• Sales and Security

    After the widely-reported and ill-timed breach of data security at Target (and some other retailers) late last year, it was expected that this blow to the company's brand image would result in lower revenue and profit, at least in the short term, as consumers stayed away during the holidays. Now that the results are in, were the experts right?

    Yep. They often are. That's why they are called "experts". The massive data breach certainly sapped the confidence consumers have in the retailer, despite the fact that this data breach could happen to almost anybody, and it contributed to a 4% drop in sales in the latest quarter. To be fair, Target has also been losing money in a failed bid to penetrate the Canadian market. Yet it is hard to discount the effect that negative publicity can have on a well-established brand, and there are about 80 standing lawsuits against the company to further sully its image. Sales are steadily improving, suggesting that consumer memories aren't terribly long, but Target must lower prices and offer more discounts to kerep store traffic humming along. This will result in higher sales but lower profits for investors, yet it is what Target must do. 

  • More Bad News for Junk Food

    For makers of "fun for you" foods and beverages, the hits just keep on coming, and I don't mean that in a good way. The threats to the makers of nutritionally-challenged products are numerous and have been well documented, as the nation, and indeed the world, remains gripped by the obesity epidemic. So what's the latest?

    Not only are junk foods being phased out of the nation's public K-12 schools by the beginning of the next school year, but now the entire idea of advertising to students is under fire. The White House is moving to phase out junk food advertising on school property, including scoreboards at athletic events which has been a source of revenue for cash-strapped athletic programs. This means that Coke won't be able to advertise but Diet Coke will. Interesting.

    The other major development this week involves an announcement, again by the White House, that Nutrition Facts Panels on products might be significantly revised for the first time since 1994. The proposal will make it easier for consumers to decide which foods are healthier than others including a much larger font size for calries, a line for "added sugars", and new rules regarding serving sizes. Of course none of this will happen without input from industry trade associations and consumer groups, but once the FDA has its sights set on something, it usually happens.

  • Tacos For Breakfast

    In the fast food business, breakfast has always been the most difficult meal for marketers to figure out, and it seems that McDonald's has dominated the market for quick breakfasts for decades. Today, most fast food brands are offering breakfast in one form or another, but no one player has emerged as a threat to the market leader's position.  Enter Taco Bell.

    On March 27, Taco Bell (a division of Yum! Brands) will officially penetrate the breakfast market with several offerings including the A.M. Crunchwrap, a product designed to appeal to the 20-something young male. And if sausage and scrambled eggs wrapped in a waffle sounds good to you, then you are in luck, since the company will offer that too! The company says that it plans on being a strong number two after McDonald's in this space 9and will serve breakfast until 11am), so don't expect the company's marketing efforts to be half-hearted. It's going to be all out war. The industry hasn't changed much since Wendy's dethroned Burger King as the number two fast food brand overall, so perhaps Taco Bell can shake things up some.

  • Nature Versus Retailer

    Unless you operate a snow plow or a ski area or sell winter weather products, if you are a retailer it is highly unlikely that you get excited when the weather turns bad. Bad weather is bad business, generally speaking, and this rule of thumb becomes starkly apparent when the weather is bad for an extended period of time. Yep. I'm talking about the East Coast. And it's not just snow, but also cold weather that keeps the shoppers away.

    Larger retailers have the size and scale to weather the storms, so to speak, but what about small businesses? As you might surmise, they are taking quite a hit this year. In a recent survey, 30% of small business owners and executives across the entire U.S. have lowered their sales forecasts as a result of the rough winter in the eastern part of the country. The western half, on the other hand, is experiencing an unusually dry winter. Indeed the bad weather out east is projected to subtract .3% from our Gross Domestic Product (GDP), which is rather significant, and exactly what our sputtering economy did not need.

    The good news in all of this is that people still shop online when the weather is bad, and online sales in general continue to increase every year, so the weather is likely to play a lesser role in the years to come as far as retail sales go. But that's the consumer end of things. The logistics of the supply chain and delivery of goods, however, is another matter entirely.

  • Twitter's Ostrich in the Living Room

    Think Twitter can ever match Facebook as far as having more potential for generating advertising revenue? Well, hashtag this. It ain't gonna happen. You see, Twitter's primary problem is reaching mainstream users, and the company has failed to reach expectations as far as "monthly active users" is concerned. Instead of the projected 400 million active users at the end of 2013, Twitter reported only 241 million. That's no small potatoes, but advertising on the internet is not yet as lucrative as print and broadcast media, and a successful model to draw advertising dollars may require more eyeballs. And Facebook has many more eyeballs. What's the problem?

    Many experts feel that the 140 character limit is in and of itself entirely too limiting, especially for the over-40 crowd. Other reasons may involve the difficulty users might have in forming relationships through the medium (Facebook does not have this problem) and the amount of perceived noise. I find the latter reason the most compelling. The name "Twitter" says it all, and I always get images of many birds tweeting at once, all in their own particular idiom. How many people really want to tune into all of that chatter? How many people really want "followers"? Marketing research tells us that only 10% of the general population can be considered opinion leaders, so how many of these folks want to become "followers" and read the tweets of others? And how many followers who are not extroverts by nature really want to share their news and views with the Twitterverse? Ultimately the noise may prove to be too much for too many. Or perhaps another disruptive technology will emerge.

    Methinks the market for all of this is rather limited, and Twitter may have found the ceiling on its current business model. Marketers have looked at this medium as a "must-address" for the past few years, but ultimately the lack of mass appeal may remove some of the luster from Twitter. And when marketers with limited budgets are forced compare the advertising possibilties with the likes of Facebook, there is little question as to where most would place their ad dollars.

  • Gap Embraces Minimum Wage

    With major efforts underway by many in government to raise the minimum wage to $10 from the current $7.25 an hour, it isn't surprising that a major retailer has stepped up and announced that it would voluntarily raise its wage to meet the proposed standard. Gap does this for a few reasons. For one, it is probably only a matter of time before the minimum wage is in fact increased, so why not be proactive and begin to plan for that inevitability? It's usually a good idea to do that. Second, the company's image stands to improve, especially among the its more "progressive" consumer base. But what about the hit the company might take in the way of profits? Surely increasing labor costs must result in lower margins and therefore a devaluation in the stock market. Can Gap make up for the loss?

    Of course they can and must, and this should also not be a surprise to anyone who actively scans the overall marketing environment or understands the nature of a publically-traded firm. It is no secret that technology, particularly the touch-screen tablets that have become so ubiquitous, is "creatively" destroying many aspects of the service industry. Semi-skilled jobs are being phased out left and right due to a combination of rising employee costs, spectacular technological advancements, and widespread consumer acceptance of said advancements has created a "perfect storm" situation. All estimates now point to up to a million jobs being lost due to the proposed increase, and that is just in the short term. The wage increase will almost certainly speed up research and development on even newer labor-saving technologies resulting in even more "creative destruction".

    So I would expect that Gap will find ways to begin phasing out entire job categories and replacing personnel with technology where possible. We've already seen it in the airline industry. Remember how well-staffed those check-in lines used to be? And Chili's, among many others, is already beginning to use tablets at the table. So much for many of the relatively well-paying server jobs we've all become accustomed to. the fact of the matter is that increases in productivity (output per worker per hour) should more than compensate for the labor cost increases experienced by Gap, and any such increases would be phased out down the road anyway as technological advancements continue to present themselves. So, higher wages but fewer jobs might help the company overall. This sort of thing will certainly happen across the board in the retail and hospitality professions over the next several years, but what does it all mean for customer service and the marketer's ability to deliver on expectations? We shall see.

  • Chipotle's Original Content

    It was really only a matter of time before marketers of branded products figured out how to optimize the use of video on the internet. Sure making really funny videos that you hope will go viral on You Tube and perhaps catch the attention of the "journalists" on CNN is all well and good, but better publicity might be generated from original content produced by the marketer itself. Enter Chipotle, a company know for shaking things up and making noise.

    Chipotle has long positioned itself as a purveyor of better burritos that feature sustainable, locally-produced ingredients, and has long been associated with a rather quirky approach to advertising. So the company decided to produce its very own four-episode comedy called "Farmed and Dangerous", which airs on Hulu, and presents a narrative that at the same time criticizes industrial farming practices and espouses the virtues of smaller scale agriculture.

    This development may usher in a new era in product integration, moving from jamming the product down the throats of consumers through multiple impressions and towards a more subdued, subtle approach. Chipotle has alrerady made a few of these videos in the past, so one can expect that marketers are pleased with the results of this non-traditional marketing approach thus far. The company clearly endeavors to facilitate a dialogue, which stimulates word of mouth and generates media publicity, in hopes that the consumer will come to her own conclusions. In this way, Chipotle also cost-effectively engages in advocacy or "values branding" at the same time. The company isn't likely to make any friends at ConAgra, but who cares? Small scale is what the brand is all about. Sounds pretty smart, if you ask me. 

  • "Rad Red" to Target Millennials

    The Millennials (also know as Gen Y) are finally coming of age, as the oldest members of this age cohort turn 34 this year, and this means that the more "grown-up brands" (for lack of better terminology) will begin to target this huge consumer segment. People in their 30's don't act like people in their 20's, or so we would like to believe, and with getting older there are numerous changes in what is known as the Family Life Cycle. So Radisson is the latest organization to develop products specifically for this target market and, as such, will roll out "Radisson Red" a chain of hotels that will reach 60 locations by 2020 and will feature services that Millennials reportedly want.

    The brand is currently known as a fairly no-frills operation, and so this strategic move is all the more interesting for it. The new hotel chain will feature large open areas, a loft-style layout, 24-hour deli where you can order pre-made sandwiches, a service where you can arrange to have family photos beamed to your television set so that you can feel more at home, custom mini-bar requests, a la carte pricing, and numerous other changes. It sounds interesting, and one would hope that the company conducted extensive research before developing this new product, and that they know what this group really wants. Are the Millennials really that different from Generation X (ages between 35-50)? It looks pretty gimmicky to me, but perhaps this huge group of consumers will be delighted that their generation-specific needs are being addressed, whatever those might be. Red seems to be a big color for some reason. Adding a bunch of services is all well and good, but this struggling generation is probably most interested in price, so hopefully the new brand has addressed this issue.

    Radisson isn't the first to target the maturing Millennials, as Marriott recently teamed up with a Spanish outfit to co-operate a hotel chain in Europe called AC Hotels (coming soon to the U.S.), and you can be sure that we will start seeing increasing amounts of  grown-up products targeted to Millennials as they finally form their own households and their own consumer preferences. The youngest member sof this generation are becoming teenagers so marketers have plenty to work with.

  • Tide Changes Strategy

    Proctor & Gamble knows that they have a wonderful brand in Tide. Extensions have largely been successful, and higher income consumers have embraced the brand as the company had intended. But maintaining the consistent levels of growth required of publically-traded companies can be difficult, and brands must continually evolve to meet growth and profit projections. How should Tide grow?

    The stain remover stick and pods were excellent new product introductions, and new price points were achieved, but it was just a matter of time before Tide would be tempted to address a new market with a new product, a strategy known as "diversification". So the company introduced a lower-end product called Tide Simply Clean & Fresh, which as we marketers know, can threaten to dilute the brand equity built up over the years. This might not be the best strategic move for the high-end brand, especially considering that the parent company, P&G, already has two lower end laundry brands, Cheer and Gain. So a smart marketer might suspect that some consumers might migrate from the Cheer brand up to the lower end Tide product, which as we know is called "cannibalization". Customers move from one company-owned product to another and there is no net gain in customers. This might be a move that P&G comes to regret.

    But these aren't the only potential problems with this new strategy. In order to offset the lower profit margins that the new lower-end Tide product will achieve, Tide has also "downsized" some of its fancier Tide varieties, a change in packaging that doesn't result in higher prices for the product, but does result in a slightly smaller, almost unnoticeably different package size. So, yes, high-end Tide consumers will pay more to subsidize the lower-end product designed to expand Tide's market. Will these high-end consumers go elsewhere, or are they are price-resilient and brand loyal as Tide thinks they are? And will the expansion of the market into a lower-end consumer base result in dilution of the high-end brand image Tide has worked so long to achieve? Notice that the colors of the lower end product are different than the Tide's usual signature colors, and also bear in mind that Whole Foods Markets, a premium natural foods retailer, is also facing these same issues as pressures mount to offer discounts in order to expand their market. One would hope that all of these marketers have anticipated these potential pitfalls and have planned accordingly.

  • Dr. Pepper Tries 60 Calories

    Well, the full strength stuff isn't doing very well, and neither is the sugar-free variety. As consumer tastes have shifted toward other types of beverages, the carbonated soda category has been shrinking for about a decade. Concern about obesity is mostly driving the shift away from the sugary stuff, and concern about the healthfulness of artifical sweeteners is mostly driving folks away from the diet products. However, the shifting tastes of the vast Millenial generation coupled with the sheer availablity of substitute products have marketers in this declining category scratching their heads. So what is a Pepper to do?

    Try something in the middle. As such, the company has announced that it is formulating a 60 calorie option for some Dr. Pepper, Canada Dry, and 7Up products made with natural sugar and stevia, a recently approved natural sweetener. Notice that high fructose corn syrup is no longer in the mix. This ingredient has seen much scrutiny over the past few years, and its use is on the wane despite being about three times cheaper than regular sugar. And since consumers prefer the taste of sugar to high fructose corn syrup by 4 to 1, this product could be a slam dunk.

    If it is indeed successful, other products in the category will follow suit, and perhaps the real sugary stuff and the diet stuff (including the Dr. Pepper 10 calorie product) will eventually disappear from the shelves. That may be a long time away, but there is no doubt that something must be done to turn around the fortunes of this once growing product category. Consumer behavior and attitudes cannot be ignored for long!

  • The Reformulation Continues...

    The health and wellness trend we have been experiencing here in the U.S. for the past two decades has resulted in the meteoric rise of the natural and organic products industry, as well as some attempts by non-natural players to make their products healthier through reformulation. The removal of trans fats from most products is nearly complete after certain states and regulatory agencies set their collective sights on that rather unhealthful ingredient many years ago. And other ingredients are also being slowly removed from the supply chain, as regulatory agencies step up scrutiny of certain ingredients in both food and personal care products.

    The latest move comes from Kraft, who has voluntarily removed sorbic acid, an artificial preservative, from its cheese products. The company says it is replacing the ingredient with natamycin, a natural mold inhibitor, after it became common knowledge that the former ingredient is also used in yoga mats. Yum! Even fast food chains are getting into the act, with announcements by Subway, Chik-fil-A, and Pizza Hut who have announced the removal of ingredients such as high fructose corn syrup, azodicarbonamide, and artifical dyes.

    The removal of potentially toxic and/or harmful substances from the products we use everyday, called "green chemistry" by some, is nothing new. Lead used to be an ingredient in a lot of what we used to buy, for example, and we know that the entire natural products industry positions itself on offering products that are free of these highly questionable substances. What has changed is the level of government action. It is rising and doing so rapidly. Companies are advised to be proactive and remove these ingredients BEFORE the government tells them to do so. A short online search will expose a large number of potential candidates for government regulation. Such a strategy enables the company to reformulate on its own terms greatly increasing the chances that its consumers will accept the changes to the product.

  • "Dumb" Starbucks A Dumb Idea

    The community of Los Feliz, California, at the foot of the Hollywood Hills, has a new landmark, but it is likely to be one that is extremely short-lived. "Dumb Starbucks" opened its doors to much fanfare featuring the Dumb Venti, Dumb Caramel Machiatto, and many others. This is all fun and games, but there is only one problem. Intellectual property.

    The store's employees weren't talking, but there was a handy Q & A sheet that defended the use of the trademarked property under the guise of what is known as "parody law", and the products sold at the store would therefore be considered "art" and therefore not subject to licensing rules.  Huh? Only in California. And perhaps Oregon. And New York. Colorado. Ok. This type of weirdness could happen anywhere!

    The "Dumb" marketers wish to use Starbucks' intellectual property under "fair use"  and the only way to do that, they say, is to parody the well-known brand. Hmmmm.. But the bottom line is that the company is making money off of someone else's hard work, and our commerce laws have been designed to protect against this. These people are making money of the Starbucks brand name...pure and simple. It will be interesting to see how long this place stays in business, or if California proves that the stereotype of it being a terrible place to do business is really true!

     

  • The Roar of Lower Prices?

    Let's hope that this is the beginning of the end for high ticket prices in the NFL. Not only did three of the most important home playoff games fail to sell out (it took valiant efforts by sponsors, broadcasters, and others to avoid the dreaded "blackout"), but the Big Game itself is rumored to have had some unsold seats as well. Shouldn't  ticket prices finally fall? But this is sports, and not a regular consumer good. Are lower prices the shape of things to come in pro sports?

    The Detroit Lions think so, and I can't think of a more appropriate franchise to experiment with what is known as "variable ticket pricing", wherein the price is shaped by anticipated demand for particular contests. This has been in full effect in other major sports leagues, but as of yet it has only resulted in increased ticket prices for high demand games, but not reduced prices for games no one wants to see.

    The Lions are not a horribly-performing product, but the fan base is dwindling with the fortunes of the Detroit area. First they will reduce the prices of preseason tickets by 70%. Theoretically, that price will rise as demand dictates. Or perhaps it won't. But regular season games will be priced at two different levels, premium and non-premium, which is a new strategy for a product that produces only 10 home games, eight if you don't count preseason. Low inventory levels is the reason that the NFL has not instituted this pricing strategy in the past, since other sports have many more home games to  worry about, but it appears that too many folks now eschew the live event for the privacy of their own domiciles. This is happening in all professional sports.

    Ultimately prices will have to come down for the live event, but the NFL is stubborn and after record consumer prices were realized in this year's Super Bowl, the reality of lower prices seems elusive. But the destructive power of technology coupled with the increasing revenues generated through television and other mediums is hard to ignore, and the industry will surely have to adapt..The Lions are the first to drop prices, but only for the preseason. And, as season ticket holders know, that hardly counts for anything.

  • "Minifigs" On The Big Screen

    On the heels of the opening of The Lego Movie it is important for marketers to ask, "Why haven't they done this before?" It's a fair question considering that there are billions of dollars on the table and it seems that every possible exploitable property has already been previously exploited. Not so for Lego, and now is the time for the beloved "minifigs" to shine.

    The issue up until now has been control. Control over the production means control over the brand, and this is always something a marketer strives for. The movie will make hundreds of millions and the company will likely sell a huge pile of toys as a result including Lego sets, books, games, collectible mini-figures, and a whole lot of apparel. The company says the movie is about building its brand, and that may be true, but it is of course ultimately about driving revenue, which is what marketers really do. 

    The bottom line is that a global franchise will be built around this film, which will likely include several sequels. We have seen this occur with Harry Potter, Batman, and so many others--franchises that were able to make money without losing control over their brands. In addition to addressing existing markets, the movie gives Lego the opportunity to address emerging markets with huge groups of consumers like China, Brazil, and India. And what marketer doesn't want that?

    We have seen this kind of thing happen before and there is no reason to assume that this time will be any different. Let's see what the movie brings in in its first week.

  • The Smart Bra

    It should not be surprising at this point that scientists can make anything "smart", and so marketers are inevitably tasked with trying to find new uses for the technologies. Studying physical reactions to stimuli is not a new science, and often our biochemical reactions, such as levels of certain hormones, can tell us much about ourselves and can tell others much about us. Enter the smart bra. Technologically driven underwear already exists in certain forms, but this is something completely different.

    Ravijour, a company based in Japan, has announced the invention of a device called "True Love Tester", wherein a Bluetooth-equipped bra measures the presence of a group of hormones called catecholamines, which the designers say "can only be secreted when you're truly in love". The bra transmits data to a mobile app (of course!) and your "True Love Rate" can be calculated. No kidding. But it's supposed to be even smarter than that. As an extra safety precaution, it can only be unhooked if true love is present. I am not making this up.

    Will it work? Who knows if it will even come to market, but the product claims alone would attract immediate scrutiny from U.S. regulatory agencies. Just how does one prove that the increase in this group of neurotransmitters is related to true love being present? And, of course, we have no idea how long true love might last. Only the EHarmony guy knows that stuff. One thing is for sure, technology sure is fun, and there may be some science behind this idea. Who knows what may come next, but we do know that love sells. Happy Valentines Day.

  • CVS Blowing Smoke?

    I don't think so. The large pharmacy chain recently announced that it would forgo $2 billion in annual revenue and will no longer sell tobacco products. The company generates $123 billion in annual sales, and so this isn't likely to break the bank, so to speak, but it is a significant move by a market leader that may have implications for not only other drug store chains, but also many other types of retailers.

    Clearly CVS can improve its image by making this move since cigarettes and chew are not product categories that most of us would consider to be "healthful". Most stores still carry these products, not because they are wildly profitable, but because they have always done carried these products. Cigarettes used to be a much greater part of the social fabric, and the majority of Americans used to smoke. With rates declining below 20% and still falling, it appears that this product category is certainly well entrenched within the decline phase of the product life cycle. And companies will often delete a product during this phase so that they can divert resources to areas that afford more opportunity. If this is true then CVS is simply the first major chain to do the inevitable.

    The fact of the matter is that CVS intends to become more than just a drug store, capitalizing on the new health care law. Doctor's visits, for many reasons, will become more complicated, despite what politicians have promised, and CVS intends to exploit an opportunity to provide some services that traditionally require a visit to the family doctor. Expect the chain to expand its in-store clinical services and become a one-stop-shop of all sorts of basic health care needs. A bold move, but one that is likely to be successful and therefore imitated.

  • A Trip To Mars

    I went to the game. It took several hours to get in to the stadium. It took hours to get out, and most out-of-town fans were stranded in airports all during the next day due to a storm that arrived four hours after game time and dumped a foot of snow on that God-forsaken place in an eight hour period. Oh sure the weather was nice during the game so the NFL can claim the event a success, but it got very nasty real fast, as it usually does this time of year, after the game. Tickets were double what they were in 2013, beer was 414, and I ate a $22 cheesesteak. Oh, and they ran out of Budweiser, the sponsor of the event, by halftime, obviously underestimating the amount people would drink both before and during the game. Perhaps New Jersey wasn't such a good idea after all. Let's not do that again. So it was a debacle in every sense of the word (unless you are a Seahawks fan), with the exception of a few isoloated highlights. One of these was the halftime performance of Bruno Mars.

    Granted he was already a rising star before his spectacular performance, but something clearly happened last Sunday. He became a super star! Although Mr. Mars, a native of Hawaii, didn't get paid for his performance, he will surely reap marketing benefits in both the near and long terms. Consider this, Madonna increased her sales of digital tracks by 165% after her 2012 performance, the Black Eyed Peas 107% and Beyonce saw a 68% increase. Even the half-century-old band, the Who, increased its sales by 392%! And Bruno Mars is going on tour real soon. How many more concert tickets do you think he will sell now?

    The Super Bowl is not only a tremendous marketing platform for sponsors and advertisers, as we all know by now, but also for the halftime performers. Perhaps that explains why they are willing to go thorugh so much trouble to play only 15 minutes of music. Regardless of the outcome of the game, and this was one of the very worst contests I've ever witnessed, people do look forward to the halftime show. It's become as big a deal as the advertising and almost a big a deal as the game itself.