Gift Cards: Big Business, New Rules

There's a gift card for almost everything, from flu shots to charitable donations to Major League Baseball seats and merchandise. Now the rules of the gift-card game are changing.

In the past, marketers set various expiration dates and fees for their gift cards. Effective August 22nd, however, gift cards must comply with a number of new federal rules. The biggest change is the expiration date: gift cards must be valid for at least 5 years. Where issuers charge a fee (for lack of activity, for example), only one fee may be assessed per month (not counting any fee charged at the time of purchase). And for transparency, issuers must provide clear disclosure of terms and conditions on each gift card.

Some of these rules don't apply to gift cards produced before April 1, 2010, but all gift cards will have to be in compliance by January 31, 2011. Until then, retailers and other gift-card issuers will be posting in-store signs or links on their web pages to appropriate disclosures.

Price Wars

Procter & Gamble is defending its market share with price cuts in batteries, shampoos, liquid detergent, and other categories. To get ahead of rival Energizer, it added more batteries to its Duracell battery packages, which meant customers were paying less per battery. Then Energizer fought back with lower prices, which drew P&G more deeply into what has become a battery price war.

But are price wars worth fighting? One classic Harvard Business Review article by Rao, Bergen, and Davis suggests that marketing managers pick their battles carefully:

It is generally wise to not stir a hornet's nest by starting a price war with a competitor that has a significantly larger resource base or a reputation for being a fierce price warrior.

Ralcorp, which owns the Post cereal brands, touched off a breakfast cereal price war earlier this year by cutting prices. Now Post's profits are hurting, as are Kellogg's profits.

Marketers of e-book readers have become embroiled in a price war that is bringing the category into the mainstream and pushing profits down, down, down. Only three years ago, Amazon's Kindle debuted at $399 and today there's a $139 Wi-Fi-only model. All the players in this price war are big enough to keep it going strong through the holiday selling season.

Watch for more price wars as the economy remains sluggish and marketers fight for every customer, dollar by dollar.

Expanding Archie's Brand

Archie, Veronica, Jughead, Betty, and the whole gang in Riverdale are part of an ambitious plan to expand the Archie brand into new media and new product possibilities. The buzz started last year, with news that Archie might wed one of his long-time girlfriends (actually, there were two "weddings" but neither was real). When these story lines appeared, Archie's comic book sales soared, and sales have remained higher than before the "weddings."

Parodies of Twilight and other pop-culture phenomena--starring Archie, of course--have been previewed on MTV's site. Now the Archie brand is on Facebook and Twitter and the characters star in online games and other digital fun. All of this is part of a broader strategy for updating Archie and his pals for 21st-century marketing by showcasing the brand for new audiences.

Coincidentally, the USPS recently released a new series of stamps honoring classic comics, including Archie (see above). Yes, the stamps show the old Archie, but they also raise awareness of the brand's authenticity and longevity, not to mention pushing nostalgia buttons.

Comics are a big and tough business. Archie the brand competes with a spectrum of characters and corporate owners, including those under the Marvel umbrella (part of deep-pocketed Walt Disney).

How far can Archie's brand extend?

Retailing E-books and E-readers--Welcome to the Revolution

E-book readers are becoming the trendy gadget du jour. Remember when hotels furnished iPods along with hiply-decorated suites? Now Fairmont Hotels offer Kobo e-readers to their best guests. Plus, when guests check out, they receive coupons for discounts on Random House titles.

Welcome to the revolution. The rapid rise of popular e-book readers such as Amazon's Kindle and multifunction devices such as Apple's iPad, accompanied by a sharp increase in e-book sales volume, has publishers and retailers thinking hard about the future. The price war in e-book readers such as the Barnes & Noble Nook (above) is helping to drive sales volume higher and faster. Which products and retailers will reinvent themselves and thrive--and which will dive?

Barnes & Noble, the largest US book retailer, tells the New York Times: "The growth in our e-books business is about nine months ahead of our plan." To cope with the unexpected timing of this shift in consumer buying patterns, the retailer is retooling its merchandise mix by adding games and other non-book products. Remember, Barnes & Noble stores have lots of shelves to fill, and the peak holiday buying season is just ahead.

Holiday buying brings up one more revolution spreading across the retail world: Gift cards. Lance Ulanoff, writing in PC Mag, suggests that Amazon create a mechanism for people to gift specific Kindle e-books. He also wants Barnes & Noble to create a similar card for Nook users. With consumers changing their buying habits and Black Friday still 15 weeks away, the retailers have time to follow up on Ulanoff's idea.

The State of State Marketing

With so many consumers choosing staycations or close-to-home getaways instead of overseas summer travel, states are investing in marketing to attract visitors interested in unique experiences, beautiful vistas, or specific activities.

• Michigan's campaign, Pure Michigan, focuses not on Detroit or industrial centers but, as you'd expect, on its "unspoiled nature and authentic character." The campaign includes the Web site plus social media such as a blog (vacationers are invited to "guest blog"), Twitter posts, YouTube videos, and Flickr photos.
• Massachusetts tells vacationers: It's All Here. There's something for everyone (fun, romance, exploration, experiences, family time/activities, a bit of luxury, and play opportunities). Both Facebook and Twitter are part of this campaign.
• Not the official campaign of New Jersey but worth mentioning is Jersey Doesn't Stink, which wants to counteract the negative perceptions that many vacationers have of this "Garden State." The campaign is on Twitter, Facebook, and Youtube as well.
• Hawaii showcases its alluring scenery to highlight its strength as a vacation destination on Go Hawaii. Each island has its own tab on the home page, and interestingly, Hawaii links to the independent TripAdvisor site, urging vacationers to "get advice from real travelers," a great way to let opinion leaders share their ideas and recommendations.
• Louisiana wants to reassure vacationers that there are still many opportunities to enjoy the state's natural wonders, music, food, and more. In addition to videos, the official tourism site has an "update" section with the latest news about the oil spill. Social media connections include Facebook, Twitter, FriendFeed, Vimeo, Flickr, blogging, and Youtube. The state has also created a mobile-friendly version of its tourism site for smartphone users. Very smart.

Pop-up Stores Fill the Void

Pop-up stores have been coming on strong for the past decade. (Even longer if you count Christmas tree markets and other temporary stores that pop up seasonally.) During the current economic difficulties, with many vacant storefronts seeking tenants, pop-ups have become even more popular.
 

• Inc. recently reported on how to use pop-ups to (1) get the word out, (2) unload inventory, (3) test new markets, and (4) vet new retail ideas.
• The Wall Street Journal just did an article about pop-ups for (1) generating buzz, (2) testing new concepts (especially niche businesses), and (3) testing new markets. 
• The New York Times reports that pop-ups may be open for a few days or a few months, depending on the product and the marketing objective.
• The Denver Post reports that a pop-up store recently opened to serve as "an incubator of creative ideas" by featuring local artists.
• Target is one of the largest US retailers using pop-ups to build excitement about specific products, brands, and new markets. 

What will be the next pop-up trend to pop up?

Tracking What We Do Online

The Wall Street Journal has started a fascinating series, "What They Know," about how advertisers and companies that offer Internet services gather info on online consumer behavior. It's no secret that privacy is, sadly, either non-existent or very difficult to protect. Although many marketers are listening more closely to consumers' concerns about privacy, this series shows why the issue has become so controversial.

The first article explained the background and extent of the tracking, with a sidebar showing, in detail, how consumers can try to block tracking technology.

Today's article discusses how Microsoft could have turned privacy protection on in its Internet Explorer 8 software as the default setting (as product planners intended). Instead, thinking of the future advertising revenue to be gained by tracking users' behavior and serving up ads as appropriate, the firm ultimately released the software with protection set to "off" by default; users must turn on the privacy protection every time they start the software. Not a user-friendly decision, IMHO.

This is a must-read series for marketers that want a multidimensional view of online privacy. The stakes are high--and if marketers don't do more to disclose and to give customers easy ways to restrict some tracking, the backlash will get ugly.

You can get updates from the Twitter feed based on the series.

Marketing to the Mobile Crowd

Demographics can give marketers a general picture of the market, but to dig deeper, companies must understand and respond to customer behavior. Otherwise, competitors that identify trends early and respond with appropriate behavior-driven marketing may be able to pick off customers, first in ones and twos and then in torrents.

The widespread adoption of mobile devices is a good example. A recent article in BusinessWeek discusses the vast opportunities available to marketers that understand how, when, where, and why people use mobile devices. Smart phones, iPads, and other mobile gadgets have become utterly indispensable for many consumers and business folks.

It's actually a risk not to include mobile in today's marketing plans, IMHO.

For instance, knowing that so many drivers have iPhones within reach, the insurance firm State Farm offers an app for reporting an accident (and locating nearby repair facilities, etc.). This kind of behavior-driven marketing demonstrates to customers that the company gets it. More important, it adds utility that strengthens the overall offering.

However, many marketers haven't yet jumped on the mobile bandwagon. The firm eROI finds that less than one-third of companies surveyed believe their customers put a high value on an optimal mobile marketing experience.

I wonder whether these non-believers have tried turning off their smart phones for a day? The danger in lagging behind your customers' behavior is that you might lose customers to competitors before you have a chance to catch up. Behavior-driven marketing is often the most powerful and effective marketing of all.

Group Buying Goes Global

Group buying has been gaining ground worldwide. It got its start in China as tuángòu and now hundreds of Chinese Web sites compete to provide deal-of-the-day discounts to Chinese consumers.

Groupon, a fast-growing US group buying site, is a popular destination for consumers seeking special limited-time, deep-discount deals offered by restaurants, stores, hotels, spas and other marketers. Groupon's competitors include LivingSocial and Tippr (see logo below). Facebook and Twitter are an integral part of group-buying communication, allowing deals to go viral and win customers quickly.

Groupon's London branch maintains a Facebook page where thousands of fans can click to see the deal of the day, suggest new deals and send friends to sign up. UK consumers can also find deals at the site and FB page of competitor Groupola.

Can group buying sites be a long-term value proposition? Or is this concept maturing so rapidly that the major competitors will have to evolve other offerings to stay relevant and gain attention in an increasingly crowded marketplace?

Zynga + Google vs. Facebook?

Zynga, known for FarmVille and other Facebook games, is reaching for the sky with ambitions to be as ubiquitous in the game world as Google is in the search world. Its slogan is "Connecting the world through games."

Zynga is releasing apps to reach the mobile audience and expanding its line with instantly popular FB games such as FrontierVille which, after a month, has already attracted 20 million users. With so many players, Zynga has great potential as an advertising medium (see interview with Zynga's founder here).

However, the New York Times points out that Zynga's traffic dropped a bit after Facebook restricted some of the Zynga messages related to game usage ("Look! I found a pretty, purple, polka-dotted pony that needs to be petted/fed/watered/walked/brushed!").

If, as reported earlier in July, Google is indeed investing heavily in Zynga, the resulting marketing power could give Zynga the platform it needs to break free of Facebook's framework and create a new global gaming/social media structure. Given the many questions that Facebook's privacy policy has raised, players just might be upset enough to migrate (as a group) to a new Zynga site. This will be interesting!