Category: Marketing Strategy

“Change” is ’09 Marketing Buzzword, Too

“Change” is in the air. It was the one word uttered by Barack Obama that propelled him to the White House. Change is being forced upon us in the business world as well. First it was escalating prices, then deteriorating credit access and finally, a sharp pull back on consumer spending. With no immediate end in sight, 2009 will require change in marketing and strategies.

An excellent article on the need for change in marketing was written by Jonah Bloom for Advertising Age. Among the most critical points Bloom makes is that short-term obsession on sales and profit growth should refocus and become a long-term view of brand building. In particular, brand building efforts that entail environmental and social responsibility components can elevate the relevance a brand holds for consumers. Bloom points to Jet Blue and Starbucks as two brands that may have gotten too consumed with growth and lost some of its relevance with customers in the process.

There are concerns that weak economic conditions may force companies to abandon social responsibility initiatives given that they often create expenses that lead to higher prices for their products. In Bloom’s view, companies must not back down from becoming better stewards of the places where they do business. In a list of 8 resolutions for 2009, Bloom quotes Nike chairman Phil Knight on the role brands will play going forward: “The performance of Nike and every other global company in the 21st century will be measured as much by their impact on quality of life as it is by revenue growth and profit margins.”

Link: Ad Age – “Recession Provides a Chance to Build a Better Capitalism”

McDonald’s Shows How to Succeed in Lean Times

Economic news is bleak daily. Today’s bad news includes Tribune Co. filing for bankruptcy protection and layoffs at Dow Chemical and Anheuser-Busch. But, a glimmer of good news comes from McDonald’s. Its same store sales in November were up 7.7% globally and 4.5% in the U.S. over the previous year. An obvious explanation for the positive results is pricing. McDonald’s low priced fare is less immune to a down economy like casual dining restaurants. As a matter of fact, fast food restaurants probably benefit as people who might not patronize Applebee’s or Chili’s to save money would venture to McDonald’s or Sonic instead.

Attributing McDonald’s growth to low price does not give proper credit to the company’s other marketing moves. Stores have received makeovers, as has the menu. The addition of Southern style chicken sandwiches and biscuits as well as premium coffees has strengthened its offerings. Customers’ needs do not go away altogether when they are trying to save money. McDonald’s shows good marketing goes beyond offering value prices. It is all about meeting the needs and desires of customers.

Link: USA Today – “McDonald’s Same-Store Sales Jump in November”

Saturn’s Demise Squarely on Shoulders of GM

As General Motors fights for its life, one scenario for a slimmed down GM calls for deletion of some of its brands. Among the brands on the deletion list are Hummer, Saab, Pontiac, and Saturn. While Saab and Hummer may be candidates for sale, Pontiac and Saturn would more than likely be eliminated like its late sister brand, Oldsmobile.

As an owner of two Saturns, the possible elimination of Saturn is disappointing. As one reviews the twenty year history of the brand from its conception to its precarious state today, there are many missteps that can be identified. Saturn hit a home run early on with its no haggle pricing, folksy image, and dependable, fuel efficient cars. Then, in the mid 1990s the SUV craze hit the market. Saturn continued on selling its fuel efficient cars. By the time the VUE SUV was introduced in 2001, GM had missed an opportunity to take advantage of the SUV market.

GM has been all over the board with Saturn, trying a mid-size sedan that failed (the L Series), and now selling a minivan (Relay), crossover (Outlook), roadster (Sky), and European styled sedan (Aura). These models were pushed at the expense of Saturn’s core product, the economy car. As GM has tried to expand Saturn’s product mix (and raise price points), the market has come back to lower priced, high gas mileage vehicles. Also, GM missed a golden opportunity to use the Saturn brand as a development brand for hybrid or electric vehicles. An experiment with an electric vehicle in the early 1990s, the EV1, was a modest success. GM decided not to pursue the EV1 further and destroyed all of them once their leases expired.

Perhaps the destruction of the promising EV1 more than a decade ago was a foreshadowing of what would ultimately happen to the Saturn brand. I hope I am wrong.

Link: Business Week – “GM, Ford Prepare for Congress”

Find a Niche to Remain Viable in Changing Markets

Yesterday’s post discussed how print media properties are challenged to remain relevant in a time of rising costs and shrinking readers of print versions of their products. One strategy I identified to overcome this challenge is to explore options for publishing niche publications. Today’s post is an example. The Philadelphia Inquirer, a large metro daily newspaper facing the declining market referenced previously, has launched a glossy magazine, called I. The magazine will publish six times a year and has the advantage of a built-in distribution as it is inserted into newspapers.

Why would the Philadelphia Inquirer do a brand extension at a time of such uncertainty? To pursue a market opportunity, in this case, reaching affluent consumers. I will target upscale areas of the Philadelphia market, making it attractive to advertisers. Revenues from ads are key to the success of a newspaper operation, and if revenues from the traditional daily newspaper product are unstable, it is imperative to look elsewhere for revenue streams.

A continuation of this trend in the newspaper industry will not be surprising. It is a matter of evolving the business model rather than trying to rely on a mode of news delivery that may be past its prime, the print newspaper.

Link: DM News – “Philadelphia Inquirer Launches Luxury Glossy”

Going Digital-Only Out of Necessity

PC Magazine made news last week when parent company Ziff Davis Media announced that print editions would end early next year after a 27-year run. The reality is that the vast majority of revenues and profits derived from PC Magazine come from the online arm. Is this a taste of what might happen to countless magazines and newspapers in the future as higher costs and smaller circulation bases make print products unprofitable?

As much as we like to hold on to traditions, unprofitable traditions are not of much value. In the case of print media, it is possible that the print product can only be sustained if it is reinvented in some way. In the case of newspapers, a greater focus on local news or other local content seems to be the point of difference on which they can stand. Niche magazines are likely to survive longer as they have always had smaller, but highly interested, audiences. As costs rise and customers hold purse strings tight, nothing should be off the table when evaluating profitability of various forms of product distribution. It could include the tough choice Ziff Davis made after nearly three decades of a print version of PC Magazine.

Link: The New York Times – “PC Magazine, A Flagship for Ziff Davis, Will Cease Printing a Paper Version”

Being Average – The New Lifestyle Aspiration?

A recent article in The New York Times suggests that Americans are shifting their lifestyle aspirations downward as the economy shifts downward. More specifically, the pursuit of affluence has been replaced with a reality of frugality. Higher order need fulfillment that marketers seek to position their products to meet such as achieving a desired social status, appealing to one’s values, or self-image enhancement are being replaced by more practical needs such as saving money and controlling expenses.

If this shift is indeed occurring, does it mean that marketers positioned to serve upscale markets should abandon their focus or face impending doom? No. Affluent markets will continue to exist, meaning opportunities to serve that niche will continue to be there. Obviously, the value-conscious segment of the market is another opportunity today. As consumers tighten their belts, any way that a marketer makes it easier to buy products, whether it be low price, layaway (yes it’s coming back), or friendly credit terms, will make those offerings more relevant.

It is the offering that is neither upscale nor low price that is the most vulnerable. A brand’s value proposition must be compelling enough for people to decide to part with their money. If value, either in the form of benefits or minimizing consumer sacrifice, is not clear to consumers, the prospects for weathering the current economic storm are not very good.

Link: The New York Times – “Goodbye Seduction, Hello Coupons”

Presidency Only Obama’s Latest Win

Barack Obama’s win in the U.S. Presidential election was not a surprise given the fact he had won on another ballot recently. Obama was named Advertising Age magazine’s 2008 Marketer of the Year. Obama edged brand darlings Nike and Apple, resurgent brands Coors and John McCain, and upstart online retailer Zappos. What makes Obama Marketer of the Year material? How did a brand that virtually was nonexistent two years ago eclipse brand powerhouses like Apple and Nike?

Many marketing lessons can be learned from Obama’s campaign. One, he identified a market opportunity that had gone untapped by politicians in recent years: younger voters. Two, the Obama campaign utilized new media that resonated with younger Americans: the Internet, social networks, and mobile media complemented traditional mass media advertising very effectively. Third, positioning of brand Obama was powerful. Obama’s position was based on “change.” The timing of such a point of difference was fortunate. “Change” does not work if times are good, but the prospect of change apparently sounds good to millions of Americans at this time. In contrast, John McCain positioned on “experience.” McCain’s position was not bad, it just was not as relevant to Americans as Obama’s call for change.

Link: Advertising Age – “Obama Wins! … Ad Age’s Marketer of the Year”

AC/DC Passes on Digital Distribution, Partners with Wal-Mart

Australian heavy metal rockers AC/DC have released a new album, Black Ice. It has been 8 years since the band’s last studio album, and a lot has changed in how music is distributed and consumed… but not for AC/DC. The band has opted not to make individual songs available for sale online. Their preference is to have consumers buy the entire body of work an album entails rather than the à la carte approach of iTunes and other digital music download services.

In another departure from conventional marketing strategy, AC/DC has chosen Wal-Mart as its exclusive retail partner for Black Ice. According to the band, the decision is all about market penetration. Wal-Mart is certainly the choice if you are looking to maximize your points of distribution. It is an interesting choice for Wal-Mart, too, as the rough and tumble image of heavy metal rock is in contrast to the folksy, small town picture Wal-Mart has painted for years.

The absence of a digital strategy for AC/DC may have been a non-issue so far in the early years of the digital era, but this is their first album of new music in the iPod age. Will sales suffer because of their principles, or will AC/DC be “Back in Black,” reaping the benefits of its exclusive distribution deal with Wal-Mart?

Link: USA Today – “AC/DC Freezes Digital Outlets out of ‘Black Ice’ Album Sales”

Emphasis on Value Can Take a Brand Off-Target

Consumers are more price conscious today as their purchasing power is strained to cope with higher prices for a wide variety of products. This trend plays into the hands of value priced brands, for their point of difference is that they cost less than competitors’ offerings. Thus, being at a disadvantage to a brand positioned on low price can be more of a problem now than during times when consumers exercise less restraint in their buying behavior. The obvious strategic move is to focus more on value offerings.

It is possible that such a shift in emphasis toward price positioning can harm a brand rather than help it. Take the case of Target, the “cheap chic” retailer that has succeeded by positioning itself as having trendier brands and better merchandise presentation than Wal-Mart. Target has bowed a new campaign with the slogan “Expect more. Pay less.” The idea is to reinforce the belief that Target has low prices that are competitive with Wal-Mart. The slogan sounds eerily similar to Wal-Mart’s current campaign of “Save money. Live better.” Does Target need to be perceived as being like Wal-Mart? Bear in mind that the reason many people shop Target is that they do not value the Wal-Mart experience.

The point? Be true to your brand. Yes, brand position can evolve over time and in response to competitive and customer trends. However, the retreat to promoting low prices will not serve Target well considering Wal-Mart dominates the low price position. Wal-Mart dominates it so well that it has had difficulty moving away from being thought of as only a low priced brand! Target’s point of difference resides elsewhere. It should focus on its relevant points of difference (e.g., image and presentation) and leverage them.

Link: Advertising Age – “Target to Put More Focus on Value”

Competitors Can Be Your Friends, Too

There is a tendency to view competitors strictly as adversaries. While it is not necessary to engage in a lovefest with other firms battling for the same customers, occasionally competitors do favors without realizing it. Take the airline industry as an example. I blogged recently about the ill-advised fees American Airlines is charging customers for services such as checking a bag. The fees being charged by American and some other airlines have given more nimble competitors such as Southwest Airlines an opening as big as the skies their airplanes fly through to lambast their fee-happy competitors.

Southwest is launching a new ad next week that mentions the fees American and other airlines are charging and points out that Southwest would never treat their customers that way. It seems that Southwest should send its competitors thank you notes for making moves that strengthen Southwest’s position as a customer friendly airline. Gaining a competitive advantage is a never ending quest; anytime the advantage is served on a silver platter by your competitor you have to take advantage. Kudos to Southwest for seizing the opportunity!

Link: Dallas Morning News – “New Southwest Airlines Ad Campaign Targets Other Airlines’ Fees”