• Amazon On Top Again

    When you do only one thing, the saying goes, you'd better do it well. So it should be no surprise that Amazon.com remained the best website for shopping online according to ForeSee, a customer satisfaction measurement firm. A score of 80 or higher is generally considered desirable, and Amazon's was once again an 88 out of 100. Amazon has had the highest rating in each of the eight years the study has been conducted, and LL Bean rated second at 85. Impressive!

    Gilt.com and Fingerhut.com (whatever those are) shared the lowest score at 72, and struggling retailer JC Penney Co. suffered the largest drop in customer satisfaction from the previous year (a 78 down from 83). Apple dropped to 80 from 83 suggesting a bit of trouble at the online Apple Store. Dell fell from 80 to 77, Target scored 79 (up from 76), and Wal-Mart dropped from 79 to 78. So what?

    These customer satisfaction ratings are an important tool for marketers to use from year to year in order to assess how their online strategies are working in the marketplace. The eight years of trended data in the ForeSee studies represent some solid numbers for marketing strategists to use in planning, suggesting whether or not a particular e-tailer is going in the right direction. Amazon is clearly THE benchmark for all online retailing, and it is becoming increasingly clear that JC Penney's online strategy will fail to rescue the venerable retailer as it tries to re-invent itself. One thing is for certain. The online component is becoming increasingly important for retailers of all shapes and sizes, and a failure to nurture this important function can result in the failure of the retailer itself as consumers continue to migrate towards e-commerce.

    DDS

  • Holiday Sales Lousy

    Blame it on Superstorm Sandy, the impending "fiscal cliff", the anemic economy, the lack of consumer income growth over a decade, or perhaps the Mayan Calendar. The bottom line is that this holiday season has seen the slowest growth since the 2008 recession, and this is not good news for a so-called economic "recovery". After falling dramatically in 2008, sales bounced back over the next few years, but economic conditions have not improved enough to sustain the level of annual growth that the retail sector has come to expect.

    In addition, it appears that the Black Friday weekend period around Thanksgiving is becoming less of a barometer for how overall holiday sales will shape up. This year, Black Friday sales were rather brisk, but as I have mentioned in this column before, holiday shopping is a zero sum game. That is, most people will spend a certain set amount (rough or specific) during the holiday season, and with deals beginning well before Thanksgiving, the sales are spread over a longer period of time. Thus, money spent earlier in the season cannot be spent later in the season, so earlier sales cannibalize later sales.

    So, the overall 6-week period wasn't so great this year. And now retailers must sell heavily-discounted extra merchandise to folks redeeming gift cards and returning ugly sweaters to clear out inventory for the next buying season. After all, the so-called "Hallmark Holidays" begin in six weeks!

    -DDS

     

  • The Christmas Cacaphony

    Bells ringing, Christmas music blasting, people jabbering. These are the in-store sounds we have become accustomed to during the holiday season. Annoying? For certain. Effective? It appears so.

    Christmas is getting louder, there is growing evidence that a noisy retail environment helps trigger impulse purchases, and so retailers have pumped up the volume this holiday season. The aforementioned Salvation Army bell rings in at 83 decibels, and just for scale consider that a lawn mower is about 90 decibels. Wow. I think this may take a toll on the hearing of the bell ringer, but that's another story altogether. The Gap's store floor recently registered in at 81 decibels and Abercrombie & Fitch hit 86, creating store environments that foster disorientation and overstimulation as well as increased revenue. Sound familiar?

    Further research may expose that this may not be a good long-term strategy, since making people crazy probably won 't encourage them to stay in your store for very long, but during the holidays such cacophony is expected. The strategy is obviously fraught with ethical peril, but then again so are most attempts to manipulate consumers to do what we want them to do. Barring excessive media coverage about the ill effects on the health of shoppers (resulting in legislation or industry self-regulation) or large-scale consumer displeasure with being annoyed, expect marketers to continue this practice

  • Print "Not Quite Dead Yet"

    Like the ill-fated knight in Monty Python's hilarious, classic "Holy Grail" film (NetFlix that one), the newspaper industry refuses to give up, failing to recognize a lost cause when it clearly presents itself as such. Yet, things at The Daily Planet might be better than they seem. It is true that ad revenues for print are still falling and that online editions on average are much cheaper than print for advertising space, but it appears that losses from print circulation have begun to stabilize. Why is this good news?

    There will probably always be a core group of people (a niche perhaps) who prefer consuming information in print to the increasingly pervasive digital format. Anecdotal evidence in my classrooms suggests that there are many young people who prefer the print edition to the digital format of The Wall Street Journal (a requirement for many of my classes) when faced with the choice. This decision never ceases to surprise me. The strategy question for publishers is whether or not there are enough of these folks to justify the expense of producing a print edition versus a much cheaper online format (see Newsweek's recent move). And the stabilization of circulation losses suggests that for many quality publications, print will continue to be a profitable proposition.

    Of course, it makes sense for publishers to encourage users to move toward the less costly digital format (without forcing them) if they can also move the advertising revenue in that direction. But, there is much evidence that the majority of consumers dislike most forms of online advertising even more than they do traditional advertising. Internet users see these ads as more intrusive and therefore shun them, a phenomenon marketers are struggling with every day.

    It is clear that in a digital age, there are still far too many print publications in the marketplace, so further vetting of the weak is assured. If the stronger publications begin to discontinue print editions, it will be time for the knight to surrender to the inevitable forces of consumer preference and technological advancement. You just can't stop progress.

    -DDS

  • Retailers Tapping Social Media For Preferences

    Whether consumers know it or not, their online behavior has actually dictated (in part) what is on the shelves this holiday season. Retailers such as Macy's and WalMart have polled consumers and have even let customers vote on what items to carry.

    There is little hard data on how this sort of informal market research affects the bottom line. We simply don't know how or if the millions of Twitter and Facebook followers actually influence sales. Perhaps this is the new era of market research. Gone may be the days of randomized sampling, controlled studies, and focus groups. Bring on the masses!

    While practitioners of market research may be quaking in their boots, the jury is still out on the efficacy of these efforts. It sounds reasonable to assume that millions of people couldn't be wrong, but much of science isn't necessarily intuitive. That's why we study stuff. To be certain, social media will continue to play a huge role in how companies make decisions until proven otherwise.

    DDS

  • Will Blackberry Ride Again?

    Could this be the greatest comeback story since the St. Louis Rams pulled Arena Football player Kurt Warner out of the grocery store he was working in and turned him into a SuperBowl quarterback? That was a pretty big comeback story considering the odds. But what about RIM's aging Blackberry brand? Can this former market leader be turned into a contender?

    After years of inaction, the company is finally rolling out two new Blackberrys next month, and is pinning its hopes on reinventing the look and feel of the device's user interface. Behold the "Blackberry 10". Ultimately, the brand and its patents will likely be purchased by competitors for small change if this product introduction doesn't succeed, as the Canadian firm has been in trouble for quite some time. So, that's the product strategy. What about promotion? Positioning the devices against  the "toys" that un-serious smartphone users are using (iPhone, etc.) and targeting business people is probably a smart creative and positioning strategy, and I would certainly use a variety of in-store and online sales promotions to encourage action. Will anyone care?

    This is certainly the company's last gasp. Sears and JC Penney have struggled to turn around their fortunes, suggesting that recapturing a brand's former glory is a tall order indeed. After six months, we should have a pretty good idea as to whether or not this product introduction succeeded. Stay tuned!

    -DDS

  • NFL Fan Ejections On Rise

    One of the factors that keeps people, particularly families and older adults, from attending live sporting events is the presence of less-than-mannerly, often drunk spectators. This is a problem for all sports, but has become such an issue in the NFL that the league has engaged in a high-profile campaign to penalize out-of-line behavior. As a result, ejections and arrests are at an all-time high.

    Is the league overreacting? Or are rude fans keeping paying customers from consuming the sport? A recent Sports Business Journal survey of almost 800 adults asked them to answer a true/false question that read, "The NFL game experience is one I feel comfortable taking children to".  Only 47% of respondents answered "true" and a full 40% answered "false". Remember that this is a recent survey, so the situation probably used to be worse.

    Why does this matter? Families and older folks are the backbone of fan attendance. They have and spend lots of money, buy season tickets, and generally cause very little trouble for stadium management. When families prefer to stay away and watch the game on their 50" HD TV with surround sound rather than expose their children to Raider fans, it is a problem that needs to be addressed. I have often felt that the fighting in the NHL, while exciting for some, turns off the majority of potential fans, especially families. Acceptance of violence in society is on the wane.

    The league asserts that ejections are on the rise because teams are aggressively enforcing the code of conduct and not because fan misbehavior is on the rise. Time will tell if these efforts improve the fan experience. Personally, other people are a major reason I tend to stay away, but I do have Broncos season tickets this year and it's been a happy bunch of fans, so I've been putting up with it.

    DDS

  • Got Milk?

    Increasingly, the answer to this question  is "no". In an age of flavored teas, vitamin waters, energy drinks, and just about every kind of beverage you can think of, milk is often an afterthought. In fact, the category has been declining for decades. Part of this is due to the fact that milk consumption is highly correlated with age. The younger the person, the more milk he/she drinks. So if children are a smaller share of the U.S. population, we can assume that consumption would fall. But is this the whole story?

    Despite a great deal of milk mustache-sporting celebrity advertising, per capita milk consumption has fallen 30% since 1975, so obviously other factors are at work here. The sheer choice of beverages available in the marketplace probably accounts for much of this, as well as more awareness of lactose-related disorders among many Americans. Certified Organic, a fast-growing category, is still only 4% of the total market, and efforts by producers to offer more convenient sizes as well as milk products fortified with functional ingredients are meeting with mixed results.

    Milk is often placed at the rear of the store as a form of "loss leader", making it more likely that consumers will buy numerous other items when they shop. If milk is losing its luster, this practice could change. As volume drops, prices could rise, which would further complicate matters. Nevertheless, producers and retailers will be watching consumer behavior very closely for cues as to how to alter marketing strategy in this important category.

    -DDS

  • Wal-Mart's Reputation Takes Hit

    Wal-Mart has had a rather turbulent history when it comes to labor relations and environmental stewardship, but several years ago the company actually enacted major efforts to police its outsourced contract manufacturers in Asia. The result was a strict set of supplier labor and environmental policies, and in many ways Wal-Mart has transformed the world of overseas contract manufacturing. But labor woes here in the U.S. have persisted, and the Goliath retailer is still viewed by many as the evil killer of small businesses and purveyor of crappy jobs.

     

    Most of that is just perception and not based in much reality. The retailer has created millions of decent jobs and through its obsession with efficiency has made buying the necessities of life incredibly cheaper for everyone. Certainly, in the name of lower prices, Wal-Mart has shipped many jobs overseas and has taken much heat over the years for this. The recent calamitous fire that killed many workers in Bangladesh was immediately (and accurately) traced back to Wal-Mart by the media. The problem? Although responsible for its actions, Wal-Mart didn't hire that contract manufacturer.

    Despite the company's strict codes, some jobs were further outsourced to unauthorized sub-contracted manufacturers. That subcontractor was in violation of just about every rule Wal-Mart has, but the company had no way of knowing that its supplier had contracted out the work to maximize profits. This is shameful indeed, and exactly what Wal-Mart doesn't need.

    The lesson remains that every organization is responsible for the actions of its supply chain partners, and must ensure that using cheap, overseas labor (which is to many people  borderline-exploitative by definition) doesn't hamper the organization's efforts to foster an improved image of social environmental stewardship. Outsourcing can be a good thing, but with the rewards of lower costs come the risks of a lack of control. Simply put, the "developing world" is just that...developing. U.S. marketers are responsible for their products from A-Z and must take pains to maintain control upstream in the supply chain. Ignore this and the brand may suffer for it.

    -DDS

  • British Retailer Exits U.S.

    After an investment of $1.6 billion and five years of futility, London-based retailer Tesco has decided to close its 199 Fresh & Easy stores and head back over the pond in search of new opportunities. This wasn't really a case study in poor strategic planning or a poor quality product so much as it was an exercise in seeing what can happen when marketers have bad timing. That is, uncontrollable external factors in the business environment can foil even the best laid plans.

    Tesco entered the U.S. right before the Great Recession, and having set up stores near new housing developments in California, Nevada, and Arizona, failed to gain traction when the economy and the housing market collapsed. Those three states were (and still remain) some of the hardest hit places in the country. Frankly, that Fresh & Easy was a subsidiary of a large, wealthy British retailer insured that it would at least survive for a while. Although the recession has been over for almost five years, the economic recovery has been anemic at best and housing is only beginning to improve. And it appears that Nevada, California, and Arizona have a rather long way to go before those markets are healthy again. It also didn't help that Fresh & Easy's business model resembled a cross between a grocery store and a convenience store (in the spirit of the iPad Mini, I guess), and competition is fierce in the grocery category. It is likely that many consumers probably never really saw the "need" for such a format.

    So what's a marketer to do? Punt. Sell your real estate, liquidate your assets, and move on, remembering all the while how important it is for marketers to incessantly and compulsively scan the external business environment. Many economic observers predicted a protracted economic downturn well before it happened, so perhaps the plan should have been postponed after all. But hindsight, as they say, is 20/20. Rewards do not come without risks in marketing, and sometimes it's better to recognize failure, learn from it, and move on.

    DDS

  • Price Fixing in Europe

    The recent announcement that a cartel of global electronics companies has been fined for price fixing comes as a surprise to many people. Do executives employed by competing firms actually have secret meetings to fix prices so that these companies can avoid costly competition and optimize profits? The answer is "Sure they do!" This practice is of course illegal, but unfortunately it happens all too often. And sometimes they get caught. The latest fine, $1.47 billion euro (around $2 billion), involved a decade-long price fixing scheme between Panasonic, Philips, and five other players who conspired to manipulate prices with regard to television and computer tubes (a now outdated technology).

    Surely, many of these huge companies figure that they can make much more breaking the law than they can following it, and unfortunately this is too often true. Apparently, there isn't much of a hit to brand reputation since most people have no clue this is happening, so there isn't much reason for them to avoid the practice. Ethics, anyone?  Here are the EU's biggest fines against cartels since 1969:

    2012               Displays                    1.47billion euros

    2008               Automobile Glass   1.38billion euros

    2010               AirFreight                    .80billion euros

    2001               Vitamins                      .79billion euros

    2008                Candle Wax               .68 billiion euros

    2010                 LCD's                         .65 euros

    So it appears that there is no category untouched by the influence of the cartel. Sometimes these judgments involve remedies for consumers, and sometimes they don't. We can all be sure of one thing. These are just the biggest offenders. Competition is supposed to lower prices and insure an adequate level of quality. When prices are fixed by competitors, these two market dynamics often fail to materialize, and the loser is always the consumer.

    DDS

  • Sports Arenas Going Upscale

    First there were seats in the front row. Then there was club level. Then the skybox. Will the well-to-do ever be satisfied with the luxury options they have at stadiums and arenas? Probably not, and far be it for me to question why a wealthy person would want to be somewhat isolated from the general population. As a matter of fact, the proliferation of idiots at games is a major reason I tend to watch them on TV. The games, not the idiots.

    So what's the latest trend for the well-to-do sports fan? High-end night clubs can now be found at arenas in a few of the larger cities, and it looks like there are more to come. We aren't talking a glorified bar here. We are talking about the real deal...the DJ, the light show, the doormen, the fashion. All of it. The first one appeared in 2009 at LA's Staples Center, and recently Brooklyn and Miami have added night clubs to their array of peripheral product offerings.

    Why would anyone want to go to a nightclub during a professional sporting event? Is half time really that long? Does any of this make sense? Perhaps not to the average person, but the average person is nowhere near the target market for these services. The lesson is that it's not only important for marketers to listen to their customers, but they must keep in mind that it is poor practice to make assumptions about what is and isn't needed by a particular consumer group without market research. So far, these night clubs are working well in the large cities, and it's up to marketers to deliver the goods. Enjoy the beat!

    -DDS

  • ebay For The Rich

    Little-known website, 1stdibs.com, recently received a $42 million venture capital infusion which means that the company is ripe for growth. So what is this site all about? Antiques. Lots and lots of expensive antiques.

    The interesting thing about this site, aside from the fact that it serves a niche market of well-heeled consumers, is that the company has been around for 11 years! And the fact that I didn't know about it suggests that I am neither well-heeled nor a part of this niche market. But is this really true or could it be that the company is too small to reach more people? we do know that the investment largely went towards cashing out the original owners, so we can probably expect one of two things to happen. Either the company will be taken public or it will be sold to a larger suitor such as eBay. What this also means is that the company is sure to expand, and this begs us to ask the question, "Will they move away from high end items to expand their market?" The savvy marketing student knows that this is a terrible idea. Stick to your core positioning unless the company is doing poorly and a change is necessary

    So what's the strategy here? My hunch is that the market for high end antiques is considerably larger than the market 1stdibs.com is currently addressing. More money means more marketing. More marketing means more reach and brand awareness. More awareness leads to more usage, which leads to more return on investment for shareholders. Isn't business a beautiful thing?

    DDS

  • Boomers Drive Some Food Chains

    Baby boomers, those Americans who were born between 1946 and 1964, are doing something previous generations have never done before. They are eating out more. and are reacting demonstably to chains that are catering to the older crowd McDonald's and Chipotle are none too happy, as these brands have long catered to a younger demographic, and many of  these financially-challenged young folks are reducing their fast food and fast casual consumption overall. No job means no money. No money means fewer restaurant visits. And so it goes.

    The restaurant industry has been fueled by 18-34 year olds for many decades, but the sheer size of this wealthy generation, coupled with the low purchasing power of the 18-34 crowd these days, is helping to turn the tide. Some brands have been slow to react to this shift, but others such as Panera, Wendy's and Burger King saw the writing on the wall and began courting older, well-heeled customers. So much for the traditionally-coveted younger demographic free of cares and flush with disposable income. Economic realities have caught up with spending for younger people, and the competition for the 35 and up age group will only increase.

    DDS

     

  • FDA Eyes Energy Drinks

    It is probably inevitable that there will eventually be some cap as to how much caffeine can be in an energy drink, But until that time comes, marketers of these popular beverages will continue to pack in the pep despite some evidence that there may be negative health consequences tied to imbibing in certain amounts. For example, a teenager (with a pre-existing health condition) died of cardiac arrest after consuming two 24-ounce Monster beverages. Such incidents tend to inspire emotional responses.

    This is a good opportunity for science to clear the air. The Food and Drug Administration has said that it is taking a closer look at the health effects of energy drinks, but it has also said in a recent letter that the agency is unaware of any causal link, stating there is "a long history of safe use" of products containing caffeine and that the agency is unaware of any scientific studies that prove otherwise. But the FDA is looking more deeply into the issue.

    So the $10 billion industry gets a regulatory reprieve of sorts, but I imagine that future studies will show high correlations between elevated levels of caffeine and health issues. But this is largely a hunch. The FDA's letter did not rule out regulating amounts of caffeine allowed in the products or any labeling requirements that might materialize from its review. The industry should be watching very closely.

    DDS

  • ConAgra to Become Private Label Giant

    With the announced acquisition of private-label food manufacturer, Ralcorp Holdings, the already huge ConAgra stands to become the second-largest U.S. packaged food company by sales. The deal also means that ConAgra will become the largest provider of private-label products in the U.S., making and packaging store-branded products for retailers, as well as contract manufacturered goods for branded products. Hidden behind many of the brands you buy is a relatively nameless, faceless "contract manufacturer".

    Private labeling is an important part of the supply chain, providing much needed support for branded product companies that may lack enough manufacturing capacity to ramp up volume, as well as for companies that prefer to use contract manufacturers to concentrate on other competiecies such as marketing or research and development. Bath and Body Works, for instance, makes few of any of its own products. It likes to concentrate on making new fragrances and operating its stores.

    Larger retailers also offer their own store brands, but few of these organizations make their own products, so these retailers contract out these manufacturing and packaging services. This is the world of private-labeling. It's really a fancy word for contract manufacturing, and ConAgra is about to become the dominant player in this space.

    DDS

  • Vail Games Loses Title Sponsor

    Despite revealing that the company is actual;y increasing its marketing budget by 40% in 2013, eleven-'year title sponsor and shoe maker, Teva, has ended its relationship with the Colorado-based Summer event. Since we know its not because the brand is reducing its budget, what's the reason for this move? "It was time for a change". This is probably true. Companies alter their strategies from time to time, and the people who often suffer are the advertising agencies, sponsorship relationships, PR firms, and other vendors, who are often casualties of these strategic changes.

    In this case, Teva has spent over $8 million for over a decade supporting the sponsorship, not to mention the money it spent leveraging (reinforcing the relationship by spending additional marketing dollars). So why change after such an investment? Who knows? Maybe a change in target market necessitates a change in direction. Perhaps the company has found a more effective way to reach its audience. We do know that the Mountain Games in Vail, Colorado will have to find a new title sponsor to hopefully pay the same or more than the amount that Teva paid for its sponsorship. Sponsorships are what makes events possible, and Vail should have no trouble.

    DDS