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.
Burger King, in an ongoing effort to unseat number two rival Wendy's and gain much-needed ground against market leader McDonald's, continues to tweak its menu in hopes of finding the right formula for success. It has struggled to compete with the McDonald's dollar menu, and Wendy's yanked second place away from Burger King a few years back by offering a much more eclectic product mix as well as implementing an effective premium fast food brand positioning strategy. Fresh is better than frozen and all that jazz.. The latest offering from Burger King, if successful, could possibly change the industry in ways that make perfect sense in today's anti-obesity climate.
Introducing "Satisfries", a new lower fat lower calorie replacement for the traditionally bad-for-you side dish. Indeed the product does have 30% fewer calories and 40% less fat than McDonald's fries, and this meaningful point of differentiation can be turned into an obvious competitive advantage if the fries are a hit with customers. Burger King said that it is targeting "lapsed users" of the product, but if successful this could change the face of fries industry-wide. Who doesn't want something that is tasty and is also better for you than alternatives? And if Burger King can do it, so can others. But how quickly?
The king is spending a fortune on this rollout. Now that menus for the mid and large sized chains must clearly feature calorie counts, consumers can make more informed choices about what they put into their bodies. When they look up and see that one McDonald's lunch is over 1,000 calories, then the reasons behind why they might be a bit overweight become less of a mystery. Information is power, and I do strongly believe that food will be a lot healthier in the near and long term as a result on this pervasive and ongoing social attitude. Fast food is not immune to this effect.
First it was a problem. Then it was an epidemic, as more and more people around the world, and within the U.S. in particular, became dangerously obese. The response has been slow in coming, but the federal government in conjuction with NGO advocacy groups has begun to act to protect people from their own mouths. Whether you believe in this idea or not politically is immaterial here. The fact is that it is not a good time to be a marketer of "fun for you" foods.
By now you probably know that marketing junk food to children has been heavily curtailed over the past few years as large companies have succumbed to pressure by health advocates. Indeed the feds haven't yet defined exactly what a junk food is, but by next school year all public K-12 schoold will no longer feature products seen as unhealthful. 100% fruit juice only. Granola bars instead of Snickers and Funyons. Parents cannot monitor children when they are at school, say supporters, so restricting choices for young people who are not old enough to make good decisions for themselves is the best course of action. I applaud this move and agree with the reasoning, but I think that the government needs to define exactly what a junk food is in terms of calories, fat, salt, etc. per gram. This should be forthcoming. So what about food stamps?
It is already illegal to use government-provided/taxpayer funded food stamps for unwholesome products like cigarettes, alcohol, or prepared food (I'm not sure why that one is in there). Now some legislators in Congress want to include junk food in that equation. Should people on the public dole be able to buy whatever they want? We know that obesity and poverty are closely correlated and obesity has staggering social costs, so isn't this move in the best interest of the people? Consider that food stamp recipients spent $2 billion last year on sugary carbonated soda alone. So this issue isn't about a ban on junk food, but simply ensuring that people who are dependent on public assistance don't make poor choices that make them obese. Cigarettes and Pepsi are similar products in this light. What do you think?
One of the most recognizable brands in the world, Apple, is finding it hard to stay on top. After beating Blackberry at its own game and changing the face of mobile technology with its iPod, iPad, and iPhone, the company has failed to live up to its reputation as an innovator over the past three years, offering only what we call "continuous innovations" in product development. Most marketers would say that slight changes to existing products aren't innovations at all, but rather merely improvements on existing products. I would agree with this assertion, and if this is true, Apple is no longer innovating at the present time. Samsung is eating its lunch.
The iPhone 5s and 5c were introduced recently, and the company reported that 9 million hand sets were sold in the the U.S. and a few select countries, which is no small potatoes. But it's important to note that Apple doesn't usually introduce two phones at once or include areas outside the U.S. when reporting numbers. So it's safe to say that the company has "juiced" the reported unit velocity to satisfy investors. Industry observers aren't stupid. But what about customers?
These phones are meant to replace the iPhone4, which for most users is at the end of its life cycle (the iPhone 5 is not yet in need of replacement for current users). I believe that the reason that Apple didn't call it the iPhone 6 is that it isn't innovative enough to warrant the promotion. Even Apple agrees, perhaps not explicitly, that these phones aren't a big deal. A built in fingerprint scanner to replace passwords, an improved camera, and a faster chip are certainly product improvements, but Apple must do better if it is to continue its leadership role in the industry. Blackberry failed to innovate just like the Palm Pilot before it, and as such is about to join Palm in the electronics graveyard of history. In the technology world a company has two choices--innovate or compete on price. Apple must do one or the other or suffer the consequences.
Network TV. Four networks have represented the lion's share of the broadcast advertising industry for the past several decades, but now the industry is experiencing a major shake up. The first threat to the existing model comes from the world of cable, or pay TV. HBO, Showtime, Netflix, TNT, AMC and their ilk are now offering top quality "original" programming, as consumers continue a shift from broadcast to cable channels. The second threat has emerged from online video, as more and more people are consuming media online, and younger consumers are "cutting the cord", using the internet medium exclusively. These social trends are indeed driving this shift, but this isn't the whole picture.
Another big issue here is that broadcasters no longer have first dibs on scripts as cable and online video outlets continue to ramp up offerings of "original programming". In most cases the best scripts and writers are now a hot commodity. This competition is obviously good for consumers, as more choice provides myriad market benefits, so the whole mess is likely to result in lower prices across the board as well as buffet-style channel selection for consumers. This is yet another example of Joseph Schempeter's "creative destruction" concept, wherein industries are destroyed (creatively) and new ones emerge. Change can be painful, but it sure is fun to watch!
The liquor industry has undergone a massive transformation during the past few decades. Over the years, I have watched consumer tastes shift from favoring domestic beer to imported beer to wine to fancy spirits to fancy craft beer, and now flavored alcohol is the latest craze amongst the "boozerati". And we aren't just talking about flavored Stoli here. This is much much bigger. Taking inspiration from fancy desserts, marketers are now offering pumpkin pie vodka, deluxe chocolate irish creme liqueur, a champagne inspired apple drink, iced-cake Smirnoff, and other over-engineered libations. It seems that many consumers, particularly the "hipster" crowd, want their drinks to be increasingly complex with more of a "foodie" orientation. But will it last?
Certainly there will be some winners here, but 90% of the products introduced won't be around five years from now. Initially there will be an overwhelming number of choices as product developers try to find the right combination of what they can make and what consumers actually want, but consumers will soon pick winners that will be become bar staples. But there is only so much room behind the bar, so these winners will be few and far between. Social media will enable the winners and will destroy the losers. In the meantime, you will begin to see one new flavor after another, and possibly a consumer backlash against the complexity of choice, what I like to call the "tyrrany of choice". But variety-seeking behavior is a fundamental part of being human, and so there will always be room for new and improved products. Booze is no different from any other product category in this respect.
One of the most important issues in marketing today concerns consumer privacy and the issue of whether or not marketers are violating said privacy when they use tiny trackers called "cookies" to monitor people's browsing behavior. Since the consumer doesn't give permission to marketers when they use these little computerized parasites (a practice called "opting in"), it is clear that there will be government regulation down the line unless industry leaders make efforts to self-regulate. It turns out that Google may be taking these first steps, and it could change the way advertising is delivered industry-wide.
The search engine giant recently announced that it may dispense with the intrusive cookie practice and instead switch to a system that would create a distinct and anonymous indentifier for each unique user. This move would force advertisers to use Google, a company that already dominates the world of search advertising, to get information about people's psychographics rather than tracking users themselves.
The upside of this is that a few companies will control all of the data, which would make the industry much easier to manage and regulate. The downside of this is that a monopoly situation might be created wherein there is only one dominant and viable player. Such a situation is generally bad for consumers, and so regulators might not be too keen on Google's plans. Either way, change is in the air, and the issue of protecting consumer privacy will be on the forefront of debate until such time as it has been adequately addressed.
What a difference one year can make. Ticket prices for the NFL's Superbowl over the past decade have been priced at between $500 and $1,000 each depending on seat location, unaffected by economic conditions, as we might expect. This price has remained steady regardless of location. This year's game, to be played at MetLife Stadium in New Jersey (I'vebeen there and it's not really in New York), is commanding unprecendented prices for premium seats. Prices have literally doubled for the higher end seats, which are now at $2,600 each, and the lower end seats remain at $500. There are only 500 of these available and last year 500 winners were selected from 30,000 entries. Wow.
Why charge such high prices? Partly it's because the NFL can. The demand for tickets to this game is always very high, and so marketers can charge premium prices. Another part of the answer lies in the location. New York is a high income area with much higher than average wages, and so the cost of living is rather high compared to the cities that usually host the big game. Thus we would expect ticket prices to be inflated. But is $2,600 a pop going too far?
Probably not. Most experts believe that the Super Bowl has historically been way underpriced, and that consumers would likely pay much more than the NFL is charging this season, let alone in past years. Remember that this isn't your average sports contest with your average fans in attendance. Participating teams distribute just 35% of the tickets leaving the rest to the general population. Roughly 50 million people live within 200 miles of the stadium, so I don't expect there to be any empty seats regardless of who plays. We do know one thing for certain. It won't be the Jets or the Giants!
Most students and practitioners of marketing are probably familiar with the practice of "marketing through sport". That is, a branded product manufacturer makes a strategic decision to use spectator sports as a marketing medium. One of the most common ways to do this is through a sports sponsorship, and the most expensive form of sponsorship is known as "venue naming rights". In general these agreements for new arenas run in the tens or hundreds of millions for anywhere from 10 to 30 years of exposure, and when it's time to build a new arena or make very major revisions to the existing arena, then a new sponsor is sought for a new long-term agreement.
Recently, a sales rep working for the NBA's Portland Trail Blazers noticed that a major health care player in the region, ODS Health, was changing its name to Moda Health as part of a major re-branding effort for the firm. The savvy sales professional, knowing that name changes make for great sponsorship opportunities, immediately contacted the company and suggested that a naming rights deal might make for an excellent cornerstone for Moda's re-branding efforts. And thus a deal was born!
Well, ithe Moda Center deal is only $40 million for 10 years, but it represents the first such deal for the Blazers. It is likely that a new partner will emerge after the 10 year contract period at which time the Rose Garden (the current name for the arena) would to be remodeled or demolished to insure team retention. The $1.6 billion Moda admitted that if it were not for the re-branding effort, it would never have considered a naming rights agreement; but the sheer amount of awareness the company needs to generate, necessitate a major strategic move.
One of the major crticisms of Apple's product development strategy is that the iPhone is too expensive to attract too many more users. That is, in order to increase revenue, Apple should introduce a series of less expensive iPhones and expand into new markets (what we call a "diversification" strategy). China in particular would present a very good opportunity for growth since the country has a few billion people, and iPhones are manufactured there. The problem with the current iPhone is that most Chinese can't afford it .
Yet, Apple doesn't want to cheapen its brand image. It is positioned as a high quality, innovative brand that offers a superior product. You want an Apple product? You gotta pay for it. Offering a cheaper iPhone could dilute the equity that Apple has built with this strategy in place. The new iPhone 5C, the latest unremarkable offering from Apple, will cost about $799 in China , a country whose carriers do not typically subsidize phones with long-term service contracts. That's an expensive proposition, and Apple is not likely to gain much share in that lucrative market.
Is this a good move for Apple? Should the company offer a cheaper phone? If so, should the product be available in the U.S. or limited to certain international markets? Such questions constantly vex even the most experienced marketing professionals. Yes. Even the marketing professionals at Apple.
Even as kids, we all knew P&G as a gigantic global manufacturer and marketer of every day household goods, from laundry detergents to feminine hygeine products. Chances are also good that you actively use numerous brands from this iconic company as part of your day-to-day life, and the offerings seem to get fancier by the day. In general, marketers of branded products are fairly limited as to what they can do to keep older brands current because it is generally ill-advised to make too many changes to goods and services that have "brand equity". So actions are limited to minor packaging tweaks and minor changes to the formulation. So the question is, "How can marketers keep brands exciting and relevant?"
The answer often lies in brand extension whereby a marketer introduces a new product under the umbrella of an existing brand. The recent success of Tide's new Pod product (a P&G brand) is a great example of the successful implementation of a brand extension. One can leverage the equity built up over years of marketing to gain immediate sales on a newly-introduced product that sports the famous moniker. Now that the Tide Pods have proven to be a successful brand extension, P&G hopes to use the lessons learned and apply them to some of its other premium brands.
So now we are seeing more everyday luxury products with names like "Cascade Platinum", "Bounty Duratowel", and "Tampax Radiant". Theoretically, these new products are superior not only to other competitive products in the marketplace, but also the existing versions of the brand. Therefore a customer of the regular Bounty paper towels might decide they want to pay 20% more for a superior Bounty product. This sounds all well and good, but the problem with such a strategy is that users of the existing product will migrate towards the premium version and will in effect "cannibalize" the sales of the original product. As long as the company plans on this happening, things usually work out well. But if the cannibalization is unplanned, the marketer can find that they have robbed revenue from one product and have given it to another while spending big bucks marketing both. This can be a great idea when a company plans on ultimately discontinuing a particular good or service, but can also be risky.
Proctor and Gamble is good at what it does, so I suspect that most of these offerings will attract both the existing high end user of the brand as well as consumers of competitive products. Any cannibalization that does happen has probably been planned for, so nasty surprises shouldn't hinder the ability for the company to reach its revenue and market share objectives.
Every few months a TV service provider such as Comcast or DirectTV balks at the cost of carrying hundreds of cable channels that their customers might or might not want. Most recently the spat is between Dish Network and ESPN, owned by Disney. ESPN is the highest profile and most expensive of the national sports channels and is included in an offering of other Disney-owned stations such as ABC and a whole bunch of others.
The practice is called "bundling" and, now consumers are begining to revolt at the increasingly high prices they are forced to pay. Many Pay TV bills run over $100 per month, and younger consumers in particular have been "cutting the cord" in favor of other media consumption mediums. Who needs five hundred channels? But can you imagine paying for Dish Network and not getting ESPN? Well, I could do without most of the obscure channels under the brand (remember ESPN The Ocho in "Dodgeball"?), but not the main ESPN stations. I could do without Bravo, but not AMC.
Consumers should be able to make choices, and the future will feature a more buffet-style offering.The industry is reacting very slowly to the mobile revolution, and it is likely that an entire restructuring of the way that all of the industry players do business is in order. After all, consumers must ultimately be satisfied if the exchange process is to work properly. The discontent surrounding the current situation is a symptom of a huge, industry-wide problem. It needs to be fixed soon.
Even after over 25 years of existence, the Arena Football League, a smaller format, indoor version of the real thing, is still fighting for recognition and legitimacy. Despite a labor problem a few years ago that resulted in a one-year league shut down, this scrappy league has survived and now features a couple of dozen teams in both small and large markets, as well as a lower level indoor league largely concentrated in areas that do not offer much in the way of spectator sports options. Remember Kurt Warner? Iowa Barnstormers man.
I must confess to having actually watched the first ArenaBowl in 1987, my senior year of high school, wherein the illustrious and storied Denver Dynamite dominated the four-team fledgling league. Twenty-five plus years later and with the recent announcement that the band KISS is part of a new expansion franchise ownership group (and will perform at LA KISS games), I had to do a double-take. But that's not all. The franchise first move is to lure the controversial, athletically gifted, and unemployed Tim Tebow in a deal that "will encompass a three year contract with the possibility Tebow can earn millions". True.
Why? It's obvious that such "star power" will fill the arena over that three-year period with what I have come to call "The David Beckham Effect". That is, you find a highly recognizable figure who is past his prime (sorry Tim, but you are that, at quarterback anyway) and use his/her start power to enhace your sports property in a limp-along league. In this case it's the LA KISS helping out Arena Football. For those of you who are thinking, "Isn't KISS enough of a spectacle? Why Tebow too?", I have no good answer for you. Only that sometimes marketers overdo things in their zest for revenue. Others may be asking, "Who is KISS?". Wiki it. As for the KISS themselves? I can't wait to see how they pull this off. And Tebow? I highly doubt he will bite.
The state of Maryland, tasked by ObamaCare mandates to enroll the uninsured as soon as possible, has enlisted an unlikely partner in this effort to spread awareness and encourage people to take action...the Super Bowl-champion Baltimore Ravens. There isn't anything unusual about this as we have seen athletes endorsing product brands for decades, but when the government partners with an entire team, it isn't something one sees every day.
The Obama administration had previously hoped that the entire NFL would get behind this project, but with the majority of Americans actually against ObamaCare (42% versus 37% in a recent poll), this probably would not be a good move for the league. The NFL as a league smartly balked at the offer and said that it would be up to individual teams to decide if they want to participate. Republicans, who are largely against the program, are watching closely as are other teams in the league, some of whom have already signed on.
One can see why the president (or anyone else for that matter) would desire to use the NFL for marketing purposes. This is what sponsorship in sports is all about. But for NFL teams and the league itself, such political side-taking is a very controversial, and I would say a wrong move. And just what do a bunch of football players know about health insurance anyhow? Is this really a good idea? Don't mix politics with sports.
It is not common knowledge that there is really no formal definition for, nor is there any true regulation of, products marketed as "natural". In the past decades, the FDA and FTC have been completely unwilling to define the term for consumers or industry despite the rapid, sustained growth natural products; and these regulatory agencies, without clearly understood rules and regulations, cannot monitor this $300 billion industry. So, if the regulatory framework won 't stop "green washers" from misrepresenting their products as natural when they are really mostly synthetic, whom can we count on to protect consumers? Enter the judicial branch of government. Just sue baby.
There are a number of not-for-profit NGO's out there with the mission of protecting consumers from unethical marketers, and in the absence of government regulation or effective industry self-regulation, we must turn to the courts to get things done. The latest violator is Naked Juice, a company that used to be all-natural but now that it is owned by Pepsi-Co, is cutting a few corners in the name of shareholder value. Apparently the company has been hiding the use of GMO's (Genetically Modified Organisms), which are increasingly viewed as not natural, as well as a number of synthetic ingredients such as zinc oxide, ascorbic acid, and calcium pantothenate (which is produced from formaldehyde). Yum yum! The company has settled the suit, will pay $9 million, and will cease and desist using the term natural on packaging and marketing communication materials.
This type of thing is happening more and more, so it begs a few questions. Is it ethical to market a product as all-natural when it clearly isn't? Should the FDA and FTC finally address this area? This case is considered a total victory for natural products industry advocates who have long been frustrated by the lack of regulation, which has largely resulted in confusion and distrust in the marketplace. Pepsi has even called for clarification here. I wonder if and how our government will respond.
First it was Yoplait with its creamy, fruit-at-the-bottom brand indentity. Then it was frozen yogurt as an alternative to ice cream. And now we have the latest fad in this important product category...Greek Yogurt. Consumer perception that this type of yogurt is high in protein and low in sugar has been driving this trend, and it appears that, unlike the average short-lived "fad", the category is here to stay. All is not well in the world of healthier snacks, however, and the market leader is facing its first challenge in managing public perception. What happened?
Chobani has been fielding complaints for the past several months that some of the company's plastic yogurt containers become bloated and leak in the refrigerator. Other customers have complained that the yogurt tasted strange, and some folks have complained about illness. Generally the FDA demands a product recall in these cases, but Chobani has already taken several actions voluntarily, making a mandatory recall unnecessary.
The company has apologized, identified the problem facility, and has voluntarily recalled the offending batch (IMS code 16-012 with Best by Sept. 11 to Oct. 7). When a company acts in good faith and is cooperative with regulatory authorities, things go much better for everyone. A problem like this can happen anywhere to anyone. It is the manner in which a company responds to a PR crisis that matters most. An apology and a plan of action can go a long away in alleviating any potential long-term brand image problems that can arise from this sort of negative publicity.
Back to School season is an important time for parents, as they buy the stuff their kids will need for the school year. Obviously this is also a huge season for retailers, and the biggest challenge is that the shelves must soon be cleared for the "make or break" holiday shopping season. Our sputtering economy over the past five years isn't helping things much, and it is becoming increasingly difficult to forecast what consumers will do in both the near term and the future. This demand uncertainty makes it rather hard for retailers to order the right amount of the right items for their shelves.
It looks like this year will be no different. Since Back to School season is usually an indicator of how consumers will behave for the remainder of the year, observers pay close attention to revenue results in August and September. So far, retail sales have been very sluggish as consumers remain very sensitive to price and highly motivated by sales promotions. It is true that many Americans have been buying big ticket items like cars and appliances (due to pent up demand), but this behavior hasn't translated into the more frequently purchased items like consumer packaged goods. Consumers simply don't yet have the income to begin spending like they did before the recession. Retailers notice these things and have adjusted their end-of-year projections accordingly.
Therefore we can expect a rather bleak holiday shopping season with moderate growth in store sales and lower store profits due to the heavy discounting mentioned previously. And with six fewer shopping days between Thanksgiving and Christmas this year, we can expect Black Friday (the day after Thanksgiving) to come even earlier this year. Hopefully 2014 will be a better year.