Tuesday, July 29, 2014

Battling for Share in the Market for Coconut Water

A recent article in the New York Times illustrates why competitors are such a vital stakeholder group for any company, stimulating aggressive marketing battles that can push the firms to do their very best, day after day.

The article concerns the outlet-by-outlet battle for shelf space--and, ultimately, market share--by two fierce competitors in the coconut water category, Zico and Vita Coco. 

Zico positions itself as pure, premium coconut water.

Vita Coco positions itself as fresh and natural.

The two startups began fighting for shelf space in New York City around the same time in 2004. Soon other firms joined what was a niche industry and now has become a fast-growing major market poised for global expansion.

It didn't take long for big corporations to get involved. Pepsi bought a chunk of O.N.E., which competes with Zico and Vita Coco. Coke acquired Zico. Chinese-based Reignwood Group just purchased a stake in Vita Coco, which is the current market leader and is distributed by Dr Pepper Snapple Group.

Once Zico became part of Coca-Cola's beverage empire, Vita Coco's cofounder Michael Kirban says he felt less pressure in the day-to-day fight for shelf space and market share. He told the New York Times that he wishes Zico was still a serious threat. Why? Because having a scrappy rival forced Vita Coco to be at the top of its game and remain aggressive and creative. As the market leader, will Vita Coco feel sufficient pressure to keep fighting, shelf by shelf, outlet by outlet? China is the company's next major target market, so the fight is on.

Thursday, July 24, 2014

Unintended Consequences of Loss-Leader Pricing

Staples, the office-supply superstore, used loss-leader pricing to gain New York State as a customer for a three-year period.

To seal the deal, Staples said it would price 219 commonly-purchased office supplies at just one penny each.

One penny for a paper shredder. One penny for a box of blackboard chalk. One penny for six dozen batteries.

What happened next shouldn't surprise any shopper who has gotten up at 4 a.m. to take advantage of a super bargain price on Black Friday.

Government agencies and organizations that qualify under the New York purchasing umbrella rushed to order the one-penny items. Not just one or two, but dozens. One school district in New York state ordered loads of merchandise, total value more than $677,000 at list price (admittedly higher than the usual selling price). The district paid........$299.15, according to a Wall Street Journal article.

Staples isn't the only firm to experience the unintended consequences of loss leaders. Many small businesses see Groupon's daily deal loss-leader as a high-profile way to introduce the business to new customers. But some that offered loss-leader deals through Groupon found themselves overwhelmed by orders that left little if any profit margin. The response far exceeded expectations and strained the business's ability to operate effectively and efficiently, an unintended consequence that soured some firms on the daily-deal pricing model.

Loss-leader pricing can be effective in many situations. Prince used it to launch an album in 2007--he essentially gave CDs away in partnership with a London newspaper, incurring a loss on the deal. But the buzz over this giveaway helped Prince sell out 21 live shows in London, netting the performer a hefty profit. The newspaper saw a bounce from its involvement, as well.

Loss-leader pricing can be excellent for attracting attention, driving publicity and word-of-mouth, and increasing traffic, either to a website or to a retail location. Marketers need to link pricing to overall marketing strategy and understand how the program will affect short- and long-term customer loyalty as well as ongoing profitability.

Tuesday, July 22, 2014

Privacy and the Internet of Things

Internet-connected appliances, wristbands, and many other items are part of the "Internet of Things" that, by one estimate, will encompass 50 billion gadgets by 2020.

What does it mean when those gadgets are collecting data on the personal life, behavior, and habits of consumers (fitness patterns, usage of appliances, etc.)? Behavioral targeting is on the rise and marketers want to be able to reach consumers at appropriate times and places and occasions. Data from gadgets can be of great value in such targeting.

One issue is whether users are even informed about what data is being collected and how it will be used. Privacy policies posted on web sites won't help if you're not able to read them before you connect the thing (new air-conditioner, new fitness band) to the Internet. Your choice will be made even before you know you've made a choice.

A second issue is how safe your personal data will be. More than half of the respondents to a recent survey indicated they were extremely concerned or somewhat concerned about privacy issues such as a breach in security.

A third issue is personal identifiability. Will collectors of data from your gadgets be able to distinguish you and your habits from others? Do you or should you have the right to say whether this data is collected and how it is used, by whom, and for how long?

Wednesday, July 16, 2014

Pop-Up Shops Are Mainstream Marketing

Pop-up shops are no longer a passing trend--they're a mainstream marketing method used by brands, businesses, and even government groups to achieve one or more of these objectives:
  • Increase brand or product awareness
  • Introduce or test a new brand or product or line
  • Reinforce brand image associations
  • Reach new markets or segments
  • Communicate brand benefits
  • Provide a tangible, tactile brand or product experience
With the exception of seasonal retailing, such as stores selling Halloween costumes or Christmas products, pop-up shops are not necessarily aiming to make sales. Instead, communication and branding objectives usually take priority, even when revenue is involved.

For example, Kraft in Canada has planned a series of pop-up shops to reinforce the emotional connection between customers, Kraft dinner products, and fun family times. For three days, Kraft will operate pop-up shops in Toronto, Vancouver, and Montreal, bringing the "fun" aspect of the brand to life. "It’s not enough to tell consumers to go out and have some fun," explains the brand director of Kraft Dinner. "We also want to create experiences that enable them to do so."

When the owners of Parlor Blow Dry Bar wanted to launch their new business in the Raleigh, North Carolina market, they began with a pop-up shop in a high-traffic area. "A pop-up is not something for financial gain," says one of the owners. "It’s a great way to introduce a concept and get to know people." Now the owners have a better idea of which customers prefer which services, an invaluable element in crafting marketing strategy for the new business.

The Canadian government has even used the pop-up shop concept to open a temporary office in Pittsburgh promoting trade between Pennsylvania and Canada. The space was called "Pop-Up Canada!" and remained open for four days, inviting local businesses to learn more about trade, energy, and investment. The opening featured, naturally, a hockey face-off, and the Stanley Cup made an appearance. The point was to highlight close economic ties between Canada (Canada as a brand) and U.S. businesses and of course to encourage more trade.

Read more here: http://www.newsobserver.com/2014/07/12/3999999/triangle-pop-up-stores-proliferate.html#storylink=cpy

Monday, July 14, 2014

HBO's "Game of Thrones" Licenses and Licenses and Licenses

Game of Thrones is HBO's most popular series--ever.

Across platforms, it averages more than 18 million viewers per episode, eclipsing HBO's hit series The Sopranos. 

 Naturally, HBO wants to make the most of this highly visible brand.

So it's been licensing Game of Thrones for all manner of products, including:


  • Jewelry made by Pyrrha, featuring the symbols of the powerful Westeros houses (see above). Pyrrha segments this market by gender, recipient (family, friend, etc.) interest in a particular "house," type of jewelry, and meaning (friendship, love, wisdom, recovery, etc.)
  • Beer made by Ommegang, a New York brewery. The initial beers were inspired by the House of Targaryen (think dragons). 
  • The Wines of Westeros, made in Australia, will debut in 2015, in time for Season 5 of the series. Aggressive Westeros houses are represented by red wines, while white wines embody the subtlety of the sly houses.
  • Living Language is planning to offer a new "Learn Dothraki" language course in October.
What product categories can Game of Thrones NOT conquer with the strength of its brand equity?

Tuesday, July 8, 2014

When Food Fads Fade--Fast

Crumbs, a chain that at its peak operated 78 gourmet cupcake bakeries from its base in New York City, abruptly shut all stores on July 7th. It was the largest US bakery chain marketing specialty cupcakes, founded in 2003. After steady expansion on the East Coast, Crumbs was acquired as a way to go public in 2011, with the long-term goal of operating 200 stores by 2014.

Instead, the cupcake fad has peaked and now faded, in a rapid acceleration of progress through the stages of the product life cycle. With cupcakes in the "decline" stage of the PLC, Crumbs had to retrench in the face of worsening financials; its stock was suspended from NASDAQ trading.

It seems that the cupcake fad has given way to other food fads (cronut, anyone?). Meanwhile, Crumbs fans miss its cupcakes, judging by comments on the Facebook page (111,000+ likes). The bakery also has thousands of Twitter followers and Pinterest followers. Will Crumbs be able to reinvent itself to take advantage of demand for other newly-popular baked goods?

Thursday, July 3, 2014

How Quirky Screens New Product Ideas

By now you've heard of Quirky. If not, an online search will bring up the site with this description: Shop for the world's best products, invented by real people like you. If you've got an incredible idea for a product, we want to know about it.

Quirky is one of several fast-growing firms providing platforms for crowdsourcing new product ideas and transforming the most promising into marketable merchandise--in a matter of weeks, not years. 

The New York-based firm receives thousands of idea submissions every week, winnows them down to about a dozen, puts these to votes by employees and the public, and moves several winning ideas into preproduction every week. Every week--accelerating the new product development process to Internet speed. No wonder Quirky's revenues are projected to surpass $100 million in 2014.

Quirky has been especially interested in developing product concepts in specific categories: electronics/power, travel, parenting, health and fitness, home and garden, kitchen, and play. Just recently it announced a major "smart home" products initiative. It's also partnering with GE on products like smart air conditioners (see video below) and smart lightbulbs.

 

So how does Quirky screen the thousands of new product ideas it receives every week? 
  • First, it eliminates ideas that are very much like existing products. Or that don't solve a customer problem as well as an existing product. Or that are already being worked on by Quirky people.
  • Second, it eliminates ideas for products that are too complex. Or unnecessary--meaning they don't deliver valued benefits.
  • Third, it eliminates ideas for small niche products that would appeal to a target market too tiny to scale for profitability.
  • Fourth, it eliminates ideas that can't be produced with currently feasible technology. 
  • Fifth, it eliminates ideas that fall outside its concept categories. If Quirky expands into that category, however, it will review the product idea at a later date.

Tuesday, July 1, 2014

Catalogs: Source Books or Dead Trees?

Restoration Hardware made business headlines recently by doing something that proves catalog marketing is far from dead: It mailed millions of 17-pound bundles of source books. The company's home page describes the source books as "over 3300 pages of curated and inspired design." The bundle included 4 "lifestyle books" (such as interiors) and 9 "category books" (such as lighting, bath, etc), mailed once a year.
From Tumblr "Deforestation Hardware"

Some members of the public don't see what Restoration Hardware sees, especially since the CEO has been promoting corporate sustainability, saying, "I don’t know of another catalog retailer of scale taking the steps we are to minimize our impact on the environment."

In and around Palo Alto, California, some recipients were so outraged by the sheer size and weight of the delivery that they returned the bundles to the nearest Restoration Hardware store. Other media around the country (social and conventional) have picked up the story and consumer comments.

The debate continues: Are catalogs source books or dead trees?

To engage shoppers and save trees and money, many catalog merchants are testing innovations. For example, IKEA Russia has a new app in its Instagram presence that allows smartphone users to see more merchandise photos.

Meanwhile, consumers who don't want catalogs in their mailboxes can add their names to a variety of "do not mail" lists like DMA Choice and Catalog Choice.

Wednesday, June 25, 2014

Customer Satisfaction Rankings of Fast-Food Chains

The latest rankings are out from the American Customer Satisfaction Index, and McDonald's is at the very bottom of the US fast-food restaurant industry for 2014. According to the ACSI, McDonald's has improved its US satisfaction rating since 1995--but it still is at the bottom for 2014.

Worldwide, McDonald's has more than 35,000 restaurants, so keeping every customer happy in every outlet, every day, is a challenge--especially in a chain so heavily dependent on franchised operations. As the McDonald's director of media relations says: "We are always listening to our 27 million customers every day and appreciate hearing feedback from them and other sources as it helps us improve and evolve." The McDonald's annual report notes that the company is focused on improving service and satisfaction at each "moment of truth"--each interaction or touchpoint between the company and its customer.

Interestingly, the ACSI shows that smaller US restaurant chains such as Panera and Chipotle have higher satisfaction ratings.

In 2014, the top five US fast-food chains, ranked by customer satisfaction, are:
  • Pizza Hut
  • Papa John's
  • Little Caesar
  • Domino's Pizza
  • Wendy's
In the UK, the customer satisfaction index for 2013 (most recent year available) covers a slightly different group of restaurant competitors. McDonald's is next to last in the UK, just above Burger King.

The top five UK restaurant chains, ranked by customer satisfaction, were:
  • Gregg's
  • Subway
  • Costa Coffee
  • Starbucks
  • Yum! Brands (KFC and Pizza Hut)

Friday, June 20, 2014

Got Milk? Milk's Marketing Challenges: Consumer Behavior, Targeting, Positioning

The new tagline is "Milk Life"
Who can forget the iconic "Got Milk?" milk moustache ads of yesteryear? Celebs from all walks of life were featured, as you can see here. The goal was to encourage higher milk consumption through associations with health benefits and, of course, high-profile personalities. The campaign became a big hit and a pop culture touchstone.

After nearly 20 years, however, Got Milk? is no longer the national tagline for the Milk Processors. It's still in use in California, where it originated. But the new national tagline is "Milk Life," backed by a $50 million campaign. In fact, Milk Life already has its own FB page (with 451,000 likes) and its own hashtag (#milklife).

Whether the new campaign will reverse U.S. milk consumption trends is a big question mark. Americans drink a lot less milk today than they did in 1970, and the downward trend is especially pronounced for full-fat milk.
The chart above shows that today's Millennials are drinking much less milk, compared with U.S. teens and youngsters in the 1970s. Meanwhile, nichification has resulted in a dizzying array of milk variations and alternatives. One glance at the "milk section" of the supermarket will give you a hint at the many segments being targeted and the many products being offered. This is a consumer behavior issue as much as a targeting and positioning challenge.

On the other hand, milk consumption is going up in some nations. Not in the UK, where the downward trend is evident, but in many developing countries, including China.