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.
Genetically-modified organisms (GMO's) are scary to many people. The Certified Organic category, which is non-GMO by definition, has grown dramatically over the past two decades as GMO's have become more prevalent in the overall food supply. The movement against these modified agricultural products, which include most types of corn and the Ruby Red Grapefruit among many others, has been so strong that there are efforts at the state level to force manufacturers to label products that contain GMO's. A law was recently passed in Vermont requiring such labeling.
Obviously this isn't the label, but it is amusing nonetheless. The fact is that a comprehensive National Academy of Sciences report released last week reviewed over 900 studies spanning 20 years, and every single one of these studies found that GMO's pose no health risk to humans. That's zero risk. There may be some environmental issues with weed and pest resistance, but human health should no longer be of concern to the average consumer. But try telling that to the average consumer. In a survey conducted by research giant NPD in 2013, when asked to describe in their own words what GMO means to them, the most common response was "I don't know". We often fear what we don't understand. And then of course there are the people who think that they do in fact know better despite the extensive research. After all, science is never really settled.
Despite the facts, sales of non GMO-labeled food have increased from $12.9 billion in 2012 to $21.2 billion at present. Clearly this isn't organic growth (pun intended), and fears about GMO's spurred on by years of legislation in Europe and what has apparently been a campaign of fear and misinformation initiated by the natural products industry in the U.S. are clearly having a major effect on consumer attitudes and behavior. With the new law in Vermont (a tiny state that gave us Bernie Sanders and generally leans slightly to the left of Marx), marketers will be forced to decide whether or not they want to bother with this tiny market at all or whether or not they want to absorb the costs that a "Contains GMO" labeling law would create. And it is highly likely that these costs would be passed on to the consumer in the form of higher prices, and it is highly unlikely that a company would make special labels for just one state. The argument in favor of GMO labeling is that consumers should know what they are eating. It's not a bad argument, but scare tactics sap its credibility, and it's hard to draw the line on what to put on a label and what to leave out. Full disclosure would require a pretty big label indeed. Besides, if you want to avoid GMO's you can buy Certified Organic products (another multi-billion dollar segment growing at double digit rates).
The primary question here involves what consumers really need to know balanced with what presents an undue burden on marketers. Labeling changes are very costly to organizations for a variety of reasons, and the undeserved GMO stigma as it stands now could literally ruin a brand. Plus lots of marketers are now taking advantage of consumer ignorance about GMO's. Indeed many consumers can't be bothered with facts and will simply believe what they want to believe. We are not always rational creatures. So in light of the science, is it necessary to require companies to disclose whether or not the product contains GMO ingredients? One thing is for sure, this is one of the most controversial marketing issues of our time.
Much has been written about the delayed route to adulthood taken by so many young people in this age of economic stagnation, globalization and technological change, and much of this phenomenon has been blamed on the extremely anemic economic recovery we have had over the past several years following a rather deep recession. This might be true to some extent, but slow growth can't explain away everything, and it looks like the downturn seems to have caused some serious changes in the behaviors of many young adults. Indeed, a new report demonstrates that a full 32% of adults under 30 are still living with their parents, up from 23% in 2000, which was also a period of very slow economic growth (the dot com bust coupled with 9-11). In record numbers, Millennials are delaying getting driver's licenses, cars, careers, higher education/skills, marriages, children, homes, furniture, and many other life cycle milestones that are so important to this nation's economic growth.
Economic factors are important to marketers. Consider that consumer spending represents about two-thirds of GDP (the most common indicator of economic health), so when an entire segment of consumers fails to spend on big ticket items, we can expect some economic turbulence. Among the largest retail product categories are cars, gas, furniture, home improvement, and general merchandise; all are markets that far too many Millennials have yet to enter. So, these are products that simply aren't being purchased in great enough quantities to support a healthy, growing economy. Also consider that clothes and food/beverage stores are among these large economic categories, and in this case parents (as heads of households) are making these sorts of household decisions for their live-at-home kids the vast majority of the time. Thus it appears that the Millennial "failure to launch" is not only annoying, but is also having major economic consequences and may help to usher in the inevitable next recession, which is likely just around the corner. Too grim? Economic cycles are not kind. And as rising minimum wages in many states make workers much more expensive, expect a revolution in labor-reducing technology. This does not bode well for employment numbers, especially among low-skilled, inexperienced young people, the majority of whom, another study recently found, do not appreciate capitalism as an effective economic model. Interesting as well as instructive. A few economics classes or perhaps a decade or so living on one's own, working steadily, earning the means to one's ends, and paying taxes tends to suppress visions of luxurious, idle living, but there is good news for the rest of us.
The good news is, countless studies show that if you have relevant education and requisite skill sets, you should be fine. It's the uneducated, the drop-outs, and those who insist on getting expensive degrees that provide little in the way of marketable content are the ones who bear the brunt of this economic reality. So staying at home for a while might make sense if it means that the young adult will incur less college debt and save money for that inevitable first-home down payment. And delaying marriage as well as the kids that often come with it isn't a bad idea as long as it results in more informed, goal-directed life choices based on the higher level of maturity brought on by increased years on the planet. Why else would someone want to live at home well into adulthood?
Of course, there is a marketing lesson here. Until this "true adulthood" stage is reached (call it reaching a more advanced emotional age versus a chronological age) marketers of many types of products must rethink the resources they want to expend in targeting this large demographic, since the "live-at-home" young adult crowd (32% of the bunch) isn't yet in the market for many of the goods and services purchased by household-forming young adults of previous generations. And certainly other products might be better served by instead marketing to their parents, who still make many consumer decisions for their basement-dwelling offspring such as which food to stock or which household items to use. At the very least, unless marketers are operating in industries like food and beverage service, entertainment, education, or other "experience-based" products, they might want to reduce their near-term sales forecasts for many categories of goods and services and in the longer-run increase the age at which they target young adults. And they might also want to think about whether or not these changes in consumer behavior will drift into the next generation, currently coming of age in their middle teens. Will any of this change if and when the economy finally gets back to where it belongs? Will we become a society that has larger and fewer households? Marketers must pay close attention to what transpires over the next few years.
"Hyper-local" is developing into a hot, new term in the world of goods and services, as the young consumer struggles to find brands that have products with acceptable levels of authenticity that only locally-produced goods and services can truly provide. Authenticity is a big deal for the under-35 crowd as it has traditionally been (to a much smaller degree) for their Baby Boomer parents. So, no great surprise there. And what can be more authentic than a locally-brewed triple-hopped, infused, craft beer? Hmm? But since there are so many new breweries springing up each week, joining an ever saturated market, and macro beer players are buying up many of the largest among them, perhaps the future for many of these brands lies not only in how local the production is, but also the consumption.
Twisted Pine Brewing Company, a Boulder-focused, somewhat regional, staple in bars and liquor stores for 20 years, has decided that a "hyper-local" strategy might be the key to its future prosperity in the increasingly hyper-competitive retail beer environment. Years of slugging it out with much larger competitors in liquor stores has been rightly coupled with significant investment in a taproom, thus fostering a very local base of core consumers and staking out turf that would be better be described as "neighborhood" rather than "regional". So in light of this, the company recently announced that it will be pulling out of stores and will instead concentrate on serving fresh, Twisted Pine beer to a hyper-local group of consumers.
Is this smart? Perhaps it's more than smart, but rather represents a likely future for many new and existing breweries. Obviously growth opportunities are limited with such a strategy, but the survival and prosperity of the brand is much more under the control of the beer marketer rather than the retailer, and a very comfortable living can be made for all involved in the venture if the taproom is successful. Survival and prosperity is in no way assured, but it is much more likely under a hyper-local scenario. Local food, local beer, local people, and all that jazz...The company has said that it will continue some keg sales to certain local bars, which is also a thoughtful move since folks that have the beer at another bar might want to visit the taproom to try some malted concoctions. It will be interesting to see how quickly other small, under-capitalized breweries catch on and abandon the shelf for the taproom. For it's part at least strategically-speaking, Twisted Pine is having no trouble seeing the forest through the trees.
The Four P's, also known as the Marketing Mix, in proper order are comprised of Product, Price, Place, and Promotion strategies and tactics. Most marketers of branded products know that the most difficult "P" to execute is Place, or distribution, and this fact is becoming ever more apparent in the overheating craft beer industry. Sure, the segment is growing rapidly, as younger consumers (and even some older ones) drive an overly-rapid proliferation of craft breweries, each sporting dozens of flavors that require distribution. There are numerous signs that this volume of players might be reaching a critical mass, as most of the larger craft players have been purchased by the macro-breweries that still represent 85% of the beer sold. Because these smaller breweries are now owned by these larger players, they can no longer be considered "craft". This blurring of what is and isn't "craft" will surely have a negative effect on growth as once small and hip brands become too "commercialized", as happened to Samuel Adams, still the largest craft brewer.
Aside from the well-argued charges that consumers will eventually tire of too many versions of the same thing (some very poorly produced) or that the overly-hip mentality that seems to permeate beer culture these days will eventually lose its popular appeal, the fact of the matter is that there are simply too many breweries chasing far too few tap handles, and liquor stores only have so much shelf space for new beers or smaller players in general, since the big boys have superior powers of distribution. Too many stock keeping units (sku's) chasing too little space. With distribution opportunities becoming ever more closed to smaller players as the industry inevitably matures, a great culling of the herd is most certainly around the corner. Or is it? The next post will focus on one Colorado brewery that is taking a bold and perhaps prescient step in its development. Staying "hyper-local".
Marketers of alcoholic beverages sold in bars have always been adept at placing their respective brands in high-profile places where they can reinforce their brands and hopefully gain more sales among competitors. The free glassware, stirrers, coasters, napkins and other branded gifts have always been very useful to bar owners who often operate on thin margins and must find ways to cut costs. Every little bit helps. And booze brands often use these promotional items to reinforce advertising campaigns and other branding efforts. These days are far from gone, but a new trend has infiltrated some of the more cutting-edge taverns who have traded up on the promotional opportunities that abound inside their friendly confines.
Not only are brand-reinforcing signature drinks and food dishes becoming increasingly popular with hospitality marketers, but now logos imprinted on things like ice cubes are becoming more common, and in many cases it's the bars themselves doing the branding instead of doing free marketing for their vendors. Even slivers of lemon and oranges which are commonly found garnishing mixologist-inspired, hand-crafted libations aren't immune to imprinting. It's smart marketing and after all, many of these bartenders have college degrees! In addition, branded coasters and swizzle sticks featuring bar logos rather than liquor brand images are fast becoming the norm, as marketers discover an opportunity to reinforce the bar brand while the customer is in a captive environment. This reinforcement is especially effective during times of "happy hour", a period of time that invariably lasts much longer than an hour and almost always results in at least one person being unhappy.
Liquor brands will come and go as tastes rapidly shift, but the bar remains (hopefully), and the bar's brand is what the hospitality marketer of today wants to focus on. This is especially true since consumer wants have trended towards more rather than less variety, making an already strong case for reinforcing one's own brand in the service environment even stronger.
Fast food chains are making some interesting choices these days, making attempts to reach young consumers that sometimes seem desperate and are often futile. But try they must. Take KFC's ill-conceived and poorly executed reintroduction of "The Colonel" spokescharacter as an example. It hasn't gone well. So while changes to the menu are an ongoing effort at most restaurants, other more interesting tweaks are beginning to spring up, and sometimes in the most unlikely of places.
Some fast food restaurants, instead of concentrating on "turns" (that is getting as many people in and out of the place as possible) now want you to sit back and stay a while and as such are testing a variety of ways to encourage customers to hang out. For example, a Burger King in Helsinki has been outfitted with a spa, media lounge and gaming center. I am not making this up. Last year, Taco Bell began selling liquor at a location in Chicago and is making efforts to re-design its interior in a Mission Revival-esque style. Outdoor dining areas, exposed wooden beams, and plush seating could become the new norm on 'The Border". A few years back even Popeye's got into the game and added upscale wrought iron and other aesthetics to encourage people to stay a while longer. Why is all of this happening?
Millennials tend to prefer fast-casual operations (a step above fast food that's sometimes difficult to define) and endeavor to have a better dining experience without paying the higher prices associated with finer dining. For this generation, fast food has a negative connotation. Taken in this context, it's easy to see why fast food brands want to become more fast-casual. In fact, it might become an imperative. The days of plastic seating and sterile, quick in-and-out eating environments are clearly on the way out, but consumers still want fast service. The fast-casual format is winning the restaurant wars, and fast food operators must continue efforts to upgrade menus, facilities and overall brand image to address this new zeitgeist. And not all of them will do so successfully. The strong shall survive.
As if all of the lawsuits involving misleading "natural" claims weren't bad enough, a recent article by a Tampa Bay Times food critic has revealed that some of the "farm-to-table" fare we think we are eating isn't what we think it is. This was described as "an exhaustive investigation" and exposes just how little of the prepared food advertised as organic, locally-sourced, and non-GMO actually deserves the nomenclature. If this report is to be believed and hopefully soon it will be studied a bit more scientifically, the credibility of these sorts of claims is cast into further doubt, fueling skeptics and threatening a rather large and still rapidly-growing industry.
The jist of the report findings seems to be that many restaurant owners had at one time tried to provide sustainable fare, but for one reason or another ceased doing so. One of the reasons seems to be that consumers were not really willing to pay a higher price point for this low-volume, local fare, which nevertheless did not deter many marketers from defrauding their customers. Another reason concerns the availability of "sustainable" ingredients.
And eating locally isn't really what it's often cracked up to be. First of all, "organic" doesn't mean "local". An organic avocado can (and often does) come from places like New Zealand. And locally-grown food cannot be available throughout the year due to constraints caused by climate, growing seasons, etc. Seasonal vegetables are one thing, but getting the consistent mix of ingredients that chefs need to provide a consistent product and consumers demand just isn't possible most of the time. Add to this the inconvenient truth that local supply chains (such as they are) are wildly inefficient and sometimes, as was the recent case with Chipotle, it is difficult to trace the "chain of custody" and find out where the food really originates. Combine all of this with the discovery that many restauranteurs are unscrupulous with their marketing claims, and marketers should have a fairly serious authenticity issue on their hands. But is this true?
Perhaps not. Consumers often like to fool themselves in the name of moral satisfaction, and marketers usually have few qualms about enabling this behavior. And fraudulent marketing claims made by small restaurants, rather than large chains, are almost impossible to track and regulate. After all, this whole natural/organic/local thing has become a major differentiator for marketers and therefore represents a major market opportunity as well as a competitive advantage. No wonder the federal government is going after so many natural marketers these days. Marketers should have to make truthful claims. But buyer beware! The next time you order that farm-to-table kale and beet salad and aoli-drizzled, locally-sourced, free-range chicken, it might come with a side of untruth. Caveat emptor.
In a very interesting strategic marketing move, Wal-Mart has decided to dispense with its fledgling private-label organic brand, Wild Oats, in favor of a more "organic" strategy. Obviously the project has under-performed, but the organic category is growing rapidly. So what does this mean?
Well, it doesn't mean that the retailer is giving up on the fastest growing food category in the U.S. (17% annually), but it does mean that its supply chain partnership with private equity firm Yucaipa is over. Call it an annulment, since the agreement with the company that bought the rights to the former Wild Oats Market nomenclature lasted only two years, and one can only speculate as to what went wrong with the whole thing. Perhaps Wal-Mart can make organic products itself for cheaper, a classic change in the "make or buy decision", and history shows that it can probably lower costs by offering a store brand. But maybe instead of doubling down on private-label products the company will opt to increase the number of name brands it carries, thus broadening its organic depth. Either way, one can bet that the retail giant is desperate to demonstrate some modicum of growth these days and perhaps getting a better handle on the organic category is just the remedy for this improvement. Certified Organic is an important category so the question is "Can the company execute?"
And the winner is? Word-of-Mouth. Driven by social media following an apparently unsatisfactory effort by movie producers, word-of-mouth quickly killed huge initial interest in the latest superhero redux, "Batman v. Superman: Dawn of Justice". Opening to $424 million in the first week made it the fourth highest grossing movie ever for an opening weekend. But the fun didn't last.
Opening weekend was awesome despite overwhelmingly negative reviews from critics, but fans just had to see it for themselves. In fact, research shows that in general people tend to believe movie trailers more than they do friends and family when it come to movies, so in light of that, ignoring critics isn't all that surprising. it's what we do. Nevertheless, the film has grossed $867 million, which is no small potatoes, but the typical movie "multiple", that is the final gross of the movie compared with the opening weekend, averages between 2.5 times and three. So by industry standards, the film grossly under-performed, which doesn't bode well for sequels.
That the movie title includes a colon suggests producers have at least one sequel in mind, but it looks like they may need to rethink what (and who) might be involved in any sequel. Marketers will have to overcome massive social media and skepticism from professional film critics as well as a gun-shy audience disappointed by the first film. But this Herculean task been accomplished before. I am a middle-aged guy, so I think of the first Star Trek movie, which was so incredibly dull I fell asleep. OK I was only 10 at the time but everyone else hated it too and I was never much of a napper. But the follow-up, the wildly-entertaining"Wrath of Khan", is commonly viewed as one of the best sequels of all time, so it can be done. Yet after this less-than-desirable experience, you can bet strategists at Time Warner are already making some significant changes.
Most of us have seen the TV commercials. Don't just use a real estate agent, use a REALTOR. And you must pronounce it correctly with the emphasis on the "or". Clearly this realtor thing is some sort of important, higher end, home selling designation, above mere real estate agent status, and I guess that's all we really need to know. Realtors are better. And those of us who watch the perennial hit show "Modern Family", know that everyone's favorite Realtor is Phil Dunphy.
I don't remember him ever actually having mentioned that he is a "Realtor" until recently, but I could be wrong about that. But this is not surprising considering that the folks who handle product placement deals at ABC and the National Association of Realtors decided to do some business together. Phil Dunphy, who plays one of the father figures in the comedy, not only mentions his Realtor status, but the entire concept of being a Realtor versus a real estate agent was the plot foundation of a recent episode. This is taking product placement to an entirely new level, and no word yet on the cost of the placement.
In the episode, Phil makes the point that he is a Realtor and then proceeds to win a battle with his nemesis based on some specialized information that only a Realtor would be privy to. The fact that it was the theme of an entire episode makes the brand integration worth more than 30 minutes of TV commercials, let alone one 30-second spot. This marketing tactic is simply brilliant, and marketers at the NAR should be proud of themselves. Imagine how many people will now think twice when they buy or sell a home. Imagine how many people will now associate Realtors with the warm feelings they have for Phil's character. And we do have warm feelings for Phil. Imagine how many real estate agents might aspire to instead become Realtors. Perhaps the NAR has plans for future brand integration. Perhaps this is only the beginning.
The small-batch Craft Beer Industry, which now comprises 12% of the overall beer market, is growing by double-digits with some sources estimating that at least one new brewery opens in America each day. It seems like the taps will never stop flowing as just about every brewer who has at least a rudimentary understanding of marketing, management and basic math seems to be succeeding in this profitable industry. But despite all of the positive energy and camaraderie amongst competitors, case study after case study shows us that there are some looming threats on the horizon.
First, the largest craft breweries (those that produce fewer than six million barrels of suds annually) are being sold left and right. Only a few of the larger independents such as Yueng Ling, Sierra Nevada and New Belgium remain independent, and can rightfully call themselves craft breweries. The big beer company-owned brands such as Goose Island can no longer be considered "craft", and these popular beers will now have major distribution advantages over smaller players. There are only so many tap handles in the bars and there is only so much shelf space in the liquor stores. Industry consolidation is a huge threat.
Second, there are simply too many breweries coming on line and there are thousands more waiting in the wings. Brewers used to travel to Belgium, Germany, and other "beer meccas" to learn the craft, but now can learn from a local public university, a two week workshop, or an online program. This means that there are probably too few excellent brewers out there, and uneven quality could very well affect the future growth of this category. One thing we can say for the big beer brands is that they are consistent in quality. Ultimately, most consumers won't stand for uneven quality for very long.
Third, craft distilleries are becoming hugely popular, and these harder beverages are a major substitute for beer. Substitutes, like competitors, are threats to every product category.
Finally, there is evidence that America (and the Millennial generation in particular) might have a bit of an alcohol problem to go along with the well-documented issues with obesity and prescription drug dependence. There is a growing body of research indicating that young people are drinking earlier, more frequently, and in higher volumes than earlier generations. We are still getting fatter and more substance-dependent as a society. The result of this trend could be regulatory efforts to limit alcohol content as well as societal efforts to lose weight, which is much more possible if you don't drink much alcohol. Public health is thus becoming a major threat to an industry that seems to try to outdo itself with beers containing more and more alcohol.
And as for the assertion by the brotherhood (they are mostly men) of brewers that they are all just one big, happy, profitable, slightly tipsy family? Cottage industries are often filled with such cooperation among competitors, but this effect becomes heavily diluted once growth begins to slow and hyper-competition begins to weed out the weaker players. Industry maturity might begin happening over the next few years, or it might take much longer as the craft segment continues to attract new customers seeking variety. But the huge growth can't last forever, and there are indications that some very new challenges might be around the bend.
After four years of losing members, it was starting to look like Weight Watchers had already seen its best days. the well-known weight loss company would become yet another brand enjoyed by older generations, but unable to broaden its brand appeal to younger consumers. This might still be a likely scenario, but a huge boost from Oprah Winfrey, who is now a part owner and spokesperson, as well as a new diet plan product have turned things around, at least temporarily.
Oprah doesn't really have the appeal that she used to have and she doesn't resonate well with the under-30 crowd, so it remains to be seen how important her involvement will be to the long-term success of the company. But for now, her smiling face seems to be helping matters a great deal, as the company reported an 11.2% increase in North American membership over the past quarter. International membership is still down. Marketers know that developing new products is utterly crucial in the effort to attract new customers, and it looks like the latest offering from the company is doing very well. More profits means more investment in the brand, which hopefully leads to more customers and thus more profits. It's easy, right? Well, it's certainly seems easier than losing weight and keeping it off, and although one quarter is not representative of an entire year, Weight Watchers appears to be on the right track.
While there are some who believe that "bald is beautiful", and while there is evidence that a perfectly-shaved head can actually provide some business advantages for men, most folks will spend whatever amount is necessary to fend off falling follicles. Of course, there are many over-the-counter drug preparations, with Rogaine being perhaps the most recognizable brand, and they are effective for most users. But this stuff is expensive. Wouldn't it be nice if there was a less expensive way to maintain adequate hair volume without breaking the bank?
The answer might be found in caffeine. Not only is it one of our very favorite beverage ingredients, but there is also a growing body of evidence suggesting that it is useful in counteracting the effects of testosterone, a chemical that stimulates hair follicle growth (treatment) and prolongs the time hair follicles remain in the growth phase (prevention). Some shampoos and lotions already contain caffeine, promising to help keep hair thick and full, but making a more specific product claim promoting the "regrowth" of hair or the "prevention" of baldness is an entirely different story. Such claims would require FDA approval.
Interestingly, earlier research exposed that too much caffeine actually has the reverse effect, perhaps due to an over-stimulation of the hair follicle, but upon further review it looks like this incredibly useful substance is effective in the right dosages. And caffeine is cheap. A 12-ounce bottle of Dove's Men+Care shampoo, which already contains caffeine, sells for only $4. More science will surely reveal the proper dosages as well as other important factors involved in optimal hair maintenance, and it does seem likely that caffeine is poised to become a very popular hair care ingredient. If additional research validates caffeine's effectiveness and if hair care claims for caffeine are eventually approved by the FDA, baldness might be curable after all.
Students of marketing are accustomed to learning about the pricey ads placed by branded product marketers that are aired during popular live sporting events, but seldom do educators talk about the amount of money spent by networks to advertise their own programming. And with 100 viewing days before the Rio de Janeiro Olympic Games, broadcaster NBC has rolled out a rather expensive media campaign aimed at attracting viewers and maximizing opportunities for their advertisers.
The Games only come around every few years, so drumming up interest in advance is always a good idea, but NBC has valued their planned efforts at $100 million, a 33% increase over four years ago. Wow. It's a good thing they own the network! Usually, networks view the Olympics as loss leaders and so don't make much if any money, but the negative publicity surrounding the problems Brazil has been having preparing for the event have network executives even more concerned than usual. All of this concern might be unfounded, but NBC is taking no chances. Indeed the network has guaranteed key advertisers an audience of 20 million viewers, equal to the bunch that tunes in for Sunday's NFL games. A tall order that NBC is betting $100 million it can deliver. Let's see what happens.
Even the most casual observer of the marketing environment knows that Chipotle has some work to do before its brand reputation gets back to what it used to be. Rather than embarking on a nationwide apology tour (a tactic favored by BP among others), marketers have instead settled on an old, tried-and-true sales promotion tactic to get customers back in the doors. Free product.
Of the 5 million "Free Burrito" coupons issued via mobile offer, a whopping 67% of them were redeemed for a total of 3.35 million burritos. That is an impressive response rate indeed, but it is important to note that most coupons used by product marketers feature "price-off" deals rather than vouchers for free product, so one would expect response rates for free burritos to be relatively high. Still, it's impressive. But profits and sales are still far below their peaks despite the promotion, and we know that it takes time to repair a brand's reputation by re-establishing trust in the marketplace. As I write, marketers are preparing to wean customers from the free stuff and towards buy one, get one free offers, which at least necessitate a purchase of some kind. But what happens when this strategy is exhausted? Can over-discounting actually hurt a brand? How will marketers eventually get customers to pay full price again? Chipotle faces some challenging times ahead.