• UPS Deflecting in Denver

    A modest snowstorm dumped a foot of snow on the front range of the Rocky Mountains last week, but folks out there are used to storms such as these and commerce is most often conducted as usual. So what happened this year? UPS had trouble delivering packages as promised, and many did not arrive until the Tuesday after Christmas. Of course, things like this do happen and companies are sometimes forced to underdeliver on service delivery promises. After all, Mother Nature can throw us some curve balls and affect logistics in all kinds of nasty ways. Just look at what happened in Thailand and Japan this year.

    The lesson here is not how the natural environment can disrupt distribution, although that is an important factor to bear in mind, but in how a company responds to complaints and inquiries when they are unable to deliver on promises. Last Saturday afternoon, hundreds of people stood in line at one distribution center hoping to retrieve packages before Christmas, and when a writer from the Denver Post quizzed the manager  he said, "I've got an army out trying to find packages and I've got an army out trying to deliver packages. The moral of the story is you have to ship early."

    This may be true, but this is not the sort of response they teach you to make in Public Relations boot camp (if there is a such a thing). Another UPS spokesman said, "The fact of the matter here is they were hit by a blizzard...Weather is not something we can monitor...control."  Rather than shrugging their shoulders and blaming procrastinators, it would be wiser for UPS employees to think about what they could do better in the future, since FedEx and other carriers did not experience such a disruption in service. And, by the way. To a bunch of guys in brown shorts at the Atlanta headquarters it may have looked like a crippling blizzard. To people from Colorado it was an average winter storm. UPS can do better.

    DDS

  • 2012 Predictions (Part 1)

    It looks like this holiday season is shaping up to be one boasting of modest gains for most U.S. retailers. According to most observers, retail sales will likely rise by just over 3% this year compared with last year, and this is accepted as fairly good news for the sector. But, we know better don't we? Revenue is not the same thing as profits, and it's tough to make profits when you have to discount everything to the point of paper-thin margins, as well as stay open 24-7 for a holiday "season" that gets longer and longer every year.

    Retailers can't maintain this pace forever since shareholders demand some sort of return on their investment, so the discounting is likely to continue until weaker players downsize and/or exit the marketplace altogether. Fewer competitors means more success for the winners. Look for a modest vetting of the weak to happen in 2012, as economic uncertainty fueled by slow income growth, a disruptive election, and problems in Europe give us another relatively flat year. Sears may be one casualty, since they are already showing immense signs of weakness after poor holiday performance.

    Since on-line sales continue to eat away at brick-and-mortar sales as well as delight both customers and investors, it seems that any retailer with a significant online presence will be better equipped to handle the tumultuous election year ahead. But this may not be enough. All of this bodes well for consumers, as the free market's competitive forces work their magic. Let's see what happens.

    DDS

  • No Happy Ending For Movies

    There is nothing like seeing a movie in a theater, on the big screen, preferably with very few people in the room. This experience is much like attending a concert in that it is tough to duplicate at home, regardless of the size of your entertainment system. But, alas I have found myself simply unwilling to subject myself to anything that has been released in 2011. The Oscars will have a difficult time finding enough worthy flicks to fill the bill for the next awards ceremony.

    Why do I say this? In a previous column, we mentioned that the overwhelming success (number one for several weeks) of the Lion King several months ago, a movie that was first screened in the early 90's and was re-done in 3-D for a "new generation", was a small symptom of an overall lack of quality movie introductions. The seemingly endless succession of remakes, the pointless resurrection of obsure comic book characters, formulaic spy dramas and vampire movies, and a helping of hackneyed, poorly-made children's movies all point to a lack of creativity in the industry. The top movies of 2011 were all sequels with the exception of Captain America and Thor (see above comic book reference). So if it is true that movies stink these days, why do we keep going?

    Well, it seems that consumers are finally fed up. Box office receipts have declined for the second straight year (amid an improving economy and record movie prices, I might add) and sales were down 22% at the beginning of 2011 compared with the same period in 2010. This consumer response does not bode well for an industry increasingly threatened by increasingly cooler technological substitutes. I feel that the music industry is facing the same sort of "creative malaise", but that is another story. Think I'm crazy or out of touch? Think again.

    Here is a quote from Peggy Noonan in yesterday's Wall Street Journal, "John Ford would be forced to turn John Wayne into a 30-something failure-to-launch hipster whose big moment is missing the toilet in Hangover Ten. The movie culture has descended into immaturity, deep and inhuman violence, a pervasive and flattened sexuality. It's an embarrassment. In Iraq this year I asked an Iraqi military officer doing joint training at an American base what was the big thing he'd come to believe about Americans in the years they'd been there. He thought. 'You are a better people than your movies say.'" I rest my case.

    DDS

     

  • Bed, Bath, and You'd Better Advertise

     

    For many years, pundits have been singing the praises of the online marketing model. "Traditional media and retail are dead," they have said, "Everything is migrating online." Indeed, in the 90's many people predicted that both consumer buying behavior and marketing activities would quickly migrate from more traditional formats toward online formats and by now, they would be dominating the commercial landscape. This of course has not come to pass as online advertising and retailing still represent only a fraction of their more traditional counterparts. But, despite what has turned out to be a grossly exaggerated and premature prediction, a frenzy of non-traditional marketing techniques has indeed muscled onto the scene attempting to eclipse television, radio, and print advertising with a combination of both hype and reality. In addition, we are all aware of the success of online-only retailers like Amazon.com. Now, many of these same experts, and a few new ones, are viewing social media as the wave of the future, and that online modalities will eventually destroy the traditional advertising and retail models as we know them. 

    We have mentioned in earlier columns how important it is for large brands to maintain adequate levels of exposure, primarily through traditional advertising, so that they can maintain high levels of consumer awareness and therefore defend market share from more aggressive rivals. Social media is a useful part of a marketer's strategy, but it cannot yet, if ever, be a foundation for marketing strategy. Pepsi has learned this lesson in a big way, as the company has lost market share after attempting to reduce its advertising budget and shift marketing dollars to less traditional techniques. The result was a dramatic drop in sales. 

    Now, it appears that despite the exit of primary competitor Linens 'n Things only a few years ago, Bed, Bath and Beyond may be in for some challenging times ahead. According to the Wall St. Journal, Bed Bath and Beyond spent $198 million in advertising in 2010 versus $266 million in 2008. The company is spending roughly what it spent in 2006 when sales were 25% lower and although it is doing rather well at present, the good times may be over soon as many experts have attributed the increase in the company's profitablity to the strategic reduction in marketing spending. Indeed a reduction such as this can only go on so long before sales will fall.

    Marketers must be able to forecast results years in advance, and they must also be able to measurably predict and assess the effects of their marketing activities.  When marketing budgets are cut, the short term effect is often increased profitability, as expenses are reduced and sales remain constant or perhaps drop slightly. In the long run, however, the effects of less advertising tend to influence sales, and not in a good way. Certainly the slow economy has attributed to the decision to reduce spending, but Bed, Bath and Beyond should exercise great care here. The availability of an increasing number of products online has changed the way consumers buy and has also altered the assortment of products that retailers are able to offer, making traditional advertising even more important for brick-and-mortar stores. Could online competitor Amazon eventually sell more pillows and sheets than Bed, Bath and Beyond? The answer, if Bed, Bath and Beyond fails to defend its market share, is quite possibly yes. DDS

  • Wendy's at the Gates, King Worried

    And you thought she was just a cute little cartoon girl endorsing hamburgers and a host of fast food fare. Or perhaps you were never fooled by the bubbly  "spokescharacter". Perhaps you noticed that Wendy, depsite her hometown, folksy image has been up to quite a bit of mischief, stealing fast food industry market share from No. 2 Burger King. We have previously written about Burger King's difficulties, ranging from pricing and product problems to the dethroning of the ineffective "king" character from its promotion strategy. And slowly but surely, Burger King's market share has given way to Wendy's despite outnumbering the chain 7,264 to 5,883 U.S. stores. Wendy's is expected to gain the number two spot within a few quarters

    According to the Wall Street Journal, Wendy's sales per U.S. store is $1.4 million compared to $1.2 million, suggesting that either more people visit Wendy's than they do Burger King or that they spend more per purchase. It could also be a combination of the two factors along with a number of others. Burger King has also suffered from a number of management and ownership changes as well as an over-reliance on younger customers, who have cut back dramatically during the economic downturn.

     

    Wendy's, on the other hand, has engaged in extensive menu development and fostered a "fresher and tastier than thou" image in the marketplace. The company even changed from the square burger to a round format after focus groups reported that the latter format was "more natural." Now, several varieties of salads accompany a fresh burger and unskinned french fries with sea salt. Classy! And Burger King? The company has added oatmeal for breakfast and is test marketing fruit smoothies in certain markets. Uninspiring. The company is also working on its image, having shifted from a creepy king to a no-nonsense, product focused campaign that frankly bores the heck out of me. What about McDonald's? $2.3 million per store with a total of 14,027 stores in the U.S., and McThanks for asking!

    -DDS

  • Saab's Final Hour

    After much speculation by industry experts over the past few years, the verdict is finally in. Saab Automobile will shut its doors after a storied 64-year history. Production halted back in April while the company, originally formed to build airplanes for the Swedish airforce prior to World War II, restructured and struggled to find investors in China. So, crippled by inadequate cash flow and struggling to expand market share amidst competitors such as Volkswagon, BMW, and Audi, the brand that pioneered turbo charged engines in the late 70's decided to call it a day.

    You might recall that General Motors, majority owner of the company until 2009, had originally decided to liquidate Saab's assets two years ago, but changed its mind under pressure from workers to keep the business going. GM was able to sell the business to Netherlands-based Spyker Cars NV for $74 million, but the momentum the brand had achieved over several decades was apparently lost.

    Failure to refresh the brand admidst rising competition could have been a factor contributing to its demise besides the usual mismanagement we always see with struggling companies, but could any of this really have been avoided? In marketing there are winners and losers, and perhaps Saab is just one more in a long line of brands that, for whatever reasons, just couldn't meet the challenges of the future. Rest In Peace.

    http://www.reuters.com/article/2011/12/20/saab-idUSL6E7NK2YC20111220

    DDS

  • Consumer Income and Consumer Price Index

    A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households.  The CPI in the United States is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services."  The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically.  Sub-indexes and sub-sub-indexes are computed for different categories and sub-categories of goods and services, being combined to produce the overall index with weights reflecting their shares in the total of the consumer expenditures covered by the index.  It is one of several price indices calculated by most national statistical agencies.  The annual percentage change in a CPI is used as a measure of inflation.  A CPI can be used to index (i.e., adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values. In most countries, the CPI is, along with the population census and the USA National Income and Product Accounts, one of the most closely watched national economic statistics.

     

    The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today.  Over the last 12 months, the all items index increased 3.4 percent before seasonal adjustment.  The energy index declined for the second month in a row and offset increases in the indexes for food and all items less food and energy.  As in October, the gasoline index fell sharply and the index for household energy declined as well.  The food index rose slightly in November, though the index for food at home declined as four of the six major grocery store food group indexes fell.  The index for all items less food and energy increased 0.2 percent in November following increases of 0.1 percent in each of the prior two months.  The indexes for shelter, medical care, apparel, and personal care all rose.  These increases more than offset declines in the indexes for new vehicles and used cars and trucks.  The all items index has risen 3.4 percent over the last 12 months.  This is a slightly smaller increase than last month’s 3.5 percent figure, as the 12-month change in the energy index declined from 14.2 percent to 12.4 percent.  The 12-month change in the food index also declined slightly, from 4.7 percent to 4.6 percent. In contrast, the 12-month change in the index for all items less food and energy continued to rise, reaching 2.2 percent in November.

    On the other hand, median household income fell to $49,865 in the third quarter of 2011, according to the latest estimates.  The 2011 figure was 2.7 percent below the $51,246 median in the third quarter of 2010, after adjusting for inflation.  The third-quarter household income decline was particularly sharp for householders under age 25 (down 5.8 percent) and householders aged 25 to 34 (down 7.1 percent).  There was no change in the median household income of householders aged 35 to 54.  Constantly rising consumer prices and stagnant or shrinking consumer income has had a huge impact on the health of the U.S. economy, and this unfortunate trend will likely continue for the forseeable future. GB

     

     

  • Emotional Marketing Value

    The emotional marketing value (EMV) scale uses emotional waveforms in the categories of intellect, empathy and spiritualality.  Scoring high in any one or all three categories means the reader is emotionally influenced beyond the mere meaning of the words.  If you are using any type of print marketing (e.g., advertising) to reach your audience, this method of title writing can be used to give you more power in your titles.  Waveform analysis used in EMV has been around since the 1990s.  It was developed by Dr. Hakim Chishti and a team of researchers that developed special algorithms to analyze over 200,000 words in the English language for their emotional impact.  The tonal qualities of each word were analyzed to determine the most impact in specific centers of the body.  Word tones, or waveforms, activate specific motivations in the reader that go beyond the definition of the word.

    Intellectual

    Empathetic

    Spiritual

    Words which are especially effective when offering products and services that require reasoning or careful evaluation. Words which resonate in with Empathetic impact often bring out profound and strong positive emotional reactions in people. Words which havethe strongest potential for influence and often appeal to people at a very deep emotional level.

    The technique and technology has been use to develop brand names and marketing communications have been improved for optimum performance per word used.  A person's emotions are affected by the sound of words.  The tone of voice in communication can be even more impacting than the words used.  The same is true for marketing experts using headlines or titles rich in EMV wording.  Tones within words have meaning regardless of whether you understand the word or not.  Specific words can provide an emotional connection to your product.  If your title scores high in all three waveforms, your emotional appeal will be broad and appeal to the masses.  It is also interesting to note that most professional writers only score 30% to 40% in their headlines.  It is not difficult to make your appeal even higher if you work at it. 
    If you are targeting businesses or professionals in the education, law, medicine or political fields, your headline should be rich with intellectual impact words.  If you are marketing to groups such as nurses, doctors and counselors, words in the empathetic impact area are best.  Clergy, new age, health food and related markets are most impacted by spiritual impact words.  GB

    Read more here.

  • Understanding Demographic is Understanding Consumers

    What is the U.S. consumer marketing going to look like in the near future?  What will be the best way to reach these consumers through promotion?  How should products be positioned in order to appeal to them?  These are all questions that can be at least partially answered by taking a look at demographic trends in the United States. 

    A recent article claims that a browner, grayer and more culturally diverse population and workforce will dramatically transform the nation’s social, economic and political institutions.  The research reported in the article identifies major shifts in U.S. demographics and their implications for business, consumer markets and the nation’s competitiveness in the global marketplace.  “The U.S. population is far different today in terms of geographical distribution, racial and ethnic composition, age mix, family types and economic circumstance from what it was a decade ago,” said James H. Johnson Jr., co-author of the report with John D. Kasarda.  Six major demographic trends are identified below.

    1.  The population is shifting to the south.  More than half of the nation’s population growth during the past decade (51.4 percent) occurred in Southern states, driven in part by an in-migration of an estimated 2.3 million newcomers from nearly all demographic groups – blacks, Hispanics, the elderly and the foreign born – and high fertility rates among some, particularly Hispanics.

    2.  There is a "browning" of the population.  Nonwhites accounted for an estimated 85 percent of U.S. net population growth during the past decade.  Non-Hispanic whites represented 65 percent of the U.S. population in 2009 compared to 76 percent in 1995.

    3.  The incidence of interracial marriage is increasing.  Marriage across racial and ethnic lines has doubled since 1980, further contributing to the browning trend, with 41 percent of all intermarriages in 2008 between Hispanics and whites; 15 percent between Asians and whites; 11 percent between blacks and white; and both parties nonwhite in 16 percent of intermarriages.

    4.  There is a "graying" of the population.  The first baby boomer born in America turned 65 on Jan. 1, sparking a “silver tsunami” of 79 million baby boomers who will exit the U.S. workforce over the next 20 years.  About 8,000 Americans will turn 65 every day over the next five years, and they will live longer than previous generations because of advances in health care and lifestyles that are more active.

    5.  There is a gender shift in employment.  Women now hold nearly half of all paid U.S. jobs (49.8 percent), own 40 percent of all businesses and hold 43 percent of executive, administrative and managerial positions in the U.S. economy, narrowing the male-female wage gap to its lowest point in history.

    6.  There are mMore grandparent-headed households.  The number of children living in grandparent-headed households increased by 26.1 percent between 2001 and 2010, compared to 3.8 percent for all U.S. household types.  One or both parents also live in about two-thirds of the grandparent-headed households.

    These demogrpahic  trends bring both opportunities and challenges for businesses.  For instance, the South now offers the largest and most diverse consumer markets for goods and services.  Aging boomers, increasingly well-educated, youth-oriented, tech-savvy and possessing more discretionary income, will drive demand for new consumer electronics and other high-technology goods and services as well as a range of products and services related to “elder care.”  Meanwhile, more diverse, multicultural consumers and workers will require companies to develop new strategies for attracting customers and managing their workforces.  For the nation, an increasingly diverse workforce can provide significant competitive advantage if lawmakers and policymakers respond effectively to the challenges these shifting demographics present.  GB

  • Recent Marketing Trends Reflect Economic Conditions

    Many of the recent top marketing trends reflect consumer and company adjustments to the weak economy.  For two years, the questionable economy and uncertainty about its future has fostered one overriding new product trend: fewer gee-whizzers.  Did things change in 2011.  Chief among 2011's consumer-packed good trends are these: Keep it simple, better for me, and cheap.  The major forces in the marketplace for 2011 seem to be those that help consumers simplify,  Consumers are more financially, physically and emotionally stretched than ever.  They are looking for ways to accomplish more — but to do so economically.  The sheer numbers are on the rise, too.  New product introductions began to increase this year after plummeting last year.  Many of the packaged foods and household goods that align with the new trends are coming from giants such as Kraft, P&G and ConAgra.  They've got the deep pockets to concoct them and the dough to market them — increasingly with social media.  Not only will Facebook, Twitter, and YouTube be used to market most of the products behind the trends, but social media itself has played a critical role in creating the trends.  It's hard to find a new product that hasn't been driven by consumer actions, reactions or demands.  Among 2011's top 10 new product trends — in no particular order are the following.

    1.  Products to simplify life.  Consumers aren't just time-pressed — they're downright lazy. They sit at their computers or in front of their high-def TVs and look for ways to do less.

    2.  Product to make one look younger, cheaper.  Oh, how badly we want to look younger — but without paying big bucks to accomplish that.

    3.  Fast scratch (food at home).  Just as the world of social media has made instant gratification a cultural norm, it's also become the norm of our kitchens.

    4.  Pro hair for pennies.  Dry shampoo might not sound sexy. But in the world of mass hair care, it may well achieve cult-like status in 2011.  It's all about wanting the stuff celebs get — but on the cheap. "One of the best weapons that stylists have will now be available to consumers," says David Rubin, Unilever's hair marketing chief.

    5.  Products that appear almost homemade.  How do you make a prepackaged chip dip seem somehow homemade — and even natural?

    6.  Flexible diets that appear healthy.  There was a time when the divisions were crystal clear: Folks were either red-meat-eating carnivores or dedicated vegetarians.  But along came trends like Meatless Monday. And other considerations, like cholesterol. Enter the new world of folks who enjoy eating meat — but want less of it. Some 47% of Americans are trying to reduce meat consumption.

    7.  Instant whiter teeth, cheap.  It's too much to ask the Facebook crowd to spend weeks with whitening strips in their mouths. 

    8.  Sweet potato products.  If 2011 is the year of anything, it's the year of the sweet potato.  The orange spud has broken away from the holiday stereotype, thanks to growing consumer awareness of its health benefits, such as vitamin A and beta carotene.

    9.  Hybrid cracker chips.  Think of them as Goldfish crackers — for grownups.

    10. Feel the clean.  It's not enough anymore to just brush your teeth. These days, it's got to be an experience.

    Read more here.

    GB

  • Groupon is Both Good and Bad

    Each day, Groupon emails its members one unbeatable offer on something great to do in your city.   Here in the Denver area, I have personally used Groupon discounts for flyfishing lessons and a massage.   It offers consumers great values by guaranteeing businesses a minimum number of customers.  If a certain number of people sign up, then everyone gets the Groupon offer. If that minimum isn't reached, then no one gets it.  In addition to huge exposure, Groupon generates a large number of sales in a short period of time.  Given the appeal of its offers, users frequently pass the information along to others, which translates to the potential for even more customers for your business.

    There is no denying that daily deal sites like Groupon are incredibly effective at getting new customers to visit local storefronts.  Despite their powerful ability to generate sales for merchants, the costs that business owners incur by advertising with group buying sites can be overwhelming.  Many business owners have reported that daily deal websites have actually done more harm than good for their company.  Common problems that businesses experience when offering group buying deals include things like a drop in online ratings, overselling coupons, overbooking appointments, and a lack of staff members to handle the flood of new customers.  Many issues that arise from group buying campaigns can be tempered with strategic planning and some foresight but it’s important to remember that each marketing tool has its own limits.  While there are many advantages for businesses to use daily deal sites, there are many disadvantages for using social buying sites like Groupon to promote your business as well.  Here are the top 10 reasons businesses may want to reconsider using Groupon-like services.

    1.  Greater expenses.  Typical deals featured on sites like Groupon are discounted by 50% off the original retail price.

    2.  Brand dilution.  The huge price cuts that are required to be featured on daily deal sites like Groupon severely damage a brand’s image.

    3.  Attracting the wrong customers.  Some business owners that have used Groupon to promote their services in the past have commented that Groupon buyers are not the kind of customers you want.

    4.  Too many customers too soon.  The power of group buying can rally enormous numbers of people to your place of business.

    5.  Less online traffic and links.  Sure you get the foot traffic to your physical storefront but your website doesn’t get the bump in online traffic it normally does through traditional web based ad campaigns.

    6.  Hiring more employees.  The huge influx of new customers that result from your deal offering means you’ll likely have to hire a few extra employees to handle the increased workload.

    7.  Lower profit margins.  Forget about making any profits from customers that buy deals. Most businesses that offer deals are lucky if they break even.

    8.  Short-lived exposure.  While daily deal sites can generate an enormous amount of attention for your business, that intense spotlight only lasts for a few days.

    9.  No customer addresses gained.  Growing one’s customer database may be the single most important goal for a business owner.

    10. Employee morale may suffer.  Business employees have complained that Groupon customers tip very little because they’re trying to squeeze the most out of a deal.

    GB

    Read more here.

  • Chinese Consumers: Let's be Prepared

     

    So the oil companies are telling us the cost of oil is high, partially because of the demands in China.  Those who have recently traveled to China claim the Chinese consumers, at least in large cities, have as much or more access to high-end fashions and other Western products than we do in the U.S.  Should we feel threatened by all this?  Or should we relish the many marketing opportunities?  The quickest way to both allay our fears and to take advantage of business opportunities is to understand the Chinese.

    Increasingly, Chinese consumers are behaving like us.  They are more demanding and pragmatic than ever as their horizons expand beyond basic concerns about product features.  Also, they are willing to pay for better value and quality and are spending more time researching and are exploring product nuances. Yet McKinsey’s 2010 survey of China’s consumers also found that they are blazing a uniquely Chinese trail. The country obviously offers some of the world’s biggest growth opportunities—but only for consumer product companies that understand and respond to this rapidly evolving marketplace.  Chinese consumers remain brand conscious but, unlike shoppers elsewhere, they focus on value so intensely that brand loyalty is often secondary.  The needs or interests of their families have greater importance for them than for their counterparts in the developed world.  Word-of-mouth has become a more significant source of product information than it is elsewhere, thanks largely to fast-growing use of the Internet, which Chinese consumers see as a credible information source.  Most intriguingly, though, China’s consumers prioritize purchases across different product categories by trading off among them: the Chinese maximize their buying power by spending more in the categories they care about most and less in others.  Also, the size and reach of China’s markets mean that any trend’s impact may vary from place to place, depending on local circumstances. 

    These trends suggest to a transformation in the behavior of the Chinese as they develop into some of the world’s most complex consumers.  China is now the planet’s second-biggest economy, after the United States, and its consumer sector may be the healthiest of any major country.  In the past, consumer companies could enter China with their existing products, strip them down to basics, and then sell them at low prices throughout the country.  Today, local consumers, like those in developed markets, appreciate and demand better products.  Many companies that have struggled to find a niche in China may now find a market for their products and attract partners. Conversely, companies that have relied on low-cost, low-quality business models may end up on the losing end of trade-off decisions and could require a shift to value.

    Read more here.

  • Brand Equity: Is It Real?

     

    A company's brand can be very complex.  A brand includes the actual name of the product, sometimes legally protected, logos, slogans, colors, jingles, shapes, etc.  Many companies spend times and money on developing strong brands, but are these efforts really worth it?  According to Brand Z, Apple is now the world's top brand.  Google, IBM, McDonald's, Microsoft, Coca-Cola, AT&T, Marlboro, China Mobile, and General Electric round out the Top 10.  Another brand valuation company, Interbrand, offers information on the Top 100 Global Brands.  This list differs slightly from the Brand Z list.  The Interbrand list reveals that the brand elements for the top brand, Coca-Cola, are worth nearly $72 billion dollars.  Even the last brand on the Top 100 list, Harley Davidson, is worth over $3.5 billion.

    Top Ten Brands of 2011 (Interbrand)

    1 Coca-Cola 71,861 ($m)
    2 IBM 69,905 ($m)
    3 Microsoft 59,087 ($m)
    4 Google 55,317 ($m)
    5 GE 42,808 ($m)
    6 McDonald's 35,593 ($m)
    7 Intel 35,217 ($m)
    8 Apple 33,492 ($m)
    9 Disney 29,018 ($m)
    10 Hewlett-Packard 28,479 ($m)

    How are these brand values estimated?  The methodology used by Interbrand is very comprehensive, but in a nutshell, Interbrand's method looks at the ongoing investment and management of the brand as a business asset.  This means that its method takes into account all the many ways in which a brand touches and benefits its organization -- from attracting and retaining talent to delivering on customer expectations.  The final value can then be used to guide brand management, so businesses can make better, more informed decisions. There are three key aspects that contribute to the assessment: the financial performance of the branded products or services, the role of brand in the purchase decision process, and the strength of the brand.

     

    Financial performance measures an organization’s raw financial return to the investors. For this reason, it is analyzed as economic profit, a concept akin to Economic Value Added (EVA).  To determine economic profit, Interbrand removes taxes from net operating profit to get to net operating profit after tax (NOPAT).  From NOPAT, a capital charge is subtracted to account for the capital used to generate the brand’s revenues; this provides the economic profit for each analyzed year.  For purposes of the rankings, the capital charge rate is set by the industry weighted average cost of capital (WACC).  The financial performance is analyzed for a five-year forecast and for a terminal value.  The terminal value represents the brand’s expected performance beyond the forecast period.  The economic profit that is calculated is then multiplied against the role of brand to determine the branded earnings that contribute to the valuation total as noted earlier.

     

    Role of brand measures the portion of the decision to purchase that is attributable to brand—this is exclusive of other aspects of the offer like price or feature.  Conceptually, role of brand reflects the portion of demand for a branded product or service that exceeds what the demand would be for the same product or service if it were unbranded.  Role of brand determinations for this study derive, depending on the brand, from one of three methods: primary research, a review of historical roles of brand for companies in that industry, or expert panel assessment.  The percentage for the role of brand is multiplied by the economic profit of the branded products or services to determine the amount of branded earnings that contribute to the valuation total.

     

    Brand strength measures the ability of the brand to secure the delivery of expected future earnings.  Brand strength is reported on a 0 to 100 scale, where 100 is perfect, based on an evaluation across 10 dimensions of brand activation.  Performance in these dimensions is judged relative to other brands in the industry, and in the case of exceptional brands, relative to other world-class brands.  The brand strength inversely determines, through a proprietary algorithm, a discount rate.  That rate is used to discount branded earnings back to a present value based on the likelihood that the brand will be able to withstand challenges and deliver the expected earnings. 

     

  • Facebook: A New Barometer for Marketing Success

    According to a recent article, the Los Angeles Lakers quietly became the first American sports franchise to accumulate 11 million Facebook fans.  Kobe Bryant's team isn't just tops among NBA teams, Hollywood's favorite basketball squad leads all North American sports franchises when it comes to the social network.  However, the Lakers actually only fourth worldwide, trailing European soccer powers Manchester United, Real Madrid and the king of Facebook, FC Barcelona, which has 23,128,028 fans.  It took the Lakers just three years to leave all the other U.S. s franchises in the cyber dust. The Boston Celtics, owners of 17 championships, have only 5,636,135 fans, according to Sports Fan Graph.  LeBron James' Miami Heat and Derrick Rose's Chicago Bulls are next on the list.  Owner Michael Jordan can't be pleased to know his Charlotte Bobcats have the fewest Facebook fans: fewer than 85,000.

    Over in the NFL, the Dallas Cowboys are tops on Facebook with a little more than four million fans.  The Pittsburgh Steelers are next, followed by the New England Patriots and then the Green Bay Packers and their virtual cheeseheads.  Jacksonville's Jaguars, have the NFL's fewest Facebook fans with fewer than 230,000.

    In the past several years, businesses large and small have come to realize the positive impact of engaging their brand-loyal public and — more importantly — potential customers, via Facebook pages.  While fan pages are typically seen as a destination for users to remain privy to brand news, a recent comScore report shows that a Facebook page is really just the place where content resides, as fans are 40 to 150 times more likely to consume branded material in their news feeds than on the actual fan page itself.  This discovery led to Facebook’s expansion of “page Insights,” including new metrics and analytics designed to constantly remind business owners of what truly matters: engaging content.

    Facebook utilizes an algorithm that ensures the most relevant content for each user finds its way onto that particular user’s news feed. The relevancy of this content is determined by a number of factors, including how many times it is liked, shared, commented on, etc. When fans of a company interact with branded content, it can then be passed on to their friends and their friends’ friends. With fan acquisition as the main motive behind the Facebook strategy of most businesses, it is helpful to learn that friends of fans are more likely to visit a brand’s store, website and even purchase a product than the average, uninfluenced consumer. In addition, the average friends-of-fans group for the top 100 brand pages on Facebook is 34 times larger than the fan group. This means that a business can often have greater influence amongst its second degree connections, and the virality of a page’s content can be directly related to the success of a business. So, ultimately there’s a need for better insights into Facebook content consumption.  GB

    Read more here.

  • Multicultural Marketing and Possible Marketing Jobs

    Depending on where you live in the United States, multicultural marketing may be mostly Hispanic marketing in South Texas and Southern California or it may be Japanese-American marketing in Hawaii.  In most large U.S. cities, there are many cultures and multicultural marketing efforts can be seen throughout.  Culture cannot be learned, says Wanla Cheng, president of multicultural marketer Asia Link Consulting Group. It must be absorbed by osmosis.  For example, a non-Chinese marketing expert might know that in Chinese culture the number eight is lucky and four is bad luck, similar to number 13 for many Americans, but he cannot truly understand what a Chinese immigrant wants –- or fears -– from an American bank.  Without that understanding, a marketer can't communicate with the target audience: Chinese bank customers. And that's why, according to Cheng, it's vital for marketers to be members of their target audience.  Other experts disagree.  It is not necessary to be a member of your target audience, but to replace that native knowledge, an outsider to a culture must expend much effort and resources to perform marketing research to develop a deep understanding of that target audience.

    Multicultural marketing has arrived.  Asian Americans, African Americans, gays and lesbians, and especially -- thanks to their surging numbers and immense buying power -- Hispanic/Latino Americans all represent lucrative and growing markets.  Looking ahead, the surge in Hispanic/Latino and Spanish-language marketing will continue, particularly in areas like financial services, entertainment, automotive and travel. 

    Does this mean improved job prospects for marketing experts who are multicultural?  "Definitely," says Rochelle Newman-Carrasco, CEO of Enlace Communications, a Hispanic/Latino marketing company. But simply being Hispanic/Latino, Asian, African American or gay does not mean you're a multicultural marketer.  "It's not a birthright," notes Newman-Carrasco. "You have to leverage your culture, heritage, insights and background. You need multicultural and marketing skills."  Vijay Chattha, "chief talker" at marketing agency VSC Consulting, advises multicultural job seekers to consider: "What skills do I bring to the table?" For example, if a prospective employer is expanding in your country of origin, highlight the connection in your cover letter.  "We market a lot to Indians and Pakistanis," Chattha says. "It's important to know that applicants speak, read or write those languages, or have traveled there. Even spending time in ethnic areas of big American cities is good, especially if you've looked at marketing strategies there.

    Right now, the multicultural marketing sector needs analysts, researchers, writers, translators and salespeople, says Newman-Carrasco. Multicultural marketers should possess foreign-language skills, particularly Spanish or Asian languages, and the ability to understand other groups from anthropological, sociological and cultural perspectives.  Regarding specific job opportunities, Newman-Carrasco sees growth in the consumer insight and innovation areas (new technology, such as podcasts and cell phones), "ethnographies" (lifestyle studies, like living with families as they open cereal boxes and videotaping their breakfast routines) and entrepreneurial opportunities (hiring outside marketers with insights).  There is good money to be made in multicultural marketing with more to come, says Newman-Carrasco. "This is an additional skill set, and companies now recognize its importance."  GB

    Read more here.

  • Did Black Friday 2011 Measure Up?

    Black Friday brick-and-mortar retail shopping visits grew 84% compared to the previous Friday’s shopping visits, the largest increase seen for any single Friday since the weekly reporting began.  
    According to Shopping Activity Weekly Holiday Trends Report, the average amount spent per shopping visit grew by 46 percent compared to the previous Friday and was another record-setting Friday.  Of course, we would expect Black Friday's sales to increase from the previous Friday before the holiday deals began.  However, how did this Black Friday (November 25, 2011) do in comparison with previous Black Fridays?
    Black Friday sales increased 6.6% to the largest amount ever as U.S. consumers shrugged off 9 percent unemployment and went shopping.  Consumers spent $11.4 billion, ShopperTrak said in a statement yesterday.  Foot traffic rose 5.1 percent on Black Friday, according to the Chicago-based research firm.  “This is the largest year-over-year gain in ShopperTrak’s National Retail Sales Estimate for Black Friday since the 8.3 percent increase we saw between 2007 and 2006,” ShopperTrak founder Bill Martin said in the statement. “Still, it’s just one day. It remains to be seen whether consumers will sustain this behavior through the holiday shopping season.”  As many as 152 million people shopped at stores and websites on Black Friday, up 10% from last year, the National Retail Federation said.
    Rather than waiting until Cyber Monday, Black Friday also brought a significant increase in online activity.  For Friday, Nov. 25, 2011 (Black Friday),  online share of buying visits jumped by 57 percent compared to Friday the prior week.  Starting on Black Friday, sales at brick-and-mortar stores may rise 2.8% to $465.6 billion this holiday season, slower than the 5.2 percent gain last year, according to the NRF.  Online revenue may advance 15% to $37.6 billion, according to ComScore Inc. 
     
    While holiday day sales are up for both brick-and-mortar retailers and online retailers, sustaining this throughout the year remains the problem for retailers.  Sustaining this higher level of spending year long seems to be something that consumers are not yet prepared to do, as unemployment rates continue to hover around 9% and real growth in earnings is on a constant downturn.  GB
  • LED Bulbs' Fuzzy Math?

    Remember back when LED (light emitting diode) light bulbs were introduced? These are the bulbs that last 10 times longer than regular bulbs, but cost as much as 20 times more than the wasteful, largely heat-emitting bulbs we are all used to. Has this been a tough sell for marketers, especially during this prolonged economic downturn? You bet it has. Not too many regular folks are willing to shell out cash up front to save money in the future. Most people would rather spend less money to meet an immediate need rather than spend more right away to save money in the future. It reminds me of the government push for adoption of solar panels over the past 30 years. How many consumers have ponied up the thousands of dollars necessary to "go solar"? The answer...not many.

    Interestingly, companies have been the best consumers of these LED bulbs. At first they were primarily purchased as part of an environmental sustainability strategy to demonstrate the "green" practice of conserving energy, but now businesses are finding that the fact the bulbs can last up to 10 to 12 years saves them considerably on labor. Simply put, it takes many labor hours to replace lights on most large corporate and government campuses, and with the older bulbs, they have to be replaced rather frequently. A case study conducted by the Department of Energy and recently reported in The Wall St. Journal analyzed the parking lot of a Wal-Mart in Kansas over a 10 year period and actually found a savings of about 5% over that period of time, despite a larger initial cash outlay. Think about what it must cost to pay people to climb large light poles and large buildings or, lacking willing individuals, the equipment required in such an effort.

    Perhaps then it will be businesses, and not consumers, that will ultimately purchase enough of these bulbs over the next several years to bring the prices to more affordable levels for average consumers, the resulting reduction in price being a well-documented relationship among volume, time, and demand variables. And the reasons don't have to be environmentally-focused. Perhaps simply saving money is good enough reason to engage in a practice that helps the environment.

    DDS

  • A McShame

     

    Shame on McDonald's. You may or may not be aware that the obesity epidemic facing this country is one of the most potentially damaging health problems we have ever faced as a nation. We are now, on average 20 pounds heavier than we were only 20 years ago. This obviously has huge health and financial implications for our nation, and so policy makers have responded with a number of initiatives, from encouraging the elimination of trans-fats from foods, to looking at the way we market unhealthy foods to children.

    The city of San Francisco (that bastion of progressive thought) has responded by prohibiting fast food restaurants from including toys with children's meals that don't meet certain nutritional guidelines. Although a bit Draconian in nature, the intent is to discourage the corporate practice of using toys to "bait" impressionable children into eating foods deemed unhealthy. That is, the desire for toys leads to the desire for a Happy Meal, and this ultimately leads to fat kids.

    So how has McDonald's responded? In an attempt to maneuver around the law without breaking it, McDonald's franchises will now begin charging a dime to customers who request that toys "be added" to their happy meals. Whether one sympathises with the government or with private enterprise is a moot point here. The blatant attempt to circumvent a law designed to protect children is certainly not good PR. And simply complying with the "letter of the law" as opposed to the "spirit of the law" presents a very interesting ethical dilemma.

    McDonald's, in an effort to avoid too much negative publicity, says that the proceeds from the sales of these toys will help build a new Ronald McDonald House, a charity closely associated with the company. Does this lack of a profit motive make you feel better? McDonald's hopes this gesture is enough to neutralize any criticism generated by this move, but the broader issue of what a company does strategically to address a law it doesn't like is the real story here. I think that this ethically-challenged strategy is a McShame, and it only reinforces the view that government needs to do more to regulate this industry if society is to recover from the epidemic of obesity and all of its associated costs.

    DDS

  • Polar

     

    Recently we posted a piece about Coca Cola and its new cause related marketing strategy, associating with the World Wildlife Fund in an effort to help the polar bears. It's simple, Coke simply ties in consumer purchases with donations to the non-profit effort, and consumers become a part of the effort as well through their purchase behavior. Sounds like a good plan, but it hasn't worked out exactly as planned thus far.

    The snowy white can, introduced for the holiday season, is not a big hit with some consumers. It is the first time the company has ever put regular Coke in a white can, and the images of  polar bears are compelling. Yet, the effort has some people confused. Several people have returned the white cans after opening them because they thought they were drinking Diet Coke, a product packaged in a similar lighter color scheme than the traditional signature red we all associate with the brand.

    Though Coke regularly tweaks its packaging to coincide with seasons and sponsored events such as the olympic games, a move of this magnitude does not always go over well with those of us who are used to certain brand characteristics, such as the flavor of the soda (remember the New Coke debacle from the 1980's) and the packaging of the product. People don't always embrace change, and brands strive to remain consistent so that they are easier to remember and can inspire brand loyalty. Coke also has red cans for the holiday season making things a bit confusing for some.

    The backlash isn't exactly an epidemic and of course the packaging shift was always meant to be temporary, but it does teach us an important lesson. Consumer confusion, while it can generate buzz about the brand, is usually not a good thing. It is almost certain that the confusion with the diet version of the product was not something marketers though of in advance. Perhaps the use of focus groups prior to this sort of move would have been a prudent move. Or perhaps Coke is so large and successful that a problem like this barely registers on the radar. Either way, marketers should be aware that the changes they make to established brands should be done with the utmost care.

    DDS