When it comes to maintaining a premium corporate identity, Martha Stewart Living Omnimedia has shown us how not to do it. The primary lesson from MSLO: It is easy to lower the value of a brand and much more difficult to raise the value of a brand.

Last week CEO Susan Lyne resigned from the company, having taken over MSLO in 2005 while Martha was preparing to try on the latest in ankle bracelets. During Lyne’s tenure, the stock price lost over 70% of its value. Lyne had had some previous successful ventures at ABC television, as well as launching Premiere Magazine. So what went wrong?

Many would blame Martha Stewart herself. How can you sustain a company brand around one personality, particularly when that personality is convicted on four felony counts of obstructing a feeral securities investigation? And she is a bit passe, no? Today it’s Rachel Ray and iron chefs. Still, Martha had many loyal fans.

A much deeper issue was in the comapny’s merchandising. Much like Harley-Davidson did in the ’80’s, Martha Stewart went for cash gain and cheap marketshare in 1997. They struck a deal with Kmart, who was in bankruptcy at that time. Why, many colleagues have asked me, would someone like Martha Stewart sell her merchandise in Kmart? According to Slate’s James Ledbetter, Kmart agreed to pay a minimum of $40M a year in royalties to MSLO through January 2003. For a while the cash cow concept worked in MSLO’s favor. But the struggling Kmart never got on its feet, merging with Sears in 2005. From 2003-2007, Kmart did not sell enough of Martha merchandise to pay anywhere near that original royalty. So the cash flow dries up and the Martha merchandise is selling next to the end-cap of cheap motor oil. And today, here’s Martha trying to pitch her brand as a premium buy at Macy’s. So which is it? Upscale premium or mass commodity? The market doesn’t like to view a brand with double vision. Hard on the yes, you know? And to make matters worse, MSLO has also cut a merchandising deal with Costco!

The simple rule of thumb is that you cannot extend a brand that far and expect it to retain its value. At best, MSLO should have created a low-end subbrand that could have stood for a price-value without trashing the entire brand (even GAP got that one right!). You need to manage your brand as a portfolio. You need to think long-term and not chase the easy dollars into commodity land.

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What makes someone choose your brand over another? How do your products reflect your brand identity? As your promise of what you stand for in the marketplace, your brand must be both relevant to consumers and different from your competition. When you design for your brand, you integrate marketing analysis and design instincts. What’s going to be relevant to your customers is based on where your products are in their market life cycle, and on the spoken and unspoken needs of your customers.

You may have a technology advantage over your competition, but is that what is important to your customers? Your brand design elements must show your customers that you get them. They must not only communicate the functional advantages, they must radiate the emotional cues that attract and retain your customers.

Do your brand elements engage senses other than sight? What does your brand sound like? Smell like? Taste like? What is its feel? Effective brand identity design considers multiple ways to express your brand persona and value proposition, all aimed at reinforcing customer preference.

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