• Tax Masters Out of Business

    What is missing this tax season for most of us over 40 folks, besides any hope for a refund? Why, it's the cheruby, trust -inspiring face of Patrick Cox CEO of Taxmasters, promising the usual relief from the IRS for regular people, just like you! The problem? He can't deliver!

    The State of Texas has found the owner and his Texas-based firm guilty of over 111,000 violations of the state's Deceptive Trade Violations Act. That's a lot of violations. This is not good news for those who take "puffery", a term for slight exaggeration in marketing, in an entirely too literal manner. Unethical? For sure. Illegal?  Yes indeedy. And $195 million in restitution and bankruptcy for the company is what's happening, which should be a timely message to those who make false and misleading marketing claims in the media, even if it's only on a state or local level. Where does the FTC stand on this? Stay tuned. It may get worse.

    -DDS

  • Grumbling About Graduation

    In this column we talk a lot about all kinds of products. One of the hot button issues of the past few weeks has been the student loan problem. Tuition continues to rise, incomes are stagnant, and student loan default rates have risen astronomically. The result? Students are taking out more loans than ever despite an overall debt load that has increased by 24% over the last 10 years. What gives?

     

    When jobs are scarce, and they have been especially so for young people who lack experience and hard skills, people go back to school. Since there has been no income growth for a while and America's savings rate was actually negative before the recession hit, there is nowhere to get the money for school. Enter Uncle Sam, with a promise of future employment prospects enabled by historically low rates. It seems that getting a college education has become another American entitlement.

    On the face of it, this looks like a good thing since the data point to college graduates doing better than non-graduates, but there is much more to the story. There are so many people going to college these days that it actually matters what you study and how well you perform, as there is very little demand for a C student who majored in philosophy. Unfortunately, we are churning out quite a few graduates who performed substandardly and studied what we can all agree was "softer" subject matter. This doesn't bode well for employment numbers except in certain majors I have mentioned in an earlier column.

    So, more people are flocking to colleges, too many choose a path of least resistance, and the government has made it all easier with cheaper, more available loans. President Obama has been speaking about it all week, friend to the student that he has been, and the administration is now considering making it easier to forgive student debt during banckruptcy. What happens in pricing when a marketer lowers the price and makes it easier to buy a product? Often more consumers will buy the product. Ask yourself if this is a good idea in the face of rising default rates and Occupy movements with out-of-control student debt as a platform.

    Statistically a university education is still a better alternative to having no post-secondary education, but perhaps we have lost sight of what constitutes higher education. There are plenty of understaffed vocational programs, like plumbing and electrical, waiting for bright young minds to "occupy" them. Perhaps kids have been sold a bill of goods in thinking that all of the psychology and sociology majors we churn out every year will find employment in their fields, or meaningful employment at all for that matter. The result...more school! Perhaps it is time to rethink what our perception of "skills" has morphed into since it has been demonstrated in studies that criticial thinking skills only improve about 10% for most graduates during college. It has become clear, however, that there are too many college graduates with soft skills and not enough jobs to go around, resulting in higher unemployment and higher default rates. This isn't likely to get better any time soon, so the lowest performers in the majors with the least demand for their skill sets will continue to suffer for it.

    DDS

  • Iranian-American Reality TV

    If you didn't believe that America's number one specialty is most certainly generating popular culture for mass consumption, you must certainly be living in western Pennsylvania (just kidding...Go Pirates!). Raised in the hills of LA, I grew up with many refugees from the Shah of Iran's toppled regime. Tens of thousands of Iranians settled in the western part of Los Angeles, and being flush with oil money, proceeded to create a wealthy subculture in the region. Fast forward 30 years and you have the "Shahs of Sunset", a reality TV show featuring a Jersery Shore-esque view of the lives of six spoiled, wealthy Iranian-Americans.

    Yes. Even the conservative and modest Muslim-American subculture is no match for the power of American popular culture. No one is immune. It can infect almost anyone exposed to it and is very contagious. This show, and you can imagine that its content is not flattering to the individuals in it, has become very controversial in the Iranian-American community. Community leaders like former Beverly Hills mayor Jimmy Delshad fear that it will "take us back and make us look like undesirable people." Yes, there's vomiting in Vegas and on-screen colonic irrigiation, but that's soft core stuff to reality TV veterans in the U.S. get over it, Mr. Delshad, and join the rest of us who are embarrased by this sort of programming. It's nott culture bound. It's about what people will watch and what advertisers will support.

    What is interesting here is how quickly any dominant culture can eclipse a subculture from another country, and how quickly the dominant consumer tastes are adopted. There are lessons here for those who choose to engage in multi-cultural marketing. If people assimilate to this degree, does it make sense to market to second generation hispanics in Spanish, for example, or engage in any multi cultural marketing at all? Perhaps it's better to target based on behaviors, attitudes, geography and on other demographics such as age and gender.  "Americanization" happens within two generations and maybe faster for folks from more "western" origins. Humans are humans, I suppose, and the show will air as long as people watch it and advertisers will subsidize its content.

    Thank you Bravo and Ryan Seacrest. Before the "Shahs of Sunset", I feared that we had run out of ideas for Reality TV since there are now TWO shows about people who catch catfish by hand for a living. Is nothing sacred? So now I have an idea for a new reality series, which I would like to call "The Inuits of Indiana", a show that will follow six recently displaced fishermen from the farthest reaches of northern Canada and see how they adjust to their new life in working on a Riverboat in Gary, Indiana. I think that Mr. Seacrest and the folks at Bravo should take a look at this. It's a winner.

    -DDS

  • The Skechers Sponsorship

    Track and Field. Some of the best athletes on the planet routinely do things the rest of us can only dream of doing. But where is the audience? Where is the money? It's nowhere to be found.

    We all know by now that there is no money in this sport, save the occasional Olympic "nod" to a few select athletes during the Olympic season with salary structures based on performance. Not a great proposition for those who don't medal. But perhaps this can all change. Indeed, Skechers has raised the bar, as sport rules limiting athletes in Track and Field to only one sponsor have recently changed, and now the shoe company is on the move.

    Base salaries of these athletes are far below an assistant manager position at McDonald's, so one would figure that it would be good marketing strategy if companies sponsor these athletes and take advantage of the limited, but very saturated, exposure these "mini-properties" represent. What a great way to cut through the clutter. Rather than sponsor the Olympics, why not sponsor an individual athlete instead? After an expensive foray into the world of Superbowl advertising (Remember Quigley the pug with the red shoes?), the company has decided to follow up with a sponsorship of Olympic medalist and NYC Marathon winner Meb Keflezighi and a certain tie in to its national advertising campaign.

    Perhaps this is a new frontier in sport marketing, since so much of it is saturated with the "usual suspects." Maybe Skechers is on to something. Cut through the clutter by sponsoring an undermarketed Olympic event by way of its individual athletes, and don't pay them on performance but on "appearance", as Skechers has done. In a world dominated by Nike and Reebok/Adidas, it is refreshing to see some new tactics.

    DDS 

     

  • Jobs for Marketers

    While there are horrific reports of skyrocketing tuition, too much student loan debt, and student loan default rates between 20 and 30 percent of the total, it is still a good time ot be a college graduate. University costs have far outpaced inflation, and it seems that some schoold seem to somehow justify increasing tuition just about every year. Eventually something will have to give here as this model is totally unsustainable; but what about the value that consumers (students) get from a university education in a time where such value appears to be rapidly eroding?

     

    Much of the rate of employment after graduation is due to the unemployment rate which has been over 8% for quite some time (and many observers incuding the author feel that the number grossly underestimates the "real" rate of unemployment). This rate would be much better if it were comfortably below 5%, and a high rate of unemployment often affects younger people in a more negative way due to older folks hanging on to jobs longer, the relative inexperience of younger people (they require investment), and the nature of the skill sets the graduate brings to the table. There is little demand for the philosophy major as such. But, a philosophy major with other hard skills might do better. In addition, companies are adding to their "bench strength" after years of shedding older workers. Hopefully young workers bring a fresh, new set of skills and perspectives. Hopefully!

     

    The very good news for marketing graduates in particular? According to a recent report on Dow Jones Newswires, the top jobs out of higher education include engineering, computer science, accounting and finance, marketing, education, and health care services. Hooray! So, even though job prospects aren't what they once were (for many of us), a degree in marketing gives you a "marketable" set of skills. So by all means, feel free to graduate and get a job. Good luck and much success!

    DDS

  • The Return of the Dead Brand

    Companies go out of business for a variety of reasons. They fail to deliver value to consumers, they run out of resources, they sell to the competition, their executives get in trouble with the law, among many other reasons. So what happens to the brand equity these organizations have built over years of marketing? Isn't the brand name, and in many cases, the product concept worth saving?

    Increasingly the answer seems to be "yes". Trademarks, if they haven't been used for three years, are generally considered abandoned and can be claimed by aspiring entrepreneurs with little or no investment. The idea is that if some aspects of the marketing model worked before, they are likely to work again. Lessons can be learned from these case studies and in many situations the brand can be revived by doing things better. National Premium Beer ( a former Stroh's brand), Astro Pops (Spangler Candy), and Seafood Shanty (a restaurant chain) are all slated for introduction.

    What's the big idea? Discontinued brands can be tapped for their nostalgic value, a creative strategy that has been used by many companies with great success, and also any capitalize on any remnants of brand awareness that may exist. Most people over 40 know exactly what an Astro Pop is. This can save money that would otherwise be spent generating brand recognition, and older people get to mentor younger people and explain how things used to be. I look forward to the revival of many more brands to come. This is a trend worth following.

    DDS

  • Coke is Good for Investors

    It is no secret that Pepsi faces some challenges managing its core brand as well as its portfolio of products. What isn't getting much attention is Coca-Cola's strong performance in the marketplace. It is true that consumer tastes are shifting away from sugary carbonated beverages and towards flavored waters, teas, and other "still" drinks. Coke owns many brands in this category such as Dasani and Gold Peak Tea, so the company can capitalize on these shifting tastes. And even with recent increases in the costs of inputs, materials that are used to make the finished product, Coke has managed to post a 10% gain in profits.

    How did they do it? A combination of increasing volume (5%) and increasing prices (3%) tells much of the story. Brand loyal consumers are often very understanding when it comes to small price increases and many wouldn't notice a 3% increase. Such price increases are planned and executed very carefully, as too high of an increase will result in less demand, as is the case for any elastic product. The major worry for Coke these days is Pepsi's planned $600 million advertising blitz, which could result in a price war. This bodes well for consumers, but for investors, not so much.

    -DDS

  • Is Today Is "So Yesterday"?

    The viewership results are in! The Today Show, an NBC staple for decades, has been eclipsed by Good Morning America, ABC's morning program for what seems like centuries, for the first time in 16 years. Certainly the five million person- plus viewership each show manages to attract is no small potatoes in the world of morning television, but the leader enjoys a mostly moral victory, a public relations coup if you will, by being Number One. So why the concern? The Today Show is one of NBC's most profitable business units, as few shows attract such a large, loyal audience five times a week, and so advertisers are keen to spend premium money to reach this audience. And Today has been collecting more ad revenue than Good Morning America over the past several years, so that share is likely to shift in ABC's direction. This looks like bad news for NBC if Today's descent becomes a trend.

    But not so fast! Today still enjoys dominance in the coveted 25-54 age demographic, and it may be a while before ad dollars actually shift. In addition, does it really matter who is on top? Either way a national consumer brand would do well to advertise during both programs if the budget allows. But if an advertiser is forced to choose, would they choose the medium with slightly higher viewership, or would other factors such as psychographics come into play? Indeed, the size of the audience, sometimes measured as Cost Per Thousand (the cost to reach a thousand people through a particular medium) and also by share of households, is only one factor in making a decision on where to place advertisements. Either way, such competition for ad dollars can only increase the quality of the programming (let's hope), and perhaps a rising tide in morning viewership (bolstered in part by high unemployment) will raise all boats.

    DDS

     

  • The Joy of Franchising

    Retailing is a dynamic part of marketing, and the fast food segment is an area that is always changing. Previous columns have thoroughly explored the so-called "burger wars" between McDonald's, Wendy's, Burger King and others, but what about ownership of these purveyors of tasty, but largely unhealthy fare? It is still a surprise to some people that many restaurant chains operate on a hybrid model of ownership. That is, some stores are company-owned while others are what are know as "franchises", locations that are owned and operated by private individuals. This is not to mean that a Subway that is owned independently can do whatever it wants to do. There are strict guidelines on the freedom (if any) independent owners have with regard to menu, location aesthetics, and participation in Subway promotions such as the popular 5-dollar footlong deal.

     

    What is interesting is that the model is slowly changing. Chains such as McDonald's, Wendy's, Yum Brands (KFC, Taco Bell), Jack in the Box, Justice Holdings (Burger King, Arby's), and even Jamba Juice are shedding corporate-owned stores in favor of more profitable independently-owned stores, a practice known as "refranchising". Why is the latter more profitable? Simply put, the franchise owner has more to lose than a large corporation with a few failing locations and is likely to try a lot harder to make that particular location work. This is rather remarkable in that these large organizations are in fact admitting that smaller operations run more efficiently than the larger whole. Interesting indeed.

    So, Burger King hopes to have all of its stores franchised by the end of 2013, and Yum Brands currently owns just 5% of its KFC and Pizza Hut stores. McDonald's likes a little more control with 19% of its' stores corporate-owned, down from 23% in 2007. Will this trend continue? Stay tuned.

    DDS

  • The Worm in the Apple

    Readers of this column know by now that I am not an Apple-phile. That is, I don't think that Apple is the most amazing organization to hit the planet since the Dutch Trading Company in the 1600's (and that company truly was amazing). Sure, Apple makes some very cool stuff, but so do a lot of other companies, and  I have been unimpressed by the tactics employed by the organization for a very long time. I find Apple to be institutionally arrogant and a bit questionable in their dealings over the years, from unfair supplier policies and patent infrigement issues to sweatshops in China. I also feel that without Steve Jobs leading the product development efforts, the company is in deep trouble with regard to R&D and new product development. The late Mr. Jobs has placed the company in a good position for the next several years, due to the high quality of its technology platforms, but the company has yet to demonstrate what it can do without their "dear leader". His forced absence in the late 80's and the 90's nearly tanked the company. Jobs returned and revolutionalized the desktop computer (the iMac) as well as music (iTunes), and then proceeded to "creatively destroy" the mobile phone market. So, the company may have already reached its peak, as all things in this world do.

    So what's the issue today? After issuing a "heads-up"  several weeks ago, the U.S. Justice Department has charged Apple and several large publishers with collusion, including allegations that involve Apple holding regular meetings at upscale dining establishments in Manhatten with several large publishers. The meetings, according to the government, culminated in an agreement between all parties on a set price and profit margin for books (made by the publishers) to be sold through Apple (the retailer) in an attempt to stave off the immense threat Amazon has posed to the industry. This is illegal. And how dare Amazon offer such low prices and great service! Shouldn't Apple and inefficient Web 1.0 retailers be entitled to high profit margins through a "fixed" cost and higher price points for consumers? Of course my words are dripping with sarcasm, as such an entitlement is both anti-competitive and bad for consumers. Amazon is clearly an efficient machine, much like Wal-Mart has been for decades, and is therefore the primary threat for many players with regard to retailing books.

    This sort of price fixing happens more often than one might think, and the burden of proof will be on the government to prove that Apple and the publishers did something wrong. In the spirit of television news and of having never trusting Apple's publicity team, the court of Professor Duber-Smith has already convicted the company. Why? History tends to repeat itself as most humans really aren't overly-creative by nature, and three of the publishers, including Barnes and Noble, have already settled with the government. It appears that Apple will use its bank of billions in cash to tie this up in court for years to come. Hooray for Apple, a company that despite its incredible products, continues to demonstrate that it cares little for the ethics of competition.

    DDS

     

     

     

  • McDonald's: An Expert on Multicultural Marketing

    It only takes one quick look around to realize that America is a multicultural marketplace.  Those companies that have realized this fact and have developed and implemented multicutural marketing strategies have the potential to enjoy huge beneifits.  Perhaps one of the most adept at multicultural marketing is McDonald's.  It is so successful, that sometimes people like me (white middle-aged male) are being left out of McDonald's consideration.  So serious is McDonald's about this endeavor, the company recenlty hired a Vice President just for this purpose.

    Illinois-based McDonald's announced in December 2010 that Edgardo A. Navarro Linares had been promoted to Vice President, Multicultural Marketing, McDonald's USA. In this role, Navarro is responsible for McDonald's U.S. strategic and ethnic consumer marketing efforts. Reporting to McDonald's U.S. Chief Marketing Officer, Neil Golden, Navarro assumed his new role on January 4, 2011. "Multicultural marketing at McDonald's is more than segmented ethnic advertising campaigns; it's a business imperative and an integral element in our business strategy and marketing plans," said Golden. "With Edgardo's leadership, we will continue to align and allocate resources in support of the most significant growth areas of our business and ensure that an ethnic consumer perspective is understood and applied at all points throughout the marketing process."

    "With the growing influence of ethnic consumers on mainstream trends including music, food, sports, fashion and lifestyle, I am delighted to take on this new role and build upon McDonald's success as a brand that customers know and trust," said Navarro. "Our multicultural marketing efforts are critical in helping us to expand and build brand relevance in the U.S. with our diverse customer base. I am honored to assume this responsibility." An 18-year McDonald's veteran, Navarro most-recently served as the Vice President & General Manager
    of McDonald's Indianapolis Region, which encompasses a total of 598 restaurants in Indiana, Tennessee, Kentucky, Illinois and Missouri.  GB

    Read more here.

  • Socially Responsible or Socially Responsive?

     

    Well, here's another McDonald's blog.  If someone was to ask you if you thought McDonad's was socially responsible or socially responsible, your first reaction might be "Huh?"  If that's the case, it's probably a simple problem of not understanding the difference between the two concepts.  Social responsibility is a proactive approach where an organization will try to solve problems before they become problems; they will be involved in social issues without any pressure from outside concerns.  Social responsiveness, on the other hand, is a reactive approach.  This occurs when an organization receives pressure from external sources and then responds to those pressures.  This is not always a bad approach because some problems cannot be foreseen, so to react to problems after they have occurred may be the only response possible and it is important to respond quickly in these cases.

    Now that you know the difference between the two concepts, you can probably think of ways where McDonald's is both socially responsible and socially responsive.  It is no secret, for example, that McDonald's stopped using stryofoam containers and started offering more healthy menu choices because of external pressures.  It wasn't too many years ago, long after McDonald's stopped using styrofoam containers in the U.S., that I went to a McDonald's in Puerto Vallarta, Mexico, and discovered the company was still using them there.  Even in the U.S. McDonald's has not completely stopped using the material from which stryrofoam is made.  Nowadays, the company wraps many of its products in paper and one side of the paper is slick and glossy.  The slick and glossy side is reportedly made of the same substance from which styrofoam is made (petroleum).  However, no one can argue that McDonald's does many socially-reponsible things also, perhaps the most notable is the Ronald McDonald House activities.  GB

    For a video on McDonald's social responsibility, go here.

  • McDonald's Color Scheme: Strategy or Chance?

    Have you ever wondered about McDonald's colors.  Did the company select these colors by chance or by strategy.  If they were selected by strategy, one would think that the company took into account the meanings of different colors.  And if this is the case, did the company take into account the fact that some colors mean different things in different cultures?  For example, white to many Western cultures is the color of purity.  However, in some Asian cultures, it is the color of death.  However, McDonald's appears to be using the same color strategy globally and it looks like it is working for the company.  Here is why the colors work for the company.

    Yellow symbolizes sun, life, energy, friendliness, innovativeness, etc.  Red is a color that stimulates the adrenaline glands in the brain. The company appears to have selected red for this specific purpose. There are other reasons it chose the red, but the major one is the chemicals it creates in the brain. Now ask yourself this, who does Mcdonald's market to? Apes? Dogs? Adults? Children? It has built its empire on directing ads at kids. In fact, those little toys it hands out have done well for it. Enough about that though.  What colors do children respond to? Primary colors is the answer. So there we have the red. Also, adults respond to red as well. (The adult is the action taker.) Who has the money to pay for little Johnny's lunch? So of course, the company needs to focus on mom or dad in the process. Red is a call to action, and it also stimulates the appetite.

    Now the yellow. Why yellow? Yellow represents many things; it all depends on the message being sent, the product and the actual yellow itself. In this case, the message is friendly. At least one of them anyway. Are they friendly in Mcdonald's? Yes, they are.

     

    Now let's move onto the clown, Ronald McDonald. He just screams out so many messages: red hair, red stripes and red shoes. Knowing that red can represent energy, exciting and courageous, you cna see its significance. The color red was chosen for the clown very carefully. Now what does Ronald do? He has lots of energy. He is also very excited, and he portrays joy. (Yellow can also represent joy.)  Now, why would he wear yellow? In this case, it is because he is friendly. Yellow can also mean caution, and red can be related to sex or war. It does not matter. It is the message that you want to send and how it relates to your product. This is an example of a company that chose its colors very carefully so that it could send very specific messages.  GB

    Read more here.

     

  • Place Strategy: It's All in the Location

     

    Have you ever had to look very hard to find a McDonald's restaurant?  I think I drove through a small town in remote northwestern New Mexico a couple of weeks ago that didn't have one.  But the very next town did have one, though it was almost 100 miles between the two towns.  If you're in a large U.S. city, all you have to do is drive around for 5-10 minutes to find one.  If you're in a large city in another country, you may have to look a little harder and McDonald's probably hasn't invaded many of the small rural communities in many countries.  This raises the question, "How does McDonald's select a location."

     

    Customer convenience and research is the driving force behind new McDonald's restaurant locations. The company is committed to responsible growth and works closely with local planning officers and community groups when developing a new restaurant. When McDonald’s opens a restaurant, it is a long term proposition, and local knowledge is key to choosing new locations. McDonald’s relies on discussions with local managers who are closely involved at the grass roots level with local communities. The company strives to offer greater convenience to customers whilst responding sympathetically to local circumstances. Without the support of the communities in which they trade, the restaurants have no business. McDonald’s always takes a sensitive approach to new restaurant environments, working with planning and conservation officers to preserve buildings of architectural merit and to improve the townscape. Additionally, areas near main roads can be chosen because they provide greater accessibility to McDonald's customers.  GB

  • Beware of the Brand Ambassadors

    A recent article in the Wall Street Journal shed light on a relatively new phenomenon on our university campuses, the act of tech start-ups and established brands enlisting students as "brand ambassadors." On the face of it, this seems like a neat idea. These students are unpaid and are tasked with spreading positive Word of Mouth about the brand in question. From making Facebook postings and videos to starting "impromtu" chats with people on the street, these young go-getters are eager to pad resumes with non-academic activities in a bid to stand out from the competition in the search for employment. Many start-ups give these kids fancy titles such as Director of Social Media or Campus CEO, in an effort to make the prspect of representing them more attractive.

    So what's wrong with this? Why am I not excited? One thing I know about the college-age generation is that they are very skeptical of institutions, do not like being marketed to as a matter of principle, and resent attempts by institutions to clandestinely get them to buy things. This means that marketers must be increasingly creative when trying to reach this demographic, but it also means that they must be very sensitive to the perception that these practices are invasive. Young people, as a rule, do not like the ads on Facebook or any other sites for that matter and will probably not appreciate a secret corporate representative operating within their social circles. The term "brand pimp" comes to mind, and I feel sorry in advance for the many ambassadors who will earn social sanctions as a result of their gratuitous attempts at commercializing social interaction.  I think of the proverbial couple at the cocktail party trying to convince friends to buy into the latest multi-level marketing buying club or time share program. These odious folks have been avoided and shunned by most Americans for decades, and it still surprises me every time one of my friends gets sucked into such a program. The criticism here is that the casual nature of social interaction is violated by predator salespeople attempting to do business in an in appropriate setting. Many of these folks drink only water at these events, shunning alcoholic beverages so that their skills remain sharp. Yuck.

    Sound lame? It is. It is also sad that the employment situation is so grim that students have to sully their college experience in this way. The fact that these naive students aren't paid is not only strange, it is also not an accident. If these brand ambassadors were paid, they would have to disclose their relationship with the company to the public when officially representing their brand. A paid representative is not as credible as someone who is willingly spreading word of mouth. Right? Isn't this attempt to mislead people a tad unethical?

    I expect this fad to generate a backlash and quietly go away. If I am wrong, it will signal a social shift toward embracing marketing activities. I just don't see this happening.

    -DDS

     

  • Nike Takes Over

    It just sounds right. "Nike is the new official provider of licensed gear for the NFL". Although Nike has had deals with individual teams in the past, this is the first time that the brand will be the exclusive supplier of NFL gear for all 32 teams. The deal is for five years, and the first consumer line will be available at the end of this month. Not only will consumers get a new line of gear to enjoy, but the league itself will sport new uniforms starting this season as a result of the deal, uniforms that weigh less, provide a greater range of motion for the players, and look a little different.

    You might recall that Adidas/Reebok held the contract for the last decade, was recently admonished by a federal judge for trying to sell NY Jets Tim Tebow shirts prior to the expiration of their contract, and ordered to cease and desist. Why the desperation? The loss of this licensing deal is expected to cost the company between $200 and $250 million annually! This is no small potatoes, and Adidas/Reebok will have to find other sources of revenue.

    Under a licensing agreement the licensor (the NFL) receives a healthy revenue stream by essentially renting the rightsd to use its logos, and the company can concentrate on what it does best...football. The licensee (Nike) pays a fee, often in the form of a per-unit royalty, and can focus on what it does best...putting logos on things people wear. Interestingly enough, Nike's first shoe was a football cleat, despite being known for running, basketball and other high-finesse sports, so the company should be very comfortable in its new role. NFL fans should look forward to the new look for players as well as the opportunity to replace all of their current apparel with the new style. I smell money!

    -DDS

     

  • Et Tu, Easter Bunny? Et Tu?

    These famous words spoken by Julius Caesar to Brutus the Betrayer (not the Easter Bunny), come to mind when I think about all of the wonderful buying opportunities each holiday brings our way. It seems that about every month there's another holiday demanding the time and attention of cash-strapped Americans. There's Valentines Day, Mother's Day, Father's Day, 4th of July, Memorial and Labor Day, Christmas/Hannukah, and don't forget Black Friday weekend. There are several I didn't even mention, most notably Easter. Even I was surprised to read that this holiday is actually the third biggest "buying holiday" in the U.S. behind Christmas and Valentine's Day. And this year the holiday comes two weeks earlier than last year, so WalMart expects to sell enough eggs during the holiday period to circle the globe (really!).

    So, retailers and manufacturers can jump for joy while holiday purists, including Christians who actually celebrate Easter as a religious holiday, lament over what they consider to be over-commercialization of a special occasion. I don't feel this way personally about Easter, not being a very religious person, but I understand where these folks are coming from. It does appear that Thanksgiving, a family-focused non-demoninational holiday all Americans can celebrate and one of my favorites, has been eclipsed by Black Friday. Talk around the table now focuses on where the best deals are how early people are going shopping in the morning, rather than enjoying a meal (and some NFL football) with family and friends.

    Either way, early indicators demonstrate a healthy buying season ahead despite stagnant incomes, high unemployment, and increasing food/gas prices. Warmer temperatures are partly responsible for htis phenomenon as more people go shopping when it is nice outside. So where is the extra spending money coming from? Credit cards, probably, which is not good news, but excessive consumer borrowing was standard practice prior to the recession, and probably a key reason for the downturn itself. Despite the correction, we appear to be back to our old habits even though most of us are no longer able to borrow on the equity in our homes. And Easter is the next big opportunity to purchase items that no one really needs. Let's face it, this isn't exactly a utilitarian buying situation such as the "back to school" season.

    And gosh. When the Easter Buying Season is over, we only have five weeks to Mother's Day. It makes me want to look for a second job just thinking about it.

    -DDS

  • Research In Slow Motion

     

    Long a source of Canadian national pride, smartphone maker Research In Motion (of Blackberry fame) is in a complete tailspin and threatens to join the former source of Canadian national pride, Nortel, in the backwaters of corporate R&D. A new CEO promised a new marketing strategy to turn the company's fortunes around, but it is indeed highly unlikely that simply altering the messaging and promotional mix can achieve anything short of a temporary stoppage of the proverbial "bleeding". Shipments are down by more than 25% from last year and there is no end in sight as consumers migrate to much smarter phones.

    Indeed, a marketing strategy will not overcome this lapse in innovation, a failure to engage in competitive research and development, as Google, Apple and others have passed them by. There are echoes of Kodak and Yahoo, other companies that failed to plan for the future. But can the company get Blackberry back into motion or has it reached the "decline" stage of the Product Life Cycle?

    Probably the latter. But the company can be sold to a stronger competitor for its customer base and patents, a stronger organization that may choose to focus on business professionals, Blackberry's traditional core market. It is highly unlikely that in this age of hypercompetition and continuous innovation, a former market leader can hope to regain its former glory. I'll have to replace mine very soon.

    DDS

  • FDA Fails to Ban Plastics Additive

    After over 20 years in the natural and organic products business, I have been drinking a lot of the so-called "Industry Kool-Aid". That is, it has been hammered into me that synthetic ingredients and products are on the whole not good for human and environmental health, while natural and certified organic products are just the opposite. And a growing body of clinical research fueling a rapidly-growing natural products market of over $200 billion dollars in the U.S. alone confirms that this belief is not an isolated one. It seems that society is trading "Better Living Through Chemistry" for a more natural approach.

    So, if the social trend overwhelmingly favors policy directed toward health and wellness (refer to the imminent junk food tax), why did the Food and Drug Adminstration, the agency that governs product content and labeling, fail to ban the widely-studied and much maligned synthetic chemical, BPA? This compound has been repeatedly linked to possible health problems of the brain, breast and prostate and is nonetheless used in most plastic packaging. As a result, it turns out that now we all have "acceptable" levels of BPA in our bodies. Apparently, the FDA feels that more study is needed, and it is just this sort of thing that has been driving the health and wellness trend for over 50 years.

    The FDA, although recognizing that this decision is in no way final, ruled that the jury is still out as to whether or not this widely used synthetic chemical poses a risk to human health. Much like the argument as to whether or not humans are causing global warming, the controversy surrounding this ingredient is in no way over. There are literally hundreds of synthetically-derived and synthetically-processed substances on a list of ingredients that many professionals and activists would like to see banned. Europe has already taken steps in this direction and, before the recession hit, California was on the way to adopting European standards which would have had a huge effect on these industries in the entire U.S.

    Four years into a lousy economic recovery and much of that is ancient history. Will societal concerns for health and the environment once again take precendent over concerns about the economy, government debt and terrorism? Will this decision regarding BPA be a catalyst for such a shift in societal attitudes? Does the FDA have a duty to ban an ingredient BEFORE it is certain of its ill effects? These questions and many others are impossible to answer, but watching what happens in the legal and regulatory environment can help marketers predict the future to some degree, so at least the result is not a complete surprise to the organization. You can be sure that thousands of companies are watching this one very closely.

    DDS