• Why Radio Shack?

    Well, why indeed? Is anyone else out there as perplexed as I am that this ancient seller of wires, adaptors, and other obscure parts still has 4,600 stores scattered across America? Up until recently, the company had been doing rather well, despite its odd merchandise mix, as a purveyor of hard-to-find gadgets and accessories with top notch, informed sales people delivering personalized service. But is this still enough?

    The company did make one major strategy change over the past few years, as it has placed a major bet on the mobile device market, offering phones, accessories, and plans from multiple providers. As we all know, this market is maturing rapidly, and providers all have their own stand-alone stores at this point in the game. Radio Shack has been left in the dust with a stock price down 80% over the past year. If investors are losing confidence, it's because customers are as well. Sales of consumer electronics has fallen 27% this past quarter, but the company still saw modest growth in the mobile category. Don't expect this to last.

    The answer from the marketers at Radio Shack apparently lies in a multi-million dollar advertising campaign to be rolled out next quarter entitled, "Why Radio Shack?" It's about time this 91 year-old company found a new identity (if it ever really had one to begin with), but it all might be too little too late. If the rapid decline of retailers such as Best Buy is any indication, it would behoove Radio Shack to ramp up its online efforts in addition to convincing consumers of the company's contemporary brick-and-mortar relevance. A brand must struggle to remain relevant in this age of global hyper-competition, and it appears that Radio Shack has been a bit slow on the draw. Next time you are in a mall, stop on by and ask the bespectacled service rep, "Why Radio Shack?" Then, we will wait and see what the corporate marketers have to say in September.

    DDS

  • Olympic Alloy

    The 2012 London Summer Olympics is well under way, and it should not surprise the astute marketing student that there are dollars to be made selling anything and everything that features a Union Jack and approved Olympic logo. The committee expects to sell about $1.5 billion worth of 10,000 approved items, most of it cheaply made, but confidently priced. This lofty goal will apparently allow the organizing committee to generate $80 million in profits, and thus break even on the games. It seems that bureaucracies are always running out of other people's money, but that is another story.

    Many of the items feature Wenlock and Mandeville, the official one-eyed mascots of the games, who have reportedly failed to win the hearts of the buying public as of yet. They do look bizarre.A famous art critic was quoted in the Wall Street Journal very recently as saying that the London Olympic logo is "one of the most superlatively awful devices of all time" with the mascots being described as "computer generated smurfs" and the composition simply described as "Chinese junk". Ouch.

    Veritable or not, it is clear that we are not off to a good start if suppliers and vendors expect to profit from selling approved merchandise. Numerous online vendors already have merchandise marked down as much as 50%. Some retailers are pointing out that it's the least useful products that tend to sell best, almost certainly a result of  low price points, and so volume must compensate for lower margin items. It is important to remember that the economic success of the games in any city is partially measured by how well retailers do. In the meantime, order a faux gold Olympic torch for only $15 and support the effort; or at least watch and Shazam/QR scan some of the commercials during the events. We gotta make some money here!.

    DDS

  • Olympic Caliber PR

    Whenever it comes down to a vote among the people of a particular nation as to whether or not to host the Olympics, the result is usually fairly divided. Fiscal conservatives say "no" because the events ultimately end up costing the host country's government a bit too much overall even though many private businesses stand to gain from the spectacle. Other observers tout the more intangible, public relations/publicity benefits of the event, something marketers of all products are always attempting to exploit. In case of the 2012 London Olympics, which has already begun for a few events, it appears that PR is a major deliverable for those concerned with objectives-driven marketing, or perhaps the strategy is merely a common sense-driven decision devoid of marketing guile. Either way, the pageantry is sure to impress, and this is good news for both the Olympics and British brands.

    Postcard settings abound during the Summer Olympics this year. The British organizers have guaranteed gorgeous backdrops for many events in hopes of goading the world's movers and shakers to travel to, and perhaps invest in, the Queen's territories. Beach volleyball played at the Horse Guards Parade anyone? It is true that the main arena, which will house many events, was constructed on the city's east side, which is in great need of revitalization, but organizers smartly decided to also feature historic buildings and the such in other areas of the city for certain events. Thus, the entire city benefits from the tourism. Simply brilliant!

    The venerable Serpentine Lake in Hyde Park will host several events, and the exclusive Lord's Cricket Ground (which hasn't had a non-cricket event since the 1960's) will provide an apt setting for the archery competition. Barring any catastrophic incidents caused by either humans or Mother Nature, this will play out to be a successful global event in a truly global city. Some parties will gain from this economically in the short term, but the entire nation stands to gain in the long run if England can deliver the goods. The U.S,, China, and Britian are the likely favorites in the total medals category and this always bodes well for their overall reputations as well, at least in the very short run. Enjoy the show.

    DDS

  • Is This The End Of First Class?

    It appears the answer to this question is "yes". The days of plush, roomy cabins with turndown service, pajamas, slippers, meals served in courses and other amenities are coming to an end. Those of us who fly domestically have noticed that there are fewer and fewer first class cabins fitted on airplanes, particularly the newer planes. Most current first class travel involves long, overseas flights. The issue? Almost no one actually pays for these seats, since employers foot the bill for a vast majority of this type of travel. A Chicago to Tokyo ticket on United or American will run you about $7,244, so who's got that kind of money anyhow?

    A major driver of this shift is less about consumer tastes and more about fiscal reality. Corporate budgets have tightened considerably over the past decade and, as a result, we have seen the emergence of "business class". This is really a form of watered-down first class with amenities coach customers don't receive, but it is nothing compared to a plush first class cabin.Yet, companies will still fork over $4,644 for that same Chicago to Tokyo flight in business class to insure that their road warriors are rested and ready to do global business. At least that's what the TV commercials make it look like. My most recent coach ticket was only $1,200 from Denver to Hong Kong in comparison.

    What does this mean for the rest of us? Not much, since most of us can't afford business class, and the vast majority of university graduates will work in smaller businesses that don't require global travel. Sorry about that. But, hey, it's fun to analyze shifts in the market. Isn't it?

    DDS

  • Taxes That Are Tough To Dodge

    Online sales tax is coming! Online sales tax is coming! To arms! To arms! Well, maybe not. The simple truth is that consumers in 45 states have been underpaying on sales taxes for years because online retailers like Amazon are not allowed or bound by law to collect such state taxes. This means that almost $20 billion in taxes goes uncollected every year, and in an age of underfunded state governments, this money could be put to some public use. In fact, a purchase made in every state except Alaska, Delaware, Oregon, Montana, and New Hampshire (places with relatively few consumers) does not include state sales tax.

    On the face of it, this sounds like a bad deal for governments, but a pretty good deal for consumers. Pretty, pretty good. But, this practice is increasingly seen as being anti-competitive, since brick-and-mortar retailers must collect sales taxes and prices are that much higher (generally around 5%) for traditional stores. All of this adds up.

    And it appears that the political landscape is changing, as some governors have dropped opposition to a federal law allowing collections. Thus, it may not be necessary to wait for the remaining 45 states to each individually pass its own law (sorry about that, Federalists...). This sort of thing really highlights the importance of monitoring the legal and regulatory environment when making marketing decisions, as well as the fact that the Internet will likely be a major legislative focus over the next decade. Let's hope all of this scrutiny is focused on protecting the consumer, and not special interests.

    DDS

  • Mother Nature Provides A Price Check

    Even casual observers of current events are aware that the Midwest, as well as other parts of the nation, is experiencing the worst drought in over 50 years. Some experts are making references to the "Dust Bowl" crisis of the 1930's wherein much of the migration to Pacific states occurred. Some of my family migrated west from the scorched steppes of Oklahoma, unable to grow and harvest crops to make a living.

    Today, the effect is much the same. Many crops in the so-called "Breadbasket of America" will wither and die in the fields, and what farmers are able to harvest will be much, much more expensive than before. Prices of corn and soybeans have surged by as much as 40%, and all of this is falling on the heels of previous price increases over the past year that were unrelated to the drought. Ranchers, unable to feed their livestock, have had to sell or slaughter, resulting in more scarcity for commodities like beef. When Mother Nature disrupts the supply chain, such as with regard to this this crippling drought, the result is, well, a disruption in the supply chain.

    Scarcity in raw materials will almost always lead to higher prices for finished goods manufacturers that use these ingredients. This, in turn, will lead to higher prices charged to wholesalers and retailers. I'm sure you can guess what I'm getting at. Yep. Higher prices for consumers in the face of an already depressed economy and even slower growth projected on the horizon.

    Higher prices will force consumers to make tough choices and in many cases "trade down" to lower priced brands. The brands affected the most tend to be the mid-priced products as middle-class consumers turn to less expensive brand names to save money. Higher priced goods aren't nearly as affected because higher incomes tend to remain relatively stable in economic downturns due to higher education levels and skill sets among its workers. But even these products see a modest reduction. Lower end brands often enjoy great success in troubled times.

    We can all pray for rain, but the fact of the matter is that too many days of above-100 temperatures without much precipitation have already affected this season's yield. Let's hope a healthy dose of competition keeps prices down for consumers and that next year Mother Nature is a little less aggressive.

    DDS

  • Marketing Research Gets Fancy

    Once of the biggest complaints that marketers have in the world of researching consumer preferences and motivations is that consumer research is often unreliable. People forget, misstate, and misrepresent themselves consistently; and when you consider the social dynamics that appear in situations such as focus groups, the information gleaned from such expensive and time-consuming projects becomes even less useful. Even though this is largely true, some research is still much better than a complete lack thereof, so marketers attempt to utilize combinations of methodologies in order to glean the same information.

    Enter the retinal scan. Since what consumers say can be largely unreliable, scientists for the last several years have attempted to use technology to see which marketing tactics work well and which ones do not. Marketers can now combine three dimensional computer simulations of product designs and store layouts with eye-tracking technology. The eyes don't lie, so to speak, So in this way, researchers can decipher what catches the consumer's attention, among many other applications for this sort of technology.

    Of course, the subject gets paid for his/her participation as is also the case with focus groups and in some cases questionnaires. It is a win-win situation for all parties involved. Consumers get more of what they want, and marketers can determine how best to market their goods, and therefore avoid making fatal errors in a world where most new products fail.

    DDS.

  • Strange Bedfellows in Retail

    Count me among the many observers who were shocked to read about a new strategic alliance between upscale department store, Neiman Marcus (sometimes disparagingly referred to as "needless mark-up"), and not-so-upscale Target (pronounced tar-jhay when compared with WalMart). The move, announced last week, will involve two dozen designers making exclusive items for sale at both Target and Neiman Marcus. These items will range from $8 to $500, but the average will be about $60 per item. But aside from selling clothing, what could these two stores possibly have in common?

    Nothing, really. Target has almost 2,000 stores and customers with a median household income of almost $60,000 per year. This is much higher than that of WalMart, but it doesn't begin to approach the $175,000 household income of Neiman Marcus customers shopping at only 77 locations. So, why sell the same items at both stores? Apparently Neiman discovered that many of their customers also shop at Target for their household goods. Anyone who has been in a Target and has seen the difference between that store and a WalMart realizes that Target is indeed higher end. But a strategic alliance with Neiman Marcus?

    It looks like a good deal for Target (a retailer known for smart designs at low prices) because its customer base will have access to items usually seen at Neiman Marcus. But what about all of the brand equity Neiman has built over the past 50 years? Doesn't a relationship like this one dilute the retailer's prestige image? You bet it does. I see no upside for Neiman Marcus, but time will tell if this strategy will result in advantages for both parties. Let's see what the numbers look like in a year.

    DDS

  • Gay Market Not What It Used To Be

    It appears that retailers are finally coming out of the closet. Addressing the upwardly mobile and fiscally attractive gay market used to be a niche game, with marketing communications hyper targeted to specialty publications and cable TV stations. But my how things have changed!

    Note JC Penney's recent hiring of the openly gay Ellen DeGeneres as the retail chain's spokeswoman. It appears that Penney is attempting to do what few other retailers have done, which is integrating this group of 16 million consumers into mainstream advertising. Is this a good idea? The obvious risk has been proven in similar moves by retailers in the past who have attempted to integrate various minority groups into their mainstream marketing efforts, which threaten the retailer's relationships with some loyal shoppers. But that didn't stop Target from selling same sex greeting cards as well as a line of gay pride t-shirts that sold out in a month. So when marketers look at the rising acceptance of gay issues (such as marriage) within the broader framework of society, it isn't tough to see what this means for marketers.

    Consider this. The average gay consumer has almost twice the disposable income of the average American, some $49,000 per capita versus $26,000, and so this demographic is extremely attractive. The assimilation of this group into the larger, mainstream social fabric is a significant development in consumer behavior, and opens the door for savvy marketers to address this market without alienating the more conservative consumers. It is highly likely that more and more retailers as well as branded product manufacturers will embrace this change. Stay tuned.

    DDS

  • The Psychology of Discounting

    Marketers (and retailers in specific) have been using sales promotions since the mid-1800's, and discounting has consistently been one of the most common and effective types of sales promotion. During the recession and in the slow growth years after, consumers have become accustomed to discounts as high as 80%, and many shoppers would shun anything that wasn't at least 30% off or higher. I expected this effect to wear off as too much discounting generally results in higher original price points for consumers, as well as a lack of customer loyalty for retailers as price-conscious consumers do not tend to be brand loyal. But it has not yet abated.

    A recent study at the University of Minnesota has shed even more light on consumer attitudes to discounting and found, surprisingly, that most people prefer to get something for free, a "value-added" element, rather than simply getting something for cheaper. The reason for this is not surprising, however, as the study found that most people are very bad at math, and struggle with fractions in particular. Consumers fail to realize, for example, that getting a 33% discount on something is actually a better deal than getting 33% extra of something for free. A 50% increase in quantity is, in fact, the same as a 33% discount in price for numerical reasons that aren't immediately obvious to most. So they see the numbers and believe what the marketers want to believe.

    What is the significance of all this? Obviously we can have lots of fun and make lots of money confusing consumers with such tactics as "double discounting" wherein people are more likely to see the bargain in a product that has been reduced by 20% and then an additional 25%, rather than a one-time 40% reduction (which is exactly the same deal). The sky is the limit when marketers are neither legally or morally bound to do the right thing. And quite frankly, too many marketers fail to see the ethical dilemma in misleading consumers. An obvious solution would be to force retailers to more prominently display unit prices so that at least some folks can attempt to do the math, but this will not likely help the more intellectually challenged amongst us.

    Remember that in the United States, the idea of Caveat Emptor (Let the Buyer Beware) was long ago replaced with the Consumer Bill of Rights, which is why legislation here can be easily justified. Anything that helps the consumer make a more informed decision is fair game in the legal and regulatory environment, and we might see some changes down the road. But then again, we might not. In the meantime, Buyer Beware!

    DDS

  • What It Means To Buy American

    A growing segment of consumers is concerned with where the goods and services they buy are actually made; specifically the question is commonly asked "Is it made in America?" Of course, it's easy to look at a particular good on the shelf and determine its country of derivation since such disclosure is dictated by the law. But, sometimes derivation can be difficult to discern because a particular component might be made in one place, another component made in another place, and the entire product is assembled in yet another place. So with this in mind, what does "Buy American" really mean, and what should you look for when buying American?

    Let's take France-based Airbus, one of the two largest makers of airliners in the world, as an example. Parts are made all over the place. And just because a company is based somewhere, or owned by citizens of a particular country, it doesn't mean that the jobs help that particular economy. The profits of a company are allocated to relatively few shareholders who could be scattered around the world, while jobs in a particular country contribute directly to that country's Gross Domestic Product (GDP), the primary measure of a nation's economic health. 

    Until recently, Airbus has been making planes in France, and therefore the preponderance of jobs remained in the region. However, the tax situation in France combined with economic incentives offered by nations such as Germany, China, and the U.S., have resulted in the company's decision to build a new manufacturing plant in Alabama. That's right, Alabama is the home of low taxes and weak labor unions, and now boasts the presence of American icons like Toyota and Mercedes-Benz. (Japanese and German companies, respectively). Therefore these jobs will contribute to the American GDP rather than that of France, and this is why governments go out of their way to attract jobs, regardless of who owns the company.

    So what does "Buy American" really mean? It might be impossible to determine where all the components come from, but if you look for where the assembly and production manufacturing jobs are, rather than the ownership, you will get a good idea as to which countries the company is actually benefitting. According to this logic, a foreign-owned company making products in the U.S. is more "American" than an American company that creates jobs for competing nations. Candidate Romney will have to address this issue directly given his record on outsourcing jobs when he was a captain of industry. His messaging about American jobs over the next few months could determine whether or not he wins the election. 

    DDS

  • Emptier Stadiums Necessitate League Action

    What should a marketer do when a successful product (attending NFL football games) begins to show signs of decline? The short answer is improve the product and/or lower the prices, but it appears that the NFL is willing to do neither. Rather than "devalue" the experience of attending a game by making it more affordable (the best course of action in my opinion), it has made sweeping changes to give teams more flexibility to fill seats.

    Ticket sales have declined in each of the last five years, in part due to the economic downturn, and average game attendance is down about 5% since 2007. This isn't a huge deal yet, but consider the NFL's antiquated "blackout" rule, which stipulates that unless a stadium sells out, the game will not be televised in the local market. This rule was written in the analog age, and now that we have entered the digital age, the NFL is poised to relax these rules among many others. Relaxing the rule could result in even more empty seats as more fans opt to stay home to watch. Other rule changes include allowing fans to see instant replays on giant screens and access mobile devices for such extras as listening in on "mice'd up" players while you are at the game. The blackout rule will be reduced from 100% to 85% of capacity so that more games may be televised, and more teams get additional exposure.

    Cities with the worst attendance? Cincinnati (75% of capacity), Miami (81%, Washington (84%), Buffalo (85%), and St. Louis (85.4%). It is likely that the owners will continue to buy out these seats, up to 85% of capacity, in order to avoid television blackouts, and some may even take steps to reduce capacity by removing access to certain blocks of seats. Rule changes, although releatively rare in professional sports, are often enacted to appease the fans and enhance the customer experience. These current changes are no different, and certain tweaks must be made periodically to keep up with the times, but eventually the NFL and other premium sport products will have to address the pricing issue. Hooray for progress!

    -DDS

  • Will "Mormon" Thrive in the Heartland?

    From the creators of South Park, we now have the hottest musical in years...The Book of Mormon. It appears to be exactly what you might think it is, which is a Broadway musical that pokes fun at a religion that is both mysterious and a bit wacky to most people. Laced with profanity and filled with irreverant takes on religion and poverty, the musical has already won nine Tony Awards and has grossed almost $100 million. The first year involved a tour that targeted large affluent cities to make certain that venues would fill with people. Any people. Even the ones who are simply curious or are just fans of South Park. By carefully limiting the number of performances and tickets available, marketers employed a "scarcity" strategy, pumped some money into marketing, and let the power of Word of Mouth do the rest. It also helps that the writing and production has been characterized as nothing short of outstanding, and that fans know what they are going to get with Mr. Parker and Mr. Stone of South Park notoriety.

    So, will success in the big city translate into success in smaller, more conservative regions? That is, will this irreverent humor go over well in Omaha? The short answer is probably yes, especially if performances and seating are once again limited, allowing for flexibility in charging higher price points through the simple Law of Supply and Demand. As supply goes down, demand tends to go up. Simply put, there are enough people in just about every region in the country who "break the mold". This explains why many conservatives live in San Francisco and Portland, as well as progressives living in Jackson, Mississippi. It takes a lot less effort to fill a theater than it does an arena or stadium, and any public outcry over the production will likely fuel demand.

    Another important factor in play is the nature of the religion itself. It is a relatively obscure branch of Christianity, and would certainly be classified as a minority religion, with only 6 million members in the U.S. most of whom are concentrated in the underpopulated mountain region. There are simply not enough of these folks to offend, out of a total population of about 310 million Americans. In addition, it is likely that most casual Christians and fans of other religions who are not really bothered by (and may prefer) a more bawdy form of entertainment are likely to embrace a high quality product such as this. And this appears to be a high quality production. Good luck to Matt and Trey, two highly creative people I met in college. I am rooting for you!

    -DDS