Archive for the ‘Value Mapping’ Category

When you hear the word "value", grab your wallet !

April 28, 2009

Ken’s Take: I often say in class that “value” is the most over-used and mis-used word in marketing.  Glad to see that somebody else has noticed, too.

Excerpted from Brandweek “Enough With the Value Messages Already,” By Todd Wasserman, Apr 11, 2009

Perhaps no word in the marketing lexicon has been abused as much …  as “value.” … Marketing messages of this stripe are one strategy for addressing the fact that consumers are loath to open their wallets these days. But they’re also only one alternative to cutting prices. It seems like marketers aren’t exploring others.

An alternative way to go at it, for instance … is to create a “fighter brand” like Procter & Gamble did in 1976 with its Luvs diapers, which were meant to be a hedge against store brands while Pampers held down the high end of the market.

Still another tactic—and, lately, a more common one—is what some are calling “value brands.” Paradoxically, though, value brands may be the most expensive solution to the problem, which is why you don’t see a lot of them kicked off these days. Marketers who have the wherewithal to launch a value brand in this climate would probably be rewarded. But in case not, there are still many other ways of attacking the problem.

One of the biggest proponents of value brands is Martin Bishop, director of brand strategy for Landor Associates … Bishop differentiates value brands from fighter brands this way: “Unlike defensive fighter brands, value brands respond proactively and aggressively to opportunities in the value market. Instead of defending the flagship brand, these brands take advantage of a clear value opportunity. Their purpose is not to defend the status quo, but to take advantage of a new market opportunity” …

Red Bicyclette from E&J Gallo, for instance, “built an identity that is entirely separate from that of its parent company’s brand.” The brand is cheap wine with an adventurous and fun attitude—which is a different thing, Bishop says, from just cheap wine …

If you had to pull out one thing that separates a value brand from a fighter brand then, it would be that the brand has more going for it than just price. It’s also got some attitude in there as well …

In Bishop’s view, a value brand is a much better proposition, but … in this climate it’s probably too expensive an option for most marketers. In other words, it’s something that would have been nice to have launched two or three years ago, but is off the table today …

Luckily, marketers have other weapons in their arsenal. Bishop pointed out that when Nescafé wanted to grow sales in the Philippines, the company was very conscious about cheapening its brands, so it addressed another variable—portion sizes—and came out with single-serve packets that didn’t skimp on quality …

Unfortunately, right now such solutions (just like disposable income) seem to be in short supply. Instead of experimenting with value brands, fighter brands, portion sizes and portfolios, marketers are simply hurling the word “value” at consumers and hoping it’ll mean something to them. As everyone humps the same tune, all that expensive messaging could turn out to have no value at all.

Edit by SAC

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/direct/e3id54466e9215cc2baf2a798becbda167a

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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.

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

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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.

Edit by SAC

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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

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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.

Edit by SAC

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

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Value is the name of the game

February 9, 2009

Excerpted from the Progressive Grocer, “Nielsen Consumer Insight Report Offers Ways for Retailers to Navigate Rough Economic Seas“, January 8, 2009

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How to Cope During Difficult Economic Times,” a Nielsen Consumer Insight report provides value programs and dramatic cost-reduction strategies to help retailers struggling to attract beleaguered shoppers.

While declines in discretionary expenditures have been taking a toll on low-, mid-, and high-end department stores, select retailers within grocery, dollar, club, and drug stores fared better. Retailers carrying more “need-to-have”, not “nice-to-have,” assortment have registered positive same-store sales growth. 

Consumers — protective of their spending power — learned to trade down to value channels, reduce purchase frequency, move from on-premise consumption to off-premise purchasing, and downscale from premium to mid-tier or value brands.

Fully 40 percent of shoppers think that food and personal care prices have increased over the past three months.

When offered some ideas for coping, consumers expressed a preference for larger sizes with a lower price per serving (47 percent of shoppers) over smaller pack sizes at lower prices (17 percent).

Nielsen research shows that shoppers are increasingly happy with private label products, calling them a good alternative to name brands, at parity with or better than national names on quality criteria, while offering good pricing and value. The social stigma is gone, along with boring generic-looking packaging. Many retailers treat private label and exclusive brands as an integral part of their corporate brand image.

Forecasts call for continuing tough times and economic instability that filters throughout the economy. In short, we can brace for more of the same, and expect existing behaviors to intensify. Shoppers will first meet their basic needs and forgo discretionary purchases.

At-home opportunities will climb. Variety and convenience will take a back seat to value. Trading down will become an acceptable way to stretch budgets. Local sourcing gains traction, not as a green activity, but rather as a strategy for controlling costs, delivering value, and maintaining product freshness.

Edit by NRV

Full article:
“http://www.progressivegrocer.com/progressivegrocer/content_display/features/center-store/e3i9953839003c11ce8daf4ca7117546a38?imw=Y 

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Consumer choice modeling … how people decide to buy

January 15, 2009

Excerpted from Strategy+Business, “Tracking the Elusive Consumer”, by John Jullens and Gregor Harter, Novermber 11, 2008

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Consumer choice modeling … offers a better understanding of consumer preferences: 
  • What does the consumer want?
  • Why do individuals prefer one product or service over another?
  • How, precisely, do most consumers make their purchasing decisions?

Recent work on the art and science of consumer behavior has refined, updated, and strengthened an analytical tool known as consumer choice modeling, initially developed in the 1960s by Daniel McFadden, a winner of the 2000 Nobel Prize in economics.

Simply put, this model examines the personal reasons for individual choices and provides techniques researchers can use to measure and predict those choices. By exploring why individuals make specific trade-offs among various product options, consumer choice modeling can determine the features that people in different economic and demographic strata are looking for and how much they are willing to pay.

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Originally, this technique suffered from a lack of sophistication. A typical implementation involved asking respondents to react to lengthy paper-and-pencil surveys offering a series of preconfigured and static product or service possibilities. Although some insight about consumer preferences was typically evinced, it was often shallow, limited by researchers’ inability to dynamically change the direction of the questioning on the basis of the responses.

However, advances in experimental designs and information technology now allow researchers to better approximate the shopping experience when asking questions by adjusting product choices in reaction to a person’s answers. By analyzing the responses from a representative sample of consumers (or potential future customers), researchers can produce econometric models that depict the relative weighting of specific product features and price points.

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Early in 2007, Booz & Co.applied consumer choice modeling to identify and measure the drivers of demand for mobile phones. One example::  Apple’s iPhone.

Long before the iPhone’s launch,  the Booz  model correctly predicted that it would be the most attractive overall offering to consumers despite its high price tag. 

Booz  surveyed more than 1,800 consumers by simulating the actual mobile phone purchasing process and asking people to compare their existing package with alternatives.

For example, owners of low-cost Sharp handsets running on pay-as-you-go carriers such as Virgin Mobile or Boost Mobile were offered a U$100-plus Samsung phone with Nextel service and a $250-plus LG phone with Verizon’s network. Respondents were asked, “If these two packages were your only alternatives, which one would you choose: Samsung/Nextel, LG/ Verizon, or neither?” and “If Samsung/Nextel were your only option, would you purchase it or continue to use your current package?”

The majority of the low-end and midlevel consumers were highly commodity driven. Other than by offering an attractive handset price, it is almost impossible to convince an individual to change his or her current mobile phone package. In fact, further analyses revealed that one-third of U.S. consumers are unwilling to change their wireless package, no matter how much the handset price is lowered.

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Of all phone users, owners of low-end handsets made by the Nokia  value their phone package the least. Consequently, these consumers are the most willing to switch to another carrier and handset — an opportunity for competitors to attack Nokia’s base by producing a low-cost package with a function or two that outpaces the relatively plain Nokia product.

The consumer choice model also revealed that owners of handsets made by Sony Ericsson , which tend to be highly designed, full-featured products, care much more than Nokia users about functionality, usage range, and purchase location (they prefer to buy their packages at stores that offer personal attention, rather than at Costco or Circuit City, for example). And although these customers, too, are price conscious, they’re willing to pay a premium to have their preferences met. A service provider could use these findings to target Sony Ericsson owners with a slightly less expensive offering that in all other ways matches their current package.

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Consumer choice modeling also has the ability to predict the impact of future products and services on the market. Booz  simulated the characteristics of “the ideal high-end phone” as consumers viewed it. From this, the survey gleaned that three primary factors — feature, design, and brand — are of paramount value to consumers considering a higher-priced model. These factors, of course, were exactly what Apple focused on in developing its blockbuster iPhone, launched in July 2007.

Significantly, as the model predicted, Apple stumbled when it came to price, which the survey showed matters at all levels of cell phone purchases.

At a price point of $599 for an eight-gigabyte phone, the research forecasted that Apple would have difficulty reaching a significant portion of the high-end market. But the same research suggested that performance would improve quickly as soon as Apple cut prices. In fact, that is precisely what happened: In September 2007, Apple discounted the phone by $200, and sales rose well over 1,000 percent in the succeeding quarter from sales in the prior three-month period. And in June 2008, CEO Steve Jobs announced a much faster eight-gigabyte iPhone — using AT&T’s state-of-the-art 3G network — for only $199, a move that further aligned Apple’s pricing with that of its peers and that will almost certainly improve the product’s market share.

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Consumer choice modeling yields valuable insights for demand-driven strategy development by providing customer value segmentation maps, measuring market share impact of new product–service combinations, and assessing overall brand equity. Perhaps most important, choice modeling can reveal sa­lient differences between managers’ beliefs about customers’ needs and preferences and customers’ actual needs and preferences. For managers seeking reliable feedback on how customers view their products and services, consumer choice modeling provides a rigorous way to turn customer-driven feedback into profitable and sustainable tactics for retaining or capturing market share.

Edit by DAF

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Full article:
http://www.strategy-business.com/resiliencereport/resilience/rr00064?pg=2

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