Is Premium Brand Development A Double-Edged Sword?

One must remain sharp to fend off the pirates — and the vikings.

First, you build your brand (you’ve heard us say this before).

But your work’s not done. You must then protect your brand. You must be on guard not just against your competitors, but also actual counterfeiters, and brand knockoffs.

That’s not a huge surprise, especially if you’ve ever been offered an eye-widening bargain for a new “Gucchi” handbag or “Rollects” timepiece. It might shock you to learn, though, that this is hardly a new phenomenon. Premium brands were being harried by knock-offs much earlier than most of us realize.

How early? At least as early as the Viking age — over 1,000 years ago.

The well-equipped Viking, as he set out from Scandinavia on his dark errands, might wear at his hip the finest sword he could afford. We know from the archeological evidence that the most sought-after sword in those days was the Ulfberht.

No one today is sure exactly what the word Ulfberht means. It might have been a family name, but since the swords were in production for well over a century, it probably wasn’t the name of a single craftsman. It was clearly a brand, though, in the most literal sense. The word was proudly and intricately inlaid into the steel of the blade.

A few dozen Ulfberhts have been recovered and are in museums around the world. Not long ago, researchers noticed something odd about them. About a third of them bear their “trademark” in this format: +ULFBERH+T. Tested metallurgically, the steel of these blades were found to be remarkable: extremely high-quality carbon steel forged in a process that wouldn’t be recreated in Europe for centuries.

The others, which comprise the majority, are branded +ULFBERHT+ and are made of cheap, inferior metal. Our hypothetical Viking would have no way of knowing this without access to a scanning electron microscope…or until his prized sword shattered during battle.

The battle metaphor is pretty common in business, marketing, and yes, branding. Some wonder if it might be hyperbole. Our 1,000-year-old case study insists it isn’t. Consumers buy brands they trust because they’re expecting consistency in quality and service. Knock-offs dilute that quality and erode that trust.

And even today, long after the last Viking ship has sailed, this can still be a matter of life and death.

The C4

1. Brand counterfeiting isn’t just about cheap handbags that look vaguely like the original. Everything from auto parts to smoke detectors are being counterfeited. Cheap knock-offs can and do hurt people.
2. A thousand years ago, some unlucky Vikings learned this the hard way. The expensive+ULFBERH+T and the affordable +ULFBERHT+ looked equally shiny and nice just off the showroom floor. It was only when its owner needed it most that the metal’s mettle was truly tested.
3. Consumers and brand-owners are both in similar peril today. Every product, every brand is subject to counterfeiting. Only an informed public and a proactive business community can fight that.
4. First you build your brand, then you protect it. Branding is a process that never stops. Yes, we’ve said it before, and we’re sure to say it again.

Read Our Lips

Advertising is a cost of doing business.

Tax policy is such a multifaceted thing — if it weren’t so dry and yawn-inducing, it would make a fascinating case study for the reach and scope of government. It creates and regulates the flow of revenue into the treasury, of course, but it’s arguable whether this is its most important function.

Tax policy is also a cudgel, or a spur. It encourages certain types of behavior, while discouraging others. Very often that’s entirely deliberate. There’s a proposal under discussion right now to levy a 10% tax on the use of tanning beds…not so much because those extra dollars are needed, but rather to prevent, hopefully, some number of new cases of self-inflicted melanoma.

That’s all well and good. But what about the unintended consequences of tax policy? What about tax policy that will discourage behavior that no one can argue is detrimental?

Like buying American.

Separate committees in both the House and Senate are currently discussing overhauls to the U.S. tax code. Both committees, it’s been reported, are considering what we think is a drastic and ill-advised step: reclassifying marketing and advertising costs so that they will no longer be treated as normal, deductible business expenses.

Clearly, we have skin in this game. And clearly, we can argue that designating advertising as anything other than a necessary cost of doing business is simply inaccurate.

Instead, we’ll make this point: Tax policy is indeed a cudgel, and it does indeed alter behaviors. It’s an easily proven fact that when taxes are levied on a particular activity, then fewer people will engage in that activity.

By taxing advertising expenditures, the federal government will ensure that less advertising takes place. That distresses us (no surprise there) but it’s our contention that it should distress you, too. Why? Because the vast majority of advertising dollars are spent locally — local businesses working with local agencies, print shops, and production facilities, to place ads with local newspapers and broadcasters. Even on a national level this principle holds true. When American companies market to American consumers, most if not all of their expenditures stay within our borders.

For more than a century, since the birth of the federal tax code, advertising has been treated precisely like what it is: a wholly legitimate operating expense, necessary for finding and keeping customers. The industry that’s grown up around that need has become an engine of American economic advancement, and a thriving source of American jobs.

The proposed change to the tax code, the alteration of the advertising-expense deduction, will change all that, very much for the worse. We oppose it as strongly as our finite voices and human frailties will allow. We’re saying so to our senators and congressmen, and to anyone who’ll listen, really. We’re making the same case we’ve just made to you. We think it’s a convincing one.

If we’re right about that, then all that’s left is to ask this simple question: Are you with us?

The C4

1. The tax code is a mind boggler. No doubt it’s in need of an overhaul. But the sections governing advertising expenses, classifying them as deductible business costs, are right on point, we think.
   
2. It ain’t broke, but the government is trying to fix it. Both the House and Senate are considering changing or even eliminating that deduction. It is our stance that not only would this result in an unfair tax on a legitimate operating cost, it would also cause irreparable harm to an important American economic sector.
3. Marketing and advertising creates jobs and spurs growth — locally, regionally, and nationally. “Buy American,” they tell us. Well, when you buy advertising, that’s exactly what you’re doing.
4. How on earth can they justify attacking that? Make no mistake, a tax on advertising will mean less advertising, and that means an economic hit, right here at home. It’s wrong, it’s folly, and it needs to be stopped. We’re trying our best to stop it, and we sincerely hope you’ll join us.

Washington Post Acquired By Amazon’s Jeff Bezos

Medias merge.

Jeff Bezos, CEO and founder of internet-commerce giant Amazon.com, has entered into a purchase agreement with the Washington Post Company to take control of their 136-year-old flagship newspaper, The Washington Post. The paper, famous for its Watergate-era truth-to-power journalism, went for a reported $250 million, or a little less than 1% of Bezos’s net worth.

Although the Post has long been considered one of the nation’s premier dailies, on a rarefied par with the New York Times, it’s not immune from the modern perils plaguing all traditional newspapers.

Declining ad revenue and a shrinking readership base is the new — or maybe not so new — norm for these institutions. Even the Post, which boasts a vibrant digital presence, has suffered earnings shortfalls in each of the last six years. Although the Graham family, which has owned the paper for four generations, gave no previous hint that the Post was for sale, no one should really be surprised by this turn of events. Newspaper sales are also the new normal, because for many of them, their only hope of survival is new management.

At first glance, it might seem that the big story here is the marriage of a venerable media company, with one of its upstart online heirs. And maybe there’s something to that — ad revenue, after all, isn’t just the Post’s bread and butter, it’s also the mainstay of many a Dot Com. That’s not true for Amazon, though, which is a straightforward product retailer (once operated, by the way, from Jeff Bezos’s Seattle garage). No, it seems that the only real connection between the Post and Amazon is their mutual purveyance of the printed word.

It’s important to remember, though, that the NASDAQ-traded corporation Amazon.com didn’t buy the Post. Jeff Bezos did. When the sale is finalized, probably in October, he’ll be the paper’s sole proprietor.

And that, we think, is the story. “Billionaire buys paper” — it’s not a new story. Just a few days before Bezos made his move, John Henry, owner of the Red Sox, bought the Boston Globe. In both cases, the newly minted publishers publicly affirmed their commitment to ongoing journalistic integrity, and to a “hands-off” editorial policy.

Newspapers are in trouble. They’re vital to communities, but as profit centers they’re sorely lacking. It just may be that the stewardship of benevolent billionaires, who let journalists be journalists and for whom ad revenue isn’t so important, could be exactly what saves them.

The C4

1. Jeff Bezos founded Amazon.com in 1994. Legend has it he wrote the business plan as he was driving from New York to his new home in Seattle. A little unsafe, yet still inspiring.
    
2. He turned that little online bookselling concern into one of the most valuable, recognizable, and enduring online brands. Jeff Bezos helps define twenty-first-century entrepreneurship.
    
3. So maybe we shouldn’t have been as shocked as we were when the Graham family announced on August 5 that they were selling the Washington Post to Mr. Bezos. 
    
4. What comes next is entirely up to him. He might dismantle the newsroom and sell the fixtures. He might turn it into an editorial cheer-section for all things Amazon. Or he could reach into those deep pockets and create a journalistic legacy, independent of meddling and financial worries, that will go on serving the readers of the Washington Post. We think we know which way he’s leaning. We sincerely hope we’re right.