Coke’s Price Increase Might Be Hard to Swallow

Rising prices are all around us. We have gotten so numb to the idea that when a company announces that it has decided to pass along rising costs to their customers we merely shrug and accept it. Or, do we? Many products that have increased in price (namely gasoline and food products) are essential items. While we can curtail our consumption, the need for the product remains.

In the case of a non-essential product like soft drinks (although I have a long running affair with Diet Coke so it seems more essential to me than it really is), a price increase could be the trigger to lead consumers to seek alternatives. The largest bottler of Coca-Cola in the U.S., Coca-Cola Enterprises, has indicated it intends to raise prices after Labor Day. Rather than paying a higher price for Coca-Cola products, consumers may opt to drink similar products at lower prices. Private label brands could become a more attractive option for consumers feeling the pinch of rising prices. Even worse, consumers might cut back or quit drinking carbonated beverages altogether.

I don’t fault Coca-Cola for seeking to cover its costs, but Coke is accepting a risk that its sales will take a hit. A situation like this is precisely why companies need to avoid a reliance on selling price-sensitive products. If Coca-Cola can deliver innovative, unique products it would have a chance to realize higher profit margins that the commoditized standard cola product cannot deliver.

Link: New York Times – “Largest Bottler of Coke Plans to Increase Prices”

Give Customers a Voice… So Others Can Listen

Many people make extensive use of the Internet to research products and services when making purchase decisions. More of us are reading user reviews as part of the process of information search. A survey of online shoppers by Opinion Research Corporation found that 61% of those surveyed seek out customer reviews and other types of feedback posted online when making a buying decision. Certain product categories are of great interest to searchers who want to read what customers have to say about products, namely leisure/travel services (82%) and electronics (80%).

It was not all that long ago that giving customers what they wanted on the Web could be achieved simply by having a web site. Today, a web presence is a necessary, but not sufficient condition for marketing success. Transparency with customers is in; the days of sellers holding more information than buyers has passed. Whether it be creating a user review area on your web site or engaging customers and others using blogs, be open to ways you can have a conversation with those people who are talking (and listening) about your company and products.

Link: eMarketer – “Online Reviews Sway Shoppers”

Product Placement Rules to be Tightened?

The Federal Communications Commission is considering changing the rules for identifying product placement sponsorships in entertainment programming. Currently, a paid placement in a television program must be mentioned but is often relegated to the credits at the end of a program. Much of the audience is gone by that point, so the acknowledgement of paid sponsorship goes unnoticed most of the time. Possible changes to the current rules would require that paid placement be acknowledged on screen at the time it occurs or at the beginning of a program.

Product placement has become a popular communications tactic as it benefits from the blending of entertainment content and commercialization. The lines between the two become blurred when products become part of the story line. TV programs such as “Survivor” and “The Apprentice” have utilized product placement as a key element in episodes. Because the practice has become so popular, product placement may have lost some of its luster as a stealth-like marketing tactic. While the ability to reach an audience in a way that does not have the appearance of advertising is very appealing, it should not be done at the expense of losing trust or confidence that could occur if people believe they are being deceived. That risk can be minimized if a clear identification of sponsored product placement in entertainment programming occurs.

Link: Backchannel Media – “FCC to Consider Product Placement Rules”

Word of Mouth at Work

The power of word of mouth communication is undeniable. The credibility of messages spread person-to-person usually trumps the most creatively crafted paid marketing communications. We know that word of mouth is prevalent in our personal networks, but in what contexts do we engage in word of mouth? According to a survey released recently by BIGresearch, the workplace is a hot bed for spreading information. 95% of those persons surveyed said they give information about products and services to co-workers, and 93% seek advice from their workplace peers about products. Another interesting finding for marketers (but disturbing for employers) is that a substantial percentage of people are searching for product information online during the workday. I’m sure it is always done during lunch or other personal time!

It is easy to understand why marketers want to stimulate word of mouth communication given the frequency with which it occurs in the workplace. Also, the survey’s findings have implications for search advertisers. Workday hours should be viewed as an opportunity to reach consumers online even though they are at work. Our multitasking tendencies mean we can work and search. The connections that can be made with working consumers can impact beyond those searching because they can spread the word about new products, promotions, or other brand related information for you.

Link: Online Media Daily – “Study: Workplace Peers Influence Shopping Habits”

Supreme Court Decision Can Be a Home Run for MLB

Major League Baseball, like any good brand steward, vigorously protects its brand marks and how they are used. However, MLB lost its most recent battle of brand protection when the U.S. Supreme Court refused to rule on an Appeals Court decision that upheld fantasy baseball service providers’ rights to use the names and statistics of MLB players in their fantasy games. MLB had sought to license the information to the independent fantasy game providers, contending players’ names and statistics were intellectual property. The lower courts’ opinions maintained that the information is already in the public domain, and free speech rights of independent fantasy baseball companies trumps MLB’s rights to control names and stats of its players.

MLB has fought the good fight, now it is time to embrace the fantasy game industry and figure out how it can benefit from independent fantasy game operators. Two huge benefits are evident. One, the independent fantasy game providers are helping to maintain and build interest in MLB. The more people who play fantasy baseball, the more potential visitors there will be to MLB.com as well as purchasers of premium MLB content such a MLB.TV. Committed fantasy baseball players want more information and stats that they can find in the newspaper and even on the Web, and they will often pay to get info that may propel them to the top of their league! Second, competition encourages innovation, both from MLB and other firms. The potential exists for smaller firms to develop new features or games that broaden the market for fantasy baseball.

Today’s fantasy baseball market is made up of an estimated 3 million players, which is a fraction of the market for fantasy football (15-16 million). There is room to grow the business, which only makes it more valuable because it would attract more advertising and sponsorship dollars to fantasy baseball… and to MLB. So, rather than feeling as dejected as a batter who strikes out with the bases loaded, MLB should see the potential that exists for fantasy baseball when open competition is allowed.
Link: USA Today “Supreme Court Refuses to Consider Fantasy Baseball Case”

Sponsors Should Value Fit over Publicity

Hooters restaurants made big news last week when it announced a deal to sponsor thoroughbred Big Brown in the Belmont Stakes, the final leg in the Triple Crown series. The timing was great for Hooters as Big Brown was hoping to become the first Triple Crown winner in 30 years. Hooters never fully realized the impact the deal could provide as its logo was not allowed to be displayed on the silks of Big Brown’s jockey, Kent Desormeaux.

The Hooters-Big Brown link was not the first quirky marketing deal the chain has undertaken over the years. Remember Hooters Airlines? The exposure Hooters received (as if anyone or anything associated with Hooters needs more exposure) was great in terms of brand mentions and publicity, but those outcomes are not the foundation of a sound sponsorship strategy. Sponsors should seek to associate with properties that are highly relevant to their customers. Linking with a top thoroughbred for a Triple Crown race may be opportunistic, but it has no long-term rationale. When selecting sponsorsorship partners, clearly define the outcomes that are be achieved. Also, remember that the rights fees to be a sponsor are merely a starting point in the investment needed to make a sponsorship successful. Sponsorship is a relationship, not a one-night (or one-race) stand!

New Promise for Online Couponing

Coupons are a staple promotion tactic for consumer packaged good marketers and retailers. Despite a seemingly miserable redemption rate of between 1-2%, coupons are important because they provide consumers an incentive to purchase a product. Hopefully, the purchase made with a coupon will lead to future purchases made without a coupon. Couponing has become more challenging as a prime distribution method, free standing inserts (FSIs) in newspapers, have been hurt by declining readerships. Online coupons have yet to catch on a broad scale. However, that might change if a new online coupon distribution method gains traction.

A service from Coupons, Inc. called Brandcaster will serve coupons contextually on web sites. For example, a magazine article that discusses different varieties of coffee could include a link to a coupon for Folgers or some other brand of coffee. This approach to online coupons seems to be a more effective way to reach consumers than coupon destination web sites like coolsavings.com or coupons.com. Consumers are looking for ways to trim their rising grocery bills, so the timing of the Brandcaster service is good. And, the linkage of coupons to web content that is of interest to the reader makes targeting of coupons more effective than can be achieved in FSIs.

Link: DMNews – “General Mills Others Try Contextual Online Coupons”

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”

High Gas Prices Cost Dads in Many Ways

It does not take a degree in Economics to understand that higher prices for gasoline and groceries mean that many people have less money to spend on other purchases. The pain felt at the gas pump and supermarket will extend to dads everywhere on Father’s Day this year. According to a survey sponsored by the National Retail Federation, average spending for Father’s Day 2008 will be an estimated $94.54, down from $98.34 last year. The reduced spending coupled with rising prices means that those buying gifts for their dads will have less buying power. Despite the lower expenditures for Father’s Day this year, the NRF says certain retailers will be frequent shopping destinations for buyers. In particular, many shoppers will seek gifts at department stores (ties and cologne, no doubt) and discount retailers.

Just in case dads are tempted to pity themselves about the prospect of a lean Father’s Day this year, they can take comfort in the fact that moms felt the sting of a tough economy, too. Average spending for Mother’s Day was estimated to be $138.63 this year, down slightly from last year’s $139.14, according to the NRF.

Link: National Retail Federation – “Dad Takes a Back Seat to Gas and Food Costs, According to NRF Survey”

American Airlines’ Pricing Blunders

It has not been a good week for American Airlines. First, the company drew the ire of air travelers by announcing it would charge $15 per checked bag beginning June 15. Then, American had to backpedal on a decision to charge $2 per bag checked by skycaps at Boston’s Logan International Airport and ban skycaps from accepting tips.

These recent moves by American Airlines are bewildering. It is no secret airlines have struggled since 9/11, and the effects of rising oil prices hit particularly hard in the airline industry. But, the company’s decision to use bag checking to create a revenue stream is a huge mistake. Travelers understand that the costs to use air transportation have risen. It would be much more palatable to build costs into prices of tickets. Add-on charges for baggage handling on top of higher fares just will not sit well with customers! Also, American is taking a risk that other airlines will follow suit with similar charges. If not, American may be forced to back off the fees. Unfortunately, the damage to customer goodwill will have occurred already.

Link: Baltimore Business Journal – “American Airlines to Halt Curb