• Tablets For Everyone! Hold the Retailer

    Do you have a case of tablet-envy? Are you one of those people that holds out until the holidays to test the gift-giving waters in hopes that someone might be thinking of you, or at the very least wait for the wallet-easing holiday deals to which we have all become accustomed? If so, you are in luck. Not only will the top three tablets and e-readers by sales volume--Apple's iPad, Amazon's Kindle, and Barnes and Noble's Nook--be available in vast quantities this year, but all can be purchased directly from their respective makers online. This can mean big savings for consumers, big profits for manufacturers, and bad news for retailers such as Best Buy, Wal-Mart, and Staples who count on popular products like these to lure shoppers into their stores.

    Since manufacturers traditionally must allocate much of their profit margin to the retailer, a product that is sold direct-to-consumer can be purchased from the manufacturer for a much cheaper price than the same product bought from a traditional retailer. Retailers are valuable members of the supply chain and can help manufacturers sell more goods in a variety of ways, but the advent of e-commerce has changed the way we buy products and has therefore transformed the way businesses sell them. If a brand is well-known and there is a high consumer demand for it, the product marketer can sell the product in lots of places and not worry so much about price conflicts among the various channels of distribution (different kinds of retailers). Brands that do not possess much equity must be very careful not to undercut their retail partners on price when these intermediaries are bypassed and their products are sold directly to the consumer online.

    Thus, consumers can expect to find tablets and e-readers at ever lower prices through the brand's website. If this reduction in price doesn't occur, you can be sure that the company is reaping massive profits since they don't have to pay so much to intermediaries such as wholesalers and retailers. Big box retailers, on the other hand, may be left out of this frenzy and may wish that they had spent a bit more time thinking about how to generate store traffic, instead of relying on the same old tactics over and over again.

     

  • Labeling Foods As "Healthy"

    The movement to fight obesity and improve the health of Americans may soon take another turn. It is no secret that ingredients such as fats, sugars, and salt have been under fire from a variety of stakeholders for several years, most significantly government regulators. There is little doubt to the industry observer that sweeping regulation in terms of product formulation and labeling are right around the corner. Smart marketers have already begun reformulating products to make them healthier, a trend that arguably accelerated a few years ago with the widespread removal of harmful trans fats from foods by major food manufacturers. The latest development concerns a report released this week by the Institute of Medicine urging regulators to require a ratings system for foods (ranging from unhealthy to healthy) based on the contents of the product. These would include easy-to-read comparisons of serving sizes and more transparent disclosure of calories and "unhealthful" ingredients among other changes.

    Clearly inspired by the Energy Star ratings program for appliances, this powerful group can do much to influence public policy. Not only will impending regualtions force eventually force compliance by all players, but some market leaders may see an opportunity for brand differentiation and general goodwill by leading the new labeling effort. Others will be forced to follow suit. There is little doubt that industry groups will lobby to fight any impending regulations, as they always do when faced with what they view as anti-business measures, but not much can be done about a social trend this large. Attitudes about what constitutes healthy living have been changing slowly but surely for decades. The natural and organic products industry is now in the hundreds of billions in annual sales and has been growing rapidly for over 30 years. There will be more interesting developments over the next few months.

     

  • Fast To Fresh

    A fairly recent development in the retail environment involves an evolving placement of packaged goods products migrating from aisles arranged by product category and brand to the produce aisles where "freshness" prevails. It seems that simply being next to fresh foods such as fruit and vegetables can help make your product look fresh as well. This is known as the "halo effect", or in its most negative connotation, guilt by association. In this respect, however, it is packaged'goods manufacturers such as those brands marketed by Kraft Foods, that want to get next to the fruit so that they can be preceived as fresh too!

    This week, the Wall Street Journal reported results of a study that identified 92% of consumers as saying produce is the primary reason they choose a grocery store. 92 percent is an unbelievably large number, statistically speaking. Indeed retailers may have already realized that dairy items such as packaged milk and cheese and items such as yogurt and tortilla chips may sell better when placed along side of items perceived to be "uber-fresh" by consumers. This strategy seems to have limited implications to marketers, however. Marketing theory suggests that the packaged good should be complementary and fit with the produce marketed near it.

    Conditioner is seldom purchased without the requisite shampoo, and so it should follow for other related goods in the retail environment. It will be up to the marketers to determine which goods are cross-merchandised with which goods, and this should not be limited to the fresh produce section. The lesson is that goods are often bought in tandem and too many times retailers fail to perceive this, favoring sections arranged by product category and brand. Hopefully, the end result will not be too confusing for consumers. After all,  we need to find what we need, get in, and get out. Ultimately, this balance can be difficult for retailers to achieve.

    DDS

  • Cola Bears

     

    In the very near future, Coca-Cola Company will unveil a uniquely-designed can as part of a cause-related marketing campaign directed at protecting polar bears. Ring a bell for anyone? Since 1993 the company has been using versions of animated polar bears as part of its advertising creative strategy. Cute and cuddly bears elicit good feelings and hopefully consumers will associate those good feelings with Coca-Cola. At least that's the general idea behind using such a strategy. Yet, utilizing an image in marketing communications and actually aligning the brand with a not-for-profit cause is a whole different animal.

    Of course, most large organizations now engage in promoting some sort of cause as a part of marketing strategy, a practice that is largely intended to demonstrate a corporate concern for more than just profits. And that Coke is actually partnering with the World Wildlife Foundation, commiting resources to helping polar bears, and spending millions promoting this fact is worth noting. Yet, I can't help but wonder why it took brand strategists so long to figure out what I consider to be a very, very obvious connection between using polar bears as a part of creative strategy and cause-related marketing. If we had all day every day to think about the Coke brand, I think this would have occurred to us sometime in 1993 or 1994 instead of 2011.

    Was this really an oversight on the part of Coke? Can you think of any other reason why the company waited so long for such a partnership? Check out the link below for a blurb on the new agreement.

    http://online.wsj.com/article/SB10001424052970204777904576651572048222338.html

  • News Flash: TV Bad For Kids!

     

    Is TV good for tots? Well, once again the American Academy of Pediatricians has suggested that it probably isn't such a good idea to allow children under two years of age to watch television or videos as a means of entertainment. The group, a not-for-profit representing a rather influential bunch of child doctors nationwide, first announced these findings back in 1999 after compiling a body of research, and has recently reiterated the same message based on at least a decade of new research. The verdict is in. Not only is marketing to children at younger ages a questionable practice, but the simple presence of the video medium in and of itself is apparently enough to delay a child's development, including the ability to talk. So far this overwhelming body of data only applies to children under two, but stay tuned.

    The important thing for marketers to remember is that the development of programming for and the marketing of products to children of all ages are under fire both as viable forms of entertainment and as mediums for marketing goods and services. The traditionally unregulated marketing of junk food, toys, and other products by organizations using young peers and cartoon spokescharacter endorsers alike has always been a legal practice, although often questioned by many observers of ethical business practices. To what degree will these reiterated findings( and possibly many others yet to come) affect products targeted to the younger crowd in the immediate and distant future? We know that this group largely relies on parents to make the final purchase decision, since in the whole it lacks much in the way of disposable income and purchasing power. But the younger children are, the more negatively influenced they may be by video. This may be fodder for new pressure from external stakeholder groups and possibly future legislation with regard to a very profitable target market.

    Clearly, this is exactly the type of thing a marketer needs to be aware of, since monitoring the external business environment is crucial to the success of any marketing strategy. In the zeitgeist of increasing exposure to media by children of ever younger ages, it could be time for legislation, and this is something a savvy marketer had best not overlook.

    DDS

  • The Importance of the Customer

    The marketing concept goes something like this.  Organizations should commit their resources to satisfying customers, but also keeping in mind that they need to make a profit to fulfill obligations to investors, or if they are non-profit organizations, they will still need to meet some sort of organizational goals.  This marketing concept clearly puts the customer, or target market, at the center of marketing.  It seems so simple, yet putting customers first is a relatively new concept in business.  The chart above summarizes the eras business thought and practice have gone through.  If we go all the way back to the the early nineteenth century, a woman who wanted a new dress had two choices: to make her own or to hire someone to make one for her. If she decided to hire someone, she would pick out the fabric and get measured, and the dress would be custom-made for her. There were no standard sizes as there are today. Standard sizes are the result of modern mass-manufacturing processes.

    The Simple Trade Era.  Prior to the Industrial Revolution, people made most of what they consumed. Any excess household production could be brought to town and sold or traded for other goods. This type of economy is commonly referred to as a pure subsistence economy. In a pure subsistence economy, there is little need for marketing (to facilitate exchanges), since each household produces what it consumes.

    The Production Era.  The production era is so named because many companies' main priority was the reduction of the cost of production. Companies felt that exchanges could be facilitated merely by lowering manufacturing costs and, in turn, passing along the cost savings to customers in the form of lower prices.

    The Sales Era.  The next era of marketing evolution is called the sales era because many companies' main priority was to move their products out of the factory using a variety of selling techniques. During The sales era, companies felt that they could enhance their sales by using a variety of promotional techniques designed to inform potential customers about and/or persuade them to buy their products. This type of thinking was initiated by the economic climate of the time.

    The Marketing Department Era.  The manufacturing capability of most industrialized countries—except the United States—had been destroyed during World War II. Therefore U.S. firms once again found it relatively easy to sell the products they manufactured because there was little competition from abroad. Armed with sales concepts developed during the sales era, as well as new manufacturing capabilities and large research and development (R & D) departments developed during the war, firms realized that they could produce hundreds of new and different products.

    The Marketing Company Era.  Firms that have moved from simply having a marketing department that follows a customer orientation to having the marketing department guide the company's direction are called marketing companies. In marketing companies, the marketing department sets company operating policy, including technical research, procurement, production, advertising, and sales.

    The Relationship Marketing Era.  Relationship marketing is the process whereby a firm builds long-term satisfying relations with its customers in order to retain the customers' loyalty in buying the firm's products. Philip Kotler (1997), a noted author of several books on marketing, has pointed out that the need for customer retention is demonstrated by the fact that the cost of attracting a new customer is estimated to be five times the cost of keeping a current customer happy.

    The Social/Mobile Marketing Era.  While most believe that the Relationship Marketing Era continues, it has also been suggested that 2010 saw the demise of that era and a new business era has begun.  While still adhering to many of the tennets of the previous era, it focuses on real-time connections and social exchanges based on relationships driven by the customers.  In this era, business are connected 24/7 to current, future, and potential customers in real time.  Communication and exchange of information is a critical success factor.  So, if anything, this era has become even more customer-oriented with customers having access to many organizations any time they want.

    Read more:  http://dstevenwhite.com/2010/06/18/the-evolution-of-marketing/

  • Renegade Starbucks Breaking the Political Neutrality

    The Northwest has long been known for being a little bit rebellious.  Starting with being the birthplace of grunge music, like that produced by Nirvana, and including the protests against the WTO in Seattle in 1999, the Northwest is anything but a laid-back and peaceful place.  Maybe people really care about issues there, or they are rebels without a cause, in some cases.  Starbucks is the latest in a long line of renegades from the Northwest.  The compnay got plenty of media buzz last month when CEO Howard Schultz pledged to boycott political donations and help boost the economy by creating more jobs.  Brands usually strive to stay politically neutral, but in this case, some experts say the Seattle-based coffee behemoth could be making a wise marketing play. 

    When Schultz announced last month that he would stop political contributions until lawmakers come up with a deficit-reduction plan, he said 100 other business leaders had also agreed to keep their checkbooks shut.  But 38 of those executives appear not to have made any political contributions at all since at least 2008. Another 20 gave less than $5,000.  "That's a real easy one for me," said Jim Morris, the head of Lecere Corp. He hasn't given any money to a candidate in the past four years. "I don't understand why people make large campaign contributions, anyway.  I haven't ever played in that arena," he said.   Schultz launched his quest last month, circulating a letter to fellow chief executives asking them not to make any campaign contributions until lawmakers deliver a "fiscally disciplined long-term debt and deficit plan."  It followed months of partisan rancor in Washington about a deal to raise the federal government's borrowing limit.  He also called on the executives to commit to do "all they can to accelerate job creation."

    It's hard to tell what effect this campaign will have,  The 100 executives who signed Schultz's pledge have only given a combined $1.9 million in political contributions since 2008. Much of that money went to industry groups and other political committees instead of candidates.  By comparison, presidential candidates alone raised $1.6 billion in donations in 2008; the totals for the 2012 race are likely to be higher.   Also not clear is whether the pledge will prompt companies to disengage from Washington in other ways. Political action committees associated with companies headed by executives who backed Schultz's campaign spent $1.2 million on political campaigns since 2008, federal records show.  The companies spent significantly more — at least $11.7 million — lobbying Congress on issues ranging from trade to medical regulations since 2009. Nasdaq — whose chief executive, Greifeld, signed the pledge, has spent about $2.4 million lobbying on issues ranging from financial regulation to rules about market data in the past three years, government records show.  A Starbucks spokesman said the company did not plan to stop lobbying.  Starbucks spent about $350,000 on lobbyists last year, seeking to influence lawmakers about everything from cup recycling to health care reform.  Still, it's time that demands for fiscal responsibility be directed at government and even if Starbucks' CEO has only a small impact, it may be the beginning of something with the potential to change the economy and government fiscal irresponsibility.

    How will, the campaign impact Starbucks itself?  The contentious political climate makes Schultz’s crusade a noble one and therefore reflects positively on the Starbucks brand, say some experts, including some that specialize in public affairs and reputation management.  If this were ordinary times, this kind of a ploy probably wouldn’t succeed, but these are not ordinary times. People are upset with the lack of leadership and looking for leaders where they can find them.  Business leaders, such as Schultz, are filling a perceived leadership vacuum, so the timing is perfect. The Starbucks brand is a very good fit with this movement. It can only help Starbucks.  However, some critics disagree.  They say that Schultz’s statements will have little consumer or brand impact.  His pronouncement will have no impact on their own brand.  The impact may even be slightly negative as it can easily be characterized as political rhetoric, placing this action in the same arena as bipartisan politics.  But Starbucks’ case is unique because Shultz’s stance fits in with the coffee chain’s aspirational image. Brands have a rare opportunity, sometimes, to mesh with public policy issues and when they do, if you can figure out a nonpartisan way of doing it and it fits into the image of your consumers, it’s always a great thing to do. GB

    Read more:  http://www.marketingpower.com/ResourceLibrary/Pages/newsletters/mne/2011/9/starbucks_political_boycott.aspx

     

     

  • Consumer Decision Making: Thinking or Feeling?

    Do consumers spend a lot of time thinking about and analyzing everything before they make a purchase?  Or do they just buy things based on gut feeling, or by the seat of their pants?  The answer is simple and is, "it depends."  What does it depend on?  The answer to that question is not so simple.  Recent consumer research suggests that purchase decision making is based on gut feeling (affect) as often as it is based on thorough thinking (cognition).  What are some things that might drive a consumer to purchase more on affect than on cognition, or vice versa?  Much of it depends on the consumers themselves.  Their personalities, experiences with purchasing similar products, knowledge they have about the product, how important the product is to them, etc., can help drive the decision making into either an affective decision or a cognitive one. 

    Some consumers may take time to thoroughly research each and every product before they purchase it, while other consumers may be more impulsive and just buy things based on their moods, emotions, what their friends say, etc.  Some products, such as homes and automobiles, tend to make even affective consumers take a more cognitive approach because of the expensive nature of the products.  Some products may be important to a consumer for only a short period of time.  In other words, for one purchase, the product may require a cognitive process by a consumer, but at other times, the same product is an affective decision for that same consumer.  For example, if you have invited your boss out to eat, you will likely expend some effort thinking about and deciding which restaurant to use for the occasion.  If you are not feeding the boss and just going out to eat by yourself or with close friends or family members, the decision is likely much simpler and more affective.

     

    Neuroscience is an emerging technology that has practical applications to understanding potential consumers of any marketing program.  Neuroscience is being utilized by leading companies in their marketing plans.  Conventional market research uses powerful techniques such as surveys and interviews, said O’Connell, Senior Vice President of Consumer Neuroscience Practice at Millward Brown. However, “neuroscience is beginning to offer some new possibilities” in helping marketers understand decision-making drivers that are based more on intuition than reasoning and analysis.  Building the case for the critical role of neuroscience, Steven Walden, Senior Head of Research and Consulting at Beyond Philosophy gave a presentation on the emerging field of customer experience psychology and management, which is founded on neuroscience.  Walden suggests that customer experience is no longer just about the 4Ps of price, production, promotion, and place.

    “To understand what your consumer really thinks about your marketing, you need to understand both their logical and emotional responses, whether those responses occur consciously or subconsciously in their brains,” said Andrew Pohlmann, Managing Partner of Professional Services at NeuroFocus.  Pohlmann noted that the human brain processes 11,000,000 bits of sensory information every second, but the conscious mind can only handle about 40 bits per second; the rest is processed unconsciously.  Brand, product, packaging, advertising, and in-store applications all lend themselves well to neurotesting, neurodesign, and neuromarketing, said Pohlmann.

    Read more:  http://www.marketingpower.com/ResourceLibrary/Pages/White%20Papers/Marketing_and_Neuroscience.aspx

  • Online Retailing and Digital Co-Marketing

    What in the world is happening to retailing?  Blink your eyes and everything changes.  Of course retailing business are still making money from selling things, both in their brick-and-mortar operations and/or their click (online) operations, but now they are using the digital environment to tap into other sources of revenue.  To briefly summarize what is going on with retaliers, online retail, by its very definition, exists so companies can sell products and turn a profit on those sales.  This model has grown steadily over the past two decades as consumers become increasingly comfortable purchasing goods online.  Even simple retailers like pawn shops are currently doing more business online than they are in their physical store locations.  Savvier online retailers, however,  are not merely face-to-face consumer stores anymore.  They are evolving into media companies that can sell advertising and profit off their audience.  In the process, they are creating a myriad of new digital co-operative marketing opportunities for themselves and their suppliers.

     

    On-site ad sales remain the most common way for retailers to dabble with transforming assets into paid online advertising opportunities for suppliers. Similar to their use of retail signage or TV display ads at their brick-and-mortar locations, online retailers are transforming online real estate into digital media opportunities.  Suppliers and third-party advertisers can purchase ad placements on the retailer's homepage, or within specific product category pages.  On-site ad inventory gives advertisers the opportunity to push their message in front of online consumers as they are close to making purchase decisions.  What better time for a product manufacturer to target a consumer than when they are already on the retail site? It appears to be a great opportunity for the advertiser, and can boost the retailer's revenue as well.

     Read more:  http://adage.com/article/digitalnext/retailers-creating-media-properties-revolutionize-marketing/230465/

    This all sounds great in theory, but are any online retailiers really taking advantage of this strategy, and are they having success at selling ad space?  The answer "Yes" to both.  Amazon recently announced that it would sell media impressions across the web, via a DSP, powered by its own customer-browsing data. BestBuy's online cookie program segments its 30 million online shoppers into consumer categories — categories that can be addressed with display ads across large publisher partner sites. As more retailers explore the potential of selling media, their interest will revolutionize co-operative marketing. Whether it's on-site advertisements for co-marketing partners,  the ad is reaching a consumer who is actively looking to purchase in a supplier's retail channel. As more retailers focus on building audience networks, they will open the door to a powerful advertising tool unmatched by anything else online.

    GB

  • The Shrinking, Hard-Working American Middle Class

    Many economies in the underdeveloped world are largely defined by a tiny upper class that hoards all the country's riches for themselves, and a huge lower class that struggles to survive while working inhumanly  long hours in conditions that are far from ideal.  Who could possibly think that this situation would ever come to the United States?  Solid jobs that once provided a secure chance to realize the goals of the middle class (a house, college for the kids, a retirement) have changed to become low-wage ones.  Traditional jobs that once helped form the backbone of Ameircan business and economy are beginning to crumble.  For example, Detroit auto-workers, pointed out that new hires can find themselves working opposite long-term colleagues who do similar jobs yet earn twice as much. The system is called a "two tier" wage structure  Perhaps that system can be justified as an emergency measure to keep Detroit's auto-industry alive and help it survive the current tough times. But, it actually looks far more like the permanent shape of things to come. American society is bifurcating, squeezing the middle class out of existence and pushing most of them into the lower classes.  The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a staggering pace.

    What are some critical signs of the impact of this bifurcation?  In 313 counties in America, life expectancy for women has actually declined over the last 20 years. Six million more people have fallen into poverty since 2004.  The US Census Bureau recently reported the results of a survey showing that one in six Americans now live in poverty: the highest number ever reported. It also showed that real median household incomes dropped 2.3% in 2010 from the year before, reflecting the decline of the middle class. At the same time, the richest 20% of the US population now controls 84% of the wealth. In fact, so staggeringly unbalanced has America become that the richest 400 American families have the same net worth as the bottom 50% of the nation.  As much as 83 percent of all U.S. stocks are in the hands of 1 percent of the people.  Sixty-one percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.  Incredibly, 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.   In addition, 36 percent of Americans say that they don't contribute anything to retirement savings.  A staggering 43 percent of Americans have less than $10,000 saved up for retirement; 24 percent of American workers say that they have postponed their planned retirement age in the past year.  Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.  Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.  For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.  In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.  As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.  The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

    Read more:  http://finance.yahoo.com/tech-ticker/the-u.s.-middle-class-is-being-wiped-out-here's-the-stats-to-prove-it-520657.html?tickers=%5EDJI,%5EGSPC,SPY,MCD,WMT,XRT,DIA

    If that's not bad enough, here is more.  Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.  In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector.  The top 1 percent of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago.  In America today, the average time needed to find a job has risen to a record 35.2 weeks.  More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.  For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.  This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.  Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.  Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.  The top 10 percent of Americans now earn around 50 percent of our national income.

    The case is made, the majority of American's have less buying power now than they did even a single year ago.  America's corporations are run by the top income earners.  Do any of them care about those below them?  There are signs that there are some seemingly rare social responsible thoughts found at the top.  For example, Procter & Gamble, a marketer with its finger closely on the pulse of the American public, last year introduced a bargain-priced dish soap under the Gain name.  The move was seen as an acknowledgement of the strained economy.  It seems like most companies are moving the other direction, however.  The American consumer is not getting any assistance for oil companies.  Another company is forcing its employees to take three-day weekends every week in order to keep their jobs.  Of course, their pay is reduced accordingly.  Airlines are seeking ways to further charge for their services.  Increased taxes at all levels are looming on the horizon.  Questions to consider are what does the American middle-class consumer do?  Where will they find help?  How long will this last, or is it permanent and will continue to get worse?

  • Fashions and the Death Stage in the Product Life Cycle

     

    Marketers, both practitioners and students, know about the product life cycle.  It is basically the succession of stages a product passes through from when it is first introduced to a particular market until it is no longer a viable product in that market.  The diagram above outlines the stages you can find in most marketing textbooks and other sources about the product life cycle.  In each stage, marketers should be adjusting their marketing strategies to the changes in sales and other factors that drive the product through this cycle.

    In the Introduction Stage, a company seeks to build product awareness and develop a market for the product.  Product branding and quality level is established, and intellectual property protection, such as patents, trademarks, and copyrights, is obtained.  Pricing may be  low penetration pricing to build market share rapidly, or high skimming pricing to recover development costs and help establish an initial perception of higher quality.  Distribution is often selective until consumers show acceptance of the product.  Promotion is aimed at innovators and early adopters.  Marketing communication seeks to build product awareness and to educate potential consumers about the product.  Effective marketing strategies are especially important in the Introduction Stage because if a new product is going to fail, it is most likely to do so in the Introduction Stage.  In the Growth Stage, a company seeks to build brand preference and increase market share.  Product quality is maintained and additional features and support services may be added.  Pricing is maintained as the company enjoys increasing demand with little comptetition.  Distribution channels are added as demand increases and customers accept the product.  Promotion is aimed at a broader audience.  In the Maturity Stage, the stong growth in sales begins to slow down.  Sales eventually top out, and then start to decline.  Competition may appear with similar products.  The primary objective at this point is to defend market share while maximizing profit.  Product features may be enhanced to differentiate the product from that of competitors.  Pricing may be lowered because of new competition.  Distribution becomes more intensive and incentives may be offered to encourage preference over competing products.  Promotion emphasizes product differentiation.  In the Decline Stage, a company has several options.  It can maintain the product, possibliy rejuvenating it by adding new features and finding new uses.  It can begin a harvest strategy where costs are reduced and continue to offer it, possibly to a loyal niche segment.  Or it can discontinue the product, liquidating remaining inventory or selling it to another company that is willing to continue the product.  The marketing mix decisions in the Decline Stage will depend on the selected strategy. 

    Most discussions about the product life cycle end with coverage of the Decline Stage.  However, once the product's sales decline to $0, it enters a death stage.  When a person declines and finally passes away, those living who knew the person will be sad, will miss the person, will grieve for the person, but then will go on with life, while fondly remembering the person.  But what if we knew that a person would be reincarnated or in some other way return and we would get another opportunity to enjoy them and interact with them in this life?  We might prepare for when they come back.  We would learn from the mistakes that we may have made in our interactions with the person the first time around, etc.  Such could be the case for a product.  Once a product has gone through the entire product life cycle, it dies, but some products come back at some time in the future.  If marketers have a good idea that their product may come back, they can prepare for its return and correct many of the mistakes they may have made in the product's marketing strategy the first time around. 

    Products that return do exist and they are known as fashions.  Fashions, as referred to here, are products that usually go through the product life cycle more quickly than other products.  They then die off after the Decline Stage.  After a period of time, they will return to go through the product life cycle again.  If the time duratoin they are gone or dead can be predicted, preparations can be made by marketers to welcome the product back and to do an even better job of marketing it upon its return.  Thus, the period of time the product is dead, the Death Stage, becomes important in the case of a fashion.

    In this case, we must differentiate the product life cycle fashion from the normal use of the word.  Fashions are usually considered to be such products as apparel, shoes, accessories, hair styles, etc., that are related to a person's appearance.  If the product life cycle fashion happens to be this sort of product, the average duration of the Death Stage is about 20 years.  If the fashion is not related to a person's appearance, the duration of the Death Stage is more unpredictable and more variable.  Some examples of product life cycle fashions are bell bottoms, low-rise pants (called hip huggers the first time around), high-rise pants, tube tops, hair styles, and cars (e.g., Thunderbirds, Mustangs, Chargers, etc.).  The last comment to make is that when a product repeats, it does not always come back to life in exactly the same form.  For example, in the case of automobiles, new technologies in electronics, engines, and interior designs have been incorporated, but the external designs look similar to their orginal forms. GB

  • Product and Branding Concepts and Tiger Woods

     

    Students of marketing know that branding is a part of product strategy which is an element of the marketing mix, marketing strategy, or 4Ps.  They also know that there are three components that make up a product.  The first component is the core component which is the product itself.  If one thinks of a soft drink in a bottle, the core component is the actual liquid in the bottle, including all the ingredients in that liquid.  The second component is the packaging component.  Taking the same soft drink example, the packaging component would be the bottle; for other products, it is the packaging that contains the product.  Also included in the packaging component are branding elements, country of origin, trademarks, copyrights, etc.  The final product component is the support component which includes guarantees and warranties, instructions, warnings, spare parts, lists of ingredients, nutrional information, websites, consumer hotlines, etc.

    So how does this all relate to Tiger Woods?  Tiger, along with other well-known athletes and other celebrities, is a brand  himself.  Sure he has been branded by Nike with that company's Tiger Woods line of golf apparel, but Tiger's brand goes far beyond what Nike has done.  And being a brand, Tiger and his representatives should practice sound brand management strategies that will result in more brand equity and increase the value and worth of the Tiger Woods name.  Unfortunately, Tiger and his team have not done well recently in managing his brand.  In the past, companies flocked to Tiger for product endorsements. 

    Woods was called the world's most marketable athlete.  Shortly after his 21st birthday in 1996, he began signing endorsement deals with numerous companies, including General Motors, Titleist, General Mills, American Express, Accenture, and Nike, Inc.  In ensuing years, he added endorsement deals with TAG Heuer, Electronic Arts, Gillette, and Gatorade.  According to Golf Digest, Woods made $769,440,709 from 1996 to 2007 and the magazine predicted that by 2010, Woods would pass one billion dollars in earnings.  In 2009, Forbes Magazine confirmed that Woods was indeed the world's first athlete to earn over a billion dollars in his career.  The same year, Forbes estimated his net worth to be $600 million, making him the second richest "African American" behind only Oprah Winfrey.  It seemed like Tiger Woods and his brand would go on forever. 

    What happened to all these deals when Tiger's bad morals and ethics were revealed?  Tiger lost his endorsement deals with Gillette, Accenture, Gatorade, TAG Heuer, and General Motors.  However, the other companies decided to ride out the storm and stay with him.  Whether Tiger can make a comeback is still to be determined.  His golf game has not been strong and many experts believe his best days of golf are behind him.  However, Rolex signed a new endorsement agreement Tiger Woods a few days ago and his agent is working on a new endorsement deal for Tiger's golf bag.  Tiger buzz is still louder than the buzz of any other professional golfer and the tournaments in which he participates still seem to the largest crowds.  So the question remains, "Is Tiger on his way down, or is he on his way back up?"  Only time will tell, but much of it will depend upon his ability to perform effective brand management.  GB

    Read more: http://articles.latimes.com/2011/oct/09/sports/la-sp-tiger-woods-20111010

  • Netflix Responds to the Power of Consumers?

    http://video.nytimes.com/video/2011/10/10/business/media/100000001103317/timescast--netflix-backtracks.html

    A few weeks ago, a blog about Netfilx appeared here.  At that time it seemed that the company was planning to do everything wrong.  It had managed to anger customer, investors, and the general public.   Back in July, Netflix announced a substantial price increase to all of its customers.  The company decided to get rid of the $9.99 bundled price plan and to separate its two offerings - streaming video and DVD delivery - and price each individually at $7.99. It was a 60% price increase and customer reaction was immediate and angry. Blog posts and comments piled up across the Web in reaction and over a million customers voted with their feet by unsubscribing to the Netflix service. In addition, Netflix announced that it was creating a new company - Qwikster - for its old-fashioned DVD delivery service, igniting speculation that it would then quickly sell this new company and only retain its streaming services.  One writer jokingly suggested that Netflix should be a verb.

    net-flix
    1. to cause disruption or turmoil to an existing business model
    2. to destroy a previously successful business model
    3. to displace the way value is currently created, delivered, and captured

    Read more:  http://tech.fortune.cnn.com/2011/10/11/netflixed/?section=magazines_fortune

    The company, which will keep the 60% price increase in place, declared that it had moved too fast when it tried to spin-off the old-fashioned DVD service into a new company called Qwikster, angering many subscribers. “We underestimated the appeal of the single Web site and a single service,” Steve Swasey, a Netflix spokesman, said in an interview, before quickly adding: “We greatly underestimated it.”

    Read more:  http://mediadecoder.blogs.nytimes.com/2011/10/10/netflix-abandons-plan-to-rent-dvds-on-qwikster/

    This situation raises the question, "Did consumer opinion have the power to change Netflix' miund?"  The answer is that it may have had some power, but the bottom line is that Netflix lost over 1 million customers.  The voice of the ever-beckoning dollar appears to still be much louder than the voice of the consumer, despite what is being taught in marketing classrooms about relationship marketing.  So consumers have to keep talking with their wallets and their feet, leaving companies that anger them.  And don't forget consumer buddy care; through a sense of loyalty to their fellow consumers, many will take others with them as they leave.

  • A Sticky Situation

    Reports of rising food costs have been circulating for months. What does this mean for suppliers of raw materials like peanuts, flour and sugar? Will it mean higher prices for consumers already crippled by a prolonged economic downturn, or will branded product manufacturers such as Jif peanut butter be forced to absorb the higher costs as retailers such as Wal-Mart compete for increasingly price-conscious consumers? Usually the manufacturer is asked to absorb the costs in the form of lower profit margins (which as we know can be addressed by selling more peanut butter), but not this time. Kraft Foods has raised prices 40% per jar and, according to the Wall St. Journal, peanut butter is now 30% higher than it was only months ago at retail giant Target.

    What has caused this crisis? A hot, dry summer has literally roasted any chances for peanut growers to make any money without charging higher prices for their raw materials. Much higher prices. Companies like Jif and Skippy can only absorb so much in the way of higher costs, and the prices are so high that retailers have no choice but to pass the pain onto the consumer. If most retailers do this, the consumer will have three choices--pay the higher price, trade down to a lower prestige/quality brand, or forgo the product purchase entirely. Not many moms will choose the latter, as peanut butter is a staple for most households with non-allergic children. Trading down is an option, but the end user, the child, might not appreciate a product that tastes different than what he/she is used to. The "nagging effect" is important here, as many children tend to get what they want in our culture. The most popular option will be to grin and bear it, especially if the household isn't hurting too bad financially.

    The natural environment can have many effects on the supply chain. Something as common as a drought, or too much rain, or a hurricane can devastate an industry, and the repercussions often reverberate throughout the supply chain. A marketer can only hedge his/her bets against such an event, but there is no excuse for a failure to plan. There wasn't much Jif or Target could do in this situation, but perhaps you can think of ways that other marketers of other product categories can address the threat (or opportunity) that an act of Mother Nature can create for their particular good or service.

    DDS

     

  • Detroit City

     

     

    Can sports really be good for a local economy? The obvious answer is, "Yes. Sporting events create jobs, traffic to businesses surrounding the venue, and overall goodwill." But, can the success of sport properties have an effect on the overall economy of a city, or say, even a state? What if I said the city is Detroit, and the state is Michigan?  According to the Wall St. Journal, things are looking up for what has been one of the most challenged areas of the country. Home prices and payrolls are not only up, but far outpace the national average. In addition, the stubborn jobless rate is down from 15.8% to 12.8%, still very high but the reduction has been sharp. Obviously the success of teams such as the Tigers, Lions, Michigan State and Michigan affect the local areas, since wins theoretically bring more fans, more excitement, and hopefully more money. But, is this "winning spirit" affecting the entire state? Is it contagious?

    Automakers, the backbone of the region, are doing much better. This has improved the overall mood, and the support of winning professional and college sport programs certainly doesn't hurt either. There is indeed something to be said for the psychology of a people. Depression breeds more depression and so on. A combination of very real economic factors, driven by the success of the Big Three automakers and a host of supporting companies, a major source of jobs in the region, combined with the psychological boost by culturally-significant and successful sports teams could in fact be the "mojo" Michigan has been looking for. The "Underdog of America" has nowhere to go but up and it is becoming increasingly apparent that the best is yet to come. Go Lions! Roar.

    DDS

  • Red Hot Marketing Analytics

    It is amazing how much the computer age has changed us.  We have access to so much information now that we have a difficult time managing it, searching it, collecting it, storing it, etc.  And then there is the added data that becomes available to marketers through social media.  Now that there is so much more data with the advent of social media, marketers must look beyond their traditional sources of data warehousing.  And the process of integrating online and offline data is becoming increasingly complex.  To put it in perspective, Google’s CEO, Eric Schmidt, recently said that “we create as much information in two days now as we did from the dawn of man through 2003.”  Wow!

    The availablitly of all this data makes a relatively new field, marketing analytics, really hot.  In fact, it has been identified as one of the top ten marketing trends of 2011.  After all, the goal is not to collect data, but to be able to analyze it to develop marketing insights.  The social media conversations are giving marketers an unending stream of incoming data, but marketers need advanced analytical capabilities to identify, analyze and describe patterns amidst all the digital garbage.  Unfortunately, people who are skilled at doing this are becoming increasingly difficult to find.  Many marketers will look to outsource this function.

    Read more:  http://fifthgearanalytics.com/2010/11/10-marketing-trends-for-2011/

    To close the gap between the numbers of people needed for marketing analytics and what are currently available, some colleges and universities are developing from single classes to certificates to complete majors in marketing analytics.  It is imperative to do this unless we want to lose even more jobs to foreign work forces.  So, what exactly is marketing analytics?  It is the practice of measuring, managing and analyzing marketing performance to maximize its effectiveness and optimize return on investment (ROI). Beyond the obvious sales and lead generation applications, marketing analytics can offer important insights into customer preferences and trends. Despite these benefits, a majority of organizations fail to ever realize the promises of marketing analytics. According to a survey of senior marketing executives published in the Harvard Business Review, "more than 80% of respondents were dissatisfied with their ability to measure marketing ROI."

  • Steve Jobs: Product Design and Marketing Genius

    Like everyone else who has ever heard of computers, tribute and sorrow is felt for the loss of Steve Jobs.  We have all marveled over the years at his creativity, genius, ability to stay one step ahead, and knack for coming up with the "next big thing."  His ability to dream up products and then actually produce them was amazing.  Was he also a marketing genius, or did he always produce products that just sort of sold themselves?  Let's take a look at some of the marketing basics and what Mr. Jobs and his company, Apple, have done.

    ht steve jobs apple tumblr nt 111006 wblog Steve Jobs: Apple Logo Re Imagined to Pay Tribute

    If we examine what Jobs and Apple have done with their marketing strategy, or the 4Ps, we will be able to see if this creative genius spilled over into marketing as well.  Marketing strategy consists of product, price, promotion, and place or distribution.  Let's start with product.  Is there any doubt that Steve Jobs' creativity was most apparent here?  He designed a specific operating system (MAC OS X) that helped to firmly distinguish the Apple computer from competing PCs.  He also designed the Macintosh which was known as the first "cute" computer.  He was responsible for the MacBook Air, the first thin and lightweight laptop computer.  More contemporary products are the iPod, the iPhone, the iPad and iTunes.  These products have all been leaders in the consumer media revolution that has seen a significant shift in how consumers buy and enjoy media and entertainment products.

    Read more: http://www.msnbc.msn.com/id/44805821/

    Getting away from the obvious area of genius, how did Jobs and Apple do with the other elements of marketing strategy?  For price, Apple products are always among the most expensive products in their categories.  This may seem a foolish strategy in this economy; however, it continues to work, for Apple.  Apple-loyal consumers care little about price.  They will line up any time a new Apple product, or a new version of an existing Apple product, is about to become available.  This hype around Apple products creates an atmosphere akin to Black Friday, no matter what time of year it is.  It is important to remember, however, brand-loyal consumers are not stupid.  They expect a high-quality product for the price, and Apple has been able to deliver, justifying the company's skimming pricing strategy of setting their prices above the prices of their competitors' products.

    Promotion is another area where Apple seems to excel.  Though not a heavy advertiser, especially recently, Apple is able to create enough hype through public relations activities, such as press releases, news conferences, etc., that an circus-like atmosphere exists each time a new product is released.

    The final piece of the marketing strategy for Apple is its place or distribution strategy.  Many of Apple's less expensive products that require less consumer education and support are found in nearly every retailer that sells products in the appropriate categories.  However, Apple computers are available through Apple stores where experts can more completely educate and provide customer service for these higher-priced Apple flagship products.

    Whether Steve Jobs was responsible for all of Apple's marketing strategy or not, it is clear that a creative genius similar to his appears here as well.  As was demonstrated during those years when Jobs was not with Apple, the company will surely miss him, as will the world.

  • Dishonest Consumers

    One of the first things we learn in marketing is that conducting consumer market research helps us develop more effective 4 P strategies and reduce the risk of failure (which tends to be very high for new product development in particular). That is, we need to gather and analyze information on our target markets and existing consumers if we are to develop, price, distribute, and promote goods and services effectively. So, what factors are in play when a company does conduct exhaustive research to assess consumer behaviors, attitides, and demographics and yet the product still fails? Sometimes the marketer fails to ask the proper questions or fails to field to a large enough sample size that is representative of the population to be studied. These can be costly errors, to be sure, but they are all controllable by the organization. Another, more insidious factor is often in play.

    It is no secret that consumers often lie, mislead interviewers, don't know what they want, don't remember things, and provide a variety of other misleading answers that may confound the results of a marketing research program. Some are intentional and some are not. For instance, the Denver Post reported earlier this week that when asked questions about healthy eating in a survey fielded last year, consumers often say one thing and do another. That is, they often talk about how they really do want to eat healthily, and that they would love to have a larger selection of healthier foods, but when it comes to decision-making it's the same old burger and fries.The Post reports that although 47% of survey takers say they would like restaurants to offer healthier options, only 23% tend to order these foods. This gap is simply too large to ignore.

    What causes this disparity between research and reality?

    How would you answer such a survey?

     

    DDS

  • Kodak's Moment

    Ten years ago, when you thought about photography, you probably thought of the brand Kodak. Early pioneers in the industry now known as "imaging", Kodak was the most recognized brand and most dominant player for decades. Now the company is having trouble coming up with enough cash to operate during this very dark period in its history. What happened?

    This is a simple case of what we call "marketing myopy", that is a failure of a marketer to recognize major changes in the industry and the consumer market, and adapt his/her 4 P strategy to address those changes. It is no secret that the adoption of digital technology over the past 10 years has completely changed the way we take and store photographs (in fact "creatively destroying" the industry). When a marketer misses a major technological shift or considers it to be a non-threatening development, he/she risks the future of the entire brand. Major shifts in the external business environment often result in both oppportunities and threats for the organization, but if there isn't a fundamental change in the marketing plan, these important environmental developments often fail to get addressed.

    How could Kodak fail to see this shift coming? Arrogance? Stupidity? Negligence? There aren't too many possibilities here, so go ahead and pick one those three. One of the first lessons most of us learn in marketing is a case study outlining the failure of the railroad industry to adapt to the technological and consumer shift in transportation away from rail and toward trucks, cars, and airplanes. The rail companies literally owned transportation across the nation and were some of the most powerful companies in the world for decades, and then in one fell swoop became secondary players. Myopy can be fatal, but some companies learn the lesson, albeit a bit late, but perhaps early enough to avoid missing an important opportunity or a fatal error.

    Yes, it may have taken a few too many years for waffle and pancake maker Eggo to exploit the opportunity, but these marketers finally realized that most of us like syrup with our waffles, and that many of us would be happy to buy both Eggo waffles and Eggo syrup. What business is Eggo in? If the answer is "breakfast", then Eggo can use their brand equity to leverage the introduction of all sorts of breakfast-related products. The same goes for Kodak. The company still has a recognizable brand name resulting derived from early first mover advantages and years of effective marketing, so perhaps it can be salvaged and regain its leadership position. With the proper effort, it should not be impossible. For now, despite a strong brand, the company is barely afloat.