Thursday, August 28, 2014

Remember Store Credit Cards and Cash?

Credit cards remain a highly popular payment method in America. Thirty years ago, nearly every major retailer in America had its own proprietary charge card, usually self-funded but sometimes backed by a third party such as General Electric or Citicorp. Many consumers had wallets filled with cards from Sears and other mainstream retailers, happy to be billed once a month for purchases made all month--and happy to get catalogs and special offers only for cardholders.
About that time, MasterCard (originally Master Charge) and Visa began charging into the department store industry, seeking to be accepted at the point of sale. Looking at an old issue of Mart magazine, as of mid-1977, 32 out of the top 100 U.S. department stores honored MasterCard and Visa, compared with only nine of the top 100 department stores honoring the bank cards in 1974.

Fast-forward to the 21st century. Very few department and specialty stores operate their own credit programs these days. Most have sold their receivables to a third party, and accept all kinds of plastic at the point of sale. For example, Synchrony (formerly part of General Electric) provides private-label credit services to Walmart, JC Penney, and other retailers. Citi Retail Services provides private-label credit services to Staples, Office Max, Best Buy, and other stores.

Cash is still around, but some consumers prefer plastic or mobile payments. According to a new survey, Millennials are more inclined toward digital payments for small purchases, while Boomers will use old-fashioned cash for payments under $5. Gadgets like Square and Amazon's new Local Register make it easy for small businesses to quickly authorize card payments via mobile, so why carry cash?

Consumers know about digital wallets (Google Wallet, PayPal, Apple Passbook) but actual usage is still relatively low, according to research. Apps are helping to fuel mobile payments. Will your wallet have any credit cards by 2020? Will you even be carrying a wallet with dollar bills and coins?

Friday, August 22, 2014

Instant Cameras in the Digital Age?

A few years ago, a South Korean soap opera ignited a fad for cute, compact instant-photo cameras made by FujiFilm. The Cheki has been on the market since 1998, and after a strong start, sales plateaued as smart phones and tablets took center stage.

Then the soap opera featured characters using the handheld camera, which prints business-card-size photos in moments, and celebrity-watching teens took notice and began buying. And yes, the camera requires film--a novelty in itself (and another way to gain revenue month after month once consumers buy the camera).

The Cheki (and its later sibling, the Instax Mini) have been marketed through Walmart, Amazon, and other US retail outlets. Cute, stylish, unusual, and attention-getting. FujiFilm itself has been savvy in transitioning strategy for the digital age, diversifying beyond film products and getting experience in electronic technologies.

Polaroid pioneered the instant camera market...then suffered a series of financial setbacks as the photo industry evolved and digital alternatives became affordable and popular. The Polaroid brand lives on, with a range of imaging products that includes instant cameras and, brand-new, a lightweight Cube video cam made specifically for sports activities. So a brand that made its name in film cameras has wound up with film and digital imaging equipment.

Sunday, August 17, 2014

New Life for Lassie the Iconic Brand

Lassie became part of mainstream pop culture in the early 1940s, when the movie Lassie, Come Home was a big box-office hit, based on the popular Saturday Evening Post story.

After a profitable film career, Lassie arrived on the little screen as a 1950s TV series that lasted for nearly 20 years--and episodes may still be playing in reruns somewhere on the planet. Descendants of the original "Lassie" (real name: Pal) have portrayed the character for decades. Because Lassie is trademarked, any dog in the role must, legally, have four white paws and a sable-brown body, a white blaze atop the nose, and a lush collar of white fur.

These days, Lassie the iconic brand is looking for new life. Owned since 2012 by DreamWorks Animation, Lassie has been making the rounds of media outlets to attract attention and keep the brand in the public eye, even if this is "the world's most famous dog."

According to research commissioned by DreamWorks, Lassie has very high brand recognition among US consumers and is associated with attributes like loyalty. Nielsen's research shows that 70% of the respondents to a survey in China recognized the Lassie brand (iconic, indeed).

The previous owner of the Lassie brand had recent licensing deals with pet-food manufacturers and dog accessory marketers. But is Lassie the 21st-century brand relevant in a digital world where LOL Cats take center stage? Can Lassie bring home the big bucks for DreamWorks in the form of merchandising and licensing? Stay tuned.

Thursday, August 14, 2014

Entrepreneurs Run with Sneakerization

Entrepreneurial marketers like Bucketfeet and Lechal are taking advantage of the ongoing trend toward sneakerization, the development of hundreds of niche markets within a particular product category. The obvious example is sneakers, which used to be canvas shoes with rubber soles, usually equipped with laces. If you were lucky, you had a (limited) choice of colors.

Today, of course, there's no such thing as a prototypical sneaker. Thanks to sneakerization, there are shoes for every sport, activity, season, age, personality, lifestyle, climate, you name it.
 

Bucketfeet shows sneakerization in action for the niche of people who want to wear art on their feet. The company recruits artists from around the world and pays them royalties based on sales of sneakers bearing their art.

Bucketfeet shoes are now in Nordstrom as well as being sold directly to customers online from the Bucketfeet site.

Buzz is important for young brands, and Bucketfeet is active on Pinterest, among other social media networks. The brand's slogan is "We believe art is for everyone." But the shoes also have functional benefits that appeal to buyers, as shown at left.

Lechal is taking a different approach. It's segmenting the market by technology involvement. Lechal sneakers are designed with Bluetooth built in so wearers can track their activity and be guided on foot to walking destinations via data from Google Maps.

Originally designed for visually-impaired wearers, Lechal shoes (the brand means "let's go") appeal to the wearer's sense of design and personality as much as to his or her preference for cutting-edge tech gadgetry. Navigation, fitness tracking, fashion--all in one shoe.

Sunday, August 10, 2014

Boeing vs. Airbus: Whose Strategic Vision Is Becoming Reality?

BOEING VS. AIRBUS

Eight years ago, I wrote my first-ever blog post, "The Future, According to Boeing and Airbus." My point was that the two competing jet manufacturers had entirely different views of what air travel would become in the future, and those visions fueled their product planning and marketing strategy. At the time, I believed Boeing's prediction that passengers would prefer to fly regional jets, point-to-point, rather than Airbus's vision of jumbo jets flying hub-to-hub.

Today's New York Times has a long article about just this topic. The marketing chief for Airbus's jumbo A380 is quoted as saying: “The A380 is not made for every route, but it is ideal for high-traffic routes, high-volume routes that are congested, or where there are flying constraints.” Airbus designed its jumbo jet specifically for a vision of the future in which airlines would fly large groups of passengers from one hub city to another, and then the passengers would fly on smaller planes to their final destinations.

Unfortunately for Airbus, that future has not become a reality. The company's biggest A380 airline customer, Emirates, has invested heavily in these jumbo jets for hub-to-hub flights. Its 380s have luxury touches that appeal to affluent business and first-class passengers. Very few other airlines have followed the Emirates model, however, in part because their customer base is different and in part because airports must make some modifications to welcome the A380.

Meanwhile, Boeing's vision of point-to-point flights has become the reality for many airlines and in many parts of the world, and that's the vision it followed when originally designing the 787 and tweaking the 777. The 777 has attracted 245 orders already in 2014.

Still, the 787 Dreamliner has had a bumpy launch, with high-profile battery problems and  reliability reportedly at only about 98%, compared with more than 99% for the well-established 777.

What next for the Airbus A380 and Boeing 787?

Wednesday, August 6, 2014

What's Next for Off-Price Retailing?

Loehmann's, one of the original off-price retailers, went bankrupt last year and its logo has disappeared from shopping centers everywhere. In its heyday, New York-based Loehmann's was the go-to store for high fashion at low prices, and an early proponent of bullpen dressing rooms, which keep costs low so prices can be low. Syms, another New York area off-price retailer, is also gone. Hit or Miss, an early Massachusetts-based off-pricer, is long gone.

But T.J. Maxx is not only alive, it's thriving. It's survived tough economic times and tough competition. Beth Kowitt, writing in Fortune's latest issue, asks the question: Is T.J. Maxx the best retail store in the land?

Kowitt makes a very convincing case, and I agree with the 7 key points she lists:
  1. Shoppers are looking for "new" merchandise, not "sale" merchandise. Yes. This is a major reason for the success of Costco, Zara, and other strong retailers, not just T.J. Maxx. Store traffic is vital, and shoppers enjoy the hunt, so new inventory has to be added every few days to keep the hunt going.
  2. Give shoppers treasure to hunt for. Costco is famous for this. T.J. Maxx also stocks some special products, but not in the same product category as Costco.
  3. Know what to buy and buy advantageously. This is what made Loehmann's reputation in decades past: Its buyers knew what to offer and when to make an offer to acquire special merchandise for the treasure hunt. Fast-forward to the 21st century: T.J. Maxx has its buyers constantly searching the marketplace for the next opportune buy.
  4. Get close to suppliers and order merchandise for yourself. No, there's not enough off-price merchandise to go around. That's what the other off-price retailers discovered as they tried to expand to keep up with shopper demand. T.J. Maxx wisely makes buys for inventory purposes, not just during mid-season or off-season opportunities.
  5. Make big buys. Today's apparel manufacturers appreciate the financial possibilities of purchases made by off-price retailers. Money talks, and T.J. Maxx has the money to make important buys (see #3 and #4).
  6. Build supplier relationships. Knowing that shoppers covet brands (see #2), T.J. Maxx will work with suppliers. Of course price is carefully negotiated, but without good supplier relationships, no retailer can accomplish key points #2 and #4.
  7. Give the leadership reins to a real retailer. T.J. Maxx's CEO, Carol Meyrowitz, is a seasoned retailer with the know-how and the experience to keep the company moving forward day after day, no matter what happens to the economy and the competition.
My big question: What will T.J. Maxx do as more shoppers move to mobile and digital shopping? Part of the buzz of an off-price chain depends on bringing shoppers back to the stores week after week in the hunt for "new" things at low prices (see key point #1) and treasures (point #2). Off-price does not operate using the same retail model as Gilt Groupe, for instance. Sometimes shoppers just have to go to the store and walk the aisles in search of that special bargain.

T.J. Maxx is definitely social: It has more than 2.2 million FB likes and 28,000 Pinterest followers. And the parent company has begun addressing online retailing in some divisions. What's next?

Monday, August 4, 2014

How Facebook Helped MegaRed Improve Market Share

Yesterday's New York Times has a detailed article about how Facebook worked with Reckitt Benckiser to create a targeted FB ad campaign for MegaRed, which competes with fish oil pills. The fish oil market rings up $1.2 billion in annual US sales, so market share matters.

A number of advertisers say FB has helped them achieve results and get returns on their ad investments. In fact, FB is investing heavily to be able to present more interactive and more creative ads, giving mobile marketing a particular emphasis because so many FB users access their pages on the "third screen."

In the case of MegaRed, one communications objective was to achieve 100,000 Facebook fans. The financial objective was to increase sales and improve market share by orchestrating the ads within a campaign that included point-of-purchase marketing, TV ads, and sampling.

Facebook recommended advertising MegaRed to every US woman aged 45 and up--approximately 32 million people who use FB. Reckitt Benckiser had a more precise targeting process in mind: It wanted to target current users of fish oil and consumers who have "heart concerns."

FB said its demographically-targeted ads would be measurable and, by analyzing who in the broad female audience responded early in the campaign, FB could refine the targeting when placing more ads. Reckitt Benckiser gave the go-ahead to test the demographic targeting and the targeting to fish-oil users. A big part of the process involved testing different creative executions, including both emotional appeals and rational appeals.

The results: MegaRed added more than a full percentage point of market share during the campaign and generated much more revenue than the campaign's cost. MegaRed fell short of the 100,000 FB fans it hoped to attract, but with 240,000 likes (as of today), the brand's FB page has a solid fan base. "Facebook is a fantastic tool for doing personalized marketing at scale," says Reckitt Benckiser's global marketing head.

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?