Monday, February 25, 2013

Goodbye to the Penny (Maybe)

Canada is phasing pennies out of circulation because the cost of materials and minting a single penny is now 1.6 cents each. No business could survive this cost structure for very long and Canada has decided that in the long run, the country can do without the penny.

And Canada's not the only nation to take this action. For example, New Zealand stopped minting one-cent and two-cent coins in 1989; three Scandinavian nations--Norway, Sweden, Finland--no longer mint pennies. Treasury officials in other countries are looking more closely at the penny's cost-benefit analysis, as well.

The U.S. penny costs more than 2 cents to make! While rumors of the penny's demise swirl around us, talk of saying goodbye to this coin is nothing new. The future of the penny is unlikely to be settled at this very moment, but the economic case against continuing to produce this coin is strong.

Yet so many customers prefer to pay with plastic or with digital wallets that the penny may not be meaningful to daily life for very much longer. In practical terms, the rise of non-cash transactions may settle the fate of the penny within a few more years.

If the penny goes away, what would marketers have to deal with? A few thoughts:
  • Cash transactions would have to be rounded up or down. Think of all the prices that end in .99. Without pennies, those prices might end in .00 or, depending on each area's sales tax, they might remain at .99 if the cash price with tax included winds up to be a figure ending in .00 or .05. Otherwise, checkout terminals would have to be programmed to round cash transactions up or down accordingly, depending on any legislative or regulatory rules. In Canada, debit and credit card customers pay the full amount but cash customers pay a rounded up-or-down amount. (Until the penny disappears entirely, Canadian businesses have the option of continuing to accept pennies at the checkout--so some may avoid rounding for now.)
  • Consider new perceptions of pricing. Pricing theory suggests that consumers look at prices from left to right, which means a price of $14.99 is perceived to be more in the $14 range than the $15 range. Many upscale marketers use round numbers to avoid a discount image, pricing at $15 instead of $14.99. With the demise of the penny, prices that end in .00 or .05 may take on new meanings. What will shape those perceptions?
  • Pennies as nostalgia. If the penny goes the way of the buggy whip and the slide rule, pennies and prices that end in odd numbers may become the stuff of nostalgia marketing. Marketers may use advertising or other communications to remind consumers about the "good old days" when a few pennies could buy bubble gum or when copper pennies sparkled in the palms of kiddies. Some companies may retain .99 (or other odd price numbering) as a nostalgic branding device or a connection to the discount days when pennies were meaningful.

Saturday, February 23, 2013

Changes in Store for In-Store Health Clinics?

Back in 2006, in-store health clinics were in their infancy. The idea of dropping by the local supermarket or discount store to have a nurse, physician's assistant, or doctor look at a sore throat was just getting established, but drug stores and chain retailers had ambitious plans. 

At the time, CVS had 70 MinuteClinics in stores coast to coast, and it bought MinuteClinic to drive rapid expansion. Walmart planned to open 2,000 clinics within a few years. Target had plans for multiple clinics, and other regional and national retailers were jumping on the clinic bandwagon. Their goal: broadening services by offering convenient access to health-care providers for common ailments like scrapes or sore throats, with the ability to fill prescriptions on-site if needed, all at a reasonable cost.

Of course, shoppers might just pick up a few other items before or after being seen at the in-store clinic, adding to the overall transaction size and profit potential. Especially in areas with limited access to everyday health care or few doctors, in-store clinics can fill the void.

Fast-forward to 2013: Walmart has fewer than 150 health clinics--far fewer than it projected. Overall, retailers are still refining their marketing of in-store health clinics. Walgreens, for example, is expanding its clinics on a market-by-market basis. A few years ago, CVS began shutting some Minute Clinics when seasonal demand was low, referring customers to nearby locations instead. As demand increases, it reopens individual locations to meet local needs.

Yet some surveys show that consumers remain interested in visiting clinics in stores and offices, seeking both convenience and affordability. In fact, new health-care legislation is likely to accelerate demand for in-store health clinics in the coming years

Meanwhile, retailers have been using the flu shot as a competitive tool, emphasizing flexible hours and availability. In the 2012-3 season, Rite-Aid offered a booklet of discount coupons worth $100 and CVS offered a 20% deal on all store purchases made during the flu shot visit. Walgreens has steadily promoted flu shots and is one of the country's largest providers of flu vaccinations, despite the recent vaccine shortage due to high demand. Walmart, Costco, Stop & Shop, and other retailers have featured flu shot signage and events to heighten awareness and draw customers in.

What other changes are in store for in-store health clinics?

Wednesday, February 20, 2013

How Stonyfield Farm Applies Consumer Behavior Insights

Stonyfield Farm recently introduced a new line of yogurts with organic fruit blended in (which is why the line is called "Blends"). The company applied classic marketing techniques based on consumer behavior insights to launch this line.

I first found out about Blends through a coupon I received at the supermarket checkout, offering a freebie. Probably I was selected to receive the coupon because I was buying a lot of competing yogurts. That's the first insight based on consumer behavior: Stonyfield is offering the no-risk sample to people who are already yogurt fans, enticing them to compare and switch brands. Trying to convert non-yogurt fans would likely be less effective--and more expensive. This way, yogurt lovers can try without losing anything.

The product intro was also promoted through exclusive preview samples offered on the company's Facebook page. This gave brand fans an "inside" view and encouraged word of mouth.

As you can see from the foil top shown above, Blends is being marketed with a bit of an attitude: "Other yogurts better watch out," warns the top. "This new Blends could get other yogurts pushed to the back of your fridge."  

That's the second way Stonyfield is applying consumer behavior insights: Consumers tend to bring favorite foods forward in the refrigerator, so foods out of favor wind up in the back. The company is demonstrating its understanding of how people really behave, even as it differentiates itself with its slightly cheeky comments. A good way to stand out on the supermarket shelf, compared with other yogurts that lack this bit of attitude!

Once I peeled off the foil cap, I encountered a surprise: A money-saving coupon for $1 off 3 containers of Blends. Stonyfield's website also offers a 50-cent Blends coupon for download.

This reflects a third critical consumer behavior insight: To become a faithful buyer of a brand or product takes time. Giving buyers a discount to try 3 more containers is a good way to reinforce the buying decision, build familiarity, encourage enthusiasm, and strengthen preference. After enjoying 4 Blends (1 free and 3 discounted), yogurt fans will know whether they want to adopt the product on a regular basis, which translates into valuable customer loyalty.

Blends are still in the intro stage of their product life cycle. Will Stonyfield Farm's classic marketing make Blends into a big success? 

Tuesday, February 19, 2013

Retail marketing's strong local flavor

"If we came to Canada and didn't offer ketchup-flavored potato chips, then we would have looked like we didn't know what we are doing," says the head of Target Canada. In other words, the U.S. company behind the red bulls-eye logo can't simply add a maple leaf and use Canadian spelling to impress shoppers as it readies its new store openings.

Customers can tell at a glance whether a retailer understands what they prefer. If locally-produced or locally-popular products are featured on store shelves, if cold-weather products are available in northern states during winter, those are signs that the retailer is paying special attention to customer behavior on a store-by-store basis. By tailoring the merchandise assortment to local needs, retailers can compete more effectively and boost sales/profits. This approach also sends a signal that the retailer is committed to understanding the local community.

Local merchandising is nothing new--but national chains are still rediscovering its marketing power. Walmart, Walgreens, Trader Joe's and others are playing up local interests and local favorites with signage, displays, and special events that appeal to local shoppers. Macy's is involving its employees in the effort to tailor merchandising and service to local preferences.

In the UK, Tesco has adopted virtual merchandising as a way to see, at a glance, what store shelves would look like with certain products and a certain number of facings for each product, category, and brand (see photo at right).

The system allows Tesco's marketers to rearrange shelf displays for different stores, and also overlay data about sales velocity or profits as an input to decisions about what goes where. What should be placed at eye level, what should be placed on the top shelf, what should be placed at the bottom? This system helps its marketers decide.

Sunday, February 17, 2013

Sample Marketing Plan: Sonic 3D+ SecurePhone

Cell phones have certainly changed since the original "brick" phone was introduced in 1984 (you can see in this photo how big and heavy it was).

Fastforward to smartphones, which make up nearly half of all new mobiles sold worldwide. Samsung has become a real competitor to Apple's iPhone juggernaut, a rivalry that is boosting innovation and giving customers a lot to cheer about.

To go with the new edition of my Marketing Plan Handbook, I updated the abbreviated sample marketing plan to focus on a highly fictional 3D smartphone with special security technology. You can see this sample plan on the book's companion website.

Although the features I created for this fictional phone will likely be seen in real phones within months, the real point of posting the plan is to show the structure and content of a sample marketing plan (minus so many of the financial details). Please take a look!

Wednesday, February 13, 2013

Browsers Battle for Share

Remember Netscape? Once the premier browser brand, founded in 1994, Netscape's Navigator was essentially mothballed by owner AOL at the end of 2007.

Meanwhile, Bloomberg Businessweek reports that Google's Chrome, which didn't even exist until after Netscape's demise, is now the market leader in web browsers.

This chart also shows how dramatically Internet Explorer's grip on the market has been reduced. Microsoft introduced IE in 1995 and the browser had more than 90% market share by 2004. By 2009, IE's share was below 70% as Firefox (introduced in 2004) and Safari (introduced in 2003) caught on. By 2011, IE's share was down to 43% and Firefox had zoomed into second place with 29% share.

Currently, some of the biggest browser battles are taking place on the smallest screens. Mobile browsers are increasingly the focus of innovation, with apps giving users increased flexibility and functionality. The chart above shows mobile browsers gaining ground. The next step is to bring some of the mobile functionality to desktop browsers.

As Netscape's eclipse demonstrates, even the mightiest brands can be overtaken--and quickly--in the high-stakes browser wars. Which brand will dominate during 2013?

Monday, February 11, 2013

Mission Statement as Strategic Guiding Light

Marketing isn't just about money: It's also about making a real difference to stakeholders (customers and community, employees, suppliers, channel partners, and so on).

The best mission statements serve as strategic guidance for long-term and day-to-day decisions because they spell out the firm's fundamental purpose, its foundational values, and its aspirations.

Consider Ben & Jerry's mission statement, which has three parts: the social mission (improve quality of life), product mission (make fine, all-natural ice cream in a sustainable way), and economic mission (be profitable to add value for shareholders and employees).

Even though Ben & Jerry's has been owned by Unilever since 2000, the company clearly marches to a different drummer, which its marketing reflects. Over the years, the corporate parent has influenced Ben & Jerry's, and vice versa.

The Starbucks mission statement is short and to the point: "to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time." Starbucks identifies as its stakeholders: customers, employees ("partners"), coffee growers, stores, neighborhoods, and shareholders. The company explains in some detail how its mission and vision affect each group, giving marketers and other decisionmakers a goal and a responsibility for living up to the mission.

Coca-Cola's mission has three parts: (1) to refresh the world, (2) to inspire moments of optimism and happiness, and (3) to create value and make a difference. This mission directs its decisions about people, product portfolio, the planet, profit, and productivity. Its marketing follows the mission, bringing a smile to customers' faces and accentuating the positive in an entertaining way.

Of course, some mission statements may seem too filled with platitudes to be helpful in guiding marketing. Check the mission statements of some firms you buy from or admire. What do you think?

Friday, February 8, 2013

How Well Do You Know Your Customers?

Small businesses often try harder to cozy up to their customers because each relationship is so valuable, both in terms of short-term transactions and over the entire period of their business connections.

Community banks, for example, generally have deep roots in local areas and can get to know consumers and commercial customers very well.

Noah Bank, a tiny four-branch bank that targets Korean-American businesses, talks the talk (see newsletter at left) and walks the walk. It understands the complex professional and personal relationships that keep its business customers going and contribute to their financial success. Its officers are always out and about in the community, meeting with customers and listening to them talk about their situation and priorities.

Close customer contact like this also demonstrates a deep interest in customers and builds a strong foundation of mutual trust and respect.

Banks of all sizes, in particular, are seeking to rebuild trust and differentiate themselves in a meaningful way to retain customers and attract new ones. Citibank's European marketing director recently said that banks must "try harder." Consumer brand leaders such as Apple, she points out, can be good role models for banks, because these firms are known for their ability to identify and satisfy customer needs: "We need to elevate our holistic product to the level of leading consumer brands-to meet and exceed requirements. Give people a reason to choose you over rivals."

How can a marketer (especially a small business) find out about customer needs? Start by doing your homework on the customer, the industry, and the overall business environment. Think about the value your goods or services might add, depending on what individual customers need. Be knowledgeable and prepared before you see any customer.

Sales expert Geoffrey James suggests a few strategic questions during conversations with customers, such as: "Please tell me how your company uses widgets [insert your product category]." Then you can ask about challenges, based on your knowledge of this industry, such as "In my experience, inventory of widgets that are stored for some time might degrade before being used in production or operations. Have you experienced this?"

Monday, February 4, 2013

Super Bowl Ads Not as High Scoring as Ravens

Sandy Hook Elementary School chorus 
with Jennifer Hudson
Super Bowl XLVII featured a lot of drama on the field (the Ravens' 108 yard return touchdown to start the second half and the 49ers' unsuccessful last-minute attempt to tie the score at the end).

The drama of brothers coaching opposing teams added to the anticipation all week. And emotions ran high as the Sandy Hook Elementary School chorus sang just before the game.

Even the half-hour electrical glitch inside the stadium contributed to the drama of the game's second half and its eventual outcome.

Sadly, the ads were the least impressive part of the event, as so many Monday morning ad quarterbacks say in their critiques (and I agree).
  • New York Times ad columnist Stuart Elliott writes: "Super Bowl ads speak to a generation. But which one?" He complains that many of the ads played on old, wornout themes. Mother-in-law jokes (Century 21)? How very last century.
  • The ad panel of Kellogg (at Northwestern) ranks Blackberry at the bottom of the ads (due to "weak branding"). Century 21 finished fairly low, as did Lincoln and Calvin Klein, among others.
  • Joann Ostrow of the Denver Post writes: "Most of the spots were forgettable." Her critique concludes: "Too bad, in the rush to cash in on new technologies, too many ads skipped the creativity." 
  • Budweiser's Clydesdale ad
  • Ad Age's Kevin Wheaton comments: "There's not much of that [originality] on display this year." Too right.
So which ads did score high? USA Today's Ad Meter--which counts votes from the public--says it was the sentimental Budweiser Clydesdale ad, nudging out the fun P&G Tide ad featuring the miracle stain. The Kellogg School Super Bowl Advertising Review gave top honors to the Tide ad. Stuart Elliott mentioned the Clydesdales and the Tide ad in positive terms, along with the Stevie Wonder "voo doo" ad for Bud Light, the M&M ads, and the Oreo ad.

In December, I wondered whether the Best Buy, SodaStream, and Gildan ads would stand out. Not really. Oh well, there's always next year.

Sunday, February 3, 2013

Should You Cannibalize Your Own Products?

Not so long ago, cannibalization was generally a no-no. When planning a new product, you tried not to take sales away from your current products (think of it as "a bird in the hand" marketing).

These days, the mandate to go ahead and cannibalize comes from the top, as a way to preempt competitors from stealing sales away.
  • John Donahoe, CEO of eBay, says yes: "In technology, either you cannibalize yourself or someone else is going to do it." So eBay made changes, including pushing into mobile marketing for autos, among other big-ticket items. Today, eBay says it sells 8,000 cars a week via its mobile app. Ka-ching.
  • Tim Cook, CEO of Apple, says yes: "I see cannibalization as a huge opportunity for us." Witness the iPad Mini, which is sure to cannibalize some of the iPad's sales. But if the Mini prevents rivals from getting Apple's customers, it's worthwhile to accept lower revenue/margins rather than lose the entire sale. Let's see how Apple reacts to Samsung's strong competition on the smartphone side.
  • Toyota's Prius may have cannibalized some of the Camry's sales, yet it also became the frontrunning pioneer (and category prototype) of hybrid gas-electric cars. In fact, the exec who championed the Prius is in line to become Toyota's next CEO.
The equation will be different for every product and company. Look at how cannibalization is likely to impact your product lines, overall sales, customer loyalty, and market share. Sometimes the answer may be in the timing of something new.