Darrin C. Duber-Smith
Darrin C. Duber-Smith, MS, MBA, is president of Green Marketing, Inc., and senior lecturer at the Metropolitan State University of Denver’s College of Business. He has almost 30 years of specialized expertise in the marketing and management profession including extensive experience in working with natural, organic, and green/sustainable products and services. He was a co-founder of the Lifestyles of Health and Sustainability (LOHAS, c. 1999) market/industry model and was leader of the first U.S. industry task force that helped frame the Natural Products Association’s definition of natural (c. 2005). He has published over 80 articles in trade publications and has presented at over 50 executive-level events during the past 15 years. A frequent media contributor and recipient of The Wall Street Journal’s In-Education Distinguished Professor Award in 2009 and WSJ’s Top 125 Professors Award in 2014, Mr. Duber-Smith is author of Cengage Learning’s “KnowNow! Marketing” blog at http://community.cengage.com/GECResource2/info/b/marketing/. He can be reached at DuberSmith@GreenMarketing.net or firstname.lastname@example.org.
In a fairly rare, but not unheard of, move against a not-for-profit charity, the New York Attorney General's office is seeking to close the National Children's Leukemia Foundation of Brooklyn, NY and recover funds raised through alleged fraudulent misrepresentation. That's pretty heavy stuff. The organization claims that it fulfills "the wishes of young cancer patients, arranging family trips, tours, introductions to celebrities and other requests." The organization also claims to have a "computerized database of potential bone marrow donors throughout the world." Wow! Where do I sign? The problem? None of it is true.
The facts are that roughly 83% of money collected between 2009 and 2013 was paid to professional fundraisers and most of the rest went to salary and operating costs. Not much, if any, was actually allocated to those the organization professed to help. This sort of fraud does happen more often than we would all like to believe, and its difficult to track the hundreds of thousands of non-profit organizations in the U.S. to see if they are really doing what say they are doing. So when something like this arises, it's not to difficult to imagine that for everyone that gets caught there are many others getting away with unethical and illegal fundraising practices. If what the Attorney General's office says is true, this particular "charity" is toast, and it serves as a warning to other bad actors that they might be next.
The claims on TV are certainly sketchy. Can a company really offer the kind of identity protection that LifeLock and its spokesperson Rudy Giuliani promise in the advertisements we have all seen over the years? Perhaps not. The Federal Trade Commission (FTC), whose primary function is to regulate advertising, is taking the company back to court with claims that LifeLock continues to violate a court order from back in 2010 to cease and desist making false advertising claims. The court also mandated that the company do a better job of protecting its customers' private data (what organization doesn't have that problem these days?) and forced the company to refund $12 million to customers.
Despite the irony of a company whose function is to protect customers from identity theft doing such a poor job at it that it is unable to adequately protect the information it holds on these same customers, it is pretty poor form to have the FTC come after you twice in five years. This time, the agency is charging that LifeLock failed to abide by the original court settlement, but it will be up to the U.S. District Court of Arizona to decide to take further action after determining if there was indeed a material breach of the agreement. Nevertheless, the stock has taken a huge it, losing half of its value after the announcement, and if the media decides to make this an issue, the brand should suffer irreparable harm as well. In the meantime, perhaps Mr. Giuliani, a former mayor of New York City, should find another brand to endorse.
Most of us who like to watch spectator sports on television have seen the NBA-focused State Farm Insurance "Assists" advertising campaign which features Cliff Paul role playing twin brothers, one an NBA star and the other a State Farm insurance agent. Both individuals, you see, are really good at assists. It is a clever campaign, and the creative strategy now features several athlete endorsers, from Hall Of Fame guard John Stockton to WNBA all-star Sue Bird. All have twin siblings and all are really good at assists. It's a fun campaign but does it actually work?
The best way to measure whether or not a sport sponsorship arrangement is working is to set measurable objectives at the outset and then determine whether or not objectives have been reached within the given time period. Objectives should be SMART--Specific, Measurable, Attainable, Relevant, and Time-Bound. In this case, what is measured is the number of "avid" and "casual" NBA fans who know that State Farm is a sponsor, rather than confusing it with one of its competitors or not knowing at all. The higher the number, the better the marketing investment is working, and for State Farm, the sponsorship seems to be working. The percentage of fans who are aware of the relationship increased by four percentage points from 2014, which in the sports sponsorship world is a fairly significant increase, and the biggest increase was a doubling of awareness among "casual" fans. This change would indicate that the company has been spending lots of money leveraging its sponsorship by running ads on multiple sports channels whether there is an NBA game on or not. Such leveraging is necessary to maximize ROI in any sports sponsorship, and the sponsor must have a large budget for advertising and other forms of activation to reinforce the sponsorship in the minds of consumers. Simply spending money on a sponsorship without the requisite leveraging yields poor results, and makes it more likely that a fan will actually think that a competitor is really the sponsor rather than the entity that paid several million dollars for the sponsorship. State Farm has suffered from this problem, as far too many fans (about 30%) still think GEICO, Progressive or Allstate are the actual sponsors. And well over 30% of avid and casual fans still have no idea who the NBA insurance category sponsor is.
What does this mean? It suggests that although there has been improvement in fan recognition over the past few years, State Farm clearly has some more leveraging to do if they want to call this particular sponsorship a success. When you compare these results with Gatorade (about 50% awareness), it seems like they State Farm isn't doing well at all, but the fact of the matter is that most NBA sponsors are in the 20% awareness range suggesting that they could all do a better job of leveraging. It's a good thing that these sorts of surveys are conducted fairly often since so many millions are spent annually on sport sponsorship. And awareness of the sponsorship itself is a key metric. And it will be fun to see whether or not State Farm continues to improve in this area.
McDonald's has been struggling of late, and there is no quick fix to the problems that this aging fast food giant has accumulated. This said, readers of this column know that the company has been testing the all-day breakfast concept at select locations, and it looks like the feedback so far has been very positive. So top management has informed its franchisees (90% of locations are owned by independent entities) to gear up for a national roll-out of an all-day breakfast menu starting this fall. Is this a good idea?
Well, no one who is hankering for an Egg McMuffin likes being turned away at 10:31am when they flip the signage to lunch, but an all day breakfast offering will further complicate its already-complex menu. In fact, many observers have recently noted that slow service is one of the company's main issues, and that a menu that is currently too complex is a large part of the problem. Adding breakfast certainly won't help that situation, but McDonald's is allegedly also in the process of overhauling its food service system, so perhaps this problem will eventually be addressed. Perhaps the lunch and dinner offering might eventually be pared down. Either way there is little doubt that this move will improve revenues at least in the short run. Let's see what happens.
Starbucks really wants you to think it is a socially responsible organization. It really does. And the massive corporate behemoth doesn't want you to blame it for ruining small businesses either, which many folks often do. We all know about the company's leadership in the areas such as Fair Trade and environmental conservation, and of course more recently the ill-fated program wherein "baristas" (servers) were encouraged to engage customers on the issue of race. This column challenged the notion that any brand, even one with lots of brand equity, should take a position on such a hot-button issue. It generated publicity for Starbucks, but not the good kind. The company, as a result of massive criticism and as predicted, quickly scrapped the program.
But it doesn't take long for the people at Starbucks to get bored with simply selling high price point coffee drinks, so it has embarked on its latest socially responsible marketing strategy (or gratuitous attempt to generate publicity), announcing that it will be opening several shops in low income areas such as Ferguson, MO. The upside? Starbucks looks good by building, or in some cases upgrading, stores in low income areas, and has also announced that some of these locations will also be training centers for low-income people to acquire skills. It appears that the latest advocacy issue for the company is labor-related. As such, CEO Howard Schultz has pledged to hire 10,000 young Americans over the next three years who otherwise are unemployed and not in school.That sounds like a company that cares!
The downside of all this is that most people in low income areas probably shouldn't be consuming $4 plus coffee beverages on even a semi-regular basis. This seems obvious to the average taxpayer. And Stabucks has always been a premium brand, targeting high income consumers, so one might ask why a company plans on targeting low income individuals most of whom have trouble buying basic goods and making rent, let alone being able to afford luxury items. It just doesn't make much sense to encourage that sort of behavior or to assume that people in low-income neighborhoods will irresponsibly engage in it. Another issue involves the training aspect. It makes little sense to train 10,000 people to be retail clerks and baristas if they have limited employment options in their neighborhoods, and since low income people aren't often very mobile, it seems that the company would also have to offer assistance with regard to relocation and job placement. Will Starbucks really have enough jobs for the people they train? If Starbucks is truly serious about this sort of social activism, it better not do this halfway. Is Starbucks prepared to follow through? If it doesn't, critics will tear this often ridiculed "Wal-Mart of the coffee industry" to shreds.
Pabst Blue Ribbon. Amidst the beginning of the craft beer movement, the name became a joke by the late 1980's, a symbol of how beer used to be--cheap and mass-produced. The Blue Ribbon, which the brand apparently won a few centuries ago, became the focus of the ridicule. After virtually disappearing in most places, overshadowed by larger competitors and craft brewers, the brand has made a comeback over the past several years, a favorite cheap "go to" beer consumed primarily, it seems, by today's hipster set.
Now Pabst, a brand that has been bought and sold a few times in recent history, is building a new brewery on the site of its former home in Milwaukee where it intends to brew its iconic swill as well as some smaller batch, craft products based on long-archived recipes. Today's craft beer it seems to me, has become over-engineered, and brewers desperate for the next new "style" are now reverting back to what was popular in the 90's (flavored beers for example). This is not a good sign if you are a fan of innovation. Something is inherently wrong with a cherry-flavored beer. But a contemporary interpretation of long-dormant recipes by a very well-known brand should challenge the industry to think beyond its over-reliance on hops and high alcohol-content, and brewers can begin to make more balanced, better made beers based on "rediscovering" past techniques and ingredient combinations. It certainly makes for a good brand story, anyhow, and for a segment that continues to absorb so many new competitors, this strategic move should provide ways for Pabst marketers to differentiate the brand from an increasingly homogenized bunch of brews.
Not long ago, it used to be a rather obscure third-party certification used by some of the more socially-responsible coffee producers to demonstrate that the native population and natural environment from which the popular beans originate aren't exploited during the bean-to-bag process. But now "Fair Trade" has become a necessity for marketers as an increasing number of apparel brands seek to certify that they too care about the workers upstream in the supply side of the supply chain. Fair Trade has gone mainstream.
Many observers point to the high profile factory collapse in Bangladesh a few years ago that killed over a thousand workers as the impetus for this movement, but in truth it has been slowly gaining momentum for well over a decade. But after that preventable disaster, a certification group, Fair Trade USA, introduced more than 300 compliance criteria for textile factories, and brands like Patagonia, Williams-Sonoma, and Bed Bath & Beyond are only a few of the retailers who have begun highlighting Fair Trade offerings in their stores. Of course the whole movement is really driven by consumers, who have shown time and time again that they care about where their products are coming from and what is in them. Few industries are immune to this societal paradigm shift. And simply complying with whatever labor or environmental laws the third-world producer in question might have on the books is not enough for the information-empowered consumers of this day and age. Many consumers now demand the ethical treatment of workers and the natural environment in the making and marketing of goods and services, transparency throughout the supply chain, and wherever possible, third-party validation of the products they consume. And for brands that insist on manufacturing things in countries that have cheaper labor and fewer environmental regulations rather than here in the States, Fair Trade certification is becoming a necessity. Despite the obvious cost to businesses (1-5% of manufacturing costs on average), this is probably a good thing for global commerce. Expect more of the same..
It seems hard to believe, but self-driving cars are actually here. We also finally have jet packs and hover crafts available, but these cool, yet non-utilitarian products aren't likely to catch on anytime soon. Self-driving technology (which began with drones) is being tested successfully in several places, and with tens of thousands of deaths on American roads each year that are caused almost exclusively by humans and their unpredictable and erroneous ways, it will be difficult to build a case against the widespread adoption of this technology by the automotive manufacturers who are charged with the stewardship of public safety. So of course, this adoption is exactly what is happening.
But there are at least two competing visions for how this discontinuous innovation (one that involves major changes in consumer behavior) will diffuse across the population. Traditional automakers, as might be expected, have already begun to gradually automate their systems with each new model and hope to, by 2025, have some models that can drive themselves. But some disruptive technology companies like Google, Alibaba, and others are more aggressive in their endeavors to get some vehicles on the market much sooner. But the automotive industry has a complex supply chain and state laws that govern how vehicles can be sold, so it is hard to imagine that these two sides won't have to team up eventually. Obviously the ever-darkening cloud of global software hacking (by individuals and nations) could arrest some of this development and what insurance companies might think of all this will certain come into play. But as far as making the roads safer is concerned, the industry is well on its way to a complete transformation, and the way you drive will certainly be affected in the very near future.
The hospitality industry is in the midst of a major shift. A restaurant in Wheat Ridge, Colorado was the latest to join a slow-moving, but nevertheless sustainable nationwide trend, when it announced that it is replacing tipping with an included service charge. In an environment of rising minimum wages for food service workers, pressure to pay vacation and benefits, as well as the increasing availability of inexpensive labor-replacing technologies such as table-side tablets, it appears that the massive food service hospitality industry is ripe for creative destruction in the near future. While this is good news for marketers, it is not good news for university hospitality programs or the millions of workers that depend on the industry for career employment. Indeed half of all servers in the U.S. have college degrees and the requisite debt. And many servers make upwards of $50k per year even in the low-end environment, so the industry has attracted young workers in droves, promising cash, flexibility, and work that requires little to no training and is anything but intellectually rigorous.
Abrusci's Italian Restaurant announced that it will add a 20% service charge to customer bills that will go toward restaurant benefits and payroll. Many experts believe that technology will replace much of the labor in the industry over the next decade or so, as it continues to do in banking, air travel, and so many other industries. Just think of how many bank tellers were replaced by ATM's (Bank of America is now closing entire branches) and more recently, how many airline service workers have been replaced by kiosks. Of course, rising labor costs will force business owners to replace this once-necessary resource with technology. Wherever labor adds value to the process of serving food and beverages, it will be retained. Bartending for example will remain relatively untouched in the near future (although there are already signs of automation in that area too) and those running food to tables and cleaning them up will also be largely spared pink slips, but most servers in most food service formats will indeed be eliminated. Surveys consistently show that poor service is a major turnoff for customers and human servers are often to blame for these lapses. Technology should get people in and out faster, and more "turns" means more customers which translates roughly into more revenue. Nothing will stop this juggernaut. And companies will learn very quickly to provide the same (or better) level of service with fewer resources, and will also learn which aspects truly need the human touch and which areas do not. Restaurants can only raise their prices so high, so eventually costs such as labor will have to be reduced in order to cope with the ongoing situation in the American labor environment. Labor will be the first to go, and the shift will soon be in full swing. Get ready.
It should not be very surprising that San Francisco, long a desirable area to live and work, and limited by insurmountable geographic boundaries, is an expensive place to stay for the night. But it is downright shocking that the City By The Bay now has the most expensive average room rate in the world. That's right, the world. At nearly $400 per night, the city ensures that none but the extremely well-heeled will be able to stay in San Francisco proper for any length of time. For comparison's sake, Chicago ranks in at $240, Milan at $271, and New York at $202. Paris? A paltry $146 and all the baguettes you can eat. But four hundred bucks a night? What's going on here?
Obviously the extremely high cost of living has always been a huge factor in room pricing, but room rates have jumped by an incredible 88% in the past year, so it follows that this dubious top honor might not be sustainable after all. A temporary dearth of newly-built hotels combined with a rapid expansion in technology jobs and the desire of many tech workers in the 18-34 Millennial generation to experience the city rather than stay in the areas around which they work such as the Silicon Valley are surely culprits. Indeed it is likely that his convergence of market factors has resulted in the aforementioned boom. So it might be a few years before things even out, and one might expect other desirable nearby locations such as Marin, Berkeley, and Napa to experience rapid, yet unsustainable price increases as demand for their locations rises. Enjoy it while it lasts marketers!
Too much of a good thing is, well, too much of a good thing. Take milk suppliers as an example. Domestic output is projected to be the highest ever for the fifth straight year (apparently driven mostly by high consumer demand for cheese), but it seems that this year producers may have been a bit too optimistic. May's output was about 18.5 billion pounds, and there is so much of this perishable product being produced that some of it has to be thrown away.
Dairy farmers are still making money, however, because feed has become so abundant and inexpensive that farmers have little incentive to cut production. The big question here is whether or not this will all translate into lower prices for consumers or simply larger profits for farmers. Competitive forces and the availability of substitutes are supposed to keep price points down, and in an industry that makes, excuse the pun, a homogenized commodity, this is what should happen. As long as supply is higher than demand, prices should fall, at least until suppliers adjust their outputs to compensate. But this hasn't happened with regard to oil and gas, which is abundant and but also currently cheap, and producers around the world have kept supplies up in order to retain market share, even at a loss. Will this happen in the case of dairy farmers and milk? We shall see...
At the beginning of the e-commerce age, it was difficult for marketers to get consumers to use the new-fangled technology to actually buy things, rather than simply "surf" for information. But consumers were long used to purchasing through mail order, so the website (essentially an online catalog) was eventually adopted as a bona fide channel. And much thanks to Amazon for blazing that particular trail. Fast forward twenty or so years and online retailers, after two decades of rapid growth, are once again struggling to get people to buy stuff online. What's going on?
A new study has revealed that online shoppers are leaving retailer websites more often without buying anything, and when they do buy, they are buying less on average than in the past several years. This is an alarming trend, and the news arrives even while retailers are spending record amounts of money on web development. Analysts have given the usual excuses about sites not being engaging enough, but that argument just doesn't hold water. Indeed, we are human after all and it is probable that most of us still prefer to use all of our senses when making final purchase decisions and therefore prefer to visit a brick and mortar location before pulling the proverbial trigger. But if this is true, why don't we return to the web to purchase the product after touching it?
There are two obvious reasons for this. One is the "immediate gratification" most people desire when they have finally made their decision. The Internet it seems is being used primarily as a means of searching for information and identifying alternatives to satisfy the particular consumer need in question. So it's simply more desirable to get the product right then and there. Another reason concerns the convergence of products and prices through both online and brick-and-mortar channels. Simply put, it's harder to find deals on the Internet because retailers don't want to undercut their own sales by offering discounts online, and branded product manufacturers are finding it increasingly difficult to cut through all of the clutter and achieve any meaningful volumes without using these large retailers as intermediaries. Consumers expect the same products and pricing whether they shop online or in the store, and with comparison shopping made easy through mobile technology, there is pressure on retailers to harmonize their product mixes. The online landscape has truly changed, but one thing hasn't changed, and that is the proclivity for humans to be, well, humans. And there is only so much the Internet engineers can do to transfer the very human experience of buying things onto the not-so-human Internet.
After having recently celebrated its100th birthday, the beloved Oreo cookie is about to be downsized. Almost certainly driven by the obesity epidemic, a political and regulatory environment that is hostile towards sugar, and the commensurate changes in consumer preferences, this new product introduction is long overdue. Mondelez International, makers of snack foods around the globe (and formerly half of Kraft Foods), says that it will add "Oreo Thins" to its menu of offerings. The slimmer version is also lower in calories, with four cookies containing 140 calories instead of three cookies at 160 calories in the traditional product. This is a significant difference for people who like to snack, but are still conscious of health issues. Unfortunately these cookies are not designed to be split open, and company spokespeople are stressing that they are for adults, comparing them to crepes versus pancakes. Okay...
This kind of targeting is unnecessary as the product is clearly better for both kids and adults than are the Oreo's we are all used to, although they apparently aren't quite as fun. Since half of all Oreo customers like to pull apart the cake pieces to eat the creme filling first, it will be interesting to see how this all works out. Will they change their behavior? And the new product will surely cannibalize existing sku's. So maybe health-conscious snackers don't really need thin Oreo's after all. Perhaps we could all just eat fewer of the fatter ones and enjoy the filling.
Consumer tastes have changed, and not even long-standing tradition can stand in the way of this global juggernaut. As an example, take the long, crusty baguette, a staple of French culture and tradition for time immemorial. No, really, take it, because a lot of French consumers don't want it anymore. For years, France has boasted the largest representation of small-batch bakers supplying freshly-baked loaves in all of Europe, and yet the sliced bread business, long a staple of American culture and tradition, is rapidly expanding at the expense of the baguette makers. Bread is bread after all, and on the whole, people are eating less of it than in the past.
What's driving this trend? The same thing that drives it in The States--convenience, longevity, and changing lunchtime habits. A full 26% of French workers report that they take 15 minutes or less for lunch. That leaves little time for baguettes and more time for the kind of sandwiches that Americans more easily recognize. The packaged bread market in France is now worth $560 million annually, and it is rising rapidly. And out of two billion sandwiches sold over that period, a full third of those were served on "American" sliced bread. One brand, devised after the second world war when a baker saw what American troops were eating, is even called "American Sandwich". Globalization is surely another driver of this and many other trends, suggesting that the world is indeed becoming more homogenized. The Internet, social media, pop culture. All of these important enablers of consumer behavior are now being shared by unprecedented numbers of people, which is great for marketers who wish to reach billions of consumers. But becoming less heterogeneous also means that cultural differences will become less pronounced and certain customs will disappear altogether, which is bad if you are an anthropologist. Of course, this won't happen with regard to the baguette, which has already been adopted in many parts of the world, but it does suggest that the delicious, flaky bread will eventually cease being something we consider as "French". The major global shift illustrated here is worth pondering.