and pioneered the ATM, has strayed a long way from its roots (to get a great overview of the nuts and bolts of how far they strayed, see this weekend’s exhaustive article in The New York Times).
A few months ago, I posted on how banks were going to have to return to their consumer banking fundamentals to prosper in this new era. In short, they had to get boring and dependable again. I hope it’s not too late for Citigroup to figure this out.
To do this, my guess is that they’ll have to sell off the parts that don’t fit together (first by splitting the banking and insurance parts) and then shrink. From there, if they survive —which most people predict because they are “too big to fail”— success will come from the kind of marketing discipline that will remind each component brand what it is all about, who its Target Market is and how to go about serving those Target Market needs and restoring the bottom line again.
One thing is for sure, the way out of this mess isn’t through more financial piracy —mergers and acquisitions will only further dilute the marketing concept!
And remember, it’s always easier when you keep marketing and branding in mind.
TODAY'S TANTILLO TAKEAWAY -
Real Marketing demands that some pretty simple questions need to be asked: What products do I want to market? What products classes do I understand? Who is my Target Market? How can my products satisfy my Target Market's needs?