• Marketing Surge For Harley-Davidson

    Perhaps this is exactly what the iconic American maker of motorcycles needs to get things moving again--a major investment in marketing. Ad agencies rejoice! Harley-Davidson intends to dramatically increase not only marketing expenditures, but also development, the cornerstone of product strategy. Indeed marketers must do something to energize the brand, since they have been losing market share, have failed to attract an adequate number of under-50 customers, and have been victimized by a strong dollar (which makes their exported bikes more expensive for international customers).

    Students of marketing know that you have to spend money to make money, but it matters greatly how that money is spent. It seems that someone must do something to make Harley (and perhaps motorcycles in general) part of the cultural conversation again. A clever creative strategy and well-placed advertising, as well as a robust PR and internet marketing program (and maybe a sports sponsorship or two) would be a good start for Harley-Davidson, but perhaps marketing strategists at Harley should go a bit further. Would a product placement/brand integration strategy make sense? Perhaps a large presence in a movie that either has the potential to become very popular or attracts a smaller, "indie" audience could kick start cultural interest in these motorcycles. In fact Harley's obsession with customization fits in very well with how younger consumers want their goods and services these days.

    Product placements, with a little skill and lots of luck, can be very lucrative indeed. Brands tend to stand out when they are placed in movies, TV shows, video games and other content and cannot be skipped like commercials. Marketers also often get the opportunity to show the product in use, which can enhance interest in the product among the more receptive viewers. In many cases, the company can influence the script, thereby controlling exactly what is happening with regard to the product being placed. Product placement affords marketers lots of possibilities. The brand simply needs to find the proper fit. Harley is still very profitable and has a rabid base of fans as well as quite a few less avid customers. Like so many other iconic brands out there, it just needs a shot in the arm.

  • More McTesting

    Well-known and omnipresent brands enjoy the luxury of testing ideas before engaging in large-scale commercialization of said ideas. This reduces the risk of failure. Smaller brands don't usually have that luxury because speed-to-market is so important to these nimble, yet financially-challenged organizations. Larger competitors can easily take an idea from a smaller company and scale it up very quickly, thus beating the smaller player to the punch. In short, small companies have to take larger risks. And so a sprawling organization such as McDonald's, a brand that is currently struggling, can test market a product to help determine the viability of introducing nationally, and possibly even internationally. Monster, of course, would very much appreciate the new revenue stream as well as the increased exposure it would gain from this relationship.

    The company recently announced that it is testing Monster brand energy drinks at 20 locations around the U.S. This small sample is supposed to be representative of the over 14,000 stores in the U.S., and as long as these test locations have been carefully chosen, the findings should be valid enough to help marketers make a more informed decision. And isn't obtaining data to make better decisions what marketing research is all about? Previous tests many years ago with a veggie burger concept failed to impress researchers, but recent tests exposed high demand for an all-day breakfast concept which McDonald's has subsequently rolled out. Let's see what happens with this latest monster of an idea.

  • YouTube's Ad-Free Offering

    One of the brutal realities of becoming a thinking adult is the eventual realization that someone, somewhere has to pay for all of the wonderful things that we consume on a daily basis. And if it isn't us personally (or our over-generous parents), it is most certainly going to have to be someone else. Indeed there is no such thing as a free lunch, but that rule didn't used to apply to content on the internet, at least initially. In the early days it seemed that an ever-ready bevvy of savvy techies was always around to create content simply for the sheer joy of expressing themselves through the exciting new medium. And the limited number of users were glad to oblige. But the content was admittedly lousy...or pirated. Fast forward 20 years and, with the exception of a relative handful of informative blogs and social media posts, quality content must increasingly generate revenue in order to exist.

    It is no secret that both content providers and the TV/satellite service companies that have been delivering our video content for decades have struggled to migrate their business models online, like so many other marketers over the past 15 years, but migration is happening nonetheless. In short, almost all of what we see on TV will soon be available online...for a price. Forget about the ad and subscription-free stuff. Most content must be paid for either by advertisements you must endure, through subscriptions paid by you, or some combination of the two. Fear not--the most revenue-rich business models are being fleshed out by the major players right now.

    So what about the content born and raised on the internet? Ad-dependent YouTube, for one, is launching an ad-free subscription service called "Red" that blends ad-free videos with on-demand, unlimited streaming music for only $10 a month. That sounds awfully cheap for content that won't be supported by the dollars supplied by advertisers, but it might be enough to make money. The problem? How will YouTube compensate ESPN, for example, to rebroadcast its content, which is paid almost entirely by its television and internet advertisers? Nonetheless, streaming services such as Pandora, Hulu, Spotify, and TuneIn have also gotten into the act, so clearly some mutually beneficial arrangement is being worked out. So it looks like ads and pay-content are here to stay, and consumers had best get used to the idea. After all, it wasn't too long ago that cable providers managed to convince the majority of us to pay for TV content AND watch the ads. How did we let that one get by? We were enabled by the promise of improved content, of course. Indeed there is no stopping the creative destruction challenging marketers who must face technological shifts almost daily. The bottom line is that consumers don't much care which device it's on; they just want entertaining content.

  • Subway's Unfinished Business

    As if all the negative publicity surrounding the struggling fast food chain's affiliation with a former spokesperson and admitted pedophile wasn't bad enough, the issue of Subway downsizing its sandwiches has finally been settled in court. And Subway once again has garnered some bad press. It's hard to feel sorry for a company that not only knowingly, but strategically, misrepresented the size of both its 12-inch and 6-inch sandwiches since 2003. And not only that, but marketers had the unmitigated audacity to use the "five dollar foot long" as the centerpiece of its creative strategy up until very recently. Never mind that franchise owners also sued the company due to the unprofitable nature of selling foot-long sandwiches for only five dollars. And now we know that they were actually about eleven inches. 

    It turns out that the class action suit will not result in millions of customers receiving court-ordered refunds, however, as is often the remedy in these matters. And indeed only the nine plaintiffs in the preliminary resolution will receive any money, a paltry $1,000 each maximum. But the decision did require a promise that the company will pay more attention to what its' stores, almost all of whom are independently-owned franchises, are doing with regard to sandwich size. 

    While not a ground-breaking resolution to this misleading marketing practice, the court has sent the message that marketers can't expect to get away with this sort of this thing in the Age of Instagram. After all, the legal action originally arose from a 2012 social media post about a foot-long sub that didn't quite measure up to marketing promises. While this sort of thing may be legal with regard to the exaggerations of the multitudes promoting themselves on sites like Facebook and eHarmony, it won't work for marketers who are required by law to engage in an honest exchange process. Subway can do better.

  • WNBA Failing To Impress

    The Women's National Basketball Association celebrates its 20th anniversary next year, but league marketers certainly wish that they had a little bit more of a reason to celebrate. Although the 19th championship game, which was recently played, drew a sellout crowd, a closer look at the league's flagging attendance tells a very different story indeed. From a peak of 10,864 in 1998, average attendance has dropped to 7,318 per game and television viewership is down 3.4% from last season. Quite simply, the league is losing its customers.What's going on?

    There isn't much a marketer can do when she is forced to sell an inferior product. Consumer perception of product quality is the final word in the marketer's world, and despite best efforts and major subsidies from the successful NBA, the WNBA remains unprofitable. And while sponsorships have been strong (marketers want to reach a largely female audience), fans have been few for the 12-team league. Since the action on the court (what sports marketers call the "core" product) isn't doing the job, marketers must focus on the "peripheral" product. Attending a minor league baseball game can provide much insight into what all of this really involves, but suffice it to say that fans must be entertained in every way possible. Yet minor league games don't really draw huge crowds either, so even with heavier investment in the peripheral part of the fan experience, the league is unlikely to see profits any time soon.

    So without profits, the WNBA must rely on subsidies for survival. Theoretically, the NBA could subsidize it forever as a way to engage female basketball fans, but sponsors and advertisers will eventually cool to the lack of "eyeballs" both in the stadiums and on television. Although marketers insist that the league product is "far ahead of what it used to be", the lack of customers over 20 years paints a different picture altogether. Currently league marketers are looking at expansion as a way to attract interest, but this seems like a backwards strategy to me. Expansion should happen when a league is growing, not contracting. One thing is certain. This is not an easy product to sell, and under its current strategy the league will likely continue to lose customers until it finally folds, as so many others have done in the past.

  • Phony Ratings? Say It Isn't So!

    The announcement that Amazon is suing more than 1,000 people for posting phony positive reviews on its site made me chuckle. I have long been a skeptic when it comes to online reviews, especially the anonymous kind. It is very difficult not only to tell exactly who is giving a review, but it's also tough to sort the bogus reviews from the legitimate ones. It seems that the online format is tailor-made for this sort of behavior, but a lawsuit by the most prolific online company might change things.

    Sketchy new trend - hiring fake online review writers - AGBeat

    The case was filed in Washington state and it will likely expose a practice that is probably more common that anyone imagined. Commissioning people to provide positive or negative reviews is not only an unethical marketing practice, but it could be illegal. The case will not only be interesting, but it will also set some precedent for how people conduct themselves online. The perception that one can do or say anything they want online has been pervasive since the dawn of the technology, but the rules of business, although slow to migrate to the internet, should apply to this medium as much as any other. This is happening slowly but nonetheless surely. And busting people for writing five-star reviews for products they didn't even try might be just the right place to begin. In the meantime, I'm going to give myself an excellent rating as well as a chili pepper on Rate My Professor. Or would that be unethical?

  • PC Does What?!?

    My PC (and probably yours too) cannot do what the latest PC's on the market can now do, and so in a rare display of industry camaraderie, several companies have banded together to help consumers discover their need for a new PC. In the old days, the technological changes in the computing sector were so frequent that consumers were forced to upgrade their home computing equipment every few years. Now? Not so much. My 10-year-old laptop/desktop is performing adequately, thank you very much, but I have been thinking recently that I am missing out on some new technology. So how do marketers get old computing veterans to buy what they are selling if there is no perceived need for an upgrade? A national advertising blitz, of course!

    The fact that there is a $70 million ad campaign on tap (called "PC Does What?") is not what is interesting here. What is unusual is the degree of cooperation among rival competitors like Hewlett Packard, Dell and Lenovo who are joining with suppliers Microsoft and Intel to push the message that newer is better. Sure it sounds like the aging rockers of yesteryear are "getting the band back together" in an attempt to remain relevant to a new generation of tech consumers, but these are all still major players in this declining category. Tablets (which have also entered the decline phase of the product life cycle by some measures) and smartphones have been eating market share from the PC category for several years, but most folks still prefer to use multiple devices so it's far too early to predict the demise of the laptop as we know it. Enter the advertisers.

    http://imaqliq.com/images/cms/data/old_c...

    The campaign is similar to those that have been implemented by beef and dairy producers in the past, a form of "co-opetition" wherein cooperative advertising creates a rising tide that raises all boats. So why not band together to revive a flagging segment? The campaign will focus on those of us who haven't purchased a newer model PC with in the last five years, and will aim to surprise viewers with all of the new bells and whistles today's devices include. Slimmed-down size, faster chips, detachable keyboards, longer-lasting batteries, and higher resolution screens are only a few of these upgrades within the category. Will it work? Perhaps. It is certain that these cooperating competitors have done their collective due diligence and know exactly what consumer demographics and psychographics are in play. The campaign, if the creative strategy is good one, should at least temporarily result in a boon for the category. Time will tell.

  • A Natural Threat

    Be careful what you wish for. This lesson applies to companies (and indeed entire industries) as much as it does to individuals, and the natural products industry, which has enjoyed meteoric growth for about 40 years, is beginning to face a new reality. Back when most mainstream products were filled with unhealthful ingredients,  a  multitude of natural foods stores, branded product manufacturers and their suppliers filled a very lucrative market niche. Simply put, there were plenty of people who desired healthier and more environmentally-friendly alternatives to what they were finding at Wal-Mart and Albertsons, and the industry congealed to give it to them, albeit at higher prices than they were used to.

    Fast forward a few decades and the industry has gone mainstream with large retailers carrying multiple natural/organic lines and mainstream brands offering natural products of their own. All of this competition has been challenging for the smaller industry players, but at almost 10% annual growth, almost everyone can still be a winner. The latest threat, however, might be impossible to overcome. What's happening is that artificial flavors, colors, and preservatives are becoming a thing of the past for packaged food producers. Ranchers are eliminating the use of antibiotics in their livestock. McDonald's is demanding cage free eggs. Oh my! The movement has gone completely mainstream which, while great for the planet and everything on it, is bad news for the companies throughout the natural/organic supply chain that have been enjoying a virtually uninterrupted period of prosperity. Marketers at both the manufacturing and retail levels have been successfully differentiating these brands as healthier alternatives and now that point of differentiation is being challenged for the first time on a massive level.

    And so, while making the planet a healthier, happier place has been such an integral part of the missions and visions of so many organizations, if everyone is getting into the act, the exclusivity is lost and success will become increasingly difficult for new entries. The result so far has been a consumer shift away from desiring brands that use terms like "natural" and "organic" and towards concepts like "locally-grown", "artisanal", "small-batch", etc. Witness the recent rise of craft beers, distilled spirits, farmer's markets, and trendy, hipster, foodie restaurants as examples of this phenomenon. The reaction among marketers to this new zeitgeist within the natural products industry has been rather slow, as decision-makers have become rather complacent over many years of unmitigated success. Eventually, the industry will have to adjust or, without a meaningful and sustainable way to differentiate itself, it will be absorbed into the newly-conscious packaged goods industry. Natural has indeed gone mainstream, but this might not be good news for this insular industry. Be careful what you wish for.

  • Holiday Shopping Slowdown

    As the economy continues to slowly amble along, consumers are expected to tighten their wallets a bit this holiday season as spending is expected to rise 3.7% this year, down from 4.1% last year. It may not seem like much of a difference, but when one is talking about $630 billion, a few decimal points really matter, especially for retailers that are still struggling to stay afloat. And the National Retail Federation, the most prolific of the industry trade associations and keeper of such knowledge, is usually right about these things.

    The slow pace of new jobs being added to the economy coupled with deflationary pressures on retail prices are the main culprits in the minor slowdown, but the fact that consumers have been spending more on themselves, namely in the form of vacations and restaurant meals rather than goods, factors in as well. This shift away from accumulating "things" is a recognized trend driven by Millennials and their retiring Baby Boomer parents that is unlikely to be reversed any time soon. Indeed retailers should take heed of the increasing consumer desire for experiences (services) rather than goods as this shift might ultimately prove to be rather substantial in nature. Unsurprisingly, online sales are expected to rise by about 7% to just over $100 billion as younger consumers continue to shift purchases away from brick-and-mortar stores, but this growth rate has slowed in recent years.

    All of this should mean lower prices for consumers and of course the usual barrage of obscene sales promotions that have come to characterize the Halloween-New Year's retail environment. Apparel in particular will be heavily discounted as price reductions of 40% or more have become the norm. But overall, sales are in fact rising so this should still be a fairly lucrative holiday season as well as a nice boost for our stagnant economy. Let's see how the season progresses.

  • Netflix Raises Ante (Again)

    Sometimes it's good to be king, and as such, video rental service provider Netflix has once again raised its prices. The king can do that. Sure it's only a buck, and the company promises that the proceeds will be used to develop more original content, but a closer look reveals that the strategic move is more a result of increasing content costs rather than the need to develop programming in house. Marketers have smartly grandfathered in current customers until October 2016 at which time they will have to pay the new price. A good move to be sure, and perhaps the company can use a small portion of the proceeds to hire a social media editor.

    But all monarchs must be wary of contenders to the throne who might wish to crash the gates and loot the company of its market share. And the competition, most notably from streaming apps like Dish's Sling TV and HBO Now among several others, is becoming increasingly prevalent. A price increase is a sure sign that margins are being squeezed, but we should expect that Netflix will indeed produce more original (and more importantly exclusive) content. Sixty-five million customers is nothing to sneeze at, after all, and the company has successfully made the transition from a mail order business to one that is largely internet-based. But content seems to be everywhere and having exclusive shows is what everyone in this business does. The content must be excellent or it will be difficult for marketers to compete at a high level. For Netflix, so far so good.

  • The Diet Pepsi Challenge

    Pepsi has a big problem, and it's not just about the flagging growth in the declining soda category anymore. It looks like all of the hubbub about aspartame, the artificial sweetener of choice these past few decades, has had some unintended results. The soda maker, in replacing the controversial ingredient aspartame with the less controversial sucralose, is losing even more customers since the introduction. Indeed for Pepsi it's the old "damned if you do and damned if you don't" syndrome.

    Pepsi Next Logo Pepsi the next generationthe

    Although the science behind the perception that aspartame is unhealthy is far from conclusive, it is consumer perception that matters. For a while, some folks even thought that vaccinations were giving their kids autism, an entirely absurd claim publicized by an uneducated actress, of all people, among a handful of other highly visible, but nevertheless unqualified people. Why do people make this stuff up? Welcome to the marketer's world!. Nonetheless, the new formula is invoking comments such as "yuck" and "unpalatable" from soon-to-be former Diet Pepsi drinkers, and since the old version has been discontinued, Pepsi can expect to continue losing customers as the product moves through the "decline" stage of the Product Life Cycle. What can Pepsi do at this point?

    There's not much a marketer can do to compensate for a terrible product, which the new Diet Pepsi seems to be, so perhaps Pepsi should consider returning to the older version (so that the product can be properly "harvested" of all potential profits before eventual deletion) or, better yet, the company should start working on a better-tasting formula to grow its market. Diet sodas don't taste very good as a rule, and formulators are limited by what they can use as sweeteners for the product, so reformulation is challenging to say the least. Would replacing aspartame with stevia, a popular natural ingredient, help matters? Not likely. That stuff has a really distinct bite that is difficult for food chemists to mask, and it seems that only the core natural products consumer (a la Whole Foods) can stomach the taste. And of course we know that the diet soda category has been waning for many years as consumers have switched to flavored waters, teas, and other sugar free substitutes. Perhaps the age of the diet soda is ending. Time will tell.

  • Ad Blocking Becoming Problematic

    Also from the Department of Inevitable Outcomes arrives news that the ad industry, including both buyers and sellers, is concerned about the looming threat that ad blocking represents to an already fragile revenue model. Internet advertising, although growing rapidly, doesn't command the price that mediums such as TV and elite print ads can for reasons that are still uncertain. So if you aren't a search engine, a popular website, or a hot app, it's difficult to generate much income from advertising online. So when consumers block ads, they don't see them, and when they don't see the ads, advertisers want to pay less for placement. It's a fairly straightforward concept.

    So at the 12th annual Advertising Week gathering of executives in New York City, this topic was up for discussion as was piracy, fraud fueled by electronic "bots", transparency on ad buying, and the viewability of ads, among many other hot button issues. But it is highly unlikely that consumers will stop skipping ads that either do not interest them or outright annoy them, so advertisers are going to have to get more creative with regard to making these ads more interesting and therefore more engaging. And consumers must also understand that the ads are largely what pays for the content that they enjoy. No ads means no content, unless of course you'd like to pay for accessing the content you crave, but we know that you hate fees even more than you hate the ads. Internet use continues to rise, so this problem is no going to go away by itself. And something must be done soon because the status quo is unacceptable to all parties involved. Let's see what happens.

  • The Land Of The $30 Toll

    Colorado has tried a lot of things to alleviate *** growing traffic in the I-70 corridor, and although traffic both into and out of the Rocky Mountains has been horrible for at least 30 years, it is actually getting worse. Some estimates put the number of people moving into the Front Range area at 10,000 per month, but these kinds of things are very difficult to estimate with any degree of confidence. Nevertheless the problem is not likely to get better by itself.

    Lots of ideas have been floated, and those familiar with the highway know that it can't get any wider than it already is due to the inconvenient presence of the Colorado River. Perhaps the most feasible solution involves a double-decker format in certain congested areas along the Interstate, and ultimately this might be what has to happen. The idea of a building a massive monorail, which would cost tens if not hundreds of billions of dollars, take decades to complete, and likely do nothing to reduce overall vehicle traffic (much of which is caused by long haul tractor trailers) is an idea forwarded primarily by those well-intentioned folks who believe that government money is created by forest pixies rather than the private sector. So what has been done in the short-term?

    Rating: 3.5 / 5 ( 1 ratings)

    Over the past few years, the Department of Transportation has widened what it could widen and has created an HOV lane that could save Denverites a half an hour on just one 13 mile stretch of this congested highway. The problem with such a lane? Too much demand. So this can't be your run-of-the-mill toll road. Clever planners have proposed a dynamic pricing structure similar to airline and hotel pricing where the price fluctuates with demand. Thus the toll could be $3 on light traffic days (ha ha!) and as much as $30 on the heaviest ski days. Despite the genius of this proposal, the usual complaining about low income people not being able to afford it is omnipresent. But there isn't much the DOT can do about that. There are simply too many vehicles, and as such there is probably no other immediate solution to this problem. It isn't often that state governments think like clever marketers. Let's give this one a go.

  • Far From "Peak Car"

    Millennials are growing up. And just in time! Although there is some disagreement as to exactly what range of years comprises this generation, let's settle with those born between 1981 and 2000, since Generation X is widely agreed to be between 1965-1980 and the Baby Boomers between the years 1946-1964. The point is that although development into adulthood has been grossly arrested by economic malaise among other factors, the oldest Millennials are turning 35. And that is the beginning of middle age by most marketing standards. Ouch. So with adulthood (or middle age for that matter) come adult responsibilities such as raising a family, which among other things often requires moving to the suburbs (or even the ex-burbs) to find affordable, roomy homes and the soccer fields that parents require. This also requires buying one or more vehicles. So these tech savvy, urban-dwelling, craft beer-drinking, moped-riding, asset-eschewing aging young adults will ultimately prove that those who have been predicting that this generation would usher in the reduction of automobile and fuel use are probably wrong. Millennials might not be so different from the rest of us after all. Indeed Nielsen reports that this age cohort is 40% more likely than the average American to buy a vehicle over the coming year. So much for "peak car".

    You are not stuck in traffic, you are traffic

    Attitudes change as we move through what is known as the Family Life Cycle. We age and so do our attitudes and behaviors. The recent recession and anemic recovery has affected Millennials more than any other group, and so there is quite a bit of pent up demand for high price point necessities such as automobiles and homes. With the youngest of this generation leaving high school, it looks like the demand for autos, and thus oil, will continue unabated for quite some time. Until industry can offer an economical alternative, our reliance on automobiles will continue.

  • Cold Dudes At Whole Foods?

    Every once in a while a company makes a very strange announcement, and this time it was Whole Foods Market, purveyors of fancy natural fare, that has garnered some negative attention. In short, the pioneering "supernatural" retailer, which has come to represent all that is natural, organic, green, and wholesome to so many consumers, decided to acquiesce to a Texas protest against the sale of products made with prison labor and discontinue its vendor relationship. Why?

    The demonstration of course was a protest against the perceived low pay the exploited inmates receive for their labor, but its surprising that Whole Foods would dump the program based on this obvious fact. And not too many people think that inmates should receive market competitive wages, since they are in prison after all. On the other hand, it doesn't make much sense to allow them to whittle away their days watching TV, playing Risk, and composing hip hop lyrics. Rather unproductive indeed. How much pay is adequate, and could Whole Foods have used the clout it has earned to effect change rather than discontinue the cause-related marketing program? And it seems to me that the program by nature was a rather socially responsible one, since helping prisoners learn market relevant skill sets and work habits is probably a good idea as most of them will one day "be on the outside" and need to work. What does Whole Foods, a retailer struggling to remain relevant to a new generation reticent to pay its prices, gain by making such an announcement without explanation? It looks like we need some PR help down in Austin. Whole Foods should rethink this one, or at least offer an adequate explanation for their decision.

  • Too Much Sales Promotion

    From the Department of Inevitable Outcomes emerges the discovery that Bed Bath & Beyond, a home furnishings chain that has relied on old-school direct marketing tactics for several years, has finally reached "maximum coupon".  It seems that all that discounting, mostly through the ubiquitous over-sized, blue, card stock coupon most of us receive in the mail each month, has squeezed the company's profit margins as consumers increasingly rely on the discount. And with revenue growth at a very low level, shareholders are losing their appetite for this strategy.

    A sales promotion by definition is a value-inducing incentive to buy, and for it to be effective, it should be short-term in nature. And when couponing (one of the more effective forms of sales promotion) is used too often, the customer gets used to what is essentially a new price point and will be reticent to pay full price in the future. Granted, the coupon in question, which comes in many shapes and forms, can only be used on one item, but consumers tend to use it on big ticket items which is where profit margins are supposed to be high. Twenty percent off such items can put quite a damper on shareholder returns.

    It seems that over-discounting isn't the chain's only problem as it, like so many others, struggles with competition from the e-commerce channel. Generally speaking, the industry has become rather low margin over time, and so marketers, having gone to this particular well one to many times, are going to have to be a bit more creative in the immediate future. Me? I'm heading there right now to use the coupon I just received in the mail while I still can.

  • One Or Two Teams For LA?

    Indeed this is the big question in the football world, as three teams are vying for the opportunity to enter what has become the largest, most under-served market in the history of professional spectator sports. The region hasn't had a team since 1996 when the Rams moved to St. Louis and the Raiders slithered back to Oakland, and only a select few NFL executives really know exactly why the league has left all of those millions of dollars on the table for so long. But it appears that NFL football will return to LA as soon as next season. Teams from San Diego, Oakland, and St. Louis all want to move, and it will be up to a 3/4 vote among the team owners to see who is approved and who is not. The Chargers and Raiders have proposed a joint stadium while sports mogul Stan Kroenke, owner of the Rams, wants to build and finance his own stadium. All three teams have formerly played in LA so a move would be a homecoming for all of them. What is the most likely scenario?

    NFL in LA: Could Los Angeles Get an NFL team again?

    At this point it is really up in the air. The market (between Santa Barbara to the north and the Mexican border to the south) is certainly large enough to support two teams and it probably could handle a third franchise if necessary. The hesitance over allowing two teams relates to TV and the problems with marketing two teams at the same time. Two local games in the market each week might lower overall ratings in the area due to fewer national TV windows available than would otherwise exist with only one one team. And of course the teams would be competing in the same market for the same fans, but this market is huge. Think of how many teams the northeast part of the country supports. How does football survive in small-market Baltimore for example? Clearly the northeast is viewed as a sort of "mega-market", so why can't southern California be considered one too? Is this a form of "east coast bias" against the west? Should Uncle Rico write a strongly-worded email?

    Probably not. It looks like the best move for the league would be to allow two teams to relocate there. The San Diego Chargers would move a hundred miles or so north and would have the opportunity to retain much of their fan base (at least the ones who aren't totally miffed at the move), but there doesn't seem to be much percentage in allowing the Raiders to return. The mega region would probably be more likely to embrace the Rams, a team that played there for about 50 years versus a team that lasted only 13 and whose ownership threatened to leave town every few years or so. So instead of the Chargers and Raiders sharing a stadium, which is what is being proposed, it might be feasible to let the Rams and Chargers share a stadium, or if the Chargers owners can get funding, perhaps two stadiums could be built. The latter alternative seems wasteful, but consider how much money we are talking about here. Any which way, we will be hearing something very soon.

  • Airbnb Making Impact

    The growing prevalence of Airbnb and other internet-based home rental companies is beginning to impact hotel pricing, and for consumers this is incredibly good news. One need look no further than the pope's recent visit to the U.S. last week where we saw thousands of listings in the cities where the pope appeared, effectively diminishing the hotel's ability to engage a variable pricing strategy and raise rates. It looks like competing head on with thousands of individuals puts these institutions at a competitive disadvantage. And that is probably a good thing.

    Facing an initial public offering, Airbnb’s overwhelming problem is ...

    Why? because the power of consumer choice is vastly important to the success of the free market economic model. Choice makes it difficult for a monopoly player or an oligarchic cabal to increase prices while skimping on quality, and now services like Airbnb have permanently changed the way we buy (or rent) products. And this open marketplace concept is just getting started. The only major threat to this and many other business models, it seems, is the specter of regulation, whether it be the government variety or homeowner's agreements becoming less conducive to the idea of short-term rentals. Governments like to use licensing as a way to regulate the quantity of service providers as well as the nature and quality of the service delivered, and HOA's are tasked to manage residential occupancy. These entities can pose problems to the new model, but companies like Uber and Airbnb threaten the old model in a big way. Unfortunately for hotels, there will be no stopping this sort of consumer-friendly  technological progress, but HOA's may prove to be more difficult adversaries now and in the future due to covenants and the such. Nevertheless, this genie is already out of the bottle, so government and industry will both have to adjust to the new zeitgeist.