• Certified Organic Still Surging

    The rapidly-growing market for Certified Organic products is still growing...rapidly. The industry was able to sustain a remarkable rate of 12% growth from 2012 to 2013, which for a $30 billion product category, is quite impressive indeed. And it looks like consumers aren't about to let up anytime soon on the demand side of things. Consider the following data:

    -75% of consumers use certified organic foods and beverages

    -25% of the general population reports using more organic products this year, and 38% of organic users indicate they have increased their usage

    -81% of moms buy organic, up from 73% in 2009, and 44% of kids under 12 eat or drink organic foods/beverages at least once per week

    -25% of consumers buy organic to avoid GMO's and only 25% of consumers think that GMO's are safe (erroneously)

    -The growing Hispanic population has a significantly higher interest in organic than the general population

    -15,000 new organic food/drinks were launched around the world in 2013

    How about those numbers? It looks like the health and wellness trend shows no signs of abating, and consumer concern about what's in the food we eat, the air we breathe, the products we put on our bodies, etc., isn't going away any time soon. The organic products industry, as well as the much larger "natural" products industry, is poised for significant growth for years to come.

  • Cannabis Industry Going Mainstream

    With the legalization of recreational pot in Colorado and Washington during the 2013 election as well as Oregon, Alaska and Washington DC this year, it is becoming abundantly clear that full scale legalization might be only a few years away. The revenue generated from taxing the stuff is extremely difficult for cash-strapped governments to forego, and the money saved from not prosecuting and incarcerating offenders is sure to be huge. Plus the majority of Americans now favor legalization. What does all of this mean? A multi billion industry including equipment suppliers, growers, processors, packagers, retailers, and makers of accessories has emerged from the shadows.

    Well, it hasn't exactly come from the shadows since medical pot has been legal in many states for many years, but rather the industry is growing up. What does this mean? Big players with big money have entered the very fragmented industry and are attempting to find ways of achieving economies of scale and scope by building large, branded operations. So it shouldn't be a surprise that a large private equity group has landed the marijuana industry's most enviable celebrity partnership:  Bob Marley.

    It's not exactly an endorsement deal since Mr. Marley has been deceased for many decades, but the company has negotiated 30 years worth of licensing rights with Marley's estate to use various aspects of the singer's intellectual property in the marketing of its products. The Wall Street Journal reports that there will even be Jamaican strains of the herb sold under the Markey moniker, and that the Markey estate will even be equity owners in the operation. Will the Marley name help the company sell more pot? Probably so. And "Markley Natural" may very well be the first global cannabis brand, but don't count the major cigarette players out just yet. They have been waiting on the sidelines to see how things shake out, and this new licensing agreement might just be the catalyst to get these shrinking giants to address what is clearly going to be a "growing" market for many to years to come.

  • Black Friday Losing Significance

    When experts talk about Black Friday losing its significance as an important day for both retailers and shoppers, they are really talking about the day itself and not necessarily the whole concept. What they mean is that the deals commonly found on the day after Thanksgiving are now spread over several days and in many cases several weeks for most large retailers. This dilutes the importance of the day itself, since sales are now spread out over a longer period of time instead of being concentrated in one 24-hour period. Yet, consumers still respond to the term "Black Friday" in a rather Pavlovian way, as the mere mention of the words makes many people think "deal".

    One of the other factors diluting the importance of the day itself is the proliferation of sales moving online. Not only can consumers now enjoy several days of deals, but they can also do so anywhere they have an internet connection. This relatively recent development has certainly been a game changer. And recent studies have indicated that the best deals are rarely found on Black Friday, and in fact most goods and services are cheaper earlier in the year. It appears that we have been fooled. To compound all of this, it also appears that Black Friday (always seen as a sort of holiday barometer) isn't even a very reliable forecaster of holiday sales after all. The data show that it is just as effective to flip a coin as it is to use Black Friday as any sort of predictor.

    Although Black Friday still generates the highest volume of retail sales of any day in the year, this might not be the case for very long. Consumers only have so much to spend over the holidays, and it doesn't matter much when they do it. Sales promotions that are offered earlier will cannibalize purchases that would have happened later, so it is really becoming pointless to talk about holiday sales in terms of one day, but rather we should view it as a two month-long period of holiday shopping. Perhaps it should just be called "the holiday shopping season".

  • Selling The Rights To Make-Believe?

    A few decades ago many people were still lamenting the good old days when stadiums and events didn't have corporate sponsor names attached to them. But those days are long gone and we have now grown accustomed to events like the Cars.com Bowl, as the vast majority of sport and entertainment properties are understandably unwilling to forgo the millions of dollars in revenue such sponsorship arrangements typically generate. Theoretically, these properties could offer better amenities or perhaps even lower admission prices if they can get enough corporate sponsors to provide a significant enough revenue stream. And of course the sponsors themselves receive all sorts of benefits commensurate with what they spend. Onsite signage, distribution rights, logo rights, hospitality opportunities, customer list exchanges, access to a live audience, in-game commercials, and many other components of sponsorship are all possible at the right price. So we are used to corporate involvement with regard to spectator sports, charity events, concerts, festivals, and other large-scale consumer events. But what about a children's museum?

    Well, museums need the money too, one might say. What's the problem with New Balance sponsoring a giant 3-D puzzle or Texas-based grocer H-E-B sponsoring something called the Kitchen Lab? And what about Krispy Kreme's exhibit where kids move donuts from a conveyor belt to boxes? Marketing to children has always been controversial and is even more so with the obesity epidemic in full swing, but it seems that many of these sponsors are actually targeting their parents, not the children. It is unlikely that a kid will want New Balance shoes or to shop at H-E-B, but they might want a nice, unhealthy Krispy Kreme doughnut. Should this be an issue? And are we selling the rights to make-believe?

    Well, not really. It's more like leasing the rights, and as long as the sponsors aren't specifically targeting children, there shouldn't be much of a problem among the myriad child and food activist groups. Corporate sponsorship has become the new reality and a necessity for entertainment venues, so children's museums should be no different. After all it is the consumers who will tell them when they have had enough marketing. But when sponsorships exist, taxpayers aren't as burdened with funding the organizations and admission prices can be lower than they would otherwise be, so in this way a tastefully-executed corporate sponsorship is a win-win all the way around. It's good to look at the big picture when analyzing such matters. With this in mind perhaps dealing with the presence of a for-profit business isn't such a big price to pay after all.

  • Three Cheers For Fuel Cells

    At the beginning of this century, I was fortunate to briefly work for an influential (if small) natural products industry publishing/conference company during which time I spoke with a representative from Toyota who was at one of our conferences touting an invention called the hydrogen fuel cell car. The vehicle emits only heat and water and runs on compressed hydrogen, meaning that green house gas emissions are minimal. Despite the fact that the prototype cost Toyota a cool $1 million to make, with additional product development the implications for the future of travel, according to the man, could be huge.

    Fast forward 10 years. A much greener option than the electric vehicle (which is powered by all kinds of different energy sources including coal) and the natural gas-powered car (only a bit cleaner than a diesel engine), the hydrogen fuel cell vehicle now costs only $57,000 and is now available exclusively in Newport Beach, California, where the money meets the sea. Why only there? Obviously the residents are extremely affluent, and as Tesla has shown us with its electric car, affluence and green consumption go hand in hand. And the area is relatively small, so re-fueling will be easy and word of mouth will spread quickly. Another reason is that fuel cell-powered vehicles face the same problem that all vehicles face. They require a distribution network of re-fueling stations, and at present only gasoline is available on a national basis. This is changing, and Toyota is investing in an infrastructure of 31 stations in the U.S., but this isn't likely enough to move a nation, so Newport will do for now.

    So far, replacing the relatively dirty internal combustion vehicle has proven difficult and the progress has been slow despite hundreds of billions in investment over the decades. But it looks like a renaissance of sorts is in the wind, and having numerous technologies competing for driver dollars will not only help consumers but certainly the natural environment as well.

  • Natural Foods Claims, Settled in Court

    Branded product manufacturers have been using the word "natural" as a meaningful and highly effective point of differentiation for almost 40 years, however the penetration of these items into mainstream retailers has caught the attention of numerous activist NGO's of late. But apparently not the attention of the Food and Drug Administration, which is the agency tasked with governing ingredients, labeling, product claims, and product safety. What does this mean for marketers?

    The FDA has never really defined the term "natural", and so companies have been relatively free with the use of the term in marketing communications. The agency will say only that a "natural" product should be free of artificial/synthetic ingredients, but hasn't bothered to define exactly what that means, or what a natural "ingredient" might be. Is a highly-processed sweetener like high fructose corn syrup truly natural? Do genetically-modified ingredients count as natural? Apparently not. But rather than make an effort to actually set rules for an industry that is now in the hundreds of billions revenue-wise, the agency has decided to let the judicial branch of government handle things. Thus, there have been several hundred lawsuits over the past few years claiming that companies are misleading consumers. The primary issue is the term "100% natural", and every company using the term that has been challenged in court has agreed to cease and desist. The latest to make this decision is General Mills.

    Does this mean that there is no such thing as a 100% natural product? Of course not. A quick trip into a Whole Foods Market, for example, will reveal hundreds of smaller brands whose products are comprised of simple, minimally-processed ingredients, and the vast majority of these companies have not been sued since Whole Foods is rather picky about what it puts on its shelves. But without FDA guidance, it is virtually impossible for an industry (and even a trusted retailer like Whole Foods) to do what's right for consumers, so company will try to do what's right for shareholders. And natural product positioning is pretty darned effective. So it is the FDA's responsibility to figure out these sorts of ingredient and labeling issues so that products can be positioned ethically and legally; and then the FTC can monitor the claims made in advertisements. It is simply remarkable that such an important industry receives such little support or guidance from regulators. What does natural really mean? Apparently, we won't find out any time soon.

  • Cheaper Fuel But Higher Fares

    Consumers everywhere should celebrate when fuel prices drop. Too much supply and not enough demand results in a glut of oil on the market, and so the price-per-barrel begins to fall. The price of gasoline, which is an important by-product of oil, then also falls. This means that consumers have  a lot more disposable income and theoretically they can spend more, stimulating the economy as they do so. What's not to like about that?

    Traditionally fuel costs have been a huge influence on pricing in the airline industry, and so high fuel costs meant higher fares. Conversely lower fuel costs resulted in lower fares. This used to be a rather nice economic arrangement. But what's happening now is that airlines aren't passing on the fuel savings to the consumer, opting for higher profits for shareholders instead. This isn't necessarily a terrible thing, as shareholders had endured many years of losses and needed some return on their investment. But why are prices up almost 4% from last year, now sitting at $372.21 average? Isn't competition supposed to put pressure on companies to offer lower prices and higher quality, especially in the face of falling costs?

    It seems that exactly the opposite is happening in the airline industry. Customer satisfaction is at an all-time low and the prices keep rising. Perhaps there aren't enough competitors in an industry that has seen much consolidation over the past few decades. Maybe the major players are colluding, either actively or indirectly, to keep prices high. More likely, however, is the fact that airlines have dramatically reduced capacity over the past several years, retiring older jets, reducing the number of flights, and making heroic efforts to fill planes. And it worked. Why pass on the fuel savings, which is always temporary, to consumers if they don't have to? And ultimately, $372 might be a good price equilibrium, so demand may not increase very much at such high fares. This could be a nice happy place for airliners to be at least in the short run. In the long run, however, a combination of new competitors and increased demand should be enough to pressure airlines to lower prices. In the meantime, we can use the money we save on gas we buy when driving to spend more on airfare. It all comes from the same place.

  • The Traveling Fan

    People who like to attend spectator sports might have noticed an interesting trend developing of late. Steelers fans in Dallas. Broncos fans in St. Louis. Cowboys fans, well, are everywhere! It is not your imagination. There is an increasingly larger group of visiting fans invading the stadiums of opponents, much to the home team's chagrin. Should sport properties care about this trend, or should they just be concerned with filling up the stadium? Does having too many visiting fans negatively affect the experience for fans of the home team? Is there more fan conflict due to this trend? And why is it happening more these days than in days past?

    Indeed franchises should be concerned when they are unable to generate enough regional interest to fill the stadium with friendly, cooperative faces (and voices). It is clearly a sign of waning fan interest in the home market, but there are other factors driving this market trend. Over the past few years it has become easier for the enemy to get a hold of tickets. Remember when fans had to line up at the stadium months before the season to secure tickets? I didn't think so. Those days are long gone. And the internet has made the on-street "scalper" a last resort, so it's much easier these days for people everywhere to secure tickets no matter where they are. Ticket-swapping sites such as TicketExchange and StubHub has made it easy for fans to buy on a whim and plan trips at the last minute. It also makes it nearly impossible for marketers to control who gets into the stadium.

    Unfortunately for the home teams, this presence can be a huge advantage for visitors. But the cities sure like the extra business. Hotels, bars, and restaurants get extra business, and the government benefits from tax revenue, sort of like what happens when a city hosts a conference or a trade show.. This is especially true if your team is located somewhere besides Cleveland or Detroit, or in other words somewhere someone would actually want to visit. Right or wrong, this trend will not be reversed, and as our society becomes more mobile, we can expect even more home invasions. It's time for teams and their fans to adjust to the new reality. And be polite to those Bills fans when they are here. they spend money when they are in your city, and after all it's not really their fault they live in Buffalo.

  • Holiday Creep: Part Two

    Forty-five percent of consumers plan to shop on Thanksgiving, so it shouldn't be surprising (especially to a marketing practitioner) that stores are opening earlier and earlier every year. Of course much of this shopping will be online, and with Wal-Mart's recent announcement that it will run its Black Friday specials over a five-day period beginning Thanksgiving morning, perhaps some of the usual holiday pressure will be alleviated. Perhaps the days of people running over each other for "door buster" sales are finally on the wane. Best Buy, Amazon, and others also made similar announcements about extending deals earlier (and later).

    Some "Black Friday" deals are actually already in motion, which further dilutes the revenue importance retailers traditionally put on the day after Thanksgiving. Simply put, the day itself is not nearly as important as it used to be, but the holiday shopping season, loosely defined as the six weeks or so before Christmas, still represents up to 30% of total revenue for many retailers. A recent survey found that 70% of consumers think that Black Friday is an unimportant day due to the prevalence of sales promotions throughout the holidays, but the "idea" of Black Friday is still powerful. As consumers, we have become conditioned to respond to Black Friday in much the same way that Pavlov's famous hungry dogs eventually learned to salivate at the sound of a bell instead of the appearance of food.

    So the sales start earlier each year, the same promotions are now found both online and in-store for most retailers, price-matching is becoming increasingly common, and the same people complain about the continued encroachment on an important family holiday. The fact of the matter is, consumers want to shop, and retailers must one-up one another so that they don't lose sales to competitors. If someone has $600 to spend over Black Friday weekend and certain stores are open and offering promotions while your store is closed for some moral reason, where do you think she will spend the money? And how are shareholders going to respond to lost revenue opportunities? When I worked retail, I took every opportunity to earn time-and-a-half or double-time I could get. Are store employees so well-paid that they can ignore an opportunity to make more income and be able to afford more stuff themselves? regardless of the social issues involved, a failure to open earlier is clearly a lost sales opportunity, and although a few retailers such as Nordstrom are willing to let that revenue shift to competitors for whatever reasons, most chains will follow leaders like Wal-Mart. Folks may complain about the evil retailers ruining the holidays, but far too many consumers want 24-7 access to goods and services, and that's not going to change any time soon. So, the day itself might have lost much of its meaning, but the idea of "Black Friday" will live on.

  • Free Music? Time To Pay Up

    It looks like the era of free music that we have been enjoying over the past few years, offered by companies like Google, Pandora, Spotify, and Apple, will be coming to an end rather soon. Over the past couple of years, users have been able to access free services from these sites in hopes that users would eventually want to sign up for a monthly pay service, which is the preferred revenue model. Sales promotion is a great way to provide incentives for consumers to act, and there is perhaps no more effective form of sales promotion than letting consumers try the good or service for free, or sampling. And I must say that users seem to enjoy the free music very much. But maybe that's because it's free. Now that the "free lunch" is coming to an end, how will music streaming services fare? Will consumers ultimately pay for what they used to get for free?

    As students of marketing know, other than the selling of user data, there are two primary sources of revenue on the internet -- advertising or subscription access. Sites that don't have either of these are not around for very long, and remember that Spotify, et al., must pay licensing fees to be able to offer streaming music. And thus far, the streaming sites have been absorbing these costs as well as offering their services for free; but the sales promotion is ending, as all sales promotions by definition must eventually end, and soon consumers must pay to play.

    The real question here, aside from how many folks will sign up, is why advertising can't be the sole source of revenue for these services. Lots of sites make their money solely from ads because most consumers simply won't pay for access to individual sites. It's been a problem for quite a while. In addition, websites have been having a heck of a time over the past 20 years getting advertisers to pay as much as they have been paying for more traditional advertising found in broadcast, print, and other formats. It seems that advertisers have much the same attitude that consumers have. Stuff on the web should at least be cheap. But music is a very expensive form of content. Record labels charge quite a lot for licensing rights, and as you know, they have been hit by hard by the digital revolution. It's time to start making money again, and these organizations know that there is a need for the product. But will consumers pony up $5-10 per month to get it? They do for individual songs, pornography and elite publications like The Wall Street Journal but not for much else! The vast majority of content on the web is ad driven. And changing the overall feeling of internet entitlement is the primary challenge the music supply chain now faces.

  • More Robots, Fewer Jobs

    By now, we are all aware of the degree to which technology is actively replacing labor almost everywhere we look. Banks, airports, car washes, security, universities, and just about every other industry seeks to replace a resource when it becomes prohibitively expensive. As highly useful and labor-replacing technology products such as tablet kiosks and other gadgets become ever more ubiquitous and as labor becomes increasingly expensive (rising minimum wages, health care, etc.), we can expect this "creative destruction" to become even more common.

    One of the primary industries expected to lose the most jobs in the very near future is hospitality. The "server" function in restaurants for example, can largely be addressed by a table kiosk. Customers will eventually be able to order and check out whenever they want, and the amount of information this device can contain is literally limitless, compared with, say, what the average waitress might know. Airline check-in agents and bank tellers were some of the first high profile positions to be creatively destroyed by more efficient technology, and it seems that people hardly noticed when it happened. But think of what might happen when three-fourths of low-skill service jobs become automated? It will happen eventually, it's just a matter of how fast it will occur. And when it does, what will these 30 million or so unskilled and semi-skilled laborers do to earn the middle class wages to which they have become accustomed? What will happen to tipping? Faster service will almost certainly be a big hit, and consumers consistently rate other humans as the biggest problem with most service experiences, so don't expect a major consumer backlash against this inevitable situation. Rather, most consumers will welcome the shift. The latest announcement (by Marriott) introduces automated check-in and room access through its app, so expect fewer front desk personnel in the future. And this is only the beginning. Today I saw a robot made by Google that will eventually replace much of what a firefighter does. And drones? Don't even get me started. What can we do?

    In the past, new jobs have sprung from the old ones, but there is evidence that this might not be happening this time around. Many of the new jobs that might be created (making and servicing the devices, for example) can also be automated. Obviously there will always be a need for the type of high end service such as one might receive at a $55 per night Four Seasons, but these service situations represent a very minute fraction of hospitality jobs. And there are hundreds of university level programs churning out thousands of 4-year service graduates each year who are saddled by student debt. How many high end jobs will there be for these folks? And what about the massive number of people that don't go to college to learn to be better servers? A rude awakening is indeed on the way for a massive segment of the working population. All I can say is that I'm putting all my discretionary income into tattoo removal technology. Just kidding. But not really...

  • Hold The Mayo

    Hellmann's, the venerable makers of mayonnaise and a brand owned by Euro consumer products giant Unilever, is the latest company to be affected by the growth of the natural products industry. It is no secret that the natural products industry is huge and has become mainstream, and some of these companies are now large enough to really sock it to the big boys. Hampton Creek, makers of a brand called Just Mayo, is one such company.

    The upstart natural products brand has not only attracted the attention of Unilever, but the latter has actually filed suit against Hampton Creek for false advertising. Usually it's the FTC and FDA that does this sort of thing, but Unilever isn't about to wait around for that to happen, so it decided to file with the U.S. District Court in New Jersey. The claim is that Hampton Creek makes an egg-less spread and therefore cannot call its product mayonnaise. The FDA describes mayonnaise as containing vegetable oils and egg yolks. If there are no eggs can it still be mayonnaise?

    Hampton Creek and activist groups such as Change.org thinks it's another battle in a war on sustainable food companies, calling Unilever a "bully" (a hot-button word these days). According to the company since the product is clearly marketed as egg free and is called "mayo" and not "mayonnaise", Hampton Creek isn't misleading to consumers. That may be hard to prove. everyone knows that mayo is short for mayonnaise, and if mayonnaise is defined as having eggs in it, then the product would be best described as a spread and not mayonnaise. I think of Miracle Whip, which is a substitute for mayonnaise and is rightfully marketed as a spread. If it was called "mayo" would you be confused? It also doesn't help matters for the natural products company that its logo is a plant growing in front of a giant egg. Hmm....

    Unilever (playing the part of Goliath) is concerned that Hampton Creek (our David) is wrongfully stealing its market share by marketing the product as mayonnaise instead of a spread. Miracle Whip (another Goliath) sets precedent here, but remember that Just Mayo doesn't have the actual word "mayonnaise" anywhere in its marketing communications. Offering a healthier substitute to mayonnaise is a great thing, but it must be made clear to consumers that it is indeed a substitute and not a competitor within the same product category. Substitutes by definition meet the same consumer need (bread spread) within a different product category (mayo substitutes). It is likely that Hampton Creek did not intend to mislead anyone, but you probably know the old saying about good intentions. This one will be interesting to watch..

  • Holiday Creep: Part One

    Halloween is over, and that means that the unofficial "Black Friday Season" is upon us. Traditionally, the most important shopping day of the year has been the Friday after Thanksgiving, or Black Friday. The origins of the word date back to the 1950's as, each year, police in Boston would dread working the day after Thanksgiving, which was apparently characterized by all sorts of hooliganism, and aptly named it Black Friday. In later decades, retail associations would try to put a positive spin on this negative connotation and, noting that it is indeed a huge day for retail revenue, promoted the myth that most retailers on that day become profitable for the year, or "go into the black". There is no actual evidence to support this assertion, but the term is now firmly entrenched in our consumer psyche. After all it is perception that really matters in marketing.

    In spite of the facts, the sheer volume of shopping on that day does nevertheless make it an important annual milestone for retailers; and of course we all know that Black Friday has now become "Black Friday weekend" with the promotions not only in effect through Christmas (and beyond), but also reaching back into Thanksgiving (and before). When people hear "Black Friday" these days they immediately think "deal" regardless of whether or not the promotion on the actual Friday after Thanksgiving, and so you might be hearing these magic words already. As retailers compete for the same holiday season dollars, the promotions happen earlier and earlier every year. But is Black Friday all it is cracked up to be?

  • TV's Rather Rude Awakening

    Record numbers of people, especially the economically-challenged Millennial generation, are cutting the cord and opting out of the rather prohibitively-expensive satellite and cable packages currently on the market. Online options abound, and now there is pushback among providers who refuse to pay the still-rising prices that channels still charge.

    It would seem logical that prices of content would actually fall if viewership is falling, but Disney, CNN, and others are still partying like it's 1999. Dish, Direct TV, Comcast and others are blacking out certain channels in protest of the high prices they still have to pay. As a result, Dish network for example may no longer offer CNN. Yep, It's that bad.

    It is clear that prices must eventually come down as substitute products continue to steal market share from TV. Advertising expenditures by marketers continue to migrate online, and so do the eyeballs in the marketplace. TV won't go away, but all members of the supply chain must embrace the new reality of more fragmented media, and in doing so must alter their marketing strategies accordingly.

  • Mmmmm...Tequila-Flavored Beer?

    Tequila-flavored beer? Does that sound good to you? AB InBev (makers of Budweiser) thinks it may. Introducing Oculto, a beer that hopes to steal from other alcoholic beverage segments and attract a younger generation of consumers. There's no actual tequila (a derivative of the agave plant) in the beer, but it does promise 6% alcohol content with a tequila-like flavor. But wait, there's more...

    Heineken has been test marketing a tequila-flavored beer in Florida (called "Desperados") and plans to roll it out on a national level in 2015, so this is certainly a competitive play. But do consumers really want tequila-flavored beer? And if so, which consumers? Where is the market research on this?

    Tequila is not exactly the greatest-tasting hard alcohol on the market, but it does have its aficionados, the author included. And exotic flavors are an established trend among younger consumers. But tequila- flavored beer? Is this really desirable? Zima anyone (look it up)? But if it's working in Florida, can it be successful on a national level? Such is the question every marketer must ask. It doesn't sound very appealing to me, but then again there may be a market for such a beverage. It may catch on. Let's see what happens.

  • Android Sales Peaking

    It didn't take long. Instead of a closed system such as the one preferred by Apple, Google decided that it wanted its Android operating system to be open source/free to use so that it could make its money off of ads and user data sales. In much the same way that fast food chains can grow much faster by selling individually-owned, licensed franchises, Android was able grow quickly by allowing the Samsung's of the world to use its software. Android now has 84% of the smartphone market compared to Apple (with 12%), Microsoft at 3%, and former market leader Blackberry with a paltry 1%.  But the problem is that Android used to have 85% of the market. Is this the beginning of a decline or just a blip?

    No one knows, but the market for smartphones is not yet saturated, although it may seem like it is. Remember that there are always new consumers entering the market as they come of age or immigrate to the U.S., and that many of those older consumers who are nearing the end of their lives were never users of mobile phones in the first place. This suggests prospects for growth. And many people still have the cheaper flip phones. These consumers tend to be lower income, and so they will not be able to afford Apple or Blackberry products. That leaves Microsoft and those companies like Samsung that use the Android system to pick up these customers as phone prices fall over time. Eventually a low end smartphone will be introduced, and the market will finally be mostly saturated. Google clearly will make more money if more users turn to Android, but as the preferred search engine regardless of device used, the ad money will keep rolling in. The company's strategy and execution has been nothing short of brilliant, as marketers decided against the easy money in favor of long-run residual returns. Bing and Yahoo aren't likely to unseat the leader in search any time soon, so expect Google to be a major player for many years to come.

  • Cramped Quarters

    Business students learn a lot about efficiency, and decision-makers at all organizations are constantly tasked with lowering costs and doing more with fewer resources. Indeed, the whole concept of "productivity", crucial in assessing the disposition of any particular organization/economy, involves increasing output per worker per unit. It's usually a good thing! So is it any wonder that airlines must strive to increase productivity just like any other business? Over the past decade, previously-struggling airlines have dramatically reduced their collective capacity, as older planes have been retired and marketers have striven to offer fewer and fuller flights. This has all been very successful, and now heroic efforts are being made by engineers to fit more even more seats into a typical cabin. Cutting a few inches from each seat even as humans grow ever larger in height and weight is great for the airlines, just about all of which are profitable these days, but it's not so much for most consumers. More people on a plane results in less customer satisfaction, so why do airlines keep finding new ways to pack more of us into the same space? Shouldn't they care about our happiness? Is this eventually going to be a safety issue? Where is the love?

    Theoretically, customer satisfaction should be at the heart of marketing strategy. But when you have a handful of major airlines dictating the direction of an entire industry (as we do now), and customers have very little choice in terms of adequate substitutes (want to take the bus instead?), this is the sort of thing that tends to happen. Why then doesn't Southwest, the self-styled maverick brand in the industry, differentiate itself further by offering more room? That would be a neat strategy, but it just can't afford to do so. Remember that these airlines were very unprofitable prior to the industry's consolidation, and the main reason they are now profitable is that they are more efficient. Want more room? Then get out of coach and pay a higher fee to enjoy a better in-flight experience! Many consumers are already doing so.The average person doesn't really travel all that much, so is it too much to ask them to pay a little more when they do travel for a more comfortable flying experience?

    Unfortunately, lower-fare, coach customers (the back of the plane) will continue to get squeezed as higher paying customers (the front of the plane) demand more amenities and less guest contact, and the number of airlines catering to this no-frills crowd will likely proliferate. To stay profitable, low-fare airlines like Southwest will have to look more and more like flying Greyhound buses (albeit a much more efficient option) than resemble the airline experience our parents and grandparents enjoyed. Such is the price of affordability. Ask yourself whether or not air travel was ever intended to be a cheap way to move large numbers of people. Indeed $300 seems cheap when you consider the resources it takes to travel 3,000 or so miles. Just when did consumers develop the expectation of cheap air travel? Should the government subsidize air travel with taxpayer dollars so that lower income consumers don't have to put up with discomfort, or should the market dictate what happens? Is there a solution somewhere in between? These are interesting questions. It seems to me that if we are going to move the masses through the air at a price that most people can afford, then customer expectations with regard to comfort must be adjusted accordingly, yet government oversight must insure that safety is not compromised by overcrowding. Most airlines now operate on an "a la cart" basis, and so travelers must completely customize their experience (and pay accordingly) whether they like it or not. And as is the reality in most cases, you get what you pay for.

  • Bad Science

    It seems that lots of people these days, especially politicians, invoke "science" when they want to make a point in an argument more effective. There's nothing wrong with science, and I love a good debate as long as both parties are somewhat prepared for the task, but invoking "bad science" has become a disturbing trend over the past several years, and it's affecting how products are made and reformulated.

    The "97% of climate scientists agree that man is contributing significantly to global warming" number is often cited, but the number actually comes from a very unscientific survey of 49 hand-picked climate scientists of which 47 agreed. Global warming may indeed be real and exacerbated by man, but when you consider that warming has largely halted since 1998 and every single predictive model thus far has been grossly incorrect, the science is clearly far from settled. The same goes for the so-called science on the unhealthfulness of Genetically-Modified Organisms (GMO's) that has scared the living beejesus out of some people. There are no conclusive studies that I know of that have found GMO's to be unhealthy or unsafe in any way. Maybe they are after all, but there isn't any meaningful science behind such an assertion as of this writing. Here's some more. The number citing that women make more than twenty cents less than men do for the same work is an utter fabrication. That number fails to take into account the kind of job, level of experience, degrees held, career interruptions, personal choices, risk taking, or anything else for that matter, but yet I hear it repeated every day as if it were a scientific fact. Recently, and more relevant to a marketing column, we heard of an exhaustive and widely-publicized study of salt intake has found that too little salt is just as bad if not worse than too much salt, and that the levels of daily salt intake that the government has been recommending are in fact dangerously low. So why the War on Salt? Where was the science over the past several decades? And cities all across the country are actively outlawing e-cigarettes despite the utter lack of evidence that they do any harm to anyone. We don't yet know of any second-hand smoke with an e-cigarette (only a mysterious vapor that has yet to be studied), so why are regulators treating it like a traditional cigarette? Remember the 'red slime" scare? The stuff is harmless. And there are so many other examples of this out there.

    The latest exhaustive scientific study involves fat, and according to the data it looks like the low fat regimen recommended by so many for over 35 years is also based on shoddy science. Why does this matter? It matters because the Dietary Guidelines for Americans, which is updated every five years by the USDA and HHS, is a major influencer in terms of what companies produce and what consumers buy. These are the guys that recommended loading up on carbs instead of meat, cheese, etc. back before the low carb craze of the early 2000's. Bad advice indeed, as carbs now seen by many observers as a major cause of obesity. And you know what? It costs companies a lot to reformulate their products and to account for things like GMO's on labels every time there is a new call to action. Some think that it's better to be safe than sorry, but it is easy to see what a slippery slope that such thinking invites. Where doe sit end? The label has only so much space. I think that it's best to invoke science only when there is adequate scientific evidence, and even then such evidence should be given due scrutiny and findings should eventually be duplicated through additional research efforts. Products of all kinds are affected by these decisions. Making major policy decisions based on shoddy science doesn't seem to be in the best interest of the consumer, because you know who ultimately pays for all of this costly regulation? You do.

  • Chuck's Legacy

    Who was Chuck Taylor, and why would he be happy right now if he were still alive? The simple answer is that in 1932 he became the namesake for the Converse sneaker that was invented way back in 1917, and that he would probably be tickled to see how many knock-offs his "Chucks" have spurred. He didn't invent the shoe, he only sold them as a salesman, but if imitation is the best form of flattery, then Chuck would probably be flattered along with the nameless inventor of the sneaker. But would he support suing those who have gratuitously bitten the Converse style and have essentially copied just about every aspect of the sneaker? Do these perpetrators deserve to have the book thrown at them?

    Nike, which bought the brand in 2003 thinks so, and is involved in legal action against Wal-Mart, Fila, Ed Hardy, and Ralph Lauren among 27 others for copying its All-Star shoes and therefore violating its trademark. Lower-priced knock-offs are a problem in so many industries, so it will be instructive to see how far the suit gets, and whether or not it will ultimately be successful. Even more interesting is the fact that the Converse sneakers were not initially designed for basketball, but for soccer and a sport similar to basketball called "netball", but that is another story altogether. And as for Chuck Taylor, like any good salesperson, he would most likely realize that knock-off competitors meant more competition, fewer sales for Converse, and less commission for him. So if he were here today he would probably get over the flattery fairly quickly and support Nike's efforts.

  • Radio Shack Running Out Of Ideas

    It used to be the "everything small" electronics store. It had everything you might need. Every seemingly-random wire and obscure adapter could be found or at least sourced by the wizards working at your local Radio Shack. It seems to me that was quite a long time ago, and the electronics chain has been struggling for many, many years now. It's incredible how long a "walking dead" brand can survive if it manages to generate or raise enough cash to stay afloat. Just what does Radio Shack stand for these days? Why would a consumer want to shop there?

    To help answer that question the company has raised a bit of cash and has hired a 37 year-old "chief revitalization officer" who has a decade or so of experience in finance and a brief stint on the team overseeing the restructuring of General Motors after it went belly up. The problem? Although this relatively young man was actually brought out of retirement after a very successful (yet brief) career in finance and can probably do much to successfully restructure the company operationally, what does he know about marketing? What does he know about finding the right product mix to appeal to the right group of shoppers in the right kind of shopping environment? What they are doing now clearly isn't working, so it seems to me that they also need some sort of retailing genius to handle the marketing end of it. But unless Radio Shack figures out who it wants to be, and soon, all the brilliant corporate restructuring in the world isn't going to sustain the company for very long.