Don Roy, Ph.D.

The Power of Customer Reviews: It’s Not What They Say That Matters

Customers shopping online increasingly look to product reviews written by customers when making buying decisions. These unfiltered comments give a balanced view of a product or retailer’s strengths and weaknesses. Such information would make a retailer cringe, one might think. But, that is not the case. Product reviews allow shoppers to make a more complete assessment about different brands before making a purchase. Shoppers are too savvy to think that a web site that has nothing but positive remarks reflects the views of every customer. Likewise, if a small number of customers have negative comments or views about a product, most shoppers recognize if negative ratings are outweighed by positive comments.

The value of giving customers a voice may be understood, but smaller businesses could be reluctant to add a review feature to their web site out concerns over costs. In the CNNMoney.com article linked below, the company featured in the piece added a user review feature to its web site for about $80 a month. The benefits of implementing a reviews feature are numerous. It gives prospective customers information to help make a decision while on your web site, the importance of which cannot be overstated. It encourages customers to talk about your brand. If they will write a review on your web site, will they engage in similar conversations in other places, both online and offline?

Perhaps most important is that giving customers a voice through a reviews feature is an excellent marketing research tool. What do customers like about your products? What negative experiences are they having? Equipped with feedback from a user review page, marketers can manage customer satisfaction efforts and address problems they may have never known existed otherwise.

CNNMoney.com – “Even Bad Reviews Boost Sales”

Are Market Share Gains Worth Profit Margin Losses?

An article in The Wall Street Journal this week reported how Hewlett-Packard has set out to become the market leader in PCs. A key strategy in H-P’s quest is using low price to attract buyers. Case in point is offering an entry level laptop for just under $300 in the recent back-to-school selling period, with plans to do more of the same this Christmas. H-P is moving toward its goal of being the market leader, with its 2nd quarter market share hovering around 20%. Dell, H-P’s chief competitor, had just under 14% share for the same period.

Market share is nice to have, but it is crucial not to lose sight of the profit picture. H-P’s operating margin was 4.6% in July, down almost 1% from the same period last year. The prevailing mindset in the pricing game has always been to set a lower selling price, and additional sales volume will make up for the lost revenue. Nice concept, too bad it rarely happens. In this case, H-P’s expectation could be that increased sales of PCs will lead to sales of complementary, higher margin products, such as printers, ink cartridges, and other peripheral devices. Another interpretation of H-P’s pricing strategy is a signal that it sees PCs becoming more of a commodity, making it difficult to maintain high profit margins.

For its part, Dell appears to staying out of a price war with H-P. It is focused on its own profit situation, and giving up profits to sell a few extra PCs does not seem to be an option for Dell at this time. Market leadership and profitability are two distinct metrics. Dell has chosen to find some other approach rather than price to compete in the PC market. At some point, Dell may feel compelled to fight H-P’s prices, but for now it is pursuing more profitable options to compete.

The Wall Street Journal – “H-P Wields Its Clout to Undercut PC Rivals”

Wish Your Customers "Happy Birthday"

My birthday was on the 1st day of this month, and, like any other event, I cannot help but notice the marketing activity that surrounded it. Marketers capture a great deal of personal data about their customers, but it seems the occasion of one’s birthday is an event that is often a missed marketing opportunity. If a business really wants to have a “relationship” with customers, why not treat customers as we would people we know and offer birthday greetings and maybe even a present?

I received birthday greetings via e-mail from a few brands with which I have a permission-based marketing relationship. A $5 discount from a deli, a free beverage from Starbucks, and birthday greetings (but no freebies) from Coca-Cola. Two “old fashioned” communications stand out, though. One was a birthday card from the realtor who helped us buy a house in 2000. He sends a birthday card with a $2 bill enclosed each year on my birthday, my wife’s birthday, and the birthdays of our three children. To date, the realtor’s investment in our family is approaching $100, but the goodwill and positive-word-of-mouth that gesture creates is more powerful than any ad he could place in a newspaper. Also, I received a mailing from a pizza restaurant, Bellacino’s, containing three coupons for my birthday. Two of the three coupons were buy one, get one offers (creating revenue), while the third coupon was for a free sandwich.

What’s the big deal, you might ask, given that promotions like these are seen frequently. In the case of the coupons mailed by Bellacino’s, the result is pulling me into the store three times this month (the coupons are good for September only), which is probably three more times than I would have gone had I not received the coupons. More importantly, Bellacino’s will be a brand I will consider in the future when considering dining out options, giving it much stronger consideration than in the past. While the delivery method could be made more efficient by using e-mail over direct mail, the intended effect was achieved.

Birthdays represent an opportunity to bond with customers. If you are not capturing birthday dates from customers, take the time to ask, especially if you are collecting other customer data already. Then, seize the opportunity of a customer’s special day by delivering a birthday greeting message and an incentive to do business with you. The result might be a happy birthday enjoyed by all!

Protecting Brands in a Down Economy

A weak economy has forced marketers to evaluate the pricing structure of their products. Consumers are being more cautious with their spending, and value priced offerings have become more commonplace as businesses strive to meet consumers’ needs and remain competitive. It is important to note that there is a difference between offering value priced products and lowering prices on products. In an article in 1-to-1 Weekly, John Gaffney points to examples of how companies have responded to the economic downturn by offering new products. For example, Quizno’s created a value line with its Torpedo sandwiches. This line provided an alternative to the core sub sandwich line, which remained essentially unchanged.

What are the implications for brand management? Customer value does not have to be price-based. Offering price-based value, like Quizno’s Torpedo subs, is one way to win customers and market share. The ideal is to avoid damaging brand equity of core brands by discounting price. It opens flood gates that are very difficult to close. Protect brands in bad economic times so that they are poised to succeed when good times return!

1-to-1 Weekly – “Innovation Beats Pricing in New Economy”

Advertising: Loathe It but Don’t Leave It

“Advertisements are now so numerous that they are very negligently perused, and it is therefore become necessary to gain attention by magnificence of promises, and by eloquence sometimes sublime and sometimes pathetic.”

That quote sums up the opinion many people have of advertising today. But wait, this quote is from 1759, attributed to English author Samuel Johnson. Apparently, the downward spiral toward atrocious advertising has been going on for at least 250 years. That is, if you subscribe to the view shared by those who have little regard for the value of advertising.

An article by George Simpson appearing at Online Media Daily reminds us that somebody must find value in advertising, otherwise it would cease to exist. Simpson’s article, and the less-than-flattering views that contrast with the idea that advertising adds value, gives pause to consider what advertising’s role is today and will be going forward. Advertising on TV and in newspapers appear to be the most likely candidates for significant change.

Any change in advertising will be driven by consumers’ media consumption habits. If people spend less time watching TV (a study by Nielsen Co. indicates TV viewing is threatened by time shifted viewing and watching video online), advertisers will need to respond by either shifting where they place messages or change the nature of their messages. Commercials could become available in an on-demand format in which a 30-second version might be the norm to embed in a program, but a long-form version allowing for more extensive consumer engagement might be a click away. Similarly, as newspaper readerships decline, advertisers’ needs to communicate do not decline along with the circulation numbers. It necessitates a change in how to reach the audience once accessed via print newspapers. Perhaps it is through a newspaper’s web site, with the ability to drive traffic to an advertiser’s web site for more extensive engagement of the consumer.

I agree to a certain extent with Samuel Johnson. There is some really bad creative work being called advertising today. But, there are good and bad books, good and bad paintings, and good/bad works in virtually all art forms. The demise in advertising quality may be debatable, but the demise of advertising as a communication form is greatly exaggerated. The need for businesses to communicate with audiences is greater today than ever before given the intense competition for customers in most industries. Its form may change, but advertising will be around (and likely loathed) 250 years from now.

Online Media Daily – “Unloved. But Effective.”

Prescription for a Profit Fever? More Marketing Dollars

A retreat in marketing spending was a course of action taken by many companies in the wake of the recession that unfolded in the past year. The response is not uncommon; if revenues fall expenses must be kept in check, including marketing expenditures. But, there comes a point in which companies must commit more resources for marketing to spur sales and enhance profits. More evidence of firms taking the plunge has emerged recently. The latest example comes from Del Monte Foods, which has announced it is increasing its marketing spending by up to 50%. Results of a commitment to greater marketing investments is appearing already as Del Monte posted net income of nearly $59 million in the most recent quarter, compared to a loss of $8 million for the same period last year.

If only it were so easy to follow a formula of spend more money, reap higher sales and profits. That is an oversimplification of what must be done. If more money is going to be spent on marketing, where should the dollars go? More consumer promotions? Search advertising? Social media? Strategic objectives must be in place before making plans to spend marketing dollars. Increasing marketing spend is not a strategy! The strategy resides in what can be done to advance a company and its brands. Once plans are developed to pursue these aims, then and only then should attention turn to refining the marketing budget. Otherwise, decisions on expenditures have little or no strategic basis.

Kudos to Del Monte for increasing its investments in an effort to further fuel its growth. The key is understanding how to appeal to customers in today’s environment, then devising programs to reach them in an effort to win their trust and gain share of customer.

Marketing Daily – “Del Monte to Hike Marketing Spend by 40+%”

Sports Properties Should Embrace, not Fight, Social Media

The National Football League has issued a policy against live blogging of game accounts. The policy bears some similarity to one issued by the Southeastern Conference concerning the use of social media at its sporting events. The aim is to prohibit transmission of game accounts, presumably to protect the massive investments of broadcast partners. Both the NFL and SEC have multi-billion dollar media rights agreements with traditional mass media partners. The no-social media policy appears to be an effort to thwart parties without financial stakes from becoming an information provider.

The policies of the NFL and SEC reveal a significant gap in understanding of the role and power of social media. Instead of going out of its way to ban social media, sports properties should be exploring options for greater integration of social media. A blogger posting game updates will not supplant a live broadcast on TV or radio, but it could drive traffic to broadcasts. Sports properties should view social media coverage of their events as free exposure, reaching consumers who may be best reached through social media. In particular, social media usage skews toward younger age groups. Young people are a challenge for sports marketers to attract. Why not meet them where they are and allow, if not encourage, social media distribution of information?

I am all for protecting the interests of business partners. Sports properties recognize that ambushing takes place whereby companies or brands that have not made investments as “official” partners try to benefit from an indirect association with a property. Social media usage does not seem to fit in the same category, however. In an open-source world, media and sports entertainment partners should make maximizing exposure a priority, and if other parties can help create that exposure, so be it.

Daily Online Examiner – “NFL Fumbles, Tries to Limit Live Blogging of Games”

Campbell’s Chunky Retires NFL Stars in Favor of the "Everyman"

Campbell Soup is moving away from a decade-old campaign for its Chunky soup brand that featured NFL players. In its place is a new campaign touting a reformulated product intended to be better tasting and healthier. While one cannot argue with the success of the NFL-themed campaign and the impact on sales, the time was right to reposition the brand in conjunction with the product makeover.

The weaknesses of the NFL campaign was that it missed a key group in the decision making process for meals: women. The everyman campaign should overcome that weakness. Also, older male audiences (35+) were more difficult to reach with the NFL campaign. The focus on the everyman seems to fit the current economic and cultural climate. The NFL campaign was great, but like the greatest gridiron stars retirement is inevitable. Sure, there is risk involved, but there is also risk involved in allowing a brand to stagnate.

Marketing Daily – “Campbell Position Shifts to ‘Healthy Everyman'”

Ads on Milk Cartons- What’s Next?

Getting through to consumers is more challenging than ever today given the immense clutter created by marketers vying for their attention. The need to find unique, less cluttered landscapes to place ads could lead to no space being off limits. A good example is placing ads on milk cartons. The use of milk cartons to carry messages is not new; ads providing information about missing persons have appeared on milk cartons for nearly 20 years. A company involved in the placement of ads on milk cartons, Box Top Media, claims milk cartons can be found in 96% of American households. The extensive reach and absence of other ads on milk cartons make it an interesting advertising option for large and small brands alike.

While the use of milk cartons to place ads is a clever way to cut through advertising clutter, there would seem to be a point at which ads are so prevalent that they become part of the landscape and are not noticed. Remember when ad-wraps first appeared on autos? They stood out at the time, but as that form of advertising became more common it lost impact. Also, one wonders what clean spaces are in line to become ad spaces. Some possibilities could be:

1. Paper towels – A lot of impressions possible on a single roll
2. Toilet paper – Positive and negative takes on this, I suppose
3. Sporting goods – Ads stamped on baseballs, soccer balls, etc.

On second thought, I’ll stop here. Let’s not give advertisers any more ideas than they have already!

Media Buyer Planner – “Milk Carton Ads Reach 96% of Households”