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  • Welcome to Cengage Learning's Know Now Marketing

    Greetings one and all! On behalf of my colleague, Gregory S. Black, PhD., MBA , I am Darrin C. Duber-Smith, MS, MBA, professor and marketing consultant. We are pleased to be the authors of Cengage Learning's brand new "Know Now" Marketing blog, and welcome you to what promises to be an engaging forum for tackling contemporary marketing issues. Our mission is to blend traditional marketing theory with best practices in current marketing applications. This means that we will discuss what's happening right now, but within an academic context, so that both students and professors, indeed all readers, can participate in a meaningful way.

    Within the framework of a 3-5 times per week posting schedule, the two of us will provide links to relevant articles and other tools where and when appropriate, and will join in the discussion when it will significantly add to its quality. Our individual bios will be posted within the next few weeks, and we plan to hit the ground running after the 4th of July holiday. Enjoy your weeknd and check back with us next week!

    Darrin C. Duber-Smith, MS, MBA     www.GreenMarketing.net

    Gregory S. Black, PhD., MBA

  • Google Fishes in the "Emerald Sea"

     

    It seemed just like yesterday that global powerhouse Google threw its hat into the social networking ring by introducing Buzz, an alternative to market leader Facebook, deposed champion My Space, and a host of other services. But alas, all of the brand equity inherent in the world's largest search engine and the fact that they have more users than Quaker has oats, weren't enough to lure loyal users away from Facebook. The product fizzled. What happened? Perhaps Google marketing strategists failed to adequately differentiate this new product from competitive offerings, and instead introduced yet another "me-too" alternative in a sea of competition. Perhaps this time it will be different.

    Google+, developed secretly under the code name "Emerald Sea", strives to gain market share in the social networking space by offering a product benefit Facebook has yet to address--the ability for the user to share with small groups rather than an entire universe of friends. Google has an unprecedented existing user base, a huge marketing budget, and what they feel is a good product idea. But will it be enough to draw users away from the established market leader?

    This writer believes that since the much needed technology to link various social networking sites together is not yet widely in use, consumers and their friends are forced to choose one primary site and then stick with it in order to facilitate intergroup communications. Furthermore, there is no reason to believe that Facebook lacks the capability to develop the product benefits found in Google+. Even with Google's dominance in search, it may not be enough to slow the momentum generated by Facebook over the past several years. Search and social media address different needs, and both brands are indeed powerful. However, most observers are at a loss to adequately explain exactly how and why MySpace lost half of its users in a very short period of time. Could the same thing happen to Facebook? This will be a fun one to watch. The link below offers some further insight.

    http://www.pcworld.com/article/235033/google_13_questions_to_ponder.html

  • Verizon Shifts Pricing Strategy

    Don't get too comfortable with your Verizon Wireless service plan.  The company recently announced that it will alter they way it prices data service in a manner that will surely impact the entire industry. Verizon is the largest carrier in the U.S. and, as such, is the market leader. This means that the company wields a lot of power in the supply chain, and so it can dictate terms to its partners and, to some degree, its customers. As such, Verizon has announced that it will discontinue its unlimited data plan offering for new smartphone users (as number-two carrier AT&T did last summer), so it looks like this new development does not yet apply to existing users, folks who may not readily accept dramatic changes to their data plans.

    Why is the company making this move? There are several reasons:

    1. With the introduction of its new 4G high speed network, Verizon expects that data usage among its user base will increase dramatically, and so it makes more sense strategically to charge users for the amount of data they consume rather than the former industry standard, one-size-fits-all approach.

    2. A major competitor has already made this move, has taken the risk, and has blazed the trail for other players in the industry. Usually the market leader is the first to make such a move, so perhaps Veriizon is feeling a bit behind the curve.

    3. If the largest companies in an industry do something, it quickly becomes industry standard. New customers may not have the option of obtaining unlimited data packages from competing carriers.

    4. Because they can. Switching costs are rather high for smartphone users so the company is making a bet that, rather than endure the pain of switching providers, most customers will simply go with the new program.

     

    Discussion Questions:

    1. How will customers react to paying a different amount each month?

    2. Will Verizon continue to offer its unlimited data plan for existing customers when they renew their contracts or will they slowly migrate everyone to the same program?

    3. Will number three carrier Sprint follow suit and drop its unlimited data plan, or will the company use the strategy as a point of differentiation and competitive advantage?

     

     

  • Deals, Deals Everywhere

    There is little doubt that the recession and its lingering after-effects have influenced the way marketers promote goods and services. Discounting, formally known in marketing as Sales Promotion, has always been a tried and true way to elicit a response, usually resulting in a sale. But just as is the case with addictive behavior, consumers require larger discounts and in greater frequency to have the desired effect. Indeed we become "de-sensitized" to promotions because their overuse has diluted their effectiveness. I will discuss GroupOn and other "deal-a-day" concepts in a later column. Here I want to highlight some of the back-to-school promotions tech companies are offering to reduce inventories and cross-sell products.

    Since almost 9 out of 10 college students report using a laptop (according to USA Today) and 56% of all laptop sales are generated in June, July and August, it should be no surprise that laptops are heavily promoted during these months. Tablet computers, while growing in popularity, still represent a fraction of overall computer sales. Here are some of the laptop deals reported in today's USA Today:

     

    *Apple offers a $100 gift card to the Mac Apple store with the purchase of a MacBook or Mac desktop. This is a smart strategy because consumers are likely to spend more than the allotted $100 dollars at the Apple store.

    *HP is giving away an Xbox 360 with the purchase of a qualifying PC of over $690 in value. This is interesting because the Xbox profits are primarily generated through sales of the games themselves rather than the hardware. But Xbox is a Microsoft product so there must be some sort of strategic alliance in play.

    *Former market leader Dell is still around and offering the same deal as HP.

     

    It's clearly an opportune time to purchase that new laptop, but a marketer must always question the need for such steep incentives. This isn't some 10% off coupon we are talking about here. These types of promotions seriously reduce profit margins and have other unintended consequences, which will be addressed next week. Can you hypothesize as to what these unintended consequences might be?

  • Heating Up the Market for Soup

     

     

    Can the market for soup become exciting again? I realize that it's 102 degrees outside so, for most of us, it's difficult for us as consumers to think of soup in July. However, as strategic marketers, summer is exactly the time to be thinking about soup. U.S. soup sales have been flat for years despite the high profile advertising efforts of General Mills' Progresso brand and, according to the Wall St. Journal, are indeed down 5% this year from the previous year. This is not a good sign.

    It is unclear as to the exact reasons for this overall industry slump, but one major variable is all too clear to the new CEO and the marketing folks over at Campbell Soup's New Jersey headquarters. There has been a significant lack of investment in the brand over the past several years. We know that organizations must allocate appropriate marketing dollars to generate revenue, so it should be no surprise to students of the profession that when a company fails to invest in its brand, the result should be a loss of market share and a reduction in sales growth. This is exactly what has happened. Couple this with an over-emphasis on low sodium soups (a strategy employed to address the growing health and wellness trend that has not gone as well as had been anticipated) and you have a brand that needs serious attention. Indeed Progresso, with its significant investment in national advertising, has exploited this weakness and has grabbed market share.

    Although Campbell has already announced some strategy changes, including ending an overeliance on margin-busting sales promotions, investing in brand-building advertising, and trying to appeal to a younger demographic. These all sound like good moves, but this author believes that the fact that the company's advertising budget is a fraction of what it was two years ago ($125 million less), is probably the biggest culprit here. We saw what happened to Pepsi over the last few years as the company strategically pulled back on important national advertising campaigns (including the Superbowl) to focus on less expensive public relations efforts--the Refresh America Campaign. This effort has so far been a failure perhaps due in part to Pepsi's over-focus on "good for you" foods rather than the tasty products we usually associate with the Pepsi brand. The reduction in advertising has hurt both Pepsi and Cambell in similar ways.

    What's the lesson? Reducing marketing expenditures may result in better profitability and return on investment for shareholders in the short run, but long term implications can really hurt your brand. Why invest millions to develop brand awareness and attitudes over several years, only to pull back and lose the groud you spent so much time and money gaining?

    Thought Question:

    Bearing in mind that simply spending marketing dollars can be a huge waste of money, what marketing strategies would you employ if you were Campbell's VP of Marketing?

  • Why All the Summer Deals?

    It is imperative for the marketing practitioner to understand why companies, particularly retailers, engage in sales promotions (such as discounting) at certain times of year. Indeed we are all used to the "festival of discounts" that begins shortly before Thankgsgiving and extends well past the first of the year. Black Friday, the day after thanksgiving and the day that retailers theoretically become profitable, has become a national holiday, with people foregoing Thanksgiving activities to line up for limited supply bargains the night before. A bit much if you ask me!

    The primary reason for discounting is to stimulate a purchase. The most effective way to get a person to adopt a product is to encourage him/her to try it. A discount does just this, but if the consumer does not perceive positive value from the transaction, they are not only unlikely to buy the product again, but certainly wouldn't purchase it at the regular, un-discounted price after the promotion expires.

    Another huge reason involves inventories. As you know, manufacturers make products and often sell them through retailers rather than directly to the consumer. Therefore both parties must make projections as to how much they think they can sell, and as you might imagine, these projections are rather imperfect. Both the branded product manufacturers and retailers must offer incentives to alleviate excess inventory.

    Why is excess inventory a bad thing?

    1.  Inventory ties up cash flow that could otherwise be used for business operations and marketing

    2.  Inventory is often perishable and can expire on the shelves. Such spoilage costs are most often absorbed by the manufacturer (usually the weaker member of the supply chain) rather than the more influential retailer (who is closer to the consumer)

    3. Inventory gets stolen, a phenomenon that we call shrinkage, and broken, and phenomenon we call carelessness

    4. Inventory costs money to store, keep at appropriate temperatures, insure, etc.

    Obviously if you don't have enough inventory, you will lose customers. Too much or too little inventory is known as the "Bullwhip Effect" and is a factor marketers are constantly concerned about. Similarly, marketers must be concerned with over discounting for the reasons mentioned above. We don't often think of inventory when we think of marketing, but it is indeed a major part of product strategy and supply chain management.

  • Can Banning Kids Be Good For Business?

    I can't say that I was surprised when a story appeared in the national news about a restaurant in Pennsylvania that has banned the presence of children under six. Indeed, the "right to refuse service" we see on so many storefronts has been enacted! Ironically, the owner is a former high school teacher, and he says for many years he has been fielding complaints from customers about the disturbance caused by children and unattentive parents  before he decided to take this high-profile measure. Obviously this move has touched many nerves across the country both for and against, but as marketers, we must put aside our biases and ask the question, "Will this move be good or bad for business?"

    A poll on a Pittsburg TV channel's website found that out of 10,000 voters, 64% supported the idea and 26% thought it was a bad idea. In addition, the owner reports that rather than receiving hate mail and threatening comments, folks have spoke out 11 to 1 in favor of his decision. Obviosuly, Internet surverys are not acceptable for statistical analysis in a pure research sense, but they do provide information as to the direction of public opinion. And, the owner's perspective is purely anecdotal. However, I believe that this story is the first of many more to come. Why?

    It's really very simple. Baby boomers (aged 46-66) are the largest generation in history (with the exception of their Generation Y children who are a bit larger but are not yet having children en masse) and are the biggest reason we keep hearing about "the aging of America". Older people may love their grandchildren but have traditionally shown little tolerance for energetic young ones running wild through "inappropriate" places. In customer service/hospitality we call this phenomenon "Guest Conflict". Quite simply, it seldom works out when you seat people with children in the same vicinity as invididuals or couples without children. The same general rule applies to large groups of loud people, which can be equally disruptive. Since businesses want people to enjoy themselves, tell their friends, and return, they obviously don't want guests arguing and fighting, it's up to management to take steps to prevent this. It's sad how few restaurants understand this simple concept. Certain states even ban children from bar areas while, somehow, other states let them belly right up alongside their parents. I expect this to change. And since older people also control much of the country's wealth and influence, I would expect that they will continue to assert their collective will on society, and thus the social norms for where children are welcome may change.

    There are many more reasons why I think that this idea can work, barring any discrimination court cases that may arise. The simple fact is that not all guests are alike, and when your product or service appeals to a broad group of consumers (as is often the case in food service business models), there will be conflict. Sports stadiums attempt to address this by offering "Family Sections" and of course we are all aware of places like Chuck E. Cheese that cater exclusively to families. I would expect that many businesses that target the rapidly growing segment of people without children will experiment with such policies. Will it stand up in court? That's another story.

    Here is an article from the Wall Street Journal:

    http://online.wsj.com/article/SB10001424052702304223804576444393604792386.html

  • Marketers' Invasion of Social Networking

    A social network is merely a social structure of individuals connected by some commonality, such as friendship, kinship, sexual preference, ethnicity, age, religion, hobbies, relationship status, values, beliefs, etc.  To a marketer, these commonalities look suspiciously like common bases of consumer segmentation.  By collecting these individuals together into a social network based on these commonalities, these sites are providing a resource that makes marketers lick their chops in anticipation.  To collect so much information on consumers, marketers spent much time and money in the past.  Now, the work is done and all marketers have to do is to somehow tap into these resources.  Being the profit-driven entities that they are, these social networking sites are only too eager to let marketers invade their sites, for a fee.  And the results to marketers are huge market segments.

    Just take Facebook for example.  There are more than 650 million active users.  Ten million users per month are joining.  One in every thirteen people on earth are members of Facebook.  Nearly 50% of young Americans rely on Facebook for news.  Nearly 50% of 18 to 34 year old Americans check Facebook when they first wake up in the morning.  Nearly 75% of all American internet users are members of Facebook.  So this is fine for marketers who are targeting young adults, right? Yes, right, but what about the older consumers?  Nearly one-third of all Facebook users are over the age of 35.  Okay, so that covers the U.S. market, right?  Yes, but what about the international market?  More than 70% of all Facebook users are from outside the United States.  So what is there about these social networking sites that marketers don't like?  Probably nothing.  (See more Facebook facts at http://www.jeffbullas.com/2011/04/28/50-fascinating-facebook-facts-and-figures/)

    Okay, this is old news for marketers.  They have been using social networking sites for years now.  So what have we learned over these few short years?  We have learned that not using social networking to market a product should not be an option.  Customers are increasingly searching online and want to find their brands of interest where it's convenient for them to browse, share and buy.  We have also learned the reasons that consumers discuss products on social networking sites (see the chart below).  What have we learned thatmarketers shouldn't do with social networking?  Stay tuned for the next blog.

    Why People Discuss products in social

  • Marketers, Beware when Using Social Media Marketing

    Like it or not, marketers have invaded social networking websites.  Once used by individuals to connect with others, these individuals have formed large networks of people who are similar in many ways.  To marketers, these large networks of similar individuals look like huge market segments filled with potential customers of their products.  So, we shouldn't be surprised that marketers have found ways to use social networking sites to market products.  This practice is known at social media marketing (SMM) and has become so pervasive that companies not doing it are perceived to be missing out on a large proportion of their potential sales.  The new rule of thumb in some industries is " refuse to use social media marketing at your own risk."

    While many of these sites are free to use for individuals, they are not free for companies.  And these marketing costs are increasing dramatically.  For example, it is estimated that the cost of advertising on Facebook has risen by nearly 75% so far this year (in cost per click).  (Read more: http://www.marketingweek.co.uk/disciplines/advertising/cost-of-facebook-advertising-rises-74/3028521.article.)  These rising costs of SMM mean that companies are shifting their advertising resources from traditional media (TV, radio, newspaper, magazine) to this non-traditional medium.

    Over the few short years that marketers have been using SMM, the gains in sales, brand recognition, and other typical marketing goals have been great.  But by making costly mistakes, marketers have discovered some important things that should not be done.  Some of these important lessons are listed below.

  • Is "Going Viral" in Marketing an Accident?

    Viral marketing refers to using existing social networking sites to produce "buzz" about a brand, a product, an advertisement, or some other marketing component of an organization.  In the internet world, "going viral" means becoming very popular in a very short period of time.  For example, you have probably heard about YouTube videos going viral.  A viral video is one that becomes quickly popular through the process of internet sharing, and with the growing popularity and capabilities of mobile phones, this is happening more often than ever, and quicker than ever.

    Since going viral means achieveing a lot of popularity in a short amount of time, the strategy for marketers using this technique would be short-term in nature.  Vidoes on YouTube often go viral without any expectations from the people who post them.  Going viral is often accidental rather than planned.  So, how do marketers create this very short-term buzz about something to do with their company, products, etc?  The goal of marketers interested in creating this sensation should be to produce some component of their marketing mix that will have great appeal for individuals with high social networking potential.  If these individuals can be reached and touched, many of them have mulitple electronic tools to spread the word very quickly.  They have mobile phones, all the Apple products, PCs, etc.

    In the past, this sort of marketing strategy was known as word-of-mouth.  The way it used to work was a consumer would have a good experience with a product and then tell another person.  That other person would then obtain the product, have a favorable experience, and tell others, and so forth.  The process was not considered to be a short-term strategy, but was rather recognized as something that may take awhile.  Now, put this idea into hyper-drive, and you have yourself a successful viral marketing strategy.  Marketers have to convince those consumers with high social networking potential that the word should be spread immediately, before the product is even purchased and tried.  It is still going to be somewhat up to chance that this sort of marketing campaign will actually go viral, but as marketers get better at social media marketing and identifying those influential members of social networks, this strategy will become more and more viable.

    Read more:  http://www.wilsonweb.com/wmt5/viral-principles.htm

    Read even more:  http://www.allfacebook.com/9-secrets-to-successful-facebook-viral-marketing-2011-07

  • The Increasing Challenges for Today's Marketing Majors

    "I don't like numbers and math, but I want to major in business, so I'm going to major in marketing."  Similar statements seem to be common among marketing students.  Another common theme many professors are noting is that marketing students cannot communicate well.  What is there about marketing that suggests there will be no math?  Even more puzzling is the question asking the same about communication.  The unsolvable mystery is how these students get these strange ideas into their heads.

    A recent publication identifies a number of areas in which marketing majors might find jobs, as listed below.

  • Advertising
  • Brand Management
  • Channel Management
  • Marketing Research
  • Marketing Communications
  • Marketing Strategy Development
  • Social Media Marketing
  • Pricing
  • Promotions Management
  • Product Management
  • Public Relations
  • Retailing
  • Sales and Sales Management

    In the above list, math skills are required for advertising, brand management, channel management, marketing research, marketing communications, marketing strategy development, social media marketing, pricing, promotion managment, product management, public relations, retailing, and sales and sales management.  Wait, math skills are required for all areas of marketing?  Yes.  The same goes for communication skills.  Looking at the above list more objectively, the obvious areas where math skills are required are marketing research and pricing.  However, when skills such as promotional budgeting, sales forecasting, media cost, return on investment, media frequency and reach, brand equity, customer satisfaction, salesperson compensation, clicks per month for social media marketing, etc., are considered, it becomes clear that math skills are necessary in all areas.  Further, since the main objective in all promotional acitivities is communication, this is also a critical skill for marketing majors to develop and maintain.
  • In today's economy, if you, the marketing major, do not have these skills, you are the same as most other marketing majors and will be competing on an equal basis in a very competitive job market.  Why not develop these skills while still in school to increase your chances of being hired?  While it is common for today's marketing student to avoid math and statistics classes, perhaps the new approach should be to minor, or even double major, in math or statistics.  Imagine how much more competitive you would be in this challenging job market?  By minoring in math or statistics, or at least by taking extra classes in those areas, marketing students will immediately launch themselves above more than 90 percent of other marketing students.  Maybe it's time we fought back so we are no longer known as the non-quantitative business discipline.

    Read more: http://www.biz.colostate.edu/undergraduatePrograms/academicPrograms/Pages/marketing.aspx

     

  • Hype or Genius? The Grand Opening of IKEA in Denver, CO

    When IKEA opens its doors tomorrow (Wednesday, July 27) at 9:00am in Centennial, Colorado, a detailed plan is in place to handle event-associated traffic, parking, crowds, etc.  This is a furniture store, not an NFL football game.  What is the big deal?  For this store's grand opening, IKEA is planning an event similar to what you would see on Black Friday.  It is planning thousands of dollars in giveaways and will be having a kickoff ceremony featuring Colorado Governor John Hickenlooper, Centennial, Colorado Mayor Cathy Noon, and IKEA U.S. President Mike Ward.  The store allowed customers to start lining up at 9:00am yesterday (Monday), 48 hours before the store opens. Why would people want to do something like that?  It's a furniture store. Well, the first 38 customers to enter the store tomorrow will receive a sofa and the next 100 customers will be awarded an armchair.  The first 2,500 will receive a gift certificate of random amounts from $10 to $250, or maybe a food voucher of some sort.  Yes, IKEA has a restaurant inside and reportedly, it is quite good.  People with proof that their birthday is tomorrow will receive a gift certificate for $52.80, Denver's elevation.

  • Black Friday in July, or Anytime

    One of the best ways to effectively jump-start awareness and interest in your business is to hold a grand opening. A successful grand opening can often result in a level of  sales and revenue that otherwise might have been much longer in the making. A well-desgined and executed grand opening can greatly assist the launch of a new business. A previous blog described the grand opening of an IKEA store in the Denver, CO, area where promoters had done such an outstanding job of creating hype, plans had to be made to handle vast crowds and the resulting traffic problems, parking problems, crowd control, etc.  This is the kind of event that had made Black Friday famous in the United States.

    Keys to successfully creating a successful grand opening go beyond a mere ribbon-cutting approach.  Though excessive amounts of inventory to be given away free is not necessary, consumers always like gimmicks, give aways, and other features usually only found at the circus, carnivals, or grand openings.  Small businesses may elect to have a bounce house for kids along with free hot dogs and hamburgers.  Balloons are always fun and appeal to a general group of consumers.  The trick is to have something for everyone.  Alerting media and having a unique and fun approach to the traditionally stodgy ribbon-cutting will also attract a lot of attention. Invite the media and local dignitaries.

    chickfilacow

    One large company that has the grand opening of a store down to a formulaic science is Chick-fil-A.  The first 100 people into a new Chick-fil-A restaurant win free Chick-fil-A for a year.  A grand opening for this company features people willing to wait in line for 24-48 hours to be among the first into the new location.  Some people travel around the country to attend these grand openings, even in bitter cold weather or hot and humid weather.  They have free Chick-fil-A for their whole lives, or at least for as long as they are willing to keep doing this insanity.  Oh, and the company does feed you while you wait in line and also provides some entertainment.

    Walmart_Logo

    Walmart is another retail giant known for fantastic grand openings.  On the first day of business in a new Walmart store, you can expect an opening at around 7AM.  You can expect local dignitaries, free food, unusually good sales to rival the sales on Black Friday, local sports celebrities signing autographs, etc.

    These retail giants are not the only ones who do a great job of hyping a grand opening.  Small, local companies can also have very successful grand openings.  A small chocolatier in Charlotte, NC, recently conducted a successful grand opening.  On the opening day, the company successfully gave away four sheet cakes, a piece at a time, 30 pounds of chocolate mousse, four full chocolate almond pate logs covered with caramel sauce, and over 300 chocolate truffles.  Were all these freebies worth it?  In this case, yes.  Sales have continued strong for the small company and people still remark they discovered the place by attending the grand opening.

    Forman Mills, a discount fashion retailer opened a store recently.  The company decided to create a week of grand opening excitement and activities that began with a press conference-VIP Event in the newly completed store.  The press, mayors of local towns, and other local and state officials attended the ribbon-cutting ceremony. Other activities included radio and TV station remotes throughout the weekend, jazz bands, drill teams, tumblers, autograph sessions with famous Chicago sports dignitaries and much more.  Additionally, a customer opinion survey was circulated that would help the company identify key sales, media and branding elements as they plan to open more stores in the Chicago area.

    Possible benefits to the companies holding the grand openings are obvious.  Benefits to customers are also obvious in the form of free or discounted products, getting opportunities to meet celebrities, and just feeling part of something big.  Large and small companies are increasingly recognizing the importance of this Black Friday type of hype.  So, if you don't mind crowds and if you crave free and discounted products, watch for a grand opening near you.

    Read more:  http://www.franchiseknowhow.com/articles/grand-opening-tips.htm

  • American Idol: A Marketing Juggernaut

    Didn't we just finish yet another season of American Idol?  So why are we blogging about it?  Auditions for the 2012 season have already begun and have been going on for nearly a month.  For those not familiar with American Idol, it is a reality TV show featuring a singing competition that lasts for weeks.  It usually begins in January and runs for several months.  Since its first season in 2002, it has become one of the most popular and successful reality TV shows in American television history.  How is success defined?  In this case, it has earned billions of dollars for its producers and its sponsors.  It has also "discovered" superstar talent, such as Kelly Clarkson, Carrie Underwood, and Chris Daughtry.  Sometimes, contestants other than the winners enjoy as much or more success than do the winners.  Such is the case with Chris Daughtry and Adam Lambert.

    So how is American Idol related to marketing?  Well, it is a product with a highly successful promotional campaign that has made it wildly popular.  Corporate giants with nearly bottomless pockets have signed on as sponsors for American Idol.  Coca-Cola and the Air Force Reserves are sponsoring the latest American Idol "Live" Tour.  It's not often that a U.S. government agency (Air Force Reserves) is willing to be connected with a single entity, like American Idol.  At the latest count, American Idol now has 45 corporate and government sponsors.  American Idol continues to dominate its time slots, making it "worth it" for its sponsors.

    What makes American Idol so popular year after year?

    1. It is TiVo proof.  There is something about watching it in real time that makes the consumer feel a part of something. 

    2. Its personalities persevere.  Call it casting if you want, but the judges, along with the host, are likable, or at least intersting, characters from season to season.

    3. It is water cooler worthy.  Some episodes are worth talking about at work the next day.

    4.  It has a knack for delivering a participatory viewer.  By allowing the public to vote, consumers feel more involved and buy into the show more completely.

    5.   It has delivered.  American Idol has delivered legitimate music superstars.

    6.  It is family-friendly.  American Idol appeals to people of many ages and even conservative parents don't have to be too cautious about letting their kids watch.

    Read more: http://www.imediaconnection.com/content/9618.asp

  • Unhappy Meals

     

    If there are no fries in a McDonald's Happy Meal, can it still inspire happiness? This is a very important question. It should be no surprise to marketing professionals that the food industry has come under steadily increasing scrutiny in recent years as childhood obesity levels have risen. In a self-regualtory move, McDonald's recently announced that, short of answering the call to eliminate the toys and the characters that have been so influential in establishing brand awareness among children, the company will reduce french fry portions and begin to offer apple slices as a subsitute for more health conscious parents. Apple slices? Yuck!

    Those of us who follow social trends as they relate to marketing goods and services realize that consumer attitudes toward obesity and overall health and wellness are driving a number of different market segments. I have enjoyed watching areas such as the natural and organic products industry grow at double digit rates for over 20 years. Now these attitudes have hit the mainstream in the face of some alarming health data and thousands of practitoners calling for increased government regulation. What is a brand to do? Making products healthier doesn't always result in maintaining the product characteristics that make them "yummier". As a matter of fact, the opposite usually happens. So, is this a problem for McDonald's? Is the company responding appropriately?

    History has shown that when a food service provider broadens its product mix to include healthier offerings, it can have a positive effect on overall sales. A brief look at the atmospheric growth of the health food industry provides us with literally thousands of good examples. Remember that, in the past, even McDonald's introduced salads targeted primarily to parents who want to indulge their children but prefer not to eat a Big Mac themselves. This program has been successful. So the problem is not in offering healthier options per se, but may arise when the company attempts to replace a "yummier" option with a "healthier" option. As long as the company gives the consumer the choice and doesn't attempt to dictate what products they should buy, the long term consequences of such a move will be positive.

    The link below provides more insight on this interesting development:

    http://articles.economictimes.indiatimes.com/2011-07-30/news/29833158_1_apple-portion-mcdonald-s-corp-happy-meal

  • Market Globally, Think Locally

     

    The Wall Street Journal reported yesterday that Wal-Mart, following the lead of natural products retailer Whole Foods Markets and to a degree more mainstream chains such as Safeway and Supervalu, will begin to source fruits and vegetables from more local sources. Those of you who are already familiar with natural and certified organic products are probably aware that buyng products from local sources is a big deal to retailers that sell these products. Why? Buying locally is seen by many observers as a way to:

    1. Ensure greater freshness and higher product quality

    2. Support local businesses, especially family farmers

    3. Support the environmental movement as shipping avocados from New Zealand to California is viewed by many as an ecologically unsound practice

    Just look at the way consumers have flocked to local farmers markets throughout the nation as well as to natural format stores, which have all proliferated and profited due to this rising social trend. It seems like every community has at least one of each, and I have mentioned in previous columns the prolific growth within the" healthier for you and better for the environment" world of goods and services. Is this a fad? Not at all. High growth rates sustained for decades in the natural and organic segment, now in the hundreds of billions in annual sales, prove that this trend should in no way be compared to the "Macarena". Remember that?  The big question here, especially for chains that do not have health and environmental sensitivity in their mission statements, is, "What does local mean?" Obviously in the absence of a government definition or an industry standard this concept can be very subjective and therefore abused by marketers. For example, at most large retailers "local" can mean food grown hundreds of miles away. To the smaller natural format stores, the word carries much more significance, and the retailer must take greater care in communicating because many of  their shoppers are very astute as to what products are being offered, what is in them, and where they come from.

    I will discuss the market segmentation for consumer attitudes toward health, wellness, and the environment in later columns. For now, consider the impact that a large retailer such as Wal-Mart may have on competitors, the supply chain, and consumers in general. Could it ultimately end up changing the way we produce, sell, and consume food?

  • Ticket Prices: How Much More Can They Stand? Part 1

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    Perhaps the most important question facing sport marketers today is, “How do I get fans to come back to the games?” Reasons for concern about decreasing attendance range from the ever-increasing availability of other entertainment options for consumers (including more and more professional sport leagues) to the more disturbing trend involving the migration of spectators toward media-based consumption. Is the 52” HD TV with the full sport package in fact “cannibalizing” the sales of tickets to live events? Has technology made the game so life-like that sport consumers can get the same experience at home? Preposterous! Certainly they get “an” experience, but “the same” experience? No. They are simply choosing alternative ways to view your events…far cheaper and more convenient ways. When the Wall St. Journal reported that even Cubs fans are staying away for the third stratight year (WSJ, July 16, 2011), it became clear that there is a proverbial "elephant in the living room" and its name is greed.

     

    This is not just an isolated sport phenomenon. A quick look at an industry very much related to ours, live music entertainment, illustrates a very disturbing picture. The summer 2011 market is flooded with discounted tickets and replete with canceled concerts. According to the Wall Street Journal, Live Nation Entertainment reported that ticket sales revenue is down 17%, the number of tickets sold is down 12% and the average ticket price has fallen by 5%. Sound familiar? The important lesson for sport marketers is to remember that for the most part our product is highly elastic. It is not a “necessity” and therefore demand is very sensitive to both price and economic factors Economic conditions were much worse three years ago, by the way, so don’t expect a magic spike when “things get better”. Look at what happened to premium seats when the Yankees introduced the new stadium. Empty. There should be no mystery as to why an increasing number of consumers are choosing from a variety of substitutes rather than continue to absorb the cost of rising game day prices.

     

    Obviously, a great deal of revenue can be generated through media-based viewing, but we still have to come up with ways we can get fans back into the seats. Since there isn’t a whole lot marketers can do to enhance the core sport product, the action on the field itself, efforts to increase spectator satisfaction have involved enhancing the stadium and all of the peripheral aspects to the consumer experience. These value-enhancing marketing activities, which include video screens, deluxe concessions, activities for kids, cheerleaders, hot tubs, etc., etc., can only go so far in alleviating the remorse buyers feel when they fail perceive value in what they have bought. So that’s the proverbial elephant in the living room. For most sports, ticket prices are simply too high.

     

    The sport professionals who haven’t had too much of the industry’s “Kool-Aid” know this to be true, but no one wants to be the first one to tread down that slippery slope. Marketing theory tells us that lower ticket prices mean lower perceived value by consumers. Unrealistically high prices, on the other hand, set expectations that are difficult for the sport marketer to fulfill especially if the team loses or the weather is inclement. Consistently discounting tickets means that consumers never expect to pay face value for a seat. If this is all true, what can be done?

    Part 2 of this article will appear tomorrow. Dr. Clayton Daughtrey contributed to this article.

  • Ticket Prices: How Much More Can They Stand? Part 2

    There is only one answer to the question posed at the end of Part 1. Our “irrational exuberance” in escalating ticket prices (this also goes for concessions and sponsorships) has created a ticket pricing bubble. As is the case with all economic bubbles, they must eventually descend, but it is up to the industry to insure that they do not explode and hurt stakeholders. Prices must be reduced across the board and customer volume will increase, providing more opportunities for properties to generate revenue while the fan is in the stadium.

     In addition to high prices, there are simply too many places to buy tickets and consumers are left confused as to what the actual retail price really should be since comparing apples to apples when it comes to tickets is tough to do. The sense of trust between sport properties and fans may be eroding due to these inconsistencies. For example, group reps are selling tickets to groups discounted at anywhere from 50% to 75% off the face value. Others got 2 for 1 club level seats because they are Wells Fargo customers. Season ticket holders pay only 75% of the face value of each ticket, and with the industry trending toward dynamic ticket pricing, we are now traveling down the trail the airlines have already blazed. Popular companies those airlines are! We had all better hope that the fan that did not pay full price does not get into a conversation with the fan who paid face value plus service charges.

     And high ticket prices aren’t the only issue. After paying for parking, the fan must stomach ever escalating food and beverage costs. Fifteen bucks for a hot dog and beer is now the norm, and this is almost entirely due to the practice of outsourcing food service to expensive third party providers. Concessions prices could end up being much lower and profits could be higher for sport properties that take their food service back in house. And how about that food and service quality? The consumer is the one who loses and staying at home instead of braving the expense, traffic, weather, and crowds when there are so many substitutes available.

     This may seem like common sense, but perhaps this sort of sense really isn’t all that common. If it were, our industry would be listening to the consumer and changing our ways proactively before market conditions force us to change at much greater cost. So, who wants to be first? Anyone? Anyone?

    Dr. Clayton Daughtrey contributed to this article.

  • Guerilla Marketing: The Good, the Bad, the Ugly, the Success

    Guerilla warfare includes military campaigns that are unexpected and unconventional.  It targets the enemy in unexpected places in unexpected ways at unexpected times.  The tactics for guerilla marketing were developed using similar concepts.  Promotional tools (advertising, personal selling, sales promotions, and public relations) are used in unique and unexpected ways to reach consumers in unexpected places. 

    The objective for guerilla marketing is to create a unique and thought-provoking promotional concept to create buzz.  In fact, the practice is also known as buzz marketing.  Some of the unusual approaches used are intercept encounters in public areas, street giveaways of products. PR stunts,  flash mobs, or any promotional attempt designed to create maximum impact with minimal resources.  That's right, guerilla marketing campaigns are most commonly used by companies with small promotional budgets. 

    Unfortunately, some early guerilla marketing campaigns that utilized littering, graffiti and defacing public property gave guerilla marketing a bad reputation.  Because of this, many companies are reluctant to get involved in such "stunt" marketing.  However, just like the success of guerilla warfare, guerilla marketing can also be extremely successful, if designed carefully to not offend people and to enhance, rather than damage, a company's reputation.  Small businesses have enjoyed as much as a 250% increase in sales by using this type of marketing.

    Guerilla marketing, once thought to be cutting edge and risky, has almost entered the mainstream of marketing.  A short discussion about the concept is often included in marketing textbooks and at some universities (e.g., Texas A&M in Corpus Christi), it is an elective course that can be taken by marketing majors.  The original inventor of the concept, Jay Conrad Levinson, created and maintains a website for "all things guerilla," found at www.gmarketing.com.

    Guerilla warfare was developed to give small military forces a chance, and sometimes even an advantage, over much larger military forces.  Likewise, guerilla marketing can give small businesses an advantage, or at least a chance to succeed against seemingly overwhelming competition.  However, care must be taken so that a guerilla marketing campaign is congruous with a company's product and the image of the company.  For example, it might not make sense to do some of the sensational approaches to guerilla marketing if you own a funeral home.  But, if you have a small business and your company and product are suitable for such, you might consider this relatively inexpensive form of sensational marketing.

    Read more:  http://www.noozhawk.com/sports/article/080111_paul_burri_guerrilla_marketing/

    Read even more:  http://blogof.francescomugnai.com/2009/11/the-80-best-guerrilla-marketing-ideas-ive-ever-seen/

     

  • Social Marketing: Improving the World, One Campaign at a Time

    Social marketing refers to the application of marketing techniques to change behaviors with the ultimate goal of contributing to a social good.  In other words, social marketing campaigns are designed to promote a "cause" or behavior that will improve society.  Sometimes referred to as "cause marketing," social marketing is becoming more and more common.  Most memorable are the social marketing campaigns designed to encourage people to quit, or never try, tobacco, meth, etc.  These campaigns are both public service announcements, normally sponsored by government agencies, and those campaigns sponsored by private enterprises, such as many of the anti-smoking campaigns.

     

    Social marketing has been effectively used in such causes as encouraging people to do some behavior, such as volunteerism, organ donorship, environmental activism, energy conservation, participate in eco-tourism, healthy diets and exercise, consumer safetey and traffic safety, use of bicycle helmets, radon testing, care for the elderly, care for babies, screen earlier and more often for diseases, use of birth control, use of safe sex practices, etc.  It has also been used to discourage tobacco use, meth use, alcohol use by at-risk people, introduction of harmful animal species, etc.  It has even been suggested that it be used to discourage, or de-market, such practices as sex tourism.

     

    Social marketing is a relatively new field with it first being identified as being separate from other types of marketing in 1971.  The reason promoters of social causes have adopted marketing practices is they realize that stating scientific facts about an issue alone will not convince people to change their behavior.  They need to be persuaded, and the social science of marketing presents well-developed concepts and tools to help this persuasion take place.

    Read more:  http://i-socialmarketing.org/

     

  • Please Take These Toiletries

     

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    I don't know about you, but when I travel, I never pack shampoo, conditioner or soap. Even without stringent airport security requirements and increased costs associated with packing more stuff, I wouldn't even consider transferring my regular personal care items into bottles of 3 ounces or less; nor would I take the time to buy travel-sized items in the store. All of this simply requires entirely too much effort on my part. That is not the way I roll. One of the many things I look forward to when I stay in hotels, especially with regard to more luxurious accommodations, is the neatly arranged array of personal care items usually displayed on the bathroom counter. In the last few years, I have noticed that even the lower end chains are enhancing their image through little things like the quality of bedding and room decorations as well as the quality of complimentary toiletries. Little things tend to go a long way with regard to consumer perception of quality versus price.

    Travel-sized personal care products at hotels are something many travelers now view as value added enhancements to their stay, and also as highly useful parting gifts. Indeed the industry has changed from partnerships with a few "plain jane" private label contract manufacturers to alliances and licensing relationships with global beauty brands. The result is a nice blending of the personal care and hospitality industries. Couple that with ever increasing airline restrictions and you have a category that may enjoy healthy growth for years to come. Recently, Hilton Hotels announced that it has commissioned six products from the Peter Thomas Roth cosmetics brand for use in 540 hotels in 78 countries worldwide (Wall St. Journal 8/11), and that the hotelier has shifted longtime partner Crabtree & Evelyn from supplying these hotels to selling to the company's mid market brands, Doubletree and Embassy Suites. Higher end personal care products are appropriate for higher end brands.

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    These arrangements are the result of agreements between hotels and hospitality supply companies, the former of which often license the names and formulations of known branded products, manufacture the items, and sell them to the hotels. This has been an effective model for hotels because they are not in the business of manufacturing personal care items. The core compentency of a hotel is hospitality and it therefore makes sense to outsource other functions such as room amenities. Today, it looks like global retail brands have identified a marketing opportunity in offering "samples" of their products through hotels rather than more traditional methods of sampling. I cannot think of a more cost effective way to obtain and keep a customer than to invite them to use your product throughout their stay, take full bottles of what they didn't use home with them, and then ultimately buy the product in the store.  The brand makes money on each bottle and also exploits an opportunity to have the target market try the product. Thus, the traditional model used for sales promotions such as sampling can be applied to unique situations such as this one. There is no end to what you can accomplish through marketing once you understand how marketing strategy works.

     

  • Sports Sponsorships: Money Well Spent?

    denver broncos logo 300x300 Denver Broncos logo

    As the Denver Broncos' venue changes names from Invesco Field at Mile High to Sports Authority Field at Mile High, one has to wonder why companies spend so much money on sports-related sponsorships.  If you haven't noticed, every inch of scoreboards, sidelines, concourses, ticket-backs, parking lots, and even restrooms of major sports arenas are painted with sponsor logos and brand messages.  Why not purchase naming rights to the entire venue to rise above the multitude of other advertisers and sponsors?  Reportedly, Sports Authority, a Colorado-based company, will "invest" $150 million over 25 years for naming rights to the Broncos venue.  The benefit to Denver and the Broncos is fairly clearcut.  Reportedly, half the money will go to the Broncos organization and half will go to the district in which the football stadium stands for improvemenst to both the venue and the neighborhood around it.  It seems fun and cool for a home-town company to sponsor the venue, but beyond the WOW factor, what is the advantage to companies who commit money to such expensive sports sponsorships?

    In addition to venue sponsorships, other sports-related sponsorships include endorsing specific professional athletes (e.g., Tiger Woods, Michael Jordan, Lebron James, Kobe Bryant), sponsoring specific sporting events (Vizio Rose Bowl, AT&T Cotton Bowl, GoDaddy.com Bowl), and sponsoring NASCAR race cars (every position on the car, from fenders to hoods and roofs are sold to sponsors).  Companies spend millions of dollars on these endeavors.  With the economy being down and stockholders wanting to see profits from their investments, how can these companies justify such huge "investments?"

    Sport sponsorships are becoming hugely popular as one of the best ways to create brand awareness, advertise one's services, and establish and maintain a company's reputation as a responsible corporate citizen in the business world.  Is this enough?  It seems to be.  Very little grumbling takes place from investors (stockholders) when a company commits such huge amounts of resources to these sponsorships.  In fact, in most cases, they seem to be nearly as excited as top management of the sponsoring companies themselves.  Stay tuned for another blog on sports-related sponsorships.

    Read more: http://EzineArticles.com/1041698

  • NASCAR Sponsorship and Marketing

    NASCAR

    Whether you are watching NASCAR in person at the track or on TV,  it seems that nothing associated with the sport is without a sponsor. Cars are covered in logos and stickers, drivers have patches from shoulder to shoulder and every race is brought to you by one company or another. It is obvious that sponsors shell out a lot of money for NASCAR sponsorships, but how much, exactly? And where does all that money go? 

    Being a primary sponsor of a team costs $350,000 to $500,000 per race, although in many cases, corporations sponsor a team for a full season. That means the sponsor gets to choose the paint scheme of the car, put the logo all over it, and use the driver's likeness in advertising for the product or service it wants to promote. It is possible to be the primary sponsor for just one race, and for the $.5 million investment, the car will change its appearance for just that one race.

    In addition to the above sponsorship opportunity, fuel is one of the biggest expenses - and not just fuel for the race. Every team has to get at least one car and one full pit crew to the race - plus the driver, the owners, the management, and all the team's racing gear and tools. This requires a couple of large transport trucks. Therefore, there are opportunities to sponsor fuel costs for a NASCAR team.

    Jeff Gordon.jpg

    Sponsoring specific drivers is another opportunity.  The driver typically flies from track to track, or the driver may take a tour bus, which is almost as expensive as flying. In addition, the driver's salary is generally paid for by the sponsor, which gets a certain number of scheduled appearances out of the driver in return. The driver will also split race-day winnings with the team, and there are usually incentives for winning big races.  The driver can also bring in fees for additional appearances or even license his or her likeness to advertisers. The best drivers bring in millions each year, like a recent top earner, Jeff Gordon.  In 2008, Gordon earned $17 million in endorsements and royalties, and $15 million in salary and race winnings, for a total of $32 million.­

    The final sponsorship opportunity will buy logo rights to certain parts of the actual race car.  There are three main levels of sponsorship, as follows:

    • $500,000 to $2 million for an Associate sponsor - A logo on either the lower rear quarter panels, the rear deck lid, or one post.
    • $2 to $5 million for a Major sponsor - A logo prominently displayed on either the rear quarter panels or the rear deck lid, and the uniforms.
    • $10 to $20 million for a Primary sponsor - Logos on the entire hood and quarter panels, the signage below the quarter panels, most of the two posts, the equipment, the uniforms, as well as the color scheme of the car and team uniforms.

    Read more: http://auto.howstuffworks.com/auto-racing/nascar/nascar-basics/nascar-sponsorship2.htm

  • Sports Endorsements in a Tough Economy

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    In the words of Tom Cruise playing Jerry Maguire, “I will not rest until I have you holding a Coke, wearing your own shoe, playing a Sega game featuring you, while singing your own song in a new commercial, starring you, broadcast during the Superbowl, in a game that you are winning, and I will not sleep until that happens.”  That was then (1996), but this is today in a questionable economy. 

    Professional athletes are the closest people we have to real-life super heros.  They do the impossible, kids look up to them, and they often serve as role models and trend setters for older people as well.  If they are doing what they are supposed to do and behaving themselves, they have the perfect storm of attributes that marketers want to be associated with their products and brands.  However, the current reality is that “image marketing” is being reconsidered, with tighter budgets and more accountability for return on investments. Marketers now have to find the right blend of how to use athletes while delivering a tangible business goal.  The harsh reality is that the golden smile on top of a hard body holding your product after the big win hasn’t been proven to be as golden at the sales level.

    Recent research assessed the effectiveness of celebrity endorsements for brands. It looked at how well these ads performed in comparison to those of competitors (with or without a celebrity).  Some of the lowest scores came from endorsements from star athletes. One ad with NASCAR champion Dale Earnhard Jr. for Nationwide Auto Insurance scored a -27% in effectiveness compared to ads from competing brands. In spite of Earnhard’s positive reputation and pleasant personality, the survey respondents were unimpressed, with one of them opining that the ad "missed the mark."

    Read more:  http://bostinnovation.com/2011/03/08/sports-endorsements-no-engagement-no-touchdown/

    Tiger Woods

    A truly innovative and effective promotional campaign requires something more than just a famous face, no matter how popular that famous face is.  Despite this additional concern and accountability for the money spent in promoting products, star athletes appear to still be raking in the big endorsement incomes.  Sports Illustrated names the 50 top earners every year.  For 2010, the top two endorsement earning athletes, by far, were golfers: Tiger Woods ($70,000,000) and Phil Mickelson ($52,000,000).  Other popluar athletes with high endorsement income for 2010 included Lebron James ($30,000,000), Shaquille O'Neal ($15,000,000), Peyton Manning ($15,000,000), and Dwyane Wade ($12,000,000).

    Peyton Manning

    These numbers still seem astronomical to many, and finding positive return on these expenditures is becoming more and more difficult, especially in this difficult economy.  Reflecting these concerns, in most cases, the projections for endorsements in 2011 are substantially reduced as companies continue to explore methods to tighten their belts without losing their brand image and company reputation.

    Read more:  http://sportsillustrated.cnn.com/specials/fortunate50-2010/