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What are Your Friends Worth? … New Research Puts a Price Tag on Your Network

April 24, 2009

Excerpted from BusinessWeek, “Putting a Price on Social Connections”, by Stephen Baker, April 8, 2009

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Workers who have strong communication ties with their managers tend to bring in more money than those who steer clear of the boss, according to a new analysis of social networks in the workplace by IBM and Massachusetts Institute of Technology.

The research even assigns a dollar value to e-mail interaction with an employee’s managers. Among the group studied, several thousand consultants at IBM, those with strong links to a manager produced an average of $588 of revenue per month over the norm.

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The results represent an early attempt to understand the value of the broadening variety of personal connections afforded by the Web. Users of social media rack up LinkedIn contacts, Facebook friends, and Twitter followers by the hundreds, if not thousands. But figuring out how big a difference all those contacts make in a person’s life, financial or otherwise, is a far murkier matter.

That’s why leading tech companies are hiring economists, anthropologists, and other social scientists to map and classify new types of friendships—and put a value on them.

For example, researchers found that the average e-mail contact was worth $948 in revenue. Using mathematical formulas to analyze the e-mail traffic, address books, and buddy lists of 2,600 IBM consultants over the course of a year, they compared the communication patterns with performance, as measured by billable hours.

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In another study, an IBM team analyzes company methods to introduce employees to colleagues they haven’t yet met. The idea is to create new connections within the global workforce and to encourage employees to share knowledge.

One key is to alert people to potential friends and allies at the company. Much the way companies like Netflix and Amazon study past Web-surfing patterns to recommend books and movies, Geyer and his team are digging for signs of shared interests and behaviors among their colleagues.

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Research into the networked behavior of employees promises insights about teamwork, innovation, and the transmission of knowledge and ideas within a given company.

The research is at an early stage. But as the economy struggles, more companies are sure to study the company we keep—and even attempt to calculate how much each friendship is worth.

Edit by DAF

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Full article:
http://www.businessweek.com/technology/content/apr2009/tc2009047_031301.htm?chan=top+news_top+news+index+-+temp_dialogue+with+readers

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Posted in Internet - Soc Networking, Mktg - Brands | Leave a Comment »

Marketers Step Up Promotions … What Does it Cost the Brand?

April 24, 2009

Excerpted from AdAge, “Deal or No Deal? Cheap Prices Can Maim Your Brand” By Jack Neff, April 06, 2009

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Google searches for the term “coupons” last month for the first time surpassed those for “Britney Spears.”

That simple fact drives home what a lot of package-goods marketers already know: What consumers want now is promotion.

But as the industry increasingly gives in to that wish … the question becomes how much marketers can discount without doing permanent damage to their brands …

For sure, the recession  is creating a huge consumer appetite for deals … Package-goods companies seem to be complying. After relative restraint on trade spending in 2008, marketers appear to have stepped on the gas in February. The percentage of volume sold on promotion was up 5.6 percentage points to 38.4%  …

Much as consumers and retailers may want deals, conventional wisdom is they pose a threat to brand health. Numerous studies have shown price promotion erodes brand equity by permanently making consumers more price-sensitive.

Mmarketers will resist cutting prices permanently as long as possible in favor of stepped-up promotion, because temporary deals erode margins less than permanent price cuts.

Promotion can play a positive role for brands in a recession … Promotion that wins a place on retailers’ circulars becomes more important when more consumers are planning purchases at home, as they are now … Realistically, that usually comes at the expense of a temporary price reduction.

Circulars are used about 45% of the time to create shopping lists … “If I’m a marketer, I want to make sure I’m in context of where the list is being made, because right now about 11% of the shopping list is by brand name, and when it is, there’s an 85% chance [the shopper] is going to buy it.”

Edit by SAC

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Full Article:
http://adage.com/article?article_id=135800

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Posted in Mktg - Brands, Mktg - Pricing, Mktg - Promotion | Leave a Comment »

Diageo Pushes Pricey Pods For Chilled Beer Displays

April 23, 2009

Excerpted from WSJ, “Diageo Serves Up New Campaign Aimed at Shoppers” By Aaron O. Patrick, Apr 7, 2009

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With people going out less often amid the recession and drinking more at home, Diageo is adding a twist to its marketing.

The company, whose brands include Johnnie Walker scotch and Guinness beer, is developing in-store displays to encourage shoppers to buy more of its products in supermarkets and liquor stores. Central to its approach is a plan to roll out big refrigeration units so stores can sell their beer chilled.

The idea is to create a partially enclosed, refrigerated beer zone within a supermarket aisle, using a design Diageo calls “the pod.” The refrigeration units, which will cost retailers roughly €10,000 ($13,000) each, are intended to hold all kinds of beer, not just Diageo’s brands, in an attempt to boost beer sales overall.

No retailer has yet bought the pod … But Diageo says it is working with Spar, a European food chain, to install a smaller version this spring.

The effort is part of a strategy by Chief Executive Paul Walsh to make Diageo, the world’s biggest alcoholic-beverage company by revenue, better at working with supermarket chains, an increasingly important outlets for alcohol sales …

Diageo is installing computer screens in liquor stores to help people plan parties. Customers type in the cocktails they want to serve and the number of guests they are expecting, and the computer prints out a list of ingredients and quantities, including ice. The machines, which the company says are in 500 liquor stores in 38 U.S. states, can also send cocktail recipes via email …

Analysts say Diageo’s retail push seems to be working. Sales of its Smirnoff vodka grew 2.2% in the U.S. in January, twice the rate of the spirits market as a whole … while sales of most big spirits brands fell … In Europe, Diageo’s Irish unit has emerged as a leader in the supermarket strategy. In the past few years it has given away 600 display stands that hold spirits, mixers and condiments …

Spirits account for most of London-based Diageo’s profit, but beer is especially important to it in Ireland, where it brews Guinness as well as such brands as Budweiser and Carlsberg. Diageo Ireland learned that 78% of those who buy beer in Ireland drink it within three hours, says Henry Dummer, the company’s head of customer marketing in Ireland. Many Irish supermarkets don’t sell chilled beer, missing out on sales, he says.

Now, Spar has agreed to install Diageo-designed beer refrigerators in all 50 of its Irish Eurospar stores over the next two years, says Declan Ralph, Spar Ireland’s retail-development director … Diageo is in talks with other retailers about the pod.

Edit by SAC

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Full Article:
http://online.wsj.com/article/SB123906172693095137.html

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Posted in Food & Drink, Mktg - Distribution | Leave a Comment »

A car company that knows how to create value …. hint: not based in Detroit

April 22, 2009

Ken’s Take: In marketing, there’s a concept know as “product augmentation” —  adding features and services to a “core product” in order to deliver more differentiating benefits to target customers.  Hyundai seems to have hit the target with its assurance program.

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Excerpted from Brandchannel, “Marketing Strategies that Build Value” by Barry Silverstein, April 6, 2009

Value building is not a new concept. In good times and bad, smart brand marketers have always recognized the need to build value and differentiate—to make their brands a little better than competitors by adding a new feature, creating a special promotion or forging a unique alliance with another brand.

What’s different today is the targeted relevance of value building. Faced with a protracted global economic recession, established brands are searching for ways to add maximum value without cheapening their image or undermining profits. Some brands are out-smarting and out-performing their competitors because of value-building strategies.

One breakthrough example of value building is occurring in, of all places, the automotive industry. While most car manufacturers and dealers are slashing prices and offering deep discounts, one car maker is leveraging the impact of the economy on consumers by offering something simple yet powerful and timely: peace of mind.

In early 2009, the Korean auto company Hyundai introduced a program called Hyundai Assurance in the US market. It made a bold promise: “Finance or lease any new Hyundai, and if in the next year you lose your income, we’ll let you return it.” Hyundai recently enhanced the offer, renamed Hyundai Assurance Plus: “If you lose your income, we’ll make your payments for 3 months while you get back on your feet, and if that’s not enough time to work things out, you can return the car with no impact on your credit.”

Hyundai built additional value into Hyundai Assurance by broadly defining the ways in which loss of income might occur. Hyundai included the following “life-changing events” in its promise: involuntary unemployment, physical disability, loss of driver’s license due to medical impairment, international employment transfer, self-employed personal bankruptcy and accidental death. Obviously the company thought carefully about the current economic environment and consumers’ potential misfortunes.

Ironically, when Hyundai cars first entered the marketplace, they were not well regarded; in fact, Hyundai was perceived as a lower-quality brand in its early days. But following in the footsteps of the Japanese automakers, Hyundai kept making its cars better and better. Ten years ago, Hyundai stunned the industry by introducing the best automobile warranty in the US—a “safety net” that gave customers the confidence they needed to purchase a vehicle from Hyundai. Hyundai Assurance is essentially a thoughtful extension of that original value-building strategy.

In January 2009, after the introduction of Hyundai Assurance, Hyundai’s sales were up more than 14 percent over January 2008. “Hyundai had the largest sales increase of any automaker, and it was one of only three with any increase at all,” reported CNNMoney.com. 

In March 2009, Hyundai started offering low-rate loans on three car brands, in addition to cash-back incentives. Dave Zuchowski, vice president of sales for Hyundai Motor America, told Automotive News, “We’re looking for [Hyundai] Assurance to drive traffic and then the new rebates to help close the deals” (“Hyundai Piles On Incentives,” March 9, 2009).

Another way brands can practice value building is to promote exclusivity and offer consumers something of unique value for a limited time. The recent introduction of the 70th Anniversary Platinum Edition of the Disney movie Pinocchio typifies the category.

The Pinocchio release is just the latest in a series of Disney Platinum Editions—part of a larger value-building strategy by Disney to release original movies from the “Disney vault” for limited time periods, thus increasing their perceived value. 

Disney is already one of the world’s most recognized brands, so why do they need to issue Platinum Editions? Because Platinum Editions reinforce the image of the brand. Once the limited-release time period is over, the Platinum Edition movies are no longer available through traditional retail channels—they become “out of print” collector’s editions—and the Disney brand maintains its aura of exclusivity.

A third path to value building is more conventional but just as effective: using add-ons that enhance the value of a brand and reinforce the brand purchase decision. Apple’s iPhone stands out in this area. While it was a legitimate breakthrough brand in its own right, the iPhone was high priced and, by some standards, a risky and unproven technology. Apple rapidly overcame those early objections by opening up the iPhone to developers. The result was an iPhone “App Store” with thousands of applications for the iPhone, some of them free. In March 2008, more than 100,000 developers had downloaded the iPhone Software Development Kit in a period of just four days. By the end of 2008, Apple had recorded over 100 million application downloads.

Still, Apple succeeded in demonstrating that it was once again a pioneering technology brand, and that the iPhone was an added-value platform—one that could provide a mind-numbing quantity of applications unlike any other communications device on the market. 

These brand marketers know that value building is an important means of keeping their brands fit—and creating strong bonds with customers who are seeking the best value…especially in these economic times.

Edit by NRV
Full article: http://www.brandchannel.com/start1.asp?fa_id=472

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Coke Makes An Innocent Investment

April 22, 2009

Excerpted from WSJ, “Coke Teams Up with Socially Focused Smoothie” By Aaron Patrick and Valerie Bauerlein, Apr 8, 2009

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Coca-Cola’s investment in British smoothie maker Innocent not only connects the beverage giant to a fast-growing product but also to a company known for good social and environmental behavior.

Coke said this week it will take a minority stake in London-based Innocent, which has quickly become one of Britain’s top brands by marketing its healthy ingredients and social commitment. By giving 10% of its profits to charity and using recycled bottles, Innocent was one of the first consumer brands launched in Britain to develop a big following through ethical marketing.

The investment … speaks to Coke’s continued interest in expanding beyond soft drinks and in owning small stakes in innovative companies … Founded 10 years ago, [Innocent] now has 82% of the U.K. smoothie market …

Innocent cuts a quirky public figure. Some of its trucks are covered in fake grass and daisies. Those trucks are mounted on hydraulics that make them appear to dance, with drop-down windows for giving away samples … The deal’s structure should allow Innocent to keep its funky attitude rather than risk being assimilated into a vast corporate culture whose focus remains carbonated soft drinks. Coca-Cola won’t have any management control over Innocent, but Innocent will share its expertise with the Atlanta-based beverage company …

The Coca-Cola money will be used to expand Innocent’s operations in Europe, where only 25% of European supermarkets sell smoothies … The money will be used to pay for distribution, stocking fees, sales staff and advertising …

While Innocent has run TV- and newspaper-ad campaigns, it has also specialized in less-traditional advertising. One of its ad agencies, Albion, created a board game for schools promoting the health benefits of fruit and vegetables. Some 200,000 people turned up to a Innocent musical concert in London named Fruitstock in 2006 …

Innocent’s charitable giving is also interactive. Volunteers knitted more than 506,000 little hats for smoothie bottles last year, which were then sold, raising £250,000 in proceeds to provide meals, blankets and other help for older people during the winter.

To be sure, Coke has been sporting its good deeds, expanding its recycling plants, reducing water consumption and using environmentally friendly coolants in vending machines and coolers … But the 123-year-old company has been known to kill ads that were deemed too edgy and is vastly bigger and more buttoned-up than a closely held newcomer such as Innocent.

Coke appears to be embracing the model of taking a stake rather than buying outright, after previously struggling to integrate niche nonsoda companies … Coke has had more success with its 2001 purchase of Odwalla Inc., a maker of premium refrigerated fruit and vegetable juices whose product line is closest to Innocent’s line.

Innocent’s success helped drive all smoothie sales in the U.K. From 2003 to 2007, smoothie sales in the U.K. rose more than fivefold to £241 million …

Edit by SAC

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Full Article:
http://online.wsj.com/article/SB123913675734598167.html

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Tropicana’s Tale of Rebranding Gone Wrong

April 21, 2009

Excerpted from Ad Age, “Tropicana Line’s Sales Plunge 20% Post-Rebranding” By Natalie Zmuda, April 02, 2009

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Tropicana’s rebranding debacle did more than create a customer-relations fiasco. It hit the brand in the wallet.

After its package redesign, sales of the Tropicana Pure Premium line plummeted 20% between Jan. 1 and Feb. 22, costing the brand tens of millions of dollars. On Feb. 23, the company announced it would bow to consumer demand and scrap the new packaging … It had been on the market less than two months …

Moreover, several of Tropicana’s competitors appear to have benefited from the misstep, notably Minute Maid, Florida’s Natural and Tree Ripe. Varieties within each of those brands posted double-digit unit sales increases during the period …  As the leader in the category, it makes little sense that Tropicana Pure Premium would see such a drastic sales decline while the category remained relatively flat, industry experts said …

A spokeswoman for Tropicana in an e-mail said, “No dots to connect here.” The company did not respond to further requests for comment.

“It surprises me that their performance is so different from the rest of the category,” said Gary Hemphill … at Beverage Marketing Corp. “It’s a little tough to draw conclusions over such a short period of time. But I would say that’s unusual.”

Mr. Hemphill said typically when a beverage brand undergoes a rebranding it signals increased marketing expenditures and leads to improved performance, at least in the short term. “It gets people to look at the brand again and brings some kind of news and excitement around the brand,” he added.

Tropicana had certainly sought to create excitement around the Pure Premium rebrand, announcing Jan. 8 a “historic integrated-marketing and advertising campaign … designed to reinforce the brand and product attributes, rejuvenate the category and help consumers rediscover the health benefits they get from drinking America’s iconic orange-juice brand.”

Beverage experts were hard pressed to think of another major brand that had pulled the plug on such a sweeping redesign as swiftly as Tropicana. “It’s a black eye when you have to backtrack that quickly … There must be [another example] but nothing comes to mind. [Tropicana] is a big brand, and it was a big restage. This is something that I’m sure they were not happy about.”

While it’s impossible to say whether Tropicana has permanently lost share, as a result of the blunder, competitors are likely taking note. “We think the Minute Maid brand has opportunity for growth, and we’re working hard to make that happen,” said Ray Crockett, a Coca-Cola spokesman.

Edit by SAC

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Full Article:
http://adage.com/article?article_id=135735

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Fixed Fee Flexibility – Firms Change Pricing Strategies

April 20, 2009

Excerpted from WSJ, “Firms Try Alternative to Hourly Fees” By Simona Covel, Apr 2, 2009

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For decades, marketing firms, accountants and other professional-service companies have all billed nearly the same way — by the hour, or, on occasion, with long-term contracts. But the recession is chipping away at that tradition, with companies forced to adopt performance-based pay and fixed prices in an effort to retain and attract clients.

The billing changes affect a broad swath of businesses, including marketing, advertising, accounting and recruiting. Even a few law firms have recently begun to talk about moving away from the billable hour, a hallmark of the legal-fee structure.

In recent months, advertising and communications company Button Worldwide began offering its clients an alternative to its regular billing after a few clients requested that the company cut monthly retainers for continuing work … Instead of a retainer, Button clients could use a pay-for-performance model where the company earns money only if it secures publicity for a client …

As the economy wavered this past summer, clients of Geary Interactive Inc. began balking at the $100 to $135 hourly rates charged by the digital marketing agency. To please clients and attract new ones, the agency started reducing its fees on a case-by-case basis — with a twist. 

The reduced fees are now approximately $80 per hour, but Geary added a contractual bonus to be paid at the end of a certain time period if its marketing campaigns met or exceeded a client’s goals … The move also has meant a shift for a staff often accustomed to thinking about longer-term goals such as brand development. “There’s a higher sense of urgency,” Mr. Roell says …  

Edit by SAC
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Full Article:
http://online.wsj.com/article/SB123862458936679977.html

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Hollywood’s Newest Concern? A Big Red Vending-Machine

April 17, 2009

Excerpted from LA Times, “Redbox’s $1 vending-machine video rentals worry movie studios” By Dawn C. Chmielewski, March 30, 2009

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The hottest thing in movie rentals is as old as the Coke machine — and just as red. Redbox movie kiosks are popping up by the thousands in supermarkets, drugstores, restaurants and convenience stores around the country. The kiosks stock DVDs that rent for $1 a day, a remainder-bin price that is less than a cup of coffee at Starbucks.

For all the talk about the Internet, Wi-Fi and cellphones becoming the new gateways to watch movies and wiping out the corner Blockbuster, a ubiquitous vending machine the size of a refrigerator is becoming a growing concern to Hollywood.

Consumers are pulling DVDs out of the Redbox kiosks in record numbers, undermining longtime economics that have propped up the movie business — and in the process triggered a backlash from a major studio that sought to cut off Redbox’s supply of hot new DVDs …

Redbox operates nearly 12,900 kiosks throughout the U.S. — four times as many locations as Blockbuster — and plans to introduce 7,100 more by the end of the year … Consumers rent a DVD from the machine using their credit or debit cards, which enables Redbox to charge an additional day’s rental if the DVD is not returned within a 24-hour period. A typical kiosk can earn significant coin: about $50,000 annually in revenue per machine in operation after three years.

Blockbuster … started rolling out its own DVD-vending kiosks last summer … “We have been watching very carefully as they have progressed … We think it is very consistent with what Blockbuster does, which is to provide convenient access” to home entertainment.

The discount DVD rental business worries Hollywood movie studios because of fears that it is undercutting DVD sales, which dropped 13% in the fourth quarter … DVD sales historically have been how the studios earn a profit on movies, because ticket sales are barely enough to offset production and marketing costs. Some studios believe that consumers will forgo buying DVDs if they have a cheap option to rent movies …

The kiosks caught on, especially in supermarkets, where they catch customers’ eyes as they push their grocery carts through the checkout counters.

The combination of errands to fill the cupboard and rent movies, as well as the consistent flow of customers, turned out to be advantageous … “It’s a regularity of traffic, and the biggest single place people are going after the supermarket is to their homes,” Redbox’s Kaplan said. “Consumers tend not to rent DVDs when they’re not going home” …

Video industry analyst Adams estimates that the kiosk rental market, which totaled $519 million last year, will reach $1.4 billion in five years — or about one-fourth of Blockbuster’s 2008 revenue.

“You could view that as directly competitive” with Blockbuster, Adams said. “It’s a cheaper option, and during a recession people embrace it.”

Edit by SAC

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Full Article:
http://www.latimes.com/business/la-fi-cotown-redbox30-2009mar30,0,3496501.story?track=rss

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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 …

Edit by SAC

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Full Article:
http://online.wsj.com/article/SB123871155276784313.html#

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The power of FREEconomics

April 16, 2009

Excerpted from Knowledge@Wharton, “How About Free? The Price Point That Is Turning Industries on Their Heads”, March 4, 2009

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There’s an old joke about a businessman who gives away his products. A customer asks: “How do you make money doing that?” He answers: “I make it up on volume.”

It’s nonsensical, yes. But a funny thing has happened: Giving away the product has become a legitimate business model on the Internet and even beyond. And it’s been getting increased attention. Author Chris Anderson will publish a new book in July titled, Free: The Past and Future of a Radical Price. Anderson, the editor of Wired and a former Economist reporter, also wrote the 2006 book, The Long Tail, in which he observed how companies such as Amazon.com and Netflix were thriving by offering gigantic catalogs of products that each sell in small quantities. Today, those companies are among the few thriving through a recession.

Anderson isn’t alone in exploring what has been dubbed “freeconomics.” Venture capitalist Fred Wilson of Union Square Ventures popularized the term “freemium” to describe an emergent business model — popular among online service and software companies — of acquiring users en masse with a free offering but charging for an enhanced version in hopes of subsidizing the free usage.

But what is really new here? After all, “free” has been around “probably since the beginning of business,” says Z. John Zhang, a Wharton marketing professor who has authored books on pricing strategy. “You go to a supermarket and they give you free samples and then you buy a whole box. Some bars let women go in for free and they charge the men. ‘Free’ is one of the most powerful words in marketing. It truly motivates people. If you see ‘free,’ even if you don’t want it, you’re going to get it. Marketers will take every opportunity to use that word.”

Bending the Demand Curve

Indeed, the appeal of “free” has been shown to be so extraordinary that it bends the demand curve. “The demand you get at a price of zero is many times higher than the demand you get at a very low price,” says Kartik Hosanagar, a Wharton professor of operations and information management who studies pricing and technology. “Suddenly demand shoots up in a nonlinear fashion.” Josh Kopelman, a venture investor and entrepreneur who founded Half.com, has written about what he dubbed “the penny gap.” Even charging one cent for something dramatically lessens the demand [generated at] zero cents.

It’s no surprise that many companies have worked “free” into their offers in a number of different ways. “Cosmetics are never on sale. They say, ‘Buy this at regular price and get a free gift.’ That protects the normal price,” says Wharton marketing professor Stephen J. Hoch. Adobe gives away its Adobe Reader software for displaying documents that use the company’s PDF electronic document format, but charges corporations for the Adobe Acrobat software needed to create the documents. “If you charge for both, the software will never take off,” states Hosanagar.

Of course, products and services offered for free aren’t really free; they’re just paid for in another way. Cross-subsidies have been a selling strategy for ages, the classic example being Gillette’s move a century ago to sell razors cheaply to create demand for expensive blades, long before printer makers adopted a similar strategy with printers and their supplies.

Then there are two-sided markets, which derive revenue from two sets of customers. In those, “whichever side is more price inelastic [less sensitive to price changes], that’s the side you want to charge more [for],” says Zhang. In the case of “Ladies’ Nights,” he says, establishments may increase overall revenue by letting women in for free to attract more males — who are price inelastic in that their desire to be there will not be greatly affected by entrance price.

Newspapers traditionally have charged readers as well as the advertisers who want to reach those readers. For years, however, some types of publications have been given away to readers for free, with publishing costs supported by advertisers. But the profusion of free content online has made reader demand extremely elastic — suddenly sensitive to any price above zero — and many publishers are fumbling with revised models, including cross-selling. The Wall Street Journal, for example, now sells wine to readers at wsjwine.com, Zhang notes.

What’s new, of course, is the Internet, which makes the marginal cost of delivering one more product close to zero. As Anderson explains in a February Wall Street Journal article, “Digital goods — from music to Wikipedia — can be produced and distributed at virtually no marginal cost … making price a race to the bottom.” Add in easier sourcing online of cheap products and materials, and the Internet means cost is evaporating from the system and opportunities for free offers have exploded.

Beyond minimizing distribution costs, the Internet has fostered other distinct trends that have pushed prices and consumer expectations toward zero. Two-way markets become more sophisticated online — Google is able to offer web searches for free by matching advertisers to what people appear to be seeking: Search for cars, get some car ads. “Some of these transactions could not be done before, because transaction costs for matching an advertiser with a consumer were too high,” says Hosanagar. This has inspired online firms, such as Google, Yahoo and Facebook, to take advantage of the nonlinear allure of “free” to build giant audiences in hopes of future revenues, even in cases where revenues from ads or other sources are not covering the cost of the free service.

Other factors also have been at play. On the web there’s little financial barrier to set up a store, an information site or blog, and compete with established players who may have high fixed costs and brick-and-mortar investments. This easy entry into markets has played a role in creating what BusinessWeek called the “free-labor economy.” People are putting together elaborate and sometimes useful sites at no cost other than time. Simultaneously, digital technology has enabled easy copying of copyrighted materials — music, movies, photos and news articles — that are or were products of traditional industries. The result of all this has been a change in consumer expectations. A “culture of free” has emerged — there are a lot of things for which people simply don’t expect to pay.

Consumers’ sense of entitlement to free content online “has had catastrophic effects — meaning both large and quick — that I don’t think anyone would have predicted,” says Hoch. “It’s had a yet unknown catastrophic effect on the news. It’s had a catastrophic effect on music. Clearly the concept that you can make it up in volume is bogus, because you can’t. Music CD sales have gone from $13 billion in the U.S. to about $7 billion since 2001 while legal digital downloads generated about $1.5 billion in sales.” 

“Right now, newspapers are doing things that level the playing field, bringing themselves down to the level of lower-quality competition. They should move to the high-end and exploit their advantages and distinctions.” Isaacson advocates for a system that makes it easy for readers to pay small “micropayments” online for the articles they view. But that’s easier said than done. The sort of online micropayments Isaacson and others advocate have a poor track record, in large part because the psychology of the “penny gap” is hard to overcome. It’s especially difficult because people have come to expect a vast selection of no-cost news online. “The last thing you want to do is get people addicted to free. If you’re going to go free, you ought to expect that it is going to be the price forever,” says Hoch. “If you’re going to be a low price seller,” he adds, “you sure as hell better have low costs.”

More Software Apps, Fewer People

The effects of the free culture online have had a hard impact on offline businesses. Many jobs once done by people are turning into software applications, Anderson says. “Your cranky tax accountant has morphed into free TurboTax online, your stockbroker is now a trading web site and your travel agent is more likely a glorified search engine.”

Companies have experimented and struggled with a wide spectrum of pricing strategies. Some see hope in the “freemium” model, giving away a basic version of a product, but charging for premium features. Yahoo lets tens of thousands of fantasy football players participate in its online leagues for free every season, then lures them into paying for real-time game statistics or player scouting reports. Every tax season, companies — including H&R Block and Intuit — offer free basic online tax filing, but charge for more complicated returns. Newspaper web sites have grappled with the question of what content to give away and what to lock up in areas that readers must pay to see.

Some businesses have been especially creative. In 2007, the rock band Radiohead offered its album In Rainbows as a download for a “pay what you want” price. Research firm ComScore estimated 38% of people downloading the album paid an average of $6. A later release of the album as a physical CD sold more copies than the band’s prior two CDs.

“A business needs to adapt its revenue models to new technology,” says Zhang. Not everyone can compete against free, but there are still creative ways — more ways now than ever — to employ the strategy. 

“The problem is in thinking the business model of your industry is ordained forever,” says Werbach. “Business isn’t static, and it’s less static today than it’s ever been. The great challenge the Internet poses is that it makes it possible to very quickly shift the allocation of money in certain industries. It’s not easy to go through that kind of transformation, but that’s life. Successful companies are the ones that appreciate that.”

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Full article:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2169

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Extreme Entrepreneurship: Products for Bottom of Pyramid

April 15, 2009

Excerpted from Fortune, “Products for the other 3 billion” By Michael V. Copeland, April 1, 2009

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Jim Patell … operates out of Stanford’s design school, where he teaches a class called Entrepreneurial Design for Extreme Affordability … the class mission: to teach a new generation of entrepreneurs to use their business and engineering smarts to design and sell products – profitably – for the developing world.

Some of the students – a mix of would-be MBAs, engineers, and designers – truly are do-gooders, but a fair number think building good, cheap products is a skill any corporation would value.

“We can fill a gap, with an approach that goes beyond a fast profit motive.”

For the smart, ambitious students in his classes  …professional success and saving the planet aren’t mutually exclusive.

Two such budding entrepreneurs … make cheap, solar-powered lights to replace the kerosene and diesel lamps so common in the developing countries of Asia and Africa.

 

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Often the approach involves combining cutting-edge technology with widely available products that are moving down the cost curve.

One application … make cheap, solar-powered lights to replace the kerosene and diesel lamps so common in the developing countries of Asia and Africa.

D.light, for example, marries next-generation light-emitting diodes (LEDs), proprietary power-management tools, and increasingly cheap solar panels. As a result, D.light is able to offer poor communities an affordable alternative to kerosene, which is ubiquitous but hazardous … The D.light lamps sell for about $25, steep for someone earning $1 per day, but … the quality of light was so good that people with the D.light lamps were able to do more work at night and increase their income.

* * * * *

Empowering would-be customers is one of the mantras of Patell’s class … Patell doesn’t expect every student to start a company, but he does demand that every product in the class offer poor consumers tools for their own microenterprises.

* * * * *

Capitalists in Silicon Valley are starting to take notice of the projects coming out of the Stanford course. In November, D.light secured $6 million in funding from … venture capital firms, to ramp up production and get its lamps into markets, initially in India and Africa … the financiers think D.light can model itself after another successful enterprise in the developing world: the cellphone industry.

Device manufacturers … are selling millions of handsets in rural parts of India, China, and Africa, places that in many cases don’t have centralized electricity. But even some of the poorest of the poor will pony up several months’ salary for the benefits of connectivity …

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http://money.cnn.com/2009/04/01/technology/copeland_developing.fortune/index.htm

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Outlook is Optimistic for Marketers’ Job Security

April 15, 2009

Excerpted from Brandweek, “Marketers Expect to Keep Jobs, Budgets” By Kenneth Hein, March 14, 2009

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While many reports suggest the sky is falling for marketers, a large number of top-level executives feel that their jobs and much of their staff’s jobs are safe. What’s more, the majority do not anticipate cutting their marketing budgets.

The CMO Council interviewed 659 global senior marketers online between mid-January and March 2. Overall, it found that marketers are not planning major restructuring, head-count reductions or wholesale agency terminations this year.

More than half do not feel their jobs are at risk and 20.6% simply are not sure. More than a third plan to keep their teams intact and 26% expect to add staff.

“There was not as much panic about job security that we thought there would be,” said Liz Miller, vp, programs and operations at the CMO Council. “The big story for the marketing community is it is not about budget slashing; it’s about budget reallocation. Marketers are looking to better support the sales team, drive business growth and engage the individual customer” …

“It’s not about window dressing this year … Marketers need to stop looking at how to refresh our brand, change our logo or what we mean to consumers. This year they don’t have the millions to do that. It’s how do you do it faster, better and more efficiently with less cash to waste on things that don’t work. You need to better support your sales team because they need leads, that’s the bottom line” …

Marketers top marching orders from their bosses are: Growing and retaining market share (48%), lowering costs and improving efficiencies (44%) and improving customer insight and retention (33%).

The top factors affecting marketers are customer anxiety and cutbacks (49%) and slower, more complex selling cycles (38%). The top frustrations were: Insufficient budget (43%), the organizational culture (37%) and senior management mindset (33%).

Overall, “We’re coming out of a long phase where the wind was in our favor … When they are in your favor you don’t need to be particularly smart to be somewhat successful. In these conditions, you need to be a lot smarter than before.”

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Value to consumers…it’s more than price

April 14, 2009

Excerpted from Brandchannel, “Get Back to Basics. Win Back the Trust” by Ted Mininni, March 30, 2009

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We’ve seen a number of instances where high-profile brands have violated the trust of consumers lately, eroding confidence and resulting in disastrous consequences. Even if a brand hasn’t violated consumer confidence, if it isn’t actively building trust, it’s likely losing customers. Let’s face it: without trust, there is no consumer loyalty—and, ultimately, there is no business.

Consumers are hungry for values they can put their trust in. Not hype. True value doesn’t just equate to price, mind you. While important to consumers who are tightening their belts, price isn’t the only component of value. These are the values consumers care about: fair pricing, innovation, authenticity, honesty, transparency, customer service and connectivity.

After years of overconsumption, people are learning some hard lessons about debt and economic reversal. Smart marketers understand that if customers are going to part with their hard-earned money now, they’re going to have to be given a reason to believe—a reason to trust in their brands.

Fair Pricing.
With McDonald’s launch of its McCafé ads, the company capitalized on the current consumer mood. Their business proposition: offering quality lattes and cappuccinos without high prices in order to appeal to a large swath of consumers.

Lest anyone think Starbucks can afford to stay above the fray, guess again. A recent Wall Street Journal article dubbed “Starbucks Plays Common Joe” notes a move to “counter the widespread perception that Starbucks is the home of the $4 cup of coffee.” According to the article, “To retrench, (Starbucks) executives began plotting a new strategy to portray the company as offering value.” To prove they’re not too pricey, Starbucks recently launched value-priced breakfasts at US$ 3.95 each.

The move shows how premium brands are trying to reposition themselves for a prolonged economic downturn. “I strongly believe we are going to be in this environment for years,” Howard Schultz, chief executive at Starbucks, said in an interview. “It is a reset of both economic and social behavior.”

Innovation and Service.
Down economy or not, consumers will pony up some of their hard-earned cash for specific brands that “own” innovation. Nintendo, for example, has accomplished what no other game company has: the brand has created acceptance among all age groups and both sexes in a phenomenal way with Wii and its other properties. By finding innovative ways to engage people of all ages, Nintendo defined a new genre of home entertainment at exactly the right time; people are looking for ways to be entertained at home rather than spending a lot of money going out.

In spite of intense competition in the mobile phone category, Nokia continues to take on all comers, owning a staggering global market share—38 percent of the entire category— despite intense competition. By constantly launching new-generation mobile devices, Nokia continues to raise the bar for mobile phones. Other notable brands that continue to win by focusing on quality, innovation, good design and value: IKEA, Samsung, L’Oréal, Volkswagen, Apple, Nike.

When confronted by tough challenges, Hewlett-Packard responded by putting its customers front and center in its product design development. This allowed the company to make service and innovation the focus of its brand revitalization efforts. Its interactive approach, resulting in the kinds of products consumers want, has reinvigorated the brand. And how about total reincarnations? IBM’s transformation from hardware purveyor to customized “business solutions provider” is a great B2B success story.

Trader Joe’s and Wegmans supermarkets excel in customer service, offer quality products and real value, and never shy away from innovation. Both companies have a loyal cadre of shoppers as a result. Let’s hear it for innovation with service…values that customers long for and rarely receive.

Authenticity, Transparency, Honesty.
Take a look at the recent downfall of notable companies, and you’ll find some venerable brands that left these virtues behind. They ran into problems and chose not to be upfront and transparent about it. Rather than stave off bad opinion, their actions had the opposite effect. Unfortunately, it’s easy to find examples everywhere these days, especially in the financial sector. How about AIG? Merrill Lynch? Citibank? When the truth did emerge, badly calculated choices by company management actually made the situation worse.

For the companies that manage to survive, customer perception is greatly diminished since their trust has been abused. Proof once again that when problems crop up, companies need to own up, speak up and take steps to rectify them, or they risk breaking trust with the customer.

On the flip side, over 25 years ago, Stonyfield Farm yogurt took a stand. Working with local farmers, the company pledged itself to support organic milk farming and implement environmentally responsible policies in every aspect of its business. The trust the company has built with its customers is legendary. Stonyfield Farm doesn’t talk about environmentalism in an era of greenwashing; the company walks the walk. Stonyfield Farm went “carbon neutral” in the mid-1990s, produces 100 percent organic products and gives 10 percent of its profits to organizations that “help protect and restore the environment.” It also collects used product packaging so that TerraCycle can “upcycle” it—that is, turn it into new consumer products.

Connectivity.
When Dell launched its Idea Storm social media site recently, the company’s intention was to solicit ideas from consumers and, in the process, foster closer relationships with its customers. “These conversations are going to occur whether you like it or not…do you want to be part of that or not? My argument is you absolutely do. You can learn from that. You can improve your reaction time. And you can be a better company by listening and being involved in that conversation,” Michael Dell said in a BusinessWeek discussion with Jeff Jarvis. Exactly.

Reaching out to customers and allowing them to express themselves in direct conversation with the company might yield some surprising results. Product innovations, valuable dialogue and being able to deal with problems quickly and effectively are no less important. Too many consumers feel as though their ideas and concerns go unheeded; the companies that engage their customers will win.

Positioning brands in alignment with the basic core values that resonate with consumers to build trust is job #1. Smart marketers must prove their brands’ worth and value to increasingly disenfranchised consumers. Win back the trust—and reap the rewards.

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Full article:
http://www.brandchannel.com/brand_speak.asp?bs_id=215

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Great Moments in Marketing: Stores Lure Men With Booze

April 14, 2009

Excerpted from WSJ “Belly Up to the Bar and Buy Some Jeans” By Ray A. Smith, Apr 2, 2009

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On a recent afternoon, customers at Lost Boys in Washington, D.C., sipped cold beers and watched “Casino Royale” on a giant flat-screen TV.

Lost Boys isn’t a bar. It’s a men’s clothing boutique catering to young professionals. The store’s staff offers shoppers free beer in hopes they’ll enjoy hanging out in the store and shopping a little longer, increasing the odds they’ll buy more.

By offering in-store drinks, a growing number of retailers are trying to get men to shop more like women, who often linger and browse, buy items on impulse, and return time and again to a favorite store. The recession is driving stores to search for anything that gives them even a small edge over rivals. And generally slower traffic gives sales staff more time to offer drinks and talk with shoppers …

When Rick Matthews walked into Lost Boys recently, a sales clerk offered him water or beer. His beer “certainly made me more relaxed,” says Mr. Matthews … He says he doesn’t like shopping … The beer “kept me in the store longer, at least long enough to finish my drink,” he says. Mr. Matthews ended up special-ordering a pair of $200 Earnest Sewn jeans, something he says he would have done without a drink.

Offering alcohol puts men at ease, says Lost Boys owner Kelly Muccio. “I wanted it to be like you’re going to your best guy friend’s house, a guy friend who has great style” …

“Men are more purpose-driven as opposed to window shoppers, so the addition of lounges and/or bars provides a club setting that can give sales associates a natural entrée to engage with this guy,” says Tom Julian, president of brand consultancy Tom Julian Group. “The biggest downside is the investment in these services for a retailer. This can eat up square footage and revenue stream. And once something like a bar or pool table is in, it needs to be maintained.”

While store managers say they don’t measure the sales that serving drinks generates, they think it helps. “It’s that type of innovation in these trying times that sets [retailers] apart and creates buzz” … For stores, the cost of purchasing alcohol is minimal, especially compared to other brand-building efforts like advertising.

Store managers say they are careful when they break the liquor out: usually later in the day. Sometimes, if it’s near the end of the day, store employees will have a drink with customers, the retailers say … Men “love to sit down on the couch, have a drink, try a couple of things on and hang out with some of the staff,” says Matthew Simon, a co-owner of Kesner. “They have that kind of experience and they’ll want to come back.”

His co-owner, Philip Silverman, says that being able to fix customers drinks at the downstairs bar “fit with the whole aesthetic of trying to create a loungey, comfortable atmosphere” and helps differentiate the store …

Stores say they have rarely had a problem with customers drinking too much or spills. “No one’s coming in and doing tequila shots,” says designer Billy Reid. “We’re a clothing store not a saloon.”

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What Brand Would Your Recommend? Apple Tops the List (well, almost)

April 13, 2009

Excerpted from Brandweek, “Apple Has Highest Net Promoter Score” By Todd Wasserman, March 30, 2009

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Apple is not only the brand that marketers love the best, but it’s the one that consumers recommend the most, according to new research from Satmetrix, originator of the Net Promoter score.

Apple posted a NetPromoter score of 77%, which means that 83% of respondents would recommend the brand to a friend versus 6% who would not. (The score is calculated by subtracting the latter from the former and is based on a scale of one to 10.) The only “brand” to beat Apple was the USAA, a financial services firm for members of the military.

Satmetrix’s report … narrowed its focus on a few categories, including telecom, financial services and online. Categories like consumer packaged goods were not tested, though … company is considering looking at other such segments in the future.

The overall winners:

1. USAA
2. Apple
3. Amazon.com
4. Costco.com
5. Google
6. Facebook
7. Wikipedia
8. eBay
9.  Craigslist
10. Barnes & Noble (bn.com)

Satmetrix stressed that Costco and Barnes & Noble’s sites were judged separately from their retail operations …

Satmetrix introduced Net Promoter in 2006 after Bain fellow Fred Reichheld developed the metric with the company.  The company and Reichheld believe the score has the highest correlation to buying behavior.

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Nothing Fishy About It … McD’s New Ad is a Hit

April 9, 2009

Excerpted from AdAge, “Behind McD’s Weird Filet-O-Fish Ad” By Eleftheria Parpis, March 11, 2009

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Chris Edwards, evp and group creative director at Arnold, tells a good fish story about scouting locations last year for a garage in which to film a McDonald’s Filet-O-Fish commercial.

The agency team knew going in that the spot would center around a novelty singing fish mounted on a wall. When they found just such a fish proudly displayed at one of the houses they were considering, they knew they’d found the perfect location.

“They had one of the singing fish hanging on their wall … I knew we had picked the right place.”

Today, the McDonald’s spot in question — in which the catch of days’ past sings a techno-driven “Gimme back that Filet-O-Fish!” ditty to a nearby guy chowing on said sandwich — is a legitimate viral sensation. It has garnered more than 300,000 YouTube hits in little more than two weeks.

The team … also seems to have picked the right tune, a catchy, if absurd, song that has led to DJs remixing the track and fans using it as a ring tone.

“It’s definitely the casting and the music,” said Edwards of the buzz the ad has received, including consumer-generated spots posted on YouTube featuring people singing the song while ordering …

The concept for the spot, explains Edwards, came out of the challenge of producing a commercial that could be used in both English and in Spanish. “It was tricky because you can’t rely on dialogue,” he says, and a singing fish would allow for any idiosyncrasies that can occur in dubbing …

Mark Carlson, senior creative director at McDonald’s, said the company traditionally advertises its Filet-O-Fish during the season of Lent with offbeat humor. Of the spot, he said: “We decided it was harmless and that it fits into the personality of the product. We took a risk.”

Carlson said it’s too soon to say whether that risk will pay off, but noted the company usually sees at least a 24% rise in sales of the sandwich during the yearly push …  “There seems to be a lot of viral interest beyond the traditional spot … Because it’s a little different, it stops you in your tracks. It is one of those songs that really sticks in your head — for better or worse.”

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http://www.brandweek.com/bw/content_display/news-and-features/retail-restaurants/e3i71419f4d58d0cd4c43fe847f012e10b3?imw=Y

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Hate Overdraft Fees? You’re Not Alone …

April 9, 2009

Excerpted from WSJ, “Consumers Vent on Overdraft Fees” By Kelly Evans, Mar 26, 2009

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In recent years, overdraft fees made billions of dollars for banks, but only worsened the hangover for a debt-addicted nation. Now, amid an overhaul of financial institutions and their services, consumers are seizing their moment to cry foul.

The Federal Reserve ends a public comment period this month to determine whether banks’ current handling of overdraft fees needs to be changed. In the process, its Web site has become a sounding board for Americans’ frustration with all things banking, from billion-dollar bailouts to the average $27 fine for overdrawing on an account …

Overdraft fees usually work like this: A customer makes a purchase … but doesn’t realize his account doesn’t have enough for the transaction. Rather than decline his card or alert him, the bank allows the transaction to proceed, so [the consumer] isn’t aware that his account is negative — or that he has incurred a $35 overdraft fee — until he checks his balance online …

Most banks and credit unions automatically sign customers up for what they call overdraft “protection,” that allows — rather than blocks — purchases and ATM withdrawals that overdraw their bank accounts. For this service, the institutions charge customers fees ranging from $10 to $38 per overdraft …

Some 86% of banks the FDIC surveyed had overdraft programs in place in 2006, and three-quarters automatically enrolled customers in such programs. The survey also found overdraft fees were most common among young adults, ages 18 to 25, and low-income accounts. A separate analysis … shows banks and credit unions earned $36.7 billion in consumer overdraft revenue last year, about three-quarters of their total service charge income …

People … say this isn’t fair. They want the option either to opt out of the service altogether or to be told when they’re about to make a purchase that will overdraw their accounts and incur a fee … others also object that when several purchases happen simultaneously, banks process the largest ones first, so that each subsequent smaller charge incurs a fee.

The Fed is considering a number of different approaches, ranging from no change in current practices to requiring banks to give notification on every purchase that would result in an overdraft, but many institutions say the latter isn’t realistic … others say the only real option is to allow customers to opt entirely in or entirely out of overdraft service. Those who opt out would see their cards declined on those purchases exceeding the amount available in their checking accounts …

[However] it isn’t clear how much ramped-up regulation would benefit consumers, especially if it prompts banks to cover the cost of new regulation and make up for the lost fee income by restricting debit-card usage or imposing fees elsewhere, such as on free checking accounts … “Somewhere or another these costs have to be covered,” said William Cooper, chief executive of TCF Bank … it could mean the end of free checking … “Then everyone will end up paying for it.”

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Will Sex Sell Sandwiches? Quiznos’ Edgy Campaign Sparks a Price War

April 7, 2009

Excerpted from Ad Age, “Quiznos Throws Subway Curve With ‘Sexy’ $4 Foot-Long” By Emily Bryson York, March 23, 2009

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Seeking to return to its identity as an edgy upstart, Quiznos is undercutting rival Subway’s $5 foot-long with a $4 version called the Toasty Torpedo, pitched as a product with “12 inches of flavor” by a smoky-voiced toaster that asks a chef to “Say it sexy” and “Put it in me.”

It’s the latest attention-grabbing bid by the nation’s second-largest sandwich chain, which has struggled in recent years because of problems with franchisee profitability and the perception that the food is expensive … “The reality is that we are a challenger brand,” CMO Rebecca Steinfort said … “Our main competition is Subway, which is an 800-pound gorilla. We may be 200 pounds, but they’re 800.”

Quiznos built a following with toasted, high-quality subs and envelope-pushing marketing … While the recession hit Quiznos hard, rival Subway has gone gangbusters with its $5-foot-long promotion, which helped to fuel double-digit increases in same-store sales. At Quiznos, marketing failed to drive traffic and closed stores …

Creative aside, the $4 price point might just be a magic bullet for Quiznos, undercutting its rival in a recessionary market where every dollar counts for consumers. “I think the right price point is very important in the sandwich business,” said Dennis Lombardi, exec VP-food service strategies … Subway’s foot-long “changed the paradigm. So the trick now is: How do you create a product that counters that? And a $4 sandwich sounds like a good start.”

Earlier this year, Quiznos revamped its menu to reduce prices and come closer to the critical $5 mark … This month, Quiznos offered a “Million Sub Giveaway” … While the promotion was an overwhelming success in terms of data collection, a few problems ensued. Quiznos had 1 million e-mails within three days, but some consumers didn’t get their coupons, and others couldn’t print them. A few flustered franchisees turned coupon holders away.

Mr. Lombardi said Quiznos will have to be careful of the promotions it uses to survive the recession, but “it’s much easier to go from premium product to bargain product than it is to go from bargain product to premium product” …

Ms. Steinfort said the chain’s recent marketing efforts have already begun to pay off. Quiznos’ consumer research shows that most customers come into Quiznos and notice the prices are lower, and 70% say they plan to come back. She described the results as being “significantly better,” or showing “hockey-stick-type improvement” over last year, when the chain’s prices were on the rise.

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http://adage.com/article?article_id=135435

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Outlook is Optimistic for Marketers’ Job Security

April 7, 2009

Excerpted from Brandweek, “Marketers Expect to Keep Jobs, Budgets” By Kenneth Hein, March 14, 2009

* * * * *

While many reports suggest the sky is falling for marketers, a large number of top-level executives feel that their jobs and much of their staff’s jobs are safe. What’s more, the majority do not anticipate cutting their marketing budgets.

The CMO Council interviewed 659 global senior marketers online between mid-January and March 2. Overall, it found that marketers are not planning major restructuring, head-count reductions or wholesale agency terminations this year.

More than half do not feel their jobs are at risk and 20.6% simply are not sure. More than a third plan to keep their teams intact and 26% expect to add staff.

“There was not as much panic about job security that we thought there would be,” said Liz Miller, vp, programs and operations at the CMO Council. “The big story for the marketing community is it is not about budget slashing; it’s about budget reallocation. Marketers are looking to better support the sales team, drive business growth and engage the individual customer” …

“It’s not about window dressing this year … Marketers need to stop looking at how to refresh our brand, change our logo or what we mean to consumers. This year they don’t have the millions to do that. It’s how do you do it faster, better and more efficiently with less cash to waste on things that don’t work. You need to better support your sales team because they need leads, that’s the bottom line” …

Marketers top marching orders from their bosses are: Growing and retaining market share (48%), lowering costs and improving efficiencies (44%) and improving customer insight and retention (33%).

The top factors affecting marketers are customer anxiety and cutbacks (49%) and slower, more complex selling cycles (38%). The top frustrations were: Insufficient budget (43%), the organizational culture (37%) and senior management mindset (33%).

Overall, “We’re coming out of a long phase where the wind was in our favor … When they are in your favor you don’t need to be particularly smart to be somewhat successful. In these conditions, you need to be a lot smarter than before.”

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/direct/e3idd9d6803dbe30862f19d9fb07e5dfbca

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Coke’s Challenger Brand Hopes to Power over Gatorade

April 6, 2009

Excerpted from Ad Age, “Gator Baiter: Powerade Jabs at Powerhouse,” By Natalie Zmuda, Mar 23, 2009

* * * * *

The billboard shows the vertical half of what appears to be a Gatorade bottle on one side, with the other side open to the bare blue sky. But what might at first be taken for a mistake is explained by the text: “Don’t settle for an incomplete sports drink.” A few feet down the road perches another billboard, this one showing a fully intact bottle of Powerade. It’s tagged: “The complete sports drink.”

It’s a classic challenger strategy, except it comes from one of the world’s biggest marketers, Coca-Cola Co. The company might be a giant when it comes to soda, but in sports drinks, Coke’s Powerade runs in the shadow of PepsiCo’s Gatorade. So in true competitive fashion, the smaller rival is undertaking a bold and innovative print and outdoor effort that positions the category leader as only half the brand Powerade is.

Powerade’s plan is to blitz the market with messaging that Gatorade is an inferior method of hydration, and says it has the science to back it up. Since early last year, Powerade has been in the lab reformulating its trademark sports drink to include four electrolytes — sodium, potassium, calcium and magnesium — lost during exercise. Gatorade’s formula contains just two electrolytes, sodium and potassium …

To get its message across, Powerade … developed a clever comparative campaign that pits the brand against PepsiCo’s Gatorade. “They’re the lion in the category, and we wanted to compare what our drink does for you vs. the competition,” Mr. Kahn said. “People associate [Gatorade] with the category. When you’re another brand competing, you want to make sure to give people a point of difference.”

Powerade also … will take over the cover of ESPN The Magazine, marking the first time the publication has mingled editorial properties with advertising on its cover. It will feature a blank flap obscuring half of the cover image but retaining the magazine title. The front of the flap states, “You wouldn’t want an incomplete cover.” And the back of the flap shows half a Gatorade bottle with the text, “Don’t settle for an incomplete sports drink.” Powerade is then held up as the “complete sports drink” on the inside of the front cover …

According to Beverage Digest, Powerade controls 22% of the sports-drink market, while Gatorade has a 77% share … For its part, Gatorade is shrugging off the attack, maintaining that all Powerade has done is create a spinoff of its Gatorade Endurance Formula, developed in 2004 …

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Full Article:
http://adage.com/article?article_id=135436

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Automakers Promote A New Breed of Pony Cars … on the cheap, of course.

April 6, 2009

Excerpted from Ad Age, “How to Get Consumers to Pony up for Pony Cars? With Little Advertising” By Jean Halliday, March 26, 2009

* * * * *

Question: How do you launch a big ad campaign for sexy sports car in the teeth of a recession? Answer: You don’t.

The pony car is back, as each of Detroit’s three carmakers revs up an entry in the segment for the first time in decades. General Motors is bringing back the Chevrolet Camaro, which it discontinued in 2002; Chrysler revived the Dodge Challenger last fall after a nearly 35-year absence … and Ford, which started the pony-car craze in 1964 with the Mustang, launches the newest version of the coupe in April.

Although the redone versions of the classic cars are getting good reviews from auto-buff books and car enthusiasts … the timing is awful as the industry tries to pull out of its worst sales year in decades. As a result, there won’t be high-profile national TV blitzes for the cars from Chevy or Dodge, which will rely more on nontraditional media.

Chevrolet, which started shipping the 2010-model Camaro to dealerships this week, activated a new microsite for the car … Much of the Camaro’s launch will be online … In addition, Chevrolet will back the new Camaro in co-branded ads for the movie “Transformer: Revenge of the Fallen” …

Ford teamed with the nonprofit Mustang Club of America for a long weekend of events in Birmingham, Ala., to celebrate the 45th anniversary of the pony car … Ford Racing also linked up with Miller Motorsports Park to develop a new racing series with Mustangs that will kick off there, complimented by a street party, a driving cruise for Mustang owners and a banquet …

Mike Accavitti, director-Dodge marketing, said the … there are no dedicated ads for the [Challenger]. He said the automaker plans to keep the car fresh by introducing special, limited-edition colors or racing-stripe packages … He figures the Challenger will get a boost from consumers also shopping for the Camaro. He doesn’t expect Chevrolet to bite into Challenger sales, at least for the first two months it’s on sale, because loyal Camaro fans will be the early buyers. “We’ll see a battleground after that … After 35 years, the three pony cars are back” …

U.S. sales across the entire mid-size sporty coupe segment last year only tallied 150,000 units … That compares to some 575,000 units sold in 1995, or 3.9% of all vehicles sold that year. J.D. Power projects the tally for the coupe category next year will total just more than 200,000 units, or 1.7% of all new vehicles sold.

“There’s been a shift in consumers’ taste, so the larger, sporty, two-door vehicles have fallen out of favor … But these two models are more practical than their predecessors.”

Practical maybe, but not inexpensive. The 2010 Camaro starts at $22,995 and the 2010 Mustang at $20,995, but the latter’s performance GT500 convertible version starts at $51,225. The Challenger starts at $22,545 but the souped-up R/T Classic version that went on sale early this year starts at $34,005.

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http://adage.com/article?article_id=135580

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The key to fighting private label…innovation

April 2, 2009

Excerpted from Reuters, “Foodmakers tout innovation to battle imitation” by Nicole Maestri, March 19, 2009

* * * * *

If imitation is the best form of flattery, foodmakers are finding themselves dealing with an inordinate number of compliments these days.

As the recession crimps household budgets, retailers like Wal-Mart  and Target are increasingly looking to woo shoppers with their own private label, or store brand, food items that often look very similar to name brand products but are sold at lower prices.

Foodmakers are defending their turf … they say that they are the ones who develop innovative new products and spend marketing dollars to draw shoppers into retailers’ stores.

They acknowledge that retailers are giving them a run for their money, introducing better products at a faster pace and squeezing out tertiary brands in the process… Seeking to woo frugal shoppers, retailers are giving more shelf space to their own brands and stepping up promotions… The question now looms as to whether retailers will make the leap from simply imitating name brand foods to innovating on their own.

“The entire retail trade has become energized very quickly to bring out products that compete with branded package food,” 

Wal-Mart is relaunching its Great Value private brand, adding more than 80 new products, like double-stuffed sandwich cookies and organic cage-free eggs.

Consumers really take notice of private label products when the price gap between a name brand item and a store brand one reaches more than 30 percent.

Cexclusively on price is potentially a good short-term tactic, but long-term you really want to build your brand and what it stands for in consumers’ minds.”

“If you introduce a new product, no one really knows what the price of that product should be,” he said. That allows foodmakers to set an initial price and build in a hefty margin before imitators come into the space, he said. It can also help sell higher-priced items amid a recession.

Unilever’s Bertolli frozen dinners, which are marketed as “restaurant quality.” While they may be more expensive than other frozen dinners, they are priced “at about a 40 percent value to take-out food or restaurant food.”

Shoppers feel like they are getting a deal when they buy Bertolli because they spent less than they would have in a restaurant, even though the meals are more expensive than other items in the frozen food aisle.

With retailers increasingly eyeing private label, it has become crucial for foodmakers to make sure they have the No. 1 or No. 2 brand in their categories. Brands that cannot distinguish themselves face losing shelf space.

“I wouldn’t want to be a number three, four or five brand that wasn’t differentiated.”

While the recession may create chaos as retailers and foodmakers compete for thrifty shoppers, it remains to be seen if private label can keep its allure once the tough times recede.

“As we get out of this recession, will consumers then look back to their favorite brand or not?”

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Full article: http://www.reuters.com/article/ousiv/idUSTRE52I5P420090319?sp=true

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KFC filling potholes … with chicken ?

April 2, 2009

Excerpted from Brandweek, “KFC Offers to Fill Up the Nation’s … Potholes” By Kenneth Hein, March 25, 2009

* * * * *

Kentucky Fried Chicken today announced its own urban renewal program. The chicken chain has offered to fill up the potholes in five major U.S. cities to promote its “fresh” brand positioning.

Giving back has become a trend for marketers, including Starbucks, Kellogg’s Frosted Flakes and others that have centered their message around helping the community.

KFC sent a letter to U.S. mayors today asking them to nominate their cities’ roads to be refreshed. Every pothole filled by the fast feeder will be covered in nonpermanent street chalk with the words “Re-freshed by KFC.”

Jason Vargas of the experiential marketing agency Marketing Werks applauded the effort: “That’s street marketing at its finest. It’s a cool way of breaking through the clutter and building buzz.”

The guerilla/community service effort touts the fact that the chain uses only fresh chicken shipped in weekly. The chain’s head marketer Javier Benito, said in a statement, that this is “a perfect example of that rare and optimal occurrence when a company can creatively market itself and help local governments and everyday Americans across the country.” The chain estimates there are roughly 350 million potholes in the U.S. …

Not everyone is enthused about the publicity stunt. “There is an aggressiveness towards moving into new dimensions of public spaces. This would be another example of this unfortunate incursion of advertising messaging into [consumers’ lives],” said Robert Weissman, director of Commercial Alert. “KFC should fix their menu first.”

KFC’s 2008 U.S. sales were off about 1% at an estimated 5.1 billion … It spent $291 million on U.S. media last year, excluding online, per Nielsen Monitor-Plus.

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http://www.brandweek.com/bw/content_display/news-and-features/retail-restaurants/e3ic48b7a3a3eb3111d1e753e41e824f324?imw=Y

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Money’s important … time is dear.

April 1, 2009

Excerpted from Stanford GSB News, “Focus on Time Sells More Products” by Cassie Mogilner and Jennifer Aaker, March 2009

* * * * *

“It’s Miller Time.” “Live Richly.” What do these vastly different marketing campaigns—one selling beer, the other financial services—have in common? They both focus on experiencing, rather than possessing, products… both are vastly more effective campaigns as a result.

“Because a person’s experience with a product tends to foster feelings of personal connection with it, referring to time typically leads to more favorable attitudes—and to more purchases,” says Jennifer Aaker, the General Atlantic Professor of Marketing at Stanford Graduate School of Business.

Very little research has been done on whether the focus on time actually changes consumers’ purchasing decisions or overall satisfaction with what they buy. Mogilner and Aaker hypothesized that marketers themselves weren’t aware of the value of stressing time. “What our work contributes is that they can trigger very different attitudes and behaviors just by mentioning time rather than money.” she says.

One explanation is that our relationship with time is much more personal than our relationship with money. “Ultimately, time is a more scarce resource—once it’s gone, it’s gone—and therefore more meaningful to us,” says Mogilner. “How we spend our time says so much more about who we are than does how we spend our money.”

Previous research had demonstrated that mentioning money makes people more self-sufficient, physically withdrawn, and less likely to help others. “On the other hand, when you refer to time, there’s a big social component that integrates the products you use with the people in your life, which makes the product experience more meaningful and richer,” says Mogilner.

In their first experiment the authors set up a lemonade stand—operated by two six-year olds, to make it appear authentic—for which they used three different signs. The first sign read “Spend a little time and enjoy C&D’s lemonade”; the second one, “Spend a little money, and enjoy C&D’s lemonade”; and the third, neutral one said simply, “Enjoy C&D’s lemonade.” Only one of the signs was displayed at a time. Customers were told they could pay between $1 and $3 for a cup of lemonade; the exact amount was up to them. After they made their purchase, they were surveyed to determine their attitude toward the lemonade.

The results were instructive: The sign stressing time attracted twice as many passersby—who were willing to pay almost twice as much—than when the money sign was displayed.

In a second experiment college students who owned iPods were either asked: “How much time have you spent on your iPod?” or “How much money have you spent on your iPod?” Students asked about time reported more favorable attitudes toward their iPods than those asked about money. “We were very surprised at how strong the differences were,” says Aaker.

But Mogilner and Aaker were interested in investigating even more complex ramifications of the time-money relationship. One theory is that references to money will always be negative because consumers are reminded of the cost of acquiring a product rather than the pleasure of consuming it. To explore this possibility, Aaker and Mogilner surveyed attendees at an outdoor music concert in San Francisco. Although the concert itself was free, people had to wait in line for long periods of time to get decent seats. Aaker and Mogilner asked random individuals: “How much time will you have spent to see the concert today?” or “How much money will you have spent to see the concert today?” Even in cases where the real cost of the product was time rather than money, asking specifically about time increased participants’ favorable attitudes toward the concert.

Even more strikingly, people who stood in line longer—who actually incurred a higher cost in terms of time spent—rated their satisfaction with the concert higher. “Even though waiting is presumably a bad thing, it somehow made people concentrate on the overall experience,” says Aaker.

The exception to all this: When marketing products that consumers buy for prestige value, stressing money spent seems to be more effective. Designer jeans, expensive jewelry, and high-status cars all fall into this category. “With such ‘prestige’ purchases, consumers feel that possessing the products reflect important aspects of themselves, and get more satisfaction from merely owning the product rather than spending time with it,” says Mogilner.  

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Full article: http://www.gsb.stanford.edu/news/research/aaker_time.html?tr=research

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"Don't touch my jug" … Tropicana cans new packaging

April 1, 2009

Excerpted from brandchannel.com, “Packaging: Lessons from Tropicana’s Fruitless Design” by Jennifer Gidman, March 16, 2009

* * * * *

It’s a revamp-gone-wrong tale that has already secured its place in the annals of packaging: PepsiCo retains Arnell Group to redesign its Tropicana Pure Premium orange juice cartons as part of its new ad campaign. Said cartons make their aisle debut in January, minus the familiar straw-punctured orange and sporting a modernized depiction of—well, fresh-squeezed juice. Consumers revolt and demand the old packaging back. Two months and a reported US $35 million later, PepsiCo reverts back to the original Tropicana packaging, straw between its legs (and back on the carton).

There’s nothing unusual about a perennial product revisiting its packaging, labels or logos in an attempt to bring outdated aesthetics up to par with an enduring brand message…But if the brand is still enjoying hefty market share, why putter around with its packaging?

Tropicana has historically dominated number-two Minute Maid in the OJ category. “Sometimes [package redesign] has nothing to do with the business at all—it [comes] down to the new personnel working on the brand, hell-bent on making a mark on their career,” says Dyfed “Fred” Richards, executive creative director for global branding consultancy Interbrand, which also produces brandchannel. “It’s sometimes difficult for brand managers to demonstrate growth of a brand they’re being tasked to manage and grow. But a new package design associated with those changes demonstrates these changes.”

The agencies commissioned for a redesign may also share some of the blame for failed packaging overhauls. “Sadly, many [of these] companies enjoy the design process so much that design for design’s sake takes over, and all reason jumps out of the window for the benefit of a trend or effect they’ve wanted to try.”

With properly ascertained research and consumer feedback.. a brand can, and should, make an informed decision to redesign its packaging or logo.  “If a brand is in a leadership position, then it should be protecting and leveraging those key equities at all times in an effort to reinforce the reasons why it’s the market leader.” Richards says.

All parties involved need to carefully tread the redesign waters. “Understand the brand’s history,” Richards explains. “Talk to and listen to loyal consumers. This isn’t about sticking a pretty label on a box and hoping you win a design award. All the assets of the brand need careful evaluation to find out equity stretch points and equities that are sacrosanct to the consumer. More often than not, you’re not designing for your client, and certainly not for yourself—you’re designing for the consumer.”

Tropicana’s carton conundrum is a compelling story on a couple of fronts. First, there’s the juicy, schadenfreude-esque media obsession—the panned carton was one of the most blogged topics the week of February 23–27, behind only the machinations of President Obama’s new administration, according to the Project for Excellence in Journalism’s New Media Index.

But even more unusual has been the astonishing backlash from a usually silent, brand-loyal contingent, and PepsiCo’s eventual acquiescence to these vitamin C devotees. Feedback on the design, relayed to PepsiCo via letters, phone calls and e-mails, has ranged from deeming the cartons “ugly” to expressing outright confusion—some customers passed right by Tropicana cartons on store shelves, mistaking the new packaging for private-label offerings. “What’s evident from my experience and perspective is that key equities of the brand were thrown away for a generic offering, and consumers reacted,” Richards says.

So it’s back to the drawing board (or maybe not) for Tropicana. The old cartons are expected to reappear on store shelves this month. The only remnants of the US $35 million Arnell experiment will be the cute, orange-shaped plastic caps, which will be retained on cartons of low-calorie Trop50. The advertising campaign that’s currently in place will also continue.

Perhaps this could have all been avoided if PepsiCo had sought out real consumer input in the first place.

“When you go back and look at packaging through the ages, especially the power brands that have stood the test of time through decades of changes and consumer trends, they offer a unique insight of how to develop and manage key equities and remain relevant to the consumer of today and tomorrow.”

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Full article: http://www.brandchannel.com/start1.asp?fa_id=469

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“Don’t touch my jug” … Tropicana cans new packaging

April 1, 2009

Excerpted from brandchannel.com, “Packaging: Lessons from Tropicana’s Fruitless Design” by Jennifer Gidman, March 16, 2009

* * * * *

It’s a revamp-gone-wrong tale that has already secured its place in the annals of packaging: PepsiCo retains Arnell Group to redesign its Tropicana Pure Premium orange juice cartons as part of its new ad campaign. Said cartons make their aisle debut in January, minus the familiar straw-punctured orange and sporting a modernized depiction of—well, fresh-squeezed juice. Consumers revolt and demand the old packaging back. Two months and a reported US $35 million later, PepsiCo reverts back to the original Tropicana packaging, straw between its legs (and back on the carton).

There’s nothing unusual about a perennial product revisiting its packaging, labels or logos in an attempt to bring outdated aesthetics up to par with an enduring brand message…But if the brand is still enjoying hefty market share, why putter around with its packaging?

Tropicana has historically dominated number-two Minute Maid in the OJ category. “Sometimes [package redesign] has nothing to do with the business at all—it [comes] down to the new personnel working on the brand, hell-bent on making a mark on their career,” says Dyfed “Fred” Richards, executive creative director for global branding consultancy Interbrand, which also produces brandchannel. “It’s sometimes difficult for brand managers to demonstrate growth of a brand they’re being tasked to manage and grow. But a new package design associated with those changes demonstrates these changes.”

The agencies commissioned for a redesign may also share some of the blame for failed packaging overhauls. “Sadly, many [of these] companies enjoy the design process so much that design for design’s sake takes over, and all reason jumps out of the window for the benefit of a trend or effect they’ve wanted to try.”

With properly ascertained research and consumer feedback.. a brand can, and should, make an informed decision to redesign its packaging or logo.  “If a brand is in a leadership position, then it should be protecting and leveraging those key equities at all times in an effort to reinforce the reasons why it’s the market leader.” Richards says.

All parties involved need to carefully tread the redesign waters. “Understand the brand’s history,” Richards explains. “Talk to and listen to loyal consumers. This isn’t about sticking a pretty label on a box and hoping you win a design award. All the assets of the brand need careful evaluation to find out equity stretch points and equities that are sacrosanct to the consumer. More often than not, you’re not designing for your client, and certainly not for yourself—you’re designing for the consumer.”

Tropicana’s carton conundrum is a compelling story on a couple of fronts. First, there’s the juicy, schadenfreude-esque media obsession—the panned carton was one of the most blogged topics the week of February 23–27, behind only the machinations of President Obama’s new administration, according to the Project for Excellence in Journalism’s New Media Index.

But even more unusual has been the astonishing backlash from a usually silent, brand-loyal contingent, and PepsiCo’s eventual acquiescence to these vitamin C devotees. Feedback on the design, relayed to PepsiCo via letters, phone calls and e-mails, has ranged from deeming the cartons “ugly” to expressing outright confusion—some customers passed right by Tropicana cartons on store shelves, mistaking the new packaging for private-label offerings. “What’s evident from my experience and perspective is that key equities of the brand were thrown away for a generic offering, and consumers reacted,” Richards says.

So it’s back to the drawing board (or maybe not) for Tropicana. The old cartons are expected to reappear on store shelves this month. The only remnants of the US $35 million Arnell experiment will be the cute, orange-shaped plastic caps, which will be retained on cartons of low-calorie Trop50. The advertising campaign that’s currently in place will also continue.

Perhaps this could have all been avoided if PepsiCo had sought out real consumer input in the first place.

“When you go back and look at packaging through the ages, especially the power brands that have stood the test of time through decades of changes and consumer trends, they offer a unique insight of how to develop and manage key equities and remain relevant to the consumer of today and tomorrow.”

Edit by NRV

Full article: http://www.brandchannel.com/start1.asp?fa_id=469

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Grape Nuts Breaks the Mold By Targeting Men

March 31, 2009

Excerpted from WSJ, “Grape Nuts Takes Aim at Men” By Suzanne Vranica, Mar 26, 2009

* * * * *
Seeking to revive a crunchy stalwart, cereal maker Post Foods is launching a new ad campaign for Grape Nuts that is aimed at men.

The cheeky campaign includes a special Web site on MSN with dozens of two-minute videos … which tout the cereal’s quality and offer advice, such as how to ask for a raise in a recession … The site also offers “The Guy’s Manual,” with tips on topics like restoring vintage cars. The campaign’s print ads, which will run in Sports Illustrated, feature men fishing and golfing and include the new slogan “That Takes Grape Nuts” … 

The campaign is a departure for cereal advertising, which has been dominated by wholesome images of mom and the family breakfast table. Even Grape Nuts, which is eaten mainly by men, has run ads targeting women …

While men are increasingly sharing grocery-shopping duties, the task is still handled largely by women, ad experts say. “Men will be entertained” by the ad, “but is it going to influence their purchase if they aren’t the ones doing the shopping?” asks Kristi Faulkner, a principal at Womenkind, a marketing firm.

“When you do something that is different, there is always some uncertainly,” says Steve Van Tassel, Post’s president. He says Post plans to step up its in-store marketing efforts to make sure that whoever does the shopping is aware of Grape Nuts.

Post is trying to stand out in the $6.6 billion ready-to-eat cereal category, where the Grape Nuts brand has been hurt by a host of competitors in the healthy-cereal category … Grape Nuts sales slipped 15% to $54.2 million during the 12 months ended Feb. 22 from a year earlier …  All Bran saw sales rise 30%.

Wall Street and the packaged-goods industry will be watching the campaign closely. Ralcorp’s (Ralston Purina) accquisition of Post, whose brands include Honey Bunches of Oats, Shredded Wheat and Pebbles, raised questions about how a company known for shunning advertising to keep prices low would handle brands that were largely built through marketing.  Ralcorp spent just $97, 837 on ads last year …

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Full Article:
http://online.wsj.com/article/SB123801803460241457.html

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Miller’s New Strategy … Back to the Future

March 31, 2009

Excerpted from WSJ, “Miller Reprises an Old Theme” By David Kesmodel, Mar 20, 2009

* * * * *
Beer giant MillerCoors, seeking to revive its flagging Miller Lite after a string of marketing missteps, is spending more than $100 million on a new campaign that features redesigned cans and bottles and new ads centered on the brand’s familiar theme: “Tastes Great.”

The campaign … is aimed at grabbing market share from leader Anheuser-Busch InBev and its top-selling Bud Light brand. While the new ads don’t attack Bud Light by name, they are clearly designed to persuade consumers that Miller Lite is the better-tasting brew …

Miller Lite, which introduced Americans to light beer in the 1970s, mostly has posted sales declines in recent years, and its performance has worsened under its new owner, a joint venture of SABMiller and Molson Coors Brewing … One problem is that Miller Lite has bounced from one ad strategy to another in recent years. “The brand has lacked a clear identity for so long … They just haven’t been able to find its voice” …

Now, MillerCoors, borrowing a page from Coors Light, says it will convey a consistent and straightforward message about the Miller Lite brand. That message will be built around taste … In a new twist on the “Tastes Great” theme, MillerCoors is rolling out ads that herald its “triple hops” brewing process, in which hops — the flowers that give beer its distinctive bitterness and aroma — are added to the beer at three different stages. The company says this gives the beer its flavor, “balance” and proper level of foam.

Miller Lite’s new “taste protector” cans will likewise tout the process. The cans have a lining on the inside to keep the beer from touching the aluminum, which can cause a metallic taste. The company also will promote new bottles with different labels as well as a “taste protector cap” designed to preserve the taste of the beer …

Highlighting the brand’s brewing process, however, carries the risk of backfiring with consumers, who are increasingly knowledgeable about beer ingredients. Light lagers like Miller Lite, have a low hops content, especially compared with many of the small-batch “craft” beers that are enjoying the industry’s highest growth rates.

“By overtly marketing their multiaddition hopping process, the consumer would presumably expect Miller Lite to be an overtly hoppy beer; it’s not” … MillerCoors also might find it hard to boost Miler Lite sales at the same time Coors Light sales are growing …

Miller Lite dominated the light-beer wars of the 1980s with its famed “Tastes Great, Less Filling” pitch. Miller Lite is now the No. 2-selling light beer in the U.S. after Bud Light, whose sales volume rose less than 1% last year … Coors Light, the nation’s No. 3 light beer, has been enjoying healthier sales growth than either Bud Light or Miller Lite.

MillerCoors won’t disclose how much it plans to spend on the new ad campaign this year, but Mr. England said it would be “well north of $100 million” …

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Full Article:
http://online.wsj.com/article/SB123750883420290503.html

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“Value” is the New “Green”

March 30, 2009

Excerpted from Wall Street Journal, “Value is the New Green”, by Mark Penn, March 13, 2009

* * * * *

Until recently, being green was the best way for companies to demonstrate a sense of social responsibility, and for consumers to feel good about their purchases. Healthy food, hybrid cars, energy efficiency — these were the attributes that burnished brands.

But now green is taking a back seat to a new core value — value. Green hasn’t gone away, but companies are having to consider their “value” equation to try to serve the millions of consumers who either can’t afford premium experiences, or just don’t want them anymore.

Companies need to evaluate everything they are offering consumers to see how they can infuse the value of good value into their brands.  

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Starbucks is a great example of one of the world’s greatest success stories being upended by the new times.  Its guiding idea was to give consumers not just a cup of coffee but an integrated experience filled with intoxicating aromas that made customers feel great about paying extra for a grande latte.  McDonald’s emerged as a competitor by saying skip the experience and savor just the coffee and save your cash. Two years ago, Starbucks was flying high. Today it is struggling against the value-based competition.

In the airline industry, those who have been able to make money have offered more for less, not the opposite.  Flagship airlines like United went through bankruptcy emerging in 2006, while value carriers like JetBlue and Southwest have been far more successful.  They not only offer the same basic transportation, but actually offer more up-to-date services like satellite TV in every seat, more organized boarding processes and better customer service.

But beware of being regarded as simply cheap.  Target, while holding up well, isn’t reaping the same rewards as Wal-Mart.  The trick in setting a “value” proposition is that brands need to avoid the trap of simply being less expensive without providing the right level of quality.

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This certainly spells trouble for a wide swath of experience and luxury brands for what could be an extended period, unless these brands figure out how to adapt.  History shows these trends go in cycles, and luxury always comes back.  But we are in a new age of continually declining costs of technology and manufacturing, which could mean the price of luxury will keep declining.

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Full article:
http://online.wsj.com/article/SB123689912898512981.html?mod=djemMM

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Unilever Sees More Isn’t Always Better With Ideas

March 30, 2009

Excerpted from Harvard Business Review, “Nurturing Good Ideas” by Jan van den Ende and Bob Kijkuit, April 2009

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Managers know that simply generating lots of ideas doesn’t necessarily produce good ones. What companies need are systems that nurture good ideas and cull bad ones—before they ever reach the decision maker’s desk. Our research shows that tapping the input of many people early in the process can help ensure that the best ideas rise to the top.

It’s not uncommon for companies’ idea-generation activities to produce thousands of ideas. Reviewing all of them to find the best is resource intensive and doesn’t guarantee high-quality results …

Some firms, however, are taking steps to systematically improve the quality of ideas before they’re submitted for review. They’re encouraging employees to first discuss ideas with their colleagues to gain insights about their technical and market feasibility or how they fit with company objectives, which will either enhance the ideas’ value or lead to their early and appropriate demise.

Consider how this works at Unilever, where we followed the development of ideas at the company’s food labs in a 14-month study. Employees there usually discussed an idea with colleagues and, based on their feedback, made changes in the idea before submitting it. People who tapped colleagues outside their departments were more successful; discussing an idea with them increased its chances of adoption, whereas discussions with colleagues from the same department didn’t.

Interestingly, communication with friends or trusted colleagues appeared to aid adoption, probably because their input tended to be richer and offered more constructive and critical feedback, leading to more substantial changes to the idea itself. What’s more, the greater the number of perspectives an employee got, the higher his idea’s chances of being adopted were.

Other firms take a similar tack. At the biotechnology research company KeyGene, management advises employees to discuss ideas with others before submitting them to a review committee …

This approach to idea development offers a clear payoff in efficiency and in the quality of ideas. But it has another benefit as well: It enhances motivation by improving the odds of success and reducing the chance that an employee will invest unduly in an idea that’s likely to fail.

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Full Article:
http://hbr.harvardbusiness.org/2009/04/nurturing-good-ideas/ar/1

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Airlines’ Battle a Boon for Travelers

March 27, 2009

Excerpted from Washington Post, “Downturn Puts Air Travelers on Cloud Nine”, by Sholnn Freeman, March 14, 2009

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Airlines have rushed out coast-to-coast travel deals for as little as $99 each way for the spring and summer as the economic downturn has taken hold. Continental Airlines and United Airlines, fighting it out on routes between Washington and Los Angeles, have priced round-trip tickets under $200. Airlines in recent weeks have cut ticket prices as much as 50 percent from a year ago.

The fare war comes as American companies scale back business travel and skittish consumers put off vacation plans, putting new pressure on airlines that only a year ago were fighting high fuel costs.

Yet some travel analysts are skeptical that travelers will buy, even at those prices. “With 600,000 or 700,000 people losing their jobs every month, they are asking themselves, ‘Can I really afford this?’ “

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Airlines began the year thinking the passenger market wouldn’t be so bad. Many had spent 2008 cutting less profitable routes and scaling back the number of flights, giving them more room to boost prices on the seats that remained.

Operationally, flight cutbacks mean fewer planes stacking up at airports, alleviating congestion. The government has reported that airline on-time rates are at their best level in years, even at busy New York airports.

Airlines began offering discounted fares in October after Wall Street banks began to buckle, grounding bankers and other financial executives who paid top dollar for transatlantic tickets. The steady stream of price cuts continued over the winter holidays. Now the discounting is spreading into the spring and summer — historically the strongest profit period for airlines as travelers take vacations.

“This is a major war,” said Tom Parsons, chief executive of BestFares.com, a discount travel Web site. “We never expected airfares like this in June or July of last year. We would have expected air fares double this.”

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Full article:
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/13/AR2009031303564_pf.html

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How to Stop Customers Before They Defect

March 27, 2009

Excerpted from Ad Age, “Are Your Customers About to Defect?” By Chris Dickey, March 16, 2009

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In today’s tough economic environment, the most precious asset an organization has is its current customer base. And maximizing returns on that asset begins with a solid retention strategy … it is possible to curb customer defection before it’s too late. Here are three ways to maximize customer value by decreasing defection.

1. Determine the warning signs. This begins by developing a predictive model to identify the behavioral changes that are precursors to defection. The variables that predict defection, churn and other negative behaviors are often, but not always, intuitive: usage (recency and frequency), average ticket, satisfaction, visits, engagement. A model can identify the most significant variables … so the marketer knows which to monitor …

For example, the model may indicate that usage is the most meaningful variable in predicting defection, and that a 20% change in a given time period exceeds the threshold of concern and is, indeed, a warning sign to be concerned about …

2. Track and monitor changes to warning signs. Once marketers know which customer behaviors to focus on and what levels of change should be cause for concern, they can isolate and track behavior changes over time. They can then monitor those changes in real time by setting up automated tracking processes within a data warehouse.

Marketers can monitor behaviors with database-mining software and view them at a macro level using dashboards.

3. Develop a trigger-based engagement strategy to address behaviors in real or near real time. Marketers can actively intervene before a warning sign becomes a real defection. A trigger strategy must be developed over time, testing and optimizing to see which interventions can most quickly reverse negative behaviors. Interventions should be built around a highly relevant and dynamic message, an offer of relevant and significant value communicated in a channel that takes advantage of real-time data … 

Trigger-based programs are generally easy to set up and automate, and they are highly measurable. They can be geared to a wide variety of customer behaviors, and business rules can be developed to change the message, offer or channel based on other factors beyond just the behavior … By understanding the key warning signs within your customer-behavior data and developing proactive trigger-based programs to intervene, you can more precisely hone your marketing effort to those communications that drive the highest incremental return on investment …

Examples of Warning Signs and Thresholds of Concern

A member routinely visits three times a week for six months. In the past two weeks, usage is down 30%.
A retail customer’s average ticket is in the top 20% range. Her average ticket drops 10% to 20% in a month.
A top customer rates you at five consistently. Overall satisfaction drops from five to four in two consecutive quarters.
A “best” customer visits your website weekly, with an average engagement time of 20 minutes. Average time spent on the site falls 30% in three weeks.

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Full Article:
http://adage.com/cmostrategy/article?article_id=135269

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How about a stimulus package for brands?

March 26, 2009

Excerpted from Brandchannel.com, “Time for a brand stimulus package” by Kevin Randall, March 16, 2009

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In the marketing world, our industry is witnessing a diminishing commitment to long-term brand building. The mission of the moment is driven by the CFO, not the CMO, and calls for cost-cutting and short-term revenue-generating activities represent the only immediate focus.

A weighty and consistent body of historical data shows that marketers will do harm in the short- and long-run to their businesses and brands by knee-jerk budget slashing and running scared.

Hundreds of studies of marketing over ten recessions in the 20th century have concluded that not only did sales and profits decline for brands that cut brand-oriented advertising during the recession, but also that performance continued to lag upon the recovery (“Why it is important to invest in communications during an economic downturn,” IVCA.org, 2009).

Today’s brand leaders would be wise to consider and follow these 7Ps of Branding as a guide for the recession and beyond:

1. Profit
Marketers now have a golden opportunity to profit and establish real competitive advantage by exploiting the current situation. They can increase brand value and market share now relatively more easily and cheaply than during good times. With competitive noise levels reduced it is easier for a brand to stand out in the marketplace. Media costs are more attractive.

2. Persistence
Corporate brand directors need to stay the course by going against the grain and not following the marketing herd. Even if budgets are trimmed in some areas, there should be a core of strategic and tactical activities that endure (the former initiatives tend to be less budget consuming even in good times). Such brand perseverance will provide reassurance during uncertainty to both the existing customer base, an especially critical target now, and to internal stakeholders.

3. Planning
Despite the strong economic headwinds, brand builders should remain committed to pursuing long-term visions and executing plans while selectively and pragmatically improvising marketing tactics. IBM during the recessionary early 1990s and Southwest Airlines after 9/11 are examples of brands that never wavered from their long-range strategic compasses and profited enormously by doing so. These brands did not and do not meander based on quarterly results. The strongest, top-performing brands are built to weather the various storms that come along.

4. Performance
Brands (and their communications) will be judged and rewarded now by delivering on “value” over merely price. Some marketers have and will cut prices. Brand leaders do need to (re)define the value of their offering while not compromising the quality and experience customers expect or need. Harvard Business School professor John Quelch also recommends investing in opportunistic, focused market research since there is a real need to define “performance” and “value” and gauge what is relevant to customers in the shifting environment (“Marketing Your Way Through a Recession,” HarvardBusiness.org, 2008).

5. Positioning
Brand owners must uphold and defend their core positioning and resist the temptation to sacrifice quality, reduce innovation efforts or cut prices. A study of more than 1,000 companies showed that firms that cut manufacturing and administrative functions in a recession did tend to reap the benefits while those that decreased spending on new product development, quality and marketing suffered (“What strategic investments should you make during a recession to gain competitive advantage in the recovery?,” Strategy & Leadership, Profit Impact of Market Strategy [PIMS], Keith Roberts, 2003).

6. People
There needs to be an appreciation of the link between top talent and top-performing brands. Hiring, motivating and keeping the best people (who exemplify the brand) while competitors are pruning overhead is a key source of proprietary advantage. Management guru Jim Collins chronicles the cases of Boeing, Hewlett-Packard and Procter & Gamble, who bucked the trend during tough times by investing in talent (when their rivals were shedding critical human capital) only to thrive and outperform the competition (“Crisis into opportunity,” CNN Money.com, Jim Collins, 2009).

7. Principles
Brand leaders should work with CEOs to make sure their brands and organizations are integrated and that employees internalize and externalize a set of values that don’t change. Valued customers and employees will be more loyal if they are reassured on principles—by the brand and by its chief executive and sponsor. This is especially critical in the B2B world, with its large transactions and numbers of stakeholders involved in the customer experience.

Brands by the numbers

• McGraw-Hill analyzed 600 companies from 1980 to 1985. The results showed that B2B firms that maintained or increased their advertising during the 1981-1982 recession averaged significantly higher sales growth—both during the recession and for three years following—than those that eliminated or decreased advertising. By 1985, sales for companies that were aggressive recession advertisers had risen 256 percent over companies that did not maintain their advertising (“US Recession”, McGraw-Hill, 1988).

• A study of 1,000 firms during recessions between 1982 and 1999 identified key differences regarding the strategies of the best and worst performers, with the measure of performance being changes in the company’s market-to-book ratios. Notably, the best performers had increased their marketing and advertising spending not just relative to their competitors, but also compared to their own spending in better times. (“Learning to love recessions,” Richard F. Dobbs, Tomas Karakolev and Francis Malige, McKinsey & Co., 2002).  

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Full article: http://www.brandchannel.com/brand_speak.asp?bs_id=214

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A Balancing Act for Credit Card Issuers: Cutting Costs While Keeping Customers

March 26, 2009

Excerpted from Reuters, “Credit Card Firms Slashing Rewards to Cushion Losses”, March 11, 2009

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U.S. credit card issuers are slashing rewards, raising interest rates and increasing fees as loan losses mount, taking action to “maintain a certain profit level in the business.”

Reward programs are expensive for credit card companies—for example, Discover Financial Services posted revenue of $5.7 billion in 2008, while the net cost of its rewards program was $710 million—so issuers want to make sure they are worthwhile.

* * * * *

In a recent presentation to investors, JPMorgan said cardholders using its reward program showed a faster increase in spending, generated higher revenue and had lower credit loss rates.

But that does not mean card companies will keep offering freebies to attract customers. They are trying to determine which customers are good bets. 

In addition, lenders are trying to pass on part of the cost of reward programs to merchants by offering joint promotions that could bring new businesses and customers to battered retailers.

Not only have rewards been cut back—it has become more difficult to cash them in.

Still, losing a few rewards may be the easy part. Other credit card companies are raising interest rates and increasing fees, or simply closing down accounts entirely.

* * * * *

But this strategy could backfire: Higher costs and fewer rewards could frighten clients away, reducing the risk of default but also cutting into card company revenue.

“The people who have better credit quality have more offers, and if you raise their rates too much they will in fact leave you for somebody else.”

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Full article:
http://www.cnbc.com/id/29637583 

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Starbucks New Mission? Shed image as "poster child for excess"

March 24, 2009

Excerpted from Ad Age, “Starbucks: Not as Expensive as You Think”, By Emily Bryson York, March 18, 2009

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Distressed that Starbucks has become the “poster child for excess,” CEO Howard Schultz said the coffee company plans to run an ad campaign proving its coffee isn’t expensive.

“There’s a myth out there that there’s this $4 cup of coffee at Starbucks,” Mr. Schultz told shareholders … “For whatever reason, Starbucks has become the poster child for excess, and if you want to be really smart, you should cut out that $4 cup of coffee.”

Mr. Schultz, noting that half of the chain’s beverages cost less than $3 and one-third are priced less than $2, admitted that Starbucks has been defined by its competitors … “We’ve been silent about these issues, but I can assure you we’re not going to be silent for too long.” Starbucks has also launched “value pairings,” such as a breakfast sandwich or muffin and a drink, for $3.95.

Forthcoming advertising will attempt to convince consumers that Starbucks products aren’t as expensive as they are perceived. Mr. Schultz said to expect social-media efforts, internet advertising, and more and sporadic TV ad buys he refers to as “brand sparks” …

Mr. Schultz also gave some insight into Via, the company’s foray in instant coffee … Via, he hopes, will lure some people to convert from brewed coffee. Of the 65 billion cups of coffee brewed in the U.S. every year, Starbucks has only about 4% of the market. The company will attempt to change consumer behaviors at home, where 25% to 30% of coffee is wasted, and at work, where many people don’t like the coffee that is sometimes offered free of charge in company kitchens.

Starbucks is testing Via in Seattle, without advertising, and in Chicago, with TV ads, in-store displays, and an outdoor push … Via will launch nationwide this fall and internationally next year.

Starbucks is, of course, attempting a complicated turnaround. In January, the company reported earnings were down 69% to $74 million, due largely to restructuring charges and same-store sales down 10% in the U.S. alone. At the time, Mr. Schultz said the company was beginning to see improvement in its business. Starbucks reports earnings again next month.

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Full Article:
http://adage.com/article?article_id=135361

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Starbucks New Mission? Shed image as “poster child for excess”

March 24, 2009

Excerpted from Ad Age, “Starbucks: Not as Expensive as You Think”, By Emily Bryson York, March 18, 2009

* * * * *

Distressed that Starbucks has become the “poster child for excess,” CEO Howard Schultz said the coffee company plans to run an ad campaign proving its coffee isn’t expensive.

“There’s a myth out there that there’s this $4 cup of coffee at Starbucks,” Mr. Schultz told shareholders … “For whatever reason, Starbucks has become the poster child for excess, and if you want to be really smart, you should cut out that $4 cup of coffee.”

Mr. Schultz, noting that half of the chain’s beverages cost less than $3 and one-third are priced less than $2, admitted that Starbucks has been defined by its competitors … “We’ve been silent about these issues, but I can assure you we’re not going to be silent for too long.” Starbucks has also launched “value pairings,” such as a breakfast sandwich or muffin and a drink, for $3.95.

Forthcoming advertising will attempt to convince consumers that Starbucks products aren’t as expensive as they are perceived. Mr. Schultz said to expect social-media efforts, internet advertising, and more and sporadic TV ad buys he refers to as “brand sparks” …

Mr. Schultz also gave some insight into Via, the company’s foray in instant coffee … Via, he hopes, will lure some people to convert from brewed coffee. Of the 65 billion cups of coffee brewed in the U.S. every year, Starbucks has only about 4% of the market. The company will attempt to change consumer behaviors at home, where 25% to 30% of coffee is wasted, and at work, where many people don’t like the coffee that is sometimes offered free of charge in company kitchens.

Starbucks is testing Via in Seattle, without advertising, and in Chicago, with TV ads, in-store displays, and an outdoor push … Via will launch nationwide this fall and internationally next year.

Starbucks is, of course, attempting a complicated turnaround. In January, the company reported earnings were down 69% to $74 million, due largely to restructuring charges and same-store sales down 10% in the U.S. alone. At the time, Mr. Schultz said the company was beginning to see improvement in its business. Starbucks reports earnings again next month.

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Full Article:
http://adage.com/article?article_id=135361

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The American craving for small cars …

March 23, 2009

Ken’s Take: How often do you hear: “the Detroit 3 just make gas guzzlers … not the small, fuel efficient cars that Americans want.”  Maybe some day …

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Excerpted from WSJ, “Industry’s Big Hope for Small Cars Fades”, March 23, 2009

Last summer, when gas cost $4 a gallon, buyers snapped up small cars so fast that dealers couldn’t keep them in stock. Ford decided to convert some truck plants to make small cars. GM added an extra shift at its Lordstown, Ohio, plant that makes the Chevy Cobalt, a diminutive sedan. Import brands also pumped up their production of small models.

Now, with gas prices half that level, almost 500,000 fuel-thrifty models are piled up unsold around the country. Practically every small car in the market is stacked up at dealerships.

The turnabout comes at a bad time for the struggling U.S. car industry, which has revamped factories and shifted product plans to produce more small cars in coming years.

“I don’t think Americans really like small cars,” said Beau Boeckmann, whose family’s Galpin Ford in southern California is the country’s largest Ford dealer. “They drive them when they think they have to, when gas prices are high. But we’re big people and we like big cars.”

AutoWay Honda in Clearwater, Fla.,  has a whole row of Civic hybrids that draw little interest.

Over the five months ended in February, industrywide sales of small cars totaled 718,000. That was down 28% over the same period in 2008, but small cars grew to 18.4% of total market, up 2.1 points from the year-earlier period.

Full article:
http://online.wsj.com/article/SB123776430557508813.html#mod=testMod

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Trading down … from Target to Walmart

March 16, 2009

Excerpted from WSJ, ” Wal-Mart’s Trickle-Down Economics”, March 5, 2009 

The economic crisis is compelling shoppers to dig ever deeper for bargains.

Wal-Mart Stores and Target both stand to benefit from trade-down purchases, but even price-matching can’t trump Wal-Mart’s reputation for value.

Target has been matching Wal-Mart’s prices on identical items in local markets for over 10 years. That’s 20,000 to 30,000 of the roughly 80,000 products in a store.

But Wal-Mart’s image as a bastion of value may be helping it steal traffic, causing customers to purchase items that they could otherwise buy at Target for the same cost.

Target also carries more expensive variations on items such as apparel that consumers are passing over. And more than half of Wal-Mart’s products are regular purchases such as food and personal-care products, while that is about a third of Target’s mix.

Full article:
http://online.wsj.com/article/SB123628850444943445.html

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Soften your hard edges … with an empathic logo

March 16, 2009

Excerpted from Brandweek, “Grim Times Prompt More Upbeat Logos” By Todd Wasserman, Feb 21, 2009

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As the economy gets uglier, logos are getting prettier. The stolid, angular look of visual trademarks like IBM’s and Bank of America are being supplanted by ones that sport softer, more approachable fonts; multiple colors and natural, child-like symbols.

The latest example of the trend is Kraft. While the food giant’s previous visual treatment was a red, white and blue hexagon, the new one, which the company introduced with great fanfare last week, is in lower-case and sports yellow, green, purple, blue and orange as well …

Designers have a name for the trend: The Google Effect. Many say that Google’s multicolor design and the company’s willingness to tweak its logo for holidays and such have been widely influential.

Ruth Kedar, the woman who designed Google’s logo, agrees … While acknowledging that Google wasn’t the first to tweak its logo … she said the notion was still an anathema to most companies until recently. “The idea that you could modify a brand and play with it was kind of a radical change in branding, going way out of the corporate ID manual” …

Indeed, the Google Effect in this case may have a triple meaning—Google’s introduction of an era of more transparent corporate images and the advancement of the Internet as a medium to showcase logos are also influences. Years ago, logos were designed to be seen on buildings and trucks, but now the primary forum is the Internet where “color restrictions aren’t as much of an issue” …

In regard to transparency, Mike Mitchell, a Kraft rep, said that the company’s new logo is a manifestation of a bottom-up change at the company. The visual treatment, he said, is designed to convey Kraft’s new mantra: “Make today delicious.” It symbolically represents various Kraft products. The triangle shape “is invocative of pizza,” he said.

Most consumers won’t catch those references but instead will walk away with a more positive feeling about the company, said Mitchell.

Cal McAllister, co-founder of Wexly School for Girls, a design firm … said the new logos are a reflection of a desire to at least appear more approachable and transparent. “Everyone is working off the same brief,” he said. “They say, ‘Give me something natural, like a sun or a flower,’ or ‘Make it soft and make it seem friendly …”

Since such sentiment is based on consumer research, McAllister speculated that the gloomy times may be prompting consumers to gravitate to such imagery.

“Because we’re in a tough time and people are getting laid off, I think there’s a subconscious desire to take you back to when you weren’t worried about things like that, which is why we’re seeing these almost hand-drawn logos … And when you see a logo that’s boxy and the edges are hard and sharp, and the company just laid off 10,000 people, you get mad at them. But if it’s a watercolory rounded logo, you feel kind of sorry for them” …

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/direct/e3i6c21c5456af55219d01b2ee3650498cf

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Remember when getting upgraded to a bigger rental car was, well, an upgrade?

March 13, 2009

Excerpted from Direct, “Thrifty Marketing for Thrifty Times: A Car rental case history” By Ken Magill, Dec 1, 2008

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When gas prices skyrocketed this summer, Dollar Thrifty Automotive Group — along with the rest of the car-rental industry — faced a tough marketing challenge: What to do when customers’ demand for economy cars soars and the fleet simply isn’t built to meet that demand.

“Consumer behavior has really changed a lot for us with high gas prices,” says Chris Payne of Dollar Thrifty … “There are road warriors who like to get the best deal they can. [Before gas prices went up] they would reserve a smaller car than they really needed knowing we’d probably sell out and they’d get a bigger car at no extra cost. Now people are saying, ‘Wait a minute — I reserved a smaller car and you want to give me that gas guzzler? Forget it, I don’t want it.’ Four-dollar gas definitely was a tipping point.”

As a result, the company found itself in a rough spot. “You just can’t change your fleet overnight … It’s the same issue the manufacturers have had, where for a while Detroit was pumping out all these SUVs and minivans and everybody thought bigger was better.” Moreover, he says, the cost of cars to rental companies has gone way up, so these firms have been forced to keep their vehicles longer, making fleet changes even more difficult.

“Think about running a business where the cost of your commodity has gone up by 50% twice in the last two years … All the companies have been holding on to cars for from 12 to 14 months. It used to be we’d hold on to them for about nine …”

To overcome the challenge, Dollar Thrifty began running regular e-mail promotions on larger and luxury vehicles … the company’s two brands — Thrifty Car Rental and Dollar Rent a Car — have 1.8 million and 1.3 million opted-in e-mail subscribers, respectively … The average opt-out rate for a Dollar Thrifty mailing is .12% — “which is amazingly low … we’re reaching a very targeted audience … ” Also, he says, the average mailing generates most of its activity within 72 hours and brings in over $1 million in revenue.

“Dollar Thrifty is a perfect example of a company that’s built a successful permission-based marketing program … By providing subscribers with content that’s directly relevant and valuable to them, Dollar Thrifty is able to increase revenue while keeping opt-outs incredibly low” … 

Dollar Thrifty also created a chart to be given to customers at rental counters. With it, customers can cross-reference the gas consumption of smaller vehicles against larger ones and figure out how much more they’d end up spending on an upgrade.

“What we’ve found is that consumers’ perceptions are way out of whack on the gas thing … families of five are showing up having rented an economy car because it was the best price they could find online … They’re forgoing comfort to save a few bucks, but they’re not saving as much as they think. In some cases, they’re literally spending a dollar or two more for the entire rental.”

Anecdotally at least, Payne says the program is working … As of this writing in October when gas prices had dropped, Dollar Thrifty customers remained cost conscious and the chart was still being used.

“It’s still helpful,” Payne says. “People are getting hit in a lot of areas and anything they can do to cut costs, they’ll do …”

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Full Article:
http://directmag.com/email/1201-thrifty-email-promotions/

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Avoiding the Chardonnay tax & other restaurant price gotchas …

March 13, 2009

Excerpted from WSJ, “10 Ways to Save Money Ordering Wine”, March 7, 2009

Here are 10 insider tactics for not overpaying for wine at restaurants:

1. Skip wine by the glass. Restaurateurs like to make enough on a single glass to pay for a whole bottle … many wines by the glass are poured from bottles that have been open for too long and mistreated after opening … wine bars that specialize in wines by the glass, and keep them well, are a major exception.)

2.  Make sure the wine is from a very recent vintage. Most wines are meant to drink young and fresh and many restaurants, especially informal restaurants, don’t keep their wines in perfect conditions. .

3. Bypass the second-cheapest wine on the list. Restaurateurs know that diners don’t want to appear cheap by ordering the least expensive wine on the list, so they’ll hose you for ordering the second-cheapest. The least expensive is actually a pretty good deal at many places.

4. Scope out the owner’s passion for value. If there are, say, a dozen wines from South Africa on the list and no more than a handful from anywhere else, chances are the owner knows and cares about South African wine — and therefore is more likely to know good values from there.

5. Avoid the Chardonnay tax. Chardonnay is America’s favorite wine. Just about everybody loves it and feels comfortable with it, which is why the Chardonnays on so many lists are grossly overpriced compared to other wines.

6. Never order Santa Margherita Pinot Grigio.  Because so many people like it, it is routinely one of the most outrageously priced wines on the list.  If you stay within your comfort zone, ordering only wines you already know, you will be punished for it, price-wise.  There is value in tasting something new.

7. Don’t ignore house wines, by the bottle or in carafes … more often than not, we have found these lusty and fun.

8. Look for half-price deals.  This trend is sweeping the nation. Look around and you are likely to find a deal like that in your neighborhood.

9. BYOB. Check around for restaurants that allow you to bring your own wine.   More restaurants than ever, eager for business, are relaxing their rules on BYOB and lowering corkage fees. Even some fancy places now are offering special BYOB nights.

10. Check online before you dine to see a  restaurant’s wine list . This will give you more time to study the list to find good values.

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No wine is going to seem like a good value to you when you know you could buy it at a local store for half the price or less.

And while personally we wouldn’t do it, we know there are people out there who enjoy bargaining and we’d guess that at least some restaurants would be willing to dicker on the price of more-expensive wines these days.

Full column:
http://online.wsj.com/article/SB123638925101858707.html?mod=djemtastings 

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It’s payday … and I’ve got a deal for you.

March 12, 2009

Ken’s Take:

(1) Surprised this is new news to consumer goods companies. 

(2) Wouldn’t want to be around a cash strapped senior at the end of the month.  Keep reading to find out why 

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Excerpted from WSJ, “Consumer-Goods Makers Heed ‘Paycheck Cycle'” By Anjali Cordeiro, Feb 23, 2009

Makers of household goods and food are paying more attention to the “paycheck cycle” as cash-strapped consumers are showing a tendency to make their largest purchases when their salaries first come in and to cut back as that money runs out.

With more consumers living from paycheck to paycheck, some companies have looked at ways to time their promotions around periods when consumers’ wallets are likely to be well cushioned.

PepsiCo Inc.’s Frito-Lay … has tried “promotions that are different at the beginning of the month than at the end of the month,” CFO Richard Goodman said in a recent interview. “People have more money to spend at the beginning [of the month] and a little less at the end,” he said.

The insight to promote around paychecks came from one of the company’s retailers … That retailer noticed “the strength of the first of the month compared to weakness at the end of the month as people were simply running out of cash” … Early in the month the food and beverage maker started promoting large “multipacks” of snacks sold in the range of $5.98 to $6.98, while near the end of the month it pushed smaller packs that sold for less than $2 … The company’s direct store delivery system, which delivers products directly to retail store shelves, gives it more flexibility on merchandising and promotions.

Consumer purchases can be driven by a paycheck cycle in good times and bad. But the cycle has been heightened in the midst of the U.S. recession and global slowdown. Reaching consumers at the right time and stocking store shelves with the right package size can be key for makers of branded consumer goods …

Kimberly-Clark has watched the paycheck cycle “to make sure we understand it so we have the right things in stock” … The company has seen volume spikes in the first week of the month in its Depend incontinence products business, which is used a lot by senior citizens, who get Social Security checks around that time.

“We want to make sure we’ve got extra inventory, displays set up so we don’t run out of stock at retail … It’s just an understanding of how the consumer wants to buy, so they’ve got the right mix of goods at retail so they are not disappointed.” Consumers have been picking smaller pack sizes rather than the big bundle packs later in the month …

As consumer companies gathered last week at one of the industry’s largest annual conferences, the theme of offering consumers better “value” took center stage. Most consumer makers aren’t cutting list prices for their brands, so finding ways to help consumers stretch paychecks is key. Some companies are rejiggering products to keep prices down and push the value concept …

Heinz is offering consumers larger ketchup bottles that sell at smaller price gaps to private label in the U.S. Meanwhile, Frito-Lay in North America will begin adding 20% more product to take-home bags of its corn-based Tostitos, Fritos, Cheetos and Doritos without increasing the price.

Edit By SAC

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Full Article:
http://online.wsj.com/article/SB123535246479645145.html

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Unilver Plays Hardball and Gets Axe’d …

March 12, 2009

Excerpted from WSJ, “Big Grocer Pulls Unilever Items Over Pricing” By C. Rohwedder, A. Patrick, and T. Martin, Feb 11, 2009

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A big grocery chain has removed from its Belgian stores about 300 Unilever products that it says are priced too high, a sign of mounting tension between retailers and suppliers as the recession grinds on. The move by Brussles-based Delhaize SA comes just days after Unilever reported strong fourth-quarter profit that was driven in large part by its ability to command big price increases despite the ailing economy.

The banished products include everything from Dove soap and Axe deodorant to a jam brand called Effi … The stare-down shows how fraught relations between retailers and their suppliers are becoming amid the severe slump in consumer spending. Grocery stores across the globe are putting growing pressure on food and drink companies to lower prices or to offer other more favorable terms … Meanwhile, consumer-goods companies such as Unilever are struggling with a drop in demand from stores whose customers are trading down to cheaper private-label brands …

Delhaize says its conflict with Unilever is rooted in the supplier’s effort to push a broad range of goods into its stores, including some that the grocer says it would prefer not to stock because they are unpopular. If the supermarket doesn’t buy the whole range of products Unilever has threatened to raise prices by an average of 30% for the remaining items …

Unilever wants Delhaize to promise it won’t stop selling Unilever products without consulting the company first, Unilever spokeswoman says. The Anglo-Dutch consumer-goods giant wants to increase prices for Delhaize by an average 2.5% … Delhaize is the only large retailer in Belgium that hasn’t agreed to a price rise this year, she says.

Unilever managed to push through steep price increases in 2008 even though the economic crisis drove down the prices of many commodities. In the fourth quarter, its prices rose more than 9% world-wide. But the company could be about to change strategy. A new chief executive, Paul Polman, said that Unilever will now concentrate on increasing the volume of items it sells, suggesting he may moderate future price increases.

* * * * *

Last month, the chief executive of British retailer Tesco PLC, urged suppliers to pass on to stores the recent drops in commodity and oil prices. “These lower prices need to be fed into the supply chain and passed on to consumers who are under growing financial pressure” … 

Deborah Weinswig, an analyst for Citi believes Wal-Mart’s plans to freshen up its Great Value brand will trigger more price cutting on the national brands sold at Wal-Mart. And if Wal-Mart reduces its national-brand prices, “I think the food retailers will have to follow or they will be at risk of losing market share,” she says.

SuperValu Chairman said during an earnings call last month that the 2009 first half would be a “battle ground” with manufacturers over price. Kroger declined to comment, but Chairman David Dillon said in a conference call on third-quarter earnings that Kroger’s strong private-label program, which accounted for 27% of third-quarter sales, gives the grocer leverage when suppliers approach it about a cost increase.

If national brands won’t lower prices, he added, the store’s private labels “will just pick up even more market share than we have already” …

Edit by SAC

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Full Article:
http://online.wsj.com/article/SB123430797027570341.html

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Unilver Plays Hardball and Gets Axe'd …

March 12, 2009

Excerpted from WSJ, “Big Grocer Pulls Unilever Items Over Pricing” By C. Rohwedder, A. Patrick, and T. Martin, Feb 11, 2009

* * * * *

A big grocery chain has removed from its Belgian stores about 300 Unilever products that it says are priced too high, a sign of mounting tension between retailers and suppliers as the recession grinds on. The move by Brussles-based Delhaize SA comes just days after Unilever reported strong fourth-quarter profit that was driven in large part by its ability to command big price increases despite the ailing economy.

The banished products include everything from Dove soap and Axe deodorant to a jam brand called Effi … The stare-down shows how fraught relations between retailers and their suppliers are becoming amid the severe slump in consumer spending. Grocery stores across the globe are putting growing pressure on food and drink companies to lower prices or to offer other more favorable terms … Meanwhile, consumer-goods companies such as Unilever are struggling with a drop in demand from stores whose customers are trading down to cheaper private-label brands …

Delhaize says its conflict with Unilever is rooted in the supplier’s effort to push a broad range of goods into its stores, including some that the grocer says it would prefer not to stock because they are unpopular. If the supermarket doesn’t buy the whole range of products Unilever has threatened to raise prices by an average of 30% for the remaining items …

Unilever wants Delhaize to promise it won’t stop selling Unilever products without consulting the company first, Unilever spokeswoman says. The Anglo-Dutch consumer-goods giant wants to increase prices for Delhaize by an average 2.5% … Delhaize is the only large retailer in Belgium that hasn’t agreed to a price rise this year, she says.

Unilever managed to push through steep price increases in 2008 even though the economic crisis drove down the prices of many commodities. In the fourth quarter, its prices rose more than 9% world-wide. But the company could be about to change strategy. A new chief executive, Paul Polman, said that Unilever will now concentrate on increasing the volume of items it sells, suggesting he may moderate future price increases.

* * * * *

Last month, the chief executive of British retailer Tesco PLC, urged suppliers to pass on to stores the recent drops in commodity and oil prices. “These lower prices need to be fed into the supply chain and passed on to consumers who are under growing financial pressure” … 

Deborah Weinswig, an analyst for Citi believes Wal-Mart’s plans to freshen up its Great Value brand will trigger more price cutting on the national brands sold at Wal-Mart. And if Wal-Mart reduces its national-brand prices, “I think the food retailers will have to follow or they will be at risk of losing market share,” she says.

SuperValu Chairman said during an earnings call last month that the 2009 first half would be a “battle ground” with manufacturers over price. Kroger declined to comment, but Chairman David Dillon said in a conference call on third-quarter earnings that Kroger’s strong private-label program, which accounted for 27% of third-quarter sales, gives the grocer leverage when suppliers approach it about a cost increase.

If national brands won’t lower prices, he added, the store’s private labels “will just pick up even more market share than we have already” …

Edit by SAC

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Full Article:
http://online.wsj.com/article/SB123430797027570341.html

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Consumers Trade Down, At Least For Now

March 11, 2009

Ken’s Take: Insightful article re: how consumers are (and will) react to the economic downturn.

Key ideas: downward mobility, cautionary spending, renter mentality.

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Excerpted from Knowledge @ Wharton, “The Shopper of Tomorrow: Trading Down”, Feb 18, 2009

Attention Shoppers: We no longer have the following items — “a sense of entitlement,” “conspicuous consumption” and “a golden period of luxury.” At least that is the word from Wharton faculty and other experts who point to a new logic that is defining not just what U.S. consumers buy, but how they view the shopping experience.

While shoppers typically pull back during the downward phase of any economic cycle, the severity and uncertainty of today’s crisis is likely to have longer-lasting effects on their attitudes than most slumps, these experts note. Consumers, they suggest, will eventually start spending again, but without the vigor enabled by easy credit in the Roaring 2000s …

Over the next 18 months … consumers will learn to become more frugal and are likely to carry those skills over once the economy recovers. “At some level, everybody has now been schooled about financial markets and overextending one’s credit — something American consumers have been notoriously bad at. We had a habit of not paying a lot of attention to the cost of using borrowed money” …

In the future, shoppers will learn to focus on the value of goods and services … [the] “crazy mindset” is over and shoppers are only willing to pay for what they absolutely need or items that present extraordinary value. … As for the pre-meltdown “go-go times, we will never go back to that, at least not anytime soon.”

According to consumer consultant Paco Underhill … [there] are three consumer segments now, divided not by income levels, but by income security. One group is made up of those who have lost their jobs and are downwardly mobile. For the wife of a Wall Street banker, that could result in the elimination of weekly hair and nail appointments … Those in the second group are not at immediate risk of losing their jobs, but they have friends or family who are out of work. These consumers, he says, are cutting back as a cautionary measure … A third group is relatively untouched by the downturn. The individuals in this group have paid off their mortgages and, while their investment portfolios may be down sharply, they still have an adequate cushion. Nonetheless this group is also cutting back because engaging in conspicuous consumption seems like bad manners …

Armendinger points to another impact on shopping patterns — having enough space to store all one’s purchases. U.S. shoppers do seem to lead the world in consumerism, in part because they have enough land to build huge homes and storage units to house all their belongings … In Europe and emerging economies such as India … “You don’t see the Costco mentality of stockpiling toilet paper or huge vats of ketchup, simply because [people] physically don’t have the space.”

Carl Steidtmann, chief economist and director of Deloitte Research emphasizes that the Great Depression, combined with World War II, amounted to a 15-year period of consumer constraint, first because of the economic contraction and then because of rationing for the war effort. He predicts that the current downturn, which began in December 2007, will start to abate by the end of this year, and is not likely to have as great a long-term impact on consumers as the Great Depression.

He also suggests that the most lasting impact of the current downturn may be on homeowners who are severely stressed by mortgage debt. Going forward, he expects more of a “renter mentality” in the housing market, with less emphasis on homeownership as an investment vehicle …

 

Wharton marketing professor David Reibstein says the current angst about consumer spending reminds him of the periods of recession in 2001 and 1991. At both extremes of any economic cycle — the highs and the lows — conventional wisdom holds that during the highs, everyone feels the status quo will continue, while during the lows, everyone feels that life as we know it has forever changed. “While we’re in the midst of it, there’s always that concern … What’s amazing to me is how resilient we are.”

Reibstein points to the … terror attacks on September 11, 2001, when it seemed no one would ever have the courage to board an aircraft again. By the time the current financial crisis reduced demand, air travel volume had recovered. “It’s going to take a long time for us to get through this because of the severity and depth of this cycle … but once we do, it will be amazing how quickly people do rebound.”

Gradually, he adds, as the recent shocks to the economy are absorbed, people will begin to reinvest and cautiously step up purchases. Confidence will improve even more as job losses stabilize and hiring begins again, he says. “It’s only going to take time.”

Edit by SAC

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Full Article:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2161

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Telecom: Banking on Mobile Banking to be a Killer App …

March 10, 2009

Excerpted from Marketing Daily, “Mobile Banking May Be Telecom’s Killer App” by Aaron Baar, Jan 23, 2009

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With increasing consumer familiarity and growing ease of use, mobile applications for financial services companies–particularly banks–could become the new “killer app” for telecommunications.

The number of people banking through a mobile device could hit half a billion worldwide by 2013 … “Mobile financial services have the potential to be bigger than mobile TV and premium mobile content in terms of numbers of subscribers” …

The drive for more and better mobile financial services applications is being fed by consumers who are becoming more accustomed to banking online. “The lowest-hanging fruit are the online customers … That’s one of the only barriers to mobile banking; if you don’t trust online, you won’t trust mobile.”

But just as customers are using online banking for uses beyond simply checking their accounts, they will begin to use their mobile devices for those purposes as well. “The growing parts will be more sophisticated applications like bill payment” … But banks will have to work on making the mobile experiences as simple and user-friendly as the online services.

Increasing numbers of customers–particularly younger ones–are learning to trust the online space for their banking, and mobile will quickly follow. “Generation Y expects mobile to be part of what they’re doing, and banking is no different,” …

In the U.S., the mobile banking leader is Bank of America … The bank launched its mobile service in May 2007, and by the end of 2008 it had 1.5 million subscribers. “It’s a growing segment, and it’s being led by Bank of America” …

Edit by SAC

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Full Article:
http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=98908

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Airlines Fight For First Class With Food … Umm, umm, good

March 10, 2009

Excerpted from WSJ, “Cooking Up Ways to Improve Steaks on a Plane” By Scott McCartney, Jan 20, 2009

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Competition for first-class passengers is more heated than ever in the global recession, and sometimes it boils down to whether the soup is hot enough. International airlines are beefing up food spending as a differentiating draw for premium customers — even U.S. airline spending on food has increased recently …

U.S. airlines that fly internationally increased their spending on food by 8.5% — the biggest increase in any category besides fuel … The same airlines cut labor expenses and maintenance expenses in the same period and slashed advertising more than 22%.

Many airlines, domestic and international, hire famous chefs to help create in-flight menus and lend cachet to airline food … Profitability for long international flights hinges on selling business-class and first-class tickets for thousands of dollars … Food is a crucial variable.

“Nobody complains about what kind of fuel you buy, but food does get a disproportionate share of comments … Airlines fly the same kind of planes — either a Boeing tube or an Airbus tube. What’s different is the service and the food, and that’s where we try to excel.”

The focus on food may seem a bit bizarre for travelers who usually travel domestically — and in coach. Food service on airlines has soured for many travelers after years of cost-cutting …  Even in first class, meals on many domestic flights are skimpier: Drinks and nuts are the typical offering on shorter trips …

It turns out you can serve a high-quality meal on an airplane, if you know how to overcome the huge obstacles. Because the dry air of a jet cabin dries mouths, taste is diminished in flight. So Singapore and other carriers exaggerate flavors in meals … High-quality airline food is prepared so that it can be reheated hours after its initial cooking …

Today, passengers want flexibility in meal service so they can work, watch fancy entertainment systems and sleep. And just as culinary arts have been raised on the ground, so, too, do passengers expect more from airline food …

Edit by SAC

Full Article:
http://online.wsj.com/article/SB123241509322796411.html

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Raising prices? … Put the spotlight on value

March 9, 2009

Excerpted from WSJ, “P&G, Others Are Confident Higher Prices Will Stick” By E. Byron and A. Cordeiro, Feb 20, 2009

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Chief executives from several big household-products makers voiced confidence they could make higher prices stick, even as the recession ratchets up pressure on retailers and consumers to cut costs.

“Our products don’t deliver value [just] because the prices on the shelves are lower,” A.G. Lafley, chief executive of Procter & Gamble Co., told analysts and investors … Like several other industry executives … Mr. Lafley said his company doesn’t plan to roll back the significant price increases it has made over the past several months.

Pricing has become a contentious issue between retailers and their suppliers, as retailers — desperate to lower prices as consumer spending weakens — want their suppliers to help them foot the bill. But manufacturers such as P&G … argue they need to maintain prices to offset stubbornly high commodity costs, currency fluctuations and lower sales volumes …

Clorox Co. CEO Don Knauss told the conference his company had succeeded recently in imposing additional price increases … Nestlé SA, whose brands include Gerber and Purina, cited higher prices as a factor in the 70% increase in net profit it reported for 2008. And Kimberly-Clark Corp., known for its Scott, Kleenex and Huggies brands, said it would maintain its prices, at least for now, after hefty increases in 2008.

P&G’s Mr. Lafley described the promising sales performance of several new products that command significantly higher prices than established ones in the same P&G product lines … Newly launched Tide Total Care, which claims to make clothes last longer, is priced 60% above the base Tide detergent. Clairol’s Perfect 10 hair color, which touts better color quality and faster results, is 70% pricier than P&G’s basic Clairol Nice ‘N Easy, but aims to tempt women trying to cut back on even costlier hair-salon appointments.

Rather than broadly lowering prices, many household-product manufacturers plan to emphasize the extra benefits they say make their premium-priced products worth the money. In ads for its Charmin brand, P&G focuses on the toilet paper’s durability, saying that means users require fewer sheets. It also advertises … that Olay skin cream outperforms products costing hundreds of dollars …

Continually adding product features — and then advertising heavily to advise shoppers why they should pay more for them — is a critical way manufacturers of branded products drive higher profits and fend off increasing competition from private-label goods.

Indeed, P&G is the world’s biggest spender on advertising, constantly telling consumers that paying more for the company’s paper towels, mouthwash or diapers is worth it … Still, as more consumers cut spending — even on staples such as food — some industry watchers fear the time will come when they are unable or unwilling to pay for product features they can do without. Some observers also worry about the prospect of another “Marlboro Friday,” the day in 1993 when Philip Morris said it would sharply reduce the price of its Marlboro cigarettes to better compete with bargain brands.

The dramatic price cut, in addition to launching a tobacco price war, unleashed a wave of doubt about the value of big brands and their ability to sway consumers to pay more for them …

Mr. Lafley tried to calm concerns about drastic price cutting, arguing that P&G’s brands are still increasing their market share. “I don’t think you are going to see a return to irrational price wars,” he said.

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Full Article:
http://online.wsj.com/article/SB123508966388628145.html?mod=testMod

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If you can’t fight ’em join ’em … brand names chum it up with private labels

March 6, 2009

Excerpted from WSJ, “Brand-Name Food Makers Woo Retailers With Displays” By J. Jargon and A. Zimmerman, Feb 18, 2009

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Seeking to combat stiffer competition from cheaper store brands, big-name food manufacturers, including Kraft Foods Inc. and General Mills Inc., are joining forces with retailers to promote their brands alongside private-label goods.

In the past, big food companies didn’t worry too much about cheaper store brands encroaching on their turf, because consumers were more loyal to name brands and generally believed better quality justified their higher prices. But in recent years, retailers have improved their store brands, often mimicking the innovations that national brands have introduced …

As private-label items have improved and the economy has slowed, many consumers are wondering why they should pay more when they view a store brand as equally or almost as good. Last year, sales of private-label food and other consumer products jumped 10% to $82.9 billion in 2007 … Meanwhile, sales of branded products increased just 2.8%.

Now, brand-name manufacturers are trying to boost sales and defend their market shares in part by working with retailers to create special displays that allow name brands and store brands to share the promotional spotlight. Their strategy acknowledges that the rise of store brands has been a boon to retailers, whose overall sales have slumped and whose gross profit margins on store brands typically exceed those on branded items by 10% to 12%.

General Mills, for example, is using in-store grocery displays to promote “full meal solutions” that include its brands as well as store brands … [For example], A “pizza night” display featured General Mills’ Pillsbury dough with the retailer’s store-brand tomato products.

The new collaboration with retailers comes as Wal-Mart Stores Inc. prepares for a relaunch next month of its own private brand, Great Value, with improved packaging and quality … By raising the profile of its private label, Wal-Mart could undermine some of the competitive advantage that has set it apart from other food retailers … Gains by private-label products have come largely at the expense of smaller brands. To cut costs and make room for a greater assortment of Great Value products, Wal-Mart has begun removing slower-selling brand names from its shelves …

Until recently, Wal-Mart’s private-label brands didn’t pose much of a threat to branded-food manufacturers. The products’ packaging was lackluster and the quality and consistency of many of them was uneven …

At an analyst meeting last fall, Wal-Mart said it would retool its Great Value line, in an effort to spur sales … The company tested 5,000 Great Value products against national brands and reformulated 1,200 of them.

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Full Article:
http://online.wsj.com/article/SB123491694183004377.html

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Hyundai: Lose your job? Bring it back …delivers big results

March 5, 2009

Excerpted from New York Times, “Hyundai, Using a Safety Net, Wins Market Share”, by Nick Bunkley, February 5, 2009

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In the midst of an industry-wide slump that has pushed some competitors to the brink of bankruptcy, Hyundai spent $3 million to tell Americans watching the Super Bowl how to say its name correctly.

The company’s market share nearly doubled last month as sales rose 14 percent, the largest year-over-year increase that any big automaker has posted in the United States since last May.

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One reason for the jump in January appears to be Hyundai’s new marketing strategy of promising to let buyers return their vehicles, at no cost in most cases and with no penalty to their credit rating, if they lose their job or income within a year.

“To their credit, they struck at the core of what’s bothering people, and that’s obviously uncertainty . . . It’s just the fear and the uncertainty that’s holding people back.”

“It gives them a whole new audience — people for whom it would have never popped up on their shopping list.”

* * * * *

Sales of the Hyundai Sonata, a full-size sedan that costs less than $20,000, surged 85 percent in January, making it one of the country’s top-selling vehicles. And Hyundai sold more passenger cars last month than Chrysler, which has four times as many dealers.

Edit by DAF

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Full article:
http://www.nytimes.com/2009/02/05/business/media/05auto.html?_r=2&ref=business&pagewanted=print

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