Week 12 - Social Media

This appeared on my wife's Facebook newsfeed, its going to cost me $20.

 

To celebrate my week off between semesters my wife and I are going to Las Vegas.  We’re really excited to check out Sin City, but we’ve never been and have had to spend a lot of time researching.  To this end, social media has played a very integral role in the planning of our Vegas trip.

The first step in planning a Vegas trip is choosing the hotel.  We wanted a hotel with a really cool room, nice pool, and all for a good price.  We ended up reserving a room at the MGM Grand.  After booking our room we elected to be on an email distribution for Hotel deals & info, but we were also encouraged to join their Facebook page and twitter account.  So we joined these streams of social media and over the last few months have received lots of information about the MGM Grand and everything it has to offer.  Before you know it I’m sharing pictures of meals I think my wife would enjoy, we’re talking about shows, and various package deals at the restaurant.  MGM is winning more of our vacation dollars before we even step foot in the hotel.

MGM’s social media messages revolved around deals and attraction info.  And every communication has a really fun carefree vibe.  Their messages were most commonly communicated through pictures.  In fact, every Facebook post included a picture.  Using a picture is a very effective way to catch a consumer’s attention in a crowded newsfeed.  This type of advertising is also very effective because it’s reaching you in a setting where you’re choosing to consume information.  When you log on to these sites you’re choosing to hangout and digest information.  MGM has never once sent me any junk mail and their email spam is very minimal.  I don’t think these forms of advertising are becoming obsolete, but they’re definitely falling out of favor.  I think companies like MGM are realizing there are more effective ways of reaching the consumer.

Week 10 - Brand Valuation

I grew up a huge Michael Jordan fan and one of my fondest MJ moments was the 1992 Dream Team.  Like most young men at the time I was star struck watching NBA legends team up to destroy the competition.  But when it came time for the Dream Team to accept their Gold Medals, MJ arguably had his toughest moment of the Olympics.  The athletes were required to take the gold medal podium wearing Reebok warm-up gear.  To some of his teammates this wasn’t a big deal.  But MJ is Air Jordan; he’s the face of Nike.  This was not acceptable. In 1992 Michael was at the pinnacle of his greatness and to stand on the Gold Medal podium wearing Reebok would have been an insult to him and Nike.

Michael Jordan and Nike are synonymous with one another.  Their respective brands are intertwined.  The value of both brands would suffer without one another.  Nike cannot replace MJ with a more popular basketball player (there isn’t one) and MJ can’t sell shoes with anyone but Nike.  MJ helped build the Nike brand and make it a symbol of excellence in pro sports.  For example, Lebron James was courted by many shoe companies when he entered the league, but it was said his personal brand would suffer if he went with anyone but Nike.  Nike represents the best, and going with Nike was a badge of honor Lebron had to accept if he wanted to be the best. 

Nike is my favorite brand because of MJ.  I wear Nike because I grew up watching #23 play the game in Nike.  Most men view athletic competition as battle, and if you’re going into battle you need the best equipment.  So when I go out to play Ultimate Frisbee this week I’ll put on my Nike shorts, my Nike shirt, my Nike socks, and finally my Nike cleats.  The Swoosh is everything; it’s a sign of excellence and dedication to the game.  When your competitor is wearing Nike you know you have to take them serious.  My wife thinks I’m a fool for wearing expensive Nike stuff, but she doesn’t understand.  I’m going into battle, and I’ve seen the greatest go into battle a hundred times and he always wore Nike.  I think I’d be a fool to wear anything else.

Jordan went to the podium in 1992 and accepted his Gold medal, but nobody saw him wearing Reebok.  Jordan tactically draped an American flag over his right shoulder to hide the logos.  There was too much at stake to risk wearing Reebok for 15 minutes.  MJ and Nike had to protect their brand and the influence it eventually had on my generation.

Week 9 - Culinarian Cookware

Culinarian should run a price promotion to hit the objectives outlined by the CEO.  I believe this for a few reasons.

The 2004 promotion was not a flop like the consultants suggested.  The consultants made a lot of questionable assumptions and I agree with Victoria Brown’s critique.  First, to estimate the cannibalization of the DX1 line, the consultants estimated DX1 revenue growth should be exactly the same as the year before without the price promotion (+24%).  With the CX1 price promotion the DX1 line only grew sales by 21%, so they assumed the (3%) variance was cannibalization and deducted the lost profit.  I don’t think it’s reasonable to assume, all else constant, revenue growth will be the same as the year before, it’s too simplistic!  There was likely some cannibalization, but none of the product lines had negative year-over-year sales growth.  There doesn’t appear to be enough info for the consultants to accurately assess cannibalization.  The other two critiques were related to inventory savings and overhead cost allocations.  If overhead costs are not changing dramatically there’s no reason to add this to the analysis.  If there are incremental increases to the SGA budget specifically for this price promotion, then they should be factored into the analysis, but I didn’t see anything like this in the case.  The inventory savings related to production falling behind schedule is silly.  It’s not a hard savings and definitely not a repeatable incident that you would plan on happening during another price promotion.

So the consultants were wrong about the 2004 sales promotion and it was actually a success for Culinarian.  In fact, the sales promotion for the lower price CX1 line may have increased (not cannibalized) the sales of Culinarian’s more expensive product lines.  In 2004, total cookware sales in the United States, excluding aluminum cookware (cheaper cookware), increased 6% & 16% for copper and stainless steel cookware respectively.  Culinarian’s more premium brands (made of copper and stainless steel) had year-over-year sales increases of 9%, 30% & 20%.  I think this evidence suggests that some customers were drawn to Culinarian’s products by the CX1 price promotion and decided to buy a more expensive version of the cookware instead.

Based on the analysis of the 2004 price promotion and the objectives of the CEO, Culinarian should run another price promotion.  Culinarian’s distribution network clearly prefers some form of regular price promotions, so this could only help the company widen its distribution network.  But action will need to be taken to remedy the situation of retailers pocketing the promotional savings.  While price promotions may not be common with premium cookware brands and threaten Culinarian’s prestigious image, they’re ultimately necessary to accomplish the CEO’s objectives of a wider distribution network, increased market share, and consistently strong revenue growth.  Culinarian’s marketers will need to do a better job positioning the product in the mind of the consumer to maintain their prestigious image.  The other key part of another price promotion is the effective use of Advertising.  Culinarian spends 4% of sales on advertising and only 4% of people purchasing cookware has seen a Culinarian Ad.  A more efficient use of advertising dollars in concert with price promotions will be necessary to meet the CEO’s objectives.

Week 8 - America runs on Dunkin

One of my favorite companies is Dunkin Donuts.  Growing up and working in Connecticut it’s hard to avoid them.  Dunkin Donuts is one of the most successful companies in America, and I believe they do a great job of managing their marketing mix.

Dunkin’s target audience is anyone “on the go”.  This definition targets a lot of people who occasionally or always find themselves in a situation where Dunkin Donuts can add value to their situation.  On the go could mean the typical person going to work every day, it could be the person bringing breakfast to Church, or the shopper on the go who needs an afternoon pick me up.  All of these people have a need for coffee or a quick breakfast.  Either way, Dunkin Donuts will get them what they need and fast!

Dunkin Donuts satisfies their on the go customers with many different products.  Dunkin Donut’s primary product offering is coffee and donuts, which create a caffeinated and sugary cocktail that could jumpstart anyone’s morning.  But over the years Dunkin has broadened their menu with espresso drinks and breakfast sandwiches to meet the more diverse tastes of their customer base.  Dunkin also offers products to customers in the afternoon.  In addition to coffee all day, they have ice teas and lunch sandwiches.  Dunkin also has product packaging that caters to large groups making it easy for someone to stop in and buy breakfast for the office.

Dunkin Donuts utilizes price and place to enhance the value of their offering.  Customers, who are on the go, are already stressed or have some type of burden.  So Dunkin creates an easy, low cost experience for these busy individuals.  Dunkin does this by having many locations spread out across high traffic areas.  Particularly in the North East, you can’t turn around without walking into a Dunkin Donuts.  Dunkin is always “on the way” to where you’re going, and you typically do not have to hunt for a Dunkin Donuts.  The second thing they offer is a low cost experience.  Dunkin offers low cost coffees and low cost combo meals if you choose to add some type of food to your beverage.  Compared to Starbucks, you can’t get a coffee and food for the same cost of an espresso drink.  Dunkin Donuts are easy to find and do not put a big dent in your wallet, so you never think twice about stopping in one.

Dunkin’s latest communication strategy has relied on the “America runs on Dunkin” theme.  This theme ties in the other elements of their product mix perfectly.  America RUNS on Dunkin is perfectly targeted at individuals on the go.  Dunkin identifies itself as the fuel that America runs on.  An essential ingredient to any trip!  To communicate this message Dunkin uses TV ads (showing people on the go), radio ads (in the cars of people on the go), billboards (targeting on the go commuters) and web / email advertising that people on the go can use to get coupons and new product information.

Week 7 - Cleopatra Case

This is Cleopatra from HBO’s Rome. This Cleopatra was also lazy and rested on her laurels.

 

The Cleopatra soap case underlines the importance of market research and proper planning.  The team at Colgate was blinded by the surprise success of Cleopatra soap in France and assumed it would also be a runaway success wherever people spoke French.  Here are my thoughts.

First, Colgate wanted to sell the product in Quebec.  The team was already convinced the product would do great in Quebec, because you know they speak French, but wanted the “proper” market research to confirm their beliefs.  So, naturally they went to Toronto to conduct their market research.  Geography lesson, Toronto is not in Quebec! It’s in Ontario!  And English is the dominant language in Toronto, so they shouldn’t even like Cleopatra soap, right?  But none the less, Torontonians did like the soap and validated Colgate’s belief to push ahead in Quebec.

This led Colgate to use the same advertisement they used in France.  The advertisement in France is very Egyptian and provocative.  The ad tested very well with the Toronto group (50% reacted positively), so the team assumed it was well suited for the Quebec market.  However, it was later discovered that only 37% of people in Quebec reacted favorably to the ad.  For a soap being pushed as premium niche soap, this was not a good start.

The failure of the ad to create positive customer awareness complicated the pull strategy Colgate was relying on.  The case said that Colgate was trying to “generate enthusiasm” and needed the “best ever media and consumer promotion schedule”, but it appears that the Cleopatra French ad proved to be a stumbling block out of the gate.  Because people did not react favorably to the advertisement sales suffered and consumer demand did not persuade retailers to free up shelf space through the pull strategy in an already saturated soap market.  Finally, because the product was not being properly pulled to retailers’ shelves, consumers who did want the product could not find it!  The number one response to “why haven’t you tried Cleopatra?” was “it’s not available where I shop”.  30% of people who wanted the product could not physically buy it.

The sad part of this was Colgate had a winner on its hands and it just botched the implementation.  Cleopatra was really well liked by those who bought it!  About 30% of customers who tried Cleopatra soap used it all or most of the time.  This was the highest conversion rate for any of the competing soaps.  The closest competitor was Dove at 21%.  I would recommend that Colgate retool their marketing approach for Cleopatra and adjust the advertising, or bite the bullet and invest in a push strategy.

Week 6 - Product Obsolescence

Product life cycles can vary depending on the product.  Some products have a very long product life cycle.  The wheel is a pretty good example, even most things that fly need wheels.  But other products can have very short life cycles.  I like to think of championship t-shirts for professional sports teams.  Once a team wins a championship their fans buy memorabilia, most often t-shirts, to celebrate the moment.  It’s an emotional purchase.  The life cycle for these items can be a matter of weeks.  But nothing hastens the life cycle of a product like obsolescence.  When a product becomes obsolete it’s because the customer need it was serving is now being served more efficiently by another product or service.  More efficiently can be quicker, cheaper, simpler, you name it.

A great example of this is the typewriter.  If I were getting my MBA 30 years ago I might be writing this paper/blog post on a typewriter.  Originally, the typewriter was a vastly more efficient form of word processing than writing something by hand.  With a typewriter users could write something quickly and without have to worry about the legibility of hand writing.  In the 1990’s the typewriter became obsolete with the mass appeal of personal computers.  Personal computers gave users the same keyboard functionality as a typewriter, but now they could edit their document on a computer screen and print when ready.  Not to mention their document became a digital document that could be transferred via email.  The personal computer became an easier and more efficient tool for word processing and effectively ended the product life cycle of the typewriter.

 

Various forms of Media like music and movies are another good example of product obsolescence.  When I first became interested in music I was listening to it on cassettes.  I have no fond memories of using cassettes and CD’s quickly made cassettes obsolete.   CD’s gave consumers a better listening experience with improved sound quality and ease of changing songs.  No more did you have to fast forward or rewind to get to the song you wanted!  The same transition happened as movies transitioned between VHS to DVD to Blu-ray.  But now the tangible product of a CD or DVD is being replaced by digital distribution.  Consumers are starting to prefer to own their media in the digital space via ITunes, Netflix, or Amazon.

 

 

Week 4 - Segmentation and Customer Obsession

Successful businesses obsess over their customers. One of the primary tools businesses use to accomplish this is segmentation. Segmentation is the identification of clusters of consumers with homogeneous purchasing behavior. More specifically, segmentation is identifying customers with similar needs, habits or attitudes that can be addressed through marketing. Without segmentation businesses have no choice but to market their product very broadly. Segmentation facilitates the process of customer obsession through identifying different customer segments for a business to target. Once a business has identified the market segments, they evaluate them and choose a market(s) to target. The next step is to create a positioning strategy that differentiates the business’s product offering and emphasizes selling points that customers in that market would find meaningful. This process allows the business to focus with precision on specific markets with specific products and marketing strategies. Ultimately, this process should reveal the unmet needs of customers and create a product to meet those needs. This process and the constant reevaluation of segmentation breeds customer obsession and one company that does this very well is Procter and Gamble.

P&G sells products that are generally targeted to everyone, so do they use segmentation? Yes. I’m going to steal from Dr. Talbott’s lecture and use P&G’s Tide as an example. Tide is a laundry detergent that conceivably (and hopefully) everyone that is responsible for washing clothes would be interested in. Laundry detergent isn’t necessarily a product that screams the need for a variety of choices, but that’s exactly what Tide has discovered. Through segmentation, Tide has discovered many different market segments and has created specific products for those segments. Take a look at the picture below. On the left, the product filter identifies six needs that Tide addresses and five different ways of applying it! Obsessing over the customer through the process of market segmentation has allowed Tide to discover niche segments that their one-size-fits all product was not addressing. The picture below is a screenshot of the Tide home page, and a basic Tide isn’t even on the front page! Segmentation leads to obsession, and obsession leads to this many types of laundry detergent!