Vanilla Shortage Is Back on the Menu

https://en.wikipedia.org/wiki/Vanilla#/media/File:Vanilla_florentine_codex.jpg

Six years ago, a vanilla shortage was making headlines and pushing up prices of baked goods, ice cream, and other products that incorporate vanilla as a key ingredient. And that wasn't the first time: A vanilla shortage also made headlines in 2004.

Now, the shortage is back, due to poor crop harvests in Madagascar, where much of the world's vanilla is grown. Although the shortage is not as bad as originally feared, it is causing headaches for marketers that must use vanilla in their recipes. "Eighty per cent of the market is industrial vanilla, and that's what drives the pricing," says a senior exec of one vanilla import firm. In other words, consumers aren't the big buyers--businesses are the big buyers of this key ingredient.

As a result of the shortage, some businesses are raising prices to cover the higher cost of buying vanilla. Ice cream marketers are cautiously increasing prices, for instance. Others are seeking out alternatives, such as "vanilla flavor" rather than "vanilla extract." Watch for more research on vanilla as the world copes with periodic shortages that affect the marketing plans of food businesses, perfume businesses, and others that rely on this key ingredient.

Bucking the Trend of a Shrinking Retail Presence

Even as so many retailers contract their physical presence, TJX is expanding with new stores in many of its retail brands. It owns TJ Maxx, Home Goods, Sierra Trading Post, Marshalls, and HomeSense (all in the US). Its Canadian brands include Winners, HomeSense, and Marshalls. These are off-price retailing brands, with a "treasure hunt" sensibility and lower-than-traditional-stores pricing.

Home Goods is opening stores from the Atlantic to the Pacific. Above, the grand opening day of one store, where the line to check out reached from front to back of the store for the first three hours. Before the opening, inventory was stocked neatly on shelves and attractive display platforms. Even as shoppers poured in, stock was neatened and replenished.

Wisely, Home Goods had lots of extra employees on hand to answer questions, direct shoppers to the right aisle, and direct cart traffic to keep lines moving quickly and efficiently all day. With a TJMaxx just down the road from this new store, local shoppers were already familiar with the kinds of discounts and merchandise they would find.

Another wise move: Leveraging brand synergy by putting two retail names together under one roof. Home Goods is going in with Marshalls in several sites, capturing more shoppers and, hopefully, more wallet share. This makes sense because all of the TJX brands are known for discount pricing.

The bottom line is, apparently, consumers' bottom line: Lower prices, and the opportunity to grab a bargain, will attract shoppers and keep them coming back periodically.

Macy's Fine-Tunes Store Retailing

Macy's is still attracting in-person shoppers, despite the incredible growth of online and mobile shopping, all competing for the attention of customers. Among the innovations it's using to draw shoppers into stores is its outlet-style retail section, known as Backstage.

In my local Macy's, Backstage occupies an area on the lower level, with its own cashiers and decor. Customers can register for text messages about new products, in-store events, and other Backstage specials. This retail brand has its own Instagram account, Facebook page, and Twitter account.

Backstage is largely stocked with "off-price" merchandise, often new products purchased out of season or as excess inventory. Mostly apparel, but also home goods, brand-name cosmetics, and lots of shoes.

What caught my eye was the above sign in the handbag department, sitting on top of a showcase featuring "previously loved" merchandise. Turns out these are high-end purses that have been repaired and are now marketed at discounted prices compared with the original new-product price.

One strategy Macy's is using to fine-tune its store retailing is "Growth 50." This involves testing a concept in 50 stores, assessing the lessons learned, and applying the most effective ideas to hundreds of other stores. Watch for more innovations and lessons learned as Macy's reinforces customer loyalty in this age of omnichannel retailing.

Black Friday Expands to Black November

Not so long ago, retailers would plan "door buster" deep discounts for the Friday after Thanksgiving, aiming to entice shoppers who wanted to get a jump on their holiday gift purchases.

These days, Black Friday isn't just a single day--or even a single week. Nope, it's several weeks long. Above, Amazon posts new discounts every day on its "countdown to Black Friday" page. Best Buy already has Black Friday specials.

So does Walmart, which is also planning to open many of its stores on Thanksgiving and feature deep-discount Black Friday deals at 6 pm on Thursday evening. For online shoppers, Walmart will kick off Black Friday all day on Turkey Day, as shown here on its website.

Walmart is trying something new this year: in-store parties to demonstrate products and create a special experience for shoppers who choose to buy in person. The plan is to throw some 20,000 parties nationwide, inviting shoppers to come on in and try new products, taste new foods, or watch new demonstrations--get in a festive mood and buy!

Food Trucks Roll into the Future

Food trucks have been a major fad since 2008, when the L.A. area saw the birth of the soon wildly popular Korean tacos served by Kogi BBQ trucks. Almost immediately, food trucks began popping up in streetscapes from coast to coast, offering both niche foods and mainstream foods.

Now food trucks represent an estimated $2.7 billion in revenues and a consumer behavior shift toward eating food on the move. Entrepreneurs, in particular, find food trucks a great way to test new products and new dining concepts without investing in high-overhead brick-and-mortar restaurants. Even restaurants are testing food trucks to reach customers interested in easy, casual food at easy, casual prices--competing with fast-food and fast-casual dining, in particular.

The most popular food trucks in 2017 are offering favorites like gourmet grilled cheese, burgers, and tacos (of course). Above, Mac Mart, which is both a food truck and a mac 'n cheese restaurant. Consumers are also flocking to food truck festivals around the country, enjoying different cuisines in one park or parking lot.

In some areas, the fad for food trucks is starting to fade a bit, partly due to overexposure and partly because of cities resisting the trucks to allow traditional restaurants some space to regain customers. Yet food trucks also represent a major opportunity for B2B marketers, including insurance firms that want to offer just the right coverage for food trucks.

The food truck fad is likely to evolve as the marketing environment develops and consumer behavior shifts, but for now, food on the move remains popular in many locations.

Marketing Electric Cars to Green Buyers

Tesla has had considerable success targeting green car buyers as it markets its initial two models of luxury all-electric cars, priced about $70k and up.

Now its biggest challenge is to meet the expected tsunami of demand for the popularly-priced all-electric Tesla 3. Starting at about $35,000, this stylish sedan is priced at half of what the other Teslas cost, yet it also carries the cachet of the Tesla brand, no small consideration. So Tesla has been active in the bond market to raise funds for the steep production increase needed to keep up with Tesla 3 demand.

Meanwhile, Tesla is booking way more than 1,000 reservations for the Tesla 3 every day. Delivery won't be for at least a year. This gives competitors like the Nissan Leaf time to appeal to buyers who want to drive green cars. Nissan is leaking bits and pieces of its new 2018 Leaf design to build anticipation and interest.

California is doing its part to encourage green buyers--it's looking at big rebates for all-electic and plug-in hybrids. This would bring the price of electric vehicles down to a level where mainstream buyers would do the math and see the financial benefit as well as the environmental benefit. 

Wristwatches Tick Along on Social Media Marketing

Wristwatches are decidedly old-fashioned--yet their fashion appeal lives on into the 21st century, despite the many substitutes (like the mobile devices everyone totes around, or the smartwatches made by Apple and others).

Retro, antique, and high fashion watches are ticking along on social media marketing. Just days ago, a New York Times article reported on how upscale vintage wristwatches, posted on Instagram, are drawing the interest of collectors and beyond. In fact, expensive vintage watches are selling well despite the many digital substitutes. 

As shown at top, Gucci is using Instagram for an artistic approach to marketing its stylish watches. And it's not the only brand leveraging social media. Swatch has nearly 5 million Facebook fans, for instance, and 771k Instagram followers.

Swatch--which revolutionized the watch market decades ago--is actually doing very well with its fashion watches, even in this digital era. Swatch's CEO says: "In July, our factories are at maximum capacity because the demand coming from our own brands is so strong." Swatch maintains handsome stores in airports and through carefully-selected retail stores.

US Auto Market Share Brawl

If Toyota is correct and the US auto market has peaked, meaning that total sales by all industry participants combined will barely budge in 2017, then market share is the name of the game. The only way for one company or brand to show growth is by taking share away from a different company or brand (including cannibalizing a brand in the parent's portfolio).

This situation will have a major influence on automaker's US marketing plans for the coming 18-24 months. So far, the signs point to a plateau.

For starters, consumers will likely benefit from increased financial incentives (rebates, for instance) as dealers and brands court switchers or try to hold onto usually brand-loyal customers. Dealers are also benefiting from manufacturers' financial incentives, which they may or may not pass along to consumers in the form of reduced effective pricing.

A table on the Wall Street Journal site shows that sales of light trucks are picking up speed vs sales of passenger cars. Gas prices are low, so even though SUVs and pickups don't deliver fuel efficiency equivalent to cars, buyers are returning to their truck-buying habits.

As a result, the market share brawl is not just a matter of, say, GM vs Toyota, but also cars vs SUVs and pickups, plus gas vs hybrids vs electric. How to stand out? For example, for differentiation and to appeal to targeted segments, Volvo is going all electric by 2019. What complicates this brawl is the aggressive entry of Tesla and its popularly-priced electric car (image at top). The market share brawl is underway!

Renting Clothing Is Still in Fashion

Back in 2009, Rent the Runway was in the vanguard of the clothing rental business model, offering designer-branded, special-occasion fashions at a fraction of the purchase price, to be worn for a few days and returned. Since then, it has expanded to stores and stores-within-stores at Neiman-Marcus. And gained competitors. And it offers a wider range of products like fashion accessories.

The rental/subscription model is increasingly popular as consumers avoid buying and instead, enjoy wearing in-style clothing for a limited time (a few days or a month). Of course, startups are looking for niches and differentiation so they can fine-tune an effective positioning.

For instance, Le Tote offers clothing by monthly subscription, selected by personal stylists for your consideration. Just check the "tote" to see what's being recommended, then rent, wear, return, and repeat. No shopping, no laundry, hundreds of styles/brands to choose from, and no unworn styles sitting in the back of your closet with the tags still on.

Interestingly, fashion brands that do business with these and other rental startups gain access to feedback that helps them better satisfy their customers, rental or purchase. Le Tote notes what happens to garments that are rented and returned, re-rented and returned. What parts wear out, for instance. And tells the manufacturers so they can do better. Win-win-win (for manufacturer, rental service, and--of course--the next customers.

Other product categories are represented in the rental-subscription business model, too. More on that soon,

SUV Sales Are Revving Up

Now that gas prices have been low for a long time, and consumers feel confident enough to buy new cars, more are choosing SUVs. In fact, nearly three-quarters of owners who traded in an SUV bought another SUV (compared with the 62% of people who trade in a regular car and buy yet another regular car rather than switching to an SUV or other vehicle type).

Yet a significant number of owners who trade in green vehicles (hybrids and electrics) are switching back to gas-powered SUVs because gas is so affordable these days.

Meanwhile, automakers are continuing to try to entice buyers with green SUVs. Hyundai has an all-electric SUV with a range of about 200 miles per charge, for example.

Luxury automakers are also eyeing the intersection of green and SUV. Mercedes is working on an SUV under the EQ brand, for introduction around 2020.

Jaguar has a new concept SUV that could challenge Tesla as the deluxe crossover vehicle of choice for high-income buyers, with 400 hp and an all-electric range of more than 200 miles per charge. Production is expected in 2018.

And more women are buying SUVs, a recent trend that's fueled [pun intended] by the need for more cargo space and better mileage being offered by newer models.

Marketing the Mystique of Cuba

Coffee lovers can now try "the first Cuban coffee in the U.S. in over 50 years" (quoting a Nespresso ad). In limited supply at Nespresso stores, and priced higher than other Nespresso capsules, Cafecito de Cuba offers a "taste" of the island nation, given very recent changes in trade relations.

Cuba has a mystique: It captivated the American imagination during the mid-20th century--the vibrant night life, the music, the celebrities, the food, the heritage. By now, Cuba has been off limits for so many years that it is somewhat mysterious, and its island location has considerable vacation appeal.

Currently, trade restrictions are slowly being eased (significant barriers remain), and Cuban rum and cigars are being allowed into the US.

More and more businesses are using the mystique of Cuba to market goods and services.

• American Airlines has an ambitious schedule of flights to various cities in Cuba, seeing future profit potential as tourism expands little by little. Jet Blue and Silver are also flying to Cuba.
• Starwood has three hotels under its umbrella, again awaiting the influx of tourists.
• Chanel brought a fashion show to Cuba, taking advantage of the mystique and novelty.
• Carnival has cruises to Cuba and New Orleans is trying to establish its port as another point of departure for Cuban tourism.

Subscription Boxes of Everything

In 2010, Birchbox touched off the craze for marketing of subscriptions to monthly deliveries of . . . well, almost everything, at least these days. Birchbox began by offering boxes of sample-sized cosmetics so women can try new blush, eye makeup, skin cream, and so on.

Samples are provided by the manufacturers, and subscriptions are reasonably priced to encourage people to remain customers for many months. Birchbox now offers monthly boxes of samples for women and men, curated with a theme and personalized to fit subscribers' needs.

Many consumers like the idea of trying new products with minimal financial risk. Variety-seekers are another targeted segment. Like something? Order from Birchbox or buy locally--ideally, from one of the new Birchbox retail stores. UPDATE: Birchbox is scaling back its expansion amid competitive pressures.

Meal ingredients by mail are another focus of marketing attention, with firms like Blue Apron and Hello Fresh targeting Millennials and others who want to pull ingredients out of a box, pick up the supplied recipe, and have a home-cooked meal that's tasty and elegant. Ingredients are premeasured so there's no waste, which enhances the value.

Today, subscription-based curated boxes are available in a wide variety of categories, from international snack foods and men's clothing to travel items and fly-fishing items.

What's the product life cycle of subscription boxes? Hard to say, although it's probably much shorter than the life cycle of catalog marketing (more than a century old and still viable).

Tesla, the Marketing Phenomenon

When Tesla's CEO announced the all-new, all-electric Model 3 at the end of March, car buyers didn't just cheer--they threw money at the company. Within three days, Tesla had received 276,000 pre-orders, accompanied by $1,000 per order.

And within days, the company was talking about whether it would deliver on time. After all, it usually delivers fewer than 52,000 vehicles per year, but its stated goal is to deliver 500,000 per year by 2020. Tesla's new battery factory won't be completed until next year, another factor that will affect the ability to deliver Model 3s on time.

Tesla made its name with high-end, all-electric cars that look classy, cost dearly, and perform like, well, high-performance vehicles. The Model 3 is different from the Model X and Model S because it's popularly priced at about $35,000, before government tax credits for energy efficiency. The price has captured many a headline.

Tesla's goal is to popularize eco-friendly cars. Specifically, it wants "to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible." The firm has even offered to open its patents to competitors to speed the process. It is building supercharging stations nationwide and around the world to make recharging faster and more convenient for drivers, and increasing the range of its cars to sidestep the fear of not being able to reach destinations before the charge runs out.

Often Tesla is called the Apple of the automotive industry, because of its obsession with tech innovation and design. Yet Apple may wind up competing with Tesla at some point. GM's Chevy Bolt will be a direct competitor when introduced next year. Stay tuned for a fascinating marketing phenomenon.

Mickey or Harry @ Peak Time = Surge Pricing

If it's good enough for Uber and Major League Baseball, not to mention the world's airlines, it's good enough for Disney and Universal Studios: Surge pricing comes to theme parks.

Disney announced via blog that its parks are raising one-day prices by as much as 20% during seasonal periods of peak demand. An excerpt from the blog post: "Each month is divided into value, regular and peak days with an 8-11 month calendar available for viewing online. Here’s an example, if guests plan their visit for September, they’ll have a variety of options, including many days in the value period, which will give them the opportunity to pay less for a 1-Day ticket."  

The idea of using pricing to manage demand is a basic economic principle. Movie theaters have done it for years, charging low prices for daytime movies and higher prices for evening movies. Some customer segments are willing to switch from peak to non-peak visits to save money, which frees up availability for peak visitors who can't come at other times. And that's why visiting Mickey Mouse will cost more during, say, periods when schools are on vacation and families have a few days to visit a Disney theme park. At Disney, days when demand is lowest are non-weekends, so many one-day passes for Monday-Thursday visits are "value price." Weekends are generally "regular price" and holidays are often "peak price."

Universal Studios in Orlando previously announced its use of surge pricing to manage demand this year. Its Harry Potter attractions are expected to draw crowds, and the new peak-period pricing is one way to spread out demand.

Sure, airlines have used demand-based pricing to set prices for years. That's why one passenger might pay $120 while a second passenger might pay $140 (or more) for a seat on the same plane. It's a matter of supply and demand. If there's no way to increase supply, marketers have to manage demand--and pricing is an effective way of doing just that.

Competitors as Stakeholders: Look at the Airline Industry

In my long-running series discussing the fact that competitors are stakeholders, this post looks at what happens to the airline industry when competitors make major changes.

The four largest carriers in the U.S. airline industry (an oligopoly because of the relatively few carriers who compete) are the target of a Department of Justice probe over "capacity discipline." Translation: Are American, Delta, Southwest, and United working together -- illegally -- to constrain expansion, which has the effect of increasing the pricing power of the airlines and therefore keeping up healthy profits? 

In the airline industry, "adding capacity" can lead to profit-sapping price wars as airline carriers seek to fill more seats by slashing prices to attract passengers (who in some cases might otherwise fly a different airline). During the Great Recession that followed the financial turmoil of 2008, most airlines found themselves with excess capacity as business and vacation travelers alike reduced their travel budgets. So for economic reasons, the carriers restricted capacity individually and, in that way, kept costs like fuel and payroll under control.

Clearly, if and when Southwest or American Airlines or another major airline adds flights, its competitors need to pay close attention. In fact, American's CEO recently said that although lower fuel costs are improving profit margins and can support more capacity, his airline won't aggressively add capacity in the near future. So America is maintaining capacity discipline on its own.

Yet Southwest Airlines CEO Gary Kelly said during an interview  that he's sticking to his plans to increase capacity: "Our competitors are always complaining about Southwest, and we're just going to continue to focus on running a great airline…" Not maintaining capacity discipline, in other words, which will inevitably affect the marketing strategies of other major competitors.


Meanwhile, airlines are looking at ways to increase productivity by increasing the number of seats crammed into every aircraft. This would boost per-flight profitability, but would be likely to decrease passenger satisfaction.

Marketing in the Experience Economy

Way back in 1998, Pine and Gilmore's Harvard Business Review article about the Experience Economy outlined a four-step progression from undifferentiated commodity positioning/market pricing to the highly differentiated culmination of staging an experience at premium pricing. "To realize the full benefit of staging experiences, however, businesses must deliberately design engaging experiences that command a fee," the authors wrote.

Today, consumers are surrounded and distracted by more potential experiences than ever--facilitated by connectivity and ever-present digital devices. In a very real sense, then, marketing must be ever-present and available to reach customers and deliver experiences when and where desired.

In fact, material goods are so ubiquitous that consumers often crave an interesting or unique experience in conjunction with a purchase OR rather than the purchase of a tangible item. (Think "Spotify" instead of music download, for instance, Uber car service instead of a traditional taxi service.)

Not surprisingly, consumer behavior favoring experiences is having an effect on the retail industry. Stores can't simply be stores. Prices can't simply be prices. Showrooming and webrooming rule. The key to marketing in this experience economy is to understand your customers and adapt to their needs and wants--quickly--with appropriate/differentiated offerings and customer services that set the offering apart from competing offerings.

Even purchases like Uber rides are actually experiences, especially since both driver and passenger rate the experience. Bad experience? Bad rating. Good experience? Good ratings add to the potential for further differentiating this offering and charging more for the experience.

Multichannel Marketing in the Age of Showrooming and Webrooming

Multichannel marketing is more vital than ever before as consumer behavior evolves. A recent Bloomberg Businessweek article discussed the difficulty that traditional stores have in keeping up with minute-to-minute price changes from online competitors. Shoppers will be comparing prices online vs in-store, so retailers can't afford to neglect this competitive issue.

Nebraska Furniture Mart, for instance, replaced printed price tags with digital price displays so it can make a price change in all stores with one click. The retailer is known for beating competitors' prices, so digital pricing is a big help when shoppers apply showrooming and use smartphones to check prices while they browse the aisles in person. Carrefour and other chains use digital price tags as well, such as those provided by Pricer (sample shown above).

Multichannel Merchant magazine explains that webrooming is when a consumer researches a purchase online and then goes to a store to buy. This is an emerging trend shaping marketing. For instance, IKEA was successful in using Facebook ads to increase in-store traffic by attracting online browsers who then visited a local store.

Webrooming is increasingly popular among shoppers who don't want to pay for shipping, who want to touch/see a product before buying, and who want to be sure a product is in stock before going to the store.

Microsoft Markets the Launch of Windows 10

Not known for giving much away, Microsoft is introducing the long-awaited new Windows 10 operating system as an upgrade freebie (for now). Ultimately, Win 10 will be in place across platforms, so users don't have to learn new systems for each product.

One obvious result is that current Windows users are more likely to upgrade to Win 10, a major consideration at a time when some PC users are considering changing to Apple products because of their good experiences with the iPhone, the iPad, and other well-known products. Another result is that PC sales--currently stalled while users await reviews of Win 10--should begin to edge upward for the back-to-school and holiday shopping seasons.

Free means users have an opportunity to experience all the bells and whistles without financial risk. And Microsoft is playing up the user-friendly aspects of Win 10, including Windows Hello (facial recognition as a security feature) and Microsoft Edge (a new Internet browser that could reignite the browser market-share wars).

Microsoft thoroughly tested this new OS with more than 5 million beta testers, and decided to roll it out around the world, with launch events on every continent. From Beijing to Berlin, New York to Nairobi, engineers who worked on Win 10 will meet with fans and discuss the new features and benefits. Of course the 20 million Windows fans on Facebook already know some of the details from frequent posts.

Will Windows 10 gain rapid acceptance and diffusion among users? Will it polish Microsoft's reputation for user-friendly innovation? We'll have to give the new OS time and see how reviewers and users react in the coming months.

Aftermath of Amazon Prime Day

Seems that reaction to Amazon Prime Day was mixed: There were some big bargains, but not as big as on Black Friday. Naturally, Amazon put its own products front and center, and the limited quantities of promo-priced Kindles and other items sold out quickly.

Although social media lit up with Prime Day mentions, the number was far lower than Black Friday mentions on the day after Thanksgiving. Just as bad, sentiment was mixed--with a lot of posts expressing disappointment at the "garage sale" nature of many products featured for sale. Some social media mentions used the hashtag #PrimeDayFail to describe their disappointment.

Yet sales were definitely higher for Amazon, and the full-day promotion sparked higher awareness of Prime. One analysis shows that nearly half of Amazon's customers are Prime members--an estimated 44 million people who can click for the special deals, the free video streaming, the free Kindle library, and more.

So all in all, no matter what the critics say, Prime Day turns out to be a win for the now 20-year-old pioneer of online retailing. And you can be sure Amazon will learn from this year's experience and boost its bargains to a higher level next year.

Amazon vs Walmart on Prime Day

Amazon is running an exceedingly clever promotion for its 20th anniversary: For its Prime members only, special deep discounts will be offered throughout the day on July 15th. Think how many consumer behavior hot buttons this marketing tactic pushes:

• "I'm a member of an elite group" entitled to special privileges not accorded to outsiders--which reinforces the positive associations of paid-up Prime membership.
• "Limited time only, act now" call to action increases the urgency to click and buy--on Prime Day. And some research indicates that many Prime members will do just that.
• "Like Black Friday only more bargains" has little competition in the middle of July, when others are running summer clearance sales or back-to-school deals--so Prime Day gets a lot of attention and differentiation.
• "Members have privileges" as long as they continue to be members--so loyalty increases.

Walmart is going head-to-head with Amazon by aggressively promoting its own special deals on July 15th, intensifying the message that the day is for bargain hunting. "Dare to compare: Top products, lower prices" is Walmart's theme, encouraging consumers to confirm that Walmart's price on featured products is lower than Amazon's price on those same products. Walmart's deals are open to all, whereas Amazon's deals are for Prime members only (Prime membership can be sampled for free for a limited time, of course).

If Prime Day catches on, other retailers may follow (by promoting their own "members only" day or by hitching their wagons to Amazon's day, the way Walmart is doing). Consumers will be the big winners, no matter which retail giant they buy from.