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.