Don Roy, Ph.D.

Online Retailers Giving Consumers a Voice with User Reviews

Word-of-mouth communication about one’s experiences with companies and brands has been around as long as companies and brands have been around. Now, word-of-mouth meets Web 2.0 as more companies are giving customers a voice to rate products on their web sites. According to a survey sponsored by Internet Retailer, retailers’ number one spending priority in the coming months is to add user reviews to their web sites. Interestingly, it is the top priority of all three types of retailers surveyed: store based firms, web based firms, and catalog firms.

User reviews, coupled with the number two priority of integrating blogs or forums to web sites, shows that retailers want to engage their customers in meaningful exchanges of communication. The days of marketers “talking down” to their customers are history! Greater flow of communication from retailer to customer and customer to customer will add value to the shopping experience and serve as a means for nurturing relationships.

Link: eMarketer – “Web Stores Score with Customer Ratings”

Social Networking not Ubiquitous as Hyped

Social networking has been all the rage in the last 2-3 years. Marketers have fallen over themselves trying to figure out how to have a meaningful presence on social networks. Whether it be having a MySpace or Facebook page or taking the bold step to create a social network, the aim is to listen and interact with customers as well as provide a channel for stimulating word-of-mouth brand communications. But, for all they hype and promise of social networking, it has a long way to go to become a staple of American life.

Results of a multi-nation survey conducted by Synovate found that 40% of Americans surveyed belong to a social network. This figure means the majority of consumers cannot be reached via social networks. Of course, social networking sites can reach certain audience groups (e.g., teens and young adults). Overall, social networks have not been adopted on the broad scale that computer and Internet has experienced. A more troubling finding from the Synovate study is that 36% of American social network users indicated they are tiring of using social networks. Does this mean social networking is more of a fad than a seismic shift in the way we interact?

It will be interesting to see the formation of long term behaviors with regard to social networking. Will youngsters who frequent MySpace and Facebook eventually outgrow these virtual communities? Will they move on to other types of social networking sites? Will they abandon social networks altogether? Will older Americans find social networking sites appealing and join the conversation? Time and technology will tell. The next trend in social networking is accessing via wireless devices. The cell phone could be the key to greater adoption of social networking.

Link: eMarketer Daily – “Social Networks Are Not Yet Universal”

Give Customers What They Want… Coupons

Consumers’ desire to find value has intensified in recent months because of rising prices for everyday purchases. A marketer’s solution to meet the need for greater value? The time-tested approach of offering coupons. Using coupons as a purchase incentive is a way to add value yet not have to lower prices across the board. Only those persons who perceive the effort required to obtain coupons will use them. Also, in theory a coupon stimulates a purchase that could lead to repeat purchases in the future without a coupon offer.

A recent study by Prospectiv found that coupons are being sought frequently by consumers today. More than 70% of the people surveyed indicated they are using coupons more than they did six months ago. A finding that should be of interest to retailers is that 87% said they would be more likely to patronize a retailer that offers coupons. In an environment where many retailers are very similar to their competitors in terms of products offered, prices, and services, it appears that a tactic as simple as offering customers incentives via coupons could lure more traffic to stores.

Couponing provides one hazard that must be closely monitored: too much emphasis on coupon offers could create a trap in which customers become conditioned to make purchases only when there is an incentive. This situation hurts profitability and creates less predictable demand. The ideal is to build a brand on the benefits it delivers so that price is not a major criterion in the buying decision. That ideal must be balanced with the reality that consumers are pinched financially and may view a coupon as a reward or benefit of their patronage. The desire for incentives makes the use of loyalty programs more important as they can be designed to keep customers coming back to you, not your competitors!

Link: Brandweek.com – “Majority of Consumers Using More Coupons”

English: The Official Language of the LPGA

If the LPGA needed to create more exposure for its brand, it certainly accomplished that task by announcing this week that it will require its members to pass an English proficiency test. The new policy is being positioned as an effort to have the LPGA’s players equipped to deal with the media and sponsors. In particular, the policy appears to target the large Korean delegation on the LPGA tour. The policy is effective immediately, and the proficiency tests will be first administered near the end of 2009. The LPGA pledges to give non-English speaking players support in the form of instruction and tutoring to help develop their English.

The new policy has met with a great deal of criticism. The PGA has several players who do not speak English, but it has no such policy nor has given any indication it would consider it. While it is certainly beneficial for the LPGA to have its players be able to converse with reporters and VIPs from sponsors in English, the new policy may be too heavy handed. The LPGA currently has more than 100 international members, which could potentially be leveraged as part of a global brand building effort. The international flavor of its players could be given greater emphasis than the edict of “speak English or you will be suspended.” If nothing else, the new policy may create a new sponsorship category for the LPGA: I can envision Rosetta Stone or Berlitz as the official English language resource of the LPGA!

Link: ESPN.com – “LPGA Will Suspend Memberships if Players Don’t Learn English”

Redefining "Value" is Necessary

The battle for the price-conscious consumer is always difficult. It is often a scenario of many competitors fighting for sales of low profit margin products. The quick service restaurant category is a prime example of the fight for the value customer. McDonald’s, Wendy’s, and Burger King have gone toe-to-toe with value menus. Many items on their value menus were priced at $1. Value menus are a tool for luring cash strapped customers or enticing an additional visit.

Now, in the face of rising commodity costs, the value menu is being redefined. Menu items for $1 are no longer realistic in that they are no longer low margin items but in many cases loss leaders. Thus, the frame of reference for what are value prices is shifting upward. Burger King has added two new items to its value menu (Cheesy Bacon BK Wrapper and Spicy Chicken BK Wrapper) at a price of $1.39. It is expected that other brands will have little choice but to follow suit if they intend to continue to market value priced menu items.

As much as consumers may not like this upward resetting of the definition of value price, it is necessary. Value pricing at a loss provides value for only one side in a transaction! Value priced products can be a key part of a product portfolio if they contribute complementary sales yet do not cannibalize sales from higher margin items.

Link: The Wall Street Journal – “Burger King Corp. Provides More Value for Restaurant Guests”

Youth Prefer You Tube over Boob Tube

Here’s another stat that will make traditional media properties cringe: 10-14 year-olds are spending more time online than in front of their TVs. According to a recent study by DoubleClick Performics, 83% of the youth sampled indicated they spend one hour or more a day online while the figure for spending the same amount of time watching TV was reported by 68%. The impact of this trend is not limited to parents, who are challenged to not only monitor kids’ online surfing behavior. Advertisers are affected by this tend, too.

Not too long ago, reaching youth markets was easier for advertisers as they could rely on TV to deliver this coveted audience. Now, with youth spending more time online (and on wireless devices), another audience has become more fragmented and difficult to reach. The study does point out some specific behaviors that should enable advertisers to pinpoint youth web surfers better such as the fact that over 70% visit social networking sites (especially MySpace). The trend toward greater use of the Internet by youth could be viewed as an opportunity in that online media provide ways for marketers and consumers to engage in meaningful interaction that simply is not possible through mass media advertising.

Link: The New York Times – “Preferring the Web over Watching TV”

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”

The American Consumer’s New Diet

The squeeze put on by rising prices on many consumable items, tighter credit, and less savings is influencing a shift in consumer behavior. A recent study completed by Cramer-Krasslet found that the current financial strain felt by many is not just leading to temporary belt tightening, but rather a more permanent change in behaviors. Among the behavior changes noted are more short-term responses such as eating out less, buying more private label products, and doing less driving. But, the study found evidence of more permanent behavior changes such as more “lateral cycling” of possessions by selling on web sites such as eBay or Craigslist and a desire to simplify lives by streamlining consumption.

Another trend is shopping locally more frequently. Local Chambers of Commerce have touted “shop local” campaigns for years. I have never been a big fan of these campaigns as they tend to come across as guilt trips for not shopping in one’s community. It is up to the seller to provide good value and a compelling reason for shoppers to patronize a business. The shift in consumer behavior taking place today sets the stage for “shop local” campaigns to have greater relevance than ever before. Consumers are wanting to shop local; it is up to local businesses to deliver great service and experiences that will keep shoppers returning.

Link: Marketing Daily – “Study: Downturn Gives Rise to New Consumer Beliefs”

Chasing The Elusive Consumer Using Out-of-Home Media

As options for consuming news and entertainment have expanded beyond traditional mediums (i.e., TV, radio, newspaper, and magazines)and into new media such as the Internet, podcasts, mobile devices, and others, advertisers find consumers more difficult to reach. The days of reaching a majority of America on one of the major TV networks is a fond memory. With audiences so fragmented, the challenge is to leave no stone unturned in finding mediums to deliver ad messages.

This challenge has led to the growth of new forms of out-of-home media. Out-of-home is a broad class of media that was once primarily billboards and transit advertising. Today, the category has grown to other high-traffic areas where marketers can reach their target audience. Malls, arenas, and even schools are targets of this form of advertising.

An advantage of out-of-home media is that advertisers often face less competition for the audience’s attention than when using traditional media. It is an effective way to break through advertising clutter. However, a fine line exists between getting attention and being intrusive. Out-of-home media can be used to create brand awareness or keep familiar brands on the minds of consumers. This benefit must be balanced against the possibility of alienating people who might be put off by being subjected to ad messages in what have usually been “marketing free” zones such as movie theaters or public restrooms.

Link: The New York Times – “You Are Here (and Probably Seeing an Ad)”