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.
What's the deal with all of these hybrid foods all of a sudden? Is the "cronut", a cross between a croissant and a donut that was introduced last year, going to be around in five years? Ten? What about the "wonut", which is a deep fried waffle/donut hybrid topped with sprinkles and icing? Sure these products are fun for a while, but will they stand the test of time? Should folks invest in a cronut or wonut franchise business right now to get on the cusp of an emerging trend, or will they lose their shirts the way many people who invested in the gourmet cupcake craze are currently doing?
Hybrid dishes are truly fashionable these days, but remember that Taco Bell has been doing this successfully for years. Burger King has been successful with its Croissan'Wich, and Carl's Junior is test marketing a "bisnut" (biscuit and donut hybrid). The chili dog is a hybrid food, and so is the popular chicken and waffles dish served at hipster joints throughout the U.S. (invented by freed slaves in the north after the Civil War), so we know that some of these products do actually make onto the nation's long-term menu. But trying to figure out which ones will work is probably an impossible task. Indeed, consumers, especially younger ones, are increasingly interested in culinary variety, so marketers must endeavor to find new combinations of ingredients to satisfy emerging tastes, but focus groups and surveys might not be very useful in making these decisions. Who ever asked for a company to develop a cronut, or a chili dog for that matter? The bottom line is that for many marketers, these products don't have to stand the test of time as long if there are new ideas in the pipeline. These fads come and go. Some might be introduced purely to generate publicity (and so could be considerd a pure marketing expense), and success would be just an added bonus.
When scanning the marketing environment, the savvy marketer is often tasked with separating fad from trend. What's the difference? A fad is a short-term phenomenon (like the Macarena back in the day), while a social trend (health and wellness attitudes, for example) is something that will last quite a while. Unless a marketer has created the fad or is early enough to gain first mover advantages, he/she should probably ignore it. Trends, on the other hand, should be anticipated and ultimately addressed by developing and implementing an appropriate marketing mix. It appears that the demand for hybrid foods as a whole is not going to go away, but the majority of individual product introductions, as is the case in every product category, will ultimately have a very short life cycle.
There is no doubt that the craft brew industry (comprised of brands that make less than 6 million gallons annually), is in a state of high growth. While the overall domestic and imported beer category continues to contract as consumer tastes continue to respond to the incredible proliferation of alcoholic beverages we have experienced over the past 30 years, these upstarts have demonstrated that the category is indeed here to stay.
Colorado alone now has about 200 breweries, and most of them not only foster a local tap-room customer base, but also strive to get distribution in bars and liquor stores both regionally and nationally. The trouble? There is only so much shelf space and there are only so many tap handles available, and space is becoming increasingly scarce. Over the past 25 years, the fraternity of craft brew owners has been a friendly one, hanging out together, organizing beer owner bike tours, selling equipment to one another, exchanging recipes and other trade secrets, etc. And this is a nice thing that tends to happen in every "cottage industry" when it begins to gain momentum. "A rising tide raises all boats", they say. The trouble? Craft beer is no longer a cottage industy, but rather a bona fide segment of the alcoholic beverage category, so at some point these folks aren't going to be best buddies any more. It's simply bad for business.
It is highly likely that the rapid growth of beer suppliers in this category will eventually abate as some well-financed dominant brands emerge, and all of this despite the fact that the market will continue to grow nicely. Only a few players will be able to maintain a national presence, and the regional fight will begin to get increasingly fierce. I saw this happen in the natural/organic products industry in the 90's. We were all great friends for decades until people started making millions of dollars, and then the gloves came off as investors got more serious. And these were hippies! What's in store for these brewers who have largely enjoyed unfettered success? The rules will change and there will be a major shake out, as happens in every high growth industry that begins to mature. Many brewers incorrectly believe that their true competition is Budweiser, Miller, and other giants, but this is a very myopic way of looking at the competition. Craft brewers aren't converting domestic beer drinkers as much as they are gaining new Millennial customers as they come of age. And the competition for these fickle palates, who seem to largely prefer overly-hopped, high alcohol concoctions, is getting heavier every day. The big beer companies will continue to acquire and create new craft beer brands to compete in this rapidly-growing segment, and so in this way they are true competitors.
But maturation in the craft beer category is many years away, and I don't expect the big shakeout to happen for a while. Of course another recession can always speed things up, but the industry life cycle is impossible to avoid. Who will the big winners be? Will your favorite brew be around in five or ten years?
As the fast-food industry faces a major worldwide slowdown, Chipotle has been a remarkably bright light in an otherwise dismal picture. Food costs have been rising, product quality issues have been well-publicized, and newer competitors are having what appears to be a sustainably large impact on the industry. Consumers, on the other hand, are thrilled that they have numerous choices to help keep prices down and product quality high. And man do they love their Chipotle burritos.
The Denver-based company has increased sales to over $4 billion this year, a 29% jump from last year, and has become the dominant player in the category over its 11-year existence. All of this despite having to raise prices due to the rising food costs we have been talking about for months. And it looks like investors like the products as much as consumers, since the stock price has hit a high of $659.77. Yep. You read that right. The burritos may be affordable, but the stock certainly isn't. So what's the fuss about Chipotle?
No one really knows why the company is so successful. Marketers don't appear to be doing anything terribly different from what any other players are doing in the Mexican-style fast food category. It is a nice brand and a good product, but $650 per share?!? Yet these burrito slingers do in fact appear to be unstoppable. Perhaps some analysis will emerge in the near future so that competitors can strive to emulate these successful marketers. For now, we can only make educated guesses.
Seventh Generation, a natural household products company based in Burlington, VT,, has long been a leader in environmentally-friendlier cleaning products and diapers, but for decades has chosen to focus on several core products rather than branch out into other categories. Such focus can be a good thing, but innovate a company must! So, like many organizations, Seventh Gen has chosen to acquire existing brands rather than develop new products in-house, another example of the "make or buy" decision that faces marketers at every level. The latest move involves buying Gamils, a maker of stainless-steel tea infusers and a paperless single-cup coffee brewer. Hot items indeed.
This move seems to make sense, and the CEO, who was in charge of personal care pioneer Burt's Bees prior to it being acquired by Clorox several years ago, knows how to manage the Four P's. He plans to acquire several more businesses in the future, a portfolio that he hopes will eventually comprise one-third of total revenue for the company. It is likely that Seventh Gen, with its brand equity and entrenched distribution relationships, can do even better than that with new products, both existing and not yet on the market. Many natural and organic products brands before it have successfully acquired small brands to the delight of customers and shareholders. Annie's Homegrown, Hain-Celestial, and Boulder Brands are fine examples of this strategy, and with higher volumes, these products often come at lower retail price points. Some established brands might be expensive to acquire, but the products are already on the market, which is a huge advantage over developing something in-house that might not even make it past the concept testing phase of product development, let alone onto retail shelves. This should be a fun company to watch.
Consumer palates change over time. What was once a popular flavor may quickly or slowly fall out of favor, and so marketers must consider this dynamic when they develop new products as well as when they decide to harvest/delete old ones. Lay's, a flagship brand of Frito-Lay, which is a division of PepsiCo, has been very active in this regard. Yet instead of developing a new product in the company basement with R&D folks in white coats milling about, marketers have engaged in a second annual "Do Us A Flavor" contest. This PR stunt engages consumers in a competition to win $1 million if their potato chip idea is sold nationally.
In all truthfulness, Lay's develops most of its products using those aforementioned people in white coats, but this fan engagement program for products can really help create much-needed social media buzz and perhaps even send fans to retail locations in search of certain flavors. This year's finalists include a coffee-flavored chip as well as Mango Salsa, Cheddar Bacon Mac and Cheese, and Wasabi Ginger. Add the winner to a host of recently-introduced Latin-targeted flavors and upcoming Korean Bbque and Thai Sweet Chili introductions and you have a foodie's snack paradise.
Will it all work? Of course not. Roughly 80% of new products fail within five years so many of these will be misses. But it only takes a couple of hits to keep a brand on top, and Lay's appears to be rather ambitious in finding a new mix that will resonate with enough consumers. Remember that the company is well-funded and has ample shelf space in stores so it can afford to make some mistakes. And it is certain that a few of these flavors will find their way into the snack food aisles of most grocery stores for the long-run. Let's see which ones get the long-term contract!
Is soccer here to stay? Is this finally soccer's year? Should Americans start calling it football and rename our beloved sport? The answers are yes, no, and no. Core fans have been predicting the rise of "The Beautiful Game" here in the U.S. since Pele donned cleats for the New York Cosmos in the late-70's and drew 40,000 fans at a clip. But the NASL was doomed to fail and it wasn't until over a decade later that Major League Soccer became the league that would eventually obtain enough fans to not only survive, but also expand moderately every year. But this growth hasn't been rapid, and let's face it, we Americans have quite a few choices for entertainment that residents of other countries do not have. For instance, we have a dozen professional sports franchises across a variety of sports in the Denver-area alone. How can soccer compete?
Some numbers are good. Viewership for games featuring the U.S. broke previous records set during the last Cup, and the availability of every game on ESPN's flagship station) during daylight hours certainly helped drum up viewers for all of the games. With record numbers of people not working these days, it wasn't hard to find people with free time packing the British-themed pubs and sports bars. Most of these people are what we call "Patriots" in sports marketing and are unlikely to watch any team other than the U.S. But MLS stadiums are rather full thse days with people who truly love the game ("Appreciators" in sports marketing lingo), which is a very good sign. But does this trend have staying power?
Yes it does, and as the quality of MLS improves, the sport will gain more viewers. But for now, English Premier League games, which are of extremely high quality, routinely outperform MLS games in terms of U.S. viewership. This might be good news for soccer in general, but it's bad news for lower quality leagues like Major League Soccer, the new NASL, and the USL (our three U.S. leagues). The quality of play is improving, but it is slow and steady. Only 19% of sports fans consider themselves fans of professional soccer, but that is up from 16% in 2006. MLS viewership is up 6% from last year. So the growth is not exactly staggering, but it is there nonetheless. Investing in youth leagues worked for the NBA in Europe, and it should work for soccer in the U.S. Your best fans are always former players, so this market must be nurtured in a big way. And more effort should be made to teach the rules and strategy of the game, so we can all become informed fans. MLS should also consider a more regular TV schedule as well as investing (without breaking the bank) further in star power a la David Beckam. These three steps should spur even more growth. In the meantime, the sport continues to become more popular with native born Americans, and the continued proliferation of immigrants moving here from soccer-loving nations will further help matters. As for me, I will wait for the next U.S. qualifier match before I get excited again, and I will watch the English league (as I have done for over 30 years) when there is nothing else on.
AMC Entertainment, operator of over 5,000 theaters, is in the midst of making a rather large bet in an industry that has seen flat revenue growth for many years. Low quality and the proliferation of home theater equipment are two primary factors driving this trend, and without some major changes in the industry, the poor performance is likely to continue. So, if you can't control the core product or the availability of substitutes, what is a marketer to do?
Change the peripheral product. Just as in spectator sports the facility is of paramount importance in keeping customers happy. And the outdated format of filling theaters with row upon row of noisy customers is no longer working, since theaters are rarely even half full these days. It can be a very annoying experience. But luxury has long been a niche market in this industry, with a few high end places serving beer and good food, etc. The concept is nothing new. What is new and exciting, however, is a major player like AMC spending up to $500,000 per screen to remove current seating and replace it with Lazy Boy-style recliners. The result will be two-thirds fewer seats, but for folks who do show up, it will no doubt be a much improved viewing experience. Enjoy the comforts of home while watching the latest three and a half hour Kevin Costner-produced film!
AMC is only doing this in 40% of its locations, but so far revenue is way up. If it continues to work, expect AMC to re-fit all of its theaters and competitors to follow suit. Many of these locations are rather dated and are in need of remodeling/demolition anyway, so the infrastructure investment is necessary no matter what. The company will also likely have to raise prices (again) but if the customer perceives increased value, this change will likely be OK with most consumers. And perhaps the concessions shoul dbe much higher end. Maybe going to the movies is no longer something people do fairly often, but like a baseball game, something that folks occasionally do for entertainment. Look at what people will pay to go to a professional sporting event these days, and some of those games (especially the ones featuring the Colorado Rockies) are simply horrible to witness. Just like bad movies. So why not try something that has been previously successful in a small, niche strategy and apply it to this new era of movie-viewing? It just might work.
One of the ways a company can grow is to develop a new line of products, market them, and foster customer acquisition and retention through a deft combination of both push and pull marketing strategies. But that sounds so hard. And time consuming, And expensive. A better way might be to simply acquire an already established brand rather than start from scratch. Lots fo small companies are always ripe to be acquired as founders decide to cash out rather than sell out to the public through an IPO) or remain a privately held organization. This is the way that Oracle has done it for decades with dozens of acquisitions per year, and there is much evidence that Apple, Yahoo, Cisco, and other tech behemoths are pursuing the same approach. And what is good for branded product manufacturers in this case is also good for large retailers.
As such, Kroger recently agreed to purchase Vitacost.com, an online seller of nutritional supplements and other health and wellness offerings. Obviously this provides the grocery chain with a much more pronounced online presence almost overnight as well as opportunities to expand beyond supplements into all kinds of other goods now sold in the brick and mortar store. The company's direct-to-consumer model, which is becoming increasingly important in grocery, will likely be greatly enhanced by this move as well. It is no secret that many traditional grocers have struggled to gain traction online as the Amazons of the world were first movers, and Kroger is no different. It might be a little late, but the company is very large and well-heeled, and if they don't tinker too much with what Vitacost.com is currently doing, it could be a nice deal all the way around. Clearly Kroger's customers will benefit from a broader choice of products both in the brick-and-mortar stores as well as online.
Much has been written about the generation between the ages of 14-34, or Generation Y/Millennials, and very little of it has been positive. It hardly seems fair to indict an entire generation whose only true commonality lies in when they were raised, but statistics continue to reveal that history's largest group of consumers is having great difficulty growing up into the socialized consumers that marketers want them to be. This is largely a case of "arrested development" as over 40% of adults between the ages of 18 and 30 still live with mom and dad. This lack of social mobility has far-reaching effects as young people fail to form households of their own. Many of these grown adults still aren't making their own purchase decisions, and this is unlike any previous generation in modern times, which is challenging for today's marketer. Think Millennials aren't dramatically changing things? Consider this:
*A generation that was transported by stalwart "soccer moms" is now rewarding the sport with unprecendented interest in the World Cup. Funny hats, scarves worn in 90 degree weather, a host of chants, and lots of youthful American patriotism have filled the streets for the past few weeks? High unemployment, massive underemployment, a concentration of jobs in food service, and other factors have provided a ready audience for these mid-day broadcast matches. Will the fervor last? History shows that it will not, which would make this huge burst of soccer excitement nothing more than a short term fad. The sport will nevertheless continue to grow, but it will do so slowly.
*The military has finally sounded the alarm after two decades of seeing the pool of potential recruits become increasingly unfit for service. 71% of youths, according to the military, do not qualify for military service due to obesity, mental health issues, drug use, felony convictions, body art in unseemly areas, and other reasons including the fact that 25% of potential rcruits cannot pass the basic reading and tests. Only 1% of kids are both interested and able to serve, which if you do a little math, is not nearly enough to staff a U.S. military of 1.5 million. Look for a major military marketing campaign to attract those fit for service.
*Student debt has increased three-fold, while the number of employed young people has plummetted. Most former students cannot pay back loans with their sociology and humanities degrees and feel that they must therefore live at home to "save money". Proposed increases in the minimum wage are predicted to destroy over one million jobs right away, and most of these jobs are entry-level positions traditionally sought by young people. Touch screen ordering systems should destroy the majority of server positions over the next 20 years which will further depress the ability for young people to get started in life, and will make aquiring true hard skills even more of an imperative.
*Golf has lost 22% of its players over the last 10 years. Millennials are eschewing the game, and the sport is actually considering a 14 or 15 inch cup as well as more 9 hole formats. The game is hard, expensive, and takes a long time to both learn and play, so count most young people out.
*We all know about baseball attendance, which continues to drop noticeably, hampered by the geologic pace of a game that now lasts well over three hours. Fidgety young people have trouble with this sport. As a result, stadiums such as Coors Field in Denver have taken to removing large sections of seats in favor of a club-like bar atmosphere where young people can safely mingle without having to pay attention to the action on the field. The one at Coors Field is always full and the stands are rarely so. But if you aren't watching the game, what is the point of paying for a ticket to stand around and drink eight dollar craft beers in the heat? Is this going to attract a new generation of consumers? The novelty of these facilities will wear off, as will the interest of younger consumers.
*Softball is apparently not immune to the shifting tastes of the Millennial generation. Only 12% of U.S. corporations now sponsor softball teams, down from 29% seven years ago, and this almost certainly due to a lack of interest among younger workers in this sort of team building activity. Participation is down dramatically (56% over the past 20 years) as a result. Some facilities have even added dodgeball, whiffle ball and other unchallenging children's games to attract younger customers.
*Let's not even mention the dependence on technology and social media which is resulting in greater instances of depression, obesity, predatory crime, and a host of other social problems.
I could go on and on, but I will stop here, as I don't want to appear to be too much of a grumpy 45-year-old. My generation hasn't done that much better, but the overwhelming amount of negative spin with regard to such a large and influential group of people is beginning to really concern me. Generations do dramatically change the marketplace as their consumption patterns are absorbed into the popular culture. This generation is certainly like no other before it, and the long-term effects of its behavior (both negative and positive) will be felt for generations to come. The real issue is that, right or wrong, Millennials suffer from a collective crisis of image management. Can it really be this bad? Perhaps the entire generation should use their powers of social media manipulation to embark on a large-scale, positive, image-building PR campaign. It will be up to them to demonstrate the positive contributions that they are making, and it is up to each college graduate to understand what sorts of preconceived notions people have already formed about them (before they have even interviewed or started the job) based on not only unfair stereotypes, but also well-established research and facts. If the folks in power think that you lack ambition, skills, respect for authority, etc., because of how old you are, you must be prepared, like any good sales person, to handle those objections and make the sale. The next generation will be of age in a few years and will have a whole new set of issues with which to contend. It's up to the Millennials to take steps to make certain that they don't not become the "lost generation" predicted by so many social scientists.
Anyone who still goes to movies, and there are fewer and fewer of them every year, and still buys the grotesquely expensive candy, might have noticed that some products have become somewhat larger. Or at least they have an appearance of being larger. Take M&M for example.
The candy, which used to be sold at theaters in a bag, is now offered in a bag within a much larger box. Why is this a big deal? The act of essentially concealing a bag (which might actually be a downsized version of what it used to be) inside of a large box is not only bad for the natural environment as well as an organization's sustainability efforts (which you might have heard have become rather important issues of late), but it is also a rather duplicitous practice. Whenever a marketer isn't being forthright about what is or isn't inside the box, it can be considered unethical behavior.
The job of the marketer is to communicate the features and benefits and in many cases persuade the consumer to buy his/her product, but not to miselad the consumer for short-term gains. A customer that has been lied to becomes very cranky and tends to Yelp!, Tweet, and otherwise cause trouble. Does this sound like smart marketing to you? Well, bear in mind that at the movies, concessionaires have a rather captive audience, so parent company Mars can get away with this strategy for a while. Try this packaging stunt in a 7-11 and it might be an entirely different matter.