I enjoyed a great discussion with my Principles of Marketing students yesterday about using price as a marketing strategy tool to fight competition. The case of Burger King going after McDonald’s dominance in the breakfast category was our topic. BK is offering a breakfast muffin sandwich for $1. A commercial for the product makes it clear that its inspiration is McDonald’s Egg McMuffin, but the point of difference is a $1 price. “It’s not original, but it’s super affordable” is the message.
To my surprise, the focus of the discussion quickly turned from using the Breakfast Muffin sandwich as a flanker brand to what is wrong with Burger King. The students’ lament: if you want a more profitable brand and higher market share, fix the brand experience. Several students shared stories of service failure they experienced at BK. One student said she called the corporate office to complain and gave my name saying that “you need to call my marketing professor so he can tell you how to fix Burger King!” I’m waiting on that call… not!
The issues raised by students in our discussion were a perfect segue to introducing the role of marketing communication. It is communication that supports the other elements of marketing strategy, but it must work in concert with other marketing mix elements. BK hired one of the hottest shops in the ad industry, Crispin Porter + Bogusky, and the agency has delivered great work. However, as one of my students in another class pointed out, you can put lipstick on a pig, but it is still a pig. The same goes for building a great brand. Advertising and promotion is part of the equation for success, but creative campaigns cannot hide inferior product design, bad pricing strategy, or poor customer service.
For consumers today, brand relationships are often built on experiences. If you deliver a bad experience, why should you expect customers to be willing to repeat it? There are simply too many options to have to endure experiences that do not meet expectations. No one expects BK to begin white cloth table service, but giving customers a consistent experience positively reinforces the brand in their minds. It is an impact greater than a king with an enormous plastic head or a $1 breakfast sandwich could ever hope to make.
“You’re now free to move about the country” may soon take on a new meaning. Southwest Airlines is conducting a test program that offers free Wi-Fi internet access on its flights. One plane is already equipped with the service, and three more planes will offer Wi-Fi beginning next month. After a 60-day test period, Southwest will decide whether to roll out Wi-Fi access to the rest of its fleet.
This offering seems to be one that is long overdue. Internet access in-flight could enhance the productivity of business travelers flying with Southwest or be an inexpensive alternative to offering in-flight movies. The most refreshing aspect of Southwest’s Wi-Fi service is that it is free, a word not often uttered in the airline industry. Rather than coming up with creative ways to extract money from customers in the form of new fees, Southwest is seeking to add benefits to one’s flight experience. Little wonder Southwest has fared better than most other airlines in the past decade.
Link: Marketing Daily – “Southwest Testing Wi-Fi On Board”
Is the newest member of the C-suite for corporations destined to be CCO, Chief Customer Officer? Adding a CCO to the executive suite follows the advent of CMOs (Chief Marketing Officers) about 10 years ago. CMOs give marketers a louder voice in organizations, but they are often under immense pressure to deliver results. The average tenure of a CMO is just under two years. Much like the high paid coach whose team struggles to win, CMOs are an easy target for replacement if market performance is not up to expectations.
So, will a similar fate befall CCOs? Or, will their role as chief advocate and voice for customers make them too valuable to replace? Skeptics might wonder why CCOs are needed at all; businesses have survived to this point without the position. The answer to why CCOs are needed could be that customers have a more powerful voice than ever before. They communicate on blogs, social networks, and post videos for all to see. This power can be destructive if consumers are using their empowered voices to criticize a company or promote one of its competitors. Engaging customers and proactively monitoring their needs, opinions, and attitudes is a must in today’s environment.
C-level positions tend to focus on functional areas in an organization. Why not have a C-level person who focuses on one of a company’s most important assets: its relationships with customers.
Link: 1 to 1 Weekly – “The Chief Customer Officer: A Potential Powerhouse?”
Jet Blue Airways has found another way to attempt to offset the rising costs of doing business these days: charge passengers for pillows and blankets. Disposable pillows are being replaced by a pillow and blanket package that will cost passengers $7. The change is cited in part as an environmentally driven decision, with paper pillowcases no longer destined for the trash.
When will the reach into passengers’ pockets end? Consumers are being hammered with higher fuel prices, rising grocery costs, and greater expenses in many other categories. There is nothing wrong with a business covering its costs through the price charged for products, but the airline industry has chosen to charge for a wide variety of different services and amenities offered. The perception of price could be positively impacted if an all inclusive fare was charged that covered baggage, pillows, and any other “extra” that airlines now feel obliged to charge as an á la carte item.
What’s next? Here are some possibilities… although let’s hope not:
– Pay to use the lavatory. Water is expensive, you know. Pay per flush model makes sense.
– Extra charge to recline seat. When you recline, you are using additional space on the plane. It’s really no different than charging a large person for two seats.
– Air consumption fee. Providing air at high altitudes is not cheap.
Perhaps we should not give airlines any ideas. Given the new charges introduced in recent months, they do not appear to need our help, anyway!
Link: Washington Times – “JetBlue Puts to Bed Its Policy of Free Pillows and Blankets”
The balance of power in marketing relationships has experienced two significant shifts in the past 20 years. First, it was retailers gaining the upper hand with manufacturers as massive retail chains wielded great buying power. More recently, the power has shifted from retailers and manufacturers to consumers. The empowerment made possible by the Internet gives us more information about sellers and their products than ever before.
A great example of how the power is squarely in the hands of consumers is the ability to post user reviews and descriptions of experiences with products or services online. A recent survey by the Society for New Communications Research found that nearly 75% of persons it surveyed choose brands or companies in part because of what they learn from user reviews online. More than 80% of those surveyed believe online communication mediums like user review web sites and blogs give them a greater voice.
The value consumers place on gathering and sharing information online must not be lost on marketers trying to attract and retain customers. Positive word-of-mouth simply cannot be bought; let your customers be your top salespeople! On the flip side, if you are failing customers in some way, is it not critical that you know that? Why would you want to suppress input from the people who you believe should be purchasing your offerings? Of course you would not deliberately set out to block needed feedback. But, many consumers believe that companies do not want to hear their opinions as only 33% of the persons surveyed by SNCR believe companies “…take customers’ opinions seriously.”
You can learn a great deal about what customers think about you without conducting complex marketing research. Just encourage them to talk… and then listen! Link
In the past 10 years, many marketers have embraced Customer Relationship Management (CRM) as if it is the answer to all of their marketing challenges. Why not- the promise of a powerful collection of customer data that could be analyzed to identify selling opportunities and key customers that should be the focus of retention efforts, just to name two applications, is too great to resist. Reality has not always matched the promise, as many companies spent millions on CRM infrastructure but have been unable to harness the resources and make them work effectively.
How bad has the CRM experience been? A recent study done by the CMO Council found that only 16% of the firms surveyed rated themselves as effective or extremely good at executing CRM. Only 6% claimed to have excellent knowledge of their customers based on the demographic, behavioral, and transactional data they had captured. Not exactly a glowing report for a concept that many experts believed would fundamentally change the practice of marketing.
Clearly, there is work to be done to put the “Management” in Customer Relationship Management. It can be a daunting task to pull together customer data from sources scattered throughout a business. However, the high stakes associated with knowing as much about customers as possible means CRM efforts are too critical to abandon. Link
It is oh so important to make sure customers are satisfied. While managing customer relationships is serious business, there is no rule against having fun while you do it. Here are three memorable examples that I have encountered as a consumer:
1. Several years ago (nearly 10 years ago to be more precise), I was dining at a Wendy’s with my family. As I picked up my order, the server at the counter said “See you tomorrow!” I laughed once I realized what she said. I was hardly a regular customer. In fact I was 150 miles from home! I left that restaurant feeling good about my experience… I guess the food was OK, I can’t remember!
2. I recently called my CPA’s office to ask about the status of my tax return. The woman who answered my call began with a deadpan response “We are unable to answer questions on Tuesday” (it was a Tuesday, obviously). I chuckled and engaged in some back-and-forth with her about the “policy.” It was risky on the employee’s part because she didn’t know me, but her use of humor disarmed me as I was unhappy about the length of time it was taking to complete my return.
3. On a Southwest Airlines flight, the flight attendant began her safety instructions presentation by saying, “If you will pretend to listen, I will give you the safety instructions.” Southwest employees have a reputation for injecting humor into their service delivery. It was humorous and a great way to start the flight.
What’s the point? Take care of your customers, but it’s OK to have fun while you do it. Your customers will have fun along with you!
Peter Weedfald, VP and Chief Marketing Officer at Circuit City, resigned last week after less than two years on the job. It seems he stepped down one March too late. Mr. Weedfald’s fate was sealed in March 2007 when the company decided to fire more than 3,000 veteran store employees and replace them (or rehire those desperate enough to come back) with new hires at lower wages. This cost-saving measure backfired horribly as it gained Circuit City unwanted negative publicity. More importantly, the move did nothing to help customer service. Apparently, Circuit City forgot it was in the service business. Sales for the company were down almost 9% in 2007 despite it being a period of wildly popular electronics products such as HD televisions, video game consoles, and laptop computers. As far as the impact of the customer service “strategy” on stock price, Circuit City is trading at less than $4 per share compared to nearly $20 before the employee firings last March.
Let Circuit City’s woes serve as a reminder that there is no such thing as “savings” when it comes to customer service. It should be viewed as an investment that can differentiate a brand from competitors, develop loyal customers, and build morale within the organization. The temptation to cut back will likely be even greater during weak economic condidtions. If service employees are considered a marketing vehicle more than an expense item the money spent can be worth every penny.
Would you be willing to close the doors to your business for 3 hours for employee training? Does the possibility of missed sales during that time make you weak in the knees? What if you had over 7,000 locations and closed for 3 hours- how devastating would that be to your bottom line?
If you want the answers to the above questions, you can ask the people at Starbucks. The company, struggling to regain the charm it held with consumers and investors for many years, closed almost all locations on Tuesday to hold employee training sessions. The purpose was to refocus Starbucks’ baristas on their role in delivering a great experience to customers. The training session is one of many initiatives led by Howard Schultz, who built Starbucks into a global giant and recently reassumed control as CEO.
Does it make financial sense to put passion for brewing great coffee over profits, even if it’s only for 3 hours? Absolutely! Starbucks was built on Schultz’s entreprenurial spirit, but as is the case with any business that expands to a larger scale it is difficult to preserve the organization’s culture. The training session was an organization-wide effort to instill “the Starbucks way” in the employees of this now massive organization. If that effect is realized, the potential for a long-term impact on profits exists in the form of greater customer loyalty that could arise from a better experience being offered in Starbucks’ stores.
Another benefit of the training is the exposure Starbucks received in the media. The store closings were covered widely, and it created exposure for Starbucks that millions of dollars in advertising (which Starbucks does not do anyway) could generate. While some competitors like Dunkin Donuts held special promotions that essentially mocked Starbucks’ closing for training, it is possible that Starbucks will reap the benefits of being closed for 3 hours for a long time to come. Link
As if General Motors does not have enough to keep itself busy as it has spent the last several years scrambling to remain relevant with consumers, it is facing another negative ding on its image with its handling of some of its On Star customers. The driver assistance service has approximately 500,000 customers that are being affected by the discontinuation of analog service. The change, brought about by government policy, will mean that On Star subscribers who have GM cars manufactured before 2002 (and some cars built between ’02 and ’05) will have service that does not work come December 31st.
GM’s solution? Sell them a digital upgrade kit for $15. It sounds like a small price for consumers to pay, but it would be an even smaller price for GM to pay. While comping subscribers’ digital kit fees would cost $7.5 million, it would buy a lot of goodwill… and keep subscription fees coming in. It would be shortsighted to not consider the potential effect on the On Star subscription revenue stream, but this is GM. Link