Zappos Creates Market Value in Amazon Eyes

Amazon is acquiring Zappos.com for $847 Million. With over a billion in revenue (See Forbes article) and reportedly earning $40MM, Zappos has clearly shown that there is profit is shoes. Not only profit, but equity value as well.

Where does all that value come from? Customer service. Zappos has differentiated itself among all shoe sellers by devoted, passionate, exceptional customer service. they successfully took a near-commodity product category and created brand value by differentiating themselves on service - filling a much needed gap in the online marketplace. (By the way, Amazon values customer service and has been a leader in technology solutions for serice - witness their book recommendations.) The lesson for marketers is to look for unconventional ways to differentiate the entire solution bundle (products and services), and you can create real market value.

Economic Stimulus, Brands, and the Social Contract

Our economic woes and the ongoing efforts to stimulate the economy strike me as having some comparisons and learning for corporate brand marketers. The private sector is experiencing major balance sheet issues with tight credit markets freezing the system. While political diffferences about the form exist, nearly all economists agree that some form of governmental stimulus is necessary. In essence, the government is forming a social contract with the private sector that says that government will take a balance sheet hit (increased deficit) to feed the private sector needs for this year and beyond. In return, following the end of the recession the private sector will need to help the government improve its balance sheet by reducing the deficit.

For corporate brands, this is in some ways like brands seeking corporate marketing investment to fund brand revitalization with the promise of generating future profits for the organization. As a brand leader, think about the nature of the organizational contract that your brand is making with the company. Show the company the long term return on investment proposition that you are advocating for the brand.

Democratic Party brand value proposition

Stepping aside from the typical post about Marketing ROI, today's comment is on political branding. Regardless of your politcal inclinations, it's a fascinating situation to watch from a brand marketing perspective. Did you see the speeches by Hillary and Bill Clinton over the past two nights at the Democratic convention? It's a classic case of attempting to integrate all brand messaging into a cohesive brand value proposition. In this case, built around the candidacy of Barack Obama. The brand messaging has been fractured in a highy public way during the competitive primary season. As with any brand shifting it's core communication, the key question is whether the target audience finds the new messages (from Bill and Hillary) relevant, cohesive, and believable. For the Democrats, time will tell. For your brand, is your messaging consistent?

Brand Value

Brand marketers can learn about ways to drive the ROI and value of their brands by learning from other disciplines. For example, in the world of business acquisition and sale the factors that are used to analyze core business valuation can be used to assess the strength and potential ROI of an existing brand. Buyers and sellers will conduct a SWOT anaylsis of the business, just as brand marketers anlayze the competitive strength of brands. In the acquisition world, the multiple used against EBIDTA is generally larger for larger businesses than small businesses. So to, this general rule might be applied to evaluate the relative strength of a brand. Larger share brands are generally (although not always - strength in a key niche can be valuable) more valuable than lower share brands, and there has been sufficient research conducted to document the strenght and added value of being the share leader. Business valuations typically also look at the concentration among key customers. Too much business with a core customer may lower the overall valuation because of the increased risk. This holds true for brands - too much concetration with WalMart can be dangerous for the brand. Business valuations may be lower for business where the owner is sole rainmaker and future sales are at risk when a change in control occurs. For brands, brand value may be at greater risk when a brand spokesperson or long-term brand leader has too great a role in the personality of the brand. So,take a moment and see what you can learn by looking at your brandin the eyes of a potential buyer.