Although they probably weren't planning on a less than successful campaign, no one can say they weren't original. VW put magnets on cars that appeared to be dents but were in fact just ads...
I can't imagine that would create a positive association....
http://www.autoblog.com/2007/04/17/step-away-from-the-car-vw-polo-magnetic-dent-promotion/
Tuesday, April 17, 2007
Taking Care of Business: The Countess puts on her thinking cap and ponders marketing strategy and the making of a brand
I came across an interesting article in the May issue of W Magazine. Louise J. Esterhazy writes a column in the last page of the magazine which usually includes a story or commentary on any subject she deems interesting that month. She decided to tackle branding in this issue.
She begins by discussing great brands and how they are getting lost in the mix because today, "the world is all about brands. Everything is branded: hedge funds, TV companies, drug companies, mattress retailes, nails, water, even chefs." She then dives deeper into movie and music starts as brands, and, horror of horrors, socialites who are dying to be branded (a la Paris Hitlon?). She makes a particulary stabbing comment to the socialites, "As these women preen, pose and prance for the paparazzi, they forgot that elite names like Babe Paley, Gloria Guiness and C.Z. Guest haven't faded, because they had true style....It all boils down to the fact that a brand - be it a person or a product - has to do something for us... A brand is really branded when there is quality, uniqueness and style."
I think this is particularly relevant to all of the products or companies who try to create or use a brand to maximize sales, or relate to their customers, or go global when there isn't really a brand at all, just a bad or common product with a fancy name. When there are thousands of products and hundreds of brands for consumers to choose from, throwing another one into the mix in the hope of creating a fortune isn't going to get noticed unless you truly have something to offer.
It was a really interesting article, and unfortunately I don't have a link to include, but I have a copy of the article (it's only one page long) if anyone is interested in reading it.
She begins by discussing great brands and how they are getting lost in the mix because today, "the world is all about brands. Everything is branded: hedge funds, TV companies, drug companies, mattress retailes, nails, water, even chefs." She then dives deeper into movie and music starts as brands, and, horror of horrors, socialites who are dying to be branded (a la Paris Hitlon?). She makes a particulary stabbing comment to the socialites, "As these women preen, pose and prance for the paparazzi, they forgot that elite names like Babe Paley, Gloria Guiness and C.Z. Guest haven't faded, because they had true style....It all boils down to the fact that a brand - be it a person or a product - has to do something for us... A brand is really branded when there is quality, uniqueness and style."
I think this is particularly relevant to all of the products or companies who try to create or use a brand to maximize sales, or relate to their customers, or go global when there isn't really a brand at all, just a bad or common product with a fancy name. When there are thousands of products and hundreds of brands for consumers to choose from, throwing another one into the mix in the hope of creating a fortune isn't going to get noticed unless you truly have something to offer.
It was a really interesting article, and unfortunately I don't have a link to include, but I have a copy of the article (it's only one page long) if anyone is interested in reading it.
Nike's New Downmarket Strategy
So, Nike is planning to launch a new brand called "Tailwind" targeting fashion and value conscious women. The new brand will be sold at Payless Shoes stores. According to chief analyst Marshal Cohen from NPD group "What this does is afford a big-name brand the ability to enter an even bigger market without diluting the core essence of its dominant brand". However, there are a lot of examples of failures of brand over-expansions which ended up cannibalizing the master brand name and did not provide a lot of differentiation. To avoid these potential risks, Nike will be using the Tailwind as a stand alone brand targeting a specific market segment need and a targeted value proposition to this segment.
Nike's New Downmarket Strategy (Business Week)
Hoping to make good on its promise of growth, the company is launching Tailwind, a line of shoes for fashion- and value-conscious women
by Helen Walters
Nike raised an eyebrow or two earlier this month when Chief Executive Officer Mark Parker outlined a bold plan to increase the company's business to $23 billion in revenue by 2011. "We'll get there by creating innovative products and consumer experiences," Parker said at the investor meeting held at Nike's headquarters in Beaverton, Ore., in early February. "When we're innovating, we're leading. And leading is what we do best."
It was a soundbite-worthy—and entirely unspecific—comment. But now, a mere two weeks later, Nike (NKE) has taken a concrete step by launching a new brand aimed squarely at a market segment not previously served by its core lines of athlete-focused footwear and apparel. Parker, it seems, wasn't making idle promises.
Produced by the wholly owned Nike subsidiary, Exeter Brand Group, Tailwind, as the new brand is called, is a fashion-conscious line of footwear, officially launching in three Payless stores in Manhattan and Brooklyn on Tuesday. Initially, the line will be available in 400 stores in select markets, though by December it will be stocked in pretty much all of the retailer's nearly 4,600 stores nationwide.
Bright and Sporty
The launch came with all the hoopla and sports-star endorsements you would expect from Nike. Soccer great Brandi Chastain was involved in Tailwind product development and design, and she, along with teammate Hope Solo and volleyball player Logan Tom, are the front-and-center faces of the brand.
The line aims at what Exeter President and CEO Clare Hamill describes as the "premium value" space. In other words, cheap shoes, in this case for women. For now, there are six styles, ranging in price from $19.99 to $34.99. Constructed from various materials, including mesh, leather, and synthetic suede, the shoes feature cheerfully bright colors and are certainly sporty looking. Each design features a Nike-developed technology called "G Zone," a honeycomb gel that sits in the heel of the shoe, intended to soften the impact of life on the wearer's foot.
"This woman has a very active, busy life and is looking for a product that will perform and look great," Hamill says of the ideal Tailwind consumer. "The designs are on-trend but not trendy. They're expressive and beautiful—but we were also looking to get some performance, too."
New Audience
In fiscal 2006, the six Nike subsidiaries generated $2 billion in revenue. That's a drop in the bucket compared with the $8 billion growth the company projects over five years, but it's an area of the business that Nike is moving aggressively to expand—over the next five years, Parker predicts subsidiaries will contribute around 25% of Nike's revenue growth. He says the company is "bullish" on its subsidiary companies.
"We believe Nike's 'other' business—which is composed of Cole Haan, Nike Bauer Hockey, Hurley International, Nike Golf, Converse, and Exeter Brands—is a major driver of Nike's business," agrees Citigroup research analyst, Kate McShane, who describes the subsidiaries as Nike's fastest growing division and considers them one of its major growth drivers. "We estimate this category will generate around $2.3 billion in revenues, or grow 16.5% during Nike's fiscal year 2007," she says.
Tailwind gives Nike the opportunity to attract an entirely new audience at the lower end of the market, one previously alienated by the high prices and athletic focus of Nike's core brand offerings. "What this does is afford a big-name brand the ability to enter an even bigger market without diluting the core essence of its dominant brand," says NPD Group chief analyst Marshal Cohen. "Nike really has nothing to lose and a lot of volume to gain…. Consumers like the idea that Nike is behind [the new brand]—it seems like a good bargain."
There has been a lot of talk in recent months of the dangers of unchecked brand expansion. Perhaps the poster-brand for over-expansion, Gap (GPS), continues to sit back on its haunches after an already tumultuous year. It stands accused of cannibalizing its own market share with the introduction of labels such as Old Navy and Banana Republic that simply weren't different enough from the mother brand's core offering. Indeed, Gap just announced the closure of its concept, Forth&Towne, after the 18-month retail experiment failed to take off as anticipated.
In this instance, Nike's playing it safe—introducing a line with the cachet of the main brand association (executives are hardly keeping the introduction quiet, while the chosen athletes are already well-associated with Nike) without the risk of putting its own name on the line. "It's all a question of multi-tiering the brand to appeal to several different target audiences, to sell product at different price points," says Cohen. "That's the future."
"It's important that Tailwind stands alone as a brand," says Exeter's Hamill. "This is a new premise and a new position in the marketplace. Clearly, we wanted it to be a different space and a different opportunity." And with the success of introductions such as the Starbury One, a $14.98 pair of sneakers developed by New York Knicks point guard, Stephon Marbury, that's made and sold by the discount clothing chain, Steve & Barry's, Nike is showing it's not going to treat lightly any threat to its dominance within the footwear market (see BusinessWeek.com, 01/22/07, "Changing the Game on Nike").
Spreading the Word
"The athletic industry currently faces many changing dynamics across its value chain," adds Citigroup's McShane. "As a result of consolidation, fewer manufacturers are selling product to fewer retailers. Competition has intensified, and a lot of the control footwear manufacturers once had is now in the hands of the retailers. We rate Nike as Buy (1M) because of its flexibility to operate in this changing environment."
The products may be less expensive, but the value market is certainly lucrative—estimated to generate revenues of around $384 billion in annual sales industry-wide. "We saw a need to go in and create a premium experience in this value space," says Hamill. "There are other players and people, but we very specifically saw a need to bring a premium experience through innovation, messaging, and athletes. So we went for it."
And even though it's a new segment, the might of Nike's marketing machine will be brought to bear on the line's introduction. A standalone, e-commerce enabled Tailwind Web site with rich media content features the three stars expounding on the philosophy of the brand. An extensive print campaign will run in April issues of various magazines. And the new offering will have a prominent presence at Payless stores. Hamill refused to disclose details of the marketing budget, saying simply that it will be "more than adequate." Executives hope that will be the case with Tailwind's sales, too.
So, Nike is planning to launch a new brand called "Tailwind" targeting fashion and value conscious women. The new brand will be sold at Payless Shoes stores. According to chief analyst Marshal Cohen from NPD group "What this does is afford a big-name brand the ability to enter an even bigger market without diluting the core essence of its dominant brand". However, there are a lot of examples of failures of brand over-expansions which ended up cannibalizing the master brand name and did not provide a lot of differentiation. To avoid these potential risks, Nike will be using the Tailwind as a stand alone brand targeting a specific market segment need and a targeted value proposition to this segment.
Nike's New Downmarket Strategy (Business Week)
Hoping to make good on its promise of growth, the company is launching Tailwind, a line of shoes for fashion- and value-conscious women
by Helen Walters
Nike raised an eyebrow or two earlier this month when Chief Executive Officer Mark Parker outlined a bold plan to increase the company's business to $23 billion in revenue by 2011. "We'll get there by creating innovative products and consumer experiences," Parker said at the investor meeting held at Nike's headquarters in Beaverton, Ore., in early February. "When we're innovating, we're leading. And leading is what we do best."
It was a soundbite-worthy—and entirely unspecific—comment. But now, a mere two weeks later, Nike (NKE) has taken a concrete step by launching a new brand aimed squarely at a market segment not previously served by its core lines of athlete-focused footwear and apparel. Parker, it seems, wasn't making idle promises.
Produced by the wholly owned Nike subsidiary, Exeter Brand Group, Tailwind, as the new brand is called, is a fashion-conscious line of footwear, officially launching in three Payless stores in Manhattan and Brooklyn on Tuesday. Initially, the line will be available in 400 stores in select markets, though by December it will be stocked in pretty much all of the retailer's nearly 4,600 stores nationwide.
Bright and Sporty
The launch came with all the hoopla and sports-star endorsements you would expect from Nike. Soccer great Brandi Chastain was involved in Tailwind product development and design, and she, along with teammate Hope Solo and volleyball player Logan Tom, are the front-and-center faces of the brand.
The line aims at what Exeter President and CEO Clare Hamill describes as the "premium value" space. In other words, cheap shoes, in this case for women. For now, there are six styles, ranging in price from $19.99 to $34.99. Constructed from various materials, including mesh, leather, and synthetic suede, the shoes feature cheerfully bright colors and are certainly sporty looking. Each design features a Nike-developed technology called "G Zone," a honeycomb gel that sits in the heel of the shoe, intended to soften the impact of life on the wearer's foot.
"This woman has a very active, busy life and is looking for a product that will perform and look great," Hamill says of the ideal Tailwind consumer. "The designs are on-trend but not trendy. They're expressive and beautiful—but we were also looking to get some performance, too."
New Audience
In fiscal 2006, the six Nike subsidiaries generated $2 billion in revenue. That's a drop in the bucket compared with the $8 billion growth the company projects over five years, but it's an area of the business that Nike is moving aggressively to expand—over the next five years, Parker predicts subsidiaries will contribute around 25% of Nike's revenue growth. He says the company is "bullish" on its subsidiary companies.
"We believe Nike's 'other' business—which is composed of Cole Haan, Nike Bauer Hockey, Hurley International, Nike Golf, Converse, and Exeter Brands—is a major driver of Nike's business," agrees Citigroup research analyst, Kate McShane, who describes the subsidiaries as Nike's fastest growing division and considers them one of its major growth drivers. "We estimate this category will generate around $2.3 billion in revenues, or grow 16.5% during Nike's fiscal year 2007," she says.
Tailwind gives Nike the opportunity to attract an entirely new audience at the lower end of the market, one previously alienated by the high prices and athletic focus of Nike's core brand offerings. "What this does is afford a big-name brand the ability to enter an even bigger market without diluting the core essence of its dominant brand," says NPD Group chief analyst Marshal Cohen. "Nike really has nothing to lose and a lot of volume to gain…. Consumers like the idea that Nike is behind [the new brand]—it seems like a good bargain."
There has been a lot of talk in recent months of the dangers of unchecked brand expansion. Perhaps the poster-brand for over-expansion, Gap (GPS), continues to sit back on its haunches after an already tumultuous year. It stands accused of cannibalizing its own market share with the introduction of labels such as Old Navy and Banana Republic that simply weren't different enough from the mother brand's core offering. Indeed, Gap just announced the closure of its concept, Forth&Towne, after the 18-month retail experiment failed to take off as anticipated.
In this instance, Nike's playing it safe—introducing a line with the cachet of the main brand association (executives are hardly keeping the introduction quiet, while the chosen athletes are already well-associated with Nike) without the risk of putting its own name on the line. "It's all a question of multi-tiering the brand to appeal to several different target audiences, to sell product at different price points," says Cohen. "That's the future."
"It's important that Tailwind stands alone as a brand," says Exeter's Hamill. "This is a new premise and a new position in the marketplace. Clearly, we wanted it to be a different space and a different opportunity." And with the success of introductions such as the Starbury One, a $14.98 pair of sneakers developed by New York Knicks point guard, Stephon Marbury, that's made and sold by the discount clothing chain, Steve & Barry's, Nike is showing it's not going to treat lightly any threat to its dominance within the footwear market (see BusinessWeek.com, 01/22/07, "Changing the Game on Nike").
Spreading the Word
"The athletic industry currently faces many changing dynamics across its value chain," adds Citigroup's McShane. "As a result of consolidation, fewer manufacturers are selling product to fewer retailers. Competition has intensified, and a lot of the control footwear manufacturers once had is now in the hands of the retailers. We rate Nike as Buy (1M) because of its flexibility to operate in this changing environment."
The products may be less expensive, but the value market is certainly lucrative—estimated to generate revenues of around $384 billion in annual sales industry-wide. "We saw a need to go in and create a premium experience in this value space," says Hamill. "There are other players and people, but we very specifically saw a need to bring a premium experience through innovation, messaging, and athletes. So we went for it."
And even though it's a new segment, the might of Nike's marketing machine will be brought to bear on the line's introduction. A standalone, e-commerce enabled Tailwind Web site with rich media content features the three stars expounding on the philosophy of the brand. An extensive print campaign will run in April issues of various magazines. And the new offering will have a prominent presence at Payless stores. Hamill refused to disclose details of the marketing budget, saying simply that it will be "more than adequate." Executives hope that will be the case with Tailwind's sales, too.
Monday, April 16, 2007
Starbucks and the Beatles
Paul McCartney recently inked a record deal with Starbucks-owned "Hear Music."
In light of the branding frameworks we learned in class, I wonder if this development sets a precedent for the Starbucks brand. How far will the Starbucks identity be stretched before it ceases to have the "Starbucks flavor?"
I also wonder if Starbucks will be able to weave a consistent thread amongst its various efforts. After all, coffee and the Beatles generate extremely different meaning maps.
http://www.cnn.com/2007/SHOWBIZ/Music/03/21/starbucks.mccartney.ap/index.html
SEATTLE, Washington (AP) -- Paul McCartney was introduced Wednesday as the first artist signed to Starbucks Corp.'s new record label.
The former Beatle made an appearance via a video feed from London at the company's annual meeting.
The world's largest specialty coffee retailer announced earlier this month that it was partnering with Concord Music Group to launch the Los Angeles-based Hear Music label.
The McCartney announcement is another big step for Seattle-based Starbucks' attempts to spin part of its consumer appeal into the entertainment business. The coffeehouse chain already has produced and sold some albums, markets books, and helped develop a feature-length movie.
Hear Music has been used as a brand on other releases developed for sale in Starbucks stores. The coffee giant also has a branded page on Apple Inc.'s iTunes digital music store, and a handful of hybrid music-and-coffee stores that allow customers to burn tracks to CDs.
Concord, which controls several other labels, helped Starbucks sell the Grammy-winning "Genius Loves Company," an album of Ray Charles duets.
In light of the branding frameworks we learned in class, I wonder if this development sets a precedent for the Starbucks brand. How far will the Starbucks identity be stretched before it ceases to have the "Starbucks flavor?"
I also wonder if Starbucks will be able to weave a consistent thread amongst its various efforts. After all, coffee and the Beatles generate extremely different meaning maps.
http://www.cnn.com/2007/SHOWBIZ/Music/03/21/starbucks.mccartney.ap/index.html
SEATTLE, Washington (AP) -- Paul McCartney was introduced Wednesday as the first artist signed to Starbucks Corp.'s new record label.
The former Beatle made an appearance via a video feed from London at the company's annual meeting.
The world's largest specialty coffee retailer announced earlier this month that it was partnering with Concord Music Group to launch the Los Angeles-based Hear Music label.
The McCartney announcement is another big step for Seattle-based Starbucks' attempts to spin part of its consumer appeal into the entertainment business. The coffeehouse chain already has produced and sold some albums, markets books, and helped develop a feature-length movie.
Hear Music has been used as a brand on other releases developed for sale in Starbucks stores. The coffee giant also has a branded page on Apple Inc.'s iTunes digital music store, and a handful of hybrid music-and-coffee stores that allow customers to burn tracks to CDs.
Concord, which controls several other labels, helped Starbucks sell the Grammy-winning "Genius Loves Company," an album of Ray Charles duets.
Sunday, April 15, 2007
Is Jordan's Monster Deal a good deal?
As the Official Furniture Store of the Boston Red Sox, Jordan's Furniture is currently running a marketing campaign "Jordan's Monster Deal"- if Red Sox win the 2007 Major League Baseball World Series, every sofa, sectional, dining table, bed, mattress purchased from Jordan's store between March 7 and April 16 will be FREE.
This campaign seems very attractive to consumers, especially Red Sox funs. When I went to Jordan's store in Framingham this weekend, I did see some people in Red Sox jackets wandering there. However, I am not sure if this is a good way to build brand equity. I do not doubt that this campaign can generate buzz. A lot of people will talk about it, even though many of them are not Red Sox funs. The WOM will bring more traffic to Jordan's store locations, significantly improving Jordan's brand awareness and opportunities to sell. But when we think about the emotional feeling of Red Sox funs, this campaign seems more risky than rewarding.
If Red Sox lose (just if), funs will be very upset, and losing the chance to get rebate for their furniture purchase could make them even more upset. Many of them may blame the team's loss on Jordan's. Bad WOM spreads even faster than good ones.
If Red Sox win (most of us hope so), it seems a win-win. Both Jordan's and funs will be happy with the result. But when customers receive the rebate check form Jordan's, whom will they be grateful to, Jordan's or Red Sox? I think most people will give their thanks to the latter. So what can Jordan's get from this? Hopefully, the funs will buy furniture from Jordan's again in the future.
This campaign seems very attractive to consumers, especially Red Sox funs. When I went to Jordan's store in Framingham this weekend, I did see some people in Red Sox jackets wandering there. However, I am not sure if this is a good way to build brand equity. I do not doubt that this campaign can generate buzz. A lot of people will talk about it, even though many of them are not Red Sox funs. The WOM will bring more traffic to Jordan's store locations, significantly improving Jordan's brand awareness and opportunities to sell. But when we think about the emotional feeling of Red Sox funs, this campaign seems more risky than rewarding.
If Red Sox lose (just if), funs will be very upset, and losing the chance to get rebate for their furniture purchase could make them even more upset. Many of them may blame the team's loss on Jordan's. Bad WOM spreads even faster than good ones.
If Red Sox win (most of us hope so), it seems a win-win. Both Jordan's and funs will be happy with the result. But when customers receive the rebate check form Jordan's, whom will they be grateful to, Jordan's or Red Sox? I think most people will give their thanks to the latter. So what can Jordan's get from this? Hopefully, the funs will buy furniture from Jordan's again in the future.
Saturday, April 14, 2007
Zen and the Art of Selling Minimalism
Recently I read the article in BusinessWeek that the Japanese retail - Muji - is going to head to US in this fall. This article reminds me of the Ikea & Starbucks case we discussed before.
(Muji has lots of fans in Asia and Europe and is one of my favorite brands. They are selling furniture, stationery, clothes and housewares, all of them are simple, functional but original and possess post-industrial design factors. )
This retailer will be taking on heavyweight when coming to US: Ikea and Crate & Barrel in furniture, Gap in apparel, and Target in housewares. Their first 5,000-sq-ft store will be opened in middle town Manhattan and intend to target at 20~30 young consumers.
I think it will be another case of customer experience. Muji must be very careful designing the first "touch point" in US: The decoration & atmosphere, the story, point of differences- all of them must woo Americans as well as stick with their core value- simple, functional, less-is-more aesthetic. These all affect Muji's chance to win the territory in US.
Let's see how they manage this Asian Zen style brand and unique customer experience in the Western world.
Article link:http://www.businessweek.com/globalbiz/content/mar2007/gb20070329_161669.htm?chan=search
Japanese official website: http://www.muji.net/
English version (I think they will have a new site after opening the store in NY): www.muji.net/eng/
Daphne
Friday, April 13, 2007
Branding drives condo sales
Came accross an interesting article about branding trend in real estate development. It's somewhat related to our old SCPT case, when real estate development company realized a value of developing a strong brand for all of its rental properties. Now, this article says that it became popular to associate new condo developments with some known brand names, let it be a famous fashion or jewelry designer, a symphony hall or a hotel chain. As long as it has a known luxury appeal, it helps sell the condos during bad and good times in real estate market life cycle.
Another good point the article makes is that because the branding became so popular, soon the real estate market may become over-saturated with brands and it would be hard to differentiate and draw a value out of branding. What they would do next is the open question.
Here's a link to the article http://money.cnn.com/2007/01/26/real_estate/condos_get_branded/index.htm
And here's a link to the example of branded luxury condos - beautiful pictures inside
http://money.cnn.com/galleries/2007/real_estate/0701/gallery.branding_drives_condo_sales/index.html
Another good point the article makes is that because the branding became so popular, soon the real estate market may become over-saturated with brands and it would be hard to differentiate and draw a value out of branding. What they would do next is the open question.
Here's a link to the article http://money.cnn.com/2007/01/26/real_estate/condos_get_branded/index.htm
And here's a link to the example of branded luxury condos - beautiful pictures inside
http://money.cnn.com/galleries/2007/real_estate/0701/gallery.branding_drives_condo_sales/index.html
Wednesday, April 11, 2007
Starbucks and the Schultz Email
The Schultz email to C-level employees at Starbucks sparked a great deal of interest among Starbucks watchers, and since Starbucks is one of the most interesting (and successful) marketers of recent memory, it piqued the interest of marketers as well. John Moore (a former Starbucks marketer) had a series of postings in his blog, Brand Autopsy , that related to the email. It culminated in a Change This! Manifesto made up of his and reader input.
Ultimately I think the question still remains: when a unique, interesting company seeks massive growth they run the risk of becoming a slave to the street (if they are publicly owned) or at least their own ambition (if they are not). Is it possible to remain unique and interesting when attempting growth on the scale that Starbucks has? Do streamlining of operations and pursuit of growth opportunities stand directly at odds with the uniqueness that made the growth possible in the first place? How many huge companies make products, goods or services, that are truly interesting and different?
Certainly there are alot of factors that play into that tension, but Starbucks' experience is a cautionary tale for companies that build a business on a carefully crafted product or experience: grow, and change, at your own peril. Perhaps Starbucks is ahead of the curve and can right the ship before financial results catch up with the deterioration of the Starbucks experience, but maybe recent financial results are a sign of things to come.
Ultimately I think the question still remains: when a unique, interesting company seeks massive growth they run the risk of becoming a slave to the street (if they are publicly owned) or at least their own ambition (if they are not). Is it possible to remain unique and interesting when attempting growth on the scale that Starbucks has? Do streamlining of operations and pursuit of growth opportunities stand directly at odds with the uniqueness that made the growth possible in the first place? How many huge companies make products, goods or services, that are truly interesting and different?
Certainly there are alot of factors that play into that tension, but Starbucks' experience is a cautionary tale for companies that build a business on a carefully crafted product or experience: grow, and change, at your own peril. Perhaps Starbucks is ahead of the curve and can right the ship before financial results catch up with the deterioration of the Starbucks experience, but maybe recent financial results are a sign of things to come.
Tuesday, April 10, 2007
Consumer Reports finds McDonald’s coffee better than Starbucks
Related to last night’s Starbucks discussion, Consumer Reports rated McDonald’s coffee better than those of higher end chains. The business model is different but McDonald’s has to be considered a major threat and is chipping away at Starbucks coffee market share. Starbucks stock has also declined over the past 12 months. Coffee is its core competency and Starbucks may have diluted its brand. Interesting to see what Schultz’s internal memo will spark.
A couple links to articles about consumer reaction and coffee survey results:
http://abcnews.go.com/GMA/Business/story?id=2927462&page=1
http://www.msnbc.msn.com/id/16951509/
A couple links to articles about consumer reaction and coffee survey results:
http://abcnews.go.com/GMA/Business/story?id=2927462&page=1
http://www.msnbc.msn.com/id/16951509/
Harley-Davidson
In response to the comment about Harley employing skateboarding Team Emerica for some of their events, I agree that it might appear to be a forced fit.
An acquaintence of mine was recently asked by Harley to develop a video blog of his experiences in Dayonta Beach. He's younger than the traditional "Posse Rider" and he is somewhat high visibility because he's in a well-known punk band (the Bouncing Souls). Additionally, he has previously blogged extensively about his cross-country travels on his Harley.
In light of his organic passion about the bike and the influence that he exerts over younger consumers ("pre-dreamers"), this might be a better fit than Team Emerica.
His video blog is here.
An acquaintence of mine was recently asked by Harley to develop a video blog of his experiences in Dayonta Beach. He's younger than the traditional "Posse Rider" and he is somewhat high visibility because he's in a well-known punk band (the Bouncing Souls). Additionally, he has previously blogged extensively about his cross-country travels on his Harley.
In light of his organic passion about the bike and the influence that he exerts over younger consumers ("pre-dreamers"), this might be a better fit than Team Emerica.
His video blog is here.
Monday, April 9, 2007
Angels and Devils Case Reflections
Having been part of the Best Buy Angels and Devils case debate last Monday, I have some follow-up thoughts on Customer Relationship Management (CRM), specifically in the evolution of this marketing concept through the research of Dr. V. Kumar and his colleagues.
Dr. Kumar is the ING Chair Professor of Marketing, as well as the Executive Director of the ING Center for Financial Services, at the University of Connecticut’s School of Business. He is considered a pioneer in customer loyalty and customer lifetime value (CLV) research. (www.drvkumar.com) In the October 2000 issue of the Journal of Marketing, V. Kumar and Werner Reinartz conducted studies that contradicted such commonly held marketing beliefs as long-term customers are more profitable, a customer’s profits increase over time, it costs less to service long-term customers, and long-term customers are less price-sensitive. Therefore, marketing managers cannot assume that long-term customers are always more profitable than short-term customers. The authors also discussed the concept of “barnacles” and “butterflies”, which was then expanded upon in their article “The Mismanagement of Customer Loyalty” published in Harvard Business Review in July 2002. This article also noted “loyal” customers do not always generate positive word of mouth, which was a topic that came up a lot during the discussion last week. Kumar and Reinartz wrote, “To identify the true apostles, companies need to judge customers by more than just their actions” (page 4); however, CRM systems are based on just that, past actions. In the summer of 2004, the Journal of Interactive Marketing published an article by V. Kumar, Girish Ramani and Timothy Bohling entitled “Customer Lifetime Value Approaches and Best Practice Applications.” The article outlines formulas to calculate the average CLV of a group, as well as an individual. The authors considered CLV superior to the traditional Recency, Frequency, and Monetary Value (RFM) model because it “anticipates and models future customer behavior” (page 65). Then in October 2004, Kumar published “A Customer Lifetime Value Framework for Customer Selection and Resource Allocation Strategy” in the Journal of Marketing with Rajkumar Venkatesan which presented a CLV formula that takes into account the time between purchases. The authors tested the formula against three other metrics and found CLV to be a better predictor of customer profitability. However, this study did not explain the potential impact of various marketing mix strategies on CLV. In January of 2005, the Journal of Marketing contained “Balancing Acquisition and Retention Resources to Maximize Customer Profitability” by Werner Reinartz, Jacquelyn Thomas, and V. Kumar in which the authors provide a framework to help the marketer determine how to best allocate marketing resources. Using a statistical model, they found underspending on retention of current customers has a greater negative impact on profits than underspending on acquisition of new customers. In their studies, approximately 75-80% of the marketing budget spent on retention and 20-25% of the marketing budget spent on acquisition was found to be optimal.
A recurring theme of the class discussion on Monday was all the factors that statistical models cannot account for – word of mouth (negative or positive), potential earning changes that will impact future profitability, etc. Without a method to easily collect such information, what is a marketer to do? As my team argued last Monday, we believe it is better to use the information available than not to use information, but we must remember the numbers do not convey the entire story. As Professor Fournier mentioned in class, it is up to us as future marketers to figure out how to fuse art, science, and technology, since marketing involves all three: CRM systems are the technology and V. Kumar’s research is part of the science, but art is open to interpretation.
Dr. Kumar is the ING Chair Professor of Marketing, as well as the Executive Director of the ING Center for Financial Services, at the University of Connecticut’s School of Business. He is considered a pioneer in customer loyalty and customer lifetime value (CLV) research. (www.drvkumar.com) In the October 2000 issue of the Journal of Marketing, V. Kumar and Werner Reinartz conducted studies that contradicted such commonly held marketing beliefs as long-term customers are more profitable, a customer’s profits increase over time, it costs less to service long-term customers, and long-term customers are less price-sensitive. Therefore, marketing managers cannot assume that long-term customers are always more profitable than short-term customers. The authors also discussed the concept of “barnacles” and “butterflies”, which was then expanded upon in their article “The Mismanagement of Customer Loyalty” published in Harvard Business Review in July 2002. This article also noted “loyal” customers do not always generate positive word of mouth, which was a topic that came up a lot during the discussion last week. Kumar and Reinartz wrote, “To identify the true apostles, companies need to judge customers by more than just their actions” (page 4); however, CRM systems are based on just that, past actions. In the summer of 2004, the Journal of Interactive Marketing published an article by V. Kumar, Girish Ramani and Timothy Bohling entitled “Customer Lifetime Value Approaches and Best Practice Applications.” The article outlines formulas to calculate the average CLV of a group, as well as an individual. The authors considered CLV superior to the traditional Recency, Frequency, and Monetary Value (RFM) model because it “anticipates and models future customer behavior” (page 65). Then in October 2004, Kumar published “A Customer Lifetime Value Framework for Customer Selection and Resource Allocation Strategy” in the Journal of Marketing with Rajkumar Venkatesan which presented a CLV formula that takes into account the time between purchases. The authors tested the formula against three other metrics and found CLV to be a better predictor of customer profitability. However, this study did not explain the potential impact of various marketing mix strategies on CLV. In January of 2005, the Journal of Marketing contained “Balancing Acquisition and Retention Resources to Maximize Customer Profitability” by Werner Reinartz, Jacquelyn Thomas, and V. Kumar in which the authors provide a framework to help the marketer determine how to best allocate marketing resources. Using a statistical model, they found underspending on retention of current customers has a greater negative impact on profits than underspending on acquisition of new customers. In their studies, approximately 75-80% of the marketing budget spent on retention and 20-25% of the marketing budget spent on acquisition was found to be optimal.
A recurring theme of the class discussion on Monday was all the factors that statistical models cannot account for – word of mouth (negative or positive), potential earning changes that will impact future profitability, etc. Without a method to easily collect such information, what is a marketer to do? As my team argued last Monday, we believe it is better to use the information available than not to use information, but we must remember the numbers do not convey the entire story. As Professor Fournier mentioned in class, it is up to us as future marketers to figure out how to fuse art, science, and technology, since marketing involves all three: CRM systems are the technology and V. Kumar’s research is part of the science, but art is open to interpretation.
Wednesday, April 4, 2007
Harley looking to boost its stock
Interesting to note that bad subprime loans are affecting Harley and causing stock prices to tumble. This is a premium brand for those that can afford it. I’m wondering if Harley over stretched and hurt its brand by financing bikes to riders who are not as hard-core? Harley says it’s focusing its brand in China, India, and Japan. Would be interesting to see if and how HOG posse rides are handled there and if a cult following will develop.
Company Focus4/4/2007 12:01 AM ET
How Harley stock could roar back
Harley-Davidson shares have taken a bumpy road downward, partly due to subprime loans. But investors who buy now could soon find themselves in Hog heaven.
By Michael Brush
It turns out that loans made to iffy borrowers aren't just taking down housing stocks.
Since late February, troubles with dodgy loans have contributed to a painful slide of Harley-Davidson shares, taking the stock down more than 15%.
Here's the problem: The iconic American motorcycle company has a financing arm that helps fans buy their pricey Hogs. Enthusiasts often pay $25,000 or more for custom bikes.
Harley-Davidson (HOG, news, msgs) finances about half the motorcycles it sells. Now, many of those customers are having a hard time keeping up with payments -- and the company is getting less for the Hogs it repossesses because used bike prices have been weakening.
The problems may only get worse. As lending standards tighten because of concerns about low-end borrowers, sales growth could suffer. Somewhere between 10% and 15% of bikes sold last year were rolled out of the showrooms by subprime borrowers. Already, the company has taken 2007 earnings growth guidance down to 4%-6% -- a hefty cut from the prior range of 11% to 17%.
This one-two punch has Harley-Davidson investors racing to get out of the stock. Since late February, they've driven it down to $59 from above $70.
The road to Hog heaven
At some point, though, enough will be enough, and I think we are almost there. To be sure, traders could push Harley-Davidson stock down even more on worries that the company may announce bad news with its April 19 first-quarter earnings report.
But since it's impossible to call an exact bottom in any stock dip, I'd buy part of a long-term position in the stock now with limit orders set under $59, and look for possible pullbacks from those levels to continue building a stake. Then I'd sit back and watch the stock return to the $75 high it touched last November, for a 30% gain from the current price.
Here's what's going to put Harley-Davidson on the road to a comeback.
* Harley-Davidson has enviable brand strength that will help it power through the current mess. After all, how many companies can boast of a cult brand so powerful that customers tattoo their logos on their bodies? Besides holding on to a loyal fan base, this brand power should help it in its strategy to woo more buyers among women, African-Americans and Latinos.
* With U.S. growth cooling, Harley-Davidson can focus more attention on international growth. In Europe, sales increased 29% last quarter and around 18% in the two quarters before that. Harley-Davidson is also taking Hogs to China and India. It's already the market leader for large motorcycles in Japan.
* This company has enviable cash flow, and it's not stingy with it. It's no secret that Harley-Davidson will keep boosting earnings per share with big share buybacks. It should keep increasing dividends, as well.
Read more here:
http://articles.moneycentral.msn.com/Investing/CompanyFocus/HowHarleyStockCouldRoarBack.aspx?page=1
Company Focus4/4/2007 12:01 AM ET
How Harley stock could roar back
Harley-Davidson shares have taken a bumpy road downward, partly due to subprime loans. But investors who buy now could soon find themselves in Hog heaven.
By Michael Brush
It turns out that loans made to iffy borrowers aren't just taking down housing stocks.
Since late February, troubles with dodgy loans have contributed to a painful slide of Harley-Davidson shares, taking the stock down more than 15%.
Here's the problem: The iconic American motorcycle company has a financing arm that helps fans buy their pricey Hogs. Enthusiasts often pay $25,000 or more for custom bikes.
Harley-Davidson (HOG, news, msgs) finances about half the motorcycles it sells. Now, many of those customers are having a hard time keeping up with payments -- and the company is getting less for the Hogs it repossesses because used bike prices have been weakening.
The problems may only get worse. As lending standards tighten because of concerns about low-end borrowers, sales growth could suffer. Somewhere between 10% and 15% of bikes sold last year were rolled out of the showrooms by subprime borrowers. Already, the company has taken 2007 earnings growth guidance down to 4%-6% -- a hefty cut from the prior range of 11% to 17%.
This one-two punch has Harley-Davidson investors racing to get out of the stock. Since late February, they've driven it down to $59 from above $70.
The road to Hog heaven
At some point, though, enough will be enough, and I think we are almost there. To be sure, traders could push Harley-Davidson stock down even more on worries that the company may announce bad news with its April 19 first-quarter earnings report.
But since it's impossible to call an exact bottom in any stock dip, I'd buy part of a long-term position in the stock now with limit orders set under $59, and look for possible pullbacks from those levels to continue building a stake. Then I'd sit back and watch the stock return to the $75 high it touched last November, for a 30% gain from the current price.
Here's what's going to put Harley-Davidson on the road to a comeback.
* Harley-Davidson has enviable brand strength that will help it power through the current mess. After all, how many companies can boast of a cult brand so powerful that customers tattoo their logos on their bodies? Besides holding on to a loyal fan base, this brand power should help it in its strategy to woo more buyers among women, African-Americans and Latinos.
* With U.S. growth cooling, Harley-Davidson can focus more attention on international growth. In Europe, sales increased 29% last quarter and around 18% in the two quarters before that. Harley-Davidson is also taking Hogs to China and India. It's already the market leader for large motorcycles in Japan.
* This company has enviable cash flow, and it's not stingy with it. It's no secret that Harley-Davidson will keep boosting earnings per share with big share buybacks. It should keep increasing dividends, as well.
Read more here:
http://articles.moneycentral.msn.com/Investing/CompanyFocus/HowHarleyStockCouldRoarBack.aspx?page=1
Monday, April 2, 2007
New Bar Codes Can Talk With Your Cellphone
"It sounds like something straight out of a futuristic film: House hunters, driving past a for-sale sign, stop and point their cellphone at the sign. With a click, their cellphone screen displays the asking price, the number of bedrooms and baths and lots of other details about the house..."
An excerpt from a recent NYTimes.com article highlighting some technology already in use in parts of the world. The idea is that your cell phone can be used to decode giant bar codes on billboards, sides of buildings, products, etc. The phone then uses the decoded information to retrieve and transmit the advertising/information/service/etc. to your cell phone.
Follow these instructions.
Don't read the next word: cowbell.
Everyone read the word cowbell. Just by glancing in the vicinity we automatically read the words, we have been trained to do so. You can not look at just a letter in a word and not read the word.
Point? Well, in terms of advertising, even though billboards, for example, can be obnoxious and seemingly irrelevant to you, if they are in your line of sight, chances are you will read the content. With this technology, the user is more involved, but once I know that a the bar code on a billboard on the way to work does not interest me, i will probably not access it via my cellphone every time i drive by. Although you may check out every bar code sign once to know what it is about, companies have to find good incentives/services/use for you to continue accessing ads through such a functionality or they can weave in advertising as a secondary feature of the primary service.
Rock!
Saturday, March 31, 2007
Red Bull Creates New Sport to Market Brand
Rather than co-sponsor an existing event, or even hosting its own version of an event, Red Bull has created its own sporting events (such as kiteboarding to Cuba), and in some cases a new sport to help market its brand. One such event is Crashed Ice.
*See link to Crashed Ice: http://www.redbullcrashedice.ca/
*See link to one reporter's thinking about various aspects of Red Bull's marketing machine: http://www.robwalker.net/html_docs/redbull.html
*Below is a brief preview of the NYT article that brought Crashed Ice to my attention.
WINTER SPORTS; Sport and Sponsor Collide in a Spectacle on Ice
*Please Note: Archive articles do not include photos, charts or graphics. More information.
March 3, 2007, Saturday
By MATT HIGGINS (NYT); Sports Desk
Late Edition - Final, Section D, Page 1, Column 3, 1002 words
CORRECTION APPENDED
DISPLAYING ABSTRACT - Maybe the gusts swirling snow through the alleys of the historic district here Friday were not actual winds of change. But in an old city famous for preserving the past, a new sport has become a showcase for changing relationships between fans and the way brands market to them. ...
Correction: March 6, 2007, Tuesday A sports article on Saturday about Crashed Ice, a competition created by the drink company Red Bull that is a blend of hockey and snowboardcross, misstated the number of racers who compete at a time. It is four, not three.
*See link to Crashed Ice: http://www.redbullcrashedice.ca/
*See link to one reporter's thinking about various aspects of Red Bull's marketing machine: http://www.robwalker.net/html_docs/redbull.html
*Below is a brief preview of the NYT article that brought Crashed Ice to my attention.
WINTER SPORTS; Sport and Sponsor Collide in a Spectacle on Ice
*Please Note: Archive articles do not include photos, charts or graphics. More information.
March 3, 2007, Saturday
By MATT HIGGINS (NYT); Sports Desk
Late Edition - Final, Section D, Page 1, Column 3, 1002 words
CORRECTION APPENDED
DISPLAYING ABSTRACT - Maybe the gusts swirling snow through the alleys of the historic district here Friday were not actual winds of change. But in an old city famous for preserving the past, a new sport has become a showcase for changing relationships between fans and the way brands market to them. ...
Correction: March 6, 2007, Tuesday A sports article on Saturday about Crashed Ice, a competition created by the drink company Red Bull that is a blend of hockey and snowboardcross, misstated the number of racers who compete at a time. It is four, not three.
Tuesday, March 27, 2007
WOMMA - Seriously, what does that stand for?
Having understood the perceived benefits and positives of buzz marketing/CGM/CGA/etc. this week in class, this article provides another view (generally negative) of buzz marketing. An interesting read.
The following was published in Forbes magazine by Jack Trout.
Link to the article: http://www.forbes.com/columnists/columnists/2006/03/02/gm-harley-marketing-cx_jt_0307trout.html
Tales From The Marketing Wars: Is Word Of Mouth All It's Cracked Up To Be?
Jack Trout 03.07.06, 6:00 AM ET
Suddenly, everyone is running their mouths about word-of-mouth marketing. You can tell things are getting a little out of hand when you discover there is now a Word-of-Mouth Marketing Association called WOMMA. And there are conferences popping up all over the world on this subject. One recent conference had over 400 attendees.
And that's not all. Now we have a new dictionary to learn. Word-of-mouth is now buzz marketing, viral marketing, community marketing, grassroots marketing, evangelist marketing, product seeding, influencer marketing, cause marketing, conversation creation, brand blogging and referral programs. That's the good stuff. What isn't so good is stealth marketing, shilling, infiltration, comment spam, defacement and falsifications.
If you're like me, you're probably a little confused about all this, so let's put some things into perspective.
First of all, world-of-mouth isn't new much less "the next big thing" that WOMMA declares. A third-party endorsement of your product has always been the Holy Grail. It's more believable.
In prior days, we used to try and find the "early adapters" for a product. We figured they had big mouths and loved to tell their friends and neighbors about their new widget.
What's different today is people have many more ways to communicate. Instead of just verbal we now have digital communications. Online chatter far surpasses over the fence chatter in every way, with the exception of clearly knowing the person with whom you are chattering. The trouble is that the ease of communicating en masse has raised the noise level to mind boggling levels. That's the good news.
Now for the bad news.
How many people really want to chatter about products? Do you really want to talk about your toothpaste or your toilet paper? Even people with prestige products tend not to chatter about them. All you really want is to be seen driving up in one. Now, if it's a Harley Davidson motorcycle, sure. That's because you're part of a club, and that's all they talk about. But they don't need buzz.
No product in memory got as much buzz and PR as the Segway gyroscopic scooter. The problem is that most of the buzz was negative. "Funny looking or dangerous on sidewalks" is not what you want to hear. Buzz can kill you if you don't have the right product. The very expensive movie King Kong was a bust because of a lot of negative word-of-mouth. "Too long, too loud and overdone." The Pontiac G6 giveaway on Oprah got a lot of buzz but the car died at the box office. People would take one for free, but not if they had to pay for it. You've got to have a product or service people want to talk about in a positive way, and there aren't many of these around.
Now for the really bad news. There's no way to control that word-of-mouth. Do I want to give up control and let consumers take over my campaign? No way. They aren't getting paid based on how many widgets get sold. If I go to all this trouble developing a positioning strategy for my product, I want to see that message delivered. Buzz can get your name mentioned but you can't depend on much else. Not too many mouths will do a stand-up commercial about your product vs. its competitor. Nor will they check with you in advance on what to say.
This all brings me to my word-of-mouth on word-of-mouth marketing. It's not the next big thing. It's just another tool in your arsenal. If you have a way to get your strategy or point of difference talked about by your customers and prospects, that's terrific. It will help, but you're going to have to surround it with a lot of other effort, including, if you'll pardon the expression, advertising. You just can't buy mouths the way you can buy media. And mouths can stop talking about you in a heartbeat once something else comes along to talk about.
This all brings me to my word-of-mouth on word-of-mouth marketing. It's not the next big thing. It's just another tool in your arsenal. If you have a way to get your strategy or point of difference talked about by your customers and prospects, that's terrific. It will help, but you're going to have to surround it with a lot of other effort, including, if you'll pardon the expression, advertising. You just can't buy mouths the way you can buy media. And mouths can stop talking about you in a heartbeat once something else comes along to talk about.
I certainly would never tell a CEO, "B.J., I just put a big chunk of our budget into word-of-mouth."
If you did, all I would say is "good luck".
With more than 40 years of experience in advertising and marketing, Jack Trout is the acclaimed author of many marketing classics, including Positioning: The Battle for Your Mind, Marketing Warfare, The 22 Immutable Laws of Marketing, Differentiate or Die, Big Brands Big Trouble, A Genie's Wisdom and his latest, Trout on Strategy. He is president of marketing consultancy Trout & Partners and has consulted for such companies as AT&T, IBM, Southwest Airlines, Merck, Procter & Gamble and others. Recognized as one of the world's foremost marketing strategists, Trout is the originator of "positioning" and other important concepts in marketing strategy.
BTW...WOMMA stands for Word-of-Mouth Marketing Association, an association that promotes and improves word-of-mouth marketing. (http://www.womma.org/)
The Branding of Hip Hop Super Stars
Contrary to popular perceptions of hip hop artists, I've always had an admiration for the intellect and business savvy of some of hip hop's biggest stars. Hip hop is a world full of branding. The most obvious sign of this are the consistent use of and heavy promotion of their "stage" names. Jay-Z, Diddy, Biggie, Dr. Dre, Snoop Dogg, Emimen, 50 cent, etc... Additionally, some of them are savvy enough to leverage their own brand names to help bring up other "new" brands under their umbrella, or to increase their marketshare through cross-promotions with other artists. As an example, Dr. Dre, the infamous and highly successful rapper/producer has brought to the music scene legendary artists such as Snoop Dogg and Eminem by introducing those artists as featured artists in his CDs, "Chronic" and "Chronic 2001", respectively. Many other hip hop stars have done the same thing. When one takes a closer look at the hip hop industry, one would be able to find many examples of cross-promotions through lyrical collaboration amongst various artists. Sometimes it's a colloboration between two rappers, or one rapper and one r&b (rythm and blues) singer, and sometimes it's with artists from a totally different music genre. As an example, in 2004, Jay-Z (rapper) and Linkin Park (rock band) have collaborated on their "Crash Collision" album. Their success closely mirrors the success that was achieved in 1986 in a collaboration between Run DMC (arguably the first hip hop super stars) and Aerosmith (a major rock band).
When one wants to find examples of branding, one needs to go no further than picking up or downloading a popular hip hop album.
When one wants to find examples of branding, one needs to go no further than picking up or downloading a popular hip hop album.
Sunday, March 25, 2007
Lexus looking to upgrade its brand perception
Lexus is seeking to change the brand meaning of Lexus to entice super-high end car buyers. They plan on utilizing non-traditional forms of marketing to develop strong "word of mouth" recommendations. Will this work or will it blurry the meaning of the brand for the brand's core customers?
STATUS SEEKER
To Woo Wealthy,Lexus AttemptsImage Makeover
It Seeks Luxury CachetLike Gucci and Prada;$100,000 Sticker Price
By GINA CHONMarch 24, 2007; Page A1
For years, Toyota Motor Corp.'s Lexus division pitched its cars as the practical alternative to European luxury brands like BMW and Mercedes. And over time, the Lexus brand came to be known as kind of expensive, always respectable -- and a little boring.
Audi
The Audi R8 is among the German models in the "prestige luxury" segment Lexus is trying to penetrate.
"Lexus cars are made to be luxurious and forgettable," says Ryan Wilsey, a 29-year-old Boston resident who works in venture capital. Formerly an owner of a Porsche Boxster, Mr. Wilsey's dream cars are a BMW M3 coupe or a Ferrari.
Now, with Toyota's sales hitting new records, it craves a makeover for Lexus. It wants to become a brand associated with the biggest names in luxury. Imagine "Louis Vuitton, Prada, Gucci and Lexus all mentioned in the same breath," says Brian Bolain, a Lexus marketing manager.
To get there, Lexus, a company known for its ultra-conservative culture, is introducing a slew of new vehicles costing over $70,000 -- more than anything Lexus has previously sold and nearly twice the price of its best-selling RX sport-utility vehicle. It deployed a "super affluent team," a group that traveled the country asking the ultra-rich what they want. It is throwing lavish parties around the country and cozying up with brands like Vogue Magazine and Neiman Marcus stores.
The best-selling luxury car brand in the U.S., Lexus is hardly struggling. Sales grew a healthy 7% to 322,000 vehicles last year. The company has no plans to move away from lesser-priced vehicles like the $33,470 ES and the $30,255 IS sedan, which together generate more than a third of the brand's sales. But Lexus, which is sold only in certain foreign markets, still lags well behind the world-wide sales of the BMW and Mercedes brands, which together sold more than 179,000 cars last month alone.
The "prestige luxury" segment, cars priced above $70,000, is a juicy target. Its sales have doubled in the past five years.
But today, the brand lacks the necessary cachet. "For that high-end buyer, we're not on their shopping list," says Bob Carter, head of Lexus's U.S. office.
Marketing, the lifeblood of a luxury brand, isn't a traditional strength for Lexus, which is known more for reliability and customer service. History shows it can be very difficult to change consumer perceptions of a car brand. And luxury buyers, usually older, could be even more stubborn, as they are often highly loyal to the kinds of cars they've previously owned.
WSJ's Gina Chon talks about some of the new features of the forthcoming Lexus LS V8 hybrid, which is expected to top $100,000.
Lexus's somewhat nerdy image dates back to its very beginnings in 1989. While Mercedes and BMW threw lavish parties to herald the launch a new model, Lexus's dealers offered free wine and cheese. The European rivals run ads in exotic locales stressing excitement and performance. Lexus's campaigns focus on specific technological features, like rotating headlamps.
One big challenge: high-end luxury cars traditionally target men. They represent 60% of Mercedes buyers and 58% of BMW buyers. But 51% of Lexus's buyers are female, a statistic that mirrors the proportion of women in the overall car market.
Lexus started its new push in 2005 when it assembled the super-affluent team -- nine Lexus employees from various departments including marketing and finance. The team interviewed car buyers who had at least $5 million in assets (excluding their primary residence) and who had previously owned a few luxury vehicles. More than half of the interviewees selected were men.
For the next two years, the team crisscrossed the country, asking 100 ultra-wealthy people such questions as "Why do you live where you live?" and "What do you do for enjoyment?" "We asked ourselves and these people a lot of questions," says team leader and marketing chief Deborah Wahl Meyer.
Owning Fleets
One of the team's early realizations was that the ultra-rich don't have a car. They have fleets of them, often scattered at different homes and vacation spots across the country. And not only did the rich have a lot of cars, some at the team were surprised by how often many buyers changed their fleet, trading cars more often than most people change wardrobes. Some changed cars in three months, either because they changed their minds or wanted the newest model.
That discovery led Lexus to realize that it didn't necessarily have to compete with other ultra-luxury brands as much as complement them. A Lexus sedan may not be as chic as Porsche 911 convertible, but it might be added as the practical daily driver for someone who already has one. Indeed, the team also found that many of the ultra-rich didn't act all that differently from regular Lexus owners, identifying themselves as "upper middle class" and shopping at places like Costco, Home Depot and Target.
New Hybrid
For those Costco runs -- and for a bit of Saturday night showing off -- Lexus this summer is launching the LS600h, a hybrid electric luxury sedan intended to combine the performance of a 12-cylinder engine with the promise of better fuel economy. The price tops $100,000.
The team found that ultra-wealthy buyers also like unique experiences inaccessible to the general public. So Lexus tripled the number of events it holds. Last August, it hosted a fashion show with Vogue at a vintage car show in California. It's offering 100 special-edition vehicles to big-ticket customers of retailers Neiman Marcus and Bergdorf Goodman.
To celebrate the redesigned top-of-the-line LS sedan, launched last fall, Lexus dealers threw parties on a grand scale. Two Arizona dealers hosted acrobats from Cirque du Soleil for a private performance. A Texas dealership celebrated with the legendary Motown group the Temptations, caviar, and champagne. In all, 182 of Lexus's 221 dealers had elaborate parties, many of which cost in the six figures, as opposed to the several thousands of dollars that were spent before.
Rich buyers said they rely more on their peers for advice than third-party groups. So to launch its new LS600h, the luxury hybrid sedan, Lexus is starting a test-drive program in which an influential person in a metro area -- like a Hollywood mogul -- is given the car to drive for a month. When the month is up, that person can choose the next person who gets to have the car for a month.
Quality of Service
The Lexus team says they were surprised by quality of service some super-luxury car buyers experience. "A Ferrari owner said when he takes a car in, he expects to be called and told what is going to be done to it, have it done and that's it. People who have Rolls Royces and Bentleys said the same thing," says Mr. Bolain. "But some of these people say they weren't getting that kind of service." The three car makers all say they offer impeccable service.
Lexus created four new "brand-experience manager" positions for each of its regions in the U.S. to answer queries and guide dealers on efforts like launch parties. That's a big deal for Lexus, a company so intent on avoiding waste that employees there joke it takes "an act of God" to add even one person to the staff.
To attract men to the brand, Lexus -- long known more for cushy comfort than pulse-racing performance -- is plunging into the sports-car arena in 2008, launching a souped-up high-performance series similar to Mercedes's AMG series and BMW's M models. And later this year, Lexus will announce production details of its "super Lexus" with more than 500 horsepower.
Long Haul
U.S. car makers, which have spent years trying to lure consumers away from the Japanese, learned the hard way how difficult it can be to change perceptions of a brand. It's "a long-term process," says Francisco Codina, a sales and marketing executive at Ford Motor Co.
Luxury buyers may be even more resistant. Other car makers have also found it a challenge to sway buyers from Mercedes and BMW. "If you've always bought a BMW and love BMW, why would you switch to another brand?" explains Jim Taylor, head of General Motors Corp.'s Cadillac division.
At a Lexus focus group session held at the Avalon Hotel in Beverly Hills, one 50-year-old advertising executive said he questioned whether he should give up the cachet of owning a Mercedes for a Lexus, even though he thought Lexus was a better-quality car. "My perception is that (Lexus) developed more for utility, to be a good sound car, than to deliver on style," said a 46-year-old entrepreneur who participated in a research session.
Still, Lexus's effort comes at a time when the European car makers may be losing the exclusivity that made them so desirable in the first place. By subsidizing monthly lease payments and other types of financial engineering, luxury car makers that once catered only to the truly rich have been able to dramatically expand their customer base.
In Orange County, Mercedes has almost three times the market share of Chrysler and around the same market share as Nissan, according to R.L. Polk & Co. And BMW is widely expected to launch the first car below the $30,000 price barrier when it brings its small 1-series hatchback here next year.
Donna Boland, a spokeswoman for DaimlerChrysler AG's Mercedes-Benz division, says the company's broad range of prices is a positive attribute, with different models serving different luxury customers' needs. Tom Purves, head of BMW AG's U.S. sales office, says high-end customers do want more exclusivity, but says an owner of a $121,400 sedan won't resent a 25-year-old with a much cheaper model.
There's been encouraging early response for Lexus at its newly built $75 million Newport, Calif. dealership, where visitors can practice their golf swing at the putting green or play arcade games. Allen Moznett, the dealer's general manager, says there's a waiting list for the new longer LS sedan, which can go for over $83,000.
Chris Hummel, a vice president at software maker Oracle Corp. recently bought a $140,000 Mercedes. Yet he's already seen about five others driving his pricey Mercedes in the San Francisco Bay area where he lives.
"Lexus doesn't play in that [price range] so they don't have credibility there," he says. "But given its reputation for customer service, I would jump all over it if they went there."
Write to Gina Chon at gina.chon@wsj.com
STATUS SEEKER
To Woo Wealthy,Lexus AttemptsImage Makeover
It Seeks Luxury CachetLike Gucci and Prada;$100,000 Sticker Price
By GINA CHONMarch 24, 2007; Page A1
For years, Toyota Motor Corp.'s Lexus division pitched its cars as the practical alternative to European luxury brands like BMW and Mercedes. And over time, the Lexus brand came to be known as kind of expensive, always respectable -- and a little boring.
Audi
The Audi R8 is among the German models in the "prestige luxury" segment Lexus is trying to penetrate.
"Lexus cars are made to be luxurious and forgettable," says Ryan Wilsey, a 29-year-old Boston resident who works in venture capital. Formerly an owner of a Porsche Boxster, Mr. Wilsey's dream cars are a BMW M3 coupe or a Ferrari.
Now, with Toyota's sales hitting new records, it craves a makeover for Lexus. It wants to become a brand associated with the biggest names in luxury. Imagine "Louis Vuitton, Prada, Gucci and Lexus all mentioned in the same breath," says Brian Bolain, a Lexus marketing manager.
To get there, Lexus, a company known for its ultra-conservative culture, is introducing a slew of new vehicles costing over $70,000 -- more than anything Lexus has previously sold and nearly twice the price of its best-selling RX sport-utility vehicle. It deployed a "super affluent team," a group that traveled the country asking the ultra-rich what they want. It is throwing lavish parties around the country and cozying up with brands like Vogue Magazine and Neiman Marcus stores.
The best-selling luxury car brand in the U.S., Lexus is hardly struggling. Sales grew a healthy 7% to 322,000 vehicles last year. The company has no plans to move away from lesser-priced vehicles like the $33,470 ES and the $30,255 IS sedan, which together generate more than a third of the brand's sales. But Lexus, which is sold only in certain foreign markets, still lags well behind the world-wide sales of the BMW and Mercedes brands, which together sold more than 179,000 cars last month alone.
The "prestige luxury" segment, cars priced above $70,000, is a juicy target. Its sales have doubled in the past five years.
But today, the brand lacks the necessary cachet. "For that high-end buyer, we're not on their shopping list," says Bob Carter, head of Lexus's U.S. office.
Marketing, the lifeblood of a luxury brand, isn't a traditional strength for Lexus, which is known more for reliability and customer service. History shows it can be very difficult to change consumer perceptions of a car brand. And luxury buyers, usually older, could be even more stubborn, as they are often highly loyal to the kinds of cars they've previously owned.
WSJ's Gina Chon talks about some of the new features of the forthcoming Lexus LS V8 hybrid, which is expected to top $100,000.
Lexus's somewhat nerdy image dates back to its very beginnings in 1989. While Mercedes and BMW threw lavish parties to herald the launch a new model, Lexus's dealers offered free wine and cheese. The European rivals run ads in exotic locales stressing excitement and performance. Lexus's campaigns focus on specific technological features, like rotating headlamps.
One big challenge: high-end luxury cars traditionally target men. They represent 60% of Mercedes buyers and 58% of BMW buyers. But 51% of Lexus's buyers are female, a statistic that mirrors the proportion of women in the overall car market.
Lexus started its new push in 2005 when it assembled the super-affluent team -- nine Lexus employees from various departments including marketing and finance. The team interviewed car buyers who had at least $5 million in assets (excluding their primary residence) and who had previously owned a few luxury vehicles. More than half of the interviewees selected were men.
For the next two years, the team crisscrossed the country, asking 100 ultra-wealthy people such questions as "Why do you live where you live?" and "What do you do for enjoyment?" "We asked ourselves and these people a lot of questions," says team leader and marketing chief Deborah Wahl Meyer.
Owning Fleets
One of the team's early realizations was that the ultra-rich don't have a car. They have fleets of them, often scattered at different homes and vacation spots across the country. And not only did the rich have a lot of cars, some at the team were surprised by how often many buyers changed their fleet, trading cars more often than most people change wardrobes. Some changed cars in three months, either because they changed their minds or wanted the newest model.
That discovery led Lexus to realize that it didn't necessarily have to compete with other ultra-luxury brands as much as complement them. A Lexus sedan may not be as chic as Porsche 911 convertible, but it might be added as the practical daily driver for someone who already has one. Indeed, the team also found that many of the ultra-rich didn't act all that differently from regular Lexus owners, identifying themselves as "upper middle class" and shopping at places like Costco, Home Depot and Target.
New Hybrid
For those Costco runs -- and for a bit of Saturday night showing off -- Lexus this summer is launching the LS600h, a hybrid electric luxury sedan intended to combine the performance of a 12-cylinder engine with the promise of better fuel economy. The price tops $100,000.
The team found that ultra-wealthy buyers also like unique experiences inaccessible to the general public. So Lexus tripled the number of events it holds. Last August, it hosted a fashion show with Vogue at a vintage car show in California. It's offering 100 special-edition vehicles to big-ticket customers of retailers Neiman Marcus and Bergdorf Goodman.
To celebrate the redesigned top-of-the-line LS sedan, launched last fall, Lexus dealers threw parties on a grand scale. Two Arizona dealers hosted acrobats from Cirque du Soleil for a private performance. A Texas dealership celebrated with the legendary Motown group the Temptations, caviar, and champagne. In all, 182 of Lexus's 221 dealers had elaborate parties, many of which cost in the six figures, as opposed to the several thousands of dollars that were spent before.
Rich buyers said they rely more on their peers for advice than third-party groups. So to launch its new LS600h, the luxury hybrid sedan, Lexus is starting a test-drive program in which an influential person in a metro area -- like a Hollywood mogul -- is given the car to drive for a month. When the month is up, that person can choose the next person who gets to have the car for a month.
Quality of Service
The Lexus team says they were surprised by quality of service some super-luxury car buyers experience. "A Ferrari owner said when he takes a car in, he expects to be called and told what is going to be done to it, have it done and that's it. People who have Rolls Royces and Bentleys said the same thing," says Mr. Bolain. "But some of these people say they weren't getting that kind of service." The three car makers all say they offer impeccable service.
Lexus created four new "brand-experience manager" positions for each of its regions in the U.S. to answer queries and guide dealers on efforts like launch parties. That's a big deal for Lexus, a company so intent on avoiding waste that employees there joke it takes "an act of God" to add even one person to the staff.
To attract men to the brand, Lexus -- long known more for cushy comfort than pulse-racing performance -- is plunging into the sports-car arena in 2008, launching a souped-up high-performance series similar to Mercedes's AMG series and BMW's M models. And later this year, Lexus will announce production details of its "super Lexus" with more than 500 horsepower.
Long Haul
U.S. car makers, which have spent years trying to lure consumers away from the Japanese, learned the hard way how difficult it can be to change perceptions of a brand. It's "a long-term process," says Francisco Codina, a sales and marketing executive at Ford Motor Co.
Luxury buyers may be even more resistant. Other car makers have also found it a challenge to sway buyers from Mercedes and BMW. "If you've always bought a BMW and love BMW, why would you switch to another brand?" explains Jim Taylor, head of General Motors Corp.'s Cadillac division.
At a Lexus focus group session held at the Avalon Hotel in Beverly Hills, one 50-year-old advertising executive said he questioned whether he should give up the cachet of owning a Mercedes for a Lexus, even though he thought Lexus was a better-quality car. "My perception is that (Lexus) developed more for utility, to be a good sound car, than to deliver on style," said a 46-year-old entrepreneur who participated in a research session.
Still, Lexus's effort comes at a time when the European car makers may be losing the exclusivity that made them so desirable in the first place. By subsidizing monthly lease payments and other types of financial engineering, luxury car makers that once catered only to the truly rich have been able to dramatically expand their customer base.
In Orange County, Mercedes has almost three times the market share of Chrysler and around the same market share as Nissan, according to R.L. Polk & Co. And BMW is widely expected to launch the first car below the $30,000 price barrier when it brings its small 1-series hatchback here next year.
Donna Boland, a spokeswoman for DaimlerChrysler AG's Mercedes-Benz division, says the company's broad range of prices is a positive attribute, with different models serving different luxury customers' needs. Tom Purves, head of BMW AG's U.S. sales office, says high-end customers do want more exclusivity, but says an owner of a $121,400 sedan won't resent a 25-year-old with a much cheaper model.
There's been encouraging early response for Lexus at its newly built $75 million Newport, Calif. dealership, where visitors can practice their golf swing at the putting green or play arcade games. Allen Moznett, the dealer's general manager, says there's a waiting list for the new longer LS sedan, which can go for over $83,000.
Chris Hummel, a vice president at software maker Oracle Corp. recently bought a $140,000 Mercedes. Yet he's already seen about five others driving his pricey Mercedes in the San Francisco Bay area where he lives.
"Lexus doesn't play in that [price range] so they don't have credibility there," he says. "But given its reputation for customer service, I would jump all over it if they went there."
Write to Gina Chon at gina.chon@wsj.com
Bud.TV: A Bomb for Anheuser-Busch?
A quick-follow up to last week's assigned reading on Bud.TV from the March 19 Brandweek:
Bud.TV may be giving Anheuser-Busch a sour aftertaste. The $30 million branded digital network, aimed at twentysomething males, averaged just 230,000 visitors in February, its first month online, per ComScore Media Metrix. A-B execs reportedly projected reaching 2-3 million visitors per month by year's end.
It seems like Anheuser-Busch should stick to making beer and leave the creation of online entertainment networks to the entertainment companies, and try to find another, more effective way to reach the coveted 21-34 male demographic...
Bud.TV may be giving Anheuser-Busch a sour aftertaste. The $30 million branded digital network, aimed at twentysomething males, averaged just 230,000 visitors in February, its first month online, per ComScore Media Metrix. A-B execs reportedly projected reaching 2-3 million visitors per month by year's end.
It seems like Anheuser-Busch should stick to making beer and leave the creation of online entertainment networks to the entertainment companies, and try to find another, more effective way to reach the coveted 21-34 male demographic...
Saturday, March 24, 2007
Generic Gas vs. Brand Name - Any difference?
OK, all you drivers out there - this thought may have crossed your mind. Why is the fuel at a Mobil/Shell/BP, etc. gas station priced higher than the average small town 'no-name' gas station? According to this ABC News report, it's simply because of the brand name!
According to scientific lab tests carried out on various brand-name and generic gas fuels, results show that the difference between a generic gas and a brand name gas is technically, zero. Experts believe that the brand name gas suppliers (ex: Mobil, Shell) are simply basing their prices on simple brand marketing strategies: 1) Brand loyalty 2) Brand recognition. The fact that most consumers feel comfortable buying brand name gas as opposed to generic gas, tells you that this strategy has been quite successful. For example, consumers may chose to buy fuel at a brand gas station because of it's customer service (ex: 'brand gas station' credit card usage, quick payment methods). In other words, consumers are willingly to pay extra for a brand name gas b/c of the added incentives and 'appearance-engineered' quality attributed to the brand name. Hence, the extra cents you pay for 'Mobil/Shell' gas is the 'added value' created via the supplier's brand-name. Excellent price strategy!
Link to video report:
Friday, March 23, 2007
Speaking of Major League Baseball
I found this interesting article on how MLB signed a deal with Sharp "that makes Aquos the “official high-definition television” of MLB. " I believe that sponsorships like this adds a lot of brand awareness, baseball games are on several nights a week and are always on TVs in bars and restaurants across the country. Let me know what you all think of the article and this type of sponsorship.
http://www.brandweek.com/bw/news/recent_display.jsp?vnu_content_id=1003561694
Posted to Brandweek March 22, 2007
http://www.brandweek.com/bw/news/recent_display.jsp?vnu_content_id=1003561694
Posted to Brandweek March 22, 2007
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