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.
Observers of the food service industry know that McDonald's, struggling with lagging revenues, has been planning to offer some kind of delivery service for quite some time now. Well, it appears that marketers have finally delivered on this promise, and it should be no surprise that the company has chosen a strategic partner in this venture. It also should not be surprising that the partner is Uber.
UberEats, a scrappy young start-up busy feeding the creative destruction of the transportation industry, has joined forces with McDonald's, a pioneer in the fast food industry busy feeding Americans while struggling with numerous external threats, to offer delivery from 3,500 locations across the country by the end of June. Currently orders can be placed using an app or at Ubereats.com, but it's hard to believe that there will not be a way to access the service through McDonald's own URL's very soon.
As far as new industry developments go, this is a pretty big deal, and it begins to cut into the territory of outfits like Domino's and Jimmy John's, who conduct much of their business on the front porches of homes across America. I have to admit that it's becoming a huge challenge keeping up with all of the change happening on a daily basis in the world of marketing. And this is only one of many such changes. Indeed it will be fascinating to see if this effort helps McDonald's or perhaps, even more ambitiously, it may even transform the entire fast food industry.
The Pirates of the Caribbean movie franchise has enjoyed great success over these many years, led by the very talented Johnny Depp and a crew of crazies operating in a rather impressive "alt-world" reality. The first four films performed very well and have anchored what has become a $4 billion franchise for Disney, but the current installment experienced a rather tepid opening weekend here in the U.S.
Does this mean that consumers are tiring of the franchise? Almost certainly yes, but this doesn't mean that marketers can't harvest big profits in the forseeable future; it only means that the franchise has already peaked. But if this is true, it might only be so for the U.S. market. While "Dead Men Tell No Tales" did generate a modest $77 million over the first weekend here, the film performed far better overseas at $210 million in the first weekend. And so not only will Johnny Depp and friends make plenty of money on this movie, but it does look like the Pirates franchise might have staying power in international markets, especially China.
Just look at Fast and Furious for cues as to how to manage this product. Indeed, there may be one or two more installments on the way, or perhaps the whole thing could be spun off into a related, but separate series featuring more obscure (and less expensive) actors. Depp might already have grown weary of the role. But brand equity is a tough thing for marketers to achieve and to manage effectively once they have it, and so when a franchise like Pirates comes around, it makes sense to squeeze as much as possible from what marketers have built over the product's life cycle.
Just a few years back, smart phone-enabled consumers invented a practice called "show-rooming", wherein items are viewed, sampled, and sometimes questions asked of store personnel in places like Best Buy; but the consumer then proceeds to purchase the very same product on Amazon at a lower price point. Of course show-rooming is still happening, but Best Buy has taken some very effective steps to address this channel issue and reverse the brand's predicted demise. In short, the death of Best Buy has been greatly exaggerated. Five years ago, the company looked bad, with cavernous stores, falling sales, and slimming profit margins. But sales have been up over the past few years. What's happening?
The first step in any retail turnaround is to close under-performing stores, and Best Buy did shutter about 50 locations just last year, most of them smaller format stores. Just about every established retailer is looking at reducing its brick-and-mortar footprint over the next several years as e-commerce continues to chip away at the traditional model, and Best Buy now operates about 1,600 healthy locations. In addition, the retailer has integrated its e-commerce offerings with its in-store offerings, which allows marketers to use store locations as logistics support for shipping. Efficient!
Best Buy matches competitor prices, and prices are now comparable to those of Amazon, which has sharply reduced the consumer's desire to "show-room", as marketers expected would occur. Lower prices usually means lower profit margins, but by enhancing the in-store experience through better merchandising as well as immediate possession of the purchased item, customers have more reasons to buy from a physical location. Of course Wal-Mart and Target are following suit, but the highly motivated Best Buy has a nice head start. And Best Buy can partially compensate for lower margins by doing more volume, which is what is happening right now. The company has also been ramping up services such as its famous Geek Squad in order to differentiate itself from competitors and enhance consumer loyalty. It's all working, at least for now. I am rooting for Best Buy. Amazon has a hand in about 40% of all online purchase at present, which makes me a bit nervous about too much power wielded by one company. And as well all know, healthy competition is...well...healthy.
It took a few decades of steady price increases, but it appears that Pay TV has finally become too expensive for the average consumer. Young people were the first consumers to "cut the cord", preferring to cobble together their video entertainment from what they could find on the Internet rather than foot the bill for expensive packages, but the practice is catching on. Eight million households have bailed on cable/satellite TV in the last five years. But the pickings had been rather slim up until recently since Netflix, Amazon, and others got into the video content game, and now many more high quality entertainment options are beginning to appear. The trouble for cheapskates is that the good stuff still, and probably always will, require some form of payment for access. There is no free lunch. Good TV might always be Pay TV. Revenue generated from advertising probably won't be enough.
Perhaps even more important than the entrance of these major players is the proliferation of TV networks whose content is now available in one form or another online. According to some observers, these new "skinny" streamed bundles are transforming the TV landscape. They are cheaper and smaller than traditional TV offerings, and media companies have been moving quickly to get their major channels into these new bundled products.
Sling TV (Dish), DirecTV Now, Vue (Sony), Hulu (ABC/Disney/Fox/Comcast/Turner joint venture), and YouTube (Google) are the major players in the migration of TV content to the Internet. And it probably shouldn't be surprising that weaker major channels (like Nickelodeon, TNT, Discovery) are being left out of many of these new, pared down service packages. This would suggest that many of these major channels as well as dozens of the more obscure ones (most of which emerged only recently) are unlikely to survive media's latest wave of creative destruction. This probably means that traditional Pay TV packages will also get smaller as less viewed channels begin to fail. But will they eventually become less expensive as a result of the Internet migration and the slimming down of the service offering? Will these products finally become easier for consumers to customize so they can get the channels they actually watch? This remains to be seen.
Apparently there has been a "retro" shoe craze that has gripped the hip, shoe-sporting element of our culture, and apparently it has peaked. If you blinked and missed it, that's OK. It has been fairly brief and for Adidas as well as Foot Locker, seller of classic Adidas brands like Superstar and Stan Smith, it has been sweet.
The fad, driven by young females, has reduced demand for higher-priced basketball shoes over the past few years, which hasn't thrilled the folks at Nike. Industry observers say that demand in the sneaker industry is cyclical, with models coming into and going out of style and then sometimes coming back into style again. The latest sneaker movement was sparked by designer Phoebe Philo who wore a pair of Stan Smiths to close her 2011 Paris runway show. Who knew? At the same time, Adidas had shifted strategy to be more attuned to trends and so marketers caught this important one in its infancy.
The Superstar was 2016's best selling shoe, but volume has peaked in a multi-billion dollar category (athletic footwear) whose growth is now at negative one percent. Nike, for it's part, hasn't played second fiddle in quite some time, and is number one in the shoe category, yet has experienced slow shoe growth overall along with the category. Kudos to the marketers at Adidas for spotting a need and delivering the goods, but retailer Foot Locker is already feeling the early stages of a hangover with a rather tepid sales forecast.
Adidas is already working on the next big thing with much of its current growth coming from newer NMD and Tubular shoe brands. Marketers plan to manage these and other emerging winners through their respective life cycles, and hope to eventually unseat Nike as the undisputed "king of kicks". And if Adidas continues to watch consumers closely and continue its successful run, this just might be possible.
Rooting for Wal-Mart might be difficult for many, but with Amazon's dominance and continued move towards consolidating its channel power through vertical integration, it is worth considering that a balance of two powers is infinitely better than the dominance of one.
And so the fact that Wal-Mart's sales continue to climb is probably good news, especially in a retail environment that is experiencing so much contraction in so many sectors. Not only has the retailer increased foot traffic, but e-commerce sales have been skyrocketing, up 63% over the past few months. What's the secret?
Wal-Mart's integration of Jet.com in combination with other e-commerce acquisitions has certainly paid off, as has a hefty investment in the online platform as a whole. It's not much of a secret at all. Competing with Amazon has proven challenging for seemingly everyone, but brick-and-mortar predator Wal-Mart is at least giving this online predator a run for its money. Surely lessons can be learned, and perhaps this success can be duplicated by other large, established competitors. No one, except maybe the folks over at Amazon, wants a monopoly.
Is rooting for Wal-Mart a bad thing? After all, this is a company that has been blamed for killing small businesses and outsourcing millions of American manufacturing jobs. But when you consider that there might be an even more threatening "Goliath" in our midst, a beast that rules the world of e-commerce, it is interesting to consider whether or not we should be concerned about a new retail bully.
Amazon.com now conducts over 40% of all e-commerce sales, and for an increasing number of industry observers, this is far too much market share to entrust to one retailer. And we were worried about the uneven influence of Wal-Mart!
As e-commerce sales continue to gouge away at brick-and-mortar sales and an increasing number of chains declare bankruptcy or liquidate altogether, the dominance of Amazon is becoming an even bigger deal. And now that the company is vertically integrating by launching its own logistics service and opening its own brick-and-mortar locations, perhaps its time to pause in our collective celebration of the disruption that the internet has caused to traditional brands (it sure makes for good writing), take note, and wonder if Amazon has slowly but surely become the Wal-Mart of e-commerce. Too much influence by any one entity in an industry is never a good thing since this influence almost always harms consumers. Should we be concerned?
Lately we have been hearing plenty about the proliferation of technology in the food service industry as a means of 1) serving the customer more efficiently and 2) saving the restaurant money by reducing labor costs, which continue to increase. But an under-reported benefit is the tendency for technology to help customers spend more money. during each transaction, and this is something that should certainly interest marketers.
Let's take Domino's as an example, a company that has managed to channel 60% of its orders through its website and app. Quite simply, according to the company people tend to buy more online than over the phone because they can spend more time browsing and are subject to up-selling, cross-selling and other techniques employed by internet marketers, some of whom are rather good at their craft.
Starbucks, Panera, and other large chains have used apps to devise personalized offers for loyalty members, even suggesting orders based on past purchase behavior. As a result, revenues at Starbucks are up 8% among loyalty members. At Panera, marketers are employing a rather complex loyalty program that places customers on one of thousands of rewards "tracks" based on purchase behavior. There is some serious data-driven marketing being employed here.
And what about those labor-reducing tabletop kiosks that are being employed selectively in the food service industry? How are they working out? Ziosk, the only company that makes the devices used at major chains at present, affirmed that it too has discovered an increase in customers ordering items such as appetizers and desserts. This is on top of the obvious benefits of folks getting in and out when they want to to, which results is more revenue-enhancing "turns" of the tables, in addition to the need for fewer servers overall. Chili's, Red Robin, and others are reaping the benefits of early adoption.
Indeed, the proliferation of technology in marketing is moving faster than most of us would like. Universities, and most marketing departments, are light years behind what would be considered "cutting edge" marketing technology, and even this benchmark seems to change weekly. Nevertheless, this is incredible time for experimentation since there are so many tools becoming available to help marketers foster one-to-one relationships with individual customers, something that was still a distant goal when I started teaching 15 years ago. It will be very interesting to see which tactics eventually take hold across the entire industry.
Marketers of branded products like to provide in-store marketing support since these activities act as incentives for stores to sell more of the brand's goods, but sometimes these sales promotion programs are seen as anti-competitive and run afoul of state law. So marketers must take care to understand the nuances of each state when it comes to marketing tactics in general, but this is especially true when marketers give away free stuff. And when alcohol is involved, this is probably doubly true.
And so AB InBev, the maker of Budweiser and many other big beer brands, is in a bit of trouble with the state of Massachusetts as marketers have been accused of providing over $1 million in illegal giveaways to entice retailers and bars to sell Budweiser products over those of rivals in this mature category. Apparently, a subsidiary of the foreign company supplied hundreds of businesses in the state with bar refrigeration equipment, which is apparently in violation of state law intended to keep big beer companies from squeezing out competitors large and small, and from owning too much of the supply chain.
The validity of the law notwithstanding, this case does highlight the challenges large marketers, especially global ones, face in sorting out the web of national, state and local regulations with regard to what is and what isn't legal in marketing. A local subsidiary should certainly have known better, but $1 million isn't exactly big bucks in the beer business, and it does seem like this rule is a bit obscure and possibly could even be challenged by InBev, a company with very deep pockets.
The regulations do seem to be a nod to the much smaller "craft" beer industry players to protect them from the various Goliath's of the industry, and this sort of thing is often challenged in court since it favors one group of companies over another. I'm guessing that Boston Beer Company (Sam Adams), which is one of the largest craft beer brands, also likes these regulations quite a bit. Indeed craft beer brands are being swallowed by larger brands left and right, and things are getting more difficult for the independent companies, but craft beer is still a positive growth sector (at only 5% annually these days) versus a big beer sector entering decline. And the truly small craft beer brands probably see Sam Adams, also a craft beer, as a threat rivaling that of Budweiser. Many states have post-Prohibition era laws like this one, and InBev is used to dealing with these issues. Exactly what is government's role in protecting small businesses from larger ones and ensuring that the supply chain isn't dominated by too few entities? This is a question for the ages. It will be very telling to see if any major regulatory changes come out of this situation.
My, what a nice handbag you have. How much did you pay for it? If you ask handbag marketers, probably not nearly enough. Indeed sales of handbags are slowing in the U.S., as women, especially younger women, have traded down to more compact, less expensive purses and the flurry of deep discounting that has affected so many retail sectors since the Great Recession is really taking its toll on brands like Coach and Kate Spade.
And so a merger might make sense here, as both brands can be managed separately under the umbrella of one theoretically more efficient organization. In this case it is Coach, a brand that appeals to an older shopper, that wants to buy Kate Spade, a brand that skews towards a younger demographic. The combined entity would have $6 billion in annual revenue, over 1,300 location around the world, and an online presence. But does this merger really make sense?
It does. For several years, marketers at Coach have been upgrading the brand's identity to establish and foster a more upscale image in the marketplace. This brand strategy obviously is intended to attract a higher income consumer, and these folks tend to be a bit too old to be considered "hip" in any meaningful way. Kate Spade, on the other hand, addresses the massive young adult segment. Thus, a merged entity would have two healthier brands that address almost all of the product category's market potential--that is, people, almost all of them women, who carry fashionable handbags. The best thing about a merger like this is that neither brand needs to change much about what it is doing. Synergies from the merger can help both brands invest in their e-commerce strategies, which is an absolute must in this day and age. And cooperation rather than competition means that brand managers can manage both brands in tandem, making sure to adequately differentiate the two and minimizing cannibalization. Indeed, a much larger, much stronger "Coach Kate" should emerge from this deal, and it could also spark a wave of consolidation throughout this maturing industry.
Since the death of Peanuts creator Charles Schulz many years ago, the rights to the brand have been 80% owned by a company that makes money by licensing the characters from the iconic cartoon. And now that company has decided to sell the lovable characters--to Canada.
Although the company that just sold it lost $250 million last year, the Peanuts brand is no joke, having generated $1.3 billion in retail sales in 2015 alone; and the sweetened deal (reported at almost $400 million) also includes Strawberry Shortcake, which I guess is still a thing. Even after 67 years and as one of the most widely syndicated comic strips in history, the Peanuts gang still has plenty of brand equity. It's scarcely up to Mickey Mouse proportions, but it's pretty amazing nonetheless.
The Canadian buyer, which owns the rights to "Teletubbies" and "Caillou" among many other titles, continues to add to its inventory of children's content just as an increasing number of content-hungry distributors (many on the internet) are demanding more content. And it is unclear whether or not licensing the global brand out of Canada will be any easier or cheaper than it currently is in the U.S., although Canada's weaker currency could potentially affect earnings potential.
As for the Peanuts gang itself moving to Canada? I believe the strip is based in the Northeast, so frigid Canada won't be too difficult of a transition for them. And, of course, joining a company that is financially healthy and can invest in the franchise will certainly make things much warmer for Snoopy, Charlie Brown, Lucy, and the rest.
"Tubi TV" is an internet upstart that has rapidly assumed a place as a provider of no-fee entertainment content. But what makes the company interesting is that investors are betting that more viewers will sit through traditional commercials in exchange for access to a growing litany of free premium movies and TV shows. The company says that it already has a customer base that numbers in the "many millions", and it has accumulated more than 50,000 TV and movie titles. And it is probably only a matter of time until Tubi licenses/creates/markets its own exclusive content, which is all the rage these days with content distributors such as Netflix and Amazon.
Another thing that makes Tubi TV different is that, unlike some subscription-based streaming outlets, the company has eschewed the "star power" of a few provocative titles in favor of licensing a wide array of entertainment options across multiple devices. Astutely, marketers have added a section entitled "Not on NetFlix". Bravo! Tubi boasts over 200 "content partners" and in 2016 the company grew its user base by nine fold. There is just the uncomfortable matter of the bill.
Time is money, and the Tubi model is based on the belief that enough users will watch 4-5 minutes of commercials for each 30 minutes of content, which happens to be the model of traditional TV. Will it work? Indeed as cord-cutting accelerated and service bundles become ever smaller and increasingly more available, there is much opportunity in internet television. Indeed the future of internet content probably looks a lot like television with on-demand, unlimited options, accessed anytime, anywhere. Right now, millions of viewers are paying $90 a month for pay TV and are also watching commercials. That seems a bit excessive, doesn't it? Tubi TV takes us back to the future with the original deal--you give us the content and we will pay for it by watching your sponsors' messages. Perhaps the future of internet content is rooted in television's past.
With novelty sports like Top Golf surging in popularity among the fun-loving, young adult crowd here in the U.S., the golf industry can only hope that as these folks get older, more of them will adopt the real game. It's kind of like miniature golf being a feeder to the real thing as little children become familiar with using little clubs to hit little balls into little holes. But in this case, it's beer-fueled young adults with big clubs jacking golf balls in major league baseball stadiums and stand-alone facilities. I digress.
Golf as a sport has been in decline for well over a decade now, with no signs of turning around. The sport has lost a significant percentage of its players to old age, and younger Americans have thus far demonstrated little interest in the expensive, difficult, and time-consuming activity. Courses are closing and new construction has slowed to a trickle.
As such, Nike has already exited the category, shedding its golf equipment units last year, and more recently Adidas has sold its Taylor Made, Adams Golf, and Ashford brands to a private equity firm for $425 million. Adidas maintains that the brand is in a strong position despite the struggles of the category as a whole, and says that it wants to focus on its shoe and apparel products, which it obviously believes provides more lucrative opportunities for growth.
And barring a massive shift in consumer behaviors and attitudes (perhaps driven by Tiger Woods-esque star power that professional golf currently lacks), this looks like a good move for Adidas. A private equity group will be better able to focus on harvesting profits from the brand, while the large German sports apparel company can focus on what it has always done best. Golf isn't going away. It's just getting smaller, which is where it was before the sport's surge in popularity that occurred in the 80's and 90's. It looks like that was a temporary thing. And smaller companies will likely serve a smaller market more effectively than much larger ones that lack focus. Perhaps if green fees and equipment prices fall due to falling demand, golf will become more accessible to more people, and that will help things. Time will tell.
In an industry rife with consumer unfriendly practices, Southwest usually emerges as one of the "good guys" in that the company at least listens to its customers and strives to improve. Marketers have opted to differentiate the brand from competitors and position itself as an airline that cares about its customers. When other airlines adopted the highly unpopular "a la carte" method of pricing, charging for each and every add on, Southwest took a different route and decided to retain the traditional model of service pricing.
And yet despite the best of intentions, the airline still consistently ranks in the middle of the pack in most aspects of the service offering; but marketers never stop trying to improve. They may love your bags, but far too often those bags don't arrive with you at your destination. A company that likes to remind us that bags fly free in its advertising should perform a bit better on baggage-related rankings, don't you think?
Nevertheless, the company announced that it will no longer oversell seats on its flights, a common practice that has the news of late in very negative ways. Southwest says that it has been considering this move for a long time now partly due to the falling number of people who don't show up for flights. That online check-in is a necessary thing at Southwest, known for its cattle-call boarding, is probably a driver of this important trend. But the the airline did in fact ask 15,000 passengers to give up their seats involuntarily last year, although fortunately for Southwest no one threw a tantrum and had to be physically removed from the aircraft.
The company expects that the revenue lost from the relatively small number of empty seats that would result from this new policy will be offset by decreases in compensation costs. This should be a big hit with consumers and further differentiates the brand from its comparatively insensitive competitors. Southwest really does appear to care. Perhaps other airlines will engage in more self-regulation and duplicate Southwest's best practices if this experiment is in fact successful. If not, other methods of reducing the negative effects of overbooking will have to be employed, such as offering flyers vast sums of money to get off of planes. On the other hand, airlines could continue to make minor concessions without making the necessary major changes in the way that they conduct themselves, which will certainly result in some form of increased federal regulation and major changes to the already-existing Passenger Bill of Rights. The industry is most certainly at a crossroads, and Southwest has already decided which road it wants to take. Stay tuned.
The packaged seafood industry is currently under investigation for anti-trust violations, and, if recent action against Bumble Bee Foods in any indication, there is good reason for this enhanced scrutiny. In short, the company has agreed to pay $25 million in fines after pleading guilty to conspiring with competitors to fix prices, and has also agreed to "cooperate" with what the U.S. Justice Department describes as an "ongoing investigation". Uh oh. It looks like stormy seas are ahead for the industry.
The canned tuna industry is dominated by Bumble Bee and Chicken of the Sea, two companies that up until now, were planning on a merger. But who needs to merge when you can just agree fix prices? Alas, two Bumble Bee executives have already pleaded guilty to price-fixing charges, and one would expect that further shenanigans will be exposed once folks start making deals and testifying against one another. We've all seen plenty of crime shows.
One thing we know for certain is that price fixing isn't good for consumers and that it tends to happen when there are too few players in any given industry. This is why mergers are closely scrutinized before being approved. And we know that a lack of competition almost always results in lower quality and higher prices, so this is exactly the role that government should be playing. Let's see how this tale of intrigue on the high seas unfolds.
Almost everyone over 30 has heard of "About.com", a general information site that dates back to the very early days of the internet. These types of all-purpose sites used to be rather popular, but as the overall internet audience now includes just about everyone, they have fallen out of favor, replaced by websites with much more targeted content. And this fact, for the most part, has not been lost on e-marketers.
And so in 2016, About.com began splintering into various topic-specific, stand-alone sites including a health and wellness portal called Verywell, and sites like The Balance (personal fitness), ThoughtCo (Learning), The Spruce (home improvement), Lifewire (technology), and TripSavvy (travel). And so marketers are now ready to retire the About.com domain name.
The new name is "Dotdash", and marketers are betting that these targeted sites will perform more favorably on social media platforms than has the much more generalized About.com site. Times have changed, and so what was once an advantage (being all things to all users) has become more of a liability. And so we bid a fond farewell to an entity founded in 1997 during the pre-Google internet era, a time when accessing the world's information was still mostly a theoretical concept. Indeed About.com helped make that dream a reality. It's really quite remarkable what we have accomplished in just 20 years.