Johnson & Johnson finds itself in need of emergency relief to resolve its no-win situation with the American Red Cross. The company has filed suit against the Red Cross because of alleged violations of an agreement that stipulates how the Red Cross can use J&J’s red cross logo it has used for more than 100 years. J&J has become frustrated as the Red Cross entered into marketing agreements with manufacturers to produce Red Cross-branded products that use the iconic red logo, which violates the agreement with J&J (at least according to the company).
You have to empathize with J&J in this case. Brand assets are among an organization’s most valuable possessions, and it should do everything in its power to protect the integrity of brand names, logos, and other brand marks. Unfortunately, going after a highly respected non-profit with a mission of providing relief to others in time of great need will do nothing to score points for J&J. Rather than engaging in a legal battle with the American Red Cross over co-branded goods, maybe J&J should have been more proactive in exploring co-branding opportunities for its own products. Combining these two venerable brands into product offerings could potentially command price premiums, but it’s hard to envision such a move now in light of the battle brewing between the two organizations. Link
A recent shopping experience opened my eyes to the tone retailers take with customers on what I would call “warning signs.” We shopped for hockey equipment for our youngest son this past weekend. First, we visited a small hockey shop at the ice rink in Nashville where my son plays. It is an outpost for the store’s main location downtown. It has limited hours, but it was open so we decided to go in. I couldn’t help but notice a sign on the wall that said “You flex – You break – You buy.” The tone of the sign, coupled with the employee who looked only slightly happier to be there than outside in the 100-degree heat, made me want to leave sooner rather than later. Besides, I have confidence in my child’s ability to break things!
At the store’s main location downtown, another sign got my attention. It said, “Unattended children will be sold as slaves.” I was not offended by the sign, and I assume that the signs at both stores were placed as a result of incidents in which customers, probably children, damaged or broke merchandise. However, there is a more tactful way to communicate the message and build positive rapport with customers. A sign with a message of something like, “We value the safety of your children. Please accompany them as they shop. Thanks for visiting our store” is more positive and conveys the same idea. The general message of “Don’t break anything!” can be conveyed in more customer-friendly language. I would argue that it is indeed a child’s safety that is at issue for no other reason than if a child were to damage or break an expensive piece of equipment, he or she could face the wrath of dad or mom!
As you might guess, we made purchases at neither location. We went to a third store in the suburbs and purchased a helmet and stick. I wouldn’t be surprised the next time I visit the other two stores if I were to see a sign that said “Customers not allowed.” That would be ridiculous, but so is creating adversarial relationships with your customers.
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