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 firstname.lastname@example.org.
Once again the mainstream marketing gurus have overestimated consumer demand for an exciting new product category. The "marketing concept" reminds us that marketers must FIRST assess a need in the marketplace and THEN develop a good or service to address that need. Making a product just because you can is not a good idea in a globalized, hypercompetitive marketplace. But this is apparently what has happend with 3-D TV.
If you listened to the experts several years ago, 3-D TV was the best invention since sliced bread, and it would have massive household penetration by 2015. Suffice it to say that the "experts" either failed to conduct adequate market research or consumers in fact misrepresented themselves in surveys, focus groups and interviews. Indeed it was probably a little of both. This cost prohibitive technology has even failed to catch on among the legions of sports-watching couch potatoes, a target market that was supposedly a slam dunk. But don't take my word for it. In the words of a major supplier of television broadcast equipment, "3-D as an in-home TV application is essentially dead."
But this doesn't mean that consumers don't want a more realistic in-home TV experience. There is a promising new technology called 4-K ( a higher high-def experience) and also a glasses-free 3-D product in development that may go over better with the spectator sports crowd. The last major innovation that has been widely adopted was the giant flat screen HD TV (and the DVR before that), so the industry is ripe for a new invention. It just needs to be an invention people actually want.
Hostess is back! Well, not the original company itself. That organization was poorly managed and over-unionized and went broke as a result. The new entity is a private equity group, Metropolous & Co, which promises to be a leaner, meaner, and more profitable organization. So what does this mean for consumers?
Starting July 15th Twinkies, Cupcakes, Donettes, and other iconic products will hit the shelves, displacing what the company has described as "imposter products" which have proliferated in the past several months. Hostess is expecting a blockbuster return backed by a major marketing push with a new tagline "The Sweetest Comeback In The History Of Ever". Let's see whether or not these brands have lost some of their mojo, as the absence of these products have forced consumers to switch to substitutes. Will these folks come back? In the age of obesity, can snacks like these regain their leadership position?
I think not. The products will do well, but will fail to achieve the market share they once had. Times are changing, and Hostess will eventually have to bow to market forces and make a healthier Twinkie.
Barnes and Noble engages in a daily struggle to remain relevant as the industry shifts from print to digital, and e-reader Nook was supposed to be the company's saving grace. Unfortunately for marketers, the tablet has creatively destroyed the e-reader market, and Nook is failing to meet expectations. Things are so bad that Barnes has announced that it will no longer manufacture the product and will instead seek a third party partner to do so in a "co-branding" arrangement.
Even in good times this strategy might make sense since the company's core competency is retailing, not manufacturing, and it is generally a good idea to stick to what you do best. The move toward finding a co-branding partner is intended to help the company refocus its efforts toward being a retailer. Barnes still makes money from its retail stores, which sell much more than books these days, and the company still intends to reduce its store count by about one third. Is this a sign that the company is tanking?
If we are talking about Nook, then yes, I think the end is near. But not for just Nook, the entire e-reader category will be replaced by the much more versatile tablet within a few years. Barnes will have to exit the e-reader industry and enter the tablet industry when they find a partner if they are to compete effectively. This means that the new Nook will have to be a fully functional tablet, and not merely an e-reader. The overall company, however, might finally be finding its footing. Once the unprofitable stores have been closed and the product mix has been further refined to reflect market tastes, Barnes should be able to maintain a proftiable customer base due to the equity it has built into the brand. Print books aren't going away any time soon, and remember that Barnes is still the dominant player in this declining category. What the company does this year will likely determine its long-term fate.
Lots of industries have been affected by the Great Recession and the ensuing protracted economic "recovery". Luxury goods, premium necessities, and entertainment have all suffered greatly. But what about the 1.5 million not-for-profit organizations here in the U.S., whose revenue streams depend on the propensity (and ability) of consumers and organizations to donate. How have they fared?
One thing we do know is that cause-related marketing budgets were pared by corporations in every segment when the recession hit, but corporations represent only a quarter of all donations. Individuals have also given less over the past few years for reasons that, by now, should be obvious. Although charities are struggling to reach their pre-recession high water mark of $344.48 billion in annual donations, the number nevertheless has been increasing slowly for the last three years.
All of this is a sign that things might finally be getting back to normal. Consumer spending has been remarkably strong of late, despite high unemployment and poor income growth, but there are some questions as to how long consumers can sustainably continue to eschew savings in favor of spending. Nonetheless, leading industry observer Giving USA says it might be a full decade before the non-profit sector returns to pre-recession levels. And of course the recent proliferation of domestic disasters (both natural and man-made) has resulted in, you guessed it, more donations, a fact that may be inflating the numbers a bit. For example, almost $400 million was funnelled through charities for superstorm Sandy. And that wasn't even a hurricane. If the severity of hurricanes, fires, and tornadoes continues to proliferate, perhaps the non-profit recovery will happen sooner than we think.
How do marketers create ads that capture attention and lead to desire for the product? The answer lies in developing excellent creative strategy and ensuring effective execution. In the last post, we looked Men's Wearhouse and its need for a new creative strategy with the firing of spokesperson and founder George Zimmer. Now we turn our attention to Red Robin, purveyor of "gorumet" burgers and manufactured fun, and to the attention its new creative campaign has generated.
The ad associated moody teenagers and vegetarianism with a funny quip about the fact that "they even have a Gardenburger in case your teenage daughter is going through a phase". The criticism about associating vegetarianism and teenage "phases" unsurprisingly came mostly from vegetarians, a group that comprises about 3% of the U.S. population, but much of the online praise for the ad also came from this group. The point is that the ad generated an immense amount of free publicity in the media. Publicity isn't generated from PR activities alone in contemporary marketing, but also from other forms of promotion such as advertising. Apparently it can pay to be irreverent as long as you don't go too far.
It is not uncommon for a company founder to eventually be ousted by the board of directors. Actually, this is what usually happens when a company becomes publicly-traded, since these entities must demonstrate consistent growth and profitablity over both the short and long runs. The original founders may own stock, but they are often replaced by management personnel with more knowledge and experience than they themselves possess. So when a founder eventually leaves a public company, it tends to have very little negative effect on the company's brand, since the company has probably long since moved on from its free-wheeling entrepreneurial roots. But what happens when your founder is also your key spokesperson, the "face of the company" so to speak", and he/she gets canned by the board?
George Zimmer, the guy who for many years has promised me that if I buy suits from "his" store, I "will like the way I look". I trusted this man, and own several cheap (but good looking) suits as a result of this effective marketing. Now that he has been fired, who will guarantee my satisfaction? Have I become so attached to Mr. Zimmer as ambassador of the brand that I may consider another supplier for my apparel needs?
It is indeed risky for the company board to make this move in light of how important Mr. Zimmer has become to the brand identity and image, but Mr. Zimmer hasn't been CEO for a few years and has been distancing himself from decision-making for quite some time. Will consumers notice that he has gone? Will the company choose another spokesperson as a replacement or decide on a different creative approach? Either way, Men's Wearhouse is a well-known brand that has traditionally spent quite a bit on television advertising, so whatever marketers decide to do had better be effective or the momentum and brand equity achieved over many years may be at risk.
Well, that didn't take long. The gaming community's angry, Twitter-generated responses to Microsoft's new Xbox product has combined to influence the company to reverse the unpopular restrictions it had placed on the upcoming iteration of the popular gaming system. And this all happened in less than a week's time, which once again illustrates the rapidity with which large groups of consumers can independently mobilize to force companies to make changes. And this product hasn't even hit the market yet!
Clearly forcing consumers to connect to the internet once per day to keep their games in working order was a ridiculous notion that should have been killed in the concept phase of product development. How can a company with the maturity and resources that Microsoft enjoys possibly fail to predict this consumer backlash? Was it a planned publicity grab? Despite the very recent policy changes, the company still plans on offering the Xbox at an uncompetitive $499 a pop, so perhaps there are yet additional lessons to be learned about pricing strategy.
Since we know that a company didn't become as successful as Microsoft has by doing stupid things, we can assume that Microsoft is still used to being the big bully on the block, which as we well know is a rather outdated notion in the technology sector. This marketplace is highly competitive, and Microsoft no longer has market dominance in any of the technology growth sectors, so why does it still think it can do anything it wants? The PC market is collapsing, and Microsoft has failed to product a competitive mobile device as of yet. Old habits die hard, I guess, but more missteps of this nature will result in a major change in both management and marketing strategy for the venerable firm. Perhaps this change is long overdue.
What if I told you that I wanted to introduce a product that was $100 more expensive than the closest competitor, and that I also want to restrict how consumers can use and share the product, a feature that consumers are not likely to appreciate? Good idea? Well, this is precisely what Microsoft is proposing with the introduction of its Xbox One gaming console. Not only will this product be priced at $499 versus $399 for Sony's Playstation, but users will have to connect to the internet at least once per day to keep the games functioning. This will make it very difficult for users to share with other users, but will help the company in the battle against piracy. What gives?
Microsoft's stance is that these days games are increasingly downloaded over the internet where a stricter set of anti-piracy rules are the norm. The industry is moving this way, so Microsoft has decided to nudge its customers along a bit through this transition from discs to digital. Of course Sony has been quick to jump on what it sees as a Microsoft misstep and has reminded consumers that "When gamers buy a PS4 disc, they have the right to use that copy of the game, they can trade that copy of the game at retail, sell it to another person, lend it to a friend, or keep it forever." Take that you nasty Microsoft facists!
Microsoft is correct that the technology is indeed shifting but it's not generally a good idea to force consumers to do things they may not want to do, especially if there are readily available competitive offerings offered for considerably less money. Is Xbox really that much better than Playstation to be able to successfully absorb what looks like two new competitive disadvantages? Or could this strategy have been better thought out? Let's see if Microsoft sticks with it or makes a few changes prior to introduction.
Sure the stuff is very visually appealing. And yes Apple has made many groundbreaking innovations in the past. But concerns about research and development began even before the death of co-founder Steve Jobs, and many astute observers do remember the decades-past dark period in Apple's history when Mr. Jobs was not at the helm. Can Apple still innovate?
It looks like we will have to wait a little longer for the answer, as Apple's latest product introduction involves only an update to the operating systems for iPhones and iPads. Granted those systems have needed refreshing for some time, and the breakneck pace of innovation has created a hypercompetitive, fast-paced industry where Apple formerly enjoyed domination. But operating systems are generally introduced along with a new device that operates on it, and Apple hasn't introduced any new devices in a few years. This introduction didn't even come with a new iteration of the iPhone, what we would call a "continuous innovation" in product development. So, what gives?
Clearly if Apple has some new gadgets up its sleeves, none of them are yet ready for commercialization, which explains the fact that the company felt it had to introduce major changes to operating systems independent of introducing a new device. The timing is indeed strange. The iTunes Radio part of the introduction was compelling, but it too closely resembles Pandora, a well-established leader in streaming music. It is clear that Apple cannot get by on looks alone, and Blackberry has taught us many lessons about what can happen to market leaders who fail to innovate.
As a result, the company's publicly-traded stock has been hammered, reflecting investor dissatisfaction, and more recently competitors like Samsung have been stealing market share. The coveted 18-34 demographic always tends to seek ever newer, hipper goods and services making it difficult for a brand to keep its appeal across generations. And older folks spend less on these types of products, so targeting them is not the best way to maintain market leadership. This is a challenge for Apple. Let's see how quickly, or rather if, Apple can regain its shine.
It was a risky proposition. Yes, even in our increasingly diverse 2013 society, there are still a number of people who don't want to see the "typical American family" represented by anything other than same race, same sex couples. It wasn't too long ago that advertisers eschewed showing Hispanics, African Americans, and other "non-whites" in commercials, but those days are long over, and now we have moved onto new controversies that will sound silly in 20 years. Enter Cheerios, whose ads feature a multiracial family in a typical kitchen table setting. It sound worthy of note to most of us these days, but the online buzz generated by the creative strategy forced YouTube to to ask General Mills to shut down its comments section.
Of course, many of the comments were very positive, but nonetheless, this sort of thing generates an awful lot of publicity, and the risk from negative publicity is something that major brands have tended to avoid in the past. But is this publicity really negative? That General Mills decided to take a bit of a risk with its Cheerios brand, reflects a change in the zetigeist as Americans become represented by more and more diversity. Obviously, advertisers want their campaigns to reflect this diversity, and now that Cheerios has bravely moved forward, we should probably see more of these types of ads from consumer products brands in the near future.
Well, maybe it wasn't quite "divine", but the intervention of NBA's franchise owners in the proposed move of the Sacramento Kings to Seattle has provided the struggling California capitol with another chance to keep its only major sports team. Much of the ownership changed hands, Seattle must wait for the next possible NBA defection, and the city that posted the worst attendance in the entire league this season gets an unearned reprieve.
The days of teams defecting to other places in the middle of the night are long over. League ownership must approve such moves now, so storied midnight runs such as the NFL's Cleveland Browns to Baltimore, the Colorado Hockey Rockies to New Jersey to become the Devils, and of course the Kansas City Kings to Sacramento, don't happen again and sully the integrity of professional sports. OK. That's a bit snarky. But still. Why can't owners simply move their teams if they want to? Most NBA franchises traditionally run at a loss overall, and Sacramento boasts some lousy fan support, so what's the upside for an ownership group?
Nevertheless, the new ownership which includes Qualcomm, 24 Hour Fitness, and Facebook moguls, has committed $192 million of a necessary $449m to build a new arena, which should certainly be enough to get those Sacramentoans out of the house and into the stands. Or will it? Where will the additional funds come from? Taxes? I think not. Hopefully these wealthy executives will be able to help generate big sponsorship dollars to supplement a nice fat payroll for players The bottom line is that Sacramento is a very small market, and not exactly Beverly Hills income-wise, if you get my drift. Without significant investment in the "product", namely talented yet expensive players, the masses aren't likely to show up on a consistent basis.
And of course the impatient crowd in Seattle now has one more reason besides a lack of sunlight and Vitamin D to drown its sorrows in a large vat of mocha latte, as this basketball-savvy metropolis is hungry for a new team after being jilted by a new owner who promptly moved the Supersonics to Oklahoma City several years ago. Despite the wishes of the previous ownership, the league refused to let teh team move. Let's see if such intervention ends up being good for the franchise.
The announcement last week that Nike is cutting the first of what I assume to be many ties to the embattled Livestrong charity could signify the proverbial "beginning of the end" for the popular organization and its trendy yellow wristbands. That Mr. Armstrong was stripped of all of his titles as well as his dignity has obviously harmed the integrity of the organization and thus its brand reputation, and perhaps the damage is permanent. The perennial market leader is pulling its Livestrong apparel line which will result in about a $100 million hit to the charity created by the successful cyclist to help cancer survivors, not to mention the lost opportunities for millions to see people wearing the brand. Although Nike said it will continue to support the organization in "other ways", the company was not specific as to "how", and I suspect it will eventually pull its remaining support "slowly and quietly" to avoid any negative public backlash.
Is this the end of Livestrong? Probably. There are 1.5 million non-profits in the United States alone, and many of these are cancer-related. Translation? There are numerous places for you to put your anti-cancer dollars, and Livestrong is only one of many. An organization whose inspirational figurehead has fallen out of favor has almost no chance in such a competitive marketplace. Look for other companies to follow suit, and for Livestrong to either shut its doors or become a much smaller, more focused, and re-named entity. It is a sad tale indeed.
Those of us who consider ourselves "fashion conscious" are without a doubt familiar with Michael Kors, a popular designer, television celebrity, and most recently a major marketing mogul. Once the owner of a strictly exclusive, prestige-priced brand name, Mr. Kors has expanded his offerings to address more mainstream consumers (such as those who watch Project Runway) so that his company can grow adequately. Since Michael Kors Holdings is a publicly-traded entity rather than a privately-held company, it must maintain acceptable levels of growth and profitability over both the short and long runs to satisfy shareholders. And it should be obvious to any savvy marketer that such growth cannot be achieved without the expansion of both products and markets.
Of course, the risk here is what we call "brand dilution". That is, introducing sub-prestige products as brand extensions to a prestige brand is not usually a good idea since this act tends to dilute the "prestige-ness" of the brand. Mercedes learned this lesson the hard way when they introduced cars that were more accessible to the mainstream. The result was a mass migration to the BMW's and Audi's of the world, and many years later, Mercedes still struggles to regain that prestige image. So, what's the answer if you don't want to dilute your brand but you still want your company to achieve healthy levels of growth?
The answer. The smart marketer uses a completely different 4 P strategy for each target market. The existing high end stuff (apty named "Michael Kors") has been supplemented with a lower end line called "MICHAEL". Since, the pricing is different, place and promotional efforts should be different too. Mr. Kors needs to be aware that these two different brands would best be sold in two different channels to avoid brand dilution and "guest conflict" between the two very different target markets (Nordstrum shoppers and Wal-Mart shoppers are different). This way, MICHAEL can achieve the necessary volumes required, and the high end line can remain exclusive. The high end line should be sold exclusively in Michael Kors outlets, leaving the lower end line to a less selective distribution strategy. Or it could be done the other way around. The high end stuff appears at high end retailers, and the Kors outlet stores could offer the lower end stuff. Either option is better than trying to be all things to all people.
None of these products should be sold at low end, bargain stores because it simply doesn't fit with the image. So far, the company is doing rather well, but once it begins to rely on volume over exclusivity and profitablity, it is difficult to make that return trip to prestige status.
As a consumer, I have never understood why people like to eat those big, fluffy pretzels so much. I find them dry, terribly salty, and the cheese product offered for dipping, is well "cheese product". When it comes to game day junk food, I much prefer the even sketchier hot dog. But when I look at it as a marketer (as all marketers must do), I realize that a great many people actively seek out this treat, and this is of course why they are offered at so many spectator sporting events. But why stop at sports?
Wendy's, in its' perpetual battle against market leader McDonald's and close rival Burger King, has decided to offer something a little different. Behold the Pretzel Bacon Cheeseburger! One would hope that Wendy's has done its due diligence and conducted surveys, focus groups, and taste testing during the "concept testing" phase of product development. Further, a test market might have been appropriate, but then that would have tipped off the competition who, if the test appeared to be enjoying a modicum of success, could enter the market first. Test marketing is often avoided for this reason. Yet, Wendy's has not yet introduced the product, and is being rather coy about when it will be introduced. This is a curious strategy, one that I would call a "teaser publicity" play. And the media has taken the bait.
Will the burger succeed? Possibly, since it does have bacon in it, although it's important to remember that the vast majority of new products fail despite the best of intentions and the biggest of budgets. For example, McDonald's just dropped its several-year-old Angus Burger product as it failed to meet company expectations, but management is expected to make an exciting new product announcement very soon. McDonald's and others will probably take a wait-and-see approach, but will quickly follow if the burger is a hit. If it's a big hit, Wendy's might bypass McDonald's as the market leader. As for me, a respectful no thanks,