Archive for the ‘Mktg – Product Line Mgnt’ Category

Once mighty AOL now selling off its patents … ouch!

March 26, 2012

Punch line: AOL has hired Evercore Partners to help it shop around its patent portfolio in hopes of offsetting lost dial-up business and  “accelerating shareholder value creation.”

Meanwhile, Facebook has acquired around 750 patents from IBM in order to “bolster the social network’s defenses against litigious rivals”.

Excerpted from: CNET: AOL, lacking better options, hires firm to sell its patents

Citing three people with knowledge of the hire, Bloomberg says AOL tapped Evercore to find a buyer for more than 800 patents and to “explore other strategic options” — code for a possible sale or private buyout of the entire company.

Last December, AOL announced plans to reorganize the company, combining its declining dial-up Internet service business and its Web services arm, the latter of which was recently scaled back with layoffs in the Instant Messenger group.

AOL has previously said it’s looking for ways to raise cash from its patent portfolio and is making efforts to “accelerate shareholder value creation.”

AOL’s move follows Facebook’s acquisition of some 750 patents from IBM, a deal made to bolster the social network’s defenses against litigious rivals.  Facebook has been targeted by Yahoo for allegedly infringing on a number of its patents that cover customization and advertising.

Easy to pile on AOL for its strategic mis-steps over the years (e.g. hanging with the “walled garden” too long, failing to find a way to migrate to high-speed internet service), but gotta give the company credit for its role in the Internet explosion.

And, in a timely fashion, the original owners dumped the bag on Time-Warner … walking away with a fortune …

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Wagging the “Long Tail” by self-publishing …

November 7, 2011

TakeAway: Established writers and new writers take advantage of self publishing with the evolution of digital books.

Good example of the Long Tail Strategy. 

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Excerpt from WSJ: “Secret of Self-Publishing: Success”

Self-publishing has been available for decades.

But thanks to digital technology and particularly the emergence of e-books, the number of self-published titles exploded 160% in 2010 from 2006. fueled the growth by offering self-published writers as much as 70% of revenue on digital books.

By comparison, traditional publishers typically pay their authors 25% of net digital sales and even less on print books.

A veteran romance author self-published her first e-book in April 2010. She has since cumulatively sold 265,000 units of 10 self-published titles.

Her total take from those 10 titles since last April: in excess of $500,000 after expenses. Previously, the most she ever made from a book was $33,000.

“One of the big differences between e-books and print is the sales cycle … It’s almost inverted.”

A chain store buyer makes a decision as much as six months before a book is published, and then it has no more than six months on the shelf. At that point, the sales cycle is essentially over.

But with e-books, it’s completely the opposite.

“It’s often six to nine months before your book takes off, and you never take it down.”

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P&G Sheds Pringles, its Last Food Brand

April 15, 2011

TakeAway:  In announcing the sale of Pringles to Diamond Foods for $2.35B, P&G concluded what had been a tumultuous, sometimes zany, 50-year experiment in engineered food.  P&G also refocused on its core product lines.

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Excerpted from the NYTimes, “Once a Great Flop, Now Sold for Billions By Andrew Martin, April 5, 2011

The company’s expertise in edible oils was used widely by the potato chip industry in the 1950s and 1960s, and shaped the invention of Pringles. Company officials still aren’t sure how the chips got their name.  Pringles are basically dehydrated potato flakes that are rolled and then fried, but they were not universally loved initially.  The product was such a dud in its early years that some called for P&G to dump the brand. The brand did not take off until the company tweaked the flavor in 1980 and introduced the “Fever for the Flavor of Pringles” advertising campaign.  By the late 1990s, Pringles had become a $1 billion a year brand.

The sale of Pringles was not unexpected, as Procter has refocused its attention on the core businesses of beauty, grooming and household care.

In the 1950s, roughly 25% of the company’s sales were in food, particularly in shortening and other cooking oils.  But P&G lacked a distribution network to ship perishable bags of chips to grocery stores, so it directed its researchers to come up with a longer-lasting chip that could be distributed with P&G’s existing distribution network.  P&G wanted to create a perfect chip to address consumer complaints about broken and stale chips and air in the bags.

Officially, Pringles are called crisps rather than chips, the result of a long-ago fracas between competitors and regulators over what could be called a potato chip.

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But, I just want plain old toothpaste …

March 15, 2011

TakeAway:  An explosion of specialized pastes and gels brag about their powers to whiten teeth, reduce plaque, curb sensitivity and fight gingivitis, sometimes all at the same time.

Add in all the flavors and sizes, plus ever-rising prices, and the simple errand turns into sensory overload. 

Manufacturers acknowledge the problem and are putting the brakes on new-product introductions.  In this case, more product variety isn’t always better.

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Excerpted from the WSJ, “Whitens, Brightens, and Confuses By Ellen Byron,February 23, 2010


P&G, maker of Crest, says it has “significantly” reduced the number of oral-care products it makes world-wide in the past two years.  Crest hit the market in 1955 and in 1960 became the first fluoride toothpaste to gain the American Dental Association’s “seal of acceptance.” Toothpaste was elevated from cosmetic to therapeutic status, and sales of Crest nearly tripled within the next two years. The 1980s brought tartar-control formulas, raising consumer expectations of what toothpaste could do. Ever since, companies have brought out benefits and ingredients, in search of the next game-changing upgrade.

Each new benefit is a chance for toothpaste makers to push prices upward and drive sales. With some 93% of U.S. adults using toothpaste, according to Mintel, there’s little room to recruit new users.

Packaging plays its part in toothpaste-aisle clutter. “The toothpaste carton is a certain size and shape and sits on the shelf in a certain way. That makes it hard to communicate effectively when there’s a meaningful difference in a new product,” says Jonathan Asher, senior vice president at Perception Research Services, which specializes in packaging and shopper marketing.

This year, Colgate-Palmolive introduced packages meant to be more easily deciphered. It standardized sizes of the Colgate logo, the “sub-brand” and the flavor or benefit, so shoppers will notice them in that order. It did what it calls “shelf tests,” timing how long it took shoppers to find new packages of Colgate Total Advanced Whitening and other variations, versus older packages. “The new packaging was not only preferred but it was easier to find,” says Nigel Burton, president of Colgate’s global oral care, consumer insight and advertising.

Many dentists think differences between brands aren’t very meaningful. “Just make sure it has fluoride and has the American Dental Association seal,” says Ada Cooper, a New York dentist and consumer adviser for the ADA, which evaluates toothpaste claims. The ADA’s seal “tells you that the product has been tested, that it’s effective in doing what it says it’s going to do, and has the right mix of ingredients.”

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“It starts with the product …”

January 10, 2011

TakeAway: Consumers are still cash-strapped, but that hasn’t stopped Ford from selling more cars. The company’s sales were up 19% last month, and its year-to-date sales increased 21% versus the last year.  Ford’s secret?  “It all starts with product.”  Because without product, there’s nothing to market!

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Excerpted from Forbes, “Ford: How To Maintain A Sales Streak In Tough Times” By Elaine Wong, November 5, 2010

Ford’s VP of U.S. marketing, sales and service describes how Ford is tapping into social media and consumer trends toward vehicle customization, fuel efficiency and higher product quality to drive sales in an economic downturn.

Ford’s product development team has been focused on their four pillars – quality, green, safety and smart. The sales and marketing team  has done a lot of work to transform the image of Ford to being not just a company that makes the bestselling truck [F-Series] in America for 33 years or the Mustang, but a company that delivers products that are fun to drive.

Ford has a program called Drive One 4 UR School, where thousands of dealers help support local high schools, many of which are under a lot of financial stress. Fundraisers give people a chance to test drive new products. People aren’t naturally inclined to go to the dealer to get a new car when they go to a school event, but if they’re test driving it to help raise funds for their school and as part of a no-pressure environment, they may reconsider.

Ford is continuing its “rant” style of advertising when launching its new campaign for the F-150.  The ads cut through the clutter, have great recall among consumers and, if imitation is the sincerest form of flattery, more kinds of advertising with the “rant” style are being used in Iots of other commercials.

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Kraft Wants Philly to Flex from Bagels to…Chicken

November 11, 2010

TakeAway: Kraft Foods is repositioning Philadelphia Cream Cheese as a versatile cooking ingredient, spending big to introduce a new product, Philadelphia Cooking Creme. 

The reduced-fat, creamy and spoonable version of the iconic brand will hit stores early next year and be accompanied by one of the largest ad campaigns in company history.

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Excerpted from AdAge, “Kraft Puts Big Bucks Behind Philadelphia Cooking Creme Launch” By EJ Schultz, October 26, 2010

The ad budget for this will consume half of all spending in the cheese and dairy division, which also includes Velveeta and Kraft Singles. Those two brands alone accounted for more than $38 million in measured media spending in 2009.

The refrigerated creme will come in four flavors: original, Italian herb, savory garlic and Santa Fe. The campaign will promote the product as a sauce for chicken, vegetables or just about anything else you can put in a pan. Commercials will focus on solving the “dinner dilemma.”

Philadelphia brand cream cheese was first distributed in 1880 by a New York businessman and acquired by Kraft in 1928. The brand was marketed as a versatile cheese in the early years, but Kraft began positioning it as more of a bagel spread in the 1980s. Sales later flattened, as consumers began favoring low-carbohydrate diets, such as the Atkins Diet.

The push to return the cheese to its versatile roots gained steam this year with an online campaign called “Real Women of Philadelphia.” Consumers submitted cream cheese recipes and celebrity chef Paula Deen hosted a cook-off. Kraft hopes to build anticipation for the creme by first sending it to 2,000 consumers who sign up on the Real Women website. Users can submit pitches for an online commercial.

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When it comes to consumer choice … less can be more.

October 19, 2010

TakeAway: Many companies take the approach that giving customers more choices is better.

But, there’s only so much information the human brain can process.

Recent research highlights that giving consumers fewer choices can provide a competitive edge.

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Excerpted from Strategy + Business, “A Better Choosing Experience,” by Sheena Iyengar & Kanika Agrawal, September 27, 2010

When Baskin-Robbins opened in 1953, its line of 31 flavors — one for every day of the month — was a novelty. At the time, such variety was unheard of, and Baskin-Robbins used it to stand out from other chains. …

Today it seems obvious to offer consumers more choice — but the experience is no longer a novelty, or nearly as much fun. …

Consumers have grown accustomed to having a lot of choice, and many people still express a strong desire for having more options. But that doesn’t make it a good idea. There are neurological limits on humans’ ability to process information, and the task of having to choose is often experienced as suffering, not pleasure.

That is why, rather than helping consumers better satisfy their preferences, the explosion of choice has made it more difficult overall for people to identify what they want and how to get it. Thus, if the market for your product is saturated with choice, you can’t gain a competitive edge by dumping more choices into the mix. … You can design a more helpful form of choice.

The goal of a new approach to choice should not be to manipulate consumers into making choices that aren’t right for them, but rather to collaborate in a way that benefits both of you. …To accomplish this, here are four actions you can take:

  1. Cut the number of options.
  2. Create confidence with expert or personalized recommendations.
  3. Categorize your offerings so that consumers better understand their options.
  4. Condition consumers by gradually introducing them to more-complex choices.

Offered together, these actions can distinguish your company. Rather than trapping people in a morass of alternatives, you’ll be one of those rare companies whose offerings rise to the top by raising customer spirits. …

Each of these forms of customer engagement can be technologically enabled, for example, through online networks or social media. But the heart of this method lies in better design of the shopping experience, fueled by better awareness of human capabilities. …

From the outset, your design shows them that you understand how they think and respect their desire for both control and simplicity. The message is clear: In the short run, you are helping them navigate a bewildering and even debilitating world of options. In the long run, you are inviting them to choose you.

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Gillette offers a new – cheap – shave … in India, that is.

October 12, 2010


Gillette’s newest shaving system has just one blade, a light plastic handle and a sharply lower price.  The Gillette Guard will hit stores – in India – next week and costs 15 rupees, or 34 cents, and uses blades that cost five rupees, or 11 cents.

P&G’s goals are to first bring more consumers into Gillette and then try to lock them in to future purchases. 

To develop the Guard, P&G used target costing– starting with what consumers can afford and then adjust the features and manufacturing processes to meet the target.

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Excerpted from Wall Street Journal, “Gillette’s Latest Innovation in Razors: the 11-Cent Blade” By Ellen Byron,October 1, 2010

The Guard reflects P&G’s aggressive push into emerging markets for new customers and growth. That focus is forcing P&G to be more modest on scale and more flexible on price.

Gillette commands about 70% of the world’s razor and blade sales, but it lags behind rivals in India and other developing markets, mainly because those consumers can’t afford to buy its flagship products.

Gillette Guard is aiming to lure users of double-edge razors, about 400 million men in India, according to P&G estimates. In India, a brand called Super-Max holds the lead in double-edge blades, which cost roughly 1.5 to 2 rupees, which is half of the cost of even Gillette Guard.

The need to grow in emerging markets is pushing P&G to change its product-development strategy. In the past, P&G would sell basically the same premium products in developing countries, where only the wealthiest consumers could afford them. To reach more consumers, P&G changed course by creating pared-down products specifically designed to be less expensive.

P&G has a lot of ground to make up in India, where it estimates just 10% of men who shave use Gillette blades, compared with about 50% world-wide. Its plan is to get men to start using its products and then upgrade them as India’s economy grows.

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Registers Are Ringing … at the Dollar Stores, that is.

October 8, 2010

TakeAway: As people make fewer costly shopping trips to stock their pantries and increasingly can only afford inexpensive items in small quantities, stores are scrambling for the once-ignored low-end customer.

Some customers at Wal-Mart and the major dollar chains have such modest budgets that the retailers report upticks in spending at the beginning of the month, when government benefit checks and many paychecks come through.

Some of the stores have even managed to reach some middle-income shoppers, by increasing products from well-known brands such as Hanes, Quaker Oats and Nabisco. 

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Excerpted from the New York Times, “Stores Scramble to Accommodate Budget Shoppers” By Stephanie Clifford,September 22, 2010

Dollar stores have shown the biggest gain in shopper visits over the last year out of all the retailers that sell basic consumer goods. Manufacturers are racing to package more affordable versions of products common at those stores, and other budget retailers, feeling the loss of customers, are trying to duplicate their success.

 Wal-Mart, the world’s largest retailer, is adding thousands of items to its shelves, including inexpensive ones, and is asking dollar-store suppliers to create small, under-a-dollar packages for its stores, too.

 In areas with high unemployment, Wal-Mart is grouping together its less than $1 items in a clear challenge to the dollar stores. About a quarter of Wal-Mart’s stores are beginning to offer items for under $1, such as a four-pack of toilet paper, boxes containing just a few garbage bags and single rolls of paper towels.

The dollar stores have best been able to capitalize on the downmarket trend because of strategies they embraced during the recession, when the stores kept things cheap and expanded their merchandise.

During the recession, Wal-Mart pulled back on very inexpensive products, suppliers said, to make the stores look less cluttered and to appeal to shoppers who might be testing out that retailer instead of, say, Target. That decision has it now playing catch-up.

The dollar stores have found creative ways to keep their prices low. When commodity costs rose for suppliers, for example, the dollar stores asked them to decrease the number of sandwich bags in a box or pushed them to come up with a cheaper version of the products.

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Kenmore – Sear's jewel – gets modern.

September 29, 2010

TakeAway: By any measure Kenmore has been successful over a long period of time. 

Even in today’s intensely competitive home appliance market, it has managed to stay on top across all major appliance categories. 

Now, the brand is being  overhauled in an effort to modernize.

With customer-focused innovations geared toward a new generation, including appliances that transmit data over a phone line in order to troubleshoot, the brand seems likely to stay on top for the foreseeable future.

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Excerpted from Brandchannel, “Kenmore – A classic appliance brand gets a makeover,” by Barry Silverstein, August 17, 2010

There was a time in the annals of American retailing when Sears ruled the universe in both mail order and store sales. While that era is long gone, the venerable Kenmore brand, originally associated with Sears, has maintained its independent leadership position in household appliances.

First introduced on a laundry appliance in 1927 … The brand’s awareness factor is legendary. Today, more people in the United States buy Kenmore than any other appliance brand, one in every three American homes contains a Kenmore appliance, and Kenmore ranks number one or number two in every major appliance category.

Even its rivals know the unshakeable power of the brand — Frigidaire, LG and Whirlpool all manufacture products that are sold under the Kenmore name.

But Kenmore has not rested on its laurels

The trick, of course, is to modernize the brand while retaining and enhancing its long-standing reputation. … that involves four primary areas:

1. “Premium customer touch points,” such as higher quality handles and knobs that are both elegant and ergonomic.
2. “Premium technology,” including user-friendly interfaces such as color-touch LCD displays that are advanced but intuitive and easy to use.
3. Streamlined modern design.
4. New logo and custom font, as well as a new sound palette on select products.

… Kenmore announced an additional innovation called Kenmore Connect, a technology designed to speed up appliance repairs. Kenmore machines with problems have the ability to transmit data over a toll-free phone line for review by company representatives. …

Product design isn’t the only area getting a … makeover. … Kenmore launched an interactive “Kenmore Live Studio” in Chicago. The studio is equipped with cameras that broadcast video via the Internet and includes demonstrations by chefs, presentations, and unveilings of new products that can be shared in real time on the brand’s Facebook page. …

Obviously, Kenmore is making a concerted effort to gain relevancy with a whole new generation of consumers.
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Kenmore – Sear’s jewel – gets modern.

September 29, 2010

TakeAway: By any measure Kenmore has been successful over a long period of time. 

Even in today’s intensely competitive home appliance market, it has managed to stay on top across all major appliance categories. 

Now, the brand is being  overhauled in an effort to modernize.

With customer-focused innovations geared toward a new generation, including appliances that transmit data over a phone line in order to troubleshoot, the brand seems likely to stay on top for the foreseeable future.

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Excerpted from Brandchannel, “Kenmore – A classic appliance brand gets a makeover,” by Barry Silverstein, August 17, 2010

There was a time in the annals of American retailing when Sears ruled the universe in both mail order and store sales. While that era is long gone, the venerable Kenmore brand, originally associated with Sears, has maintained its independent leadership position in household appliances.

First introduced on a laundry appliance in 1927 … The brand’s awareness factor is legendary. Today, more people in the United States buy Kenmore than any other appliance brand, one in every three American homes contains a Kenmore appliance, and Kenmore ranks number one or number two in every major appliance category.

Even its rivals know the unshakeable power of the brand — Frigidaire, LG and Whirlpool all manufacture products that are sold under the Kenmore name.

But Kenmore has not rested on its laurels

The trick, of course, is to modernize the brand while retaining and enhancing its long-standing reputation. … that involves four primary areas:

1. “Premium customer touch points,” such as higher quality handles and knobs that are both elegant and ergonomic.
2. “Premium technology,” including user-friendly interfaces such as color-touch LCD displays that are advanced but intuitive and easy to use.
3. Streamlined modern design.
4. New logo and custom font, as well as a new sound palette on select products.

… Kenmore announced an additional innovation called Kenmore Connect, a technology designed to speed up appliance repairs. Kenmore machines with problems have the ability to transmit data over a toll-free phone line for review by company representatives. …

Product design isn’t the only area getting a … makeover. … Kenmore launched an interactive “Kenmore Live Studio” in Chicago. The studio is equipped with cameras that broadcast video via the Internet and includes demonstrations by chefs, presentations, and unveilings of new products that can be shared in real time on the brand’s Facebook page. …

Obviously, Kenmore is making a concerted effort to gain relevancy with a whole new generation of consumers.
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Remember when Nokia was the dominant mobile phone manufacturer ?

September 27, 2010

TakeAway: Once upon a time Nokia was the dominant mobile phone manufacturer.  However, it lost sight of one of the critical components of a successful marketing strategy: people.

Rather than objectively applying an understanding of customer needs into its products and marketing programs, Nokia was content to assume that what customers wanted in the past would remain the same.

So while others like Apple and RIMM developed smart phones with innovations that excited customers, Nokia did nothing and has paid dearly for it. 

It’s trying to get back on track, but it might be too late.

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Excerpted from Bloomberg Businessweek, “How Nokia Fell From Grace,” by Matthew Linn, August 15, 2010

What was the most successful European company of the 1990s? Easy: Nokia. The Finnish mobile-phone manufacturer captured the emerging market for mobile phones and built the industry’s most powerful brand. Its handsets virtually defined the industry from the time it launched its first GSM phone … in 1992. From 1996 to 2001 its revenues increased almost fivefold, and by 1998 it was the world’s biggest mobile manufacturer. In 2005 it sold its billionth handset …

Now, what’s the most disappointing company of the 2000s? Easy again: Nokia. The company has been in steep decline—a point underscored by its Sept. 10 announcement that it was hiring its first non-Finn as chief executive officer. …

Since Apple introduced its iPhone in January 2007, Nokia shares have fallen 49 percent. In a ranking of global brands by Millward Brown Optimor this year, Nokia was No. 43, having dropped 30 places in 12 months. …

Recognizing the scale of its challenges, Nokia hired Stephen Elop, the Canadian head of Microsoft’s business unit, to turn the company around. Everyone will wish him well. … if the guy knows so much about phones, he’s kept it a secret. Microsoft has never made any progress in that industry.

The cruel truth is that for all its residual market share, Nokia looks like a has-been. The company misread the way the mobile-phone industry was merging with computing and social networking. And it’s probably too late to turn that around.

There are uncomfortable lessons here. First, success is not a sinecure. Nokia got to the top of its industry quickly. Once there, it became complacent. … Nokia worried about hanging onto market share rather than creating innovative products that excite customers. Second, Nokia was unwilling to challenge itself. The company clung to the idea that handsets were mainly about calling people. It failed to notice that they were just as much about checking your e-mail, finding a good restaurant, and updating your Twitter page. …

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Netflix’s steady stream of product offerings

September 16, 2010

TakeAway: One of the keys to a company’s long-term success is developing new products or services that create value for high potential markets

Rather than remain content with its status as the leader in DVD rentals, a strategy that did not work well for Blockbuster, Netflix is constantly developing new ways to deliver its services and expand its offerings. 

As technology improves and consumer preference shifts toward online streaming, Netflix has been able to thrive and add new subscribers by forging relationships with companies like Apple and Epix that respectively provide hardware to deliver Netflix’s content and license content to Netflix.

This latest deal with Apple will help ensure that Netflix continues to deliver increased value to its customers even as the DVD rental market continues to decline.

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Excerpted from WSJ, “Netflix Adds Polish With Apple,” by Nick Wingfield, September 2, 2010

Apple Inc.’s decision to include a streaming video service from Netflix Inc. is another sign the DVD rental company may be able to weather a shift to Internet video that is challenging other companies across the entertainment landscape.

Apple … said a new, cheaper version of its Apple TV set-top box … will feature the streaming Netflix service … [T]he relationship could further establish Netflix as a mainstay in electronics devices that deliver Web content to the living room.

Netflix … for several years has been cutting deals with game console makers, television manufacturers and Blu-ray disc makers to include software in their products that provide access to the Netflix streaming service. It has similar apps that run on iPhones and iPads. In total … more than 100 different electronics devices can now access the Netflix streaming service. …

The company says the convenience of its Internet service has helped Netflix expand overall subscriptions. They jumped 42% to 15 million members in the second quarter from 10.6 million a year ago. The company says 61% of Netflix members watched at least 15 minutes of its streaming video during that period, up from 37% the prior year. …

Netflix has defied predictions of its demise again and again over its 13-year history. It has weathered challenges in its DVD rental business from much bigger companies including Wal-Mart Stores Inc., Inc. and Blockbuster Inc. Both Wal-Mart and Amazon ended up getting out of the DVD rental-by-mail business. Blockbuster, meanwhile, has struggled to transform itself, warning investors that it could file for Chapter 11 bankruptcy protection. …

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Less isn’t always more … just ask Walmart.

September 15, 2010

TakeAway: Walmart’s merchandising strategy called Project Impact knocked thousands of items off the retailer’s shelves and cleared the aisles of promotional merchandise.

And, the retailer has moved to give regional and store managers more power over what their stores carry and how merchandise gets displayed.

Both  programs will have a major impact on a host of marketers over the next year. 

A few brands are immediate winners, though many of the category resets that will add back thousands of items won’t occur until early 2011.

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Excerpted from AdvertisingAge, “Walmart’s Merchandising Shift Has Five Brands Dancing in Aisles” By Jack Neff,September 13, 2010 

The program to reinvigorate growth at Walmart always focused on 10 words.

Seven remain operative, including “Save Money.  Live Better”, the slogan adopted in 2007, and “Fast, Friendly, Clean,” which refers to efforts to improve the store environment and shopping experience. 

Three — referring to the “Win, Play, Show” merchandising and assortment strategy — have been tossed out of the lexicon, according to several people familiar with the matter.   “Win, Play, Show,” reduced assortments widely and often let price leadership over competitors narrow or disappear entirely in the “Play” and “Show” categories.

Reversal of that, along with return of merchandise to aisles, or so-called “Action Alley,” is having the biggest impact on brands.

Among the beneficiaries so far, according to people familiar with the matter:

HEFTY ONEZIP: Along with Glad, it got eradicated from the food-bag aisle after a Walmart category review last year. Starting in April, it got a small amount of space back, and more recently it has fully regained its shelf space.  

PAMPERS: Since Pampers isn’t distributed at Costco or big dollar chains Dollar General and Family Dollar, Walmart takes on added importance for the brand. It’s one reason P&G is widely believed to “over-index” at Walmart, and why it should broadly benefit from increased display space at the giant retailer. 

WISK: This detergent brand had been booted from retailers in the recent years and hanging on to distribution in only around 10% of Walmart stores. Timing proved fortuitous, as Wisk was planning a formula upgrade and major marketing push for August just as Walmart was relaxing its assortment stance. The result is full national distribution for Wisk.  

ELMER’S GLUE: Timing is everything, and the decision to open up “Action Alleys” again in many stores just in time for back-to-school season put this staple of the season in high-traffic areas. 

CHEX MIX: A reset of the snack section recently has brought the item-count for this General Mills brand from three up to eight. 

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You Can’t Just “Shrink It and Pink It”

September 8, 2010

TakeAway: Eight years ago, sportswear maker Under Armour learned that making smaller, pinker versions of its male apparel wouldn’t simply translate to women. 

Women buy because a piece fits well and promises to help keep them cooler or drier. 

Under Armour’s founder believes women’s apparel will one day surpass its men’s apparel, so learning what women wanted was key…the consumer always comes first! 

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Excerpted from New York Times, “Under Armour Wants to Dress Athletic Young Women” By Elizabeth Olson, August 31, 2010

Under Armour is aiming at the “team girl,” which Adrienne Lofton, head of Under Armour’s women’s apparel, defines as a female who is competitive and confident and who plays on high school or college sports teams, or who, after college, continues to work out regularly.  “The team girl is tough, intense and passionate, and she creates her own style.”

In 2003, Under Armour began marketing a line of women’s wear designed by women. Even so, women’s apparel represents only about 25 percent of the company’s nearly $800 million in annual revenue, and it wants more.  It is the only sports apparel sector where sales are forecast to grow, according to Marshal Cohen, an analyst for NPD Group, a market research group.  Part of that is due to the marketing of active wear as street wear.

Under Armour’s newly designed line, with compression shorts, a sports bra, shorts, footwear and other training gear, is being introduced Wednesday with a campaign called “Protect This House I Will,” which builds on the company’s successful we’ll-tough-it-out-together theme that it started for its men’s gear.  

Perhaps surprisingly, the 60-second television and digital spot anchoring the campaign features both male and female athletes — a choice, Mr. Battista said, shaped by focus-group research among high school and college women playing on sports teams.  Women wanted to see themselves on par with men – as athletes, not “female athletes.” 

For the campaign’s digital marketing, Under Armour is placing two- and three-minute segments it filmed of the three female athletes on a new Facebook site for women (which is not yet active) and on each athlete’s Web site.  The digital portion of the campaign will appear on, Facebook and other teenage-oriented outlets, video sites like Hulu and CW and the high school sports site MaxPreps.  “We have been shifting more to digital,” the company’s Vice President for Brands said. “It is now 80 or 90 percent digital. Our customers are telling us they like to receive information online and prefer to shop online.”

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LEGO: Rebounding from creativity run amuck …

August 17, 2010

Punch line: In an excerpt from Design Is How It Works, former BusinessWeek staff writer Jay Greene explores Lego’s troubles and its comeback.

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Excerpted from: How LEGO Revived Its Brand, July 23, 2010

Not many toy companies in the world have more brand power than LEGO.

Three generations of kids have built cars, cities, and spaceships with LEGO’s iconic bricks. Its logo — the red square with the rounded white letters — is immediately identifiable to most of the developed world and to a bunch of developing nations as well.

Brand power opens doors, getting kids and parents alike to consider LEGO products. But if those products don’t engage them, kids will quickly move to the next toy.

It is sometimes forgotten that LEGO struggled mightily in the early to mid-2000s.

Back then, company executives believing “being LEGO allowed us to do anything” wanted to extend the brand, venturing off on wild forays into new product development.

The prototypical example: Galidor, a legendary bomb that was all about action figures that … were little different than toys offered by scores of other manufacturers. They didn’t require building skills or much in the way of imagination, the hallmark of the more traditional LEGO construction toys.

Worse still, LEGO branched into a whole new business about which it knew little. The company co-produced a kids’ TV show called Galidor: Defenders of the Outer Dimension. The story line was meant to add detail to the action figures, giving kids more reason to buy them. But the shows sparked little interest.

Within its core construction toy business, LEGO was foundering. LEGO managers had given designers free rein to come up with ever more imaginative creations. And they took it. Left to their own devices, designers conjured up increasingly complex models, many of which required the company to make new components — the various bricks, doors, helmets, and heads that come in a rainbow of colors and fill every LEGO box. The number of components exploded, climbing from about 7,000 to 12,400 in just seven years. Of course, supply costs went through the roof, too.

Even more troubling was that the new designs weren’t resonating with kids.

“We almost did innovation suicide. We didn’t do a lot of clever components. We did a lot of stylized pieces.”

LEGO had assumed it would flourish by giving its designers whatever pieces they asked for in order to unleash their creativity. Instead, costs soared as the models veered toward the esoteric.

But, just as design pushed LEGO to the precipice, it helped bring the company back.

But here’s the paradox: Instead of giving designers free rein to conjure up their most brilliant creations to save the company, LEGO tied their hands. Gone were the days when designers could go wherever their imaginations took them.

Instead of rubber-stamping nearly every request for a new component, LEGO put each one through a systematic screening process. And it eliminated rarely used pieces, slashing the total number of components to about 7,000, the same number as in 1997.

LEGO also forced designers to come out of their cocoons and work with noncreative staff. At the earliest stages of product development, marketing managers, who had detailed research on the types of products kids wanted, helped guide development. Manufacturing personnel weighed in on production costs before a prototype ever saw the light of day.

LEGO found that design thrives with some constraints.

That might send chills up the spines of some in the design world. The idea of fencing in designers, forcing them to play in a confined space, runs counter to the notion that design needs to be set free.

“If you put guiding principles in place, you empower people to make the right decision.” 

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From Design Is How It Works, to be published in August 2010 by Portfolio/Penguin Group.

Adults Only: A Trojan horse or a Trojan for horses ?

July 19, 2010

Hate to drag HomaFiles down to this level, but this one is too good to pass up.

Punch line: Since introducing its Magnum line of plus-size condoms,  industry leader Trojan’s market share and profits have surged.

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From Psychology Today …

Few marketers are as fortunate as condom makers, whose customers are glad to pay a premium for a product that isn’t really much bigger or better.

Trojan markets its Magnum line of condoms as “Bigger than most condoms …  designed to fit those that find normal condoms too constricting.”

Oh, yes, and then there are Magnum XL’s … an upsell version.

It’s easy to see why men fall for this particular sales pitch.

“The Magnum brand is viewed as a positive lifestyle badge and positive symbol … men are proud to show they carry a Magnum condom — the large size carries a certain cachet.”

The economics:  A box of 12 regular Trojans retails for around $5.99; a box of 12 Magnums or Magnum XLs is $7.99. That’s a 33 percent premium.

Trojan confesses that it’s hard to imagine Magnum buyers doing the math … and since Magnum condoms are only 3/10 of an inch longer than regular Trojans – and since XLs are the the same length as Magnums … all of the condoms cost about the same to make, so the Magnum’s price premium is pure profit.

As an academic observer notes: “I think the concept of having more sizes is a step forward for the industry … But you could never market them as small, medium and large, because no one would buy the small.”

Excerpted from Behavioral Economics: Monetizing the Male Ego, April 28, 2010

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Trojan, including Magnum, commands 75 percent of the condom market, with No. 2 Durex commanding 14 percent.

The company claims Magnum is the most popular condom among African-Americans, citing internal research that indicates they account for 22 percent of all condom purchases but 40 percent of Magnum purchases.

Next time you open a menu … spot how they’re playing with your mind.

July 15, 2010

In his new book, Priceless: The Myth of Fair Value (and How to Take Advantage of It), author William Poundstone dissects the marketing tricks built into menus—for example, how something as simple as typography can drive you toward or away from that $39 steak.

1. The Upper Right-Hand Corner
That’s the prime spot where diners’ eyes automatically go first.

Restaurants often use it to highlight a tasteful, expensive pile of food.

2. Pictures

Generally, pictures of food are powerful motivators but also menu taboos — mostly because they’re used in downscale chains like Chili’s and Applebee’s.

Red Lobster ditched pics when it started trying to inch upscale

3. The “Anchor”
The highest priced item on the menu may not ever get ordered.  That’s ok.  It’s purpose is to make everything else near it look like a relative bargain.

4. In The Vicinity
The restaurant’s high-profit dishes tend to cluster near the anchor.  They’re items at prices that seem comparatively modest (when compared to the anchor).. They’re the items the restaurant really wants you to buy.

5. Columns Are Killers
It’s a big mistake for restaurants to list prices in a straight column. “Customers will go down and choose from the cheapest items.”

Consultants say to omit “leader dots” that connect the dish to the price; and to drop dollar signs, decimal points, and cents

6. The Benefit Of Boxes
“A box draws attention and, usually, orders.

When you see an item in a box, think “high margin”

7. Menu Siberia
That’s where low-margin dishes that the regulars like end up. They’re there, but relatively easy-to-miss  … or so the restaurant hopes..

8. Bracketing
A regular trick …  it’s when the same dish comes in different sizes.

Because youre never sure of the portion size, you’re tempted to to trade up … especially from small to “regular” size.

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Excerpted from Priceless: The Myth of Fair Value (and How to Take Advantage of It), to be published in January by Hill & Wang, an imprint of Farrar, Straus & Giroux. © 2010 by William Poundstone.

Going where no Starbucks coffee could go before.

June 14, 2010

TakeAway: The ubiquity of Starbucks stores, combined with management resistance to further de-value the Starbucks “experience,” has left few opportunities for continued domestic growth of the Starbucks brand. 

To provide growth opportunities for shareholders, Starbucks will roll out a second brand, Seattle’s Best Coffee, targeting the mass-market crowd. 

In addition to distribution in fast-food outlets, supermarkets and coffee houses, Seattle’s Best will be sold in c-stores, coffee carts, and vending machines, places Howard Schultz would never consider for the Starbucks brand.

If successful, the venture will put Starbucks on the offensive against its fast-food rivals while minimizing cannibalization of Starbucks-brand sales.

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Excerpted from WSJ, “Starbucks Targets Regular Joes,” by Kevin Helliker, May 12, 2010 

In a counterattack against its lower-priced fast-food rivals, Starbucks Corp. plans to roll out a second coffee brand.

By autumn, Seattle’s Best Coffee … will be sold in about 30,000 fast-food outlets, supermarkets and coffee houses. … Eventually … the brand will also be sold in convenience stores, drive-through kiosks, coffee carts, vending machines and mobile trucks. …

The new push by Starbucks is a response to the invasion of the specialty-coffee market by McDonald’s Corp., Dunkin’ Donuts and other fast-food chains, which offer espresso-based drinks at lower prices than Starbucks.

Starbucks has struggled to expand beyond a limited menu and a largely morning clientele.

… executives unveiled a new logo for Seattle’s Best, along with a new motto: “Great Coffee Everywhere.” The motto reflects the Starbucks theory that the success of McDonald’s and others in selling coffee has created a fresh opportunity to sell a mass-market brand.

Associating Starbucks with a product sold from vending machines could … damage the brand’s upscale image. And it could cannibalize Starbucks customers. …

But Seattle’s Best is intended to appeal to just this sort of Starbucks critic. For those who find Starbucks coffee too strong-tasting, Seattle’s Best is promoting the “smoothness” of its blend …. For those turned off by the prices and ambiance at Starbucks stores, Seattle’s Best is touted as “unpretentious.” …  

Pricing will vary widely. … Seattle’s Best beans will cost consumers less than Starbucks-brand beans but more than conventional brands …

Seattle’s Best helped pioneer the specialty coffee-house concept when it opened its first store in Seattle 40 years ago. … When Starbucks acquired it in 2003, Seattle’s Best had about 50 stores and a sizable supermarket presence, particularly in flavored beans, a lucrative category that Starbucks never entered.

Perhaps the most radical feature of the Starbucks strategy calls for selling Seattle’s Best from vending machines. Vending-machine coffee has long been regarded as a last resort, … But Seattle’s Best engineers have developed a coffee-making machine that Starbucks predicts will improve that image. …

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Diageo’s martini recipe: not just dirty, down & dirty … blame it on the economy.

March 31, 2010

Takeaway: During the era of excess, brand cache was largely derived from sky-high prices as carefree consumers enjoyed opportunities to showcase and indulge in their abundances. However, like most businesses, spirit makers now face a ‘new normal.’

Diageo has found that its customers demand the same style at substantially lower prices and has concluded that many of its premium products have fallen out of fashion.

In response to this challenge, the company will launch a new ‘cheap chic’ brand of vodka as a direct attack on competitors such as Constellation Brands, which offers more moderately-priced labels.

Marketers stayed tuned: Is cheap chic here to stay? Or is it a short-term strategy aimed to ease dormant consumers back into the market in hopes that they will trade up to torpid top-shelf titans?
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Excerpt from Wall Street Journal, “New Label, Made in Sweden, Will Go Up Against Constellation’s ‘Cheap Chic’ Svedka Brand” by David Kesmodel, March 24, 2010.
Diageo plans to unveil a Swedish vodka in the U.S. this summer in a direct assault on Constellation’s Svedka, a fast-growing “cheap chic” brand that has stolen market share from Diageo’s Smirnoff and other vodkas.

The strategy suggests Diageo may not feel confident that the industry will be able to boost prices much in the next 12 to 18 months or begin seeing consumers move back toward upscale brands.

Diageo’s new Rökk, its first Swedish-made vodka in the U.S., is part of a flurry of new liquor products that the London drinks giant is rolling out in the U.S.

The new products, many of which are midpriced brands, show how Diageo is trying to appeal to drinkers that are reaching for relatively inexpensive—yet distinctive— brands in the sluggish economy. Many of the moves reflect how times have changed in an industry long focused on introducing upscale brands that tend to carry higher profit margins.

Vodka is the biggest category in the U.S. spirits industry. Sales of vodka are growing at the second-fastest rate after the much-smaller Irish whiskey segment.

The industry has engaged in heavy discounting to woo consumers, cutting into revenue for Diageo.

Svedka, a Swedish import, posted a 34% increase in volume last year, reaching 2.8 million cases, according to Beverage Information Group.

Rökk will sell for roughly $13 for a 750-milliliter bottle, a similar price to Svedka. Rökk also will compete against such Swedish imports as Absolut, which sells for about $20 and is the No. 2 vodka in the U.S. after Diageo’s Smirnoff.

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Hey, where’s my favorite deodorant ?

February 18, 2010

Bottom line: As retailers adjust to tight-fisted shoppers, many stores are shrinking the number of name-brand products on their shelves.

Don’t be shocked if you can’t find your favorite salad dressing or mouthwash on your next trip to Wal-Mart.

* * * * *, Dumped! Brand names fight to stay in stores, Feb. 16, 2010 

Large retailers — including Wal-Mart, the world’s biggest — are wrestling with having too many types of brand-name products.

At the same time, shoppers are buying less and looking for bargains.

So unless a particular brand is a top seller in its category, it’s getting knocked off the shelf — and sometimes getting replaced by a cheaper store brand.

For example, Wal-Mart recently removed Glad and Hefty-branded storage bags from shelves, replacing them with its own lower-priced Great Value brand.

Those categories at greatest risk of losing brands are everyday-type purchases such as household products, toiletries and food staples.

These are also categories in which retailers have aggressively pushed their own house brands.

Moves such as this are significant given Wal-Mart’s heavyweight status in the retail industry.

“Any change that Wal-Mart makes with its product assortment has enormous implications for the entire industry.”

Wal-Mart is not the only one doing this,  leading drug store chains, including CVS and Walgreens, grocers such as Kroger, and Wal-Mart’s rival discounter, Target, are also looking to simplify their store shelves.

In good economic times, product variety is a must for retailers. But in down times, when shoppers aren’t buying much, variety can be a burden.

“I think the feeling is that as these companies keep extending their [product] lines, it’s only causing confusion for shoppers and not really driving them to buy more products.”

“If you walk into a Wal-Mart or another large retail chain, there are so many products on shelves that it does make it harder to shop.”

Besides cutting clutter, industry experts say Wal-Mart and other retailers are looking for more lucrative deals from suppliers on both prices and advertising.

“Perhaps one consideration in which product to cut is based on which company gives [Wal-Mart] the best deal.”

“In this recession, consumers have certainly become less discriminating with what they buy. Consumers have rushed to value prices, and they are buying generic brands.”

Retailers’ own brands have grown their market share by between 2% to 6% … and 77% of consumers who traded down to less expensive private label products are happy with their decision.

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While Pepsi pushes health, Wall Street is still on a sugar high

January 29, 2010

Key Takeaway: PepsiCo, a company whose only ties to health come through the athletes in its advertisements, is trying to make a push for a more balanced portfolio.

Throughout this period, the company has seen a sharp decline in sales for many of its hero brands. PepsiCo is still staying true to its healthy vision, as the R&D budget has increased by nearly 40% over a three year period.

As delicious as Pepsi Apple Slices may sound to some, Wall Street does not seem to be as favorable to the strategy as it holds PepsiCo’s stock price well below the soft drink giant, Coca-Cola 

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Excerpted from BusinessWeek, “Pepsi Brings In the Health Police” by Nanette Byrnes, January 14, 2010

Over the past two years, Pepsi has hired a dozen physicians and PhDs, many of whom built their reputations at the Mayo Clinic, WHO, and like-minded institutions. Some researched diabetes and heart disease, the sort of ailments that can result in part from eating too much of what Pepsi sells.

Last year, technological improvements to an all-natural zero-calorie sweetener derived from a plant called stevia allowed Pepsi to devise several fast-growing brands, including Trop50, a variation on its Tropicana orange juice that has half the calories of the breakfast standby. Introduced in March, Trop50 has become a $100 million brand.

Chief Executive Nooyi says she has no choice but to move in healthier directions. For more than 15 years, consumers have gradually defected from the carbonated soft drinks that once comprised 90% of Pepsi’s beverage business. Many switched to bottled water. Meanwhile, the cloud of criticism shadowing Pepsi’s largest business, oil- and salt-laden Frito Lay snacks, grew steadily.

Coming off a tough 2009, during which once high-flying brands such as Gatorade slipped, Pepsi hasn’t convinced Wall Street that Nooyi’s plans will pay off. The company trades at a significant discount to its rival, Coca-Cola . While securities analysts say that healthier foods look like a good long-term market, for now, the slowdown in the company’s far larger traditional snack-and-soda portfolio cannot be ignored. “The consumer can move to baked chips, or pretzels, or Sun Chips, but they’re not yet giving up their chips for an apple or carrot stick,” says Bill Pecoriello, CEO of Consumer Edge Research, an independent stock-research firm in Stamford, Conn.

Pepsi built its empire on the manufacture and distribution of instantly recognizable products. It could get a bag of Lay’s or a can of Mountain Dew to customers practically anywhere in the world. So far, healthier options have produced only modest hits, including TrueNorth nut snacks and SoBe Lifewater.

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Adidas plans to extend its product line from the ground up

January 19, 2010

Takeaway: Adidas, a company well-known for shoe production, is going to enter Europe’s growing outdoor apparel market.

Market attractiveness certainly exists in this category, as outdoor gear has been outperforming other sporting goods categories.

The bigger question, however, relates to Adidas’ competitiveness in this market.

With a huge player in North Face and niche competitors, such as Patagonia, does Adidas stand a chance?

Most likely this will come down to Adidas’ brand equity in the eye of the consumer. Does Adidas stand for all outdoor activity? Or is it stuck, like a double-knotted tie, to the shoe industry?

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Excerpted from BusinessWeek, “Adidas Leaps from Hot Sneakers to Warm Jackets” by Holger Elfes, December 9, 2009

Adidas has long been one of the world’s premier brands in fashion sport shoes. Now the German sporting-goods company plans to begin selling high-end mountaineering jackets next year, muscling in on North Face’s turf as outdoor gear grows faster than traditional sporting goods.

Sales of outdoor gear will rise about 0.7% in Europe this year, outperforming the declining sporting-goods market, according to industry body European Outdoor Group.

In Europe, Adidas increased its spending on marketing this year by running TV commercials with Alexander and Thomas Huber, brothers who are known for extreme Alpine climbing. The sporting-goods maker also started sponsoring Reinhold Messner, who made the first solo ascent of Mount Everest without bottled oxygen.

Adidas Chief Executive Herbert Hainer has said his company would build its outdoor-sports division using its own brand name and without resorting to acquisitions.

“Adidas is doing a seriously good job as the company tries to take advantage of the increasing interest for outdoor gear,” says Mark Held, secretary general of European Outdoor Group. He expects the industry’s growth to continue into next year. “Even in hard times, people continue buying outdoor gear to escape for a while from the seriousness of life.”

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What bad economy? DelMonte doing peachy …

January 12, 2010

Key Takeaway: Although the marketing department may continue to be the first to get hit with budget cuts during troubling economic times, Del Monte is showing this may not be the right strategy during a recession.

Through increased advertising, a strong focus on an innovative product pipeline, and leveraging the synergies between consumer and trade promotions, Del Monte has been able to build share and profitability in several markets.

Just goes to show that during times where all of your competition begins to cut marketing programs, ample opportunity is left behind for those who continue to maintain a connection with both consumers and distributors. Who needs a finance department anyway?

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Excerpted from Brandweek, “Marketing Helps Del Monte Thrive During the Recession” by Elaine Wong, November 14, 2009

When Del Monte Foods appointed Bill Pearce as its first CMO in May 2008, the goal was to deliver category-changing marketing that would drive the organization forward, the company said at the time. Going by top-line results, you could argue that he delivered. The company reported a first-quarter profit of $58.6 million, versus a year-ago loss of $10.1 million. On Pearce’s watch, the company has rolled forth eye-catching campaigns, such as the “nude fruit”-themed “Fruit Undressed” ads—via lead consumer goods agency, Smith Brothers Agency, Pittsburgh. The advertising is part of Pearce’s strategy to reinvigorate Del Monte by more “consumer-centric marketing,” the former Taco Bell marketing chief said. Pearce, a veteran of the Campbell Soup Co. and Procter & Gamble, spoke with Brandweek about Del Monte’s new marketing focus.

BW: Earlier this month, Del Monte Foods consolidated consumer promotions and shopper marketing duties for its consumer goods and pets business under two different agencies—Catapult Action-Biased Marketing and Draftfcb, Chicago, respectively. What brought about this decision?
It goes to what we’re trying to do. I talked about top-tier growth and top-tier share, [and this is part of our effort to achieve that]. It’s not just what you do on TV, but how you surround the consumer on the integrated marketing [front]. We wanted to [increase] our ability to communicate with the shopper in-store, and that really requires ramping up our shopper marketing capabilities. And frankly, the consumer trend—how people shop—has changed over the last couple of years. So it’s really also about making sure we have shopper/consumer promotion capabilities in line with the [current] shopper marketing [trends].

BW: Del Monte Foods dialed up ad spending by 11 percent in its latest quarter. Which brands are you focused on marketing in a recession?
On the consumer side, you’ve seen our Del Monte ads [for our canned fruits and vegetables business] on TV for the first time in 10 years, and we will continue to support [that campaign]. We believe that the brand is extremely relevant, and we’ve got a very creative way to reframe it in consumers’ minds. [Spots, also via Smith Brothers, show the value and nutrition of buying Del Monte’s canned foods over fresh or frozen brands.] On the pets side, we see continued upside in the pet snacks business, and we recently launched a new campaign for Milk-Bone [“It’s good to give,” via Draftfcb in Irvine, Calif.]. We will continue to support that as well as our work on Pup-Peroni [ads show dogs communicating with their owners with the help of signs], which has been on air [since January].

BW: Marketers have cut back on new product pipelines in a recession. Do you see much of Del Monte’s innovations coming from line extensions or category-changing new products? Do you have an example of this?
Fruit Chillers [Freeze & Eat Tubes is a good example]. You can think of them as line extensions, as we do have the Fruit Chillers [fruit cup snacks] product. But it was a totally reworked proposition with an entirely new target audience. So, a focus on kids, a new product form, a handheld, versus a cup, like one you’d eat sorbet or ice cream out of with a spoon. And we view that as more than a line extension. It’s been well received. It opened our brand to a whole new user base and to new occasions that fit in with today’s lifestyles and [busy] moms’ needs.

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Starbucks plays the value card … say, what ?

October 15, 2009

TakeAway:  For a company that has increased the price of its latte exponentially each time the price of milk rose by a penny, it is very intriguing to see Starbucks aggressively offering a coffee value play.  Will a high volume, low margin gain from an extension of its market footprint be able to turn this company around … we’ll see.

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Excerpted from WSJ, “Starbucks Takes New Road With Instant Coffee,” By Julie Jargon, September 30, 2009

Starbucks aims to convince Americans and Canadians that its new Via instant coffee is comparable to its brewed product

Via is part of a strategy to provide value for customers who can’t or don’t want to splurge on a regular coffee purchase. One packet of the instant variety produces a cup of coffee for less than $1. Via costs $2.95 for a three-pack and $9.95 for a 12-pack …

Portability will be an important selling point. As such, Via will be available in stores such as REI and Office Depot … Via will be available for purchase on domestic United Airlines flights longer than two hours …

Starbucks doesn’t plan to enter traditional grocery stores until sometime next year … In traditional supermarkets, Starbucks will go up against Nestlé, maker of Nescafe Taster’s Choice, which already is running ads attacking Via.

Starbucks is launching its own ad campaign on television — a rare move for a company that has traditionally stuck to print ads and social-networking sites for its marketing.  The initial commercials will promote a “taste challenge” that will take place at Starbucks stores … “We’re convinced a majority of people won’t be able to tell the difference” …

The idea for developing an instant coffee has been brewing at Starbucks for 20 years … The company, which has struggled amid the recession as customers have either forgone Starbucks visits or purchased less expensive coffee drinks, expects its entry into the $21 billion global instant-coffee market to be a huge opportunity to boost sales …

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Some U.S. chocoholics tell Cadbury to “kiss” off … here’s why.

October 12, 2009

TakeAway:  Gasp! Cadbury chocolate sold in the U.S. is not actually Cadbury chocolate…it’s a variation of Hershey’s chocolate!! 

In a highly competitive industry where brand equity and loyalty is so important, it seems a risky business decision to change the formula of your most prized asset – your chocolate. 

A key pillar of consumer loyalty is based in the consistency of the product experience, no matter the time or the place. 

Given the volume of consumer traffic between the U.K. and the U.S., did Cadbury’s think that consumers would not notice the difference in the taste of its famous chocolate? 

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Excerpted from WSJ, “What’s in a Name? Not Much for These Fans of Imported Cadbury,” By Joe Barrett and Timothy Martin, September 14, 2009

When Gayle Green has a craving for chocolate … she drives 45 minutes to … stock up on Cadbury chocolates imported from the U.K. …  Ms. Greene could buy American-made Cadbury bars at a grocery store just a few minutes from her house … she wants nothing to do with the stuff made in the U.S. … she says, “You might as well eat a Hershey bar.” …

Some U.S. fans of Cadbury are determined to snub the Americanized version of the chocolate, which is made under license by Hershey Co. … Like Coca-Cola lovers who swear the Mexican-made version of the soda tastes better, hardcore Cadbury fans spend plenty of time in hot chocolate pursuit. They scour the Internet, pester family and friends visiting Europe, and seek out specialty British and Irish stores to get their fix of imported caramel-filled Curly Wurlys … consumers say though the U.S. candy bar’s label looks virtually identical to the U.K. version, the U.K.-made bars are “silkier, smoother and they don’t leave an aftertaste.” …

A Cadbury spokesman said, “Consumer tastes and preferences differ in each market, and accordingly the products sold in different markets vary.” … Hershey has occasionally sent legal notices to stop U.S. shops from selling British-made Cadbury products. Still, the imports can be readily found in many cities. …

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Finally, a Rolls-Royce for the masses … well, kinda.

October 9, 2009

TakeAway:  Owning a Rolls-Royce is an undisputed symbol of wealth…and many would argue that the brand’s exclusivity is consumers’ primary motivation for purchasing and re-purchasing its cars.  Rolls Royce has decided to test the loyalty of its existing consumer base by offering a lower-priced version of its car and thus making the car attainable by a larger portion of society. Will this strategy backfire and alienate its existing loyal consumer base?

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Excerpted from WSJ, “Rolls-Royce Unveils its Economy Car” By  Vanessa Fuhrmans, September 17, 2009

… Rolls-Royce Motor Cars’ answer to the worst downturn in decades: Its new Ghost model, to be had for a mere $245,000 … Though the Ghost has the same hand-crafted interiors and famous grill, the sleeker and slightly shorter model costs about one-third less than the $380,000 starting price of the British car maker’s flagship Phantom.  As more people globally can afford a Rolls, though, the company faces a delicate balancing act: boosting sales while not diluting the brand’s exclusive cachet …

The Ghost’s launch comes at a critical time. Rolls-Royce sold a record 1,212 Phantoms last year. But as the economic downturn caught up with even the superrich, sales plunged 34% in the first half of this year, tarnishing what had been a bright spot for its German parent, BMW AG.  Meanwhile, Rolls faces growing competition for the lower rung of the upper crust from Bentley … Bentley sales have risen 10-fold … The success of Bentley’s Continental model (priced between $150,000 and $200,000) underscored the market to be had in the niche above Porsche and Mercedes-Benz but below Rolls-Royce …. 

The Ghost appears to be hitting the mark: Some 1,200 potential buyers have signaled “strong interest” or pledged to order one, about the same number of total Phantoms sold last year, the company said.  As the economy recovers, the car maker says it expects to sell at least 2,000 annually, boosting its total production nearly threefold.  The company has gone to great lengths to preserve the model’s Rolls-Royce quintessence, yet at a downsized price … Rolls-Royce … said 85% of the people who have expressed interest in the Ghost have never owned a Rolls, uncommon among Phantom owners. 

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When Every Hour is Happy Hour … Restaurants Make More Room at the Bar

April 16, 2009

Excerpted from WSJ, “Bar Wars” By Katy McLaughlin, Apr 3, 2009

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When chef Eric Greenspan opened the Foundry, a $1.3 million restaurant in Los Angeles, two years ago, he created a menu of high-end cuisine, showcasing the culinary skills he had honed at some of the world’s top restaurants. Three months ago, Mr. Greenspan turned the restaurant into a lounge with nightly live bands, cocktail waitresses and promotions such as “fried-chicken-and-waffles night.” The dining room has been banished to a back patio.

Around the country, proprietors are turning their restaurants — or significant parts of them — into glorified bars. They’re ripping out dining-room tables to make more bar space, applying for late-night and cabaret licenses and adding the word “bar” to their names. Top chefs are serving up bar snacks like grilled cheese sandwiches and hot dogs.

The reason: While consumer spending at restaurants is falling precipitously, drink orders, particularly for cheaper drinks like beer, are barely dropping off. For restaurants, it’s now proving more cost-effective to serve lower-priced dishes that diners can munch on as they buy drinks …  

The morphing of some of the nation’s top dining rooms into bars and lounges with food demonstrates how dramatically and quickly consumer behavior has changed since the economy plummeted this fall … this year fine dining sales will plunge at least 12%, after falling 4% last year. Meanwhile, analysts are predicting a less painful contraction in alcohol sales …“Historically, consumption of alcohol tends to outperform compared to other parts of the economy in a recession” …

Selling alcohol, and cocktails in particular, is typically a better business than selling restaurant food because the margins are higher. While ingredient costs may account for as much as 35% of the price of an entrée in a high-end restaurant, they typically only account for about 14% of the price of a cocktail or 25% of the price of a glass of wine.

Bar snacks, which often include inexpensive items like pizzas, can also have better margins than fine-dining dishes with expensive proteins such as filet mignon or organic lamb. Since restaurants are already paying to run a kitchen, selling additional, easy-to-make food is simply an extra revenue stream.

Beyond thrift, there is a social component to noshing at bars. Restaurateurs say patrons seem especially eager to rub shoulders with one another at the bar, rather than isolate themselves at dining-room tables.

“People want to socialize and be out; they don’t want to be miserable at home,” says Chris Douglass, co-owner of three Boston-area restaurants … Informal dining is increasingly popular, and some of the restaurants launching bar menus and lounges will likely keep them even after the economy bounces back …

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CPGs chuck unprofitable products … huh, weren’t they already doing that?

February 27, 2009

Excerpted from The Chicago Sun-TImes, “Foodmakers cutting the fat” by Emily Fredrix, February 14, 2009

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Food companies from Sara Lee to Heinz are trimming their offerings to focus marketing dollars on their higher-margin, best-selling brands and retain consumers, who are trading down in the recession.

Those top brands are more likely to hold their own, and getting rid of lesser-performing brands helps companies showcase top products as retailers cut inventory. Heinz aims to remove two items for each one it introduces. Sara Lee hopes to cut its offerings 8 percent this fiscal year.

It’s all shaping up to mean fewer choices for consumers.

But will they mind?

Probably not, analysts say, noting that if these products had a big following, companies would keep them around.

The nation’s grocery shelves could stand some trimming. They’re straining with about 50 percent more products than 10 years ago, including new formulas, flavors and sizes of existing lines, he said.

The trend of cutting SKUs — or stock-keeping units, the unique identity each product carries — has caught on the past three or four years. It accelerated last year as companies homed in on their most profitable brands.

Excess sizes, types and flavors of products increase the cost of everything from marketing and production to sales. And, during the recession, it’s particularly important to conserve cash. 

Most profit for many companies is concentrated in a small number of brands anyway. It’s not uncommon, he said, for 20 percent of a company’s products to account for 80 percent of its profitability.

The lines Kraft is cutting are not “major businesses,” CEO Irene Rosenfeld said recently.

Indeed, when products are removed, sales volume drops. Kraft said this month that sales unit volume fell 5.2 percent for the three months ending in December as consumers reacted to price increases and retailers cut inventory. Within that, eliminating product lines hurt volume by 1.5 percent.

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