• If You Don't Build It, They Will Leave

    Maintaining state-of-the art facilities to maximize spectator enjoyment of sport has become an imperative for marketers across the U.S., as fans (especially young ones) have become much more interested in what is often called the "peripheral product" in sports marketing. This means the building itself and all of the amenities in the service environment must meet the growing expectations of  an increasingly fickle sport consumer base. One need only look at the proliferation of "party decks" and other peripheral enhancements that enhance social interaction at events in order to see how important these facilities have become. And this is not only true for major professional sports and colleges, but now also for the smaller leagues as well.

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    Indeed, when a community decides it doesn't have the stomach to fund the construction of a new facility (or at the very least the major remodeling of the existing facility), and in the absence of deep-pocketed ownership, it is almost a guarantee that said community will eventually lose its franchise to a place offering better digs. This happens time and again (the NFL's Rams, Chargers, and Raiders and NBA's Warriors are all moving to new facilities), with the most recent "small-time" example being the Triple-A Colorado Springs Sky Sox baseball affiliate for MLB's Milwaukee Brewers.

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    A few years back, the community voted down a proposal for constructing a brand new multi-use facility in the downtown area. The plan was to move the team from the inconveniently-located, 30 plus-year-old stadium many miles east and invigorate the city core. But voters said "no", and now the team has announced that it will move the franchise to San Antonio after next season. A short-season, rookie level team (currently playing in Montana) will take its place, and while taxpayers may have something to celebrate, fans do not. The vastly inferior product is unlikely to draw much long-term fan interest.

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    Although this move was proposed back in 2016, any deal was contingent on San Antonio building a new stadium to house the Triple-A franchise, which was only a possibility at the time. if you build it, they will come. Fans in Colorado Springs, on the other hand, will now have only 38 rather than 70 home games, and will be exposed to a lower quality sport product than they have become accustomed to. While the Triple-A product features many major leaguers, a rookie team is unlikely to produce very many quality players. Alas, the people had their chance, and now their beloved Sky Sox will be moving to Texas. But that's the way things work in the modern spectator sport environment. If you don't build it (or at least remodel it), they will almost certainly leave.

  • The New "NFL Europe"

    For about 30 years, the NFL has endeavored to build a fan base outside of the U.S., and Europe has been one of the primary markets in what league marketers see as under-tapped potential for market development. The lower-quality NFL Europa league failed over 10 years ago, but a far superior NFL product has sold out games overseas for three decades. Apparently, the folks across the pond won't stand for inferior American football, and who can blame them?

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    Indeed there has been much talk recently of allowing a struggling franchise such as the one currently playing in Jacksonville to move to a place like London, where the NFL has a fan base that has been cultivated over 30 years of remote preseason and regular season games. And the pace of overseas play has been increasing, so it does appear that a move of some sort might actually happen. That would certainly be very cool, but may still be many years away if it happens at all. And so England looks ripe, but what about Europe? Germany, in particular, seemed to enjoy the European league while it lasted. 

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    While England may get an actual team at some point in the not-too-distant future, the rest of the continent has so far been rather lukewarm to the prospect of watching American football games. But the NFL has nevertheless decided to partner with a firm to offer "Game Pass", which gives fans live and on-demand access to live NFL games and other NFL football content. The product will be offered in a total of 61 territories in Europe, from Norway to the Vatican, but it remains to be seen just where, if anywhere, outside England that a need will arise for the product. Will it work?

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    With a rather lofty goal of doubling revenue over the next 10 years (to $27 billion), the NFL certainly has to achieve most of this growth in non-domestic markets. And while the popular league has made some inroads in England, the sport is still far less popular there than soccer is in the U.S. This is an unfair comparison for sure, since American children have been playing soccer for about 50 years, and there are few youth leagues in Europe. Perhaps investing billions in youth leagues over the next few decades might be an appropriate strategy, since overseas youth programs been working out pretty well for the NBA. At present, the four games played in London every year is a very good start. By offering full access to the product, the NFL has now upped its game. The promotion strategy will be key. How will consumers respond?

  • The Mighty Amazon

    Last week, Amazon purchased Whole Foods Markets, a pioneering, upscale natural products retailer that has been under pressure to regain it's mojo. But, having failed to reverse its downward trend in the allotted period of time, Whole Foods and its shareholders finally decided it was best to find a suitor instead. And, although it sounds like a rather strange marriage, the deal between the two makes sense in a number of ways.

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    By purchasing Whole Foods, marketers at Amazon will be able to expand the brand's brick-and-mortar footprint by almost 500 stores pretty much immediately. Even though Amazon has been busy building smaller Amazon Go locations, acquiring several hundred larger grocery stores that span most of the nation gives the company an immediate advantage. And tapping into the company's natural and organic foods network is also a huge plus for marketers.  

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    For the Whole Foods brand, the advantages are somewhat less obvious, but it is clear that the natural products giant will certainly benefit from leveraging Amazon's incredible distribution system, which will enable stores to offer products at far lower price points, a problem the company has been trying to solve for many years as more competitors have entered the natural and organic products industry. However, it is unclear whether or not selling Amazon-branded products in Whole Foods stores will help matters. I am skeptical about this, but I don't think it's a large part of the plan.

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    Overall, it looks to be a good deal for consumers as well. Amazon will have a larger brick-and-mortar footprint as well as a healthy helping of the growing natural/organic pie, a dish generating hundreds of billions in revenue, and one that has been growing at double digit rates for more than 40 years. Prices for these premium items will certainly fall expanding the market potential and putting pressure on competitors to take action. Whole Foods, which has struggled to reach the younger demographic, will certainly have more appeal with low prices and an enhanced online presence. If the company cultures don't clash too terribly and if regulators allow the acquisition, it should be a very lucrative relationship indeed.

  • Collecting Brands in Canada

    By now you probably know that Burger King packed up and moved to Canada in a major merger with Tim Horton, the Dunkin' Donuts of the Great White North. But, until now it hasn't been clear as to how marketers are going to approach this convergence of two iconic North American chains. Will there soon be Tim Horton's donuts at Burger King? Will the King's signature flame-broiled burgers be available at Tim Horton's. In short, the answer is "no". Well, why not?

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    Restaurant Brands International owns both brands (and has also acquired Popeye's Louisiana Kitchen for good measure), and has announced that marketers have no plans to fuse the two (or three for that matter) very different concepts together, which might a good idea, at least from the perspective of ordering a burger at Tim Horton's. Yet, I could easily envision Tim Horton's brand coffee and pastries eventually being offered at Burger King locations. After all,  "Everything is about synergy," the company's CEO recently said. "These are iconic brands--it doesn't make sense to mix the two." It doesn't? Are there no synergies to be discovered?

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    Well, this strategy is certainly somewhat of a departure from how other fast food conglomerates have conducted business of late. For example, Yum! Brands fused KFC and Taco Bell and Dunkin' Brands put Baskin-Robbins ice cream stores inside of it's locations (an example of the "store-within-a-store concept" we see so often at grocery and big box format stores). And even though Burger King sells chicken, RBI has no plans to offer Popeye's branded chicken at Burger King locations. Hmm...

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    There is no doubt that these are difficult decisions to make. To many marketers, co-branding, store-within-a-store, and/or offering cross-branded menu items are obvious ideas to be explored. Couldn't RBI miss out on some opportunities by not experimenting with synergy? Why not offer Tim Horton's coffee and donuts at Burger King right now? Burger King isn't exactly known for its coffee and donuts so why the heck not? And why not offer a Popeye's item at select Burger King's as a test market and see if stores sell more chicken as a result? Why buy multiple brands in the first place? So far, it appears that this food giant is being a bit myopic in it's vision for the future, but one would hope with all of the resources at their disposal that the company would conduct exhaustive and continuous market research. If the company is merely collecting brands and looking for financial synergies rather than market-focused ones, the road to a blissful union that shareholders like will be a rocky one. In fact, the vast majority of mergers fail to meet shareholder expectations. And so perhaps it's far too soon to make these sorts of announcements to the media; and if you believe that, then RBI marketers have a lot of work to do.

  • German Retailer Invades America

    The Germans are coming!  Indeed there is a nefarious plan to seize territory here in the U.S. by a rather  large German discount grocer in an attempt to hone in on market share seized by Wal-Mart through decades of excellent marketing and hard-nosed business tactics. And, of course, more discount competition is just what Wal-Mart didn't need with so much of its effort being expended to address the escalating competitive threat posed by Amazon. It ain't easy being king.

    For LeBron James the challenger is Kevin Durant. For Wal-Mart, it's Germany's Aldi, which already has had a modest presence here since 1976. The company recently announced that it plans to have a total of 2,500 locations in the U.S. by 2022 with immediate plans for 900 new stores. It also plans on renovating existing stores. And with deep-discount chains expected to grow about 10% a year over the next several years, there appears to be much opportunity in offering a truly viable alternative to Wal-Mart and Amazon. Millennials in particular have proven to be rather value-oriented, largely ignoring the stigmas that have traditionally accompanied shopping for low price point items. And while many Americans continue to tolerate Wal-Mart, a company whose reputation continues to languish while its revenues increase, perhaps they will learn to love Aldi.

  • Battle of the Retail Giants

    It has become a classic battle between two retail giants, one a venerable brick-and-mortar staple of Americana now making a major foray into e-commerce, and the other a no-longer-new company that has literally defined e-commerce now making efforts to establish a significant brick-and-mortar footprint. Wal-Mart, for it's part, has been chipping away at Amazon's Internet market share, a phenomenon that has been addressed more than once in this column's six year existence. Amazon is quickly snapping up brick-and-mortar pick-up location (a concept called 'Amazon Go") so that customers don't have to wait for delivery, something this column has also addressed. This is a battle of "Alien versus Predator" proportions for sure. So what's the latest report from the front?

    Amazon has announced that it will begin to address one of Wal-Mart's core consumer segments, the 20% or so of Americans who obtain government assistance through food stamps. This might be a low income (or no income) group, but it still has considerable spending power when it comes to buying the necessities of daily life. And up until now, it's been Wal-Mart and the dollar stores who have been targeting this lucrative market segment. Wal-Mart , all by itself, represents almost 20% of the money spent through the public assistance program in the U.S.

    Clearly Amazon wants a piece of this considerable pie, and as such has announced that it will offer a discounted membership, about half price, to its popular Prime membership, which buys access to 2-day shipping, exclusive content, and photo storage amidst other benefits. Will it work? Consider that low income consumers are currently the fastest growing group of Amazon Prime customers. But low income consumers face some traditional challenges including lack of access to the internet, lack of credit, and concerns about safe places for delivery. Amazon is addressing these issues by allowing customers to load cash onto their accounts at physical locations (food stamps are not yet online), as well as offering an increasing number of delivery lockers to deter theft. In fact, low income consumers are now the fastest growing category of e-commerce buyers, so the these traditional barriers are clearly falling. And so it appears that Amazon is poised to do some serious damage to Wal-Mart's base of customers. Stay tuned.

  • Fighting Ad Fraud

    The Internet has provided marketers with unprecedented opportunities to engage with consumers one-to-one, but an increasing level of advertising fraud is vexing the industry. For years, marketers have been paying for ads that consumers do not see, but rather are seen only by nefarious software programs that mimic the human behaviors that characterize real Internet traffic. These are called "bots". They might not sound like such evil creatures considering the sheer amount of advertising that is done on the Internet, but when you consider that in 2016, marketers lost over $7.2 billion globally from this fraudulent activity, it should be cause for pause. That is a big number.

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    But marketers have become somewhat smarter as the overall investment in the Internet has proliferated, now insisting on increased levels of transparency from media vendors regarding the sources of traffic, as well as utilizing the accredited third-party fraud detection services that are now available. The result so far? Losses due to bot fraud are expected to drop to $6.5 billion in 2017, which is still high, but is representative of some serious progress in a very short period of time. Let's hope this continues, and that marketers eventually win this Battle Against the Bots, because when fraudsters lose, both advertisers and their audiences win.

  • Apple Playing Catch Up

    At this point in time it's difficult to consider Apple to be a major innovator in the true sense of the word. The company has invented a few things over the years, but for the most part, developers prefer to take an existing technology and then proceed to "Apple-ize" it. They obvious keys to success have been it's gorgeous, patented product designs and, of course, the product's fit within the Apple ecosystem, as well as it's always cutting edge software. But it has been a while since Apple marketers have introduced anything truly ground-breaking or even very interesting, and so it wasn't much of a surprise when the company announced that it too would finally compete in the newly-formed Home Assistant Industry.

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    Dominated by first movers Amazon (Echo) as well as Google (Home), the demand for voice-activated home devices that help consumers perform tasks using the power of the Internet is skyrocketing. But Apple, the company that pioneered the phone version of this product (Siri) back in 2011 is rather late to the 2017 party, only just recently ready to introduce its "HomePod" product that features Siri.

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    But never fear. Apple has legions of users around the world who have willingly imbedded themselves within it's ecosystem, and so just about every product marketers do introduce, tends to be adopted by at least the core Apple users. It is unclear what has taken them so long, but it is clear that the key to the success of the HomePod will Siri herself. She will, according to marketers, outperform the competition along several metrics and will also have the advantage of understanding more context across multiple devices. Indeed this is Apple's game, and a brand with this much equity doesn't need to worry about first mover advantages. Instead marketers prefer to wait for the competition to innovate first, and then improve upon the existing product, connect it to its ecosystem, and rely on good old-fashioned brand equity to do the rest of the work.

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    Sure, it sounds like an awfully lazy way to approach product development, but it's hard to question the strategy decisions made by such a successful company. Apple is content to leave the true innovation to smaller, more agile players, while letting the vast majority of people believe that it is the innovator. It's pretty brilliant strategy if you ask me, but one that might not work forever. Butt will be interesting to see if Apple becomes the dominant player in this particular category, or whether powerful brands like Google, Amazon and others can use this category to become more meaningful players in the world of gadgets. Apple, for its part, has quite a head start and will be tough to catch.

  • Balking at Better Burgers

    Just as our collective appetite for sit-down lunches has peaked, apparently so too has our appetite for pricey burgers. With price points reaching $13 and beyond, the basic burger has been over-engineered to the point where costs have exceeded benefits for many diners. Why do burgers cost so much? Is it all the bacon, gouda, butter lettuce and aoli?

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    Nope. Prices are high because marketers have made them that way. The Wall Street Journal recently performed one of its signature studies and found that the average cost of a burger is just under $2.00, but the average retail price has reached $9 for a very basic burger. This is almost five times cost of goods sold and is almost surely far too much profit margin for a food item. But up until very recently, consumers have been perfectly happy to pay these inflated prices, especially if the ingredients are perceived to be premium. But even using premium ingredients barely moves the meter in terms of product cost.

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    Indeed, lunch traffic is down overall, but quick-serve hamburger joints have reported a 5% reduction last year from the previous year, a drop much greater than that of the overall lunch category (2%). Clearly, this business model is unsustainable and we can expect that since fast food is an elastic product, high prices will continue to retard demand. As such, marketers will simply have to drop their prices or risk further erosion of the category. Meanwhile, McDonald's and others are upping their game, which should put competitive pressure on these burger barons and encourage these very necessary changes in pricing strategy.

  • Restaurants Losing Lunch

    Citing lack of time and high menu prices, consumers are no longer "doing lunch" at the rates we have seen in previous years. In fact, Americans made 433 million fewer visits to restaurants at lunchtime last year, which resulted in over $3 billion in lost revenue. This is the lowest level of lunch traffic in four decades. Why is this important?

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    Well, we aren't in a recession, and so we can rule out temporary economic conditions as a primary driver for this phenomenon. This looks to be a more permanent shift, which illustrates that social trends such as this one are very important for marketers to heed. And this trend in particular has been in evidence since lunch traffic peaked back in 2003, so marketers shouldn't be terribly surprised. Perhaps this is partially why there has been such a huge effort to generate revenue from breakfast among the various players in the industry.

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    More folks are taking their lunch to work, opting for delivery, or just plain passing on taking an hour-plus out of the busy workday. In office "Working lunches" are becoming more common, replacing the traditional "power lunch", which in turn replaced the "three martini lunch" of yesteryear. And most larger companies offer high end cafeterias. It is clear that American attitudes towards lunch have changed. And indeed all things are constantly changing in the world of marketing, so it's up to marketers to maintain pace with any and all ongoing trends and make any and all necessary strategic adjustments to avoid being left behind.