• The Unsinkable Geico

    $1.2 billion. That's what Geico spent last year on advertising alone, and it represents about 25% of the entire insurance category's ad spending. Wow! That is a lot of money to spend on a product that is no longer in the high growth phase of the product life cycle, so why is Geico planning to spend even more this year? The brand already enjoys top-level brand awareness (its latest creative strategy even involves average Americans saying "everybody knows that!"). So what gives? Why spend all that money if everyone already knows who you are and what you do?
     
    It seems that every insurance company now has its own "spokes characters", and Geico has used several different creative strategies over the years involving all sorts of characters. So it is safe to say that there is quite a bit of competitive spending going on in the insurance industry. When a company reduces its budget in such an environment, as Pepsi did several years ago, the result is often a loss of customers, revenue, and market share. Geico must keep spending money on advertising, but does a mature product really need to outspend the competition to such a large degree?
     Perhaps so. It looks like Geico's strategy is best summed up in the words of its owner, Berkshire Hathaway's Warren Buffet, "I am perfectly willing to spend whatever it takes to get everyone in the country to check out our price." And money is something that Mr. Buffet has plenty of. Indeed, in an industry where all of the brands appear to be very similar to one another in terms of what services they each provide, it's tough to be different. That's why you see so many strange characters representing brands. These companies are clearly finding it difficult to remain top-of-mind, and associating the product with endearing characters is now the dominant strategy. But, Geico does enjoy the competitive advantage of usually having the best price in the industry. This is a big deal, and if more people are exposed to that fact, then theoretically it should result in more customers, so the traditional wisdom of reducing your marketing budget as your product reaches maturity might not be correct in this instance. Geico should and will keep spending to stay on top.
  • McStruggle

    McDonald's is a very well-known and very large company, but it is nonetheless in deep trouble. Lagging sales have resulted in numerous management changes as the company endures its worst slump in 10 years. But is this downturn merely a blip in an otherwise successful last 50 years,or are consumers making different choices these days?

    Once again, the Millennials (consumers between ages 15-34) are getting the blame. Competitors in non-burger food categories like Chipotle as well as those making and selling "better burgers" have clearly made their mark, as Millennials increase their patronage of fast-casual restaurants while at the same time cutting back on trips to McDonald's. The problem with this is that McDonald's has traditionally targeted folks in their 20's and 30's, and this is the group they are having the most trouble with. Is the party ending for the fast food giant?

    Probably not, but it is clear that product quality (with regard to both food and customer service) has dramatically affected perception of the brand. And it doesn't help that the company recently finished dead last in a blind taste test involving 21 burgers nationwide. Low prices are great, but low quality is not something that any company wants to be known for. McDonald's will likely have to address these quality issues somehow in the near future, or it is very likely that it will eventually become known as the fast food joint for really poor people who can't afford to buy quality. I don't think McDonald's wants to be known for that, and the company would  need to adjust its targeting strategy and begin to address the income demographic rather than the traditional age demographic. Regardless of what the company decides to do, inaction is not a good option. Both the consumer market and the fast food industry have undergone changes over the past few years, and it is up to the well-funded marketers at McDonald's to figure out how to regain the lost magic.

  • Non-Athletic Apparel

    You may have noticed that athletic apparel isn't just for athletes anymore. And maybe it hasn't been for quite some time. Brands like Nike have long catered to the "athlete inside" while somehow managing to maintain a healthy base of customers who are actually athletes. But, arguably, we are all athletic to some degree, even if it's only walking, so maybe that's part of the genius of the brand. Nonetheless, this phenomenon is not limited to Nike, and since the company blazed the trail many other brands have followed the market leader into an industry that is, remarkably, still growing.

    Despite the fact that Americans' rate of participation in most sports is actually declining, the U.S. athletic apparel market is expected to increase by 50% to $100 billion by 2020. That's some healthy growth! And demand for yoga gear, for example, is outpacing the growth of the sport itself at 4.5% growth for the sport versus a 45% increase in apparel sales. It looks like yoga apparel isn't just for yoga anymore. What's happening?

    Blame the dressing down of society that has been happening for 30 years. Formal wear is largely out the window, few people wear ties, and sweat suits have become the uniform of the long-haul traveler. In short, we as a culture are a rather shabby-looking lot. Athletic apparel is designed to be comfortable and accomodate all sorts of body movements, so it shouldn't be surprising that our increasingly casual culture has adopted it in all of its forms as everyday wear. And indeed this trend appears to growing rather than abating, so this might not be such a great time to go into the men's suit or neckwear business. It looks like yoga is simply the latest type of gear we as a society are adopting. Savvy marketers know that this is happening, since they are constantly scanning the external business environment, and they are already looking for the "next yoga". A social trend is a social trend, and it is the marketer's task to identify them, act accordingly, and look to the future.

     

  • Back-To-School Battle Begins

    This back-to-school season is likely to be a very competitive one, since consumers remain rather tight with their spending, and as we move into the holiday season, things are likely to get downright ugly once again. Each year since the recession ended has been a game of "retailer one upsmanship", as deals have become increasingly steep and are appearing increasingly earlier in the year. Indeed, the high volume back-to-school season has become one of the most effective predictors of the all-important holiday sales on which most retailers depend. So far, results haven't been terribly encouraging for retailers, but as is often the case, what's bad for the retailer in a competitive environment is often great for consumers. Retailers are now facilitating communication to consumers through a range of new services and apps, catering to busy parents who demand deals. As such, Best Buy,Target and others will offer price-matching programs, and Staples is even offering an additional 10% on top of the match, further squeezing its profit margins. Ouch. Even Wal-Mart introduced a price comparison app called Savings Catcher, and of course there are a whole bunch of apps and websites to help the savvy consumer locate the best deals. Low profit margins mean that retailers will have to sell even more stuff in order to reach the profit expectations of investors, and make enough money to invest back into the business. This holiday season will have a number of retailers facing possible extinction (JC Penney's, Radio Shack, etc.), and how they perform over the next few weeks could say a lot for the future. Nonetheless, as in the past several years, consumers will once again enjoy low prices and added value as holiday gifts.
  • NFL Says, "Pay To Play!"

    The Superbowl, as we all know, draws well over 100 million viewers, and is therefore a hot property for both advertisers and sponsors. Thirty-second ad spots now average $4 million each, and the cost of sponsoring the league, and therefore the event itself, has also skyrocketed in recent years. But, branded product advertisers aren't the only ones that stand to gain from all of this exposure. Popular musical acts, long a staple during the halftime show, get a massive amount of exposure from playing the event.

    Most people don't realize that these acts do not actually get paid for their efforts, and now the NFL has decided that these acts should actually pay for the increase in concert and ticket sales they always get from playing the halftime show. "Pay to play" is the term in the music industry, and this is one of the reasons I myself left LA in the late 80's to come to Colorado. LA became a "pay to play" proposition sometime in the 80's, and I had a working band within six months of moving to Colorado. We weren't paid well, but we were in fact paid. So I know how bands must feel on principle, since not being paid for work is kind of insulting, but is the NFL truly taking advantage of these poor musicians?

    Not hardly! These "poor musicians" are backed by multi-million dollar marketing machines, and the Superbowl can easily be seen as a PR/advertising expense for these marketers. Where else can an act expect to play in front of over 100 million people that may become customers? As a way of expanding current markets and finding new markets, The Big Game is a marketer's dream come true, and the NFL has every right to demand payment for the exposure the league is facilitating for musical acts through the event.  And guess what? Just about all of these acts will, after some initial grumbling, happily pay for the exposure.

  • Potatoes Losing Steam

    Man cannot live on potatoes alone. To my knowledge, no wise person actually said that, but it is clear that use of the perennial staple peaked long ago and is on the decline. This is yet another example of how quickly consumer tastes are shifting and how a bevvy of substitutes can force an industry to contract. This is not a new phenomenon, as the decline has been occurring over the past 20 years with many consumers opting to cut carbs, in particular the starchiest offenders such as the potato.

    Consumption peaked in 1996 and usage has fallen by 25% since then. In addition to rising concerns about obesity and overall wellness, Americans are are spending less and less time cooking; and let's face it, fresh potatoes take a really long time to cook, especially in a conventional oven. The nutritional value provided by the potato can easily be addressed with a variety of other foods. French fries, the traditional "go-to" side dish is now a choice among many offerings, and the processed and packaged potato chip (a $7.5 billion industry) faces a number of healthier options that weren't there 20 years ago.

    What does all of this mean? Not much unless you are a potato grower or a manufacturer that uses the potato as an ingredient. And of course marketers should be looking at social trends to determine which new products to introduce in the short and long runs. Would this be a good time to introduce a new potato based snack for example? Probably not. Might this be a good time to consider different crops if you are a grower? Probably. Nevertheless, the shift will continue, attempts will be made by companies and the industry as a whole to stem the inevitable tide (Mr. Potato Head is a likely endorser), and the industry will regardless of these efforts contract further. The potato will never die, but it is unlikely that it will regain the crucial place it has taken at so many tables over the past 500 years.

  • Healthier Fries Flop

    About a year ago, Burger King decided to address the anti-obesity trend by introducing a healthier bag of fries, called "satisfries". How much healthier? These fries have 20% fewer calories and 25% less fat than the company's regular offering, and when it comes to comparisons with McDonald's, the fries are healthier yet. So what's the problem?

    For the most part, the product has flopped, and so Burger King has plans to discontinue it, and will resume offering only the higher calorie/fat offering. Obviously the healthier french fry wasn't tasty enough for the broader market. When faced with a choice, most Burger King customers chose the traditional fries. Surprising? Not really. When folks indulge in french fries, they want to maximize the satisfaction derived from robust flavor. Since french fries are not an inherently healthy meal choice, a substitute product that doesn't taste as good is at a disadvantage right off the bat. Who wants bland-tasting fries? I'd rather go for a healthier side item myself, if I'm not able to get the delicious greasy stuff. But Burger King did not discontinue the tastier product, thinking it was too risky to simply replace its existing offering, and also did not do much promotion, so the whole effort was a bit half-hearted.

    What is the lesson here? Offering healthier stuff is a nice way to address the health and wellness trend and the requisite consumer concerns about obesity, but most consumers will not lower their expectations when it comes to taste. Perhaps consumers couldn't make the connection between french fries (an inherently unhealthy option) and healthier eating options. Maybe it would have worked if Burger King made a greater commitment to health and discontinued the old french fries. Perhaps the company would have lost many of its customers had it done so. We don't know. But what we do know is that consumers are very fickle when it comes to healthy food, and there is no magic formula for success.

  • PGA Addresses Decline, Engages Youth

    I have always though of golf as an older person's game, and with the sport losing a full 25% of its participants over the past 10 years (most of whom are young), it looks like this might be true after all. Perhaps the "Tiger Woods" effect is wearing off, and we all know that younger folks have better things to do than chase a white ball around for half a day. Right? Not if the PGA has anything to say about it.

    After a successful three-year pilot program, PGA Junior League Golf is in full force this summer, having attracted 18,000 young players in a  fledgling recruitment effort. Junior League kids are actually on teams, they wear uniforms with numbers on them, and otherwise act like teammates. Perhaps a team-orientation will help draw member of a generation that arguably values individualism less than any generation before it, but it may very well be that golf will again become a sport largely enjoyed by the middle-aged. The early results are indeed encouraging, but it's a far cry from the two million kids playing little league baseball. Despite waning global interest in the sport, the PGA thinks it can draw 100,000 players over the next few years, and it appears that they are well on their way to doing so. Will it stem the tide of people turning away from the notoriously expensive and frustrating game? It can't hurt!

  • Ambushing the Competition: Sponsorships

    Marketers of spectator sports are all too familiar with the practice of "ambush marketing", wherein a non-sponsor gives the impression that it is attached to the event/team/league, but in reality the company is not at all associated with the sport property. Budweiser ambushes Miller. Coke ambushes Pepsi. It is a fairly common practice. One of the best ways to ambush a competitor is to use a themed advertising campaign and a player out of uniform in TV commercials during the game. This is easy to do because both the sponsors in the stadium and the team that plays there generally have little to no control over who advertises during a live or recorded broadcast. Thus, it is very easy for an ambush marketer to give a false impression of sponsorship. Think Brett Favre in his Wrangler jeans, playing football with friends in a green (Packer-esque) t-shirt. Wrangler doesn't sponsor the NFL. But as long as no trademarks are infringed upon this is a perfectly legal practice here in the U.S.

    Another way that marketers can ambush the competition is in the stadium itself, but this can be a difficult task because sponsors and sport properties have a vested interest in maintaining a "clean stadium". Tactics are often limited to people wearing t-shirts in the seats, hoping to get some TV time or at least multiple impressions from fellow spectators. In some case these folks are asked to leave. Bavaria did this to Amstel during the World Cup in South Africa, and two organizers were ultimately arrested in that country. This is how serious marketers can be about protecting their paid rights inherent in the sponsorship agreements with sport properties. Both entities must work together to combat this nefarious practice in and around the stadium. Sponsors are welcome to buy up all of the advertising slots during the game, but this highly unrealistic solution is about the only way sponsors can fight back. Plus, advertising during the game reinforces consumer perception if proper logos, uniforms, and other approved intellectual property are utilized effectively in creative strategy. This practice is known as "leveraging" or "activating" the sponsorship, and marketers often spend the same amount on leveraging as they do on the sponsorship itself.

    Sponsorship is an expensive endeavor, but it can be a great way to cut through through the marketing clutter and engage consumers. Ambush marketing by competitors threatens to dilute the effectiveness of this effort at every turn, and marketers must be prepared to spend lots of money to reinforce the relationship between the sponsor and the sport property and, at the same time, address the dreaded ambushers. A failure to do this will almost certainly result in a failure to achieve sponsorship marketing objectives.

  • Tattoo You?

    When the Rolling Stones album "Tattoo You" came out decades ago, body art was largely the domain of sailors, bikers, convicts, punk rockers, and other "pirates". At that time, these designs were a permanent social statement an individual would make to express his/her counter-cultural tendencies, and as such they weren't very common. Now? They are still a badge of deviance, but what has changed is how ubiquitous they have become. Tattoo parlors have permeated the nation over the past decade, and body art has become increasingly elaborate. So one could make an argument that these symbols are no longer counter-cultural, but rather part of the mainstream. For the past decade, this has been a good argument, however there is evidence that this fad has finally abated. Unemployment among the young, which is especially high, has been exacerbated by problems with personal appearance, from inappropriate clothing, to body piercing, and of course body art. Studies have shown that people with inked skin are more likely to carry weapons, use illegal drugs, get arrested, and have multiple sex partners. Counter-cultural indeed, but is this the kind of image that young job seekers should endeavor to portray to potential employers? Perhaps this is why there is evidence that young people, seeing their older brothers and sisters hampered by highly visible ink, are beginning to rethink this behavior. Even the army has tightened its restrictions on tattoos, and has been actively rejecting those otherwise fit for service. Who wants a soldier that won't follow orders? And what employer wants a person who represents the brand in an inappropriate manner, and won't reflect the corporate culture or make sound decisions? It turns out that there aren't very many employers willing to accept an overly-inked workforce of uber-individuals, and far too many young people are suffering for their rather permanent decisions. In fact we already learned this lesson with hippies and punk rockers in the 70's, as well as goths and heshers in the 80's and 90's. The lesson is the same...you must clean up your act for the workforce. Remember that you will not be young forever, and as all young people grow older, they make different kinds of decisions and are inclined to regret some of the ones they made when they were kids. Tattoos (and giant ear piercings that permanently disfigure the user) are all too often one of these regrets. Tattoo removal costs lots of money and takes about a year with current technology. Shops with names like "What Were You Inking?" are beginning to emerge to serve this new need in the marketplace. Perhaps body art will become more personal and less public in nature, and will not disappear entirely, but it is clear that the public display of these very personal images will most likely never be accepted in most workplace environments. Smart tattoo artists, as the market declines, will develop skills related to removal, and young people will move onto the next fad. In the meantime, marketing graduates should consider how they represent themselves so that employers can decide if they are a good fit. Unless you are in the music industry, an artist, or working at Tokyo Joe's, it is unlikely that your body art is helping you succeed.
  • Proctor and Gamble's Gamble

    The announcement that the venerable and highly influential parent of about 200 different brands has decided to jettison at least half of these products has sent vibrations throughout the consumer packaged goods community. It has recently become clear to marketing strategists at Proctor and Gamble that managing so many brands is simply inefficient, and is largely the result of 100 or so years of new product introductions and acquisitions, many of which may no longer fit with the company's current marketing strategy. Now it's high time to shed the extra baggage, and there appears to be quite a bit of it!

    Which brands will be sold or discontinued? No one but a P&G insider knows that, but the company has signaled that it will maintain 60 or 70 of its biggest brands, and dump the 100 or so that have been underperforming. Tide and Pampers, two of its flagship brands represent 90% of the company's annual sales, so I am surprised that more products aren't on the cutting/auction block. But why not use the profits from the two major brands to invest in some others? Perhaps all they need is a little more marketing to better contribute to P&G's bottom line, and the company will be flush with cash after the great brand cleansing. It will be interesting to see what happens over the next six months. It's bound to dramatically alter what consumers are used to seeing on the shelves.

  • Selling More Merchandise

    If there is one thing that professional sports leagues continue to get better and better at, it's selling merchandise. It used to be that teams would sell home and away jerseys, a few styles of hats, t-shirts, and an limited array of other items bearing the team's approved logo in a small gift shop. Today, the size and number of most in-stadium stores has tripled over the past 20 years, as fans have demonstrated a seemingly unlimited appetite for team-licensed products. Over the past decade, leagues have finally addressed the long-neglected female market with styles and sizes that are less unisex and therefore more appealing to this large, formerly under-served segment of sports fan. The results have been staggering.

    The latest trend in this area involves making and marketing multiple varieties of jerseys. From throw-backs to special 4th of July designs, it seems that many fans simply can't get enough variety. Last year the NBA experimented with nicknames, but that effort  didn't produce any remarkable results since only two franchises were involved in the marketing effort. So why not offer special Christmas Day jerseys for the ten NBA teams that participate in what has become an annual television ratings fiesta? If you want to watch some sports on Christmas (and many people do), you'll have to watch the NBA. So what's so special about these upcoming NBA jerseys in particular?

    On the front of the jerseys, the team logo will appear instead of the team name, and first names will appear on the back of the jerseys (just below the number) instead of last names. Move over Nene and Renaldo because these jerseys featuring LeBron, Derrick, Carmelo, and other NBA demi-gods are expected to sell well. Will they? Look for a Black Friday-timed roll-out around the middle of November, and we shall see.

  • The Trouble With Twitter

    Twitter has 270 million active users, and one has to admit that this is a pretty impressive feat. Never mind that the company remains unprofitable despite its popularity with consumers, the marketing world is still buzzing about the advertising possibilities therein; and Twitter has recently announced growth of 6.3% over the previous quarter, which has silenced some skeptics. But not this one. The trouble with Twitter isn't the numbers; it's the fact that 14% of its users do not log directly onto Twitter's website or its mobile app. But these happen to be the places where the ads are, so that means that these folks are using the service without seeing the ads. Thus, advertisers will ultimately refuse count those users when they decide what they will and won't pay for the space, and Twitter will have to account for them when reporting the all important user number. This is a problem for Twitter. Advertising is what drives revenue on the Internet, and most folks expect content to be free so that they don't have to pay for access. This 'ads for content" model worked with early television and currently works well with broadcast radio. But if folks don't see the ads, they can't be counted among the valued "eyeballs" that advertisers so covet. Twitter, in addition to maintaining healthy user growth, will have to figure out a way around this growing problem.
  • Cereal Falling Out of Favor

    In addition to the many product categories currently in decline, which include sodas, orange juice, golf, bowling, large-batch beer, PC tablets, and many others, we must now add breakfast cereals to the mix. Sales are down industry-wide as consumers shy away from traditional breakfasts in favor of healthier, more portable items like yogurt as well as time-saving options such as fast food breakfast sandwiches. Is this truly a long-term consumer trend, or is it more of a short-term phenomenon caused by a prolonged economic downturn? It's probably the former, and the solution for companies like Kellogg and General Mills should involve focusing in on fewer brands. It is much more efficient from a marketing and a manufacturing perspective to sell higher volumes of fewer items than it is to sell lower volumes of a larger number of items. Efficiencies are gained in scale, not scope, and it makes little sense to market products that underperform when the market is shrinking, as it is right now. And of course new introductions should be focused on categories that show more promise than do traditional breakfast cereals. Current strategy will no longer be effective. It will be interesting to see whether or not these marketers, and those in so many other large organizations, can make such tough marketing decisions quickly enough to minimize the pain that is always inherent in adjusting to rapidly shifting market conditions. Eventually, many of these big brands will lose valuable shelf space to products that are in higher demand, so the product mix will have to change one way or the other.