Not Comcastic Anymore?

Thursday, July 08, 2010

Not Comcastic Anymore?

I really don't understand why a company would rename themselves due to some unhappy customers instead of fixing the problems that caused the unhappiness.

Toyota didn't change their name when they were faced with recalls and lawsuits this year.

But Comcast is trying something different and Al Ries has his opinion. (From AdAge.com):

Comcast is in the process of rebranding some of its offerings to "Xfinity," although the company name will remain Comcast.

Consumers in 11 markets will have a choice of Xfinity TV, Xfinity Voice and Xfinity Internet. Presumably, Comcast will soon be rolling out these high-speed, high-definition services to other prospects in the 39 states the company serves.

Is this a good move?
Lawyers will tell you the best trademarks are "coined" names such as Kodak and Xerox. So we are seeing a raft of coined brand names you can't find in any dictionary, including Xfinity.

But wait a minute. There's a well-known automobile brand called "Infiniti." Isn't Comcast worried about the confusion between the two? If not, did Comcast consider using Xonda or Xundai or Xoyota?

But there is a bigger issue here. Comcast is a large company with revenues last year of $35.8 billion. In addition to its cable, telephone and internet services, Comcast has cable programming interests (G4, Versus and The Golf Channel) and also owns entertainment channel E!

Not to mention the company's 51% interest in NBC Universal, a joint venture with General Electric.

It makes sense for Comcast to be a pure "company" name like Procter & Gamble and have its services, programming and cable channels defined with their own brand names.

Internal vs. external
But what makes sense from an internal point of view often doesn't make sense from an external point of view.

Comcast is in competition with five giant corporations, each of which is spending a small fortune trying to reach the same consumers Comcast is targeting. Here is 2009 advertising spending for Comcast and its five competitors.

Verizon: $2.2 billion
AT&T: $1.9 billion
Sprint: $1.1 billion
Comcast: $439 million
DirecTV: $401 million
Dish Network: $385 million

Money is not everything, of course. The message is important, too. But what message is Xfinity trying to communicate?

"More."

As a typical TV commercial points out, Xfinity offers "more choice, more control, more speed, more HD than ever before." Other commercials boast about Xfinity's "fastest internet speeds" and "triple the HD channels."

But what are consumers supposed to think when they are bombarded by the big three big networks?

AT&T: "Fastest 3G network."
Verizon: "Five times more 3G coverage."
Sprint: "4G network."

One axiom of marketing is that confusion always benefits the leader. If the consumer can't make sense out of conflicting claims, he or she is more likely to go with one of the leaders.

That's certainly what's been happening in cellphones. In the first quarter of the year, Verizon had 92 million subscribers. AT&T had 86 million. And Sprint had just 47 million.

Old African proverb: When elephants fight, it's the ants that take the beating. Sprint is getting killed.

In the past three years, both AT&T (10.2% net profit margin) and Verizon (7.4%) have been highly profitable. But Sprint Nextel Corporation, with revenues of $108 billion, managed to lose $34.8 billion.

Brand vs. category
What's Comcast doing playing in this game? That's a classic marketing mistake. Comcast is trying to fight a branding war with its heavily-hyped Xfinity brand when it should have been fighting a category war.

With about 24 million subscribers, Comcast is the leading basic cable TV provider, well ahead of No. 2 Time Warner, which has about 14 million subscribers.

Instead of introducing a marvelous new TV, internet and phone service called Xfinity, Comcast, in my opinion, should have been telling its prospects why should buy digital services from a cable company.

Why is cable better than satellite or cellphone towers? I have no idea, but I suspect that cable might be more reliable than the alternatives.

Look at the success of DirecTV and Dish Network. Even though both companies are much smaller than Sprint, they are both profitable with net profit margins in the last three years of 6.8% for DirecTV and 6.7% for Dish Network.

My feeling is that both of these companies are successful because their satellite services have captured the public's imagination, not because they offer "more" -- more choice, more control, more speed, etc.

As a DirecTV subscriber, I'd be hard pressed to name any specific reason for selecting the service, except that DirecTV is the leader in satellite.

Leadership is the most important attribute a brand can own. It's usually better to be the leader in a small pond rather than an also-ran in a big pond.

The top two brands in every category usually suck out all the profits, leaving nothing but crumbs for the also-rans.

But then, who thinks category anyway? Today, it's nothing but brands, brands, brands.

Many well-known brands are not associated with any specific category. Many companies have taken brands that used to stand for something and turned them into master brands that don't stand for anything.

What category is a Chevrolet?

What category is a Sony?

What category is an Olay?

A quirk in the laws
What confuses many marketers is a quirk in the laws of marketing. What leaders can do doesn't necessarily apply to No. 2 or No. 3 brands.

We have warned repeatedly, for example, about the dangers of line extension. Yet the truth is, the law applies more to laggards than leaders.

McDonald's has been line-extending its menu for decades, but still remains a fast-food leader. Burger King, on the other hand, has been following in McDonald's footsteps, from chicken to breakfast to gourmet coffee, with little to show for its line-extension efforts.

On an average sales-per-unit basis, Burger King lags behind the other hamburger chains.

McDonald's: $2,158,900
Whataburger: $1,653,100
Jack in the Box: $1,421,100
Steak n Shake: $1,416,100
White Castle: $1,383,400
Carl's Jr: $1,356,100
Wendy's: $1,352,800
Burger King: $1,288,600

When we worked for Burger King, the CEO at the time told me we would be heroes if we fixed two things: breakfast and chicken.

"But your signs say Burger King," I replied. "Why don't you focus on hamburgers? Specifically, flame-broiled hamburgers."

Back then, many Burger King managers thought the hamburger was passé. The future belonged to chicken, fish, and even veal parmigiana.

Here it is, decades later, and the fast-food outlets that seem to be capturing the public's attention are the "better burger" places, like Five Guys, Smashburger, Elevation Burger, Mooyah Burgers & Fries, M Burger, Boardwalk Fresh Burgers & Fries, Meatheads Burgers & Fries and Bobby's Burger Place.

Nation's Restaurant News calls the better burger "the fastest-growing food-service category at a time when most other types of concepts have put hopes of growth on hold." According to Technomic, sales last year at the better-burger chains were up 18%.

Where was Burger King when all the better-burger action was taking place? They apparently were busy introducing their latest line extension, the fire-grilled ribs eight-piece combo meal for $8.99.

Focus vs. line extensions
Focus is what makes a brand successful, not line extensions.

Look at the success of Chick-fil-A, a brand focused not just on chicken, but on "chicken sandwiches."

Even though the chain is closed on Sunday (for religious reasons), the average Chick-fil-A unit does $2 million a year in revenues, some 67% more than the average Burger King.

On June 7 of this year, Chick-fil-A introduced a spicy-chicken sandwich, its first new sandwich since 1989. That was 21 years ago.

In many ways, marketing is a category issue and a simple test will tell you if your brand is headed in the right direction.