Come a ti-yi-yippie yippie yay yippie yay, ti-yi-yippie yippie yay, sings Roger McGuinn in The Folk Den. (listen)

Most companies are confused about what constitutes customer loyalty, writes Tim Kenningham, et. al., in the Wall Street Journal (6/22/09). True loyalty is not just an attitude, it is also a behavior -- specifically, a shopping behavior. The problem, says Tim and his three co-authors, is that most companies only conduct research into how their customers feel about their brand, and not how those loyalists spend on it. In other words, they may be loyal emotionally, but not profitably.

If such research into spending habits were conducted, most companies would find "that profitable customers tend to make up only about 20 percent of a company's customers. Break-even customers represent around 60 percent and unprofitable customers around 20 percent." Research by Ipsos Loyalty finds that a very large percentage of loyal customers -- often more than 50 percent-- are not profitable because their loyalty is driven largely by expectations of great deals."

For example, one "company mis-priced a product, which led many of its loyal customers to buy the product in large quantities -- making some of them the firm's largest customers in the process." They just weren't profitable. The answer is to calculate not only the sales generated by loyal customers, but also "the cost of serving them." The authors conclude that "the percentage of profitable loyals a company has in its customer base tends to be much more strongly correlated to its financial performance than other common loyalty metrics."

Justin McMurray spends up to 20 hours a week handling customer service questions for Verizon -- for free, reports Steve Lohr in the New York Times (4/26/09). Justin is happy to log onto Verizon's community forums and help others solve problems for nothing more than the glory of it. Even though Verizon pays him nothing, he is rewarded via "elaborate rating systems for contributors, with ranks, badges and 'kudos counts.'" It's the best thing since the Cub Scouts.

Guys like Justin are known as "lead users" or "super users" ... the only question is, who's using whom? Natalie L. Petouhoff, a Forrester Research analyst, says Verizon's approach follows "what she calls the 1-9-90 rule. About one percent of those in the community ... are super-users who supply most of the best answers and commentary. An additional nine percent are 'responders' who mainly reply and rate web posts ... and the other 90 percent are 'readers' who primarily peruse and search the website for useful information."

Says Natalie: "The 90 percent will come if you have the one percent." Verizon initially thought about hosting its own forums, but then opted to hire an outside service, Lithium Technologies, to handle it. Lithium got its start in the gaming category, with a site called Gamers.com, where it "created technologies for professional rankings and tournaments." The insight is, "The mentality of super-users in online customer-service communities is similar to that of devout gamers." In any case, it works out great for Verizon "because it absorbs many thousands of questions that would otherwise be expensive calls to a Verizon call center."

"The car already had body rust when we bought it," says Jonathan Stein in a New York Times article by Rob Sass (6/28/09). "Every six months we had to return it to the dealer to have it repaired." Jonathan's car was a 1981 Fiat 131 sedan, and it's stories like his that makes some people wonder what it's going to be like when Fiat returns to America, this time in control of the Chrysler Group. The last time Fiat was here, in the early 80s, it was peddling the Fiat Strada, whose many charms included "an engine compartment that got so hot the electric fan, controlled by a thermostat, would never shut off. It simply stayed on until it drained the battery."

Fix It Again, Tony, speaking of acronyms. Actually, Joan Sass used to refer to her 1981 Spider 2000 as her "bring it on by" car, because that's what her dealer said every time she had problems with it. And yet these Fiats, for all these flaws, "were often the darling of the enthusiast press." For example, Road & Track called the 1967 Fiat 850 coupe "one of the handsomest, best-balanced designs ever seen on a small car." The magazine also liked the 1100R sedan: "Despite the car's first purpose as economy transportation, it can deliver more sheer fun than almost any small sedan on the market."

Given common ownership with Ferrari, some Fiats look a bit like Ferraris (they shared Pininfarina and Bertone designers). Still, Fiats maintain a reputation for breaking down, and continue to suffer by comparison to its British competitors: "There were simply more MG and Triumph dealers out there, they were better stocked with parts and technicians and they spent more on advertising," says John Montgomery, president of a Fiat enthusiast club. The good news for Fiat is that, surveys show Americans don't anticipate quality or reliability issues with Fiat. The bad news is, Fiat currently ranks at the bottom of customer satisfaction surveys in Europe.

A brand divided against itself cannot stand. Or can it? The strongest brands are those that remain true to that which made them strong to begin with. The weak are those that forget what made them relevant and lose their way. Seems to me there was a book about that recently. And yet, we have Google, which makes all of its money selling advertising, but doesn’t invest much in advertising for itself. There’s Nike, whose use of recycled materials is often at cross-purposes with its reputation for “performance.”

We now live in a world where Toys ‘R’ Us owns FAO Schwarz and the Penske Automotive Group, a retailer, owns Saturn, a car company. Then again, we live in a country where an African-American man with a Muslim name is President of the United States. These curious bundles of contradictions aren’t purely an American phenomenon, though. In Germany, BMW is encouraging its factory workers to buy the cars they make. Factory workers buying luxury cars! Imagine that. They couldn’t be serious.

Or could they? Oh, probably not. But just think about that for a moment. Google’s strength is its weakness. Nike’s weakness is its strength. BMW may just be smoking something. It is indeed a delicate balance between strengths and weakness where brand identity is concerned — witness the rise of store brands as innovative rivals to national brands. Like much of the rest of marketing, things are not always as they seem, but a world of possibility resides within brand-identity contradictions. What do you think?

What started as an "artistic social experiment" has turned into a hip, trendy and successful restaurant, reports Adrain McCoy in the Pittsburgh Post-Gazette (6/29/09). At the Waffle Shop, customers enjoy fluffy waffles and coffee and are videotaped as they discuss whatever is on their minds -- "politics, society, culture." Located in a lively Pittsburgh neighborhood, the Waffle Shop is "part of an advanced undergraduate course at Carnegie Mellon called the Storefront Project.

The idea is to "develop a concept and take it out into the community to see how people react and interact." And so students created The Waffle Shop, as part restaurant and part reality show, in what was supposed to be a "two-semester" project. But it has proved so popular that it is now in an extended run, with extended hours. Originally, the Waffle Shop was purely "a night-owl hangout drawing a generally young, hip and vocal crowd." But now it's open for brunch, too, and is also "attracting many families, people from the neighborhood and curious passers-by."

In a new twist, the Waffle Shop's manager, Dawn Weleski, listens to internet news feeds via headphones and then repeats the news so customers can hear, with videos of the novel newscast carried live online at waffleshop.org. The site also now allows "users to sign into Facebook and Twitter feeds and talk back to the talk shows." Jon Rubin, the professor who runs the Storefront Project is now looking at various business models to make the Waffle Shop permanent, either as a for-profit or not-for-profit venture, noting that the restaurant offers "an unusual model for how an art space could function."

In a bid to make inroads against its bigger rivals, Denny's is enlisting the elan of mainstream pop stars and emerging indie popsters, reports Julie Jargon in the Wall Street Journal (6/30/09). The concept is to attract a younger, hipper demographic by positioning Denny's as the eatery-of-choice for "after hours" dining. At around 10 p.m., with seniors and families long gone, Denny's starts piping in "rock and country music" while offering a late-night rockstar menu featuring "items fashioned by well-known musicians."

Denny's is also "adopting emerging musicians," by giving them $1,000 worth of gift cards "so they can eat while touring," and also hosting "after-parties" for the artists, inviting their fans via Twitter and MySpace. An act called Stereo Skyline says its adoption by Denny's has been helpful, and that a concert after-party it hosted attracted about 100 fans. "It's nice to be able to have an hour or two to sit down and meet with our fans," says 18-year-old Kevin Bard, the band's lead singer.

More established acts, like Good Charlotte, meanwhile have been invited to create items for Denny's rockstar menu. Joel and Benji Madden, the twins who lead Good Charlotte, "created a pair of burritos, one made with a veggie burger, the other with smoked chicken ... Rascal Flatts offered a biscuit topped with country-fried steak, eggs, cheese gravy and three strips of bacon." Denny's is also working with colleges "to rename existing college eateries 'Allnighter' and offer items from its rockstar menu." So far, late-night traffic at Denny's 1,500 restaurants has increased by about five percent.

Most people probably never heard of Abraham Gesner, but he "effectively laid the foundation for the modern petroleum industry," reports Stephen Mihm in the New York Times (6/28/09). Gesner was the guy who figured out "how to transform the raw sludge of fossil remains into kerosene and other fuels," but if he's not famous it might be because he wanted it that way. He never took "full credit for his discoveries" because, as he wrote in 1861, "the progress of discovery ... has been carried on by the labors, not of one mind, but of many ."

Gesner is one of "countless men and women who wedded technological innovation to capitalist profit or nationalist agenda, and in the process helped usher in the modern era." Their stories are captured in "The Industrial Revolutionaries," by Gavin Weightman. Like Gesner, Gavin "believes the industrial revolution was an incremental process in which credit for any innovation or invention rightly belongs to innumerable individuals scattered throughout the world."

Gavin stitches "together thumbnail sketches of a large number of inventors, architects, engineers and visionaries central to 'the global spread of industrialism' from the 18th century to the eve of World War I." The unsung industrialists include "John Holker, who smuggled technology and workmen from Britain to France in order to jump-start that country's own industrial revolution," and Richard Trevithick, whose early work on the steam engine was later refined, and monetized, by Robert Fulton. The result is "a genuinely global history that brings the collaborative ... business of industrial innovation to life."

"It's not individual inventions that matter so much, but when large bodies of technology come together and have an impact across the economy," says W. Brian Arthur in a New York Times article by Steve Lohr (5/24/09). Brian is an economist at the Palo Alto Research Center, and he thinks that "as digital technology evolves, step-by-step innovations are less important than linking all the sensors, software and data centers in systems." John Kao, an innovation consultant, agrees: "These days, more than ever, size matters in the innovation game," he says.

If these guys are right, it means the innovation pendulum is swinging back toward "big companies like General Electric and I.B.M. that employ scientists in many disciplines (who) have the skills and scale to ... analyze, model and optimize complex networks." This also can result in a larger role for government in innovation -- already "the Obama administration is financing programs to generate innovation with technology in health care and energy" and is spending "billions to accelerate the adoption of electronic patient records to improve care and curb costs," for example.

Obama is also pushing for "more efficient and more environmentally-friendly systems for managing commuter traffic, food distribution, electric grids and waterways." Plenty of room still exists for "bottom-up innovation" by smaller companies and start-ups, for sure. However, Clayton M. Christensen is his latest book, "The Innovator's Prescription," says it's the big guys who "have the scope to create within themselves a new disruptive value network." Clayton says that if big companies overcome their aversion to disruptive innovation, they "have all the resources necessary to induce change."

The idea of governments "wading into the innovation game" on issues including energy, the environment and health care," is gaining currency around the world, reports Steve Lohr in the New York Times (6/21/09). The notion of "innovation agendas and appointing senior innovation officials" is generally more "explicit" outside the United States, "though the Obama administration is taking some initial steps," with the appointment, for example, of Aneesh Chopra as America's chief technology officer, who likes to talk about creating "innovation platforms" to drive growth.

The U.S. Bureau of Economic Analysis now also is developing statistics to "uniquely measure the role of innovation" in the American economy. Finland has been into "Finnovation" for a while now, "investing in areas as varied as an outstanding national education system and high-speed internet connections for its residents. It has also produced a power in the cellphone industry, Nokia." The next innovation frontier in Finland, according to Mikko Kosonen, president of the Finnish Innovation Fund, is "software and services ... for medical monitoring and preventive health services."

Meanwhile, in India, "the government and industry have financed research into products and services that reverse the traditional pattern of innovation from wealthy nations to the rest of the world," most notably "the $2,000 Nano" car. R.A. Mashelkar, chairman of India's National Innovation Foundation, comments: "If you make something for the rich, the poor cannot afford it ... But if you design it for the poor, everyone can afford it." The idea is not so much to pick winners or losers as it is to help "create the conditions so that new industries can rise more easily," says Philip Rycroft, who oversees innovation policy in the U.K. "We're determined not to second-guess the future," he says.