An intense battle has taken shape in the movie rental category. Blockbuster took command of the movie rental market through its brick and mortar presence throughout the country. The consumer buying process was shaken up when Netflix introduced a rent-by-mail approach. The convenience of having movies show up in the mailbox and more recently the ability to download some movies onto PCs allowed Netflix to grab market share from Blockbuster. The industry leader was starting to look like the industry dinosaur. Blockbuster has fought back. It has rolled out a mail delivery model similar to Netfilx, and this week the company announced the acquistion of Movielink, a firm offers movie download service via PCs.
Blockbuster’s recent moves are a signal that it is refusing to concede the online market for movie rentals. Customers of the two companies should be the winners in this battle, as both companies will likely be aggressive in pricing to lure customers. Also, customer service and product assortment should receive greater emphasis as each company looks to create a competitive advantage over the other. And, don’t count out cable and satellite television providers. They will make a play for customers, too, no doubt touting their advantage of on-demand delivery capability rather than waiting for a DVD to arrive via mail. Link
Cerebrus Capital Management, which recently completed its buyout of Chrysler from Daimler, grabbed headlines by naming former Home Depot CEO and GE VP Bob Nardelli as its CEO. It is unusual for an auto manufacturer to go outside the industry for its top leader. It’s even more noteworthy that Cerebrus tapped the polarizing Nardelli as its leader. While at Home Depot he led the company to impressive earnings results, but the stock price languished and he alienated shareholders and employees alike with his management style. Customer service declined markedly during Nardelli’s tenure as many consumers preferred the atmosphere and service offered by rival Lowe’s. Link
Bob Nardelli might be a good fit for Chryler in terms of strong management of costs and production issues. But controlling costs doesn’t sell cars, style and reliability sell cars! Chrysler has had success in recent years with the PT Cruiser and the Chrylser 300, but it does not have the market presence that Toyota, Honda, Nissan, or even the other US auto brands have. If Chrysler can define a relevant point of difference to consumers, it may have a chance to succeed provided the company backs up its position. A recent move to offer lifetime warranty on powertrains is perhaps one way Chryler can set itself apart, especially from its domestic competitors. Without a relevant position, the brand is likely to remain in neutral.
The state of Tennessee held a “Sales Tax Holiday” this past weekend. It is a 3-day period in which certain merchandise items are exempt from sales taxes. The holiday, held in conjunction with back-to-school, exempts school supplies, most clothing items, and computers. For a state in which the state sales tax rate is 7% and local sales tax rates as high as 2.75% on top of the state tax, it is a welcome relief to consumers!
Tennessee is one of 14 states (and DC) that offer such tax-free periods. Who wins with such a break? Of course, consumers win… as long as they do not take on too much credit card debt to pay for their “holiday” (not much of a holiday if you’re still paying for last year’s purchases!). We bought our kids’ school supplies and updated their wardrobes during the sales tax holiday, but they are purchases we would have made, anyway. Don’t get me wrong, I appreciated the 9.75% discount I knew that was being offered before I even walked into a store.
The bigger winners? One would be retailers, who can thank state governments for fueling a consumption frenzy that even the best devised promotions often fail to create. It’s a mini-version of “Black Friday,” the day-after-Thanksgiving sales event that is the highlight of the year for most retailers. Another winner would be lawmakers responsible for creating sales tax holidays. It is hard to think of a safer position for a politician to take with voters than “I’m against taxes, and I want to help you pay less taxes.” I will gladly indulge legislators as they do me a favor and suspend sales tax collections for a few days each year!
Initial response to Apple’s iPhone has not been at the level the company expected. Forecasts called for initial sales between 500,000 and 750,000 units. Actual sales have been stated to be around 270,000 units, a figure which includes phones and accessories. Price may be one factor limiting sales as well as Apple’s exclusive distribution arrangement with AT&T. The remainder of 2007 will be a critical sales period as opportunities to sell iPhones in conjunction with back-to-school and Christmas could boost sales performance.
Regardless of whether the iPhone reaches sales forecasts (remember sales forecasts are only predictions and just like the weather forecast is often wrong, so are sales forecasts!), the launch of the iPhone is noteworthy in terms of product development. The combination of multiple functions and incorporation of control via touch screen represent innovations in the consumer electronics category. Also, it enourages innovation efforts by suppliers that design components for the iPhone, accessories that can be purchased to complement the iPhone, and future generation products that build on technologies appearing in the iPhone. So, even if you do not buy an iPhone it is possible that products you encounter in the near future have their roots in innovations related to the iPhone. Thus, the “iPhone Effect” is likely to extend beyond the number of units in use and will show itself in the product development process. Link
PepsiCo has said it is changing labeling on its Aquafina bottled water brand to include information that the source of the product is tap water. The label refers to the water source as “P.W.S.” (Public Water Source). The move comes in response to pressure from advocacy groups for bottled water marketers to refrain from misleading marketing practices. In the case of Aquafina, package graphics depicting a mountain scene creates an image that the product must come from a mountain spring. While PepsiCo has shown no signs of attempting to manipulate this brand association, it is a pre-emptive strike by consumer advocates to prevent such a tactic from being used.
PepsiCo should be commended for taking this action. It is not a grand act of social responsibility by any means, but acknowledging the source of the water removes any uncertainty in consumers’ minds and removes the possibility of being accused of misleading marketing practices. The market for bottled water is strong enough that PepsiCo or any other company does not have to walk a line between ethical and deceptive marketing practices in order to make the product more appealing to consumers. Link
Nike has temporarily suspended Michael Vick from its roster of product endorsers in light of his indictment stemming from dog-fighting activity on a property he owns. Vick’s indictment was a case of very bad timing for Nike as it was about to launch a shoe endorsed by the Atlanta Falcons star QB. Perhaps the timing could have been worse if the indictment came down just after the shoe had been released.
The sticky situation in which Nike finds itself is a reminder of the perils of associating a brand with a person or entity outside the walls of your organization. The rationale for hiring an endorser is to take advantage of the endorser’s brand associations with the expectation that his or her associations transfer to the brand. Unfortunately for Nike, the associations transferred can be positive or negative. A “morals clause” can be written into endorsers’ contracts to shield companies from situations like the one that Vick’s indictment presents for Nike, but there is still a risk that a brand can be damaged or at least embarassed by an endorser’s actions.
The exposure and popularity benefits a celebrity endorser can bring to a brand must be weighed against the loss of control the marketer relinquishes by associating with someone beyond its direct control. The consequences are even greater when the relationship between the marketer and endorser go beyond name or likeness association and products or entire product lines are developed around the endorser. Link
I read an interesting article recently that discussed results of a study about consumers’ preferences for mail as a way for businesses to communicate with them. In particular, the study found that consumers prefer receiving certain types of correspondence from businesses by direct mail rather than e-mail (e.g., info about products and bills/statements) and they are less likely to ignore direct mail than e-mail. These findings are eye-opening for firms that use direct mail, especially firms that may question whether direct mail is a relevant medium to reach their target market.
Now, before anyone abandons their e-mail marketing efforts and shifts those dollars to direct mail, we must consider the source of the study. The study was commissioned by Pitney Bowes. Yes, that is same the Pitney Bowes that offers many products and services to the direct mail industry. The company has a vested interest in the promotion of direct mail as a viable communication tool for businesses. While the research design was no doubt sound, one can’t help but fight the temptation to nod and wink that research sponsored by a supplier to the direct mail industry would find that direct mail enjoys high preference levels with consumers… especially when compared with e-mail, a medium that poses some level of threat to direct mail. Survey research findings help businesses make more informed decisions and have the potential to be framed in a way that can influence decisions and behaviors. But, we must be careful not to blindly accept findings presented to us. Link
The National Football League recently announced a new policy that requires photographers working the sidelines of NFL games to wear red vests. You may be wondering, “What’s the big deal about making photographers wear a vest?” The vest itself is not the problem, it is the logos of NFL sponsors Reebok and Canon that appear on them. The American Society of Newspaper Editors and the Associated Press have voiced their displeasure with the new policy. They do not want photographers to become walking billboards for NFL sponsors. The NFL’s weak response to criticism so far has been to point out that photographers have no problem exposing brand names and logos of their equipment or shoes that they wear, so why should they have a problem with a vest containing two small logos on it? Also, the NFL claims the logos are smaller than photographers covering other sports are required to display.
This tactic is marketing overkill that borders on the absurd. It is one thing for the NFL to regulate the brands that can or must be displayed by its teams, players, and coaches. It is quite another matter to require people not directly associated with the NFL to adhere to the league’s sponsorship policies. How far will this go? Will fans be barred from wearing Nike products to games for fear a camera shot could broadcast a non-sponsor’s logo across the airwaves? The NFL has enough problems with player conduct off the field that policing what photographers wear would seem to be a low priority. It does nothing to add value for fans, just sponsors. However, the NFL could suffer negative consequences if it allows its product to become too sponsor driven and fails to take care of more important issues such as the impact of player conduct on the NFL brand. Link
My wife and I took our three sons to a Harry Potter book release party at a local bookstore last Friday evening. It was the second Potter book release party we had attended, so I knew to expect a fairly large crowd and a lot of young people. Friday night’s event was as expected on those points, but I was surprised by the number of adults actively participating in events at the party, especially the costume contest. I have been familiar with Harry Potter books since the beginning of the series, but I always equated it with children and teens. However, the more I thought about it I realized that seeing a large contingent of young adults shouldn’t surprise me as twenty-somethings were reading earlier J.K. Rowling books in their teen years. Some parents got hooked into the Potter series by reading books with their children or reading them before allowing their children to insure the content was age-appropriate. It was surprising initially to see so many adults dressed like the many children gathered, but I realized quickly it should not be surprising at all.
The excitement and passion displayed for Harry Potter at the book release party was very enjoyable to observe. I couldn’t help but think how marketers would do almost anything to create a fraction of the passion and affinity among their customers that was exhibited by Potter fans. Brands like Apple, Harley Davidson, and Ikea can claim success in the ability to elict passion from the marketplace, but for most companies that idea is as much fiction as the adventures of young Mr. Potter!
P.S. – An interesting book about the passions held by people is Who Are You People?, by Shari Caughron. People with passions ranging from ice fishing to Barbie collecting are profiled. You’ll never see “fanatics” the same way again after reading the book!
I listened to a very interesting segment on NPR’s Science Friday last week about efforts to produce environmentally-friendly packaging. It was pointed out that in some cases attempts at green marketing may have unintended consequences. For example, a container for a television that uses less materials but does not adequately protect the product could lead to damaged goods that would not only create costs to repair, but it is possible that products would have to be disposed, thus creating waste when the idea was to save natural resources.
Another point raised about green marketing is that environmental policy that affects business is often politically driven, not scientifically driven. The case of ethanol as an alternative fuel for automobiles was cited as an example. Uncertainties exist about how widespread adoption of ethanol as a fuel might impact the food supply (specifically foods whose production relies on corn), but some policy makers are promoting ethanol as the alternative fuel. In addition to concerns about how much corn would be needed to produce enough ethanol to meet our fuel demands, ethanol is a less efficient fuel than gasolinein terms of energy production. Such limitations have not stopped some lawmakers from jumping on the ethanol bandwagon (or would that be a harvester?).
The importance of conducting business in a way that protects the environment cannot be overstated. It’s more than just the basis for an advertising campaign; everyone benefits when we use our natural resources responsibly. The temptation that must be avoided is practicing green marketing simply for the sake of being able to say “we’re green!” It must be driven by the aim of being a good steward of the environment, which can also lead to a potential side benefit of a competitive advantage.