Don Roy, Ph.D.

Advertising Sends Signals… So Does Not Advertising

Marketing budgets are often vulnerable during economic downturns. When a business has a decrease in revenues, it can trigger a need to reduce operating expenses. The reduction is needed to bring the financial picture in line with the lower than expected revenues. Since marketing is a non-essential expenditure and less painful to cut than reducing employees’ hours or even making layoffs, cutbacks on advertising and promotions may be targeted. Therein lies a dangerous assumption: marketing is essential.

A study by Ad-ology on consumers’ perceptions of advertisers finds that the idea of taking a timeout from marketing during a recession may be hazardous to a brand’s health. Almost one-half of the study’s participants (48%) indicated a lack of advertising by an auto dealer, bank, or retailer during a recession is a signal that the business is struggling. So, the money saved when cutting back on marketing spending in the short term could be more than negated by customers who switch to other brands or simply stop buying because of reduced confidence.

Brand building requires a long-term time orientation. A focus on making sales targets in a given quarter or trimming costs does little to nurture relationships with customers. Ultimately, a brand is owned by customers. Their thoughts, attitudes, trust, and loyalty are what is valuable. When a business opts not to engage in marketing, it sends a message. Unfortunately, it is a negative message that can undo years of brand building.

Link: Marketing Insights Today – “New Ad-ology Study: Reduced Advertising During Recession Negatively Impacts Consumer Perception”

Social Media are for Socializing, not Selling

The beauty of social networking sites like Facebook and MySpace is the ability to connect with people who are significant in our lives. I have been fortunate to connect with many high school classmates on Facebook, most of whom I have not seen since our graduation 27 years ago (I wish that were a typo but it’s not). Now, I can see pictures, exchange messages, and send birthday greetings. I do not share that excitement about the prospect of interacting with businesses on social networking sites. Apparently, most other social media consumers feel the same way.

A study of 13-54 year-old social media users conducted by Knowledge Networks indicates less than 5% of those persons surveyed rely on the medium for guidance on making purchase decisions. Furthermore, only 16% indicated an intent to buy products from brands that advertise on social networking sites. Despite all of the promise and hype of social networking sites, marketers should take these statistics as a dose of reality. People who participate in social networks online typically do so for personal, not commercial, reasons.

Does this mean marketers should jump off the social networking train altogether? Absolutely not. It means that we must re-think the objectives of a brand presence in social media. It is all about engagement and building customer communities. A fan page on Facebook for a brand is a way for customers to show affinity or extend their relationship. Those desires usually outweigh accessing branded content on a social networking site to assist in making a buying decision.

Every communication medium is not conducive to making a sale. It would be unthinkable that a marketer would intrude on a gathering of friends at the neighborhood tavern or restaurant to try to sell products. Why would we expect virtual gatherings of friends to react differently?

Link: Brandweek – “Social Media Rarely Used to Guide Purchases”

Finding a Tipping Point for Digital Books

The book industry is beginning to observe the effects of digital books. The trend, led by the popularity of the Amazon Kindle digital book reader, presents a dilemma for the publishing industry. About 10% of all book unit sales in North America during the first quarter of this year were in digital format. Kindle revenues alone are projected to be about $400 million this year and over $900 million in 2010.

So, what is the dilemma facing the book industry? Price. The cost of entry for consumers is high as the Kindle begins at $359. Moreover, consumers’ perceptions about the price of digital books is that they should be much lower than print versions. In their view, a significant portion of book costs must be in manufacturing and distribution. Publishers would be quick to point out that the editorial process and marketing budget contributes a great deal to a book’s price. Any cost savings realized from not printing and shipping books are not so great that book prices would fall drastically.

Lower prices for digital book readers will likely aid in the adoption of digital books, just as falling prices for Apple iPods and other digital music players contributed to the growth of digital music distribution. Price played a key part in music distribution, too, as the 99 cent price point proved to be magical. Is there a magic price for digital books to be successful, yet profitable? Amazon has used the $9.99 price point with great success; that could become the standard “hot price” for digital books.

One major difference between digital music and digital books is the behavior change required to become an adopter. Digital music players were an evolutionary product introduction, flowing from portable radios, cassette players, and CD players. Digital books, in contrast, are a significant departure from the experience of holding a paper book in one’s hand. The colors, smells, and touch of a book contribute to the enjoyment of reading a book. Will the trade off of being able to download books quickly and at a lower price be enough for book enthusiasts to give up print?

Link: E-Marketer Daily – “Will Digital Books Turn Paper Books to Kindle-ing?”

Change in Google Policy Energizes Search Advertising

Search advertising is an effective but unremarkable channel for reaching customers and prospects. Measurement of effectiveness and budget management through the keyword bidding process make paid search appealing to advertisers seeking to make every marketing dollar count. Paid search is unremarkable in terms of its “flash.” Limited to text only and limited in length, the power of search ads is their ability to drive traffic to a landing page where the persuasive efforts really begin.

This model for search advertising is being shaken up by the industry giant, Google. It has relaxed a policy concerning the use of trademarked terms in text of search ads. The policy had been that only the trademark owner could use a protected word or term in search ads. Now, Google will allow search advertisers to use the trademarks of others in their ads. The policy change will likely create a new look for comparative ads on Google. Generic claims of product superiority are not as powerful as more specific comparisons of a brand to its competitors.

Some advertisers have complained about Google’s policy change, and there is a legitimate concern that competitive trademarked keywords might be bought to portray brands unfavorably. Conversely, comparative advertising is hardly new. Brands have been challenged by competitors in TV commercials, radio spots, and print ads for years. Search advertising is the newest frontier for battling competitors.

Link: Online Media Daily – “Google’s Trademark Policy Could Bring New Money to Paid Search”

Auto Dealer Cuts Painful but Necessary

News that Chrysler is terminating almost 800 dealers and General Motors doing the same to 1,100 of its dealers is a sad reflection on the current state of the U.S. automobile industry. Local car dealerships are employers of salespeople, mechanics, and customer service personnel. Those jobs will vanish. Also, these businesses have traditionally been counted on to provide support to local schools, sports leagues, and charities. The loss of community involvement by the affected dealerships will surely be noticed by those organizations that have benefited from their contributions over the years.

The reality of the market dictates fewer dealers are needed to service customers today, especially for U.S. auto brands. Lower demand for cars in general and market share losses to foreign brands have left GM and Chrysler with a bloated distribution network. In short, there are too many sellers for too few customers. Downsizing the dealer roster is the best solution to re-size these companies for today’s market. A risk exists that customer service among existing owners of Chrysler and GM cars could suffer. In turn, lower customer satisfaction could negatively impact owners’ decision to buy the same brand in the future.

Brand Building Starts at Top of the Organization

For all of the investments in brand marks, advertising, and other forms of communication, they are rendered ineffective if brand promises are not kept. That assertion seems reasonable, so any good marketing staff ought to be able to do its job to ensure that execution is consistent with strategy, right? No, the marketing staff is important, but it is not the key to creating a strong brand and bringing it to life everyday. The key resides in the executive suite.

An organization’s leader sets the tone for what is important. He or she articulates organizational values and goals. Everyday actions like meeting regularly with customers versus remaining holed up in an office send clear messages about the leader’s commitment to the organization. It also sets an example of how employees should do their part to carry out brand promises made to customers.

These thoughts come to mind as I read the Sports Illustrated list of the best and worst owners in U.S. professional sports. Specifically, I was drawn to the #5 ranking given to Tampa Bay Rays owner Stuart Sternberg. The franchise had been the butt of jokes for most of its existence. It had never made the playoffs since beginning play in 1998. The previous owner was viewed as unwilling to invest to improve the team. Tropicana Field, the team’s stadium, was considered to be one of the worst in Major League Baseball.

Sternberg arrived on the scene in 2004 and addressed many of the problems plaguing the franchise. He listened to fans, he initiated improvements to Tropicana Field, and the team worked to makeover its image in the Tampa/St. Pete area. These efforts, which also included a rebranding of the team from Devil Rays to Rays in 2008, resulted in greater fan acceptance. Winning the American League championship in the franchise’s first ever playoff appearance did not hurt, either. The value of the Rays franchise is estimated to be $320 million today, a giant leap from the $65 million Sternberg paid to buy the team just five years ago.

The best way to build a brand? A leader with vision and the willingness to serve customers, not just talking about it.

Link: SI.com – “SI’s Best and Worst Owners”

Chicken Giveaway Not Root of KFC Problem

The now infamous KFC grilled chicken giveaway will go down in the annals of marketing as a botched promotion. In a matter of a few days, KFC managed to anger customers, stress employees, negatively impact franchisees, and get lampooned in the blogosphere. What did it accomplish? Nothing, so far. But, there is a chance for redemption if KFC understands that the promotion, though flawed, was not the root of its problem.

KFC is known for fried chicken, with fried being the key word. The company has tried vigorously to distance itself from the negative associations with fried. First, it changed its name to the initials KFC so that the word “fried” would not be uttered any more than necessary. Then, there was the short-lived ad campaign in which it was suggested that eating KFC products had some health benefits for those persons on a high protein diet.

A brand cannot run away from its heritage. KFC will never be known as a “good for you” brand. It is not alone; fast feeders like McDonald’s and Burger King will not ascend to that level, either. The difference is McDonald’s and Burger King are finding ways to remain relevant with consumers. McDonald’s has added healthy menu options, but it remains focused on its core items. A brand cannot be all things to all people. For KFC, it faces a tremendous challenge if it wants to appeal to health conscious consumers with grilled products and remain known as a purveyor of fried chicken.

Link” Ad Age – “Grilled Chicken a Kentucky Fried Fiasco”

“Unthink” Holds Multiple Meanings for KFC Promotion

KFC created an extraordinary level of buzz with the launch of its “Unthink” campaign to promote its new grilled chicken product. The buzz was aided by enlisting Oprah Winfrey, the queen bee of marketing buzz. Oprah’s association, coupled with online coupons for a free two-piece grilled chicken meal, sent consumers into a frenzy and to their local KFC. Unfortunately, things have not gone smoothly at all restaurants as high demand has resulted in product shortages. The result in many of those cases has been angry customers and negative publicity for KFC.

The “Unthink” campaign ironically now has an additional, unintended meaning. The service failures KFC has experienced reminds us that the impact of promotion strategy has to be considered across all levels of a business, down to and especially the level of executing the promotion at store level. In this case, KFC appears to have pulled an “unthink” as it hatched a brilliant promotion to create awareness, interest, and trial for its new grilled chicken. However, all units were not prepared to execute the promotion. The outcome of a promotion gone bad can be the opposite of its objective. KFC has created some ill will with some customers who were unable to take up KFC on its free meal offer. Maybe the theme of the next promotion will be “Think.”

Teens Prefer Saving Green over Going Green

Younger consumers between the ages of 13-29 are generally more concerned about environmental issues than the population as a whole. But, do their concerns translate into a willingness to buy green products that often cost more than less green alternatives? According to a study done by Generate Insight, 76% of millenials believe companies and brands should get involved in the green movement.

These high expectations do not always translate into purchase intention, however. Given a scenario of buying a soda from a company that gives 5% of sales to environmental causes or from a competing company that does not support such causes but is less expensive, 71% of teen consumers said they would buy the less expensive soda. The numbers shift markedly among 18-21 and 22-29 consumers; approximately two-thirds in each of those age groups indicated a preference for the soda marketed by the environmentally conscious company.

The priority placed on protecting the environment by millenials is laudable. What are the barriers preventing their beliefs and attitudes to influence their behavior? Economics is one barrier. The price premium often associated with green products can make them a tougher sell to a market that has less total income than older age groups. A related barrier is that consumers often do not understand why green products carry a higher selling price. This lack of education about the cost of producing green products should be addressed by marketers. In addition to messages about how they are trying to make a difference through producing green products, a secondary aim should be to inform the marketplace about the higher costs of producing green products. Such an effort may not increase purchase intent for green products by itself, but at least it may reduce perceptions that companies are trying to reap excess profits from the green movement.

Link: Center for Media Research – “Green Perceptions and Packaging”