Less is More

Brand extensions are the life-blood of new product developers. When we have a winning item, we tend to crank out myriad permutations in different colors, flavors, sizes, price points, etc. In the interest of gaining market share, we sometimes cannibalize original concepts to the point that we’re just trading dollars on shelf.

Retailers eager to grow their market share through private label or those who just want to limit inventory in this recession are doing a more thorough analysis of what is actually moving the needle for them these days. The Wall Street Journal reported today that Walgreens, Wal-Mart, Kroger and others will reduce the number of offerings from some manufacturers. Even Target’s CEO confesses that he’s stymied by the sheer volume of Pantene products. Pun intended; there are 88 different kinds at Target.  

Consumers take an average of 3 seconds to scan a product label. If language nuances are unclear, it frustrates them. We’ve all had that deer-in-the-headlights moment in a store aisle, trying to discern the cost and quality differences between items based on the information available via the product alone. Wal-Mart concluded that although their customers spent an average 22 minutes in store, the wide array of offerings was not reflected in their market basket.

So how do companies limit the breadth of their product lines so as not to frustrate the consumer and still hold onto market share? Sales data such as sku productivity metrics are key, as are customer interviews, and national customer samplings. But housekeeping begins at home. If a company has 25 different kinds of bran flakes, they need to reflect on whether they really are different enough and if so, how to convey that within crucial moments. It takes a tough customer to determine if they have 20 too many, both in-house and out.

Much Ado About “Hut”-ing

Brand purists are up in arms over Pizza Hut’s efforts to reinvent itself in this down economy. It seems counterintuitive that pizza chain sales are down in a recession but thrifty consumers are even eschewing pizza delivery in favor of frozen grocery pizza. Pizza Hut has extended its menu with chicken wings, sandwiches, and pasta dishes. They’ve already exceeded $1 billion in sales of their Tuscani pasta line. Because they’d like to really emphasize the fact that they offer more than just pizza, they’ll be omitting the word “pizza” ” in some marketing efforts and will just use the abbreviated name, “The Hut”.

Apparently, some customers and marketers are not happy about this. The company is defending their choice, saying that the shortened name makes sense in an era when even our tweets are kept to a minimum. I don’t agree with marketers who feel this is brand tampering. It’s not like Pizza Hut is changing their name to “Doughy Discs” or “Cheesy Circles”. To me, this is like Coca-Cola’s “Coke”. Well, minus the monster market share.

I’d usually agree that building a brand is serious business and hard-earned brand equity should be sacrosanct. But we live in a seriously changed world. Tweaking a brand name just enough to maintain customer recognition is not a sin of omission, it’s actually a bold move. And let’s give consumers some credit; they can make the leap. After all, a rose by any other name would smell as sweet. Or in this case, as savory.

Transformidable

There’s no accounting for taste. And thank you, marketing gods for that. The Transformers sequel “Revenge of the Fallen” opened at midnight last night bringing in $16 million, the most ever for a Wednesday. The critics have not been kind but that won’t stop it from becoming another blockbuster in both the film and related merchandise categories. In fact, if the Academy of Arts & Sciences (who announced that they would double the number of best picture nominees) added a new category, “Best Tie-In Sales”, Transformers and its ilk would certainly be nominated.

Although the director, Michael Bay famously groused that Paramount wasn’t doing enough to promote the movie, the question is, how much did they need to? For fans of the first installment, the sequel was a much anticipated event. You just knew that “Revenge of the Fallen” held the promise of a “big, loud, mindless, awesome epic” as some reviewers described it. I saw the trailer some months ago and I think I may have suffered some ear damage.

But I don’t matter nor do the critics. And let’s face it, the critics that Paramount really cares about are not the film reviewers, it’s the consumers who will flock to the film, purchase the promotional products and collect the licensed merchandise. When it comes to children’s properties, the Field of Dreams law kicks into place: if you build it, they will come. K-Mart, Burger King and Mars are just a few of the inevitable merchandising partners and that’s as it should be. The films are inspired by the Transformer toys which have been popular for 25 years. They were a powerhouse brand before the film franchise and will continue to be so fueled by the sales of film-related merchandise. It’s the circle of marketing life.

Let Them Eat Cake

Every once in awhile I get a craving for a toasted croissant with scrambled eggs, bacon, and cheese but it’s not something I want to admit out loud, what self-respecting woman would? Now I don’t have to. The savvy ad agency Hill Holiday and their digital agency, Studio.com launched the perfect iPhone app today – Dunkin’ Donuts “Dunkin’ Run”. Also accessible on their interactive website, customers can create a list of friends or coworkers and notify them when a “run” to get donuts is imminent. You then create an order and take it the nearest Dunkin’ Donuts location. If you disdain donut dust on your smart phone, you can print the order out beforehand. No embarrassing recitations need be made to the runner or from the runner to the DD server. No missed orders either which is good cause we all know that Joe in IT can get positively postal if you forget his Boston cream.

It’s a brilliant social application and kudos to DD et al for thinking of it. Whole Foods launched a similar campaign but when I weigh the appeal of a fast sugar fix against the pressing need to pick up some organic flax, there’s no contest. The random immediacy of craving a donut with a caffeine chaser and the inevitable realization that others will want some too makes this app the perfect partner for social networking. It’s a great way to reach Gen X, Y, Z, who let’s face it, are still downing donuts with impunity. They’re also the ones most active when it comes to social networking.

Savvy marketers will soon find similar ways to promote their own products. Other food services, no doubt. After a tiring day at the office making Dunkin’ Runs, it would be nice to use a social app to order from your favorite restaurant so that aperitifs and appetizers can be ready and waiting. Oh, and that signature dessert that must be ordered in advance? You’re on it.

Loyal is as Loyal Does

Brandweek and others reported the results of a new study released today by Catalina Marketing. Analysis of the household shopping behavior of 32 million consumers across 685 CPG brands revealed that only four out of ten brands retained 50% or more of their customers. Those brand loyalists remained most loyal to Coca-Cola Classic and Thomas’ English Muffins. Other brands kept less than half of their customers, such as Cheerios and Tylenol.

It was a long held belief that consumers remained loyal in economic downturns but as we all know, loyalty is a two way street. Allegiance to one’s country is usually unyielding but to breakfast cereal, not so much. Anyone who’s shopping for household products these days is comparing prices. If the price of your go-to cereal hasn’t budged from a nearly $5.00 price point then you soon find yourself going to the comparable brand. Store brands and private label are looking particularly tasty these days and if the store is also offering coupons, it’s the icing on the cake (or in this case, maybe the sugar on the cereal). Just a few months ago, Reuters reported that 94% of consumers say they use coupons. Taste is important but less so when money is tight.

Discounting prices and offering coupons alone won’t raise a brand’s profile. There has to be a value proposition. Unfortunately, some manufacturers think that their higher price gives the appearance of that value. They’re hoping to prove the old adage that you have to pay more for quality. These days, consumers are more interested in quantity, as in, how much can they get for their dwindled dollar. Loyalty begets loyalty. If consumers have proof that the brands they know and love are meeting them even halfway during this recession — in the form of discounts and coupons — they may rethink their alternate choice of another brand.

Einstein Was Right

The Wall Street Journal published an excellent article today about innovation. It began by illustrating that companies in search of new ideas keep doing it in the same old ways when in fact, new ideas can come from anywhere. Allied industries; foreign markets; non-core businesses are all good sources of innovative thinking. Doctors consulted with a Formula One pit crew to explore ways of moving children throughout a hospital. Now that’s a pairing few of us would think of at first but it makes perfect sense.

In new product development brainstorming sessions you’ll hear the term, “there are no bad ideas” and it’s true. There’s nothing more productive than a wild and wooly few hours where what first appear to be ridiculous ideas are put forth and evolve, indeed snowball, into exciting possibilities. It’s energizing and fun, two valuable components to keep creative juices flowing and often for more than one session. But brainstorming works best when it’s not insular; invite a few interns in and be surprised at the youthful fearlessness with which they’ll pitch worthy ideas.

Some corporations innovate by creating scenarios for what the future may hold, imagining opportunities. Apparel manufacturers may wonder what fabric will emerge or food companies may try to predict what people will eat. Some dive deep, immersing themselves like scientists in an anthropological study. Others tap peripheral staff, allowing all employees to spend some company time to bring ideas to the top. Google allows researchers to spend 20% of their time on “play”. Empowering people to steer a company towards greatness is in everyone’s best interests because cultivating that culture can yield big dividends for all.

When hiring, companies tend toward the safe candidate, the one who will “fit in” but that’s counterintuitive if what they want to do is innovate. Those who perceive things a little differently could shake things up and shape the future. Diversifying by hiring someone from an allied industry or seeking to collaborate with those who have succeeded in other disciplines could be just the push to jump start a new era of innovation for a company. Einstein said that the definition of insanity was doing the same thing over and over again and expecting different results. He knew that certain things like the speed of light — and maybe even innovation — slow down in a vacuum.

It’s in the Bag

Even before the economy went south, women were weary of “It” bags. It seemed like each month, some website or publication was proclaiming a new one that had instant cachet, a waiting list, and a price to match. So it wasn’t difficult for many women to resist the siren call of new “it” bags but still, we do like to change things up now and then. Who would hear our silent plea for affordable bags? Apparently, Coach.

In a recent Business Week article about the company, CEO Lew Frankfort details the research they did to forecast not only the recession but that high prices would soon go the way of the dodo. Bravo, Mr. Frankfort. It isn’t every day that companies pay attention to their customers’ buying habits and here’s one that not only listened, it acted.

Coach remade their business model so that they could source less expensive materials. They took a slightly lower profit margin (which is still laudably high) yet continued to design attractive, functional, and now relatively affordable bags. Their new “Poppy” line, due in late June, includes bags that will retail for less than $200 each. They tested very well in nine Coach stores and online through Facebook. That last bit of marketing was a first for the company and was another savvy move.

I’ve recently written about the difficulties faced by companies that ignore current market conditions, so it’s refreshing to see a company face them head-on. It’s even better to hear about a company that didn’t sacrifice brand equity doing it. Coach customers will remain loyal and more importantly, they’ll gain new customers. That’s a certainty. It’s as they say, “in the bag”.

Wrong Turn

Some months ago, Hyundai began an ad campaign that promised to allow customers to return their cars with no penalty if they lost their jobs in the coming months. The result? Increased sales and market share. Consumers who may never have considered Hyundai were suddenly buying the brand. Ford soon followed suit.

So it may come as a surprise that Mercedes Benz is launching a new advertising campaign that doesn’t mention cost, the economy, or offer any deals. They are holding the old line that they don’t need to offer any deals because the value of their brand is all that consumers should consider. I’m sure consumers do consider it. But what they may consider right now is that it’s one luxury they can ill afford. Even if they have the money, these days it just seems like bad form to spend it.

I know someone who was positively bereft that he couldn’t renew the lease on his Benz. Well, he could, he just chose not to because although he’d been driving one for years he just couldn’t abide the fact that there were absolutely no deals to be had. And believe me, he tried but neither the dealer nor corporate headquarters would budge. This, while even luxury car competitors and most assuredly, mid-priced car companies were offering deals at a dizzying rate. Mercedes had a customer for life — the holy grail of brand loyalty — but in choosing to ignore market conditions, they lost him.

The question of whether or not you’re devaluing your brand is admittedly, a real hand-wringer. Companies agonize over whether they are making decisions that will do permanent damage to a brand but brands can benefit from certain market conditions, just as Hyundai did. Mercedes Benz could learn a thing or two from Hyundai and Ford, and for that matter, GM and Chrysler who are paying dearly for ignoring the trend for smaller, more fuel-efficient cars. Mercedes is wrong to go down the same old road because in this economy, that road needs re-paving.

Comfort Food

Smuckers reported yesterday that their fiscal fourth quarter earnings more than doubled. Projected earnings for the new year are above estimates. In addition to their jams, jellies, and Jif brand, Smuckers has been buying up a series of food and consumer brands, many of which were dumped by much larger competitors. Folgers in particular, exceeded expectations.

The current economy has been very kind to some brands that may have seemed like sleepy throwbacks to another time. Turns out, they were just sleepers. Consumers turn to them when times are tough. When parents began making school lunches instead of shelling out several dollars a day, PB&J must’ve been the hands-down winner. Pillsbury baking mixes and frostings, another Smuckers acquisition may have been the star attraction at afternoons that might have previously been spent at the mall. Starbucks’ earnings are down and stores are being shuttered because American consumers are shedding their costly coffee habits. Folgers must’ve picked up that lost market share.

Wal-Mart is thriving in this recession. To be honest, I never shopped there much but I’ve found that their prices on certain food brands can’t be beat. Private label food brands are also thriving as once finicky consumers decide that they’re not so bad after all. Disclosure: I developed private brands for years and I can now tell you – some are made by the very same manufacturers who make the leading advertised brands. Although advocates of healthier lifestyles will balk, McDonald’s low-priced menu has kept them in the black during this recession. Even Philip Morris is benefitting. You’d think the cost of cigarettes would cause consumers to cut back but these stressful times dictate just the opposite. Costco is also doing well as consumers buy only what they need but in bulk.

Brands that can communicate their value in recessionary times are the equivalent of comfort food. They may not have all of the flash and fire of the higher-priced alternatives but they’re just what strapped consumers need and will buy because they’re cheap, fast, and for now, filling.

Fashion Forward

The auto industry found out the hard way that you cannot ignore trends. When gas-guzzling American consumers weary of the war in Iraq and wary of their compromised earth began toting reusable bags to grocery stores and wait-listing themselves for Prius’s, the auto industry did not take note. Insisting that Americans still wanted bigger and bigger trucks and SUV’s, they blithely ignored what was happening all around them and continued along their merry way, blocking our views of the highway with urban tanks and sending themselves into bankruptcy or sale.

At least the fashion world is waking up. The Wall Street Journal reported today that Alexandra Schulman, the editor of British Vogue sent a letter to designers asking them to make larger clothes. The article reports that this caused somewhat of a sensation in the fashion world but Ms. Schulman had noted a trend – that if she wanted curvy, real women to model clothes for fashion shoots, they needed to be of a slightly more generous cut.

Although the average 30-something American woman is a healthy size 14 and has more buying power than her much younger counterparts, fashion labels still design for the 0 to size 6 set. Women of a certain age know that there is a dearth of design choices for them unless they want to dress like their daughters or their grandmothers. A few designers like Carmen Marc Vavlo have separate labels for larger women but those clothes tend toward the pricier end of the spectrum. If women got the equal vote, why not fashion fraternité?

When more clothing houses acknowledge the trend toward healthier women and design accordingly, demand will decrease costs through competition. It’s the American way.