• Next Victim, Please

    It seems that there is no end to the "creative destruction" that is occurring in several industries as a result of e-commerce. We have spoken about Best Buy and its problem with being an unwilling showroom for online retailers, as consumers look at products in the stores and then go home and buy from e-tailers such as Amazon. Well, it looks like big box office supply store, Staples, is the next retailer to reduce the amount of its retail space as brick-and-mortar stores of all kinds struggle with online competition and consumer the shift towards buying things more cheaply online.

    Rivals OfficeMax and Office Depot have already begun the "great shrinkage" by opening smaller, convenience-focused outlets. Expect new stores, like new baseball stadiums, to be much smaller that the existing ones across most retail categories. It appears that the age of the ever-larger big box format is over. Smaller is more efficient to operate, but if brick and mortar stores don't begin to offer something besides the same products that can be found online, or invest significantly more in their own e-commerce infrastructure, many big name retailers may begin to fail.

    DDS

  • Digital Media Consumption Crimping Budgets

    For the past several years, I have noticed that the share of cellphone/wireless computer device/satellite usage as a percentage of my spending budget has risen five-fold from 15 years ago (adjusting for inflation). Quite simply, the bills for media consumption and communication keep going up. And average household spending on smartphones alone exceeds $1,200, which amounts to $100 per month, up about $10/mo. from 2007 when Apple first introduced the iPhone.

    This trend has cut significantly into household disposable income, as families eschew nights out at restaurants, movies and sporting events for time updating their Facebook pages and playing Angry Birds. Government data report that consumers have spent more on communications over the last four years as spending on clothes, entertainment, and dining out have dropped.

    It may get worse since carriers continue to offer faster speeds and more amenities and seek to raise prices as they expand their market base. Families with more than one smartphone sometimes spend more that $4,000 annually in addition to what they pay for cable/satellite TV and home Internet. Wow! No wonder people are broke. Healthy free market competition is supposed to keep prices down, but it appears that in this case they continue to escalate. A bummer for consumers fo' sho'.

    DDS

  • Beef Jerky Time!

    Gone are the days of settling for one brand or flavor of beef jerky. This salty snack product, in just a few short years, has morphed into a highly competitive category with numerous competitors and a growing consumer base. Aside from the proliferation of flavored jerky (basil citrus or lemon garlic anyone?) and the availability of numerous non-beef, jerked meat options, there is a new trend developing among branded product manufacturers. You see, jerky may be a salty snack, but it has one thing most other snacks don't have...protein. And lots of it.

    Consumer demand for high protein products that are also low in calories means that many jerky products are now being positioned as healthier options. Oberto, a market leader, now uses the term "all natural" on its label, which will attract scrutiny from regulators. But as long as there are no artificial colors, flavors or additives, the natural claim is probably a safe bet since there is almost zero regulation in this area anyway. And all of this is attracting a new group of consumers...women. About 60% of Perky Jerk's customers are women, who tend to be more conscious than men about protein and its relationship to maintaining optimal weight. Jack Links, a brand that clearly caters to young males, has altered its packaging to appeal to a broader demographic. Its new white packaging appeals to females. Krave sells flavors like lemon citrus. Slim Jim is repositioning to provide a "steak-like" experience. Even I have discovered that 10 pounds of beef jerky can save your life when traveling internationally. The opportunities abound!

    Is this a revolution? You bet. This category has become very dynamic and exciting in just a few short years. Let's see what the future brings.

    -DDS

  • Amazon Faces Reseller Backlash

    Although it won't readily admit it, Wal-Mart has decided to drop Amazon's Kindle due to what we call "channel conflict". Simply put, the retailer has followed Target's lead in refusing to sell the device because consumers can get it cheaper online...at Amazon. Channel conflict occurs when a company offers its product in multiple channels, but at a cheaper price at its own outlets, undercutting the resellers. Powerful retailers, who provide much-needed volume, don't take kindly to this and are witnessing what is happening to Best Buy, a retailer that has become a showroom for products bought by consumers elsewhere.

    Look for more of this pushback. The online model does not allow for people to sample the product in ways that the brick-and-mortar model does, so these companies may eventually have to work together. Either Amazon and its imitators have to establish themselves in the real retail world, or brick-and-mortar retailers must gain a greater online presence. Either way, something has to give.

  • Missing The Movie Magic

    In previous columns I have lamented that movie quality just ain't what it used to be. Box office receipts seem to support this assertion as they have been down considerably over the past several years. No longer can we blame the recession, the slow "recovery", Netflix, or the video/audio equipment we have at home. Alas, it must be the quality after all.

    Four new releases, including End of Watch, the House at the End of the Street and Trouble with the Curve, all failed to open above $15 million, which is usually an indication that the films will not be profitable. The big winners? Yet more franchises! Finding Nemo in 3D (essentially a re-release) and resident Evil: Retribution (a seemingly endless movie franchise) have both garnered over $30 million in revenue. So, a re-release and a sequel in its fifth or sixth iteration are what passes for blockbusters as we move into the fall season. As a result of this malaise, revenue is down 25% across the board versus the same period last year.

    Clearly something is amiss creatively in this industry. Creators have already dredged up every obscure superhero they could find, and then they made sequels! Look for more obscure comic book characters, Batmans, Spidermans, Madagascars, Madagascar-inspired penguin movies, Bourne Redundancies, formulaic Bond movies, inexpensively produced animated flicks, something called "Dredd 3D", and a number of other uninspiring titles. Now that Harry Potter is middle-aged and movies about vampires and zombies are finally reaching a saturation point, what will the makers of movie magic offer us for the holidays? I just can't wait...

    DDS

  • HP Works on Aesthetics

    It is should not be new information to the student of marketing that hardware manufacturer Hewlett-Packard, one of the original tech companies, has been struggling over the past decade as competition and industry innovation have left the former influential player in the proverbial dust. Revenue has fallen by 10% over the past year, and management changes abound. Enter Meg Whitman, the former CEO of E-Bay, who was hired by the board of directors to infuse some of her consumer-driven product know-how in an effort to provide aesthetically-pleasing goods that consumers will actually want to buy.

    Ms. Whitman the company-issued laptop she received a year ago as "a brick", which inspired her to enact what I will term "an aesthetics intervention". A new line of computers will be the first to undergo this physical transformation as the CEO admits that the company has not kept pace with industry innovation. After further review, it turns out that different lines of products have been designed by different teams resulting in a patchwork of different "looks" for various product lines. Taking a hint from Apple, which owes quite a bit of its success to aesthetics and corresponding design patents that protect such "looks" from competitors, HP will hopefully transform all of its new products as they roll out and begin to manage the brand the way a brand should be managed. That is, with consistency and concern for consumer preferences. If consumers these days are just as concerned with how something looks as they are with how it functions, then so be it! HP had better get on the ball soon or it will be just another casualty in the war for the hearts and minds (and loyalty) of consumers. 

    DDS

  • Heineken Mixes It Up

    Almost everyone recognizes the signature green bottle with the green label. Brewed in Holland, this beer has consistently been one of the most popular import beers for decades. The problem? The beermaker has been losing market share steadily for many years. In 1996, Corona surpassed Heineken as the best selling import in the United States, and now the rapidly growing "craft beer" industry, led by Sam Adams with a whopping 1% of the market, is beginning to chip away at market share enjoyed by domestics and imports alike. Heineken, with 2% of the U.S. market, has decided to give its bottle a slight facelift, featuring a longer neck which the company describes as "more modern". A thumb groove improves grip and encourages drinkers to hold the bottle lower down keeping the beer colder and therefore tastier.

    Certainly this minor adjustment to packaging could not be characterized as a "re-branding", but Heineken is also changing its Marketing Communications Mix, spending millions on a global marketing tie-in to the upcoming Bond film, "Skyfall". There will be quite a bit of buzz generated when people see the martini-sipping secret agent drinking a Heineken. This act could amount to a bit of movie-blasphemy to the Bond-faithful as this group might take exception to straying from tradition. Yet, fear not! Mr. Bond will also have the opportunity to enjoy his favorite beverage, shaken, not stirred.

    DDS

  • Failing To Learn Chinese

    Marketers often make missteps when they attempt to export a successful business model from the U.S. to markets in other countries. Product, price, place and promotion strategies have all suffered from misunderstanding the nature of the new market. International marketing students learn that many factors such as culture, language, religion, attitudes, income levels, GDP, infrastructure and other important, make-or-break variables. It seems that marketing decision-makers sometimes fail to remember what they learned from these classes and fail to deliver the expected results.

    The latest retailer to be reminded of these important lessons is home improvement leader Home Depot, a company that entered the Chinese market with a 12-store acquisition several years ago and has since found that Chinese consumers differ in important ways. Very important ways. You see, the Chinese tend to favor a Do-It-For-Me approach rather than the store's core Do-It-Yourself appeal. How can a marketer expect to succeed in China when its core value proposition is something that Chinese consumers do not want?

    Exit the remaining seven of Home Depot's big box stores from the Chinese marketplace. Any do-it-youself attitudes in the Chinese culture that may have existed previously have likely been stifled by the lack of a need for lumber in increasingly crowded living spaces as well as cheap labor in the region. That a company as successful as Home Depot could make such a misstep is not all that surprising. It happens all the time. Remember your teachings and do your homework.

    DDS

  • Experts Yawn At iPhone5

    Awarded a "five out of ten" by the respected global business magazine The Economist as well as a suggestion that it may be "boring" by the Wall Street Journal, Apple's latest innovation, the iPhone5, is failing to impress many industry observers. These observations coincide with a recent suggestion by a financial analyst that the new iPhone could generate over a quarter of a point in U.S. GDP over the next year, an assertion that seems a bit far fetched, In addition to the prestige and status one would gain from owning this latest Apple device, "The Five" offers a larger screen and long-awaited 4G data capability. Uh. That means it's faster, right?

    Unfortunately for Apple, the product doesn't include a variety of features that rivals offer, such as ways to pay from your phone or a large-enough screen, and more importantly does not appear to measure up to the overall level of innovation we have come to expect from this market leader. Could the "R&D well" be running dry without the leadership of Steve Jobs at the, a man whose vision and eye for innovation has been unmatched for decades?

    There was much speculation that the previous version, the 4S, also did not meet the expectations for what constitutes a truly innovative product and was not named the iPhone 5 as a result. iPhone 4 users and those seeking to switch to the popular brand would have to wait for version 5 for the real innovation. With rumors that Amazon will also enter this competitive market very soon, Apple will have to do better. Brand equity can go a long way, but it eventually gives way to "the next new thing".

    DDS

  • The Boulder Bag Fee

    Boulder, Colorado. There is nowhere like it. Its beauty is unparalleled and so is its legislative and political activism. Decades ago, this home of the University of Colorado earned the moniker "The People's Republic of Boulder" and it has since regulated its way to infamy. Most recently, the city proposed a 20-cent fee on all disposable checkout bags distributed at grocery and convenience stores. The obvious intent is very benign...protect the environment by forcing the customer to incur the "environmental costs" of the bags themselves, which discourages the use of the bags and encourages more environmentally-benign reusable bags. This engineering of social consciousness is so common that it is now known as "Social Marketing". Excise taxes on alcohol, tobacco products, and most recently "junk food" are examples of this practice in action.

    The interesting thing about the Boulder proposal, aside from the fact that a 20-cent tax is much higher than the recommended bag fee of between 2 and 5 cents, is that it is estimated to cost taxpayers over $2 million over the next four years. Some taxpayers may not be terribly thrilled at this prospect. There is also backlash from groups concerned that the fee will adversely affect the lower income demographic as well as anger tourists (who don't commonly take reusable bags on vacation). All of these concerns appear to be valid.

    It's highly likely that the city will have to lower its aggressive fee to appease these concerns, but the broader issue of government engineering behavior is rather controversial. A tax could be placed on almost anything deemed unhealthy or unsavory, and this can be a slippery slope indeed. But these actions by governments large and small are becoming increasingly commonplace. If New York City can ban sugary sodas over 16 ounces, almost anything is possible.

    By the way, you might want to machine wash those reusable bags every few months since they absorb all kinds of nasty bacteria. Better yet you may want to hand wash them in a tub of water to save on energy and water. And you will also have to purchase plastic bag liners for your small trash cans since reusing the ones the stores used to give you for free will be cost prohibitive. I'm not sure if this is really progress.

    DDS

  • Frontier Fights Online Agencies

    Frontier Airlines, a carrier that despite its clever "talking animal" creative campaign has struggled to remain profitable, has entered the fight against the increasing influence of online travel agencies. The airline has announced that it will now penalize passengers who don't book directly with Frontier itself, making them pay more in fees, delaying seat assignments until check-in, and issuing only half as many frequent flyer miles. That stings.

    But carriers typically pay sites such as Travelocity, Orbitz, and Expedia between $10 and $25 a ticket in commissions for "brokering" the deal between the customer and the airline. Fair? Certainly. These companies are providing a valuable service to consumers and serve to keep prices down as airlines all compete for the same customers through a specific site. Frontier is correct in understanding that every customer who buys a ticket on Orbitz is less profitable than a customer that buys directly from Frontier. And the reality is that these sites are becoming competitors in a certain sense.

    The airline industry isn't what it used to be. In order to maintain some semblance of profitablity, carriers have reduced capacity by retiring planes and overbooking flights. This is why it seems that almost every flight is full. Thus, filling the planes has become less important than ensuring that each transaction is as profitable as possible for the airline. Customers use these third party sites as a means to shop competitively for the best price and travel arrangements, and in the days when filling flights was more difficult, the airines' overall cooperation with this model made more sense.

    Is penalizing customers that fail to order direct from the airline a good strategy (the proverbial stick)? Would offering incentives for ordering direct be a better strategy (the proverbial carrot)? Should airlines learn lessons from Southwest, an organization that has always eschewed the third party format? Is the much-criticized industry ripe for another round of heavy turbulence? Fasten your safety belts.

    DDS

  • FDA Tests Its Limits

    Most of us probably don't remember that in 2008 Congress gave the Food and Drug Administration oversight of the much-loathed and oft-feared tobacco industry. The ruling has resulted in the rather graphic "smoking kills" campaign. The agency, wielding its new powers, most recently pushed for changes to labeling, mandating that the package itself be covered in images of cancerous tumors, diseased lungs, gross-looking people, et al. You've seen some of these images in television advertising, but has the agency overstepped its bounds by endeavoring to require cigarette firms to label their products in this way?

    The answer seems to be "yes". On August 24th, the D.C. Circuit Court of Appeals upheld a federal district court's decision to strike down the new warning labels saying that FDA has not provided any evidence that these graphic warnings would "directly advance" the agency's stated goal of reducing the number of Americans who smoke. Thus the agency has failed to prove that such actions would alter behavior, and also drew into question broader First Amendment free speech issues ruling that these graphic warnings "violate the First Amendment" despite the entity being a company and an "unfavored" one at that.

    The lesson here is that the court has decided that commercial speech deserves First Amendment protection just like any other speech, and has set precendent for marketers in the future. Free speech also means protection regarding commerce, industry and advertising. The future will tell us whether or not this is a groundbreaking case giving marketers more freedom to make product claims, but it certainly has raised some serious questions as to what regulatory agencies can and cannot do.

    DDS

  • The Market for NFL Tickets

    Is the NFL really the hottest ticket in town? Most stadiums do sell out on a weekly basis, a phenomenon driven partially by the television "blackout rule" wherein if a game does not sell out, it cannot be televised in the home market. This rule results in quite a bit of creativity on the part of the team to ensure a sell out, and quite possibly is a factor is keeping prices at a "reasonable" level. But, what about the secondary market for tickets? How many season tickets are available of Stubhub and Craigslist?

    As expected, it depends on the team, the brand equity it has built over the years, how well it is playing at the time, as well as on the size of the stadium (it's harder to sell out a game in a huge stadium). On the low end of the availability spectrum are the true hot properties. New  England, Jacksonville, St. Louis, and Denver all have less than 5,000 tickets available on the secondary market per game. The Bears, Giants, Packers and Ravens are all hovering above 5,000. On the high end are the Cowboys (a huge stadium), the 49ers (moving soon), the Chargers, and the Redskins all have over 15,000 per game available on the secondary market. These are not what we would call "hot" properties.

    Many season ticket holders have become entrepreneurs, selling tickets for a profit and flourishing when the team is playing well, has aquired a very popular player, or is hosting a very popular team. Teams hate this dynamic, and part of the reason ticketing has gone paperless for so many organizations concerns exerting more control over the tickets themselves. Yet, it's hard to control the process when your team only has 10 home games, and season ticket holders have such great flexibility with what they can do with their tickets. The good news? If you have the dough, there is always a way to get to the game!

    DDS

  • Nokia Apologizes For Lying

    Another marketer is busted for misleading consumers. As marketing practitioners, we are very familiar with the Federal Trade Commission (FTC) and its mandate to monitor advertising in an effort to expose false and misleading claims many marketers routinely make. We are also familiar with "puffery", a marketing term describing a fairly harmless exaggeration such as "World's Best Burger". The statement can't really be proved, but it can't really be disproved either. This sort of exaggeration does not cross FTC's invisible line. Make a false and misleading claim, however, that your product does something it doesn't do or is better than a competitor, and you could be in for a world of hurt if such claims cannot be adequately substantiated.

    Nokia has recently apologized for using misleading marketing materials for its new line of phones. Not good news for an already struggling manufacturer. The interesting thing about the Nokia situation is that the FTC wasn't involved, nor were the usual consumer advocate groups that act as industry "watchdogs". Nope. Nokia was called out by a bunch of bloggers, reminding us once again of the power of the crowd. Apparently, Nokia did not use the camera on the product they are marketing, the Lumia 920, to shoot the images in the commercial. The company, the bloggers say, should disclose that the images shown are not from the product since a reasonable person might assume that they were. It is true that enough buzz on the internet can encourage companies to do a lot of things, and Nokia should be thankful to this particular gang for getting to them before more organized groups or regulatory agencies had the chance.

    Monitoring the blogosphere is a necessary part of any marketing strategy. There's lots to be learned from people, such as the author of this column, who spend time observing things. Just don't confuse us with true journalists who are supposed to be unbiased and report the news. Many bloggers may be experts in their respective fields, but at best we are industry analysts and at worst we are opinion columnists. Yet, in the case of Nokia, we were a powerful enough force to enact a company to change its bad behavior. Huzzah for us!

    DDS

  • Toys 'R' Us Enters Market For Tablets

    The already cluttered, hyper-competitive market for tablets just got a bit more crowded. The category, which was essentially invented by Apple a few years ago, now features tablets made by all of the major gadget brands. And a few not-so-major brands.

    Toys 'R' Us, a venerable retailer that has struggled to compete with Wal-Mart and online retailers in recent years has entered the fray, offering its very own branded tablet for kids. The under $150 branded product, called Tabeo, will be offered exclusively in the company's brick-and-mortar stores and on the website. This way, the company figures, shoppers won't try the product at the Toys 'R' Us stores and buy it somewhere else for cheaper, a phenomenon that is slowly killing retailers like Best Buy. The development of a store brand is known as "private labeling", which is when a retailer offers its own branded products in its own stores along side of other brands. Any grocery shopper is familiar with this product and retailing strategy, but it is interesting to see a toy store offer a self-branded high tech product (manufactured by a nameless contract manufacturer, not Toys 'R' Us). The struggling company is counting on this strategy to work.

    Is this a good strategy for the retailer? Why or why not? Should Toys 'R' Us offer the product in multiple channels, favoring a more intensive distribution strategy? Whay do you think? The link below offers some insight.

    http://investing.businessweek.com/research/stocks/news/article.asp?docKey=600-201209110448KRTRIB__BUSNEWS_41574_184-1&params=timestamp%7C%7C09/11/2012%204:48%20AM%20ET%7C%7Cheadline%7C%7CToys%20R%20Us%20introduces%20a%20tablet%20computer%20for%20children%20%5BLos%20Angeles%20Times%5D%7C%7CdocSource%7C%7CKnight%20Ridder/Tribune%7C%7Cprovider%7C%7CACQUIREMEDIA%7C%7Cbridgesymbol%7C%7CUS;AMZN&ticker=AMZN

  • E-Books To Get Much Cheaper

    Before the invention of the e-reader, which looks and acts just like a real book, digital books (e-books) were not yet ready for prime time. Recent studies have confirmed what many of us already knew, that what people do with words on the internet shouldn't be termed "reading". Skimming is what we really do, and therefore most of what we read online is short and to the point. This also means that they are devoid of substance and thus  there is very little, if any, actual "learning" going on. Print media will survive a long time partly due to this dynamic.

    Enter the e-reader. Much easier to wield than a laptop and larger than a mobile phone, this device is driving the adoption of e-books. And a recent legal decision against book publishers (most notably Apple), who were accused of price fixing, as well as an expected upcoming decision that will allow wider discounting in the digital book market are influencing the industry. An e-book that currently costs $14.99, actually priced higher than the paperback version, will cost under $10 in the near future, for example. And this makes sense. It is hard to justify an industry price point that is higher for digital than for paper, which is much more expensive to produce, warehouse, and distribute. Clearly there was some form of collusion happening, resulting in industry leaders setting artificially high prices.

    The Gods of Competition (the market) frown upon such behavior and violators will be struck by the Rod of Correction (the government).  Price fixing is bad for consumers, and this is a pretty obvious case. Apple continues to fight it however, in hopes that their legal team can keep it in court long enough so that marketers can adjust strategy. This is often what market leaders do. At least we will begin to see reasonably priced e-books, and with the advent of the tablet , expect this category to grow by leaps and bounds.

    DDS

  • Back to School Sales As Indicator

    After a tepid spring, consumers finally opened their wallets for the "back-to-school" season as sales rose 6% compared with August of the previous year. Back-to-school sales can be a good indicator of how retailers will perform during the "make or break" holiday season. So, this means that retailers are encouraged to place orders and ramp up inventories for the expected surge of holiday demand. But this flurry of ordering isn't happening. Why?

    It turns out that there are other important economic indicators and one such, the Consumer Confidence Index, fell to its lowest level in several months. If consumer confidence is low, sales are unlikely to spike as cautious consumers buy less and are ever more demanding with the discounts they expect. All of this is bad news for many retailers as they strive to avoid the "bullwhip effect" (too little or too much inventory) and must adjust market forecasts accordingly. Order too few items and consumers will go elsewhere when you run out of what they want. Order too much and you are stuck with excess inventory which can essentially kill profits.

    At present, retailers are being very cautious as stores have increased inventories at only half the levels as last year at this time. This is a significant difference. It might be an even tougher season for consumers, however, as retailers with lower inventories have little reason to heavily discount their offerings. We have become accustomed to heavy discounting beginning a few weeks before Thanksgiving and continuing well into January. It will be interesting to see what would  happen if the usual discounts don't materialize this year. Maybe Thanksgiving will be less about shopping and more about  the "3 F's"--food, family, and football.

    DDS

  • Food Fight On Campus

    Providing on-campus cuisine to hungry students isn't what it used to be. Gone is most of what used to be poor quality "dorm" food and enter a variety of multi-cultural options to please the young pallete. From franchises like Domino's and Subway to huge buffet style eating halls with multitudes of food stations, universities recognize that students increasingly demand quality, variety, and convenience. And it's not unheard of for many of these places to be open well after midnight. This is a remarkable transformation from a few decades ago.

    The most recent culinary trend on campus, however, represents a major threat to food service operators such as Aramark and Sodexo, which have enjoyed virtual monopolies on campus cuisine. The food trucks have arrived. No longer referred to as the "roach coach", these meals on wheels specialize in every kind of food one could imagine. Often staffed by eager young entrepreneurs, these trucks either work with the campus, or more stealthily, just across the street. And students love the variety and flexible hours.

    But what a young entrepreneur can do, the university can do as well. Many of these trucks are now owned and operated by the university and food service operators, and in what can only be interpreted as a spirit of poor sportsmanship, many campuses no longer allow independent operators to operate independently. Which is what they do. So much for variety and flexible hours, and so much for small business opportunity. We don't need to be reminded that fostering an environment of healthy competition helps insure product choice, convenience, and reasonable prices. Monopolies have historically provided the opposite effect. This action on the part of these powerful organizations will only encourage otherwise well-meaning business people to break the rules, and the resulting increased just-off-campus presence of food trucks will only drive customers...well...off campus.

    It would be better if these organizations stopped acting like cartels and started thinking about what the students want and what is good for commerce.

    DDS

     

  • The Big Squeeze

     

    Faced with rising food costs caused in part by the worst drought in decades, restaurant chains are faced with a very difficult dilemma. Should chains pass on the increasing ingredient costs to consumers or should they erode already thin profit margins and simply absorb those increasing costs? A difficult proposition indeed. Given low consumer confidence and a pervasively negative economic environment, raising prices can result in customers going elsewhere.

     

    Fine diners are better equipped to deal with higher prices so the answer may not be very difficult when it comes to higher-end cuisine. But, when you are already offering $1 value items, it's difficult to absorb costs. Lower price leaders such as McDonald's might be faced with difficult choices in the months to come. If food prices and the economy remain unfavorable for the market leader, things might get dicey.

    DDS

  • Amazon's Bold Move

    For a product category that didn't exist up until a couple of years ago, tablets are generating a flurry of product development among the major players in the world of cool gadgets. Amazon.com, whose Kindle Fire grabbed 22% of the U.S. market, has announced that it will introduce a new tablet that will be partially subsidized by advertising. This tablet will be priced lower than competing models and will require the user to watch an advertisement after awakening the device from the sleep mode. Every time. Although this could eventually prove to be thoroughly annoying to users after they forget they ever paid less for the device in the first place, it will certainly help Amazon's market share in the short run. After all, marketing mistakes can be corrected with successive product iterations. Can't they?

    Well not necessarily, since customers can be lost due to major marketing errors in most cases, but the gadget industry is so fast-paced that a product becomes "yesterday" within just a few short months. The product  life cycle is very short, and consumer memories are very short in this and other fast-moving product categories, so many minor mistakes are easily forgiven as consumers await the next model or simply turn to a competitive offering. Something has to subsidize the lower price point, and if the ads prove too annoying, the marketing gurus at Amazon will devise a solution, we can all be sure of that.

    DDS

  • New York Shakes Up Energy Drinks

    New York is at it again, and marketers must take note. On the heels of NYC's Mayor Bloomberg's proposal to ban sugary carbonated beverages over 16 ounces, the attorney general for the state has issued subpoenas for key manufacturers of energy-positioned beverages to provide information on their marketing practices. This is the first step toward regulation.

    The ultimate question will be whether or not there is evidence that these marketers in this $9 billion industry are deceiving consumers about the ingredients and overall health value of their products. My 20 plus years in the natural products industry, including 10 years working for nutritional supplement manufacturers in the 1990's, taught me that marketers must avoid making statements that their products can treat, prevent, cure or mitigate a disease or condition. Such statements are considered "drug" claims and violate current legislation for "nutritional supplements". Making a claim that a product "boosts" something can be interpreted as a drug claim claim, while making the statement "helps the body maintain optimal energy levels" would be seen as a much more benign supplement claim. There is a difference between "boosting" and "maintaining" one's energy levels.

    All of this will be sorted out by the judicial branch, possibly resulting in future legislation for energy drinks, and maybe supplement marketers of all kinds. The Dietary Supplement Health and Education Act of 1994 provided a framework for regulating these organizations, but compliance and enforcement has been spotty at best. It is true that many energy drink marketers, as well as other supplement companies, have been testing the willingness of the FDA and FTC to regulate their activities, but at the state level it might be easier for regulators to make their point. Protecting the consumer is Job One for these overseers. Let's see if this becomes a big deal in the near future.

    DDS