Marketing

Microsoft's Risky Strategy

06-15-2013 1:18 PM with no comments

What if I told you that I wanted to introduce a product that was $100 more expensive than the closest competitor, and that I also want to restrict how consumers can use and share the product, a feature that consumers are not likely to appreciate? Good idea? Well, this is precisely what Microsoft is proposing with the introduction of its Xbox One gaming console. Not only will this product be priced at $499 versus $399 for Sony's Playstation, but users will have to connect to the internet at least once per day to keep the games functioning. This will make it very difficult for users to share with other users, but will help the company in the battle against piracy. What gives?

Microsoft's stance is that these days games are increasingly downloaded over the internet where a stricter set of anti-piracy rules are the norm. The industry is moving this way, so Microsoft has decided to nudge its customers along a bit through this transition from discs to digital. Of course Sony has been quick to jump on what it sees as a Microsoft misstep and has reminded consumers that "When gamers buy a PS4 disc, they have the right to use that copy of the game, they can trade that copy of the game at retail, sell it to another person, lend it to a friend, or keep it forever." Take that you nasty Microsoft facists!

Microsoft is correct that the technology is indeed shifting but it's not generally a good idea to force consumers to do things they may not want to do, especially if there are readily available competitive offerings offered for considerably less money. Is Xbox really that much better than Playstation to be able to successfully absorb what looks like two new competitive disadvantages? Or could this strategy have been better thought out? Let's see if Microsoft sticks with it or makes a few changes prior to introduction.

-DDS

Posted by Darrin Duber-Smith

Apple Getting By On Looks Alone?

06-14-2013 3:21 PM with no comments

Sure the stuff is very visually appealing. And yes Apple has made many groundbreaking innovations in the past. But concerns about research and development began even before the death of co-founder Steve Jobs, and many astute observers do remember the decades-past dark period in Apple's history when Mr. Jobs was not at the helm. Can Apple still innovate?

It looks like we will have to wait a little longer for the answer, as Apple's latest product introduction involves only an update to the operating systems for iPhones and iPads. Granted those systems have needed refreshing for some time, and the breakneck pace of innovation has created a hypercompetitive, fast-paced industry where Apple formerly enjoyed domination. But operating systems are generally introduced along with a new device that operates on it, and Apple hasn't introduced any new devices in a few years. This introduction didn't even come with a new iteration of the iPhone, what we would call a "continuous innovation" in product development. So, what gives?

Clearly if Apple has some new gadgets up its sleeves, none of them are yet ready for commercialization, which explains the fact that the company felt it had to introduce major changes to operating systems independent of introducing a new device. The timing is indeed strange. The iTunes Radio part of the introduction was compelling, but it too closely resembles Pandora, a well-established leader in streaming music. It is clear that Apple cannot get by on looks alone, and Blackberry has taught us many lessons about what can happen to market leaders who fail to innovate.

As a result, the company's publicly-traded stock has been hammered, reflecting investor dissatisfaction, and more recently competitors like Samsung have been stealing market share. The coveted 18-34 demographic always tends to seek ever newer, hipper goods and services making it difficult for a brand to keep its appeal across generations. And older folks spend less on these types of products, so targeting them is not the best way to maintain market leadership. This is a challenge for Apple. Let's see how quickly, or rather if, Apple can regain its shine.

-DDS

Posted by Darrin Duber-Smith

Three Cheers For Cheerios

06-08-2013 1:58 PM with no comments

It was a risky proposition. Yes, even in our increasingly diverse 2013 society, there are still a number of people who don't want to see the "typical American family" represented by anything other than same race, same sex couples. It wasn't too long ago that advertisers eschewed showing Hispanics, African Americans, and other "non-whites" in commercials, but those days are long over, and now we have moved onto new controversies that will sound silly in 20 years. Enter Cheerios, whose ads feature a multiracial family in a typical kitchen table setting. It sound worthy of note to most of us these days, but the online buzz generated by the creative strategy forced YouTube to to ask General Mills to shut down its comments section.

Of course, many of the comments were very positive, but nonetheless, this sort of thing generates an awful lot of publicity, and the risk from negative publicity is something that major brands have tended to avoid in the past. But is this publicity really negative? That General Mills decided to take a bit of a risk with its Cheerios brand, reflects a change in the zetigeist as Americans become represented by more and more diversity. Obviously, advertisers want their campaigns to reflect this diversity, and now that Cheerios has bravely moved forward, we should probably see more of these types of ads from consumer products brands in the near future.

Posted by Darrin Duber-Smith

Sacramento Gets Divine Intervention

06-04-2013 8:51 PM with no comments

Well, maybe it wasn't quite "divine", but the intervention of NBA's franchise owners in the proposed move of the Sacramento Kings to Seattle has provided the struggling California capitol with another chance to keep its only major sports team. Much of the ownership changed hands, Seattle must wait for the next possible NBA defection, and the city that posted the worst attendance in the entire league this season gets an unearned reprieve.

The days of teams defecting to other places in the middle of the night are long over. League ownership must approve such moves now, so storied midnight runs such as the NFL's Cleveland Browns to Baltimore, the Colorado Hockey Rockies to New Jersey to become the Devils, and of course the Kansas City Kings to Sacramento, don't happen again and sully the integrity of professional sports. OK. That's a bit snarky. But still. Why can't owners simply move their teams if they want to? Most NBA franchises traditionally run at a loss overall, and Sacramento boasts some lousy fan support, so what's the upside for an ownership group?

Nevertheless, the new ownership which includes Qualcomm, 24 Hour Fitness, and Facebook moguls, has committed $192 million of a necessary $449m to build a new arena, which should certainly be enough to get those Sacramentoans out of the house and into the stands. Or will it? Where will the additional funds come from? Taxes? I think not. Hopefully these wealthy executives will be able to help generate big sponsorship dollars to supplement a nice fat payroll for players The bottom line is that Sacramento is a very small market, and not exactly Beverly Hills income-wise, if you get my drift. Without significant investment in the "product", namely talented yet expensive players, the masses aren't likely to show up on a consistent basis.

And of course the impatient crowd in Seattle now has one more reason besides a lack of sunlight and Vitamin D to drown its sorrows in a  large vat of mocha latte, as this basketball-savvy metropolis is hungry for a new team after being jilted by a new owner who promptly moved the Supersonics to Oklahoma City several years ago. Despite the wishes of the previous ownership, the league refused to let teh team move. Let's see if such intervention ends up being good for the franchise.

-DDS

Posted by Darrin Duber-Smith

Livestrong May Not Live Long

06-04-2013 5:06 PM with no comments

The announcement last week that Nike is cutting the first of what I assume to be many ties to the embattled Livestrong charity could signify the proverbial "beginning of the end" for the popular organization and its trendy yellow wristbands. That Mr. Armstrong was stripped of all of his titles as well as his dignity has obviously harmed the integrity of the organization and thus its brand reputation, and perhaps the damage is permanent. The perennial market leader is pulling its Livestrong apparel line which will result in about a $100 million hit to the charity created by the successful cyclist to help cancer survivors, not to mention the lost opportunities for millions to see people wearing the brand. Although Nike said it will continue to support the organization in "other ways", the company was not specific as to "how", and I suspect it will eventually pull its remaining support "slowly and quietly" to avoid any negative public backlash.

Is this the end of Livestrong? Probably. There are 1.5 million non-profits in the United States alone, and many of these are cancer-related. Translation? There are numerous places for you to put your anti-cancer dollars, and Livestrong is only one of many. An organization whose inspirational figurehead has fallen out of favor has almost no chance in such a competitive marketplace. Look for other companies to follow suit, and for Livestrong to either shut its doors or become a much smaller, more focused, and re-named entity. It is a sad tale indeed.

DDS

Posted by Darrin Duber-Smith

Kors In Fashion

06-03-2013 3:16 PM with no comments

Those of us who consider ourselves "fashion conscious" are without a doubt familiar with Michael Kors, a popular designer, television celebrity, and most recently a major marketing mogul. Once the owner of a strictly exclusive, prestige-priced brand name, Mr. Kors has expanded his offerings to address more mainstream consumers (such as those who watch Project Runway) so that his company can grow adequately. Since Michael Kors Holdings is a publicly-traded entity rather than a privately-held company, it must maintain acceptable levels of growth and profitability over both the short and long runs to satisfy shareholders. And it should be obvious to any savvy marketer that such growth cannot be achieved without the expansion of both products and markets.

Of course, the risk here is what we call "brand dilution". That is, introducing sub-prestige products as brand extensions to a prestige brand is not usually a good idea since this act tends to dilute the "prestige-ness" of the brand. Mercedes learned this lesson the hard way when they introduced cars that were more accessible to the mainstream. The result was a mass migration to the BMW's and Audi's of the world, and many years later, Mercedes still struggles to regain that prestige image. So, what's the answer if you don't want to dilute your brand but you still want your company to achieve healthy levels of growth?

The answer. The smart marketer uses a completely different 4 P strategy for each target market. The existing high end stuff (apty named "Michael Kors") has been supplemented with a lower end line called "MICHAEL". Since, the pricing is different, place and promotional efforts should be different too. Mr. Kors needs to be aware that these two different brands would best be sold in two different channels to avoid brand dilution and "guest conflict" between the two very different target markets (Nordstrum shoppers and Wal-Mart shoppers are different). This way, MICHAEL can achieve the necessary volumes required, and the high end line can remain exclusive. The high end line should be sold exclusively in Michael Kors outlets, leaving the lower end line to a less selective distribution strategy. Or it could be done the other way around. The high end stuff appears at high end retailers, and the Kors outlet stores could offer the lower end stuff. Either option is better than trying to be all things to all people.

None of these products should be sold at low end, bargain stores because it simply doesn't fit with the image. So far, the company is doing rather well, but once it begins to rely on volume over exclusivity and profitablity, it is difficult to make that return trip to prestige status.

Posted by Darrin Duber-Smith

Mmmm...Bacon Pretzel Burger

06-02-2013 12:18 PM with no comments

As a consumer, I have never understood why people like to eat those big, fluffy pretzels so much. I find them dry, terribly salty, and the cheese product offered for dipping, is well "cheese product". When it comes to game day junk food, I much prefer the even sketchier hot dog. But when I look at  it as a marketer (as all marketers must do), I realize that a great many people actively seek out  this treat, and this is of course why they are offered at so many spectator sporting events. But why stop at sports?

Wendy's, in its' perpetual battle against market leader McDonald's and close rival Burger King, has decided to offer something a little different. Behold the Pretzel Bacon Cheeseburger! One would hope that Wendy's has done its due diligence and conducted surveys, focus groups, and taste testing during the "concept testing" phase of product development. Further, a test market might have been appropriate, but then that would have tipped off the competition who, if the test appeared to be enjoying a modicum of success, could enter the market first. Test marketing is often avoided for this reason. Yet, Wendy's has not yet introduced the product, and is being rather coy about when it will be introduced. This is a curious strategy, one that I would call a "teaser publicity" play. And the media has taken the bait.

Will the burger succeed? Possibly, since it does have bacon in it, although it's important to remember that the vast majority of new products fail despite the best of intentions and the biggest of budgets. For example, McDonald's just dropped its several-year-old Angus Burger product as it failed to meet company expectations, but management is expected to make an exciting new product announcement very soon. McDonald's and others will probably take a wait-and-see approach, but will quickly follow if the burger is a hit. If it's a big hit, Wendy's might bypass McDonald's as the market leader. As for me, a respectful no thanks,

DDS

Posted by Darrin Duber-Smith

A Hazardous PR Mess

05-30-2013 10:28 PM with no comments

Once again our perennial provider of low prices has made news by failing to adequately monitor its vast infrastructure. But this time it's not the usual suspects overseas with the sweatshops and whatnot that are the problem. This time, the company has pleaded guilty and has agreed to an $81 million settlement regarding certain retail locations (right here in the good old U S of A) which were caught illegally dumping pesticide, fertilizer and paint among other non-biodegradable nasties. Not cool.

There is no question that Wal-Mart has made notable gains in the area of environmental and social responsibility. No really, it's true. Look it up. But the effect this sort of thing has on the perception of the company as a whole and therefore "the brand" is tough to measure. "Any" publicity is not "good" publicity despite the common perception, as a brand with oodles of awareness cannot possibly seek advantage from such negative coverage. Wal-Mart will perservere as its commitment to maintaining a good reputation has been a strategic focus for almost a decade now. But a sprawling infrastructure and supply chain is tough to control, so we shall see what other surprises lurk around the corner.

DDS

Posted by Darrin Duber-Smith

Tumblr Run By Yahoos

05-30-2013 9:28 AM with no comments

It's hard to believe that Yahoo is still plugging along considering the continued outright dominance enjoyed by Google in the area of search. Search is a huge vehicle for advertising, an element of promotion that we all know provides most of the cash for internet content. Without advertising, content would be poor, and thus far the dollars have been tougher to get than in traditional marketing mediums such as television and print. Nevertheless, the migration of ad dollars continues its shift online, however slowly it has progressed. This is all changing due to the advent of tablets and smartphones, but that is another story.

Access to customers has become a pivotal part of internet strategy since access to customers is largely what advertisers are looking for. This is why companies like Yahoo continue to buy companies like Tumblr, yet another social networking site. The coveted 18-34 demographic, almost entriely comprised of Millennials, spend more time on the internet than just about anywhere else, and Yahoo now has access to 100 million young customers it couldn't reach before. And interestingly, the service that Tumblr provides isn't nearly as important as the traffic the site generates. Yahoo may want the visitors more than the product itself.  As such, I would expect to see many smaller sites to be gobbled up by the giants in the hunt for new eyeballs for advertisers. Happy hunting!

-DDS

Posted by Darrin Duber-Smith

Let's Kill The Electric Car

05-29-2013 12:06 PM with no comments

Environmentalists are making much ado about the recent report that Tesla, the maker of prestige-priced electric vehicles, finally turned a profit last quarter. Never mind that the company's performance, and indeed the performance of the highly-subsidized industry, has failed to meet even the lowest of expectations, and let's not mention to the eco crowd the fact that almost all electricity comes from coal, a very grimy fuel, therefore rendering any "green" claims highly suspect. The recent news is that one of the industry's pioneering manufacturers is liquidating its assets, and as such it also appears that natural gas, a much cheaper and cleaner fuel that is produced right here in the good ole USA, may win out over electric.

An oil company's core competency is drilling, and it can leverage its' competency by drilling for both oil and natural gas. Numerous vehicles, mostly fleets of shuttles, taxi cabs, etc. already run on this fuel, but the major barrier has been a lack of fueling stations, not resistance to the shift by oil companies themselves. Homes have also slowly embraced this fuel for heating and air conditioning. Since the oil companies are also the gas companies, it won't be terribly difficult to re-fit fueling stations with natural gas pumps in addition to the traditional pumps. Instead of subsidizing the electric car, whose battery alone has a carbon footprint estimated by some sources to be the equivalent of 80,000 miles of travel, the government can give tax credits to folks who buy natural gas vehicles so that the activity can become profitable at a faster rate for companies that are more comfortable with selling gasoline. It is estimated that the U.S. can not only meet its own energy needs, but also develop a healthy export market for natural gas-related products. There will be no need to import anything.

While you are pondering that perspective, ask yourself what is driving this failed push for electric vehicles that consumers have neither asked for, nor particularly want. Tesla may end of being profitable, but their low end vehicles START at  well over $50k demonstrating that being green is much easier for the wealthy than it is for the average person. The numbers don't lie.

DDS

Posted by Darrin Duber-Smith

Demand For Gas Yet To Recover

05-29-2013 11:45 AM with no comments

Memorial Day Weekend traditionally marks the start of what has come to be called "The Driving Season" and oil companies usually rejoice. Yet the 2008 recession did some permanent damage to consumers and tastes have shifted. The result is that demand for gasoline has yet to recover from pre-recession levels. Gasoline sales in the U.S. are 6.5% lower than the 2008 peak of over 9 million barrels per day, and this isn't just bad news for independent owners of gas stations, but can also mean problems for all kinds of industries that depend on motorists. Clearly businesses such as hotels, services along highways, and of course the kinds of places that feature the World's Largest Ball of Yarn or Largest Prarie Dog (both of which actually exist) all suffer from lack of traffic.

But the problem isn't entirely the result of slow growth. It seems that much of the fall in consumer demand comes from the East Coast, where all the people are. It appears that these folks, who now spend 80% of their incomes on fixed costs such as housing, insurance, and loan payments, have little money for gasoline. Substitues for driving include public transportation, carpooling, walking and cycling, or simply staying home. The proliferation of high gas mileage vehicles as well as natural gas powered machines also have hands in this trend.

Oil companies have long depended on the inelastic nature of their product, and for now they are all doing just fine. If this trend continues, look for these giants to diversify further into natural gas and other forms of energy so that they can maintain leadership in this category. Demand for oil may well have peaked, and marketers are taking notice.

DDS

Posted by Darrin Duber-Smith

Consumers Skeptical of Organic

05-23-2013 9:04 PM with no comments

Perhaps the largest barrier facing the natural and organic products industry, which now generates hundreds of billions of dollars in annual revenue and continues to grow at almost double-digit rates annually, is the perception among the majority of Americans that the industry is merely using the positioning as an excuse to charge outrageous prices. This is only partly true, as costs for both natural and Certified Organic ingredients are generally much higher than their mainstream counterparts, and it is important to remember that the profit margins are also much higher in this industry than in the mainstream. Think Whole Foods Markets.

59% agree that labeling food or other products as organic is just an excuse to charge more, and only 30% are willing to pay extra for green products. Men are slightly more skeptical than women, according to a recent survey, and efforts among consumers to endeavor to become greener seem to be leveling off. Is the industry ripe for a bubble to be burst, or will the party continue? As a 25-year industry veteran, I will be watching.

-DDS

Posted by Darrin Duber-Smith

Microsoft Soft On Results

05-23-2013 8:36 PM with no comments

It looks like Windows 8, the highly touted new product recently introduced by Microsoft, has fallen flat with users. Responding to much criticism among loyal followers of this pioneer brand's newly revised operating system, the company has announced plans to make immediate revisions. The major beef among consumers involved the elimination of the all-to-familiar "Start" button and the ensuing chaos and confusion this major change has caused. A classic case of "Too Much Change Too Soon", the situation has become so pervasive that a popular app has been developed to restore the original look and feel that loyal users apparently still desire.

The consumer migration towards hand-held devices has forced industry leaders such as Facebook and Microsoft to adjust marketing strategy to address this shift. Both companies were a bit slow on the draw, so to speak, but it appears that Facebook is weathering the storm rather nicely. Microsoft, on the other hand, continues to struggle with updating its operating system, as the Vista product was a miserable failure several years ago, and it appears that Windows 8 will have its own challenges. The PC market is plummeting, and the company currently has only 5% of the rapidly-expanding mobile market. Is this the beginning of the end for the company that introduced the personal computer to the world, or can it re-discover some of the magic that made it great in the first place?

Many older brands eventually face this issue, and what Microsoft does in the next few years will determine its fate. Let's see what happens.

-DDS

Posted by Darrin Duber-Smith

Rules For Energy Drinks

05-22-2013 12:09 PM with no comments

Well, it looks like Congress has actually accomplished something, and for this we should all rejoice. About six weeks ago, a group of three Democratic lawmakers released a report exposing what industry observers already knew was a huge problem. That is, there isn't enough regulation in the area of energy drinks.

The lawmakers exposed inconsistencies in the labeling and classification of energy drinks, the practice of extensive marketing to adolescents through social media and events, as well as caffeine levels in products that exceed the safety levels set by the FDA for sodas. What does this mean? It's high time for regulation.

Look for upcoming decisions on the following:

1. Ceilings for amounts of caffeine allowed per serving and clear labeling rules for disclosure of caffeine levels

2. A decision on whether or not these beverages can be classified as foods (nutrition facts panels on the label) or dietary supplements (supplement facts panels on the label)

3. A ban on marketing to children for products with elevated levels of caffeine

4. A system of reporting to the FDA adverse effects from caffeinated beverages

Regulation in this area is long overdue. The recent proliferation of alcoholic, caffeinated beverages with names like "Cocaine" necessitated a ban on these drinks, and caffeine is starting to appear in products such as snackfoods and gum. It is clear that without some specific regulations, energy companies will do whatever they need to do to make money regardless of the adverse health effects. This temporary situation is the price we pay in a free society, and it is the role of government to intervene when public safety is at issue.

DDS

Posted by Darrin Duber-Smith

Products For Nerds

05-17-2013 11:18 AM with no comments

Back when I was a kid 30 or so years ago, we were promised by the adult community that we soon would have such things as hover crafts, jet packs, and workable forms of renewable energy. Now I know that was all a pipe dream and I have embraced the fact that it was wishful thinking, When I think about those days, I also think about some of the products that were supposed to be smash hits, but so far have failed to gain much traction in the marketplace beyone innovators and very early adopters.

3D TV. Anyone have one of those? Anyone buying one of those anytime soon? Anyone want TimGunn from Project Runway telling everyone to "Make it work!" in your living room?  I didn't think so. The Segway and the SmartCar also come to mind. Efficient transportation or products for nerds? You decide. And by now those Bluetooth headsets should be worn by just about everyone, since they are the most convenient and safe way to use a mobile phone, but in fact according to the Internet, these things are seen as too dorky by too many people. And I must admit that I concur. In most cases, these products are technologically incredible but the problem is that no one is asking for them, and so they are a hard sell.

The next failure might just be Google Glasses. This device was probably inspired by the "Terminator" movies and possibly that "Aliens" movie where the alien kills all the Marines except for one guy, Sigourney Weaver and a little girl named "Newt". The little girl and the Marine unceremoniously die at the beginning of the next movie, but I digress. It turns out that not many people want to walk around with a camera mounted on their head. Go figure. It'll probably catch on huge with the MAMIL (Middle Aged Men In Lycra) cycling crowd, but then those guys look real dorky anyway. Don't they?

DDS

Posted by Darrin Duber-Smith