• A Side Effect of Self-Driving Cars

    We have heard much about self-driving cars, and like it our not they will soon be a reality. In the past several years, suburban sprawl has driven many people to migrate back into more urban areas, which in turn have gentrified and have attracted legions of young people to these vastly-improved city centers. Even Detroit is experiencing a renaissance of sorts. This trend has pleased city planners, who rely on the taxes these folks generate, but also environmentalists as the migration of people seeking opportunities that urban areas provide lessens sprawl. But according to some observers, self-driving vehicles might help put this trend into reverse.

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    It is true that eliminating human decision-making from driving will also eliminate tens of thousands of deaths and injuries that happen on our roads each year. These robots don't make many mistakes, and human actions are what causes almost all traffic accidents. These smart cars are also supposed to alleviate quite a bit of traffic congestion since robots are better at reacting to and anticipating the movements of other vehicles. All of this is good news, but is there also some requisite bad news?

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    Of course there is. Simply put, making it easier to get around might encourage people to live farther and farther out from city centers. In other words, more sprawl. But don't Millennials (adults 35 years and under) prefer to live in cities? Aren't they different from previous generations in this respect? Well, actually no. Studies show that 66% of Millennials tell researchers that they want to live in the suburbs, and apparently the ones who can afford to do so are moving there, since suburban growth now outstrips city growth. Fascinating isn't it? Well, at least cars are getting cleaner and soon won't be producing much in the way of emissions, so perhaps the negative environmental effects of sprawl will be less pronounced in the future. But doesn't more development mean less habitat for wildlife and a need for more support infrastructure, so negative effects will no doubt persevere? And as the population increases, so will other environmental side effects such as pollution and increased water usage; and there is no indication that our population is going to do anything but grow in the future. It is certain that self-driving cars will only increase the average human's mobility and therefore the average environmental footprint, and with advancements in technology making it ever-easier to work from anywhere, it seems that this issue of increasing environmental impact will only become larger with greater technological advancements. This means that while self-driving cars might offer some solutions to societal problems such as elderly mobility and lousy driving habits, it at the same time might create some others. Technology is quite often a double-edged sword.

  • Apple Innovation Still Stalled

    Even marketers at Apple couldn't muster up any excitement when they announced that the company would be making only subtle changes in the iPhone models it will be releasing later this year. Apparently the biggest change this year will be the removal of the headphones plug, which will make the phone thinner and more water-resistant. The Lightning Connector will also act as a headphone jack. Now that's exciting. But a more interesting issue involves whether Apple is holding out on innovation for the iPhone's 10th anniversary next year or whether the company is still struggling to innovate at all.

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    Apple TV and the Apple watch, the company's latest innovations, have been disappointing for sure, and it's really been quite a while since this company that is known for innovation has made an interesting and successful new product. Nevertheless, the iPhone has been a wildly successful product and continues to be the benchmark mobile device around the globe. Next year it looks like curved screens will be introduced which will change the product's aesthetic and offer a fresh take on the brand. This will be a good thing. But if competitors such as Samsung are able to achieve true technological innovations as Apple makes incremental changes to the iPhone, the industry could change quite dramatically. Yet when a company has as much market share and brand equity as Apple does, any demise would be a long time coming if at all. A brand doesn't have to be innovative to be successful, but it also can't position its products as innovative (and charge prestige prices) if this is no longer the case. After all, true innovation involves leaps in technology that result in changes in consumer behavior. Generally, the larger the change in consumer behavior, the more disruptive the innovation has the potential to be. Even Apple "fanboys" have to agree that Apple hasn't made anything that could be rightly considered "disruptive" in quite a while. How will this affect the brand now and in the future?

  • GM Has Ford In Sights

    There are many techniques in the world of advertising. An institutional ad, for example, focuses on the organization, while a product ad highlights a key feature or benefit. A testimonial features an individual who has used the product vouching for said product, and a slice of life ad shows the product being used in every day life. But perhaps one of the riskiest types of ads is "comparative" in nature because marketers must at least allude to their competitors if not outright mention them. Why risky? It's not usually a good idea to provide free exposure for your competitor, so this technique must be employed with extreme caution. Things can go very, very wrong.

    But faced with lagging Chevy truck sales, General Motors has decided to launch an advertising campaign with a creative strategy focusing on the Silverado's high-strength steel bed, which the company says withstands damage better than the best-selling Ford F-150 truck. Of course, the campaign will employ a "rational/informational" approach espousing facts verified by lab testing and other product demonstrations, but probably should also employ some sort of emotional appeal as well. Sources say that GM will use concrete blocks to punch actual holes into the F-150 bed while the same blocks only dent the Silverado bed, and marketers will primarily use a mix of print and television to deliver the message.

    Overall, this might be a very effective campaign for Ford drivers who use their trucks to actually haul things and therefore might desire a stronger bed. A few years back Ford, among other truck producers, began replacing steel with lightweight aluminum in efforts to comply with tightening federal fuel efficiency regulations. The Silverado uses aluminum in some parts, but not the truck's bed. Ford, on the other hand, might have a durability problem, which is certainly a ripe opportunity for a competitor like GM to exploit. And when faced with declining market share, GM certainly has to try something. Let's see what happens.

  • NBA Viewers Back In Force

    What a showdown! The NBA Finals Game Seven featuring Golden State and Cleveland, a city that hadn't won a championship in many decades, drew the highest rating for an NBA game since 1998 at an average of 31 million viewers during the broadcast. Viewership peaked at 44.5 million as the game reached its climax culminating in a victory for the Lebron James-led Cavaliers over the Steph Curry-led Warriors.

    Obviously 1998 was tail end of the Michal Jordan era, so the marketing lesson here is a clear one. Sport marketers call it "Star Power", and even the most infrequent of viewers can appreciate watching two iconic players go head-to head on an international stage. This contest certainly drew a larger number of casual NBA fans than in previous years. That the game was up against a U.S. tournament soccer contest (broadcast live at the same time) made the size of the audience all the more remarkable, as international soccer has been drawing larger and larger audiences each year. The viewership likely would have been larger if the U.S. international team hadn't been playing an important tournament game at the time.

    But without the star power of Curry and James, would the audience of Game Seven have been even close to the Jordan-esque numbers? Consider that the most recent NBA Finals Game Seven was played in 2013 and drew 17% fewer viewers despite having James and two other popular Miami Heat players competing against the comparatively boring San Antonio Spurs. The star power in this case was one-sided, since San Antonio lacked the huge names that seem to be so important in drawing a larger audience. This time, having stars on both sides convinced a much larger group of people that this game in particular was not to be missed. Besides the Cavs and the good people of Cleveland, the big winners here are the advertisers, since they benefited greatly from much media-fueled, free publicity, and they  likely paid for ad spots based on previous viewership. So the 17% bump represents a quantity of consumers that marketers really didn't expect to reach. All of this leaves the NBA, the networks, and the advertisers rooting for teams with big names to go deep into the playoffs. Underdogs? Not so much. As the move many years ago by David Beckham from the English Premier League to the lowly MLS proved, Star Power really matters.

  • Keurig's Kold Killers

    Sometimes new products simply don't catch on. And smart marketers often move very quickly to delete the languishing product as Amazon did with its ill-fated smartphone a few years back. This way, the memory of the failure fades that much faster in the minds of consumers. Marketers at Keurig Green Mountain, makers of individually-sized coffee K-cups and the machines that go with them, have made one such an important move after only one year. It's hard to know when to pull the trigger, since so much time and resources have been invested, but these are "sunk costs" and marketers must be willing to walk away from a bad idea as soon as most folks in the know realize that the new product was indeed a bad idea after all. Things probably won't turn around.

    Last year, Keurig made a huge bet on an at-home carbonated soda system, leveraging its platform technology in a product category has been at the verge of decline for more than a decade. Does that sound smart? Yet marketers at Keurig thought it was a good idea and so they decided to leverage its K-cup technology to allow consumers to product fizzy beverages at home. That enough consumers would want to do that is no longer in question, and at a high price point of $369 for the machine and $1.25 for the cups, only a few thousand machines were sold in the U.S. While not a huge shocker here at KnowNow! Marketing, Keurig decision-makers were flummoxed at the product's slow progress and dropped the prices to $199 and $.50 respectively to very little effect. It looks like price wasn't the issue after all. Perhaps there was simply no real need for this product.

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    One might ask at this point if marketers at Keurig were thinking about "The Marketing Concept" when they decided to commercialize this product. That is, a need must be assessed before deciding upon an appropriate marketing mix. It seems obvious, but marketers often forget this basic marketing principle. Did they conduct focus groups? Surveys? Did they run a test market? Or did they simply build it in hopes that they will come? Such thinking might work in some Kevin Costner movies, but it seldom works in contemporary marketing. But props should be given to Keurig marketers for pulling the product before any more damage could done to the brand or the company's pocketbook. Never fear that this company will be back soon with (one would hope) a better though-out, more thoroughly-verified new product idea. Keurig has a lot of brand equity to leverage.

  • Yoga's Stinky Secret

    There is no doubt that yoga has finally come into its own as a rapidly-growing product category within the $67 billion U.S. sports apparel market. And yoga people are now so numerous and like their yoga wear so much that they want to be able to wear it everywhere they go. Even after a sweaty workout. Sound impossible?

    This looks to be a rather stinky proposition. And, what may be an unrealistic consumer demand presents a problem for both the users and makers of these products. Indeed apparel companies have heard the consumer loud and clear and have designed yoga products for everyday use. The latest synthetic fabric is intended to "wick away" the sweat so that a particular garment can be worn post-yoga, but the problem is that the same technology doesn't do enough about the odor caused by bacteria from sweat. At best it only masks the stink so that it emerges later, and often at the most inopportune times, a phenomenon aptly named "rebloom". And it appears that the stink even stays after several washes in many cases. So is the sweat being absorbed or "wicked away"? Yoga apparel makers blame consumer laundry habits, saying that cheap detergents don't actually get odors out and that consumers are no longer doing smaller loads as much as they used to resulting in laundry lying around for longer. After all, stains and odors do tend to set in the longer one waits to do laundry. But Whirlpool, maker of washers has taken a stance and says that people use too much detergent (a position with which I personally agree). Tell that to Tide, a brand that is now encouraging consumers to use more pods. Confusing, isn't?

    Obviously the apparent lack of scientific justification coupled with the irrational exuberance of yoga marketers stinks about as much as yoga pants do at dinner, but what also stinks is the expectation among a group of rather demanding consumers who want to be able to sweat through clothing and then wear it throughout the day without side effects. Bacteria causes odors and odors that are absorbed into fabrics are tough to remove. Is it too much to ask for people who work out to clean up and change clothes before re-integrating back into society? Apparently so. And how many people really look that good in yoga pants? Not many. Much like magic pills for weight loss, a cure for the common cold, and many other elusive solutions to common problems, this quest for the ultimate garment might indeed prove to be a bit of a stretch. But this isn't stopping Gap with its Athleta "Unstinkable" line. After all, 69% of Americans don active wear three times per week and unpleasant odor is now up there with stains in terms of top consumer laundry concerns. So there is certainly a need for this seemingly impossible product, but is it really technologically feasible? I am reminded of Sketchers' claims that its shoes shape your backside, but that little fib cost the brand many millions of dollars. Perhaps the industry will make a product that truly works, but that time isn't now. The bottom line is that you might not smell as good as you think in those yoga pants.

  • Less Is More In India

    Twenty years ago, India (along with Brazil, Russia, and China) stood as bright beacons of opportunity for marketers as billions of new consumers were to enter the global marketplace. Of course, this did happen. But the trouble with these places is that there simply aren't affluent consumers for many types of products. Personal care is an excellent example, as the good stuff tends to be rather pricey; and L'Oreal, for its part, has learned some valuable lessons about emerging markets over the last few decades.

    One such lesson involves how few people in these places have enough discretionary income for luxury purchases. In short, these places are still relatively poor. By offering regular-sized products, the French cosmetics brand was only able to garner 4% market share in the massive Indian market. And so marketers decided to shrink the sizes of products, which allowed them to offer much lower price points, making these products more attractive to the average consumer. A brilliant strategy to be sure, and what are termed "small packs" now comprise half of India's personal care product sales volume. L'Oreal is now flourishing and hopes to grow its customer base by 400% in India over the next several years.

    But India isn't the only place buying more sachet-sized shampoos, conditioners, lotions, and such. Indonesia's "sachet share" accounts for 62% of all personal care sales while Brazil and Japan are just short of 30%. China, the U.S., and the U.K. are all at under 20%. Still, this is a big deal considering the market was virtually non-existent before the events of 9-11 and the resultant restrictions on carry-on liquids. It appears that some lower income consumers want to buy quality goods. It's just that they can't afford to buy a lot of it. Who knew?

  • Use More Tide!

    At least that's the latest advice from the marketing folks over at Tide. Four years ago, Proctor & Gamble introduced Tide Pods, a groundbreaking, perfectly-dosed and exquisitely-designed new product, that was touted as the best solution to figuring out how much soap to use per laundry load. Many studies have shown (and Tide marketers have previously pointed out) that on average we use far too much soap, which often results in smelly laundry washers and always results in the consumer spending money that could be spent on other goods and services. The Tide Pod was the answer, and imitators flocked to the shelves.

    Fast forward four years, and Tide is struggling with sluggish sales; so marketers have a different message. "We find that people need more clarity in judging their load size. They think it's a large load, but it's actually an extra-large load." This requires using an extra pod or two, of course. Very suspicious indeed, but it does make sense that larger loads would require more soap, and this might eventually result in Tide making its Pods less concentrated to allow for more customized dosing. But doesn't all of this defeat the purpose of a pod in the first place? So are consumers to believe that offering standardized dosing was not a very good idea after all?

    The bottom line is that pod sales are cannibalizing liquid sales, and marketers must have known that this would happen. After all, if consumers tend to overuse powders and liquids (and they do) then providing them perfectly-dosed pods would almost surely reduce their laundry detergent usage. No? That marketers are struggling with sluggish sales is no surprise in this very hyper-competitive product category, and Tide is struggling to attract younger, less well-heeled consumers who may not see the value in paying premium prices for the brand. What is a surprise is that the response from Tide is to simply recommend using more product. It's a confusing strategy (one that brand marketers might ultimately rethink), and you can bet that competitors are watching what Tide does very closely indeed.

  • A War On Salt?

    If it seems like I have been writing a lot about the goings on in marketing's legal and regulatory environment, it isn't just your imagination. It's just that lately there has been a lot going on in the legal and regulatory environment. This is especially true when it comes to labeling and the opinions many people have on what consumers need to know to make informed purchase decisions. This time it isn't GMO's or sugar that the folks in government are concerned about, but rather salt. Or, more specifically "added salt". And it is important to note that, like GMO's and sugar, this regulatory activity is happening on a local level.

    Michael Bloomberg, the previous mayor of New York and self-described defender of public health, unsuccessfully attempted to ban large sizes of sugary sodas a few years back, and now the current mayor, Bill de Blasio, has been more successful, stopping short of asking for an outright ban on salty foods. This time around, the appellate court ruled that the city may proceed with a plan to require chain restaurants to post warnings about menu items containing too much sodium. Policy makers have been trying to get Americans to reduce their salt intake for decades, and in 2010 the Institute of Medicine actually urged the FDA to regulate the amount of salt that food manufacturers put into packaged goods. But a recent study published by European researchers in the Journal of the American Medical Association found that the LESS sodium that study subjects excreted in their urine, the GREATER their risk was of dying of heart disease. So too little salt is worse than too much? Uh oh. If this study can be replicated, then the idea of connecting too much salt with heart disease goes out the window, but let's not be bothered with the facts here. Perception is the marketer's reality.

    And if the average consumer's perception is that more salt is bad then food chemists must figure out how to make their products taste good without using so much salt. This sort of dietary regulation won't go away any time soon, so it might be best to begin reformulating products now rather than waiting for action on a national level. And we have already been down this road before. It wasn't too long ago that trans-fats were removed from almost every product. Did you notice that McDonald's fries taste different? I didn't think so.

  • Amazon's River of Innovation: Twenty Years Downstream

    Nineteen Ninety-Five. That was the year that Amazon burst onto the scene, quickly dominating the fledgling e-commerce movement. It's hard to believe that the company started exclusively as a bookseller, but remember that in those days Barnes and Noble and Borders were huge players. reading was a more popular activity than it is now. But marketers smartly refused to rest on their laurels and realized that, in order to succeed in the long run, Amazon would have to adapt quickly and effectively to changing industry and market conditions. And this is exactly what they have done. Let's take a look at a timeline of events that was recently published in the Wall Street Journal:

    To say that Amazon Prime Day was a raging success is a considerable ...

    1995-Launch ($511,000 in revenue)

    1997-Company launches IPO

    1998-Expands product mix into DVD's and CD's

    1999-Product mix expands to include toys, games, and electronics ($610 million in revenue)

    2002-Amazon Web Services launched (cloud computing)

    2005-Prime membership shipping launched guaranteeing quick delivery for a membership fee (approx. $10 billion in revenue)

    2007-Kindle e-reader released

    2009-Private label line launched (Amazon Basics) (approx. $25 billion in revenue)

    2011-Prime Instant Video streaming service launched

    2014-Fire TV set-top box and Echo Speaker introduced. Fire smartphone introduced and immediately discontinued

    2015-Begins Flex delivery service and opens first of many potential brick-and mortar stores in Seattle ($107 billion)

    Folks, this is what we call an "innovative evolution", and we haven't even talked about the original content the company is now producing. It simply doesn't get any better than what Amazon has managed to accomplish. Of course, it always helps to be a "first mover" within a particular category (in this case e-commerce), but first mover advantages tend to erode rather quickly as new competitors emerge. Indeed a company doesn't get to $107 billion in 20 years by simply being first. The remarkable thing about Amazon is not just its ability to adapt to changing conditions, but also its ability to continuously innovate. Marketers at Amazon have been very adept at predicting the future, and marketers who can do this effectively are the true innovators. There is simply no reason to think that the company won't continue on this path now and in the future, as the river of innovation is potentially quite long for a retailer like Amazon.

  • Coffee + Beer = Tea

    Interesting math, isn't it? But for Starbucks and AB InBev, the two largest companies in their respective categories, this is exactly how things are adding up. In an seemingly unlikely strategic alliance, these two major brands announced a strategic partnership that allows the brewer to produce, bottle, and distribute a line of ready-to-drink teas under the Starbucks Teavana brand moniker.

    Although this sort of alliance is fairly uncommon, it is not rare. For its part, Starbucks has been developing its Teavana brand for several years, and the products would have automatic distribution in all Starbucks outlets, Teavana locations, and the various places where AB InBev products are sold. And the maker of Budweiser, among many other brands, has manufacturing capabilities that Starbucks simply doesn't have or want for that matter. The former is a manufacturer and the latter is a retailer, and conventional business wisdom tells us that companies should stick to what they do best in most cases.

    That's why this strategic alliance makes perfect sense. Another reason is that the ready-to-drink tea category is one of the fastest-growing beverage sectors in the U.S. with revenues rising over 6% in 2015. In an otherwise mature and/or declining industry, teas are a warm-spot of opportunity in an otherwise icy sea of  flagging demand. It's difficult for organizations of this size to experience any significant growth since they are already quite large, and so this is a great example of how two relatively unrelated organizations can achieve far greater things together than if each went its separate way to exploit the opportunity in the category. So, in this sense the math is simple...Coffee + Beer = Tea.