Showing posts with label perception. Show all posts
Showing posts with label perception. Show all posts

Tuesday, February 01, 2011

Training your Customers to Pay Less

Only a couple of companies can be the "Deep Discount Leader". Walmart and _________.

Does anyone beat Walmart?

Maybe, but I can't think of any.

So how do you beat Walmart? Not by being a better Walmart. Be the opposite. You can't beat them on price but they are not perfect.

Unfortunately some people think that you have to offer discounts and "loss leaders" to attract customers. Drew wrote about this recently:

Groupon: Winner or Goat?

Posted: 22 Jan 2011 04:15 AM PST

The whole world is abuzz about Groupon. And who doesn't love $10 worth of Cold Stone Creamery ice cream for $5? But is Groupon right for your business?

110117.groupon1

Groupon and other social-coupon sites (like LivingSocial and SocialBuy) all work the same way -- a specified number of people have to pre-purchase the coupon for the deal to be activated. In theory, that's how everyone wins. Groupon makes a prescribed amount, the buyers get a super deal and the retailer gets a guaranteed influx of cash and in theory, new customers.

But it's not always a bed of roses. You've probably heard the nightmare of a story from Posie's Cafe and their Groupon experience. Many businesses are declaring themselves "not interested" and as Chicago wine and cheese shop owner Greg O'Neil states -- why replace full margin business with lower margin business?"

As with most things, there isn't a one size fits all answer. My Age of Conversation co-author and Texas based marketing guy Jay Ehret believes social coupons aren't smart for most businesses. On the flip side, Duct Tape Marketer John Jantsch gives it a thumbs up.

There are plenty of studies and academic opinions on the topic too. Check out what Harvard Business School and Rice University had to say.

But...is it right for you? Here are the big pros and cons, as I see them.

Pro:

Big advertising boost. Groupon subscribers number in the tens of thousands or more in most cities. This is a very efficient way to generate a significant word of mouth buzz, especially if you get creative in your offer.

Exposure to many new customers. It stands to reason that you're going to see a lot of new people coming through the door. Impress them and hopefully they'll come back again and pay full price.

A way to test a new product or service. Want to know if the market is interested in something new? If the Groupon coupon tips -- you might well have a winner!

Con:

Does the math work? Keep in mind that Groupon takes a pretty good sized cut. Half the rate charged plus 2.5% interest per transaction. (Here's a Groupon ROI calculator you can use). So depending on your cost of goods and how many people actually redeem the coupon, you could lose your shirt like Posie's Cafe.

What does it do to your customer/vendor/employee experience? Can your business handle a huge influx of buyers? How will the increased traffic impact your loyal customers? Your vendors? Your employees? Be sure you take all of that into account before you sign up.

What does it say about your brand? Do you want to be seen as a deep discounter? Does offering a 50% off price say something about your quality, margin or pricing strategy? How will your regulars feel about the fact that they've been paying full price all this time?

Lots of opinions out there but really, it's something you need to examine for your specific business. Use the ROI calculator, weigh the pros and cons... and make the call.

The cartoon is courtesy of Tom Fishburne, the Marketoonist.

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Wednesday, November 03, 2010

Should You Go Undercover?

from Drew:

Marketing tip #17: Stop assuming!

Posted: 29 Oct 2010 11:44 AM PDT

104931924I've said it before....no one is worse at seeing your business objectively than you. If you own or run it -- you cannot possibly remove your own biases, opinions and hopes from the equation.

So when you make operating, marketing and customer service decisions, you need to second guess yourself now and then. You need to remove yourself from the equation and see it from your customer's perspective. But how do you do that, if you can't possibly be objective?

You walk in your customers' shoes. Literally.

You need to experience exactly what they experience. Go through your own drive thru, try to navigate your phone system without using any of the back end short cuts, see what asking for a credit or return feels like.

I'm betting that 90% of companies never do this. They think they know what their customer wants, so based on that dangerous assumption -- they run their business. We all know the old saying about what happens when you assume...

Over at IowaBiz today, I explore this topic some more. Come jump into the conversation.

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Tuesday, April 13, 2010

Are You a Funny Looking...

... Animal?

Check this out from Drew:

Stop trying to be a liger brand!

Posted: 11 Apr 2010 07:38 AM PDT

Liger_drewmclellan I've had this conversation about 6 times this past week, so it seems timely to write about it as well.

For some reason -- many companies and brands are not content to be who they are. They feel the need to create some artificial hybrid of themselves.... no doubt because they're afraid they're leaving money on the table, they are missing out on some customers or their revenue is down, so they're going to fish outside of their own pond.

Here's the truth about your brand. If you are a lion -- then be a lion. Be the boldest, loudest, most confident lion you can be.

The minute you decide to become half lion and half tiger... you compromise your own brand. You become less of who you truly are.

I've seen this too many times to think it is a coincidence or fluke. While you are out prowling as a liger...here are the results:

  1. You chase after business that is outside of your sweet spot -- so it takes up more resources (time, talent, money) for you to deliver what you sold. In other words -- lower (if any) profit.

  2. You end up working with customers who value something other than what you are best at selling, so in many cases, you are satisfying them but not delighting them.

  3. Because you are a little (or a lot) outside of your usual scope -- you price your offerings badly -- either giving it away (what did we say about net profits?) or trying to charge a ridiculous amount, just proving that you aren't really an expert in that particular arena.

  4. While you are working extra hard (see #1 above) to deliver on business you really aren't superior in, you're so busy that you can't chase or win sweet spot business.

In short....you are working harder, delivering less spectacular results and making less money.

I get the short term temptation of trying to be that hybrid -- it's money in the pocket.

But, in the long run, you simply diminish your own ability to be remarkable. To be the brand that goes way beyond delivering satisfaction -- but instead, your customers LOVE you. Those are the companies that are surviving this recession. Those are the companies who enjoy incredible word of mouth business.

If you are a lion -- be the biggest, baddest, boldest lion you can be. You don't (and shouldn't) be anything else.

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Tuesday, March 16, 2010

When you Don't Advertise


take a look at the damage done:

Survey Indicates That Reducing Advertising in a Recession is a Mistake


More than 48 percent of U.S. adults believe that a lack of advertising by a retail store, bank or auto dealership during a recession indicates that the business is likely struggling, according to a study from Ad-ology Research.

At the same time, a large majority of consumers think businesses that continue to advertise are competitive and/or committed to doing business.

The research study, "Advertising's Impact in a Soft Economy," which was undertaken to determine whether stopping advertising during the recession could harm a business, takes an in-depth look at specific consumer perceptions regarding firms that continue to advertise in the current economy, as well as those that do not.

Not advertising can harm brand
Advertising appears to play a key role in consumers' view of how a business is doing, the study found. By not advertising, businesses may be sending a warning signal to current and potential customers, Ad-ology said.

For example, when consumers no longer see/hear advertising from an auto dealership during a down economy, 50 percent say they view the dealership as "struggling." In addition, 19 percent feel these dealers are "less willing to deal," and only 7 percent believe they "must be doing well."

On the other hand, when a dealership advertises during tough times, 34 percent believe the dealership to be committed to doing business.

Consumer perception is similar for stores and banks. When advertising ceases among the following businesses, consumers:

* View their bank as struggling (48 percent)

* Believe their bank may not be in business much longer (12 percent)

* View their favorite store as struggling (56 percent)

* Believe their favorite store may not be in business much longer (15 percent)

However, when the following businesses continue to advertise frequently, consumers:

* Believe their bank is committed to doing business (43 percent)

* View their bank as being competitive (30 percent)

* Believe their favorite store is committed to doing business (47 percent)

* View their favorite store as being competitive (30 percent)

"It is critical to advertise in the current economic climate, to maintain long-term positive consumer perception of your brand," said C. Lee Smith, president and CEO of Ad-ology Research. "Advertising not only assures consumers of a business' reliability in a soft economy, but it can influence where and what they buy, especially when the ads address concerns about value."

(Source: Marketing Charts, 05/25/09)

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Sunday, January 31, 2010

Are you Dead?


I've worked with enough businesses over the past 20 years to see a cycle of failure when a new retailer opens their doors with a lot of flash and advertising, followed by a slow death and finally a big going out of business sale, (with more advertising).

Please, don't follow this cycle.

Want more proof? Read this from Mediapost:

Advertise or Die
According to a new Ad-ology Research study, "Advertising's Impact in a Soft Economy," more than 48% of U.S. adults believe that a lack of advertising by a retail store, bank or auto dealership during a recession indicates the business must be struggling. Conversly, a vast majority perceives businesses that continue to advertise as being competitive or committed to doing business.

C. Lee Smith, president and CEO of Ad-ology Research, says "It is critical to advertise in the current economic climate, to maintain long-term positive consumer perception of your brand... advertising... assures consumers of a business' reliability... "

Other key findings include:

  • 40% of consumers use coupons more now than a year ago
  • Most consumers are as willing or more willing to pay more for ‘healthy' or ‘organic' products than they were a year ago
  • A ‘deeply discounted price' was the number-one factor that would make consumers more likely to purchase a big-ticket item (+$1,000)
  • TV, newspaper, direct mail, and Internet top local media from which consumers saw/heard an ad within the last 30 days that led them to take action
  • Store Web sites ranked second only to search engines as the way consumers research products and shop online

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The Humble Pizza


from Bnet.com:

Domino's: Why We Reinvented Our Pizza — and Then Promoted How Crappy It Used to Be.

by Cait Murphy

“Where’s the love?” one woman asked scornfully. “The worst excuse for pizza I’ve ever had,” snapped another. Then there were the references to “cardboard” and “ketchup,” words that make any pizza-maker wince. But Domino’s asked for them, and has even posted them here on a company-run Web site. The remarks, conceded a company chef, “hit you right in the heart.”

Pizza is a $35 billion industry and Domino’s gets a big slice of that — about $1.5 billion. The chain, which was founded 50 years ago in Ypsilanti, Michigan, today boasts almost 9,000 stores that deliver more than 10 million pizzas a day.

But what Domino’s is known for is delivering pizzas quickly — not for making the most mouth-watering pie around. So in 2008, Domino execs began to reinvent its pizza. At the end of 2009, it rolled out the new and improved pizza, and launched an ad campaign that features consumers ruthlessly bashing its old recipe.

Scratching a known and popular product to roll out a new one is risky — as is letting people tell the world just what they thought of the old one. BNET spoke to Russell J. Weiner, Domino’s chief marketing officer, to gain some insight into the pizza transformation and the self-deprecating marketing campaign.

The media has had a field day with your ads. Slate said of your television campaign, “It's hard to recall another recent ad in which a company self-flagellates with so much gusto.”

People may look at the ad campaign and see it as insulting. That’s not the way we see it. What we tried to do was tell a true story — not brutal, but the truth.

Also, I spent a lot of time thinking about how to change the perception of people who didn’t buy Domino’s. We talked to them, and read their blogs, and this is what they were saying. And I knew that, other than my mom, no one would care about “new and improved.” So if we just said, “Hey, this is a new and improved pizza,” we would not have gotten the doubters to try it.

Did you aim to get all this attention?

Emphatically yes! We have never seen the kind of reaction, from consumers and media, that we’re getting with our new pizza and from our advertising campaign. Awareness is high; we’re being talked about on blogs, in newspapers, on television news shows, and even the late-night entertainment programs. People are talking about Domino’s, and more importantly, they’re trying us — many for the first time in a long time.

When was the last time Domino’s changed the recipe?

When it was invented. Then in the early 90s, we went from 10 slices to eight and made a few small tweaks, but nothing like this has ever been done before.

What went into the decision?

The decision dates to early 2008, when we were having our annual strategic planning meeting in Ann Arbor, where the leadership looks five to seven years out.

Everyone knew — and there were a lot of analytics behind this — that we got high marks for delivery, convenience, and value. We thought the opportunity existed to get credit for taste, too. We know that a lot of people hadn’t tried us since college, or had stopped ordering from us five, 10 years ago. The idea was if we could win back some of those people, that would be a big opportunity.

So a conversation started to take place about how much we could capitalize on strength while addressing a perceived weakness. This was something [chairman and CEO] Dave Brandon laid out. So direction from the boss, combined with direction from our consumers, made it a no-brainer.

How did you go about redesigning the pizza?

We dissected our pizza, then reinvented it from the crust up. We tried scores of different sauces, cheeses, and doughs, with the idea of improving each of them. In each case, the market research found that the new elements recorded double-digit improvements in terms of purchase intent.

And we didn’t stop there. While we knew which individual components tasted good, we had to make sure they worked together. I always say that two good-looking people can make an ugly baby; ingredients that work well by themselves can fail in combination. So you have to make sure that all the elements taste great together.

Was there a “Eureka!” moment?

The closest thing to that was probably with the crust. No matter how much we worked on the dough, there is no way to get around the fact that most of it is covered with sauce and cheese. So we realized that the best way to improve the dough was to improve the part that was not covered up. It was when we put a garlic-butter-herb seasoning on the crust that put us over the top. This gave us the biggest jump in the data.

How do you test something like this?

Well, we have our own chefs and kitchens here in Ann Arbor, but obviously our plan is to sell outside of this building. So we spent tons of time — about 18 months — and millions of dollars looking at all the options.

Domino's Chief  Marketing Officer Russell J. Weiner and Domino's pizza chefs

Then we went to various parts of the country and did random sampling that we could then project to the U.S. as a whole. In the beginning, we focused on evaluating each element. We would make the exact same pizza, and change, say, just the sauce. Then we would ask people to taste the two samples, and give us their opinion — was the sauce too thick, too spicy, too sweet, too this, too that? This is what we call a “guidance test” and we did it on each separate ingredient — dough, crust, sauce, and cheese.

Once we established a sense of direction, we went back for another round of testing — the five best doughs, for example, and narrowed that down. Then we brought in different combinations — dough No. 1, say, with cheese No. 2; cheese No. 3 and sauce No. 4, and so on. We tested 36 different combinations. We took the favorites and put these through a robust quantitative test, with both the general population and heavy users, and we identified a clear winner.

The process sounds very data driven

Yes, but the decision was not just based on data. This is Domino’s pizza; it’s our baby. When the data came in, it was compelling, and we put it in front of the leadership team. We put the pizzas in front of them, too. David Brandon told us, ‘I don’t want to just see the data. I want to taste it.’ His point was that this change should be something that people could taste for themselves. The data was important, but the product much more so.

We made the same presentation to the board of directors, having a kind of pizza party in the conference room at our headquarters. Then we did a road show telling the story to the franchisees and we had them try it as well. The results were incredible; the amount of support when we were out there was just remarkable. These were people who had spent a lifetime making pizzas and they were able to taste the difference for themselves.

Was there opposition?

Well, I can’t say there were not people who were concerned. Heck, I was concerned. It’s normal to have discomfort in making a big decision, but other than that, we had 1,000 percent alignment on doing this. The “New Coke” analogy that we’ve heard isn’t quite right. The positions were different. Ours was a brand known much more for service; Coke was a brand known for taste, so they were changing a strength, while we were changing a relative weakness.

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Wednesday, January 27, 2010

Cheap?


If you are in a business that does Transaction Based Marketing and don't care about the relationship side of marketing, then you may be interested in this survey.

However, this is a dangerous game to play, because the store with the best buying power has the advantage when you are playing the "lowest price" game. And Walmart can beat you with their eyes closed.

I advice my clients not to do this. For the very reasons I just mentioned.

You will lose because:

1. By making less money per item resulting in a lower profit margin while you fixed expenses stay the same or go up.

2. People will always have an expectation of you and the stuff you sell, even if it is cheap. So that means there always is a Relationship Marketing factor in play.

This is from MarketingCharts.com. Click on the charts to make them BIGGER.

Bargain-Hunting Consumers Choose Print Ads over Online

Age, gender and educational level all play a role in whether a consumer will more inclined to seek out bargains from online ads or print ads, according to a new Adweek Media/Harris Poll survey.

In general, the survey found that newspaper and magazine ads are considered the best place to find bargains by nearly one-fourth of adult Americans surveyed in the poll. That compares with just under one in five, or 18%, who say online advertisements are most likely to help them find bargains.

In terms of other sources, more than one in 10 each say direct mail and catalogs (12%) and TV commercials (11%) are where they look, while just 2% say radio, the research found.

One-third of Americans (34%) believe the type of ad makes no difference when looking for the best bargain.

adharris-chart-1-magazine-vs-online-ads.jpg

Age and Gender

These preferences, however, shift when age, gender and education are taken into account, Harris Interactive said.

Online ads appeal most to people under age 45 and to college graduates, the survey found. People between ages 18-34 are more likely to say online ads (22%) and TV commercials (17%) are the best places to find bargains, while those ages 35-44 go online (26%). The older a person is, the more likely he or she is to use newspaper and magazine ads, as 24% of those ages 44-54 and one-third of those ages 55+ (33%) say those media are most likely to help them find the best bargain.

In terms of gender, women are more likely than men to say newspaper and magazine ads (24% vs. 22% of men) and direct mail and catalogs (14% vs. 11% of men) are more likely to help them find a bargain. Men, on the other hand, are more likely to say online advertisements are more likely to help them find a bargain (21% vs. 16% of women).

table-2.jpg

Education’s Role

Education also plays a role in the type of media to which consumers gravitate when seeking bargains: One-fourth of those with a high-school education or less (25%) say newspaper and magazine ads are more likely to help them find a bargain compared with 20% of those with at least a college degree. Three in 10 of those with at least a college degree (29%) believe online advertisements are more likely to help them find a bargain compared with 12% of those with a high school education or less who say the same.

About the survey: This Adweek Media/Harris Poll was conducted online within the United States between December 14 and 16, 2009 among 2,136 adults (aged 18 and over).

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Monday, November 30, 2009

The 2010 Predictions


Tomorrow marks the first day of the last month of 2009 and then with the rush of the holidays and short work weeks, it will be 2010.

It's also prediction time of the year. Today we have a piece from my email from TrendWatching.com:

2010 is rapidly approaching; we hope the December edition of our Trend Briefing, detailing 10 trends for 2010, will assist you in getting things going (again). Go straight to the Briefing, or quickly scan the 10 trends below:

1. BUSINESS AS UNUSUAL | Forget the recession: the societal changes that will dominate 2010 were set in motion way before we temporarily stared into the abyss. More »

2. URBANY | Urban culture is the culture. Extreme urbanization, in 2010, 2011, 2012 and far beyond will lead to more sophisticated and demanding consumers around the world. More »

3. REAL-TIME REVIEWS | Whatever it is you're selling or launching in 2010, it will be reviewed 'en masse', live, 24/7. More »

4. (F)LUXURY | Closely tied to what constitutes status, which itself is becoming more fragmented, luxury will be whatever consumers want it to be over the next 12 months. More »

5. MASS MINGLING | Online lifestyles are fueling 'real world' meet-ups like there's no tomorrow, shattering all predictions about a desk-bound, virtual, isolated future. More »

6. ECO-EASY | To really reach some meaningful sustainability goals in 2010, corporates and governments will have to forcefully make it 'easy' for consumers to be more green, by restricting the alternatives. More »

7. TRACKING & ALERTING | Tracking and alerting are the new search, and 2010 will see countless new INFOLUST services that will help consumers expand their web of control. More »

8. EMBEDDED GENEROSITY | Next year, generosity as a trend will adapt to the zeitgeist, leading to more pragmatic and collaborative donation services for consumers. More »

9. PROFILE MYNING | With hundreds of millions of consumers now nurturing some sort of online profile, 2010 will be a good year to help them make the most of it (financially), from intention-based models to digital afterlife services. More »

10. MATURIALISM | 2010 will be even more opinionated, risque, outspoken, if not 'raw' than 2009; you can thank the anything-goes online world for that. Will your brand be as daring? More »

We're confident that applying the above to your business will bring you at least one profitable, zeitgeist-compatible innovation in 2010!

Best regards,

Reinier Evers
founder, trendwatching.com
reinier@trendwatching.com

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Friday, August 07, 2009

Justify your Prices

From MarketingProfs:


Here's Why I'm Worth It

If you charge a bit more for your product or service, it's more important than ever to tell your customers why you offer a better value than competition that seems less expensive.

In a post at his blog, Jim Connolly presents a hypothetical scenario that offers a choice between two consultants—Bob, who charges £50 an hour, and Sue, whose hourly rate is £75. "Sue is well organised and very experienced in her field," he says. "Something that takes Bob 5 hours to do, can be done to a higher standard by Sue, in half the time."

In other words, when working on an identical project, Sue will actually deliver better results and undercut Bob's bill by more than £60. But she can't expect anyone to assume that is the case: She has to let them know why she's probably cheaper than competitors like Bob.

"Once prospective clients or customers are aware that your higher than average price or fee could save them money and give them a better quality service," says Connolly, "it’s a lot more likely they will hire you."

The Po!nt: Don't charge a higher-than-average price for your product or service without explaining the to your prospective customer why it offers good value.

Source: Jim's Marketing Blog. Click here for the full post.

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Tuesday, April 14, 2009

Are you Dying from the Inside Out?


Yesterday I met with a client whom I had not seen in a couple of months, and found out why he's been unavailable.

A couple months ago he was not feeling well and thought it was a flu bug. Turns out his appendix had burst. But he didn't realize what was going on inside and continued to try and live as if nothing was seriously wrong.

Finally after a few weeks his wife convinced him to visit the doctor who discovered how serious his condition was and he was off to surgery. They opened him up and had to clean out all the resulting infection from organs that were dying inside of him.

If he had not eventually gotten checked out, I would have been attending his funeral instead of talking about his business plan yesterday.

I have seen many businesses that are dying from the inside out too. Here's some help from the THINKing blog:

THINKing

Link to THINKing

Tap Employee Passion

Posted: 13 Apr 2009 05:14 AM PDT

Meriwether Lewis set the stage for the Corps of Discovery’s success before one single “employee” had been hired. From the outset Lewis and Clark engendered a communications culture that brought in the right prospects, then kept morale high and increased the productivity of those eventually hired.

More important, Lewis’ communication culture not only outlined the day-to-day duties of Corps member, it imbued “employees” with a sense of mission and meaning.

He ruthlessly searched for just the right recruits. Lewis sought the strong, skilled and eager, rejecting the weak, ignorant, and unmanageable. And through properly communicating his needs, he was able to get the people who could learn and live his “brand” to apply.

Prospects were told openly and honestly about working conditions: you will be in hostile territory, surrounded by hostile people. You must rely on your own devices for food and shelter, and you could die.

They learned about benefits: “great personal rewards will be bestowed upon you by a grateful government,” if you are selected.

Lewis took his “employees” one step farther: you will go, he told them, where no non-natives have gone before. You will help find the Northwest Passage. You will aid in the advancement of science, discovering new places, new species and new peoples. The mission is one of critical importance to the security of the new nation.

It was this open, honest communication of the emotional aspects, the meaning of the job that unleashed the potential of the Corps of Discovery as “brand emissaries.”

Why Bother Communicating With Employees?

Sure, you’re saying, when it’s a matter of life and death, and you must depend on the person next to you for your survival, it makes sense. But, we’re just talking about business here.

The same goes for business. Employees are your most important audience, and that they hold the keys to your organization’s success. Let’s examine the facts to find out why this assertion is true.

Companies spend millions of dollars each year developing mission and vision statements, identifying their brand, and then communicating their brand promise through various media.

Employees are the primary “media” in the majority of brand contacts. In most companies, employees don’t understand the brand promise well enough to communicate it, let alone live it and articulate it clearly.

Gallup research of 300,000 businesses indicates that 75% to 80% of your people are achieving much less and feeling far less enthusiastic about their work than they could be. If all your employees were “fully engaged”, Gallup says, your customers would be 70% more loyal, your turnover would drop by 70%, and your profits would jump 40%.

The research also found that consumers who felt fast food restaurant employees did a great job were five to six times more likely to come back to that brand. At banks where employees stood out, the customer was six to 20 times more likely to continue the relationship.

Additionally, great employees also tend to engender “passionate” customers. For example, customers who praised store-level associates were 16 times more likely to be passionate about the retailer’s brand.

Get employees on board from an emotional perspective and they carry their passion out to customers. Passionate customers carry it beyond to prospects through word-of-mouth.

Need an example? Let’s look at SAS Institute, a company with a clear mission. In its mission, SAS embraces lifelong learning for employees and service that is focused on customers with improvements driven by those customers.

Employees want a company that understands they have a life outside of work, that they have a need for learning and development beyond the strictly job-related.

Recognizing this, the company built a 200-acre corporate campus, landscaped to encourage outdoor leisure. Thousands of acres adjacent to the SAS campus were bought and made available for employees to buy and build their homes. A private junior and senior high has been opened on campus so parents can have lunch with their kids.

Employees are treated like university faculty and are helped by the company to pursue their own intellectual interests, as well as their job-related ones.

As a result, instead of the typical 20 percent turnover of software companies, SAS has had turnover of less than four percent. SAS has a 95 percent annual renewal rate among its customers, and revenues increased from $653 million in 1996 to $1.13 billion in 2001.

So, take a lesson from Meriwether Lewis: communicate your brand position with your employees, tell them openly and honestly what’s happening inside the company, and unleash some passionate results of your own. What do you think? Are employees integral to success or just another piece of equipment?

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Friday, March 20, 2009

Who Decides your Position in the Marketplace?


A thought provoking piece from the BrandInSightBlog.com:

Positioning — It’s not what you SAY. It’s what they THINK.

By John Furgurson

In the 1970’s Al Ries and Jack Trout popularized the concept of positioning. Since then, they’ve written dozens of books between them and have made a fortune on the speaking circuit.

Still, you could have a roomful of MBA’s and no two would agree on what positioning really means. Many people can’t even decide if the word is an active verb or a proper noun.

Most people think of positioning as a simple step ladder. The cheapest, lowest-end products are “positioned” at the bottom of the ladder, and the best, most expensive products are on the top shelf, if you will.

But positioning has little to do with real price or quality. Instead, it’s all about perception.

The whole concept of positioning is based on the simple fact that we form opinions about products and companies based on our own perception. These opinions are influenced by all sorts of things… word of mouth, personal experience, individual prejudices, blogs, the marketing efforts of the particular companies and a hundred other factors.

In our own minds we make some pretty broad — and often rash — assumptions about things. Call it consumer bigotry if you want to. The fact is, we pigeon hole companies and products the same way we pigeon hole political candidates.

As marketers, our goal is to tap into these existing perceptions and use them to our advantage.

Here’s a classic example. Back in1968, before the term positioning was ever invented, the makers of 7-Up scored a huge coup in the soft drink market.

Taste tests and other forms of consumer research revealed that people saw 7-Up as a refreshing alternative to colas. Respondents said it flat out… “it’s a nice change from all the cola I’ve been drinking.”

So the 7-Up executives decided to market the drink as the alternative to cola. It was a no-brainer, really. They simply took the existing perception in the marketplace and turned it into their strategy.

From a positioning standpoint this worked remarkably well for several reasons. First, it didn’t attempt to change anyone’s perception. It simply leveraged the existing public opinion.

Secondly, it effectively repositioned the competition. Without slamming them, 7-Up lumped Coke, Pepsi and RC all together in a single boring category of colas.

Finally, the new strategy made 7Up relevant to the young people who account for a large portion of soft drink sales. The campaign tapped into the prevalent anti-establishment mind set of the late 60’s. It actively encouraged defiance against the cola establishment and portrayed 7-Up as a symbol of dissent. The entire campaign summarized the popular values of the public and catapulted 7-Up into the position as the third leading soft drink in America.

Like all good positioning strategies, 7Up’s was simple and almost painfully obvious. Once the executives at 7-Up knew what consumers were thinking, there was no other way to go.

The creative execution of the strategy, however, was not so obvious. J. Walter Thompson’s simple two-word slogan “The UnCola” said it all. The campaign gave the product a personality, cemented the idea in our collective consciousness, and assured 7Up a place in advertising history.

While it is possible to build a positioning strategy around images alone, it’s usually a few simple words like “The Uncola” that solidify things in the consumer’s mind. Because you don’t “position” a product, you communicate its position.

“Just Do It” communicates Nike’s position as the shoe for serious sports. “Pizza Pizza” is a fun way to communicate Little Ceasar’s low-price strategy. “Avis, we try harder” communicated the benefit of being number two in the rental car business.

On the other hand, many automobile companies have struggled to find the words that capture the public perception of their brands. Oldsmobile, the now defunct GM brand, is a good example.

In its last 14 years, Oldsmobile floated no fewer than ten different slogans. Here’s a few of the real gems: “Olds Quality. Feel it.” “This is not your father’s olds.” “Demand Better.” “Look what happens when you demand better.” “Defy Convention.” “It knows the road.”

Ironically, the slogan that’s most memorable is the only one that even hints at the reality of Oldsmobile’s perception with American car buyers. “This is not your father’s Olds” used the old, fuddy-duddy perception of Oldsmobile and spun it in a positive way. Maybe if they’d have stuck with it for more than a year, the brand would still be alive today.

You wonder what kind of research Cadillac executives did that led them to believe they could compete with Honda and Toyota in the small car market. The Cimmeron failed miserably back in the 80’s. Then they’re tried again in the 90’s with Caterra, “The Caddi that zigs.” Now they’re trying to compete against BMW, Audi and Mercedes, with little success.

This is a classic case of force-feeding a product into a position in the market. But Cadillac as a sporty car just does not compute with the American public. It goes against everything Cadillac has ever stood for. The world’s biggest, most luxurious SUV is one thing, but we’ll never buy the concept of a small, sporty Cadillac.

On the same vein, Porsche is way off track trying to compete in the SUV market. The Porsche of SUV’s has a nice ring to it, but it will never really resonate with the public that sees Porsche as a rich-man’s sports car. What’s next, Chateaubriand at McDonald’s?

There’s an important distinction to be made here between niche marketing and positioning. Cadillac can decide to focus on the luxury sports car niche and can build a car specifically for that purpose. But that does not mean the product will ever be perceived that way in the minds of the consumer. The problem is, Audi and BMW already occupy that space in the consumer’s mind.

Here’s another trap that many companies fall into: They mistake their mission statement for a positioning strategy.

Fortune-500 companies miss the boat all the time on this. There’s a giant health care provider that recently formed an internal committee to study the “position” of the company and draft a “positioning statement.” What they came up with was a mission statement at best.

But your mission — your statement of purpose — may have nothing to do with your position in the market place. And vice versa.

A mission statement is concocted by a committee and exists in corporate brochures, annual reports, and press releases. A positioning statement is formed in the consumer’s mind. A mission statement is the rose-colored view of your company. A positioning statement is the gritty, 16mm view.

No doubt, the semantics of positioning can get confusing. But if you want to hedge your bets, think of it this way:

Positioning is not something you do, it’s something that happens. You can choose a narrow market niche, devise a new pricing strategy and launch a giant ad campaign that, together, may affect people’s perception of you. But you can’t technically “position” anything.

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Thursday, March 19, 2009

The Starbucks Saga Continues


Ya gotta feel sorry for Howard, at some point. After all from their humble begins to worldwide domination, they became the giant that everyone became addicted to, and now they are the giant that has lost their footing while other giants are wacking away at them.

Has Starbucks lost it's way? Will a poster campaign fix their image?

My answers: Yes and No.

Look Mr. Schultz, it's time to grow up and stand for what you are instead of being fickle and trying to change your image.

Starbucks is NOT going to get new customers by promoting low priced drinks. Instead they need to embrace their value and increase the prestige of drinking a Tall White Mocha, as the drink you have earned and deserve.

But no, they are running away from who they are and this will sink them further and further until either they can their marketing team or ask for a bail out.

Here's the latest from AdAge.com:

Starbucks: Not as Expensive as You Think

CEO Sets Campaign to Combat Image Coffee Chain Is 'Poster Child for Excess'

CHICAGO (AdAge.com) -- 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.

Howard Schultz
Howard Schultz
Photo Credit: AP
"There's a myth out there that there's this $4 cup of coffee at Starbucks," Mr. Schultz told shareholders at the company's annual investor meeting earlier today. "For whatever reason, Starbucks Coffee Co. has become the poster child for excess, and if you want to be really smart, you should cut out that $4 cup of coffee."

Not going to stay silent
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. "Don't let anyone tell you their coffee is the same as Starbucks because it's not," he said. "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."

The company's presentation ended with a music video (rather than the usual live musical performance) of street musicians from around the world performing "Stand By Me." Mr. Schultz said the song would be incorporated into upcoming marketing efforts.

Starbucks has long eschewed traditional advertising, but has placed a number of TV ads since moving its business from Wieden & Kennedy to Omnicom Group's BBDO, New York, in October. Mr. Schultz said that these ad buys have generated strong response with consumers. The chain gave away 2 million cups of coffee on Election Day, with a promotion by way of an ad during "Saturday Night Live." He said that the spike in traffic also resulted in incremental sales and the chain was profitable for the day.

Starbucks later partnered with Oprah Winfrey on an Inauguration Day-related volunteerism push. The chain did a limited ad buy, encouraging Americans to stop by Starbucks and get a free coffee in exchange for pledging five hours of community service before the end of the year. The day after President Barack Obama's Inauguration, Ms. Winfrey plugged the promotion on her show. Mr. Schultz said that the chain had racked up 1.25 million hours in pledged community service during the promotions two-week window.

Plans for Via instant coffee
Mr. Schultz also gave some insight into Via, the company's foray in instant coffee, as first reported by AdAge.com. While the global instant-coffee market is valued at $17 billion, he said only about $1 billion of that is in the U.S. And 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 that has included on-the-street sample distribution, bus and shelter ads, and a fleet of hybrid cars marked with the Via logo. BBDO has anchored the Chicago effort. Mr. Schultz said that Starbucks would use the pilot period to determine the efficacy of the advertising. 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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Monday, December 08, 2008

The Power of Color


For many years, I had my business card printed on a red background because red implies passion and excitement.

Do not underestimate the power of color in your world.

Read more from today's USA Today:

More holiday shoppers are buying gifts based on color

It doesn't really matter that Margie Leigh's granddaughter, Laura, got the pink iPod she so desperately wanted last Christmas — at age 4. For the now-5-year-old, pink is out this holiday, and purple is in.

Grandma in Kentucky will be buying her granddaughter in Virginia a purple iPod this Christmas for one reason — its color.

"I know it sounds crazy," says Leigh, who is retired. "But that's what she wants."

In the most economically depressing holiday season in decades, there's one buzzword — besides cheap — that's still got game at retail: color.

That's right. Bleak 2008 also happens to be the holiday season when shoppers want many of their gifts to be colorful. Or at least, a different color from last year's model. And not necessarily apparel: products such as electronics, appliances, kitchen décor, even luggage and their tags. IPods now come in a gazillion colors; so do cellphones and digital cameras. Ditto for laptops and home computers. Color is gaining traction for small appliances, such as blenders and popcorn poppers — and big ones, such as ranges.

"Color is the one area where consumers are saying, 'I'm going to indulge,' " says Marshal Cohen, retail guru at NPD Group. When Cohen advised retail clients about the 2008 holiday, his No. 1 suggestion for most was to expand color selection. Some are adding color and nothing else. Cohen says that's OK: "When you add color to a product, you stimulate the consumer's awareness that the version they already have is obsolete."

Color consultants aren't surprised.

While in a bleak economy, some companies and consumers are more somber in their choices — but a lot go the other way and embrace color. "People form a personal connection to a product in a color they like," says Jill Morton, head color consultant at Colorcom. This can be particularly critical, she says, "in times of doom and gloom."

Even in an atmosphere of lost jobs and dwindling 401(k) savings — or maybe because of it — vibrant colors symbolically and psychologically "speak to change," says color consultant Leatrice Eiseman.

Dude, it's a (lavender) Dell

It would be tough to find a company approaching this holiday with more new color choices than Dell.

Dell, which struggled like all computer makers through this year, is responding with a rainbow counterpunch.

A few months ago, it rolled out a series of colorful notebook computers (for up to $75 more than those in gray or black).

Late last month, Dell introduced the Inspiron Mini, a tiny laptop, in an assortment of colors, including "Cherry Red" and "Pretty Pink," with striking graphic designs. The colorful versions cost about $25 more.

For its full-size desktops, notebooks and minis, Boyd figures Dell has nearly 100 choices of colors, designs or pieces of graphic art.

"Dell's always been about giving customers what they want," says Ed Boyd, the design chief who worked for Nike before joining Dell last year. "Personalizing is now a requirement to play."

Color can be the key "differentiator" for a customer shopping for a computer, says Boyd. The reason a customer buys one computer instead of another may be because it's green, he says. "It's the same reason that Ford doesn't just make black cars anymore. The days of the utilitarian PC are over."

Adding color choice, or course, can add problems. When Dell started offering notebooks in a dozen colors last year, there were serious supply delays that angered some customers. This go-round, however, Boyd says Dell prepared better by staffing up.

There's no going back now. While black remains the most popular color, the reds, pinks and blues are selling well. There's even a Mini designed with real bamboo that's a hit in Japan.

IPod's not-so-golden oldies

Such consumer color devotion is a key element in iPod sales. Apple officials declined to comment, but NPD's Cohen says he's spoken with plenty of adult iPod owners who bought new iPods specifically to get a new color. "This boggles the mind," he says.

But it also jiggles the cash registers. And it's not just 5-year-olds who aren't into oldies for the color of their iPod.

Sally Trammer of Indianapolis admits to being one of them. Nearly five years ago, the senior systems analyst at Eli Lilly bought herself an iPod Mini specifically because it came in the color she craved: lime green.

Trammer was fully aware that this model stored far fewer songs than a full-size white or black iPod. "I didn't care, I just wanted to have that color," she says. She recalls overpaying, too — about $300. Then she purchased a fancy, lime-green leather case, to boot. "Regardless of what it cost, I knew I had to have it."

Earlier this month, while walking through Talbots, she spotted pink luggage tags, at $37 for two.

"I love pink," she says. She ignored a warning from her boyfriend that the tags are so nice, there's a chance they'll get swiped before her bags show up at baggage claim.

More creativity

Many others are clearly on board with color this holiday — and some have been for years:

• Dishes. It isn't necessarily bright colors that lead to hot sellers now. It's new colors.

That's one reason the two colors that venerable, very colorful Fiesta dinnerware rolled out this year are chocolate and ivory.

It wasn't until late September that Homer Laughlin China opted to offer Fiesta in chocolate. For one thing, some consumers had asked for chocolate (aka brown), says Rich Brinkman, sales and marketing chief. But also, "There are overwhelming challenges in the market," he says. "Our retailers are hurting, and the consumer is looking for a reason to purchase."

Some of the biggest names in retail are asking: Why not make that reason color?

• Cellphones. Big cellphone makers have to think about colors two to three years before a product comes to market. Motorola, for example, already is developing the color palette for its phones for 2011, says Kitty Suidman, senior manager for color and trend forecasting.

Two years ago, it tapped purple as an up-and-coming color. This fall, it worked with Verizon Wireless to launch a purple version of its Motorola W755 cellphone, previously available only in black. Now, purple is selling almost as well as black, says Suidman.

"Color broadens the reach of products," says Suidman, particularly in a tough economy. "If you introduce a second color, the reach increases significantly."

Black and silver are still dominant at rival Nokia. But its lineup also includes phones in blue, red, lime green, yellow, orange and pink.

Nokia's biggest visual and tactile changes this year are in materials, says Alastair Curtis, Nokia's design chief. That includes new combos of metals, rubbers and ceramics.

• Small appliances. Hamilton Beach's best seller, particularly at the lower end, is white, but its higher-end Eclectric line has taken off with color, including one dubbed Carmine Red (a deep red).

"We continue to develop colors to keep the line fresh," says Martin Brady, director of consumer marketing. "It's a way to create news at the shelf with the retailer and consumer."

• Large appliances. Upscale Viking Range is always rolling out new colors. The palette jumped from 14 to 24 for 2008.

Picking new ones is hard. "Every single color is a huge debate," says Brent Bailey, design director at Viking Range. But new colors can make an old product "look like a fresh product." Among this year's new hues: Pumpkin and Cotton White. Racing Red and Apple Red also were introduced in 2008.

"Color can make all the difference," he says. "I've had consumers come into trade shows who had to have cobalt blue — and nothing else — for their kitchen."

• Crayons. Sometimes a color can be made to seem new just by updating its name.

That's what Crayola did earlier this year when it nudged kids to create new names for eight of its old colors. Not new colors; just new names. Words that project upbeat emotions played a big role in the crayon color renaming this year.

A color formerly called laser lemon became "super happy." Vivid tangerine became "fun in the sun." Turquoise blue became "happily ever after."

Crayola CEO Mark Schwab says the color renaming is effective marketing — particularly in troubled times.

"Kids want their homes to feel warm, inviting, friendly and harmonious," says Schwab, whose company received more than 20,000 name suggestions for old colors. "People are looking for things that are uplifting."

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Friday, December 05, 2008

Ignorance or Ignoramus?


Over at Labov & Beyond's Idea Factory Blog, they wrote about the tech troubles with the new Blackberry Storm and Verizon that I've seen a lot of ads for recently.

Apple's I-phone had problems when it was launched too, but at least they addressed problems instead of hiding.

What happens if you pretend a problem doesn’t exist?

“So far, RIM has not commented on the problems of its first all-touchscreen BlackBerry, considered a strong competitor to Apple’s touchscreen iPhone. Verizon Wireless, the exclusive carrier of the device in the United States, has said little, except how well sales have gone. The company, like most, doesn’t publicly share sales figures.”

Which is funny, because before the Storm was launched we could not escape its omnipresent marketing campaign. Now that things seem to have not gone as planned in its first few weeks in the marketplace, however, everyone’s clamming up. And, as we all should know, what happens when you leave a void where your information and reassurances should be? That void is filled with negativity and online mob rule. And your supposed iPhone killer becomes dead on arrival.

Avoid the void, people. Avoid the void.

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Tuesday, November 18, 2008

Gas & The Mall


Interesting research in my email this morning from Mediapost that shows the relationship between shopping mall's and gas prices.

Last week it was announced that Glenbrook Square, the largest enclosed mall in Indiana, located here in Fort Wayne, may be affected by the economy. Click here for that news.

Another interesting sidenote is that shopping malls were designed to save folks money 40 years ago, because you could park your car one time and shop at dozens of stores. However in time, the perception grew that items at the mall cost more than at non-mall stores.

Here's the research:

You Can Lead a Shopper To The Mall, But...
According to Shoppertrak's Mall National Retail Traffic Index (NRTI) measure, enclosed mall common area traffic was essentially flat for the first half of 2008 versus 2007, declining a modest 0.5 percent. In July, with the price of oil accelerating to an all-time high, enclosed mall traffic declined 3.4 percent versus the prior year period.

There appears to be a strong reverse correlation between the price of oil and mall traffic, says the report. In August, as the price of oil started to decline, mall traffic's negative trend moderated. This trend continued into September as the price of oil continued to fall. During the month of October, shopper traffic in the common areas of enclosed malls has actually increased versus October 2007, contrary to common perception.

2008 Enclosed Mall Traffic Relative to Price of Oil


Monthly Average Price of Crude (US$)

Monthly % Change in Enclosed Mall Traffic VS Same Period in 2007

May

$125

+ 0.9%

June

134

- 0.5

July

133

- 3.4

August

117

- 2.8

September

104

- 1.1

October (thru 25th)

83

+ 0.4

Source: AdSpace Networks & Shoppertrak NRTI, October 2008

Department store traffic, on the other hand, has been less positive, finds the study. Department store month to month traffic changes versus prior year are significantly more negative than mall traffic overall, suggesting that while mall traffic is back, visitors are less inclined to go into retailers' stores.

Dominick Porco, Adspace chairman and CEO, said "... Our research shows that consumers are in the mall for about 77 minutes, yet they only visit an average of less than 3 stores... "

2008 Enclosed Mall Traffic and Department Store Traffic Relative to Oil Price


Monthly Average Price of Crude (US$)

Monthly % Change in Enclosed Mall Traffic VS Same Period in 2007

% Change in Department Store Traffic VS Same Period in 2007

May

$125

+ 0.9%

- 1.2%

June

134

- 0.5

- 5.4

July

133

- 3.4

- 8.9

August

117

- 2.8

- 4.1

September

104

- 1.1

- 5.0

October (thru 25th)

83

+ 0.4

-2.5

Source: AdSpace Networks & Shoppertrak NRTI, October 2008

Bill Ketcham, executive vice president and chief marketing officer, Adspace Networks, concludes "People are still going to malls, even though specific retailer traffic may be down... retailers that put compelling items on sale and communicate that... near the point of purchase, will fare best... "

A recent test, in 12 shopping centers with the Digital Mall Network, showed that when a major anchor department store discounted men's loafers, and used digital in-mall advertising, the promotional lift increased 38%. In the stores that did not promote the sale on digital screens in the mall, the loafers sale trended 15.1% above average. In general, the report notes, stores where the sale was advertised digitally, sales jumped 20.8% above average.

Other retailers reported incremental traffic and sales. 18% of a particular specialty women's segment that were in the mall during the promotional period, visited the advertised store, and 71% of those visitors made a purchase.

As a result of the study, Mr. Porco concludes that "...mall-based (retailers) that have digitally advertised price-point promotions ... (in the mall)... have seen immediate sales lift.

More information about this study may be found through KCSA Strategic Communications here.

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Thursday, September 04, 2008

Purpose..What's yours?

I often get comments from businesses that I am selling to that I am not your typical media salesperson. To me that is good, because typical is generic, bland, and forgettable.

Due to my background in and out of media, sitting in several different chairs and roles over the years, my perspective is different from anyone else that I work with. 6 years ago, I returned to this business with a purpose:

"To help business owners and managers make smart, wise and profitable decisions regarding their advertising and marketing."

Now, granted I earn my living when people buy from me, so there has to be a financial factor in there too. However Drew over at the Marketing Minute put it into perspective:

Why do you exist?

36608632 As you walk through the hallways of your company today...stop people at random. Everyone from the CEO to the part-time mail room clerk and everyone in between.

Ask them this:

Why does this company exist?

Note two things:

  1. How many different answers you get
  2. How many times you hear...to make money

A company that exists primarily to make money cannot hope to build loyalty among customers, employees or even vendors. Of course, you should be profitable -- but that shouldn't be why you exist.

You make money so you can keep fulfilling the reason you exist. Unless of course....everyone in your company thinks it's something different.

Then, sadly...the only mission/vision you all agree on is...that you should make money. Can you say "uh oh."

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Wednesday, August 27, 2008

Selling Value


Why do "Dollar" Stores and "Mega-Dollar" (High Prices) Stores continue to co-exist? Shouldn't one eliminate the other?

The answer is in the word, "Value".

Value is determined by perception which is created by the marketing.

The Marketing folks at P & G think they have created the perception of a good value with a new product they are launching according to this story from Brandweek.

P&G Pushes Value Behind New Cascade Launch

Aug 24, 2008

-By Elaine Wong


Doing more with less is certainly a familiar concept for consumers these days. It is also a theme Procter & Gamble co-opted for the launch of its new Cascade Complete All-in-1 ActionPacs as well as its existing Dawn Ultra line.

The ActionPacs, which reach full distribution next month, are part of P&G's overall strategy of playing up the value proposition of its products. The tablets are touted as helping consumers save time and money by eliminating the need for prewashing.

P&G research found that 80% of consumers would prewash dishes before putting them in the washer. "It's like adding the ultimate button to your dishwasher," is the tagline for the ad campaign which broke this month.

The first TV spot created by Saatchi & Saatchi, New York, shows the tablet bursting into the air like fireworks and then cleaning the surface of the moon like a plate. "We're trying to deliver the message that Cascade cleans so well, they'll be confident their dishes will come out right the first time, every time," said Ryan Dullea, P&G's home care brand manager for new business development.

Theultimatebutton.com and online advertising launches in September. Barefoot Advertising, Cincinnati, handles interactive.

The theme is becoming consistent among P&G's home care products. Last month, Dawn Ultra kicked off a series of ads touting its concentrated cleaning power. "With Dawn Ultra, you can clean more dishes without the water feeling...Unlike some larger bottles of dish liquid that have more water, Dawn Ultra contains 30% more cleaning ingredients. So you pay for more power, not water," says the TV campaign. The Kaplan Thaler Group, New York, handled.

The Cascade and Dawn initiatives reflect consumers' changing lifestyle habits, said Felicia Rogers, evp of Decision Analyst, a market research company in Arlington, Texas. "New products like these can help us all feel better about our efforts to conserve resources."

P&G spent $43 million advertising Cascade in 2007 and $56 million on Dawn, per Nielsen Monitor-Plus.

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Sunday, August 03, 2008

Free is Better than 50% off


I advice my clients not to offer specials or sales or discounts, most of the time. Why? It changes their product or service into a commodity that gets it value from price. And there is always someone who will sell at a lower price.

That's the philosophy behind Walmart. And do you think you can beat Walmart on price!?!?

On the other hand, one of my clients is McDonalds. And recently they have used FREE as a way to get folks to try a new product. Others are learning that FREE can be better than a Discount for both the retailer and the customer.

Restaurants' Latest Marketing Tactic: Free Food

Something totally unexpected occurred when Zaxby's, a chain specializing in chicken fingers and Buffalo wings, offered a new product for free on July 7: Sales rose 5 percent compared with that same day a year earlier.

Zaxby's wasn't counting on an instant sales boost. Its plan was merely to get customers into restaurants to try the Nibbler, the chain's first snack product, to see whether it could compete against rivals' comparable products.

"The goal was to drive new interest," said Jenifer Harmon, vice president and account group director for St. John & Partners, Zaxby's ad agency, which created the giveaway promotion. "What in fact happened was we increased traffic across the board. The [promotional] buzz for one little, tiny sandwich drove so much incremental sales and interest in the brand."

That effectively sums up why more chains are giving away menu items: Enticed by a freebie, customers will come in and buy other products, and if they're new customers they'll come back for more.

This growing marketing tactic goes beyond traditional buy-one-get-one-free offers, which operators and marketing experts agree can erode a brand's value. Customers did not have to make a purchase to get a free cup of Starbucks' Pike Place Roast when the chain reintroduced the blend.

McDonald's gave away free coffee when it introduced its premium-roast product. Jamba Juice offered free smoothies this spring, and A&W All American Food restaurants handed out free root beer floats in a one-day promotion last month. Domino's Pizza will award $1,000 in gift certificates to the winner of its recently concluded "staycation" promotion, and Taco Bell gave away its new Frutista Freeze for a week to anyone who requested one.

There's an urgency now to dangle a freebie in front of consumers, and the reason is clear.

"There's nothing like a recession to keep people at home, so it takes something as drastic as the promise of free things to get those same people in their cars and out to eat," said Tonya Hamilton, founder of Hamilton Strategic Marketing in Madison, Wis.

Zaxby's had a different reason for its giveaway. The chain's same-store sales have increased for three consecutive years, Harmon said, but consumers' eating habits are changing and they're looking for snacks. When Zaxby's decided to offer the limited-time Nibbler, priced at $1.39, the best way to let consumers know about it was to give it away, Harmon said.

The Athens, Ga.-based chain, with more than 435 units in 12 states, promoted the giveaway for a week with in-store material and online banner ads, which allowed customers to save the date of the giveaway to their Facebook or Microsoft Outlook accounts.

"What we found is that we got this incredible buzz going," Harmon said.

Buzz is precisely what giveaways are supposed to generate to get consumers to try a brand for the first time or increase their visits, and Zaxby's strong sales for the event is not unusual, said Tim Hackbardt, a former Taco Time and Del Taco marketing executive who founded White Barn Group, a strategic restaurant marketing and ad agency in San Juan Capistrano, Calif.

Consumers will buy additional menu items when they come in for their freebies, he said, and because the giveaway usually generates a lot of awareness for the brand, "you get spill-off into other dayparts" from consumers who aren't looking for a deal but buy something because the brand is now in their consideration set.

Hackbardt recalled his first job in restaurant marketing, when he was hired by a Pizza Hut franchisee to promote a particular location.

"He told me his secret," Hackbardt said. "'You give away as much food as you want. If I don't get food in [customers'] mouths, they won't come back.'"

Giveaways are not like discounting, he said, because customers understand that a freebie is a one-time deal.

Discounting, however, can condition consumers to buy only when a deal is offered and cheapens the brand, according to speakers at the Nasdaq Food and Restaurant Industry Forum, held last month in New York.

Discounting "cannot overtake your brand in the long term," said Todd Townsend, chief marketing officer for Sonic Drive-In. Although there's a need to provide discounts, as Sonic does with its Happy Hour, he said restaurants have to be careful not to overdo it.

Kay O'Leary, chief financial officer at Caribou Coffee, echoed that concern: "Consumers get trained on discounting. Customers will learn to actually wait for that discount."

Zaxby's "is not a believer in discounts," Harmon said. "You lower the value of the product. Free is a different thing."

Harmon pointed to the success of Chick-fil-A's First 100 Fans program, which awards a one-year supply of free food to the first 100 adults at grand openings. Chain president Dan Cathy said Chick-fil-A has given away more than $7 million in free food since the program began in 2003.

"Does it devalue the brand? Not at all," Harmon said. "Their loyal fans are even more loyal."

Giveaways are not a marketing tool used solely by large chains, however. Tampa, Fla.-based Evos, a six-unit quick-service chain that boasts health-oriented burgers, fries and shakes, opened a unit in Chapel Hill, N.C., earlier this month and celebrated the grand opening with a direct-mail campaign inviting 10,000 people to come in for a free meal.

Evos doesn't discount its meals, but the chain does believe that a giveaway is important in generating brand awareness, said Bernie Hinson, area development representative for SKS Healthy Foods LLC, master developer and franchisee of Evos restaurants in metropolitan Atlanta and North Carolina.

"It's an invitation to experience the brand," he said. "We would just like people to try the food. We're very proud of our products."

(Source: Nation's Restaurant News, 07/21/08)

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