Playing it REALLY safe

The marketers at Post cereals are sure not swinging for the fences. With their launch of "Just Bunches" , they have created a line extension of their Honey Bunches line, virtually assuring high cannibalization and minimal incrementality. Furthermore, their execution does not appear to be very good as noted in the linked testimonial from a Honey Bunches brand addict :http://www.phillyburbs.com/pb-dyn/news/260-12042008-1632309.html.

With limited R&D resources, slotting dollars that compete for space in a crowded category, and as a distraction to operations, the sales force and the marketing team in general, this launch seems like an overly safe play that will not gain any meaningful business. However, it will give the illusion of in-market innovation inside the company. Too often the internal appearance of what you are doing for the customer trumps the reality of the scarce innovation we consumer see. This is one of the most insidious diseases that affect brand managers today, and will continue to be so until companies adjust their cultures to demand true consumer innovation.

Tone Deaf

With the country (and the world) undergoing a deep and painful recession, some advertisers seem clueless about the tone they need to strike in their advertising. Case in point is the dramatic contrast in TV ads for Lexus and Honda. Lexus continues to rely on the old (and incredible decadent) formula of a $50,000 car as a gift, wrapped in a bow in the driveway as snow falls outside a McMansion (that is probably upside down mortgage-wise nowadays). What are they thinking! The days of reaching for cheap financing to underwrite a life of conspicuous consumption are over. For many families this is not "a December to Remember" (their tag line in prior years). Contrast this with Honda's ad portraying two 30 somethings leaving the city to visit a friend in the country: "it will be good to see him again" she says, to which he answers "he will freak out". They arrive to his home, he comes out and hugs them. End of ad. Weird ad, not compelling, but respectful of the more sober tone in the country. Lexus: get a clue.

Spotless

We have always owned an american brand of dishwasher. Be it GE, Maytag or Whirlpool they provided ample room for the large amount of dishes and cutlery that are used in american households. They did not always live up to their "dependability" promises (what do you expect for $400 bucks), but they performed adequately, and were always replaced with another US brand at the end of their life. Last spring our cool Maytag with adjustable racks expired. So I went to the durable goods bible, Consumer Reports, and read through the ratings. The Bosch brand garnered high ratings, but I was leery of anything German sounding for fear of expensive mechanical bills, reminiscent of my experience with an off-warranty Mercedes Benz. But the ratings were too good to ignore, particularly the low noise ratings. So I went to SEARS, where they assured me I could exchange it in 30 days if not satisfied. Armed with that assurance (and an extended warranty just in case), I purchased my first European dishwasher.
Fast forward 6 months. This is BY FAR, the best dishwasher (from a cleaning standpoint) we have owned and the quietest one as well. But its European heritage betrays the fascination with engineering at the expense of human factors that products from Europe can often have. Since Europeans don't eat breakfast for cereal, the racks are not designed for breakfast bowls, and they flip over, shingle or otherwise occupy space that was meant for tall dishes. The capacity must be 20% less than that of a Maytag due to the smaller interior, necessitated by greater insulation to absorb the noise. And the lack of a drying coil leaves much condensation on the dishes at the end of the cycle. So you have to dry the dishes after it washes them (or leave it open for 30 minutes to air dry).
European durable products tend to be technically better than their US counterparts which are designed for value and replacement. But they often lack the understanding of how Americans use these products, causing them to leave many points of market share on the table, right next to my dishes which, by the way, are spotless.

Less Bars in More Places

A wonderful thing this new i-Phone. It truly is remarkable, allowing you to access as many email accounts as you want at the touch of one button (unlike the single minded and inflexible Blackberry), download the coolest apps that can add navigation capabilities, allow you to track Election 08 or simply play hangman at the touch of a button. But this thing of beauty is hitched to an unreliable wireless network, the AT&T network. Lured by the promise of "More bars in more places" I switched 4 phone lines over from Verizon so my wife and I could avail ourselves of this wonderful convergence electronic gadget. And now I can not get a signal in my house unless I am standing exactly in the middle of the master bedroom. I drop more calls than ever. This is a prime example of marketing departments that overpromise and underdeliver. Such poor customer experiences create a sense of deception and diminish brand value. AT&T neeeds to soberly look at its network capability and find the differentiating point that will be relevant and can be fulfilled by their capabilities. No false promises. Until then, I would recommend their advertising team reconsider their tagline and switch to the more truthful "Less bars in more places".

The Masai Shoe

I had never, repeat never, considered plunking down $225 on a pair of sneakers, much less anything as ugly as what I was holding. Yet here I was seriously contemplating the possibility of buying these magical shoes that improve posture, increase abdominal muscle activity, reduce stress on hip and knee joints by -19%, and are beneficial to your health because of their design(http://www.swissmasaius.com/).
The Masai Barefoot Technology "shoe" bills itself as the "Anti Shoe", and it is inspired by an African tribe (Masai) whose members suffer from no back problems. It is believed their barefoot step on soft sand is to be credited with their excellent back health. Whether true or not, MBT is to be credited for entering a very crowded category, and creating a differentiated and plausibly believable positioning with a premium price point. There is a clear benefit (better back health) with a rational reason to believe (designed to "roll" like a bare foot on sand), and an edgy attitude (the Anti Shoe) reminiscent of the un-cola approach of 7 UP many years back. In the consumer world we need more of these products that attempt to provide us with meaningful benefits, and less of undifferentiated sneakers peddled by already over-paid athletes. Way to go MBT!

The joke is on you

I sit in front of the TV amused (or maybe amazed) at the number of commercials that limp along with poor strategies and rely on nothing more than over the top humor to get noticed. Advertising has "evolved" away from a communication of benefits and point of difference to micro entertainment, something to entertain us while the TV show gets back on air. And marketers have accepted and embraced this absurd notion. For inspiration, I suggest advertising managers look at the power of infomercials: tightly focused on demonstrating the unparalleled performance of the product at hand, they can hold the attention of a viewer for 10, maybe 15 minutes while the pitchman shows us how superior Oxy Clean really is! And the humor coefficient is low and when present it is incidental. Infomercials may appear crude and unsophisticated to many MBA trained marketers (like myself), but they really embody the core of advertising: sell your product on its point of difference. If you can't think of one, then spend your time and money on creating and defining one. If you don't, your most creative people at the agency will find a clever and amusing idea. It will be funny, and you will buy it. And then you will be stuck with the next Taco Bell chihuahua fiasco campaign. And the joke will be on you!

General Motors latest giveaway

Lacking the design, consumer understanding and quality to compete effectively with Toyota, Honda and the ever improving Korean automakers, Detroit has wielded the only tool left in their marketing arsenal: pricing. This time around, facing an economy that makes matters worse, it has resorted to "employee pricing". Anyway you look at it, this pricing gimmick will be an expensive one, sapping net sales, further diluting its brand equity and ticking off those buyers that paid more just 6 months back. The one upside will be the thousand of cars moving off inventory and the balance sheet.

The lesson is one that marketers in any field should heed. If you are not sufficiently consumer centric, the value of your products to consumers will decrease as better offerings come around. These products will be better fits for consumers lives and they gladly will pay more. The other products will be left to sell on price to the worst potential group of consumers: price switchers without loyalty.

As managers and marketers, we owe it to our franchises and brands to be constantly probing the end user's interaction with our product and category, and trying to improve their experience. And we should not be shy to ask for a reasonable premium for the better products we provide them.

Starbucks vs. Juan Valdez

If you find yourself in New York, near Times Square (1451 Broadway, near 41st), step into Juan Valdez coffee and try their hot cappuccino arequipe. Without a doubt the coffee experience here is unique and, in my view, superior to Starbucks. But the chain itself is stuck in neutral, not sure of what it is and where it wants to go. Juan Valdez is an incredibly powerful equity, having defined superior coffee through consistent advertising since creating Juan Valdez icon in 1959. Having succeeded in establishing the equity worldwide, they followed Starbucks in defining "premium coffee experience" in Colombia through their Juan Valdez stores. But when they rolled to USA, that experience was long defined and owned by Starbucks, and Juan will not be able to dislodge them. The US stores are mirrored on the Colombian stores, and there in lies the issue. As Al Ries has counseled many times, it is time to DIVERGE, not converge. Juan, don't try to compete head to head with Starbucks. Instead, create a new space: Juan Valdez is the latino experience of coffee - this is a space Starbucks will never be able to occupy, and one that leverages the demographic trends in America. Lead with the Colombian experience of coffee, but expand your menu to accommodate the Cuban variant, the Brazilian variant and so forth. Open stores all over Texas, California, Southern Florida, Chicago, New York City and other geographies that have significant latino presence. Also have a presence in the cosmopolitan cities of the US where people look for new ethnic food experiences, and give them the anti-Starbucks. Once you have a clear vision of where you are going, the rest will be execution.

If you are curious about Juan Valdez go to http://blog.myspace.com/index.cfm?fuseaction=blog.view&friendID=403003102&blogID=422872881

Discounting vs. Brand Building

In the very difficult world of retailing, discounting is the guaranteed ticket to store traffic and potential brand erosion. Recently I read about Abercrombie same store sales being down, a predictable outcome in a soft economy for a retailer who practices a hi-low pricing strategy. Abercrombie prices are traditionally sticker shock high. But they always have 2 or 3 sale item tables, where all the teens with baby sitting earnings flock to seek a good sale. In a soft economy their sales will skew disproportionately to these discount items, eroding margins, and their full price merchandise will wither on the shelves.  By contrast, The North Face exercises remarkable restraint in its pricing and discounting. I had the chance to walk their downtown Chicago store today, examine their merchandise and talk to their associates. Their merchandise is very high quality and fashionable. Certainly better quality than the minimal cotton outfits found in other fashionable retailers. Their pricing is not cheap, but it is not high either. In fact, it appears to be fair. There were no sale items in the entire store, allowing me to look through the store at the items we needed, not just the ones that were on sale. Finally, the imagery was aspirational, not the exploitative type that now targets the teen-age set. North Face sets an example on an alternative to high low pricing, that allows your brand to sell on its merits. It gives the customer the knowledge they did not over pay and that they will not see the same item on sale 4 months down the road. An excellent example for brands contemplating pricing strategies in today's economy.

Surviving in the Wal*Mart era

Every supermarket in America lives in fear of Wal*Mart. With its lowest cost structure and low price strategy it can quickly sap market share from regional chains, saddled with high labor contracts and supply chains that are often less efficient. An excellent example of how to compete with Wal*Mart is Fresh Market. For those of you not familiar with this chain, it is a North Carolina based company. Its stores are smaller than your average supermarket, and it concentrates on providing outstanding perimeter departments (produce, bakery, meats, dairy, wine), with a very limited presence of center of the store aisles (i.e. your basic dry grocery). It offers both organic and non organic produce, differentiating it from Whole Foods, and very select and excellent brands in the center of the store. You get a neighborhood feel from the free coffee samples available daily, and the occasional bakery cookie sample for the kid sitting in mom's supermarket cart. I had a suggestion for the store, so I filled a card and to my surprise received a personal response with lots of details (no boiler plate response here). The lesson is clear: to compete in the crowded supermarket industry this chain chose to differentiate by providing the highest quality perimeter selection, combined with a high touch environment. It did not attempt to compete with Wal*Mart. It is in fact diametrically opposed in its positioning and execution, and it succeeds in creating brand loyalty through the experience, not its prices. An interesting lesson for anyone facing a lowest cost provider.

Why 501?

In choosing the name for this blog I first gravitated to marketing 101, but that name appeared rather unimaginative and overused. I have seen many books, textbooks and editorial columns refer to marketing 101, and there is an entire cottage industry dedicated to teaching the fundamentals of marketing. That is not what I want to do. I want to share my views on business and marketing strategies based on my experiences as a consumer, but with the additional perspective of a marketer with  20+ years in the business. Who do I want to reach? People who are interested in business strategies and the way they affect people (consumers). So I settled on Marketing 501, presupposing a basic understanding of marketing, and assuming a desire to build on knowledge acquired through prior marketing experiences.