• Tomatoes: Some Rotten, Some Not So Much

    There is no question that movie quality these days is rather poor. Although a handful of blockbusters (almost always sequels) continue to break records (our population continues to grow and movies distribution is becoming more global), the industry itself has been in decline for quite some time, as theater-goers become fewer in number and ticket prices rise to compensate for the loss. Gosh, it sure would be helpful if there were more quality motion pictures available, but the sheer number of re-boots, sequels, and just plain strange original screenplays combined with high prices for tickets and concessions is giving many consumers pause and causing many of them to seek the advice of professional reviewers to reduce the chances of having to sit through a real stinker like anything made by Adam Sandler or the new Independence Day.

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    Of course this is nothing new as famous movie reviewers have been plying their trade ever since movies became widely distributed. Alas there is never a shortage of critics. But with the rise of the Internet, access to these reviews has never been easier, but like everything else online, the sheer number of opinions available can be daunting. That's why sites like Rotten Tomatoes, which distill reviews from multiple sources into a single score, are becoming so important to both consumers and the producers of the movies themselves.

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    A single score between one and 100, a rubric that anyone who attended a school understands, can really help consumers cut through the clutter, and since the score is based on hundreds of reviews, we can assume that the results are valid and reliable to a very large degree. High scores on the site are now being used in many advertisements for movies as well as in communications to shareholders, and a score below 80 is becoming a huge problem for many films. Word of mouth travels fast these days and a solid opening weekend followed by a bad review on Rotten Tomatoes and negative word-of-mouth can sink a film for subsequent weeks. It's hard to argue with the aggregate of 900 critics, but it's also true that tastes differ. For example, I think Will Farrell movies, with the exception of Talladega Nights, are all terrible. And I am apparently in the minority of opinion on that one. 

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    Some sites, like Metacritic, don't use nearly as many reviewers and also employ proprietary formulas that also measure level of "sentiment", which Rotten Tomatoes does not do. It only reflects the percentage of reviews that were positive. That's why a 60 on the former (lots of extreme opinions) can be an 85 on the latter. For my money, I'll take Rotten Tomatoes any day.Times have changed. Students go to Ratemyprofessor.com to see who they want to take Advertising from,  we vet contractors at Angie's List and Home Advisor, and we decide to stay in certain hotels based on the recommendations and opinions of anonymous, regular people. To me, this reliance on non-experts does seem a bit silly, but it's what most of us do. The movies at least is one industry where consumers still respect expert opinion.

  • Waiting for Willie

    Unless you have spent the past 10 years overseas and don't have the Internet, you might have noticed that cannabis is now sold in four states (and D.C.) on a recreational level and in over 20 states to those with medical approval (which can be just about anyone). This means that weed has already become a multi-billion industry in a limited market, and since there have been very few problems overall with the social experiment, it is expected that the market will expand rapidly as many more states join in the tax frenzy. Eventually, the feds will have to legalize it. The industry in Colorado, for example, will surpass $1 billion this year, resulting in hundreds of millions of dollars for state and local governments in the form of tax revenues. So since this thing is going to be a national phenomenon rather soon, it should be no surprise to a student or practitioner of marketing that a few high profile celebrities are leveraging the brand equity built through establishing and maintaining their "weedy" reputations. Introducing Willie's Reserve.

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    Willie Nelson, country music legend and unapologetic cannabis afficionado, will introduce his own branded line, Willie's Reserve, in both Washington and Colorado this summer, making this one of the first "national" brands in this still federally-illegal industry. This is a big deal. And Snoop Dogg, rapper, public puffer and very funny dude, is also in the process of introducing his own signature line called Snoop Dogg's Leafs by Snoop. You just can't make this stuff up.

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    Willie, for his part, is also apparently a fan of good marketing, as he is timing his ground-breaking product release with scheduled tour stops at Marymoor Park in Redmond, WA and Fiddler's Green Amphitheater in Greenwood Village, CO. We can assume those events will be smoke-filled affairs, and also that they will get some modicum of media coverage, providing Willie's Reserve (and others) with a bit of free publicity. And of course Snoop, Willie and others aren't growing the stuff themselves. As is the case with so many celebrity-branded products, these musicians are partnering with existing, licensed cannabis growers in both states. Store brands often work this way too. The products are usually made by existing branded product manufacturers rather than by the retailers themselves. But for the cannabis industry, it seems that the sky is the limit when it comes to branded cannabis lines. Maybe P Diddy can change his name back to Puff Daddy so he can make much more sense to everyone. Perhaps Cypress Hill (the band), Woody Harrelson (the actor), and Rick Steves (the travel guy) among so many other cannabis supporters can also get into the act. The big question is how many (and which) celebrity brands the market will support. We shall see.

  • Tide Tries Direct Channel: Part Two

    Inspired by the success and subsequent billion-dollar sale of direct-seller Dollar Shave Club, marketers in charge of the struggling Tide brand at Proctor & Gamble have decided to break with convention and offer products directly to the consumer. This doesn't mean that the brand will no longer be sold in stores, but rather via both channels. And although the company must be careful about pricing and ensure that prices aren't too far below what the retailer offers, Tide has developed quite a bit of brand equity over the years, so failing to carry the brand wouldn't be a very good thing for retailers.

    This is an interesting case of who has the most channel power. Generally, it's retailers, since they are the closest touch point to the consumer and get to decide which products to stock on their respective shelves and at what prices to offer those products. That's power. But certain brands like Coke, Pepsi, Tide, and many others are so ubiquitous that the retailer cannot help but carry at least some sku's. This makes it easier for Tide to try a multi-channel approach to distribution, something big consumer brands seldom do.

    The bottom line is that consumer spending is slowly migrating online, and if an upstart like Dollar Shave Club can be valued at $1 billion after only a few years, Tide is betting that consumers will also respond to a similar e-commerce model of lower prices and products shipped directly to the consumer. And there is no doubt in my mind that Proctor & Gamble will move to other product categories like razors if this initial foray is successful. And why not? If the company can leverage its brand equity and avoid angering existing retail partners, this could be a very good thing and could dramatically change the retail environment in the long term.

  • Tide Tries Direct Channel: Part One

    With the massive migration of commerce to the Internet, selling products direct-to-consumer has never been easier. Once relegated to sending mail order catalogs and placing off-peak cable TV ad spots, direct sellers can now bypass intermediaries (wholesalers and retailers) with much greater ease than in previous years.

    Using a direct-to-consumer distribution model means that marketers tend to do less volume, but wholesalers (who often take 10% of the retail price) and retailers (who often take 40-50% of the retail price) are cut out of the supply chain and so marketers can offer the same products found on store shelves at less than half the price. This looks like an attractive option.

    Indeed, direct selling has come a long way from the days of cheaply-produced commercials promoting such items as Time Life books, K-Tel music collections, OxyClean, and Ginsu knives, as goods of all kinds are now sold via direct channels. But due to "channel conflict" concerns, brands that sell to stores have been reticent to also sell direct because such a practice undercuts the retailer partner. Retailers don't like this "multi-channel" approach very much, and branded-product manufacturers must take care not to offer prices that are too far below the prices offered in stores. In fact, many products are often tested through direct channels first, and then are sold in stores if they are successful. This is what usually happens, but marketers at Tide have decided to challenge convention and are trying their hand at direct selling in hopes that such a distribution strategy can increase sales. The next post will explore this bold move.

  • Anchors Away

    Shopping malls have been a mainstay of the American shopping scene for a very long time. In fact, the whole concept really isn't American at all since one of the first recorded shopping malls was located in Rome's Trajan's Forum, open for business 100 years after the birth of Christ. In fact, the idea of a "bazaar", wherein all kinds of goods can be purchased in one location, has existed in many forms in many cultures throughout history. And in the United States, the large, in-door shopping mall has largely had the same format for decades, a model wherein a large number of small stores are "anchored" by a small number of large department stores. But all of this is changing very rapidly, as the department store retail segment is most certainly facing the biggest challenge in its history.

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    We know that most retailers have plans to downsize in the future, and we also know that department stores have been challenged as much as any brick-and-mortar format to stay relevant to a new generation of consumers some of whom are now hitting middle age. And unfortunately for these marketers, Millennial buying patterns reveal that substituting once-coveted big box chain stores like Nordstrom and Macy's in favor of sporting goods stores, fast-fashion retailers, movie theaters, supermarkets, and even gyms is better for the bottom line. This has changed the whole concept of what an anchor is, as one expert noted that the Cheesecake Factory does more business than Sears once did. Currently, when an anchor vacates space it is replaced by a department store less than 50% of the time, surely a far cry from the days when malls were completely dependent on these big box stores.

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    While great news for the retail segments mentioned earlier, this is certainly not good news for department stores. At some point in the near future, key marketers will realize that the category must reinvent itself, involving an objective, consumer research-driven overhaul from top to bottom---branding, merchandising, pricing, promotion--the works. Conditions in the marketplace will only deteriorate for the venerable department store, so they had better get cracking. What can these large retailers do to become more contemporary?

  • "Pets" Chews Competition

    The often questionable quality of Hollywood movies continues to raise eyebrows, but in this day and age, when a movie is a hit, it might actually break some records. As such, the hit sequel to Finding Nemo, the aptly-named and long-awaited Finding Dory, has been a huge hit and is poised to become the highest-grossing animated movie of all time if it eclipses Shrek 2's $436.7 million. Certainly the world is much more "global" since Shrek (Mike Myers) and Donkey (who sounds uncannily like Eddie Murphy) were around and the world's population (market for movies) does continue to grow, so it's not terribly surprising that a sequel to a beloved motion picture, however late in coming, would eventually knock Shrek off his donkey. But both movies were sequels and due to the brand equity built from the initial films, sequels tend to enjoy much, much higher revenues. It's really a very interesting phenomenon, and it's much of the reason why producers seek to develop long-term franchises from which multiple products, including but not limited to future films, can spring. But here's what's even more interesting.

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    The Secret Life of Pets brought in $103.2 million in its first week, which seems paltry compared with the kind of money that the cute fish and the lovable ogre have generated. But this wasn't a sequel, and indeed it broke records for the highest grossing movie ever that is not a remake, based on a previous movie, or adapted from a book or comic. In all three of these cases, there was existing brand awareness and a degree of brand equity which help to propel them into the high-grossing realm, unless of course the sequels are real stinkers. The lack of awareness and equity is precisely what makes the success of The Secret Life of Pets all the more notable. And audience approval for the movie, according to RottenTomatoes.com, is 76% which makes it likely that many people will spread positive word-of-mouth meaning that prospects are good for a second film. And an excellent sequel released in a few years, with the right marketing, would likely bypass Finding Dory. Most consumers like what's familiar to them, which explains habitual buying, brand loyalty and other marketing-related phenomena as well as the success of movie franchises. Original ideas are risky, and the real payoff often lies in one or more brand extensions, that is the second and successive films rather than the original film. Last year it was Inside Out, a movie about the inner workings of a teenage brain, setting the record at $90.4 million. Now it's an off-the-leash movie about pets in the city that made $13 million more. Hey! "Pets in the City". Perhaps that's a good name for a sequel. Or perhaps I'll just keep my day job.

  • The Hubris of Chipotle

    Most of the marketing that Chipotle has done since last year's crippling food contamination hullabaloo has involved giving away coupons for free burritos as well as ads geared toward the freshness of its ingredients. Marketers didn't do much in the way of apologizing and it looks like they just hope it will all eventually just go away. And it will. Eventually. One would think that a good strategy would involve staying under the radar, not generating too much publicity, and perhaps a less cynical approach to advertising.

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    But Chipotle simply can't help itself. If it isn't on the defensive it is on the attack, and it's a good thing for Qdoba that marketers are obsessed with the evils of "big food" and hammering in the fact that Chipotle isn't "big food", and not in dissing the smaller, poorly-differentiated competitor. Not only is this stick-it-to-the-man, fresh ingredient creative strategy getting a bit tired (Subway also invites you to "eat fresh"), but the comparative marketing the company has employed in the past, much of it enabled by social media, has always been a bit nasty in tone. A few viral YouTube videos and a movie come to mind. So in the face of yet more bad publicity (the chief creative person in charge of Chipotle's marketing was recently arrested on cocaine possession charges), what have marketers decided to do? Release another negative video. Readers of this blog well know that I am highly critical of brands such as Apple and Tesla that prefer to embrace a "holier than thou" attitude which is often reflected in the behavior of many of their consumers. Such hubris is annoying and unnecessary in brand management. Both brands have the resources to do much better, and at this point, I'm afraid that  Chipotle has joined these prideful marketers on my list of most annoying brands. It's a very short list, and they had their chances, but this is all fodder for another post.

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    The latest planned web video, a short film called "A Love Story", deals with juice stand owners, processed ingredients, a guilt-inspired epiphany that small and fresh is better, and corrective action. In other words, the same stuff we've also been hearing from the natural and organic products industry for 30 years. In my opinion, this mix of sanctimonious metaphor and sheer nastiness might work for core natural products consumers, but it is a rather poor way to approach mass market brand management, especially in light of the recent exodus of customers due to the product safety scare. And it doesn't help that the whole problem was food safety (a quality issue), and not service, a loud-mouthed CEO, or something else. Why would marketers want to focus on quality after all of this? Wouldn't a more creative approach focusing on other aspects of the brand be a less risky proposition? Or better yet, how about a humorous TV campaign engineered by talented creatives to distract the consumer and shape brand attitudes slowly but surely?

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    Chipotle prides itself on taking risks and has never been a shy brand. The anti-GMO movement is still prevalent, and consumers do love their fresh ingredients. Who doesn't? But contaminated fresh ingredients are what got them into trouble, so it makes little sense to remind consumers of freshness, safety or anything like that right now. Give it more time. Marketers at Chipotle have defended the upcoming video as wanting to "remind consumers about our commitment to using quality ingredients and classic cooking". I'm not sure what a couple of fruit stand owners (who for some reason are using processed ingredients) have to do with Chipotle, classic cooking, or much else, but I haven't seen the clip yet. To this 30-year marketer, it all sounds like sheer amateur hour. It is clear that marketers have lost their way at the public company as marketers sometimes do, and it is probably high time, especially in light of the drug charges, for changes at every level of the organization's marketing function. Change can be very, very good. But hubris is a huge cross to bear, so such changes might not be so easy to make. 

  • Falcons Fans First

    Top-tier professional spectator sports aren't known for their low prices. A family of four now spends hundreds of dollars on average for an outing when one includes the costs of tickets, parking, concessions, and other factors; and with salaries and facilities costs on the rise, this trend shows no signs of abating. Prices, however, continue to rise. So eyebrows were raised by many when the NFL's Atlanta Falcons decided to lower, that's right, lower prices on a several concessions items.

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    How does a $4 Coke sound? How about a $5 beer? $2 pretzels, hot dogs, and popcorn? A $3 nachos sounds good and the same goes for peanuts, pizza slices, and waffle fries. Round it off with $5 cheeseburgers and $6 chicken tenders baskets and you've got what marketers in Atlanta call "Fan First Pricing". Soon Falcons fans can party like it's 1995.

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    This pricing move just makes sense. Unreasonable concessions prices consistently rank high on the list of consumer irritants, and sport properties don't really make a ton of money on concessions to begin with since these functions are almost always outsourced. Lowering prices should also result in increased volume as more people consume more goodies, and higher volumes always help compensate for lower profit margins as fixed costs are spread over more units and economies of scale are achieved. Besides, building goodwill among fans and generating good publicity in the media aren't bad things either. Lots of good reasons here.

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    And it will all be rolled out in 2017 with the opening of the swanky, new Mercedes-Benz Stadium.  This marketing strategy goes well beyond simply bundling concessions in with ticket prices, which has been a common practice over the past decade, a sales promotion tactic that has been used somewhat sparingly during times of slow demand, bad economic conditions, and to reward loyal customers. But what the Falcons are doing is an ongoing "pricing strategy", and not a short-term sales promotion. One wonders whether or not the organization decided to take concessions in-house rather than the extremely common practice of outsourcing the function to the likes of service providers such as Aramark or Centerplate. Theoretically speaking, costs could be much lower by taking the function in-house meaning that  lower prices wouldn't cut so deeply into profit margins.

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    This will almost certainly play out to be a huge win-win situation and you can be sure that other sport properties will be watching this experiment rather closely as more and more fans eschew live events in favor of televisions and mobile devices. In ten years, Fan First Pricing could be the industry standard. 

  • The Return of The Kid

    The original company had just expired, and things were looking bad for Twinkie The Kid. The assets, including a number of well-known snack food brands including Twinkies, had been sold at auction to private equity investors, and no one knew what was going to happen. Would The Kid ever be able to regain his cakey, creamy cowboy swagger?

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    Three short years later, the new company, also called "Hostess", has become so successful it is planning an Initial Public Offering. That investors will be reaping returns of over 10 times their original investment in such a short period of time is nothing short of remarkable. Although there are several brands in the portfolio, the singular focus for marketers has been the flagship brand Twinkies in hopes that the remaining brands like Ho Ho's and Ding Dongs would succeed in its wake. And rather than engage in a huge national media buy, marketers opted for blending a far less expensive non-traditional social media-focused campaign featuring tributes from celebrities such as Will Farrell with more traditional outdoor signage such as a countdown clock in Times Square among other effective tactics.

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    Instead of limiting distribution to traditional stores, marketers were able to get products into Carl's Jr., movie theaters, and other unlikely places, and all of this with only a fraction of the 19,000 employees the former company had. Hostess now employs only 1,200 people. Although the company didn't end up purchasing the Wonder brand (which was sold to someone else), Hostess marketers quickly realized that there was opportunity in the bread segment and very rapidly expanded its product offering. As a result, Hostess-brand bread is now sold through a number of retailers. All of this has resulted in annual revenues of $650 million, and it seems that the brand has only begun to tap into its potential.

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    Lowered costs combined with major changes to the Marketing Mix have turned Hostess into a $2.3 billion IPO value proposition at a time when junk food marketers are fighting a major perception problem on multiple fronts. Can they continue to succeed in such a hostile environment? Innovations like Frozen Fried Twinkies, a smart brand extension if successful, might hold some clues as to what we can expect in the future. For now, Hostess has successfully leveraged the brand equity that was built over many decades by the previous company and has built a stable, profitable operation. Marketers will have to continue to innovate to keep this party going, but there is no reason to think that they can't do so. Twinkie The Kid rides again.

  • A Restaurant-Within-A-Store

    We are all quite accustomed to the many useful service providers such as banks, fast food joints, pharmacies and others that co-locate with much larger, goods-selling grocery and big box stores. "One-stop" shopping is important to many consumers, and it has been a key component of shopping in larger format retail environments for decades. This is nothing new, but Barnes and Noble, for its part, is thinking beyond books and coffee and is getting into the higher-end food service business. That's right. Full-service cuisine at four new stores. Of course retailers like Nordstrom and Ikea have been doing this sort of thing successfully for years now for the same reason that Wal-Mart does it. People get hungry. But can it work at Barnes and Noble?

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    Marketers are not only betting that it will work, but they have hired an executive chef to oversee the operation. Now that's commitment! The whole strategy is really an expanded version of their existing cafe concept, but it is meant to be a much more upscale offering and to encourage the customer to linger in the retail environment for that much longer. Indeed linen napkins and real silverware can go a long way towards enhancing a brand's image, but one store in an upscale New York county has an outdoor area replete with a fire pit and bocce court. Millennials anyone?

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    Today, Barnes & Noble's food service component represents only about 10% of total revenue, and marketers are operating in the declining book and DVD industries, so therefore must find revenue sources in unlikely places. But is expanding the food concept really going to provide the growth that the company needs, or does the retailer need to begin to seriously rethink its product mix beyond books, DVD's gifts, and toys? Yet, a well-executed concept with fairly-priced, tasty cuisine would certainly draw customers and keep them coming back with or without the books and toys. Should a bookseller be getting further into the restaurant business? Could this be an effective way for the company to use existing extra retail square footage and at the same time offer a service that they consider to be complementary to the goods they sell? Certainly the whole thing will generate positive publicity if the food is good. But if not... Muffins and coffee are one thing. Let's see how avid readers and gift-buyers like the breakfast, lunch and dinner.

  • The Great Retailer Shrinkage

    It has certainly been a long time coming since e-commerce was supposed to wreak this sort of havoc many years ago, but it has become clear to retailers in the U.S. that they will have to become smaller in order to become stronger. Although times have been tough for a while now, this year in particular has been brutal for mall retailers, department stores and others as consumers continue to not only purchase more products online, but equally as important is the trend of these consumers buying more services versus tangible goods.

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    Since neither trend shows any signs of abating and since most retailers have already absorbed the beginning of this market shift in the form of lower profit margins and slowing sales, it has become entirely too clear that the presence of far too many brick-and-mortar stores is also becoming a huge part of the problem. Prior to the 2008 financial meltdown, a mall brand targeted growth at somewhere between 400-500 stores nationwide, but now according to some analysts that number might now be closer to 200. Although retailers are usually reticent to close even their under-performing locations, the new zeitgeist demands leaner and meaner strategic thinking. No longer will retailers be advised to thoroughly saturate markets with sheer brand presence and as such they will have to be more creative with location selection, product mix, and target marketing than they have been in the past. And with investment in ramping up e-commerce efforts an ever-increasing imperative, these retailers will need all the extra capital they can muster to do battle with online players who enjoy lower cost business models. Not all will survive, and marketers will need every advantage. What will be done with all the extra retail space created by this exodus, however, is a matter for another column. For if there is indeed going be a great shrinkage among retailers, there will soon be a glut of it.