Usage Rate Pricing: An Acceptable Strategy Unless You Are AT&T?

AT&T created a stir among its wireless customers and technology bloggers last week when it announced a two-tier pricing system for its data plans. One plan provides 200 megabytes for $15 a month, while the other plan provides 2 gigabytes of data use for $25 a month. The move to end unlimited data consumption appears to be aimed at easing congestion on ATT’s network. The idea of charging more for a service the more it is used is very reasonable, but if the aim of the new pricing system is to deter heavy data usage it would seem to run counter to what a business wants customers to do: consume.

Usage rate pricing is an effective segmentation strategy. Not all wireless customers have the same needs in terms of phone minutes or data download consumption. However, AT&T seems to be walking a fine line that makes its new pricing system punitive for its heaviest users. Rather than trying to discourage their use of the network, AT&T should engage these customers to determine how it can serve them more effectively. At the same time, it should determine the financial value of these customers to the company and possibly seek other ways to generate revenue from these customers that do not discourage their use of AT&T’s services.

One reaction to the new pricing system has been proclamations by some AT&T customers that they will exit their relationship with the brand as soon as their contracts expire, if not sooner. In AT&T’s judgment, the possibility of this outcome is a risk it is willing to accept. But, is customer alienation and creating negative associations about the brand worth the risk? That is the situation AT&T faces as it waits to see if any of its competitors follow suit with similar pricing strategies.

Bloomberg – “AT&T Sparks User Backlash with End to Unlimited Plans”

A Marketing Lesson from Roy Halladay’s Perfect Game

Today’s teachable moment in marketing comes from the Major League Baseball. Specifically, the lesson can be found in ticket sales. The Florida Marlins, whose average attendance ranks 28th out of 30 MLB teams this season, made news when it sold more than 3,000 tickets in a few hours earlier this week for a game against the Philadelphia Phillies. Why is this accomplishment noteworthy? The game was played last week, the Saturday before the tickets were sold on Tuesday. The Phillies beat the Marlins 1-0 that day, and Phillies pitcher Roy Halladay became the 20th pitcher in MLB history to throw a perfect game. The Marlins offered unsold tickets at face value and will continue sales until the end of the season. Ticket prices range from $12-$300, with most tickets selling for less than $25, according to an Associated Press story.

Some people have questioned the ethics of profiting from an opposing team’s accomplishments and that this move does nothing to help the Marlins’ image in south Florida. I will leave that for others to decide. What I find interesting in this story is that it reminds us that consumers’ value judgments may not always seem rational. After all, would we pay for a haircut we never got or for legal consultation but never visited a lawyer? The difference in the case of the perfect game baseball tickets is that there is a great deal of emotion and passion connected with consuming sports. The tickets were bought not for any functional value- there is none because the game has been played already. It is the intangible value of holding a ticket for an event that has occurred only 20 times in more than 100 years of professional baseball. It is a piece of history that one can hold onto and say “I remember this happening” (they can’t honestly say “I was there,” now can they?).

The takeaway from the Florida Marlins post-game marketing of Roy Halladay’s perfect game is this: you must understand what customers value from their relationship with your brand. For them, what they receive from you is not a product or service- it is what your product or service does to make them feel better about themselves or improve their quality of life in some way. It is an often-stated slogan: People buy benefits, not products. True, but extend the means-end chain further to ask “what is the significance of the benefits to our customers’ lives?” Exploring that question can have an impact on what you sell, how you position it, and who you target.

How Do You Inspire Customers? Let Us Count the Ways

Inspired customers- it almost sounds too good to be true. When this status is achieved with customers, they not only buy your products, but they will tell anyone who is willing to listen about their experiences with your brand. And, they often are willing to pay higher prices for your brand because they are sold on the value delivered. How can we possibly determine how an inspiring company looks, and exactly which companies do consumers feel are inspiring to them?

One way to answer these questions is to look to Inspiration Blvd, a brand consultancy that conducted a survey of more than 1,200 adults to find America’s most inspiring companies. The survey touched on key indicators such as product innovation, growth, reliability, and charitable efforts. Below are the 10 most inspiring companies and a brief description of why they scored high.

1. Microsoft – Maybe a surprise at #1; received high marks for its charity work through the Bill and Melinda Gates Foundation

2. Google – Treats employees well; perceived as innovative as well as a purveyor of free information

3. Apple – An innovative company with a knack for rolling out successful new products

4. Ford – An inspiration for what it did not do… accept a government bailout

5. Walmart – Helps consumers by selling products at low prices; viewed as an important employer in many communities

6. McDonald’s – Charitable efforts of Ronald McDonald House cited; another company that has delivered value through low prices during the recession

7. General Electric – Receives high marks for innovation; perceived to have high level of concern for environment and health issues

8. Johnson & Johnson – Although a big company, it is perceived as caring about health and well-being of people all over the world

9. Chick-Fil-A – Practices that include closing stores on Sundays and giving back to local communities are admired

10. Target – Well known for giving 5% of pre-tax profits to local charities and causes

What does this top 10 list tell us about being an inspiring company? First, a company in virtually an industry or category can be viewed as inspiring by customers. Second, there is no single formula or recipe for being inspiring. The companies in this list were admired for different reasons, even if certain themes did emerge such as charity support and innovation. How a company can develop a reputation of being inspiring will depend on the resources it has available to commit and the point of difference it wishes to create.

Competitive activity does not matter much when it comes to the relationship between consumer and brand. A review of the top 10 list finds at least three sets of head-to-head competitors (Microsoft-Apple, Walmart-Target, and McDonald’s-Chick-Fil-A). This evidence suggests that being perceived as an inspiring company is not like a brand positioning strategy that we assume cannot be mimicked by competitors. Inspiration is in the eye of the beholder; it is up to a business to follow through on its mission so convincingly that customers feel inspired by their performance. Go forth and inspire!

Consumer Response to Celebrity Endorser Scandals: Yawn

Celebrity endorsers can be an effective promotion strategy to gain awareness and shape image. Pairing a brand with a well known or likable celebrity can elevate a brand, but what happens if the endorser runs into personal troubles (did anyone say Tiger Woods)? Marketers fear that the positive effects an endorser provides can be negated and harm done to the brand if the endorser receives publicity for problems or scandal. As a result, a standard part of endorser marketing agreements is some type of morals clause, which gives the company that hired the endorser an exit from the relationship. This response was seen in the Tiger Woods case as partners like Accenture and Gatorade made moves to distance themselves from Tiger.

Is it possible that marketers overreact when quickly disassociating themselves with a troubled endorser? The answer may be “yes” according to a study by Harris Interactive (for more info click here). A survey of more than 2,000 adults found that 74% felt no differently about a brand that employed a celebrity enmeshed in scandal. Approximately 22% said they feel worse about brands associated with a celebrity involved in scandal, and 5% said they actually feel better about brands that had endorsers associated with scandal. Persons aged 45-54 were more likely to feel negatively toward brands (28% of that group shared that sentiment), and 18-34 year-olds were more likely to feel better about brands (11%).

Do these results mean that marketers should simply let their endorsers “live and let live?” Not necessarily; a partnership with a celebrity endorser is usually an expensive one. A celebrity’s problems have the potential to create negative brand associations, and that is a risk many marketers simply are not willing (and should not) take. The surprisingly large percentage of people who are indifferent toward celebrity scandal suggests a couple of themes, though. One, we love our heroes, whether they be movie stars, athletes, musicians, or from some other source of fame. Americans are able to forgive and forget relatively fast when it comes to the transgressions of their heroes. Two, I wonder if we have become desensitized to events such as celebrities getting in trouble for drug use, infidelity, or some other form of unacceptable or illegal behavior. If we rationalize the behavior as just being part of the world we live in today, coupled with affinity for our heroes, we may be inclined to shrug our shoulders and move on.

Reclaiming Customer Loyalty

One of the most significant effects of the recession (which may be over according to economists but many households are not convinced) has been consumers’ propensity to trade down to lower priced brands. In good economic times, many marketers strived to deliver value through enhanced product features or symbolic benefits of their brands. The strategy was to deliver value that customers would be willing to pay price premiums to attain. When the economy worsened, consumers tended to become more conservative in their buying behavior, cutting back where they could and buying lower priced alternatives to meet their needs.

The behaviors described above are more than gut feelings about what consumers have been doing. A recent study by comScore found that consumers indeed traded down to lower priced brands during the recession. The study tracked consumer behavior in terms of buying the brand they wanted most for a variety of consumer packaged goods categories and housewares. All categories saw a decline in the percentage of consumers who had bought the brands they wanted most. For lower priced products that may have few perceived differences between brands, the effects of the recession on trading down were not as great. For example, 36% of consumers reported they bought the brand of paper towels they wanted most in 2010, only 1 point lower than 2008. But, for other products that have greater perceived differences between alternatives, more consumers decided to forgo the brand they wanted most for lower priced brands. For toothpaste, purchase of preferred brand dropped 10 points from 2008-2010 (67% to 57%), shampoo dropped 13 points (65% to 52%), and jeans dropped 15 points (54% to 39%). More information on the comScore study can be obtained by clicking here.

A great deal of uncertainty exists about whether the shift in consumer behavior during the recession is temporary or reflects a permanent shift toward value being defined more by low price than product benefits. Many experts believe the trading down behavior may be a realignment of consumers’ priorities. If that is the case, marketers must redefine their unique selling proposition. Is price the only point of difference that will matter to consumers? Probably not, but what brand traits will attract customers and more importantly, drive brand loyalty?

A return to branding basics seems to be in order. Trust is the foundation of relationships between buyers and sellers; it is no different than a personal relationship. Conducting business in a way that shows concern for customers, care for the community, and commitment to the well being of stakeholder groups are ways to develop and solidify trust. For example, social responsibility appears to be more than a fad; it is a shift in mindset among many people that businesses should be good stewards of the resources it uses and encourage consumers to do the same. Going forward, brand loyalty is more likely to be secured by demonstrating genuine concern for customers than dazzling them with product features or an aspirational image.

Chick-fil-A Creating Buzz, not Pandemonium with Product Launch

A disclaimer about the following piece on Chick-fil-A: I am biased because I admire the company and its values, I am a fan of its marketing, and I love Chick-fil-A sandwiches! My affinity for Chick-fil-A hopefully has not influenced the following opinion, but in the spirit of full disclosure I share where I stand with the company.

New product development is a key growth strategy for a business. Expanding offerings that reach new customers or appeal to unmet needs can lead to revenue and profit growth. Surprisingly, Atlanta-based Chick-fil-A has experienced tremendous success and growth with a menu that changes very infrequently compared to other quick service restaurants. One of the most noteworthy new product launches in the company’s history is about to occur as Chick-fil-A is adding a spicy chicken sandwich to the menu on June 7. In some ways, the spicy chicken sandwich is like a lot of new products that hit the market; they are slight variations of a core product rather than radical innovations. What is different in this case is the approach used to create buzz about the product launch.

Chick-fil-A is using a “reservation” system in which consumers can go to www.getspicychicken.com between May 21 and June 5, select a Chick-fil-A location, and request a coupon for a free spicy chicken sandwich. Where do reservations come into play? A limited quantity of coupons (approximately 100) will be distributed per location each day during the promotion. Apparently, marketing managers at Chick-fil-A watched and learned from KFC’s grilled chicken giveaway debacle last spring. Too many coupons were distributed, and customers swamped restaurants but in many cases were unable to redeem their coupons as many locations were unprepared for the response the promotion generated. Chick-fil-A is managing time and place interactions with customers.

The reservations approach to launching a new product would not work for all brands, but it is a good fit for Chick-fil-A. The reservations system fits Chick-fil-A’s brand personality trait of being slightly quirky. Many consumers, like me, will likely appreciate the more orderly approach being used to offering free product in its stores than what KFC did last year (I’ll have to remind myself of this if I am shut out of getting a coupon). And, using a promotion that relies heavily on word-of-mouth via social media and online marketing enlists Chick-fil-A’s loyal customers to help spread the word about the spicy chicken sandwich.

Good luck securing a coupon for a free spicy chicken sandwich… save a coupon for me!

Marketing is Everyone’s Job

The idea that everyone in a business is a marketer, regardless of whether it is in a job title or description, is hardly new. But, I believe it is a mindset that we should remind ourselves to have and look for ways to go from lip service to practice. I was reminded of this adage when I heard a story on NPR about Texas Health Harris Methodist Hospital Hurst-Euless-Bedford holding a “speed dating” event. The purpose was to allow people searching for a physician to meet informally with a prospective health care provider. This type of event puts doctors in the position of selling themselves. Correction, they are always in a position of selling themselves. Any service provider is engaged in marketing when they come in contact with customers. The difference with the speed dating event is that physicians are expected to sell themselves before having the opportunity to dispense their professional services with patients.

Another great feature of this event was its use of an innovative promotion channel to reach prospective customers. Hospitals and physicians benefit from branding and should have a strategy for marketing, but the approach often taken is using mass media advertising. This face-to-face event was promoted via Facebook, Twitter, and e-mail, and the total cost was about $600. The opportunity for customers and prospects to experience your brand face-to-face is one of the most powerful branding tools a business can use. Well done Texas Health… although your brand name is a mouthful!

Remember, marketing is everyone’s job. Are you doing your job today?

NPR – Hospital Attracts Patients with Doctor ‘Speed Dating’

Sponsorship Rights Fees: Know When to Say When

In the high stakes game that is NFL sponsorship, MillerCoors has folded. The winner: Anheuser-Busch. A-B signed a 6-year deal to become the official beer of the NFL beginning in 2011 that will pay between $43 and $50 million per year over the life of the contract. The asking price became too high for MillerCoors, and a determined A-B committed the dollars necessary to again partner with the country’s most popular professional sports league. MillerCoors has enjoyed a successful run as NFL sponsor, and during that time it launched the popular ad campaign featuring former NFL coaches’ press conference sound bites used as fodder for offbeat questions asked by Coors Light drinkers.

Did MillerCoors make a mistake by not retaining its NFL rights? Distributors liked the NFL sponsorship because they saw a correlation with sales. And, MillerCoors brands were able to hang on to market share in recent years in a sluggish market for beer sales. Yes, sponsorships like the NFL deal can lead to desired brand impacts such as top-of-mind awareness, brand image enhancement, preference, and increased sales. Sponsorships require a return-on-investment mindset, just as any business investment entails. The situation faced by MillerCoors is not unique. Other companies have walked away from high profile sponsorships of properties such as the Olympics and NASCAR. It is possible to reach a point beyond which sponsorship spending levels do not generate incremental benefits. And, we must remember that the NFL rights of upward of $50 million must be supplemented with additional spending on advertising, sales promotions, social media, and other initiatives to leverage the NFL association.

The partnership with the NFL has been beneficial for MillerCoors. Unfortunately, many business relationships end similar to many personal relationships: divorce. The NFL’s desire for higher rights fees did not mesh with MillerCoors’ needs to responsibly manage its marketing dollars. A consolation for MillerCoors is that it still can tap into the popularity of pro football through its coaches’ ad campaign and separate sponsorship deals it has with 22 of the NFL’s 32 teams, not to mention the possibility of new creative directions.

Anheuser-Busch introduced the idea of “know when to say when” in a responsible drinking campaign in 1982. The advice given in that campaign has applicability in 2010 for MillerCoors as it understood the point at which it had to bow out of negotiations with the NFL. Sponsors must strike a balance between associating their brands with properties that can deliver marketing impact and brand stewardship that allows for balanced allocation of resources.

The Cause Marketing Taste Test

Two recent cause marketing campaigns caught my attention. Both are for the same cause, both campaigns are from well known brands. Yet, one campaign has generated criticism of the sponsor and the cause, while the other campaign receives kudos for the sponsor and the cause. What is the difference in the two campaigns? Let’s take a look.

The cause is one of the most recognizable in the United States in recent years: Susan G. Komen for the Cure. This nonprofit organization is viewed as the standard bearer for raising awareness and money to fight breast cancer. The campaign that has played to favorable reviews is Major League Baseball’s “Going to Bat Against Breast Cancer” campaign. Players donned pink batting gloves and wristbands, and pink bats were proudly used in yesterday’s games across MLB. Fans can even purchase pink bats at MLB.com, and $10 from their purchase will go to Komen.

The other cause marketing campaign involving Susan G. Komen for the Cure is a partnership with KFC. The “Buckets for a Cure” campaign involves KFC donating 50 cents from each bucket of chicken sold, with a goal of $ 8 million. As of this post, more than $3.1 million has been raised by the campaign. KFC has a microsite dedicated to the campaign and is supporting it with social media. A KFC Twitter post even gives a nod to the MLB pink bat offer as Louisville-based KFC promotes another hometown firm, bat manufacturer Louisville Slugger.

So, what is the problem? KFC and Komen have been criticized for their partnership. Specifically, critics are quick to point out incongruence between a cause promoting women’s health and the unhealthy properties of KFC’s fried chicken. When sponsor and cause are perceived as incongruent, the impact a sponsor hopes to achieve in terms of favorable image, greater brand goodwill, and even sales increases may not be realized. In this situation, consumers call into question the motives of the sponsor- does KFC really care about the cause, or is the sponsor exploiting the cause to make money?

The criticism of KFC’s Buckets for a Cure is unfortunate and shortsighted. First, give the folks at Komen some credit that they see that the partnership will be perceived as a bad fit by many people. To that end, the partnership focuses on KFC’s grilled chicken. Moreover, KFC has a national platform to raise awareness for the cause, not to mention raise money. KFC is succeeding at doing both, and the money that will go to Komen is hardly tainted. KFC’s customer base includes women who will potentially be impacted by the influence of Susan G. Komen for the Cure. And, KFC’s male customers are part of the picture, too, as many of them have mothers, sisters, wives, and daughters who have dealt with breast cancer.

MLB and KFC have something in common: they have great reach and influence among large numbers of people. One of the most significant contributions a business can make is to use its influence to give back to stakeholder groups that are unrelated to its core business. The need met by Susan G. Komen for the Cure will not go away, unfortunately. If there are brands like KFC that can make a difference in the lives of those persons impacted by breast cancer, they should do it and be recognized, not criticized, for their support.

I Love You

I know- that is a strange headline for a post on a marketing blog. Bear with me and I will explain.

I am composing these thoughts from the comfort of my home. About 30 miles up the road, life is anything but comfortable. The Nashville area has been devastated by flooding that followed more than 13 inches of rain over the weekend. The extent of the damage is jaw-dropping, and the loss and suffering experienced is difficult to imagine. The toll of economic loss and emotional distress are simply incalculable at this point.

Amid the unbelievable pictures and accounts of the flood’s impact, one comment stands out. A Facebook friend, Marcus, posted “I Love You Nashville.” As soon as I read that statement, I knew that Nashville will prevail in this ordeal. Deep rooted passion like that expressed by Marcus and undoubtedly shared by many other Nashvillians demonstrates that while there is pain and damage to overcome, their love for Nashville will inspire rebuilding that will make their city as great, if not greater, than before.

What’s the connection to marketing? Marcus’ comment led me to ask myself how many students would say the same thing about my organization, Middle Tennessee State University? Would your customers say the same thing about your company? About you? Would employees in your organization say “I love you” to their employer? Would residents of the community where you do business say it?

Customers can develop feelings of attachment, commitment, and yes, love for your brands and company. They purchase your products loyally, eagerly tell others about you, and stick with you during tough times. What are you doing to build loving relationships with your customers? Hopefully, you will never have to endure a catastrophic event like a flood to find out which of your customers love you. And, if they experience a similar devastating experience, it is your opportunity to tell your customers “I love you.” It has been encouraging to see several businesses in the Nashville area take this step already.