• Disasters Can Be Good For Business

    Despite the "tsunami of hype" that was the exhaustive coverage of Hurricane Irene ( a category 1 by the time it finally reached U.S. landfall), it turns out that quite a bit of damage was actually done. Widespread flooding and a bit of wind took an unprepared region to the brink of panic. While retailers such as those offering apparel hope that they can make up for the lost sales caused by this event, conventional wisdom tells us that sales may be slow to return. However the reality is quite different. The last two storms actually produced an uptick in sales during the month after the storm.

    Why does this occur? The reasons why the overall retail sector rebounds very quickly are unclear. Perhaps it's simply the result of pent up demand released after the storm. Yet, it is more obvious that certain types of retailers benefit both before and after natural disasters. Before a storm, many consumers will stock up on more preventive goods like flashlights and bottled water, while during the period after the storm not only will these goods still be in demand, but the demand for a host of other goods and services rises dramatically. Home improvement (or in this case "repair" ) stores such as Home Depot and Lowe's do very well in disaster situations. Plumbing, electrical, landscaping, clean up and medical service sectors all perform quite well too.

    All of this is rather morbid, as it is hard to admit that certain industries actually profit from bad things happening. Do funeral homes root for people to die? To some degree, yes they do. The lesson is that any time buying activity is influenced by external market forces such as natural disasters, there are businesses that benefit, and a lot of them.

  • Ronald McDonald, The King & I

     

    Now that you have digested the previous article about Burger King's recent change in creative strategy, I think we should take the analysis as to "why" the company made the change to a deeper level. Maybe it was just time for something different. That could be true. And since Burger King has reported lower revenue over the last two years, it is easy the blame the lack of results on poor King Burger. Poor advertising can lead to unrealized objectives. I also mentioned that there might be problems with one or more of the other three P's-product (the food and service), price (what you give up for the food and service) and place (the restaurant itself). If that is the case, then something else may be at the root of overthrowing the king. I would submit that a primary reason for changing strategy is the increasing legal, political and social pressure to limit the marketing of products, especially the ones perceived as unhealthy, to children. Obviously, this is all driven by the increasing concern that obesity is indeed our biggest health problem.

    It all began with the call for removal of Joe Camel and the Budweiser frogs when special interest groups insisted there was a link between using cartoon characters for marketing and the adoption of cigarettes and alcohol by children. This may or may not be true, but that's where it all began. Now, we have a recent call to action by hundreds of health organizations for McDonald's to remove Ronald McDonald as a spokescharacter for the same reason; that is, encouraging childrens' use of unhealthy products. For example, San Francisco, that bastion of "progressive" thought, has recently banned toys in Happy Meals, citing that the presence of the toys lure the kids... to nag the parents... to buy the junk food... which makes them fat... et al. This is all very real, people. Remember when New York City banned trans fats in foods a few years ago? It changed the way products are made in America.

    Am I correct that this was part of the reason for such a dramatic shift in marketing strategy, or is it really about the recent sales figures?

     Is this the shape of things to come? Is it right for government to regulate these activities or should children and parents be able to make their own choices?

    These are questions to ponder.

  • Long Live The King?

     

    Those of you who watch a lot of television are probably aware that "The King", an integral part of Burger King's creative advertising strategy over the past several years, hasn't been seen lately. Some people think he's cool. Others find him a bit creepy as he often appears in commercials lurking about in the bushes, people's bedrooms and places like that. I myself found him to be a bit unsettling, but I learned long ago that the first question one should always ask oneself when one sees an advertisment is, "Am I in the intended target market?" It is immaterial if you don't like a commercial unless you are in the target market. So, knowing that large brands engage in exhaustive market research before, during and after marketing campaigns, I felt that using "The King" was, more likely than not, working well for the brand. According to the Wall Street Journal, Burger King recently fired its previous agency (known for their edgy ads) and hired McGarryBowen (known for their conservative approach to the creative process). Thus, the king is dead and a new creative concept will arise.

    Since promotion programs are supposed to be based on measurable objectives and the most important objective of all is revenue, it is no small wonder that Burger King's poor performance in the sales area compared to competitors Wendy's and McDonalds led to the demise of the former agency and its' controversial king. But remember that a decline in sales may or may not be solely a result of advertising that fails to reach its objectives. Many other uncontrollable market factors such as economics, social trends, competitors and substitutes come into play here, which is why most marketers prefer to measure success by doing brand awareness and brand attitude surveys both before and after the campaign. Yet, when a company sees sales decline over a long period of time relative to the competition something is clearly wrong, and one of the easiest things to do is replace the ad agency. Making changes to product, price or place are much more complex and more expensive endeavors.

    Goodbye King! Oh purveyor of unhealthy but delicious fare! It was a short and creepy relationship we had. I can't wait to see whether or not a more conservative campaign is effective, or whether Burger King has problems with the other three P's of marketing.

  • Mongolia's New Sponsor & Competition for Ticketmaster

    Companies will often attempt to increase brand awareness and increase sales through the medium of sports sponsorships. Many of the most popular brands sponsor all kinds of leagues, teams, and individual athletes. The most recently announced deal, however raised a few eyebrows among industry analysts and non-experts alike. Global mining giant Rio Tinto, a $90 billion dollar company, has agreed to sponsor the Mongolian Olympic Team for the 2012 Olympic Games in London. Mongolia is largely a wasteland rich in valuable minerals and not much else, and Rio Tinto is one among a handful of large mining concerns vying for access to those deposits in the form of a lucrative contract with the Mongolian government. Thus, a sport sponsorship is born! Not only is this Rio Tinto's first sponsorship, Rio Tinto is also Mongolia first sponsor. And not only should this arrangement garner valuable publicity for the firm itself, but it should also result in a long term mineral extraction deal. Mongolia, in return, gets a valuable revenue stream to help fund their olympic dreams. It should also be noted that Rio Tinto will also provide the raw materials for all 4,700 gold, silver and bronze medals as they did in the 2002 Winter Olympics. A competitive firm provided the medals in Beijing. All of this is a great example of how the political environment and competitive factors can affect marketing strategy.

    I also wanted to point out that a new ticket service is set to launch that hopes to rival industry leader Ticketmaster. The service is called Axs Ticketing and tomorrow it will begin selling seats for two venues in Denver, CO owned by billionaire Phil Anschutz's AEG Live. By the end of 2012, according to the Wall St. Journal, Axs plans on selling tickets to all 100 AEG venues nationwide and will begin leveraging their industry clout to establish contracts with venues they do not own. All of this should be good news for the consumer as the recent merger between Ticketmaster and Live Nation has left a virtual monopoly in the marketplace. This lack of competitive pressure as we know often results in higher prices and lower quality for consumers. Interestingly, the new venture is partially the result of a ruling by the Justice Department that an alternative outlet for ticket distribution be established if the merger were to be allowed. This type of legislative action is not unheard of, but it isn't exactly common. Let's see if we get lower prices as a result, or perhaps the market needs more players.

  • HP Giving Away TouchPads

    Tech industry behemoth, Hewlett-Packard Co. (commonly known as HP) made an interesting announcement last week. The company is exiting the tablet and smartphone business. Yes, exiting the business. But isn't making this kind of hardware what HP does and aren't these the hot new items, you ask? Well, not really. Computers became very commonplace long ago, and therefore profit margins are now very slim among the dozens and dozens of providers. HP, like many tech companies, has shifted its product-focused business model in favor of services which are less tangible and much more difficult for competitors to duplicate and perform cheaply. So, spinning off the hardware area, including tablets and smartphones which are also becoming commoditized, allows the organization to reallocate its resources towards more profitable products.

    So what should be done with all that inventory? Will anyone buy a "lame duck" product that they know is being discontinued? The easy answer in strategic marketing is to offer a sales promotion, that is a discount off of the normal price, and see what happens. In this case a price as low as $99 for TouchPad tablets was enough to spark a buying spree that company officials called "overwhelming." That is a price point significantly below the $499 dollar former suggested retail price. Clearly this is no run-of-the-mill sales promotion. Clearly the objective here is to unload as much inventory as possible at cost, since inventory is very expensive to hold and maintain for a variety of reasons, and the market has become too competitive to remain at high price points.

    Consider this just another of many inventory liquidations we have recently experienced from Circuit City to Linens n' Things to Borders. Too many retailers means too much inventory. There will be more closings and more deals for you in the future. Enjoy!

    Here is a very recent article from the Wsshington Post

    http://www.washingtonpost.com/business/hp-touchpad-tablet-discontinued-goes-on-sale-for-99-and-flies-off-shelves/2011/08/24/gIQASZu5bJ_story.html

  • Please Don't Wear Our Logo!

     

     

    It's back to school week for many of us around the country, and what does that mean? For many of us, it means a renewed cultural obession, especially amongst younger people, with what they wear and how they look. Grabbing headlines this fashion season is recognized international retailer Abercrombie and Fitch, a $3.3 billion dollar brand. I had to do a "double take" when I read that the company had issued a press release announcing that it had offered the members of MTV's acclaimed reality series, Jersey Shore, an undisclosed sum of money to NOT wear the company's logo on the program.

    The irony here is that many brands pay celebrities handsome sums to endorse their products. It is important to note that the Jersey Shore celebrities are providing this promotion for Abercrombie free of charge simply because they like wearing the clothes. But Abercrombie, for whatever strategic reason doesn't want this free publicity. The question is "Why?" This might be an easy question to answer since we have seen this situation before. Back in 2005, Burberry clothing became the style-of-choice for hard partying youngsters in England. The company, after seeing sales decline, acknowledged that this "undesirable" group of customers wearing the logo actually alienated some of their more high end customers. I am also reminded of the time when Los Angeles Raiders apparel became the uniform of known gang members and gang affiliates throughout the city and, to some degree, the entire country. This is probably not what the Raiders had in mind. Or maybe it was! The same happened with the Tommy Hilfiger brand when the hip hop crowd adopted the look and alienated the company's primary "preppie" target market in the 90's.

    So it's clear that these brands do not subscribe to the old adage "any publicity is good publicity." In other words, these groups of customers are not necessarily the kind of people that major brands want promoting their products...even for free. This is fascinating. People who wear a company's logo indirectly represent the brand, and obviously there are many advantages to having the "right" folks in essence "model" apparel for other potential customers. I see a person with Abercrombie on and I am reminded of the brand's existence and perhaps I'm even thinking of buying it. I see a person who is not in the company's target market wearing the logo and now I'm questioning whether or not I'm in the target market. Thus, I am less likely to buy the product.

    What do you think about this reaction? Is it just another clever way to generate yet more publicity since we are writing about it? Or is the brand really concerned about the negative association between the Jersey Shore celebrities and the Abercrombie brand? Does it really hurt the company?

  • Sports Endorsements in a Tough Economy

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    In the words of Tom Cruise playing Jerry Maguire, “I will not rest until I have you holding a Coke, wearing your own shoe, playing a Sega game featuring you, while singing your own song in a new commercial, starring you, broadcast during the Superbowl, in a game that you are winning, and I will not sleep until that happens.”  That was then (1996), but this is today in a questionable economy. 

    Professional athletes are the closest people we have to real-life super heros.  They do the impossible, kids look up to them, and they often serve as role models and trend setters for older people as well.  If they are doing what they are supposed to do and behaving themselves, they have the perfect storm of attributes that marketers want to be associated with their products and brands.  However, the current reality is that “image marketing” is being reconsidered, with tighter budgets and more accountability for return on investments. Marketers now have to find the right blend of how to use athletes while delivering a tangible business goal.  The harsh reality is that the golden smile on top of a hard body holding your product after the big win hasn’t been proven to be as golden at the sales level.

    Recent research assessed the effectiveness of celebrity endorsements for brands. It looked at how well these ads performed in comparison to those of competitors (with or without a celebrity).  Some of the lowest scores came from endorsements from star athletes. One ad with NASCAR champion Dale Earnhard Jr. for Nationwide Auto Insurance scored a -27% in effectiveness compared to ads from competing brands. In spite of Earnhard’s positive reputation and pleasant personality, the survey respondents were unimpressed, with one of them opining that the ad "missed the mark."

    Read more:  http://bostinnovation.com/2011/03/08/sports-endorsements-no-engagement-no-touchdown/

    Tiger Woods

    A truly innovative and effective promotional campaign requires something more than just a famous face, no matter how popular that famous face is.  Despite this additional concern and accountability for the money spent in promoting products, star athletes appear to still be raking in the big endorsement incomes.  Sports Illustrated names the 50 top earners every year.  For 2010, the top two endorsement earning athletes, by far, were golfers: Tiger Woods ($70,000,000) and Phil Mickelson ($52,000,000).  Other popluar athletes with high endorsement income for 2010 included Lebron James ($30,000,000), Shaquille O'Neal ($15,000,000), Peyton Manning ($15,000,000), and Dwyane Wade ($12,000,000).

    Peyton Manning

    These numbers still seem astronomical to many, and finding positive return on these expenditures is becoming more and more difficult, especially in this difficult economy.  Reflecting these concerns, in most cases, the projections for endorsements in 2011 are substantially reduced as companies continue to explore methods to tighten their belts without losing their brand image and company reputation.

    Read more:  http://sportsillustrated.cnn.com/specials/fortunate50-2010/

  • NASCAR Sponsorship and Marketing

    NASCAR

    Whether you are watching NASCAR in person at the track or on TV,  it seems that nothing associated with the sport is without a sponsor. Cars are covered in logos and stickers, drivers have patches from shoulder to shoulder and every race is brought to you by one company or another. It is obvious that sponsors shell out a lot of money for NASCAR sponsorships, but how much, exactly? And where does all that money go? 

    Being a primary sponsor of a team costs $350,000 to $500,000 per race, although in many cases, corporations sponsor a team for a full season. That means the sponsor gets to choose the paint scheme of the car, put the logo all over it, and use the driver's likeness in advertising for the product or service it wants to promote. It is possible to be the primary sponsor for just one race, and for the $.5 million investment, the car will change its appearance for just that one race.

    In addition to the above sponsorship opportunity, fuel is one of the biggest expenses - and not just fuel for the race. Every team has to get at least one car and one full pit crew to the race - plus the driver, the owners, the management, and all the team's racing gear and tools. This requires a couple of large transport trucks. Therefore, there are opportunities to sponsor fuel costs for a NASCAR team.

    Jeff Gordon.jpg

    Sponsoring specific drivers is another opportunity.  The driver typically flies from track to track, or the driver may take a tour bus, which is almost as expensive as flying. In addition, the driver's salary is generally paid for by the sponsor, which gets a certain number of scheduled appearances out of the driver in return. The driver will also split race-day winnings with the team, and there are usually incentives for winning big races.  The driver can also bring in fees for additional appearances or even license his or her likeness to advertisers. The best drivers bring in millions each year, like a recent top earner, Jeff Gordon.  In 2008, Gordon earned $17 million in endorsements and royalties, and $15 million in salary and race winnings, for a total of $32 million.­

    The final sponsorship opportunity will buy logo rights to certain parts of the actual race car.  There are three main levels of sponsorship, as follows:

    • $500,000 to $2 million for an Associate sponsor - A logo on either the lower rear quarter panels, the rear deck lid, or one post.
    • $2 to $5 million for a Major sponsor - A logo prominently displayed on either the rear quarter panels or the rear deck lid, and the uniforms.
    • $10 to $20 million for a Primary sponsor - Logos on the entire hood and quarter panels, the signage below the quarter panels, most of the two posts, the equipment, the uniforms, as well as the color scheme of the car and team uniforms.

    Read more: http://auto.howstuffworks.com/auto-racing/nascar/nascar-basics/nascar-sponsorship2.htm

  • Sports Sponsorships: Money Well Spent?

    denver broncos logo 300x300 Denver Broncos logo

    As the Denver Broncos' venue changes names from Invesco Field at Mile High to Sports Authority Field at Mile High, one has to wonder why companies spend so much money on sports-related sponsorships.  If you haven't noticed, every inch of scoreboards, sidelines, concourses, ticket-backs, parking lots, and even restrooms of major sports arenas are painted with sponsor logos and brand messages.  Why not purchase naming rights to the entire venue to rise above the multitude of other advertisers and sponsors?  Reportedly, Sports Authority, a Colorado-based company, will "invest" $150 million over 25 years for naming rights to the Broncos venue.  The benefit to Denver and the Broncos is fairly clearcut.  Reportedly, half the money will go to the Broncos organization and half will go to the district in which the football stadium stands for improvemenst to both the venue and the neighborhood around it.  It seems fun and cool for a home-town company to sponsor the venue, but beyond the WOW factor, what is the advantage to companies who commit money to such expensive sports sponsorships?

    In addition to venue sponsorships, other sports-related sponsorships include endorsing specific professional athletes (e.g., Tiger Woods, Michael Jordan, Lebron James, Kobe Bryant), sponsoring specific sporting events (Vizio Rose Bowl, AT&T Cotton Bowl, GoDaddy.com Bowl), and sponsoring NASCAR race cars (every position on the car, from fenders to hoods and roofs are sold to sponsors).  Companies spend millions of dollars on these endeavors.  With the economy being down and stockholders wanting to see profits from their investments, how can these companies justify such huge "investments?"

    Sport sponsorships are becoming hugely popular as one of the best ways to create brand awareness, advertise one's services, and establish and maintain a company's reputation as a responsible corporate citizen in the business world.  Is this enough?  It seems to be.  Very little grumbling takes place from investors (stockholders) when a company commits such huge amounts of resources to these sponsorships.  In fact, in most cases, they seem to be nearly as excited as top management of the sponsoring companies themselves.  Stay tuned for another blog on sports-related sponsorships.

    Read more: http://EzineArticles.com/1041698

  • Please Take These Toiletries

     

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    I don't know about you, but when I travel, I never pack shampoo, conditioner or soap. Even without stringent airport security requirements and increased costs associated with packing more stuff, I wouldn't even consider transferring my regular personal care items into bottles of 3 ounces or less; nor would I take the time to buy travel-sized items in the store. All of this simply requires entirely too much effort on my part. That is not the way I roll. One of the many things I look forward to when I stay in hotels, especially with regard to more luxurious accommodations, is the neatly arranged array of personal care items usually displayed on the bathroom counter. In the last few years, I have noticed that even the lower end chains are enhancing their image through little things like the quality of bedding and room decorations as well as the quality of complimentary toiletries. Little things tend to go a long way with regard to consumer perception of quality versus price.

    Travel-sized personal care products at hotels are something many travelers now view as value added enhancements to their stay, and also as highly useful parting gifts. Indeed the industry has changed from partnerships with a few "plain jane" private label contract manufacturers to alliances and licensing relationships with global beauty brands. The result is a nice blending of the personal care and hospitality industries. Couple that with ever increasing airline restrictions and you have a category that may enjoy healthy growth for years to come. Recently, Hilton Hotels announced that it has commissioned six products from the Peter Thomas Roth cosmetics brand for use in 540 hotels in 78 countries worldwide (Wall St. Journal 8/11), and that the hotelier has shifted longtime partner Crabtree & Evelyn from supplying these hotels to selling to the company's mid market brands, Doubletree and Embassy Suites. Higher end personal care products are appropriate for higher end brands.

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    These arrangements are the result of agreements between hotels and hospitality supply companies, the former of which often license the names and formulations of known branded products, manufacture the items, and sell them to the hotels. This has been an effective model for hotels because they are not in the business of manufacturing personal care items. The core compentency of a hotel is hospitality and it therefore makes sense to outsource other functions such as room amenities. Today, it looks like global retail brands have identified a marketing opportunity in offering "samples" of their products through hotels rather than more traditional methods of sampling. I cannot think of a more cost effective way to obtain and keep a customer than to invite them to use your product throughout their stay, take full bottles of what they didn't use home with them, and then ultimately buy the product in the store.  The brand makes money on each bottle and also exploits an opportunity to have the target market try the product. Thus, the traditional model used for sales promotions such as sampling can be applied to unique situations such as this one. There is no end to what you can accomplish through marketing once you understand how marketing strategy works.

     

  • Social Marketing: Improving the World, One Campaign at a Time

    Social marketing refers to the application of marketing techniques to change behaviors with the ultimate goal of contributing to a social good.  In other words, social marketing campaigns are designed to promote a "cause" or behavior that will improve society.  Sometimes referred to as "cause marketing," social marketing is becoming more and more common.  Most memorable are the social marketing campaigns designed to encourage people to quit, or never try, tobacco, meth, etc.  These campaigns are both public service announcements, normally sponsored by government agencies, and those campaigns sponsored by private enterprises, such as many of the anti-smoking campaigns.

     

    Social marketing has been effectively used in such causes as encouraging people to do some behavior, such as volunteerism, organ donorship, environmental activism, energy conservation, participate in eco-tourism, healthy diets and exercise, consumer safetey and traffic safety, use of bicycle helmets, radon testing, care for the elderly, care for babies, screen earlier and more often for diseases, use of birth control, use of safe sex practices, etc.  It has also been used to discourage tobacco use, meth use, alcohol use by at-risk people, introduction of harmful animal species, etc.  It has even been suggested that it be used to discourage, or de-market, such practices as sex tourism.

     

    Social marketing is a relatively new field with it first being identified as being separate from other types of marketing in 1971.  The reason promoters of social causes have adopted marketing practices is they realize that stating scientific facts about an issue alone will not convince people to change their behavior.  They need to be persuaded, and the social science of marketing presents well-developed concepts and tools to help this persuasion take place.

    Read more:  http://i-socialmarketing.org/

     

  • Guerilla Marketing: The Good, the Bad, the Ugly, the Success

    Guerilla warfare includes military campaigns that are unexpected and unconventional.  It targets the enemy in unexpected places in unexpected ways at unexpected times.  The tactics for guerilla marketing were developed using similar concepts.  Promotional tools (advertising, personal selling, sales promotions, and public relations) are used in unique and unexpected ways to reach consumers in unexpected places. 

    The objective for guerilla marketing is to create a unique and thought-provoking promotional concept to create buzz.  In fact, the practice is also known as buzz marketing.  Some of the unusual approaches used are intercept encounters in public areas, street giveaways of products. PR stunts,  flash mobs, or any promotional attempt designed to create maximum impact with minimal resources.  That's right, guerilla marketing campaigns are most commonly used by companies with small promotional budgets. 

    Unfortunately, some early guerilla marketing campaigns that utilized littering, graffiti and defacing public property gave guerilla marketing a bad reputation.  Because of this, many companies are reluctant to get involved in such "stunt" marketing.  However, just like the success of guerilla warfare, guerilla marketing can also be extremely successful, if designed carefully to not offend people and to enhance, rather than damage, a company's reputation.  Small businesses have enjoyed as much as a 250% increase in sales by using this type of marketing.

    Guerilla marketing, once thought to be cutting edge and risky, has almost entered the mainstream of marketing.  A short discussion about the concept is often included in marketing textbooks and at some universities (e.g., Texas A&M in Corpus Christi), it is an elective course that can be taken by marketing majors.  The original inventor of the concept, Jay Conrad Levinson, created and maintains a website for "all things guerilla," found at www.gmarketing.com.

    Guerilla warfare was developed to give small military forces a chance, and sometimes even an advantage, over much larger military forces.  Likewise, guerilla marketing can give small businesses an advantage, or at least a chance to succeed against seemingly overwhelming competition.  However, care must be taken so that a guerilla marketing campaign is congruous with a company's product and the image of the company.  For example, it might not make sense to do some of the sensational approaches to guerilla marketing if you own a funeral home.  But, if you have a small business and your company and product are suitable for such, you might consider this relatively inexpensive form of sensational marketing.

    Read more:  http://www.noozhawk.com/sports/article/080111_paul_burri_guerrilla_marketing/

    Read even more:  http://blogof.francescomugnai.com/2009/11/the-80-best-guerrilla-marketing-ideas-ive-ever-seen/

     

  • Ticket Prices: How Much More Can They Stand? Part 2

    There is only one answer to the question posed at the end of Part 1. Our “irrational exuberance” in escalating ticket prices (this also goes for concessions and sponsorships) has created a ticket pricing bubble. As is the case with all economic bubbles, they must eventually descend, but it is up to the industry to insure that they do not explode and hurt stakeholders. Prices must be reduced across the board and customer volume will increase, providing more opportunities for properties to generate revenue while the fan is in the stadium.

     In addition to high prices, there are simply too many places to buy tickets and consumers are left confused as to what the actual retail price really should be since comparing apples to apples when it comes to tickets is tough to do. The sense of trust between sport properties and fans may be eroding due to these inconsistencies. For example, group reps are selling tickets to groups discounted at anywhere from 50% to 75% off the face value. Others got 2 for 1 club level seats because they are Wells Fargo customers. Season ticket holders pay only 75% of the face value of each ticket, and with the industry trending toward dynamic ticket pricing, we are now traveling down the trail the airlines have already blazed. Popular companies those airlines are! We had all better hope that the fan that did not pay full price does not get into a conversation with the fan who paid face value plus service charges.

     And high ticket prices aren’t the only issue. After paying for parking, the fan must stomach ever escalating food and beverage costs. Fifteen bucks for a hot dog and beer is now the norm, and this is almost entirely due to the practice of outsourcing food service to expensive third party providers. Concessions prices could end up being much lower and profits could be higher for sport properties that take their food service back in house. And how about that food and service quality? The consumer is the one who loses and staying at home instead of braving the expense, traffic, weather, and crowds when there are so many substitutes available.

     This may seem like common sense, but perhaps this sort of sense really isn’t all that common. If it were, our industry would be listening to the consumer and changing our ways proactively before market conditions force us to change at much greater cost. So, who wants to be first? Anyone? Anyone?

    Dr. Clayton Daughtrey contributed to this article.

  • Ticket Prices: How Much More Can They Stand? Part 1

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    Perhaps the most important question facing sport marketers today is, “How do I get fans to come back to the games?” Reasons for concern about decreasing attendance range from the ever-increasing availability of other entertainment options for consumers (including more and more professional sport leagues) to the more disturbing trend involving the migration of spectators toward media-based consumption. Is the 52” HD TV with the full sport package in fact “cannibalizing” the sales of tickets to live events? Has technology made the game so life-like that sport consumers can get the same experience at home? Preposterous! Certainly they get “an” experience, but “the same” experience? No. They are simply choosing alternative ways to view your events…far cheaper and more convenient ways. When the Wall St. Journal reported that even Cubs fans are staying away for the third stratight year (WSJ, July 16, 2011), it became clear that there is a proverbial "elephant in the living room" and its name is greed.

     

    This is not just an isolated sport phenomenon. A quick look at an industry very much related to ours, live music entertainment, illustrates a very disturbing picture. The summer 2011 market is flooded with discounted tickets and replete with canceled concerts. According to the Wall Street Journal, Live Nation Entertainment reported that ticket sales revenue is down 17%, the number of tickets sold is down 12% and the average ticket price has fallen by 5%. Sound familiar? The important lesson for sport marketers is to remember that for the most part our product is highly elastic. It is not a “necessity” and therefore demand is very sensitive to both price and economic factors Economic conditions were much worse three years ago, by the way, so don’t expect a magic spike when “things get better”. Look at what happened to premium seats when the Yankees introduced the new stadium. Empty. There should be no mystery as to why an increasing number of consumers are choosing from a variety of substitutes rather than continue to absorb the cost of rising game day prices.

     

    Obviously, a great deal of revenue can be generated through media-based viewing, but we still have to come up with ways we can get fans back into the seats. Since there isn’t a whole lot marketers can do to enhance the core sport product, the action on the field itself, efforts to increase spectator satisfaction have involved enhancing the stadium and all of the peripheral aspects to the consumer experience. These value-enhancing marketing activities, which include video screens, deluxe concessions, activities for kids, cheerleaders, hot tubs, etc., etc., can only go so far in alleviating the remorse buyers feel when they fail perceive value in what they have bought. So that’s the proverbial elephant in the living room. For most sports, ticket prices are simply too high.

     

    The sport professionals who haven’t had too much of the industry’s “Kool-Aid” know this to be true, but no one wants to be the first one to tread down that slippery slope. Marketing theory tells us that lower ticket prices mean lower perceived value by consumers. Unrealistically high prices, on the other hand, set expectations that are difficult for the sport marketer to fulfill especially if the team loses or the weather is inclement. Consistently discounting tickets means that consumers never expect to pay face value for a seat. If this is all true, what can be done?

    Part 2 of this article will appear tomorrow. Dr. Clayton Daughtrey contributed to this article.

  • Market Globally, Think Locally

     

    The Wall Street Journal reported yesterday that Wal-Mart, following the lead of natural products retailer Whole Foods Markets and to a degree more mainstream chains such as Safeway and Supervalu, will begin to source fruits and vegetables from more local sources. Those of you who are already familiar with natural and certified organic products are probably aware that buyng products from local sources is a big deal to retailers that sell these products. Why? Buying locally is seen by many observers as a way to:

    1. Ensure greater freshness and higher product quality

    2. Support local businesses, especially family farmers

    3. Support the environmental movement as shipping avocados from New Zealand to California is viewed by many as an ecologically unsound practice

    Just look at the way consumers have flocked to local farmers markets throughout the nation as well as to natural format stores, which have all proliferated and profited due to this rising social trend. It seems like every community has at least one of each, and I have mentioned in previous columns the prolific growth within the" healthier for you and better for the environment" world of goods and services. Is this a fad? Not at all. High growth rates sustained for decades in the natural and organic segment, now in the hundreds of billions in annual sales, prove that this trend should in no way be compared to the "Macarena". Remember that?  The big question here, especially for chains that do not have health and environmental sensitivity in their mission statements, is, "What does local mean?" Obviously in the absence of a government definition or an industry standard this concept can be very subjective and therefore abused by marketers. For example, at most large retailers "local" can mean food grown hundreds of miles away. To the smaller natural format stores, the word carries much more significance, and the retailer must take greater care in communicating because many of  their shoppers are very astute as to what products are being offered, what is in them, and where they come from.

    I will discuss the market segmentation for consumer attitudes toward health, wellness, and the environment in later columns. For now, consider the impact that a large retailer such as Wal-Mart may have on competitors, the supply chain, and consumers in general. Could it ultimately end up changing the way we produce, sell, and consume food?

  • Unhappy Meals

     

    If there are no fries in a McDonald's Happy Meal, can it still inspire happiness? This is a very important question. It should be no surprise to marketing professionals that the food industry has come under steadily increasing scrutiny in recent years as childhood obesity levels have risen. In a self-regualtory move, McDonald's recently announced that, short of answering the call to eliminate the toys and the characters that have been so influential in establishing brand awareness among children, the company will reduce french fry portions and begin to offer apple slices as a subsitute for more health conscious parents. Apple slices? Yuck!

    Those of us who follow social trends as they relate to marketing goods and services realize that consumer attitudes toward obesity and overall health and wellness are driving a number of different market segments. I have enjoyed watching areas such as the natural and organic products industry grow at double digit rates for over 20 years. Now these attitudes have hit the mainstream in the face of some alarming health data and thousands of practitoners calling for increased government regulation. What is a brand to do? Making products healthier doesn't always result in maintaining the product characteristics that make them "yummier". As a matter of fact, the opposite usually happens. So, is this a problem for McDonald's? Is the company responding appropriately?

    History has shown that when a food service provider broadens its product mix to include healthier offerings, it can have a positive effect on overall sales. A brief look at the atmospheric growth of the health food industry provides us with literally thousands of good examples. Remember that, in the past, even McDonald's introduced salads targeted primarily to parents who want to indulge their children but prefer not to eat a Big Mac themselves. This program has been successful. So the problem is not in offering healthier options per se, but may arise when the company attempts to replace a "yummier" option with a "healthier" option. As long as the company gives the consumer the choice and doesn't attempt to dictate what products they should buy, the long term consequences of such a move will be positive.

    The link below provides more insight on this interesting development:

    http://articles.economictimes.indiatimes.com/2011-07-30/news/29833158_1_apple-portion-mcdonald-s-corp-happy-meal