Darrin C. Duber-Smith
Darrin C. Duber-Smith, MS, MBA, is president of Green Marketing, Inc., and senior lecturer at the Metropolitan State University of Denver’s College of Business. He has almost 30 years of specialized expertise in the marketing and management profession including extensive experience in working with natural, organic, and green/sustainable products and services. He was a co-founder of the Lifestyles of Health and Sustainability (LOHAS, c. 1999) market/industry model and was leader of the first U.S. industry task force that helped frame the Natural Products Association’s definition of natural (c. 2005). He has published over 80 articles in trade publications and has presented at over 50 executive-level events during the past 15 years. A frequent media contributor and recipient of The Wall Street Journal’s In-Education Distinguished Professor Award in 2009 and WSJ’s Top 125 Professors Award in 2014, Mr. Duber-Smith is author of Cengage Learning’s “KnowNow! Marketing” blog at http://community.cengage.com/GECResource2/info/b/marketing/. He can be reached at DuberSmith@GreenMarketing.net or email@example.com.
Rovio Entertainment, the company that owns the Angry Birds franchise, has announced that in December it will open an Angry Birds indoor children's play park in Finland, representing the latest product to be licensed by the company. Such brand extensions happen all the time, and Angry Birds is immensely popular among children (and adults) around the world. So why not license the intellectual property to whomever wants to pay the fee? Hasbro, the toy maker, and Hennes & Maurtitz, a clothing maker, have already introduced Angry Birds-branded items. The signature "round beaks with dark eyebrows" look now appears on all kinds of products, from soda cans to flip flops. And as long as the video game remains popular, which could be a challenge in such a hypercompetitive environment, there will be more to come.
In general, a strong brand can be leveraged due to the awareness and equity it has built through that popularity. And Angry Birds has become a very strong, recognizable brand, one which can be leveraged and licensed for goods and services of all kinds. The company hopes to get half of its revenue from licensing within two years. The big question is, "How long can the video game remain relevant?", because the licensing success depends on its continued brand equity. This one will be fun to watch.
Tired of Black Friday yet? Lots of labor unions and family advocacy groups are, but protesting aside, shoppers never really get tired of shopping. Enter CyberMonday, a term invented by retailer associations in the mid-2000's to highlight promotions for online buying. For the past several years, this has the biggest online shopping day of the year, but the data suggest that this may be changing as online sales are spread out over more days.
In addition to larger smartphone screens, the rapid proliferation of the tablet (a device that is more portable than a laptop and easier to use than a smartphone) is allowing us to shop wherever and whenever we want, and so marketers must be in these places too. This likely means that a "special day" for online sales will soon seem like a silly idea. Let's see what today's numbers do to the overall Black Friday Weekend tally. Amazon expects to have the biggest day in its history.
Most of the weekend's sales results are in, and the news isn't terribly encouraging. Revenue generated on Black Friday itself was down almost 2% from last year, which is probably a function of two primary factors, both cannibalizing sales on that important benchmark day:
1. Several large chains opened early, on Thursday
2. Tablets are driving a rapid shift to online sales
So, it's easy to look at the Black Friday numbers and make excuses for poor performance. But, when the entire weekend is taken into consideration, the numbers look even worse. Revenue rates for the weekend do increase some every year, and much of this is simply a function of population growth and inflation. This means that a simple positive growth rate for the weekend isn't necessarily a sign that consumers are opening up their wallets a bit wider this year. What we want to look at is the Rate of Increase, which was a slower 13% this year versus 16% last year, according to the National Retail Federation. Shoppers did spend an average of $423 versus $398 a year ago, indicating that, while consumers that did shop spent more money per person, fewer shoppers actually shopped. This is not the kind of news we want to see while we are in an economic recovery. Growth rates should be steadily increasing each year in a good economy.
The big news is that online sales, largely driven by the widespread adoption of tablets, continue to carve into brick and mortar sales. Online revenue increased by 21% over last year, and at the rate it's going, online sales could represent a majority of Black Friday revenue as early as next year. Although Black Friday success isn't always a harbringer of success for the holiday season in general, but it can be a good indicator for retailers as they manage inventories and sales promotions. If Black Friday is any indication, however, sales should be off a bit from last year, as family incomes are still stagnant, and the country faces an uncertain future with regard to the "fiscal cliff", a series of automatic tax increases that many analysts believe will result in another recession if they are allowed to take effect.
Folks who think they may have to pay thousands more in taxes are less likely to splurge during the holidays. Let's see what happens.
Black Friday kicks off yet another holiday buying season, and the deals just get earlier (and later) every year. Many stores are opening on Thanksgiving evening, and the deals will run through the weekend. In addition, brick-and-mortar retailers will offer the same deals online as they do in the stores in most cases, lest they lose customers to the likes of Amazon. America is still addicted to steep discounts and retail competition is fierce, so promotions must be everywhere.
But doesn't all this multi-day marketing dilute the effectiveness of Friday itself? You bet it does,and it looks like Friday (the day) might eventually fade into the larger "holiday season" picture. Deals will eventually creep into the days before Thanksgiving, the online deals will be everywhere and all the time, and that will be just about it for Black Friday as a "super-shopping" day At least this is one perspective. Another involves the day being affected by a growing backlash among retail employees and some consumers, a "black out" so to speak, but this movement doesn't appear to be large enough to have much of a long-term impact. Lots of people have to work on holidays, so I don't see much point in protesting about it.
It doesn't help marketers that most products can actually be purchased more cheaply during the months well before the holiday season, so the "deals" apply to relatively few items in relatively small quantities anyway (a recent Wall St Journal study). Yet, this isn't enough to deter the retailers who feel that they must "one-up" one another to stay competitive, and some eager consumers who will climb mountains to save a few bucks. At least for now.
Over the past few decades, much has been made of the natural and organic foods movement, an effort by many consumers to purchase and consume healthier foods and beverages. This industry is worth hundreds of billions and still grows rapidly every year. But, while consumers may enjoy the selection afforded by these healthier offerings, initiatives to regulate foods deemed unhealthy may be a tougher sell.
On the same day a California law to label "genetically modified" foods as such was struck down at the ballot box. the cities of El Monte and Richmond voted down a tax that would have added one cent to each ounce of sugared soda. In addition, the Danish government repealed a one-year-old tax on saturated fats because of consumer backlash and unintended economic consequences. Are these harbringers of what's to come, or merely isolated cases?
So if we have become dangerously fat, and there are societal costs to this obesity, what is to be done? if people won't stop eating and government can't regulate health, are we all doomed to be large and unhealthy? It is clear that the proliferation of farmer's markets and retail formats like Whole Foods Markets have given many of us more choice. But, these are largeky activities of the wealthy, and it is also clear that most people can't afford this lifestyle.
Enter the Food Police. It will be interesting to see how other taxes and legislation works out, including the highly publicized ban on larger size sodas in New York. Labeling foods in certain ways is one approach, and banning then outright is yet another. It doesn't appear that the obesity epidemic will go away by itself, so clearly efforts will continue to be made to abate its progress. Is it better to have labeling laws? Incentives? Taxes? Outright bans? The question remains as to how people react to such measures as they proliferate.
For those of you who think that losing venerable treats like Ding Dong, Twinkie, Ho Ho, and WonderBread is unspeakable and impossible, rejoice! The labor union has come to its collective senses, so to speak, deciding that killing 18,000 jobs and depriving consumers of their beloved sugared treats is probably not the best course of action. Negotiations have begun.
The brands wouldn't have completely disappeared, as the most popular would have been purchased in the liquidation of assets, and would have carried on the tradition. Hostess, however, would have been dead. With cases of product going for thousands on eBay, it's clear that there is still a (healthy?) demand for Hostess products. Hopefully all will work out and the company can turn around its challenged balance sheet. We need these products. Apparently.
On the heels of a $220 million first day of sales for Microsoft's long-awaited "Halo 4", Activision Blizzard's "Call of Duty: Black Ops II" topped $500 within its first 24-hour period. This level of sales is remarkable considering that movies seldom reach that mark in their entire lifetimes. It helps that there were more than 16,000 midnight openings for Call of Duty at retail locations worldwide (a pretty cool promotion), but the holiday buying season has yet to see Santa, let alone the awful lines awaiting shoppers in stores..
So 2012 could shape up to be a good year for video game companies, and this past year has been one to forget, as overall retail sales have actually contracted. It seems like a few games do very well, but the majority of the products languish on both actual and virtual shelves. Last year's Call of Duty installment rang up $400 million in sales on the first day, so Activision is off to a 20% increase over last year, and the product tallied over $1 billion in its first 16 days. Let's see if this early success carries on throughout this important buying season.
After a long period without introducing a meaningful new product, Nintendo has finally announced its new Wii U, featuring a 6.2 inch tablet-like controller that offers a second screen in addition to the TV. The touch screen, called a GamePad, is a far cry from the motion-sensing wand featured in the days of yore. Nintendo is betting that core gamers, who did not adopt the older Wii product in great numbers, will buy this one. Current Wii users are in need of an updrade, so perhaps this product will be a winner.
The challenge, aside from hypercompetition, is that at $299, the product will be a money losing "loss leader" for the company as consumers purchase the high margin games. This is a common pricing strategy in the industry, but it's always a risky proposition. Another risk is that core users may be reticent to accept the change from the wand to the touch screen. This requires a major adjustment in consumer behavior, which may backfire to some degree.
A great deal of backlash is unlikely, however, since it seems that everything is going touch screen these days. The bottom line is that Nintendo recently posted its first loss in 30 years so the pressure is on to improve market share. Coming soon? Nintendo games on mobile. The market has shifted, and it simply has to happen.
Labor problems are a constant source of worry for workers, consumers, and employers alike. We all the feel the pain when airline employees go on strike, when professional sports leagues are unable to reach agreements, and when companies that make and market the brands we love are unable to meet payrolls due to rising costs and other issues. But even I was surprised to learn that 82-year-old Hostess, maker of Twinkies, Ding Dongs and other artificially flavored delights, has opted to close its doors rather than continue to fight labor problems. Sales have been declining, as the company failed to keep up with healthier food trends, and it seems that this labor issue is the last straw.
Good for consumers? I think not. It is unrealistic to expect an entity that is losing money to make concessions to workers. It is a matter of simple math. There is no money. It is a fact that many NHL and NBA teams are unprofitable, and much of this is due to high labor costs. Teams can only raise the ticket prices so high, although it seems that there is no ceiling to what they will charge, and they continue to operate only because their billionaire owners provide cash flow. More traditional businesses can't operate this way.
What are we left with? Soggy Twinkies and a crushed Ding Dong. Never fear, however. There is much value in the brand names and recipes, so I would expect for someone to exploit that brand equity once assets are liquidated. There is a chance that the unions will relent, since the strikes have now resulted in everyone losing their jobs, but I'm not so sure. Either way, it will be interesting to see what happens to the most valuable Hostess brands.
Maybe it's something about the perceived pointlessness of making thousands of left turns for four hours straight. Maybe young people just aren't as interested in cars as they were in previous generations. Perhaps there is a quality problem with regard to the product, or a lack of "star power" among drivers. All of these have been offered as reasons, but whatever the malfunction is, Nascar is losing fans and sponsors faster than Oprah Winfrey, and the venerable motor sports league seems to have few answers.
Viewership is down 21% from its' apex in 2005, the year the sport peaked. Attendance is down too. At Talladega this year, only 88,000 fans showed up, down from double that during the sport's mid-2000 heydey. Dodge, Office Depot, and Diet Mountain Dew, UPS, Home Depot, Aflac and others have all pulled back on sponsorship engagement. Just look at boxing and men's tennis as examples of sports that are still around, but peaked decades ago. We all know that as viewership and attendance falls, so does sponsor interest and revenue in general. Can anything to be done to turn things around? What do you think?
Graduation is just around the corner, and some degree-holders will opt to start their own businesses rather than join the more traditional workforce. Some are successful, but others end up floundering, retarding their career development, and negatively affecting earning potential. So, before you decide which course to take, take a look at some of the data from a recent Wall St. Journal study:
Entrepreneurs are not commonly young, as the mean and median age is 40.
Entrepreneurs are highly educated, as 95% have bachelor's degrees and 47% have advanced degrees.
71% come from middle class backgrounds and only 1% hail from extremely rich or extremely poor backgrounds.
70% used their own savings as a main source of funding, which is bad news for those of you that don't have savings.
70% were married and 60% had at least one child when they started their business.
73% believe that luck is an important factor in the success of their venture.
How does it sound to you? Indeed, it makes more sense for young workers to gain experience in their field before going it alone, about 15 years according to the data. Experience cannot be taught in school and the knowledge you gain is much different from your classroom and internship experience. It might be better to make mistakes while working for someone else, learn from them, and apply the lessons to your own business in the future. Then again, maybe you are ready to take the risk. Hopefully this data helps you decode.
The latest Pay-TV results are in, and the news for this 40-year-old medium is getting increasingly worse. Market leaders Charter, CableVision, and Dish lost a combined 102,000 video customers in the third quarter of 2012 alone, possibly reflecting an accelerating shift away from the television, especially when accounting for the fact that 200,000 customers were lost by these companies last year. Although Direct TV reported a gain of 67,000 subscribers, that is 80% below last year's gain. Time Warner even reported that it lost more customers than expected.
What's going on? Cable operators have long ceded market share to satellite and phone company competitors, but the overall market has still been growing. But the market now shows signs of decline, as consumers may be opting to "cut the cord" and switch to cheaper options such as online video. The anemic economy, coupled with ever-rising prices for the services, has not helped matters, and since fewer people have been buying homes, there has been less new customer activity. But all of this does not explain away the overall trend. Scary stuff.
Advertisers must migrate onto the Internet if they are to address this social and technological trend, but what is a Pay TV provider to do? Satellite-driven operators can easily position themselves for international market penetration, but the "land line" companies are in a bad position. Lowering prices would help immensely. Cable may be on its way out eventually, and perhaps this will happen more rapidly than industry observers have predicted. It will be interesting to see if business picks up when we finally enter into a meaningful economic recovery.
In a landmark decision by the United States Department of Agriculture (USDA), facilities that produce certified organic products will be periodically audited for authenticity. Prior to this, these facilities were not subject to any periodic check-ups after they obtained initial organic certification from a third party organization (regulated by the USDA). Organic food advocates have been pressing for the monitoring of this certification because industries always have their "bad actors", who refuse to comply with regulations, and thus hurt competition, consumers, and trust in industry.
As a result, USDA has authorized certifiers to randomly test 5% of all facilities annually, figuring that this number would be enough to deter fraudulent activity without costing the industry too much money. Select farms and production facilities will pay to be tested to ensure they are not using banned pesticides, herbicides, Genetically Modified Organisms and other unapproved substances, in addition to ensuring that raw materials are grrown and handled to the specifications outlined in the National Organic Program (NOP).
The 1990 law that ordered the creation of organic standards actually called for the periodic testing of foods labeled as organic, but in the spirit of government regulation, failed to do so. Twenty-five years is a long time to wait for any government agency to implement its own edict, and to be frank, the USDA won't be doing any of the work. At least third-party certifiers will be better able to identify and take enforcement against producers violating the NOP standards thus protecting the integrity of a multi-billion dollar industry that has been growing at double-digit rates for decades. Hooray for progress.
Perhaps one of the biggest issues facing marketers, regulators and the general public is behavioral targeting, the act of tracking online consumer behavior so that psychographic information can be gleaned. The result is one many consider to be an invasion of privacy. Marketers, unbeknownst to most Internet users, place "cookies" into computers to track their online habits. The primary purpose is to tailor ads to address the individual consumer's actual online activities, as opposed to solely using demographics. The problem is that web users are not aware of the practice and have not given permission to be tracked. It is assumed based on anecdotal evidence that the vast majority of consumers would not give permission if asked, which is bad news for the current state of web marketing.
Not only are product marketers doing this, but also political candidates. BarackObama.com dropped 87 different cookies on website visitors during the campaign while Mr. Romney had 48 such tracking devices on its site. Politicians must be savvy marketers too, and it is no surprise that they are adept at this new practice. The problem is that it will likely be a shortlived tactic. Privacy issues will ultimately have to be addressed through the legislative and/or judicial processes, and efforts are already under way to curtail the practice of behavioral targeting.
As technology makes it easier for marketers to gather information, it is inevitable that consumers will have to be further protected from abuses. As it stands today, most observers agree that there are not nearly enough controls, so look for more regulation in the future.
It's time to get your Star Wars on, so to speak. George Lucas, the man behind the six movie, multi-billion dollar, 45-year-old franchise, is retiring and has sold his company (and everything Star Wars) to Disney. Good news? You bet. The last three films were very heavily criticized, especially among older viewers who were exposed to the first three films when they were released in the 70's and 80's. This high income crowd is looking forward to some higher quality storytelling, acting, and writing. Younger people? Maybe not so much. How did you feel about the last three versus the first three? Does it come down to a simple matter of better special effects or a "newer is always better" mentality? Or are some of the more nuanced movie attributes such as script writing and acting important to you?
Either way, Disney is chock full of fresh talent with fresh ideas, and will likely take this franchise boldly into the future. Disney appears to be rather adept at developing and implementing 4P strategies for all types of goods and services, from movies to toys to cruise ships. I expect nothing but the best from this outfit, and await Star Wars 7 (which should follow Return of The Jedi if my memory serves me correctly), which should effectively leave the pre-quel movies as distant memories. One can hope!
Mobile Marketing is probably the fastest growing area of promotion, partly because it is such a small part of most marketers' budgets (lots of room for growth), but also because it is turning out to be a very effective medium. Ad spending for online is almost ten times that of mobile right now (2% of total marketing budget), but that gap should rapidly drop in the months and years ahead. Eventually online and mobile will tracked together, as the types and number of devices increases. The overall category should really be called "Internet Marketing", and the type of device the ad appears on should become decreasingly important to industry observers. So what's working in mobile marketing?
These days, marketers are putting most of their money into search ads, just like the online ad industry, where it is easier to calculate return on investment, and where consumers are more actively looking for information. Ads that are useful (information), pay rewards (coupons), or are fun (an "advergame") are extremely successful. Ads that are none of these will likely be viewed by consumers as intrusive, as the sheer volume of communication proliferates in the near future. Marketers are currently having success with "takeover" ads that briefly fill the entire screen of the consumer's device, and then go away. The annoyance factor will obviously be key in this area as screens get ever larger, and I don't expect these ads to be effective in the long term.
What's not working? Banner ads. This is now known as the "spray and pray" approach, or what I would call "shotgun marketing". Mostly these ads are cheap, crude, loosely targeted and tend to annoy mobile users, so marketers should not expect them to click on the ads, making measurement difficult. But remember that this landscape is perhaps the most dynamic one in marketing at the present time, so what works today may not be as effective later in the game. Markters must continually monitor the marketing environment so that they may make timely decisions in regards to strategy and tactics in an ever-changing landscape.
Despite the assertion of event organizers that ambush marketing, the practice of a non-sponsor capitalizing on the prestige of an event with which it is not associated, would not be tolerated, plenty of organizations got away with plenty of shenanigans during the Olympic games in London this year. Associating with a sport property (team, league, event) without being an official sponsor is really not that hard to do. Companies use athletes, themed advertisements, indirect references to events, and other techniques to give a false impression that they are actually associated with the event. And as long as trademarks are not infringed upon, the practice is quite legal in most places.
Some cities, most recently London during the Olympics, have enacted tactics to bar this activity from happening. Mostly it involved going after small business owners with Olympics related signage on store windows. Think cupcakes arranged in the shape of the Olympic rings. Ridiculous, yes, but also a case of trademark infringement. The fact of the matter is, ambush marketing (which is not trademark infringement) is hard to prove. The language in any proposed law would bar many creative tactics from happening in and around the location and overall timing of the event. How could this even be enforced?
During the last Games, Nike used a high profile "Find Your Greatness" campaign to showcase ordinary athletes finding greatness in cities around the world named London. There are several. Irish online betting site, Paddy Power, employed billboards showing a fictitious race between an egg and a spoon in London, France. More ambushing. It's hard to miss the suggested association between the games and the creative strategy. Beats Electronics furnished its Beats By Dre headphones to several high profile British and American athletes without paying any sponsorship fee. Other alleged violators included Red Bull, Virgin Media, Puma, Mizuno, and Tetley Tea. Ultimately legal action was brought against none of them. So much for tough talk.
Martha Stewart Living Omnimedia is in trouble. The company, which has just announced layoffs, has not seen profit since 2007, well before the recession, and its print magazines are suffering from decreasing ad revenue. Two of its lifestyle-targeted publications, Everyday Food, a cooking magazine, and Whole Living, a natural products-focused publication formerly called "New Age Journal". have lost over 10% of their ad pages during the first half of 2012. As a result, the company has decided to follow Newsweek's lead and shift to a digital format for Everyday Food, and it has decided to put Whole Living up for sale. If there is no buyer, Martha says she will fold Whole Living's content into Martha Stewart Living. Following all of this?
As e-readers become the preferred method for viewing magazines, ad dollars will shift from print to digital formats. This pace has accelerated with the advent of these wonderful gadgets, but it will still happen at a slower rate than many of you might imagine. Indeed print may never completely die out at all. Nevertheless, publishers must anticipate this digital shift and move those ad dollars, and in some cases the entire publication, to the lower cost (and lower ad revenue-generating) digital format. Fear not, print readers. There are still thousands of publications left, and the strongest among them will remain in print for quite sometime. And remember that most of these publications should be available in both formats to appeal to divergent consumer tastes. Besides, how many targeted magazines can one market support?.
One wouldn't think that a store that seems to be on almost every corner would need to engage in sales promotion, the age-old value-adding inducement, let alone employ the oldest one of all...couponing. But alas, even mighty Starbucks has found success using this venerable approach to driving traffic.
Give most of the credit to the company's recent success with regard to both revenue and profits to the successful "treat receipt" program which focuses on customer loyalty. A visit in the morning nets the customer a discounted drink if they return in the afternoon. This is a clever tactic. Surprisingly, however, Starbucks also "stooped" to using daily deal sites, which are best used to fill empty rooms at new or struggling stores, but not an appropriate tactic for successful retailers. Silly me. Its' $5 coupon for $10 worth of products campaign brought 1.5 million people into Starbucks within a 24-hour period. That kind of volume tends to negate the effects of lower profit margins created by heavy promotion. Doing more volume means that fixed costs can be spread over more units, so the company can still make money despite an extremely low per-unit profit margin.
Sales promotions can be very useful, but one must always beware of over-promoting or the consumer may never be willing to pay full price for the good or service in the longer term. Yet, clever, targeted short-term promotions seem to be the most successful ones. Not only can these techniques be used to drive new traffic, but also to reward loyal customers, who buy more over time, are less price sensitive, and spread positive word-of-mouth. Can't lose on that one.
Even the casual sports fan is probably aware that in some sports, especially international leagues, players wear the sponsor's logo prominently on the front of the uniform. With the notable exceptions of the NBA, MLB, NFL, NHL, and a handful of other leagues, sponsors pay a hefty sum to insure multiple impressions every game. The so-called "Big Four" sports in the U.S. have resisted the pressure of opening up jerseys to advertisers. But that may change. Is nothing sacred? Will traditionalist fans revolt?
To predict what will eventually happen, we need look only to the relatively recent practice of attaching a sponsor name to arenas and stadiums in the form of naming rights, a relationship that usually lasts decades and involved tens or hundreds of millions of dollars. The first agreement was Rich Stadium in 1972, and now almost 90% of all venues have a sponsor named attached to them. It will likely be 100% soon.
So what does this mean to leagues such as the NBA? Can leagues and teams turn down hundreds of millions of dollars to preserve some sort of perceived "integrity issues" among certain fans? Does advertising on the jersey affect your perception of league integrity? This development has been a long time coming, and the NBA is currently mulling it over. Marketers are hoping that fans accept the logos without much complaint. I'm not so sure.