The Microsoft Brand Paradox

Its reputation apparently in retreat, Microsoft still has banner year after banner year, and is among the world’s most valuable brands. I believe this is a case that Keller (2008, p 72) describes in which a company gets behavior loyalty even though they don't have an engaging resonance with its consumers. Haigh and Knowles (2004, p 24) additionally note that other intangibles are included in various definitions of a brand. These other intangibles include: 1.) Patents, and software; 2.) Business process and supply chain configurations; and 3.) Contracts, distribution rights, and licenses.

Microsoft has fundamental patents on computer technology that is uses as a barrier to entry. Parloff (2007, p 1) reports that Microsoft is using this intellectual property to outmaneuver Open Source competitors. Microsoft also has an effective business process. A common gag in the high-tech industry is that there are two types of sales reps, those who make their quota and new ones. This may be true for IBM, Oracle and Sun but not Microsoft, who keeps on sales reps even if struggling and works with them. The sales teams eventually gain in-depth knowledge of their customer accounts. Neumeier (2006, p 18) talks about bridging the brand gap, and this requires “crystal clear and potent communications,” the kind Microsoft gets from reps with long experience on an account.

Microsoft has a long-standing relationship with the computer market in general. Keller goes on (p 84) to discuss customer relationship equity that creates a “tendency to stick with a product, above and beyond objective and subjective assessments of the brand.”He postulates (p 86) that increasing customer equity (like relationship equity) results in increased brand value.

My own experience is that this is particularly true in high-tech. There is great risk and high cost in migrating from one technology platform to another. The natural tendency is to retain the existing relationship, unless the brand in question poses more risk than a change. Keller (p 9) notes that brand loyalty provides a “predictability and security of demand” and is a barrier of entry to competitors.

A strong brand can also become a virtuous circle: a strong brand results in better market performance, better market performance increases brand awareness and image, which in turn increase brand strength. Keller says (p 12) that a strong brand is valuable reassurance to business customers. These are large buyers and I know Microsoft has sales teams dedicated to these large accounts, and top execs are also.

One very important value delivery strategy in high-tech is Total Cost of Ownership (TCO). Keller (p 14) observes that a value delivery strategy is an essential element for selling to business customers. Microsoft is aware of this science of branding 1-1, and has imbued in corporate customers the belief that its brand has the lowest TCO. For example, Window’s ease of use gives it a lower total cost of ownership (TCO) in four of five usage patterns tested (see Gaudin, 2002, p1; Microsoft TCO, 2008, p1; Microsoft Speedy Hire, 2007, p1; and Microsoft Key Stone, 2007, p1).

Keller also asserts (p 16) that high-tech customers are “committing to a long-term relationship.” Microsoft has structured a brand that has lasted over time. It provides presales technical support, product support services after sales, consulting services, and a strong commitment to research and development so an investment in Microsoft will retain its value over time.

Microsoft continuously improves its software through investments to improve fundamentals such as reliability, security, manageability, and performance. This investment in tomorrow by Microsoft helps safeguard learning Microsoft technology. Woodie (2006, p1) cites an IDC study that in commitment to long term viability, Microsoft just edged out IBM for top spot.

These are seasons Microsoft has a strong brand but not an equally strong reputation.

References
Gaudin, Sharon (December 6, 2002). Microsoft-Backed Study Slams Linux TCO. Datamation.

Haigh, D. and J. Knowles (June 2004). What’s in a brand? Marketing Management.

Keller, K (2008). Strategic Brand Management. Pearson/Prentice-Hall.

Microsoft Key Stone (2007). Retrieved on October 24, 2008 from http://www.microsoft.com/windowsserver/compare/ReportsDetails.mspx?recid=2

Microsoft Speedy Hire (2007). Speedy Hire Case Study. Retrieved on October 24, 2008 from http://www.microsoft.com/windowsserver/compare/CaseStudyDetails.mspx?recid=155

Microsoft TCO (2008). Retrieved on October 24, 2008 from http://www.microsoft.com/windowsserver/compare/linux/windows-server-tco.mspx

Neumeier, M (2006). The Brand Gap. New Riders.

Parloff, Roger (May 14 2007). Microsoft takes on the free world. Fortune Magazine. Retrieved on October 24, 2008 from http://money.cnn.com/magazines/fortune/fortune_archive/2007/05/28/100033867/

Woodie, Alex (January 10, 2006). Microsoft's Partner Channel the Strongest for Software, IDC Says.Retrieved on October 24, 2008 from http://www.itjungle.com/two/two011106-story01.html

Brand Palimpsests

I am loyal to Coca Cola in the soft drink product category. Coke communicates vitality and always has an appeal to modernity. As Neumeier and Keller postulate, successful products are experiential and Coke is that but further, it’s a part of my life. With its campaigns throughout history, The Pause that Refreshes, The Real Thing, and Max Headroom, Coke positions itself as something that fits into my lifestyle. It’s a cultural touchstone.

To me Coke communicates style and energy while Pepsi, in contrast, seems base and impoverished. This is not a result of what Pepsi is doing today, because I find them to be adequately following Coke’s initiatives. For example, Coke is leading the beverage industry in environmentally friendly containers (see Business Wire). Everyone else, including Pepsi is now following suit. No, my perception of Pepsi has to do with its history. Past communications were low cost in comparison to Coke, no art and clumsy.

The Pepsi Generation. Yipes! They improved over time but my consciousness of them is a palimpsest and the earlier writing they did on my psyche won’t ever go away completely.
They have never had anything like the Hilltop commercial: Hilltop Ad. This is how I still view Coca Cola.

On the other hand, in the computer hardware category, I am completely agnostic. I do not differentiate between Dell, HP, Compaq, eMachines, Sony, or any of them. Microsoft Windows has commoditized computer hardware. Price is the overriding determinant in my purchase decision. I am not loyal because I am really buying Windows, which sits between the computer and myself. Microsoft is the middleman controlling my access to what I want.

I have a growing interest in Apple, and now have two Macs. Apple is a completely different product and does not try to compete on hardware features but has given me a different middleman, a Linux based operating system - OS X, to the Microsoft applications I like, especially Office. Perhaps the others could try the same thing, although if they do they may commoditize operating systems, and drag Apple and even Microsoft into the same bad place they now occupy as undifferentiated products in a losing race to the lowest price.


References

Keller, Kevin (2008). Strategic Brand Management 3rd Ed. Pearson/Prentice-Hall.

Neumeier, Marty (2006). The Brand Gap. New Riders.

Causal Maps

As discussed in the previous posting, we determine the stability of a causal loop by offsetting plus and minus segments in the loop. A Causal Map is a hierarchy of interacting, interlocking causal loops. A map represents the overall model. An important question for such a model is will it reach equilibrium based on the nature of casual loops within it.

There are several strategies for determining the stability of a map that can be generalized into two categories: 1). Loops within a map are of unequal importance; 2.) Loops are of equal importance.

If loops are of unequal importance, one strategy for predicting equilibrium is to assume the fate of system is determined by most important loop. An issue arises that the judgment of loop importance may be arbitrary. We can address this with knowledge of the process being modeled to argue about the most important inner dynamic.

On the other hand, we can also neutrally look at which loop has the most variables of interest and asssume such a loop is most important. The greater the number of inputs to and outputs from a variable, the greater its importance. The loop with the greatest number of important variables is the most important loop. This is also known as the degree of the system.

In the example of urbanization that was modeled in the previous posting, variables P, M, S all have more than one output, as do variables P, D, B. So P,M,S,D,B are most important variables. We look for the loop that contains greatest number of these: P-M-S-B-D-P is that loop.

Causal Loop P-M-S-B-D-P has an even number of negative signs so it is deviation amplifying. We would conclude the system represented by the entire Causal Map is unstable, using this strategy. It will eventually destroy itself if something is not dramatically changed.

Now let’s assume a different strategy category for P-M-S-B-D-P –that the loops are of equal importance. To predict system stability, count the number of negative loops. If this is an even number, then the system is deviation amplifying, if odd then stable. In the urbanization case, we have one of the four loops negative, P-G-B-D-P. If the relationships are of equal importance, in our example the result is a stable system. The system will ultimately reach an equilibrium.

Another tactic for a strategy that assumes the causal loops in a map are of equal importance is to count the number of negative relationships between variables, making sure to count a relationship more than once if is in multiple loops. Relational algebras can be developed for such calculations for maps of any size.

It’s possible both strategy categories are applicable to a map, albeit at different times. Urbanization, in our example, may be stable for some period of time when all causal relationships are more or less equal in effect on overall system. Imbalances can, however, accumulate over time to change the egalitarian inter-relationships.

A differential speed that cycles are completed, or a growth in the number of times a particular loop is activated across periods of time can result in an aristocratic set of relationships – some holding more power and control over the system. Then we would change from a strategy assuming equal importance of all loops to analyzing the most important loop.

In sum, Causal Maps are a means to portray a complex interdependence so one can better question the situation. They help to impose some order to the domain being analyzed.

Causal Loops

A causal map is a specific type of model focusing on causal factors. It is an abstract model that uses cause and effect logic to describe the behavior of a system. Causal Models have found empirical realizations in many different fields and have been integral to theories of cognitive balance proposed by Heider in 1946 and Kelly in 1955, and since then have been applied in psychology, international relations, management sciences, game theory, group decision, and electric circuits’ analysis. They have a natural application to integrated management communications.

To construct a causal map, start by naming the variables of the relationship. Next, if one variable affects another draw a line from the “cause” to the “effect.” Place a plus or minus sign next to each line drawn according to the following: + means the two connected events move together, when a cause increases so does effect; - means the two connected events move in opposite directions, when a cause increases the effect decreases.

Consider Maruyama’s model of urban growth (see Weick for a fuller explanation of this model.) Maruyama defined the variables as:

• Number of people in city
• Modernization
• Migration into a city
• Sanitation facilities
• Number of diseases
• Bacteria per area
• Amount of garbage per area

His analysis resulted in the following relationships:

Any variable in the map that only has lines coming into it is a dependent variable. Any variable in the map that only has lines going away from it is an independent variable. A variable that has both lines in and lines out is an interdependent variable. In Maruyama’s solution above, all variables are interdependent.

To analyze with a causal map, find causal loops. To do this, start with an interdependent variable. See if there is a pathway leading out on the from-lines eventually returning on the to-lines, i.e. start with interdependent variable and see if it has paths back to itself. Here are the causal loops in the Maruyama map:

If there is an even number of minus signs (0 is even) in a loop it is a deviation amplifying loop, aka vicious circle or virtuous circle depending on your viewpoint. Trace what happens when a variable in one of the loops increases. Take loop P-M-C-P, image (1) above. An action to increase P (number of people in a city), goes through the loop, and at the end, yet a further increase in P is produced.

If there is an even number of minus signs (0 is even) in a loop it is a deviation amplifying loop. This means there is NO REGULATION OR CONTROL. Once a variable starts in a direction, it will continue that way until system is destroyed or a dramatic change occurs.

If there are an odd number of minus signs in a loop it is a deviation counteracting loop. These impose stability on the system, self regulation. Once again, trace what happens when a variable in one of the loops in our example increases. Take loop P-G-B-D-P, image (4) above. An action to increase P (number of people in a city), goes through the loop, and at the end, a decrease in P is produced. This effect, opposite from the cause results in a stability for the loop. A change eventually dampens into an equilibrium.

When we examine relationships with complex interactions, such as integrated marketing communications, we can use a causal map. After defining the varibales and their realtionships, we would

• Look for interdependent variables
• Causal loops
• Presence or absence of control
• Deviation counteracting loops mean system is basically stable

Is stable always good? Change may be an objective, in which case working a deviation amplifying loop would be advantageous.


References

Weick, Karl (1979). The Social Psychology of Organizing, 2nd Edition. McGraw-Hill.