Darrin C. Duber-Smith
Darrin C. Duber-Smith, MS, MBA, is president of Green Marketing, Inc., and senior lecturer at the Metropolitan State University of Denver’s College of Business. He has almost 30 years of specialized expertise in the marketing and management profession including extensive experience in working with natural, organic, and green/sustainable products and services. He was a co-founder of the Lifestyles of Health and Sustainability (LOHAS, c. 1999) market/industry model and was leader of the first U.S. industry task force that helped frame the Natural Products Association’s definition of natural (c. 2005). He has published over 80 articles in trade publications and has presented at over 50 executive-level events during the past 15 years. A frequent media contributor and recipient of The Wall Street Journal’s In-Education Distinguished Professor Award in 2009 and WSJ’s Top 125 Professors Award in 2014, Mr. Duber-Smith is author of Cengage Learning’s “KnowNow! Marketing” blog at http://community.cengage.com/GECResource2/info/b/marketing/. He can be reached at DuberSmith@GreenMarketing.net or email@example.com.
The world's largest airline might be "too big to fail" (or it might not), but the pain it is inflicting on its customers as it digests US Airways in a merger, is beginning to affect its brand reputation. A recent article in USA Today profiled one individual who spent $360 more simply to avoid the inconvenience of flying American, and interviewed others who actively seek to avoid using the airline. Of course, which airline one chooses is often a matter of what carriers fly in and out of the nearest major airport, but in the increasingly less common instances when travelers actually do have ample choice, American and other service providers who serially disappoint may not be among them.
But there are only three legacy carriers from the era of regulation left in the industry, and consolidation has whittled down the pack to about eight large players that serve hundreds of airports. So avoiding any one airline might be impossible in certain cases, but what about American Airlines in particular? Consider that the Department of Transportation received 3,083 service complaints regarding the airline last year, up 546 from the previous year. In the scheme of things, that's not really that many unhappy customers, but in the age of social media and instant publicity that seems to never entirely go away, any trend in the wrong direction is going to impact the brand in a negative manner. the person that allegedly said "any publicity is good publicity" was either an idiot, or was grossly taken out of context. In any case, marketers would best serve the company by analyzing the complaints, identifying the major problem areas, and outlining plans (complete with deadlines and measurable objectives) to fix problems. A major marketing research effort that includes surveys and focus groups, among other methods, might be a good idea as well. It all sounds so simple, but with two companies merging operations, it might be tough to do. Let's hope for sake of American Airlines that it doesn't lose too many customers and too much brand equity in the process.
According to a report by marketing research firm Euromonitor, Americans spent $30.4 billion on its pets last year (excluding vet expenses), up from $17.8 billion at the turn of the last century. And if we add in veterinary costs, the number increases by $28 billion, making this almost a $60 billion industry. Indeed 56% of U.S. households own a pet of some kind, and of that number 36% own dogs while 30% have cats. The remainder is made up of those who have birds (3.1%), horses (1.5%), and what is termed "specialty/exotic" at 10.6%. Indeed, just over half of America loves to spend money on its its pets.
Owning a dog, for example, can cost over $1,000 annually, and many households own multiple pets. There are thousands upon thousands of pet products out there, but there are still a few familiar, dominant players in the most important product categories. Nestle in particular garners 32% of the dog food category (with Pedigree being the #1 seller) as well as 45% of the cat food category. Purina's Friskies is still the top seller in that important segment. Kitty litter? Nestle wins again with 31% of the market.
Much like the craft beer industry, much of the growth in the category involves smaller players offering specialty goods like natural pet food, but the traditional players still have the most market share by far. This is steadily changing with the proliferation of these aspiring brands at the expense of the market leaders like Nestle, Mars, Del Monte, Clorox, and Church & Dwight, but it will take a while for lesser brands with smaller marketing budgets and weaker distribution arrangements to unseat the big brands. And, again like the craft beer industry, the larger brands are beginning to react to society's ever-changing tastes with new product introductions. In the meantime, an industry such as pet products that demonstrates healthy growth each year offers opportunities for everyone. After all, a rising tide tends to raise all boats.
While not yet complete, the recovery of J.C. Penney from the brink of brand destruction has been a surprise to many marketing observers. When a massive strategic shift away from discounting and towards more of an an every day low pricing model turned loyal customers against the company, things looked grim for the venerable retailer. While sales remain $1 billion lower than they were four years ago, when former Apple-retail-guru-turned Penney-CEO Ron Johnson (no longer with the company) did away with discounting and many popular brands, the leak has been plugged and the company is once again showing revenue growth.
While it is highly unlikely that J.C. Penney will return to its former glory, it does appear that a leaner, more flexible version of the company will be able to better negotiate the changing world of consumer goods and address a smaller group of price-conscious consumers. Keeping up with the times will be crucial to the future success of the brand, and reintroducing its direct mail catalog program hasn't hurt things either. It seems that the internet hasn't destroyed the catalog business after all. The company is still losing money and so must grow its customer base to a level where it can sustain itself profitably, but the company does report that it has the same number of active customers (87 million) in its database than it had before the ill-fated strategic shift, so perhaps it might not serve a smaller customer base after all. So this means not only growing the customer base, but also gleaning more revenue from each customer. Marketers look poised for success in this remarkable brand recovery effort.
Yet another large fast-food chain has decided to eliminate sugary carbonated sodas from its kid's meals, as American Dairy Queen Corp. has decided to follow in the footsteps of McDonald's, Wendy's, and Burger King, all of whom made the move in the past year to replace soda in favor of water, milk, and juice options. The soda category, as we all know, has dropped considerably over the last several years as consumers have responded to the obesity epidemic by switching to healthier substitutes. Add in a few government mandates on what can and cannot be sold in schools and combine with the tendency of large organizations in competitive industries to self-regulate and you have a category that will no doubt continue a slow decline in its product life cycle.
The big issue here is access to the youth market. If young consumers, who are developing consumption habits as they grow up, are difficult for marketers to reach, then they are less likely to adopt the product when they are older. Conversely, as Apple found out, exposing young people to your product can result in lifetime customer loyalty and even brand activism. These changes do not bode well for soda makers who are, for good reason, actively engaged in diversifying their product mixes to mitigate the negative effects of category contraction. Of course kids or their parents can make a special request for soda to accompany a kid's meal, but few are likely to exercise this option. Like it or not for established brands like Coke, Pepsi, and Dr. Pepper, beverage culture in America has entered an entirely new era.
For the past few years, it has seemed to me that sports marketers have been rather overdoing the "celebrating the troops" cause at the games. It's at the point where I feel guilty every time I'm asked to stand, sit, clap, cheer, or otherwise honor those who fight for our freedom. Of course, supporting the troops is a very worthy cause, but like any communication in marketing, messaging can reach a saturation level; and I'm not sure making people feel guilty is what NFL team marketers are really intending to do. I'm trying to have fun at the game, after all. But cause-related marketing, if used properly, can be a great tool for marketers in that a for-profit organization teams up with a not-for-profit organization for mutual benefit. Both entities in such an arrangement benefit through a long-term partnership wherein brands are often co-marketed. Consumers feel better about using brands that support causes they are interested in, so it is no wonder that most for-profit entities have one or more non-profit organizations that they support.
So with the recent announcement that the NFL, in its efforts to build an emotional connection with fans using the armed forces, isn't associated with a "cause" as we marketers know it (one like The Wounded Warriors Project, for example), but rather with the federal government, eyebrows have been raised. In fact, some NFL teams have been receiving direct payments from the Department of Defense in return for honoring U.S. servicemen and servicewomen. Oy vey! This is not cause-related marketing at all, and has certainly attracted the attention of the folks who are not enamored with what they call the "military-industrial complex" or who simply don;t want to mix politics with sport. Of course most fans are fooled, thinking that the communication is either a public service announcement or part of a cause-related marketing effort, but the truth is a bit more complex. Federal DOD contracts have revealed that the agency paid out a total of $5.4 million to 14 NFL teams, many of which included in-game mentions and ceremonies. What's the problem with this?
If an organization such as the NFL decides to engage in a cause (breast cancer, for instance) it is best to team up with a legitimate non-profit or simply do it out of the goodness of its organizational heart. In such an arrangement, the for-profit makes cash donations to and helps promote the non-profit and its cause. The arrangement between certain NFL teams and the government is not only shady-looking, it isn't really cause-related marketing. And, even if the cause related marketing agreement was legitimate, it would be best not to overdo the promotion of said cause, as has been done with breast cancer organizations (a non-profit area rife with fraud) and now military appreciation. the major issue is that a government agency such as the Department of Defense probably has no business working directly with the sport properties, and NFL teams, if they wish to support a cause, should do so through a legitimate not-for-profit entity. The utter lack of transparency here not only dilutes the effectiveness of the message but also dents the integrity of the NFL brand itself and the teams involved. And though the NFL seems impervious to the bad publicity it tends to generate, it's still a good idea to be above board in all marketing communication efforts. Questionable deals with government departments should not be considered.
The farmers of Hatch Valley in Las Cruces, New Mexico, want to protect both the the heritage (and the brand identity) of a home-grown, unique food many of us have come to know as the Hatch chili. Oh it's hot. But popularity has its pitfalls, and ever since imitators have started borrowing the Hatch nomenclature, it became clear to the growers there that they must take legal action to protect their livelihoods. If anyone can call their chili a Hatch, then there is little reason to insist on the ones that are unique to the region. Enter the United States Patent and Trademark Office.
The president of the Hatch growers board, who is a fourth-generation chili farmer, says that the association is pursuing legal action which was originally filed in 2012, and ultimately would like to see the association approved as a group to obtain the rights to a certification mark requiring marketers to certify that the chili's labeled as Hatch actually come from the region. This has been a big deal in places like Cheddar (cheese) and Vermont (maple syrup) and so it is a big deal to the Hatch Valley growers, who must now wait for the agency to make a decision. Let's hope for the sake of the farmers that this process doesn't take too long.
It is no secret that Olive Garden, in the face of much competition in both the full service and fast casual categories, has been losing customers for the past three years. Long priding itself on the all-you-can-eat bread sticks that groups of people, largely females according to the advertising, love to enjoy in mass quantities, the company has fallen on some hard times. Certainly, a major goal that marketers have is for the brand to be known for something positive, and after years of national advertising it is no wonder that most of us are not only aware of the brand, but we also know about the bread sticks.
So what is Olive Garden's plan for recovery? Why, more bread sticks of course. In adding the high-carb dish to both chicken parmigiana and meatball sandwiches, marketers hope that they can catch a ride on the "foodie train" and perhaps gain some notoriety for a successful novelty dish. And Olive Garden's bread sticks were recently compared by the folks at Starbucks to "hot dog buns", so we'd better hope that increasing the quality of the food is also on the menu. And bread sticks should probably be gluten free these days, no? Perhaps betting on bread, a dietary villain since the low carb craze of a decade ago, isn't such a good idea after all. But if this isn't the answer, what should Olive Garden do to remedy the situation?
The use of genetically-modified organisms (GMO's) as food ingredients is a grossly misunderstood and highly controversial issue, On one side are the people who are afraid that the technology has some unintended side effects and wants mandatory labeling requirements, while the group backed by science (and food companies!) doesn't. Several state initiatives have failed to pass voter muster, however in Vermont such a mandate did pass, became the subject of litigation, and ultimately will probably be enacted after all. So what's the problem with this?
Mandatory labeling in only one state, and a small one at that, will force manufacturers to make a choice between engaging in expensive changes to labels and manufacturing processes and not selling products to Vermont's largely eclectic, environmentally-inclined population at all. Not selling in Vermont wouldn't exactly break the bank. And non-GMO ingredients are also more expensive so that would have to be factored in as well. But Vermont may not be alone. With concern about the use of GMO's, however scientifically unsubstantiated, on the rise, it seems inevitable that there will be other states joining in on the action and indeed there have been 40 GMO-labeling bills introduced in 20 states just this year. Many companies will surely be forced to make major changes in the way they do business and a rise in food prices across the board will be a likely result of compliance. Although it is a good idea to let consumers know what is in their food, Genetic Modification is really a process, not an ingredient, and forcing such disclosure makes one wonder whether other types of processes and ingredients might be eligible for such disclosure in the future. Simply put, where does it stop? Since there have been no proven negative health effects from GMO's in literally hundreds of studies, it seems hard to justify the consumer's right to know on the grounds of the stewardship of public safety. This is a complicated issue, and it looks like the anti-GMO crowd is poised to win.
Faced with growing competition in the natural and organic products sector, "supernatural" Whole Foods is taking aggressive action. After some price reductions in certain categories as well as its first ever national advertising campaign, the high end specialty retailer is also adding more store-brand goods and implementing a customer loyalty program in an attempt to shed its "whole pay check" image. Millennials, adults under the age of 35, are particularly keen to buy their healthy fare in stores with lower price points such as Kroeger, Safeway, Sprouts, Natural Grocers, and online retailers, so Whole Foods has decided to take a dramatic step to address this problem.
We don't yet know the name, or names, of the new format, but what we do know is that the retailer plans on opening a sister chain of smaller stores targeted toward a younger demographic. The CEO promises that it will be "hip, cool, and tech-oriented", whatever that means, and hopes that the move will offer an alternative to the pioneering chain's faltering prestige business model. Recent filings with the U.S. Patent and Trademarks Office show that the company is attempting to trademark the names Clever Egg, Dailyshop, Small Batch, and Greenlife (an uninspiring batch to be sure), actions which suggest that Whole Foods might conduct some extensive market research before deciding on a name. Another possibility is that more than one name will be used if certain names resonate much more than the others in certain areas of the country. Such is the magic of marketing research!
The biggest concern with this major strategic shift is that the new format will cannibalize the existing brand, and to a large degree this is unavoidable. But Whole Foods has to do something and the new format might not only appeal to younger folks but perhaps also to a non-white, slightly less well-off demographic, a massive group that Whole Foods does not currently, but most certainly would like to serve. It will be a few years before we see any of this, however, but knowing CEO John Mackey, we will surely hear more before that time comes.
Some say that one of the best ways to save a species is to eat it. It worked for the American Bison (can't we just call it a "buffalo"?) which is now a thriving species brought back from the brink of extinction by the American appetite for meat, and it has also worked for the American Alligator. Dubbed by some enthusiasts as "The Other, Other White Meat", alligator was removed from the U.S. Fish and Wildlife Service's endangered list in 1987, and now farming and catching wild alligators has gone from a Southern past time to a booming industry.
The meat is now worth up to $15 per pound up from $7 in 2012, which is a significant indication that demand is beginning to outstrip supply. Between 1980 and 2010 it was $4 per pound. Driven largely by experimenting chefs and foodies (as well as regular Southern folk), it seems that demand for this lean, high protein alternative to chicken and pork is poised to hit the national stage on a much larger scale. And with an estimated one million alligators now in the wild and many more being farmed in captivity, there is small chance of the species relapsing into its formerly endangered status. So we can eat our alligator nuggets with a clear conscience, and use the skin to accessorize our ensembles. Perhaps the increased availability for alligator skin will spark a new fashion trend. It's not all that far fetched of a prediction, really.
In the absence of government regulation, industries and the companies within them are expected to act in the best interest of customers through self-regulation. The combined influence of competitors, consumers, the media, non-profits, et al., tend to keep companies honest. This works most of the time and government regulators are well known for being years behind industry and inadequately funded to enforce many of the regulations they do have. The largely successful effort to define and regulate USDA Certified Organic products and the largely unsuccessful non-effort of regulators to define and regulate use of the term "natural" and the subsequent abuse of its use in marketing communications offer two very instructive case studies. And so the lack of government definition and regulation of the term "craft", which has become a very effective way of defining a beer that is hip in a category that has been hurting for years. One would think that a mutual understanding of the what a craft beer really means might help consumers and the beer providers make sense of things, but there has been no effort in this direction despite the meteoric growth of the so-called craft beer segment.
And so, just as is the case with the word "natural" it is up to all of us to define what craft beer means. Most people think of it as a higher alcohol-content,offering made of more exotic ingredients and featuring a variety of brewing methods and flavors. And this may be true. The Boulder, CO-based Brewers Association offers a more helpful definition of a craft brewery as having an annual production capacity of less than six million gallons. This seems like a reasonable definition an done that should be adopted as a regulatory rule rather than an industry guideline. Why? A recent lawsuit filed in San Diego against MillerCoors and its highly successful Blue Moon beer challenges its craft positioning strategy claiming that it is not really a craft brewery and that smaller players are hurt by its dominance. The likely result?
Since there is no legal definition it will be up to the courts to determine whether or not the six million gallon limit is a commonly held belief among industry members. This is crucial and tells us whether or not we should be looking at volume at all. And the court of course will have to decide if consumers are being misled or are confused. The most hopeful result of this rather expensive lawsuit would be a legal definition so that everyone knows the rules and can therefore play by them, but after 200 or so lawsuits against companies that have used the term "natural" in their marketing communications efforts, regulators have demonstrated no appetite to address this hot-button issue. As a result, the courts must decide on this important, precedent-setting legal case.
Sometimes it's just time to simplify things, and at dairy-giant Dean Foods the time to do so is apparently now. After acquiring and spinning off White Wave, maker of the soy-based beverage Silk, the company decided to focus on its core milk business. And in a recent move to drive revenue, marketers have decided to add the brand name "DairyPure" to all 31 of its regional brands with a focus on purity as a key attribute.
When a company has spent decades acquiring competitors and small regional players, it eventually becomes unwieldy and inefficient to manage and market so many brands. But so much equity has been built in each brand over the years, that it can be an even more odious proposition to sacrifice that brand equity in the name of consolidating them all under one name and dumping the 31 brands. This is a difficult quandary for even the most seasoned of marketers because there are pros and cons in both approaches. So perhaps a compromise of sorts is in order, one which involves using the name "DairyPure" as a means of "threading" the brands together. Dean also intends to promote the antibiotic and hormone-free nature of its products through the new moniker as part of a Five-Point Purity Promise. And the fact that each of the 31 brands is in effect "local" (or at least regional) allows marketers to capitalize on the well-documented consumer shift towards using locally-produced products. And a national advertising and sales promotion plan is a must for an initiative of this magnitude. It is clear that marketers at Dean have a good strategy, but as we know, market performance is what really counts. Let's see what kind of cheese this rather expensive dairy endeavor ultimately produces.
From the Department of Very Smart PR Moves comes a statement from Mars, Inc., maker of M&M's and Snickers among other sugary snacks, advocating that people eat less sugar. Say again? It seems strange that a large, branded product manufacturer would take such a stance (in essence "de-marketing" its products), but the organization's explanation in a letter to submitted to the government makes perfect sense from a marketing perspective.
The company acknowledges that consumers should limit their intake of added sugar to 10% or less of total calories and, unlike much of its competition, backs regulatory plans to include measurements of added sugar on nutrition labeling panels. "It might appear to be a counter-intuitive", the letter reads, "but if you dig down a bit more, we know candy itself is not a diet." Indeed. And such honesty is refreshing in a consumer environment that increasingly demands honesty and transparency, and it serves to generate good publicity for the firm. Cooperating with regulators is always a good idea too.
Hundreds of manufacturers in all sectors are reformulating products to meet the demands of an increasingly health-obsessed society, and sugar is one of those ingredients on the radar. Mars makes much more that just candy, with brands like Uncle Ben's Rice in its portfolio, so its advocacy position doesn't threaten its entire product mix, but this position might actually indicate that reformulation may be in motion within the company's R&D division. An advertising-intensive product "re-introduction" might be just what some of these brands need to stimulate sales, so a healthier M&M just might be on the horizon.