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How Your Supply Chain Can
Jill is the company’s new Marketing Vice President. Her mission: develop a strategy to revitalize the brand and grow revenue 10%. She has thirty days to develop her new strategy and present it to the Board of Directors.
To prepare, she reviewed all of the current primary and secondary brand and market research. She commissioned a new survey of promising market segments. She worked with the head of Marketing Research, the Vice President of Public Relations, the Director of Retail Marketing and the Senior Vice President of Marketing Communications. She also worked with the three top business development and sales executives. After one month she was ready to present a bold new direction for the company.
The Board Members listened actively and were impressed by her knowledge and new ideas. She presented a compelling argument for the company’s new brand promise and an innovative strategy for communicating it consistently to target customers. At the conclusion of the presentation, the Chairman of the Board asked her one question, "You can make this promise to our customers, but how sure are you that our supply chain fulfillment capabilities can consistently support it?"
Delivering on the brand promise becomes a moment of truth in any customer relationship. This moment of truth can have a positive or negative impact on the customer’s perception of your brand. You may have great marketing communications and a superior product, but the buying experience stands between you and the customer. If the customer has a negative buying experience due to poor fulfillment, you have diluted the equity in your brand. And this happens all too often. So how do you make sure it doesn’t happen in your company?
Your Supply Chain is a Foundation for Building Brand Equity
Most marketing and brand executives spend little time thinking about their company’s supply chain. It is often regarded as either a nuisance or as irrelevant. However, in an era of ever-increasing customer demands and impatience, it is your supply chain that often represents a critical opportunity for you to build or destroy your brand equity. As Jan Twombly, a principal at The Rhythm of Business, stated: "Supply operations are forever directly related to demand; and managers can‘t treat them as separate." Consider the different experiences of Kmart and Cisco Systems. Kmart’s supply chain became a serious brand and customer-relationship liability, while Cisco has turned its supply chain capabilities into a core element of its brand promise.
A central aspect of Kmart’s marketing strategy was to issue circulars promoting sales of hot items. These efforts drove store traffic and led to an increase in sales of other items. However, the marketing efforts were not tied into the supply chain operations. As a result, there were frequent shortages of promoted items. Customers came in to buy the sale item, were frustrated that it wasn’t there, and left the store. After three or four similar experiences, customers began to ignore the circulars altogether. They began to distrust the retailer. Lack of coordination between marketing and the supply chain generated a brand nightmare.
Cisco Systems views its supply chain capabilities as core to its brand and customer-experience strategy. Cisco’s corporate web site is clear on the matter, "Taking orders is only one part of serving customer needs. Businesses must fulfill the promise they make to customers by delivering products and information upon request."
"One of the main objectives of our Cisco Service Parts business strategy is to use advanced supply chain management tools as a source of competitive advantage," said Jim Reily, Director of Global Product Services at Cisco in a CRMDaily.com interview last year. "Our primary expectation is a significant improvement in customer service and satisfaction resulting from better positioning of our critical inventory assets," Reily said. The article went on to highlight that, "a streamlined supply chain and more responsive customer service operations will be essential for Cisco as it goes forward with plans to expand its market share…"
Brand and marketing executives who ignore the influence of their supply chain on the customer experience do so at their own peril. An enthusiastic customer can be lost as a result of a single bad buying experience; and a prospective customer can be turned away from your product by a poor or inadequate buying experience.
By contrast, think about how much more enthusiastic and loyal customers became when they received their books two days early because Amazon upgraded their orders to express delivery free of charge. Consider all of the businesses and consumers who value Dell’s consistency and service enough to pay a little more for their commodity computer. And consider all of those shoppers at Wal*Mart. They are drawn to Wal*Mart’s brand promise, "Always Low Prices. Always." Wal*Mart fulfills that promise by employing the world’s most efficient supply chain. Each of these companies clearly articulates a brand promise and consistently delivers it by employing supply chains that efficiently fulfill and exceed customer expectations.
While Amazon, Dell and Wal*Mart each demonstrate that a supply chain can serve as a foundation for a strong brand, other companies have trouble retaining customers due to poor supply chain performance. It is time for brand and marketing executives to pay more attention to their supply chains. They must be accountable for aligning the brand promise with the company’s fulfillment capabilities because the supply chain powerfully impacts customer experience and brand perception.
Fulfilling the Brand Promises in Buying and Using Experiences -- Moments of Truth
Brands make promises to their customers. Performance. Style. Confidence. Security. Affiliation. Quality. Service. It is important to remember that the customer tests all of these promises. Many marketing executives learned long ago that promises associated with the using experience are critical. When a customer uses a product he experiences a moment of truth. The promise is either fulfilled or it is not.
If a customer purchases a product and it does not work or he cannot figure out how to use it, you are certain to have a brand equity issue on your hands. As a result, marketers have spent a great deal of time and attention on two aspects of the using experience: product quality and user-centered design. These efforts have paid great dividends for many brands such as Apple, Nike, and Symbol Technologies.
However, few marketers have spent a comparable amount of time on the other moment of truth –- the buying experience. The buying experience starts during the purchase-education process and continues through purchase commitment (the order) and ends with product or service delivery. In a retail environment, this may all happen in the confines of the store. For a new car purchase, the cycle generally starts with the customer evaluating new cars on the manufacturer’s website. It then continues through the test drive and financing at the dealership, and finally concludes when the car is driven off the lot several days later.
For many products, and indeed most services, the buying experience is every bit as critical in the customer-relationship as the using experience. Over the years, many marketers have not thought about the buying experience much beyond the "P" for placement. By contrast, many savvy marketers have transformed their supply chains to dramatically improve their customers’ buying experience.
Rebuilding a Brand by Improving the Supply Chain and the Buying Experience -- HRE Wheels
Consider HRE Wheels, a luxury brand in the custom automotive wheel business. When new management took over the business six years ago, the market was growing at 30% annually; but HRE had no revenue growth and faced mounting losses.
Breaking down barriers in the buying process
If you sell custom wheels direct, the typical consumer must arrange to have them transported to an automotive retailer and then mounted and balanced, adding extra steps to the buying process. Many of HRE’s current customer-base of Porsche, Ferrari, and BMW drivers are accustomed to having other people handle these details for them. Since HRE was inadvertently making it hard for these customers to buy and use its products, it needed to focus sales on a much smaller market segment -- largely customers who worked on their cars themselves. The new management team set out to change that situation by making the wheels more readily available to an entirely new set of customers.
"Distributors are now key members of our supply chain. They are critical to getting our wheels to the end customer," says Evan Kinsella, HRE Wheels President and CEO. Kinsella adds that this process wasn’t simple. "We had a strategy to leverage the highest quality and service oriented shops we could find. In our case, it wasn’t as easy as signing up some large chain. These stores didn’t cater to our target clientele. We had to find the right partners. We had to build a network one store at a time across the U.S."
Developing a reputation for consistency
Creating a barrier in the buying process had significant impact on the company’s brand and limited its market opportunities; but HRE faced an even bigger brand challenge by regularly missing delivery dates. This operational failure irritated its customers and was not a recipe for positive word-of-mouth advertising or repeat purchases. "The industry had labeled us a company that didn’t live up to its promises," says Kinsella.
Whereas missed delivery dates and backlogs were an irritant to consumers buying direct, these issues represented the threat of canceled orders and lost business to the aftermarket shops. To make their customers happy, shop owners must set expectations properly and meet them consistently. For HRE Wheels, becoming the image and performance leader in its category was insufficient. Improving HRE’s on-time delivery record was critical to more than just its end customers. It was also critical to HRE’s efforts to convince dealers to push its products and expand its market reach.
Kinsella adds, "We had to develop a production process starting with our suppliers through to our distributors that could consistently deliver quality product on time. We met with our key suppliers to improve quality and develop ordering programs that would minimize the risk of stock-outs of critical materials. First we had to get it right internally. Then we had to broadcast the message and deliver on the promise."
The results speak for themselves. Over the past six years, HRE Wheels has grown six fold and far outpaced all of its competitors. It now delivers custom wheel orders two weeks faster, and consistently meets its promised delivery dates. Its reputation with distributors and customers is unparalleled for both product quality and service. HRE’s brand success is now well recognized. However, what most people don’t know is that HRE would not have succeeded without entirely transforming its supply chain.
Take a Good Look at Your Supply Chain
One promise that is expected of every brand is delivering the right product, to the right place, at the right time. Your supply chain capabilities can make or break your ability to fulfill that promise. As a result, your supply chain can powerfully impact your brand equity, positively or negatively. Brands with substantial equity favorably influence purchasing behavior, command a price premium, and have referral generating customers. HRE Wheels, Cisco Systems, Dell, Amazon and Wal*Mart all understand that; and they reap the benefits every day. Kmart and Jill -- the fictitious new Marketing Vice President -- did not, putting their entire strategy and brand at risk in the process.
Positive buying experiences set the stage for positive using experiences. Customers want to associate themselves with brands that keep their promises. They believe that the brand understands their needs and they feel good about using it. These customers can be most forgiving when a product needs repair or replacement. They also tend to be among the most loyal customers when repurchase decisions come around.
When you think about your brand promise, make sure you spend as much time fulfilling the buying experience promise as you do on the image, marketing communications, and product engineering. This requires both knowledge of your supply chain and the leadership to shape it to meet your brand needs. It’s time you begin using your supply chain to support and build your brand. It can reveal hidden assets in building your brand and can ensure that your brand is not destroyed by fulfillment deficiencies.
Three Questions for Marketing and Brand Executives to Ask Themselves
Many more articles in Logistics & Supply Chain in The CEO Refresher Archives