Cut Corners, Lose Trust: The Southwest Story

I have been a huge fan of Southwest Airlines for many years. Its story as a maverick brand that fought conventional wisdom and built a profitable airline is legendary. But, the brand is now all grown up, and it is experiencing adversity that it rarely faced in the past. Earlier this week, Southwest had to ground more than 40 planes that had missed scheduled safety inspections. The inspections were done and Southwest resumed a regular flight schedule by the next day.

The Southwest situation illustrates the importance of maintaining customer trust. The cancelled flights were the least of the airline’s concerns. It’s a fact of life for seasoned air travelers. The long-term damage could be to Southwest’s reputation. Consumers could perceive that Southwest is focused too much on either making money or cutting costs to take planes out of service temporarily and carry out inspections as scheduled. Let’s face it, questions about safety are not good for any product, airlines especially.

For the first time in my 12-year “relationship” with Southwest, I find myself questioning the sincerity and integrity of the brand. It is a reminder that any person or any company that cuts corners in their relationships risk losing the trust of others. Southwest can use this negative situation to its advantage by evaluating its inspection and safety management procedures and make changes as needed. Or, this event can be harmful if the company puts too much energy into downplaying it.

Green Marketing: Fine Line Between Caring and Commercialism

Environmental concern is a major focus for many businesses today. Many companies recognize a responsibility to be good stewards of the environment. Also, socially responsible firms go a step beyond and use their platforms to spread the Green message to customers and other stakeholders. Unfortunately, some companies see green marketing as just a strategy that can be used to “demonstrate” concern.

The days of disingenuous green marketing practices are numbered, if not over already. The Federal Trade Commission’s guidelines on green marketing were scheduled for review in 2009, but that process is beginning earlier because of the concerns about businesses abusing the spirit of green marketing. Companies that are truly advocating responsible treatment of the environment should trumpet their views and actions to make a difference. But, companies that see green marketing as a way to win over a few customers and create sales are likely to be recognized as being insincere by advocacy groups and consumers. It is one thing for a company to boast “we have great service” only to let us down when we interact with their service employees. It is quite another matter for a company to make claims about the importance of protecting the environment yet can show little evidence of making a difference. Link

No Such Thing as Savings When It Comes to Customer Service

Peter Weedfald, VP and Chief Marketing Officer at Circuit City, resigned last week after less than two years on the job. It seems he stepped down one March too late. Mr. Weedfald’s fate was sealed in March 2007 when the company decided to fire more than 3,000 veteran store employees and replace them (or rehire those desperate enough to come back) with new hires at lower wages. This cost-saving measure backfired horribly as it gained Circuit City unwanted negative publicity. More importantly, the move did nothing to help customer service. Apparently, Circuit City forgot it was in the service business. Sales for the company were down almost 9% in 2007 despite it being a period of wildly popular electronics products such as HD televisions, video game consoles, and laptop computers. As far as the impact of the customer service “strategy” on stock price, Circuit City is trading at less than $4 per share compared to nearly $20 before the employee firings last March.

Let Circuit City’s woes serve as a reminder that there is no such thing as “savings” when it comes to customer service. It should be viewed as an investment that can differentiate a brand from competitors, develop loyal customers, and build morale within the organization. The temptation to cut back will likely be even greater during weak economic condidtions. If service employees are considered a marketing vehicle more than an expense item the money spent can be worth every penny.

Positioning of Presidential Candidates: Experience vs. Change

I fervently believe brand positioning is one of the most important strategic decisions a marketer makes. It is impossible for even your most loyal customers to know everything about your company or brand, but what one thing about you should they remember? What is distinct, unique, or superior about your brand relative to competition?

The candidates campaigning for the Democratic Party nomination for President provide highlight the important role of brand positioning. Hillary Clinton has positioned her campaign on the experience she garnered as First Lady and more recently as U.S. Senator. Barack Obama has positioned his campaign on one word: change. Never mind that there have not been extensive details disclosed about what changes Obama has in store for Americans. The idea of a departure from status quo is very appealing to many voters regardless of the level of detail disclosed about ideas for change.

The outcome of the Democratic race will come down to which candidate positioned more effectively. A position must resonate with the target market, which is why the “change” position of Obama has been so powerful to this point. Perhaps it will be more evident tomorrow after primaries in Ohio and Texas whether Clinton’s experience position has connected with voters. Clinton may have more experience and be better prepared for the Presidency, but that is not the point. What matters is whether voters can be persuaded to accept the positioning strategy of a candidate and take action where it matters most: the ballot box.

When Divide and Conquer is a Dangerous Strategy

The collective yawn heard among auto racing observers last week was in response to the announcement that the Indy Racing League and Champ Car World Series would merge. This move had been long anticipated; Champ Car had been struggling going back to its days as Championship Auto Racing Teams (CART). Prior to the formation of the competing racing leagues in 1996, open wheel racing enjoyed greater fan interest than stock car racing and its premier league, NASCAR. However, in the years following the split into IRL and CART the market for open wheel racing was too fragmented, and NASCAR benefited as it gained casual fans as well as fans unhappy with the split in open wheel racing.

Segmenting markets is often good. We seek market niches that we can best serve and do it with as little competitive interference as possible. The split of open wheel racing serves as an example of when not to segment markets. The IRL-CART open wheel racing war only divided the market that liked this form of auto racing. Little differentiation occurred, other than the IRL’s ownership of the crown jewel of auto racing, the Indianapolis 500. CART/Champ Car attempted to position itself as more of a global brand as well as a greater emphasis on road course racing. Hindsight is always 20/20, but in this case the feuding factions in American open wheel racing would have been better off to resolve their differences. Instead, the bitter fight dragged the sport through 12 years of strife and let NASCAR leave open wheel racing in the rear view mirror.

A similiar battle for a limited market has taken place in recent years in the satellite radio industry . XM Radio and Sirius racked up hundreds of millions of dollars in losses by paying dearly to secure content and market heavily to attract customers. At least these two companies realized a divide-and-conquer strategy had no hope of succeeding in the satellite radio industry. Hopefully their proposed merger will not be another case of too little, too late.

Passion Over Profits

Would you be willing to close the doors to your business for 3 hours for employee training? Does the possibility of missed sales during that time make you weak in the knees? What if you had over 7,000 locations and closed for 3 hours- how devastating would that be to your bottom line?

If you want the answers to the above questions, you can ask the people at Starbucks. The company, struggling to regain the charm it held with consumers and investors for many years, closed almost all locations on Tuesday to hold employee training sessions. The purpose was to refocus Starbucks’ baristas on their role in delivering a great experience to customers. The training session is one of many initiatives led by Howard Schultz, who built Starbucks into a global giant and recently reassumed control as CEO.

Does it make financial sense to put passion for brewing great coffee over profits, even if it’s only for 3 hours? Absolutely! Starbucks was built on Schultz’s entreprenurial spirit, but as is the case with any business that expands to a larger scale it is difficult to preserve the organization’s culture. The training session was an organization-wide effort to instill “the Starbucks way” in the employees of this now massive organization. If that effect is realized, the potential for a long-term impact on profits exists in the form of greater customer loyalty that could arise from a better experience being offered in Starbucks’ stores.

Another benefit of the training is the exposure Starbucks received in the media. The store closings were covered widely, and it created exposure for Starbucks that millions of dollars in advertising (which Starbucks does not do anyway) could generate. While some competitors like Dunkin Donuts held special promotions that essentially mocked Starbucks’ closing for training, it is possible that Starbucks will reap the benefits of being closed for 3 hours for a long time to come. Link

Less Confidence in Traditional Advertising? The Proof is in the Budget

My last post commented on a study that found marketers today have less confidence in television as an advertising medium. The findings are enough to make followers of the advertising industry take notice, but in case some people have a “show me” mentality and need more evidence of the decline in traditional ad mediums, here it is.

An article posted on the Advertising Age magazine web site discusses how megamarketers Kimberly-Clark and Unilever are shifting marketing spending away from traditional mediums like television and magazines in favor of digital media and experiential marketing tactics. Kimberly-Clark’s story is particularly telling: the company’s percentage of marketing spending on television in 2006 was 46%, down from 60% in 2004. At the same time, spending on nontraditional media jumped to 34% from just 10% in 2004.

The new approach to marketing investments at Kimberly-Clark are reflective of changes occurring at companies of all sizes in this country. In the face of an uncertain economy and wavering consumer confidence, it is more important for marketing spending lead to a measurable ROI. We cannot assume our marketing efforts are helping our business. We need to be engaging customers through platforms that lead to stronger brand relationships and encourage our target market to spend their carefully managed dollars with us. Link

Why TV Advertising is Less Effective

A study conducted by Forrester Research for the Association of National Advertisers found that marketers have less confidence in television as an effective advertising medium. More specifically, 62% of marketers surveyed said TV advertising has become less effective in the past two years. Also, a majority said they were interested in trying newer ad platforms such as interactive TV ads, ads on video-on-demand (VOD) programming, and ad placement on online TV programs.

This news is troubling to the advertising and television industries, both of which are dependent on ad spending for their survival, but it is hardly surprising. The television audience has been fragmented for many years, and audiences have experienced further fragmentation as media consumption has moved to channels such as video streaming over the web, blogs, and podcasts. The case for television advertising is not helped by the fact that much of the creative we see in TV advertising today is not very good… OK, it’s bad! A disconnect exists too often between the message the creative people deliver and the branding needs of the advertiser.

The role of advertising, whether it be TV, newspaper (another troubled medium), radio, magazine, or other less traditional mediums, needs to be revisited. Ad agencies are adept at creating messages that are entertaining (sometimes), but how does the entertainment value of an ad message fit into an Integrated Marketing Communication strategy? A realistic view of advertising is that it can create awareness and build interest for a brand, but other tools in the IMC toolkit (e.g., sales promotions and direct marketing) should be given greater weight to persuade an audience to take action.

Sony Ensures History Doesn’t Repeat

The white flag has been waved in the battle for high definition DVD supremacy. Toshiba and Sony have been locked in a fierce fight to have their competing technologies become the industry standard in this category. Yesterday, Toshiba announced that it would end production of its HD-DVD products and exit the market within a couple of months. This decision in effect makes Sony’s Blu-ray technology the industry standard.

The news could not have been better for Sony. The company has been seeking to regain the success it experienced in the 1980s and 1990s. More importantly, Sony was able to avoid a repeat of history as it had experienced two major defeats in technology platform wars in the past. First, Sony lost the video cassette player war in the 1980s as the industry adopted the VHS format over Sony’s Betamax. Second, Sony’s effort in the digital music download business was thwarted by the dominance of Apple.

So what was the difference in the case of high definition DVD? Sony developed vital relationships with content providers (e.g., movie studios) and retailers. With support from key players such as Disney and Warner Brothers on the production side and Best Buy and Netflix on the distribution side, Sony created a competitive advantage Toshiba realized it could not overcome. The best products and best technologies are great to have if you can produce them, but if key channel partners do not buy in to your offering you have little chance of realizing your full potential in the marketplace. Sony now has both the product and channel support. Link

Seeing is Believing… and Purchasing

Converting eyeballs to customers is an ongoing challenge marketers face as they first seek to get noticed, then persuade prospective customers that they should buy their products or services. In today’s hypercompetitive environment, how does one break through the clutter and succeed at influencing buyer behavior? According to research released by the Advertising Research Foundation, a key to making it happen is connecting with prospects through events. The research found that customer purchase intent was higher among people who had been exposed to brand-sponsored events such as trade shows, sports, or the arts.

Why do sponsorships have such a positive impact? They give people the opportunity to interact with a company or brand in the case of a trade show. For sponsorship of sports, arts, or a social cause, a brand becomes associated with something to which people are emotionally attached, such as their favorite football team or musical artist.

While the associations sponsors develop when linked to an event or other property being sponsored are the outcomes they seek to attain, it is important to realize that just the mere association is not enough. Being recognized as “the official sponsor of …” does create a desired link, but that link alone is relatively weak. Sponsors must build on the association through investments in advertising campaigns, web site content, sales promotions, sales force, and public relations efforts. In other words, a truly intergrated marketing communications effort is needed. To achieve the extent of brand impact found in the ARF study, sponsorship must go far beyond saturating a venue with signage or a slick booth presentation at a trade show! Link