Martha

A grand jury just indicted Martha Stewart on federal charges of securities fraud and obstruction of justice in an insider stock trading scandal. Ms. Stewart has denied wrongdoing in her December 2001 sale of shares of ImClone Systems Inc. But a US Attorney has been quoted saying that "thiscriminal case is about lying - lying to the FBI, lying to the SEC and investors.'' That may be true, but the real effects are showing up dramatically in the negative impact this is having on Martha Stewart, the brand.

Brand Keys has been tracking the Martha Stewart brand for nearly 3 years. "In May of 2002, the brand was one of the strongest in it's category," said Robert Passikoff, President of Brand Keys, Inc., a New York-based brand and customer loyalty research consultancy. "This is a perfect example of the fragility of all brands that are invested mainly in a human being. We often see how impermanent their brands can be, how dependent upon public whim; how sudden and irreversible their disappearance can be. Any sudden change in public perception of that "human brand" has an immediate Ð'¬and potentially devastating Ð'¬ effect on the brand's equity, and soon after, its profitability."

That's because any brand Ð'¬ and what it stands for Ð'¬ is based on the customer values inherent in the brand. Invariably the really important, lasting values turn out to be not image items, but customer loyalty values. They are usually the leading indicator values that built the brand's success in the first place. This is true whether it's a giant oil company or a Perfect Woman Doing Perfect Things, a brand's life force flows directly from the core values its customers hold dear.

More often than not, these values are not "sexy." "In her glory years, even Martha Stewart's detractors had to agree that she (the brand) was "chic" or "creative" or "elegant" or even "a style I would like to see in my home" given the environment and the available competitive set," said Passikoff. But in harsher, warier times, and under the baleful eye of the SEC and having just been indited, the broadcast media and the press, image items tend to count for very little. In today's economy, brand survival and profitability is more and more reliant upon leveraging customer values.

The difficulty is this: non-imagery values usually get examined only in retrospect, once the subpoena has been served. And