Archive for the ‘Marketing 2.0’ Category

The Tesla Model S… Marketing and Innovation Together Means Stunning Success.

April 9, 2012

Even though the tepid response to current all-electric vehicles like the Chevy Volt and Nissan Leaf indicate otherwise.

Here is quick review of the state of electric vehicles, as of Spring 2012…

“General Motors has temporarily suspended production of the plug-in electric Chevy Volt because of low sales. Nissan’s all-electric Leaf is struggling in the market. A number of start-up electric vehicle and battery companies have folded. And the federal government has slowed its multibillion-dollar program of support for advanced technology vehicles in the face of market setbacks and heavy political criticism.” – NY Times, The Electric Car Unplugged, March 24, 2012

A number of years ago, a friend turned me on to a quote by Peter Drucker that goes something like this… “The two drivers of business growth are Innovation and… Marketing.” This got to me and is a big reason I chose to get in the game of marketing way back when.

At our core, we are a big fan of “new stuff.” We love the challenge of taking new ideas to market, of creating or exploiting demand for products people don’t even know they want, need or love yet.

You Say You Got a Revolution!

In this regard, today is a feast for marketers with a taste for taking innovation on. That’s because we are living in a period of radical change powered by exponential growth of a variety of enabling capabilities. The most notable example perhaps is Moore’s Law and how the number of transistors on a chip have been doubling every 18-months since 1965. Starting gradually, almost flat, after enough doubling, the curve starts to climb and then goes like an elevator straight up if this compounding effect can be maintained.

There are a number of other enabling technologies entering this supercharged phase simultaneously including Bandwidth, Storage and Information creation itself as indicated by the Digital Universe Study conducted by IDC in association with storage leader EMC will attest.

The Potential of Innovation: A Vacuum Effect That Pulls Innovation Forward

Add it all up and we are living in a revolutionary period that is driving the Potential of Innovation, on the grandest scale.

What do we mean here by Potential of Innovation? Simply put, it’s when a Capability has entered the latter or steepest phase of the exponential growth, and the deployment or Utilization of this potential is lagging well behind, as the chart above indicates.

Over the years I have heard technologists describe this gap as a vacuum, a vacuum that by its very nature must be filled… and from what I can tell, the best of what fills this empty space can be boiled down to vision, creativity and innovation.

One company that to us most exemplifies these characteristics is Tesla Motors and most especially the Model S, their new vehicle that is now gearing up for production. With over 7,000 advance orders already on the books for this gorgeous pure electric vehicle, we believe the Tesla S will be a game changer and the first vehicle to truly fulfill the promise of widespread adoption of a car that is not powered in any way by the internal combustion engine, New York Times notwithstanding.

Here’s why?

Again and again we hear about energy efficiency and “green values” relative to the environment and planet we all live in. There is no doubt there is a much higher level of consciousness than ever before. The only problem is, although we may expect or want companies to be good environmental citizens and follow best practices, we as consumers don’t necessarily want to pay extra for it. And for all the talk about energy-efficient cars, the reason we don’t have them now is that customers traditionally follow the money… lower gas prices means we accept the status quo, high prices mean that we cut back. In other words we cut down consumption when fuel cost is high, but invariably resort to our old gas guzzling ways when prices go down with no real alterations made to efficiency standards.

Electric Vehicles: Niche Category…

What this means is that true electric cars appeal by definition to the niche we call Early Adopters, who are into energy efficiency and green tech because they believe in it and are quite willing to pay extra and buy before anyone else to support this belief. And Hybrids? These vehicles aren’t disruptive in any way except that they get good and often great gas mileage. They do prove however there is an audience for energy-efficient products.

This is what makes what Tesla is doing very interesting.

Tesla’s first car the Roadster has been on the market for a couple of years and has sold, if the public account is accurate, around 10,000 vehicles at $100,000 each. These cars are not only pure electric, they are also a very fast, super premium product. In other words, the Roadster is a high performance (0 to 60 miles per hour in 3.6 seconds) sports car that can perform in a league with a Ferrari or a Porsche, that just happens to be electric.

As far as markets go, this is an extremely limited audience by any measure. However, the Roadster is a clever first step from a strategic marketing perspective, as it begins to alter the accepted perception that electric cars by definition don’t measure up to those powered by internal combustion engines.

One of the other objections to electric vehicles overall is that they necessitate new driving habits and expectations that American car buyers have been slow to accept, if at all. The perception is that electric cars are slow, don’t drive as well, cost more than they are worth, and what’s worse, make driving a structured activity posing the risk that the batteries may run out of juice mid trip. This is not a recipe for wide-spread adoption in the US market, certainly.

You can see this reality playing out right now with the Chevy Volt:

“Volt offers the fuel efficiency and forward-thinking you’d expect from Chevrolet.”

The Volt has a range of approximately 35 miles, when the gasoline powered generation system kicks in, so drivers don’t have to worry about getting stuck. It doesn’t look bad, but politics notwithstanding, with a pure electric range of 35 miles a charge, it is compromised and production has stopped, at least for now.

“the new car. 100% electric. zero gas. zero tailpipe.”

And then there is the Nissan Leaf.

The Leaf looks funny, and with a range of 65 miles seems too complex and different for the mainstream car buyer. Again, this is a compromised driving experience, something only an early adopter electric car buyer could and would love.

… Or Mainstream?

The Tesla S is clearly different.

Tesla Model S: Another Vehicle Entirely…

As you can see it’s beautiful. I’d put it next to a Lexus, Mercedes or Infiniti anytime. It also boasts great performance for a luxury sedan (0 to 60 in 5.6 seconds), can go up to 300 miles on one charge, and because the drive train is all-electric, it opens up cabin space and also lowers the center of gravity for a great driving experience. In other words Tesla S is great luxury sedan designed from the ground up that is electric and not the other way around.

In fact, most drivers can get back and forth to work for a week on one charge.

Marketing is a Key Enabler

The question now is, how can we position this vehicle so that the mainstream car buyer get’s it?  As it turns out Marketing has a set of tools that can help us figure it out.

Here is the current positioning from an outside looking in point of view:

Tesla is beautiful luxury car that performs better than any other sedan on the market, including Mercedes, Lexus or Infiniti. It (base model) costs $50,000 gets up to 300 miles a charge, costs a few hundred dollars a year to run and is all-electric.

This can be reflected in Tesla’s own taglines:

  • Performance for the 21st Century
  • Electric from the Ground Up
  • Zero Emissions. Zero Compromises.

Not bad…

The issue here is these core positioning tag lines are not connected directly, and the umbrella line of “Performance for the 21st Century” forces us to define what that means to us. And since there is no “Mainstreet” context for reference,  the “Electric from the Ground Up” with “Zero Emissions and Zero Compromises” then is clearly focused to Early Adopters, which is fine except that it misdirects the overall value proposition away from the mainstream audience and dilutes the position that is inherent to the product to engage the larger “Majority” audience and therefore fulfill its true sales potential.

Positioning for Success

Let’s use our double vector model to break this apart and see what we can do re-position the Tesla Model S for even greater success.

Vector #1: Luxury Sedans

In this case, the Market Alternative is Luxury Cars.

The singular “value vector” in red comes down to best luxury performance in a world dominated by leading brands such as Lexus, Mercedes and Infiniti among others.

With a gorgeous bottom to top design with acceleration from 0-60 in 5.3 seconds and amazing handling, the Tesla S can clearly outperform its gas-powered luxury sedan counterparts.

Vector #2: Electric Cars.

As we can see, there are some stunning differences especially related to design, but here we are looking for a more logical or mental key difference, and what really sticks out is the range. Model S gets up to 300 miles a charge, the others not even close. The Volt goes so far as to integrate a gasoline powered generator that kicks in after 30 miles, but that is an obvious compromise. Tesla does not compromise here. This is where Tesla’s no compromise position noted above obviously comes from.

“X” Marks THE Position… Where Differentiation Matters

Add the two up and Tesla can now make a statement like this:

Add it all up: The Tesla S is designed from the ground up to be a beautiful luxury sedan that just happens to be all-electric. And because we make no compromises, Tesla S not only outperforms any gas-powered sedan in terms of pick up and handling, it also gets up to 300 miles a charge so you drive everyday and never fill up at the pumps again.

Now let’s revisit our tag lines:

Nissan Leaf boils it down this way – “the new car. 100% electric. zero gas. zero tailpipe.”

Chevy Volt – “Volt offers the fuel efficiency and forward-thinking you’d expect from Chevrolet.”

Tesla Model S – THE Luxury driving experience with no compromises, no emissions and up to 300 miles per charge.

Bottom Line: Now, what car do you want to buy? And I am not just directing this question to Early Adopters, who will validate the product, but mainstream car buyers who will elevate this 21st Century Silicon Valley startup into a real player on the auto manufacturing stage with a product category that for the moment at least, is given up as lost.

Marketing and Innovation: Where Everything IS Possible

On one level this is monumental achievement, but for someone like Tesla’s Elon Musk, whose other company SpaceX actually launches stuff into orbit around the earth, this is a manageable task. Tesla clearly demonstrates that when marketing and innovation come together, everything is possible.

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Music Is Free–Let It Loose… and Reap the Benefits. PART II

March 11, 2011

This is what the Grateful Dead’s sound system looked like in 1973, from an article in Rolling Stone entitled A New Life for the Dead: Jerry Garcia is Checking Cash Flow Charts.

The Dead was a growing enterprise as the scale of this, their very own sound system in 1973 indicates. The ballroom days are long gone now.

It was a monster — state-of-the-art in those days. This hippie band was really taking off even then, as the 1960’s, the decade of their birth was now long gone. The Woodstock Festival in 1969 showed the world that rock music had an enormous audience and in 1973 that potential was becoming realized. The music business was now a big, big business!

The ballroom scene that featured multi-night engagements in small intimate halls with capacities of up to a thousand or so, described in Part I, was over. The capacity of these venues was not enough to sustain the escalating costs and fees of touring artists any more.

And we all know that things were to get bigger yet.

What is clear, as the last posting suggested, is that the Dead were riding the wave… and were now in control of their business and destiny. Consciously or not, they were also creating best practice marketing, building an ever-larger base of community support and demand for their product – improvised music that reflected the moment, the connection with a co-creating audience, that was different each and every night.

If we rewind just a couple of years earlier back to 1969, I can share how it looked on the ground as some of this was developing. Imagine we are at Boston’s top rock club, the Boston Tea Party, formerly The Ark, a venue that could hold an audience of 1,500 or thereabouts. It’s New Year’s Eve 1969/70 and strangely enough, the Dead are playing in Boston, instead of their home base in San Francisco. What a way to end that action packed decade.

I am helping the band’s road crew load in. Lot’s of gear to move, and extra hands help. There is one fellow that stands out. He is dressed in western gear with a couple of leather bandoliers strung across his chest, looking like a space-age cowboy outlaw. Instead of bullets, however, the bandoliers are filled with little bottles of liquid, containing what I do not know.

Introducing, The Bear, aka Augustus Stanley Owsley, the Dead’s sound guy and from what I could see, much, much more. He is overseeing the PA system he designed, making sure everything is unloaded safely, placed where it needed to be and in the process of getting hooked up properly.

I had met Bear before and was nervous at first. His reputation preceded him and I knew he was very, very smart. Plus I was just a teenager and Owsley (let alone the whole band) were in their mid-twenties at least and much older than I was, so it was easy to feel intimidated. I was around grown ups, legends already thanks to Tom Wolfe’s Electric Kool-Aid Acid Test, numerous articles in the early version of Rolling Stone, and Herb Greene’s iconic photos.

But Bear was cool. Maybe because I was helping out, I don’t know for sure, but I found he was very approachable and very friendly… he also exuded an air of authority, confidence and hipness just by his being. He didn’t need to talk too much.

The Sony 770 Portable Tape Recorder was state of art in the late '60s and as Owsley told me, a triumph of miniaturization. Check out the soundboard tapes from the era and you can hear just how good these machines... and the band were!

Two things I also noticed as we loaded in and set up for this New Year’s run. First, Owsley was carrying around, I remember this clearly, a couple of state-of-the-art Sony, I think they were Model 770, portable reel-to-reel tape decks. He used them to record each and every show right from a stage-side hook up.

They were sleek, portable devices, Sony’s top-of-the-line decks. The way Owsley talked about them, their bass response, wow and flutter and other such features, these machines were a triumph of miniaturization. I remember the price too. I lusted after one but the price was way out of reach, something like $800, which was a small fortune in those days.

The second thing I noticed happened right before show time. The Dead always took sound seriously and their monitor system, the speakers placed on stage so they could hear each other play, was very important to them.

I gather this was one of Owsley’s PA responsibilities and he would always reveal himself to the crowd as he adjusted things at the soundboard by the stage. He would bring one of those Sony tape decks (or two) down with him and plug them in to a junction box type of device.

Then something funny would happen. Every once in a while a fan would go up to him with a tape machine and ask if they could patch in. And it usually happened in one of two ways… some would ask nicely. And you could see it, if they did he would smile and help patch some of them in.

Others would demand this opportunity. These folks would be ignored. The pushier they got the more he ignored them, and at a certain point a burly member of the road crew would wander by and “gently” escort this individual away, without the sought after connection made.

What did it all mean?

Looking back, I now realize what I was seeing. This was an early version of band-accepted tape sharing at close range. And Jerry wasn’t the guy, nor was Phil or other band members. And it wasn’t the road crew either. At this point in time it was Mr. Bear himself.

At the time I didn’t understand what I was experiencing exactly, except that this was something different. After all no other band that I was aware of tolerated in any way, shape or form, fans taping “their” shows like this right off the soundboard, ever. Club maybe… fans, no way.

Whether it was by intent or lucky accident, now I know I was seeing what today marketers call Positioning in action.

Winning Hearts and Minds…

In simple English, Positioning is all about addressing the questions “How Are You Different?” and  “Why Should I Care?” in a clear and direct manner that cuts through the filters we all employ to drown out the marketing “noise” we are all exposed to each and every day. It is the key that opens the door to a customer/company/product relationship and a community interaction.

Differentiation is the “Mind” element of Positioning, and the Dead were different in all respects, including the music, which, since it was improvised, was indeed different each and every night.

The “Heart” side in this case is the connection audiences had and still have with the band’s music, the feeling it created in millions of fans all over the world that listened to and loved it then and do to this very day.

Sharing, whether by design or accident, supercharged this connection, this sense of Belonging and Community that are cornerstones to effective use of Social Media today.

The Dead, somehow found a way to position themselves to win both the Hearts and Minds of the people, and I saw it begin to happen right in front of me, in a hall that maybe held 1,500 folks with the person at the center of the whole thing, a couple of feet away.

That’s what Positioning is all about. It is not a battle as many think, but connecting in human terms the mental and emotional connections we have with people, with information, with products and services we let in through our filters and then, in the end, act on.

No box here!!! Courtesy of NASA.

We have all heard the expression, supposedly coined by Apple’s Steve Jobs, “In the box, out of the box doesn’t matter because, actually there is no box.” From what I can tell, Owsley had nothing to do with boxes and the results of how this helped drive the ever-expanding Grateful Dead community at that time, speaks for itself.

Luck, accident, invention? Conscious, strategic intent? Who can say? It was so long ago after all. However, there were real things going on. And one thing is sure, today we have the opportunity with the luxury of 20/20 hindsight to identify goodness where we find it, and the Dead is fertile soil that offers useful info, even marketing information that we can use today. Who knew? Now we do.

Music Is Free–Let It Loose… and Reap the Benefits. PART 1

December 3, 2010

Intro: Back to the Future

I recently tee’d up final group projects for my Principles of Marketing classes this semester. Since I started doing classes in 2002, I have had students attack the music industry and break up into teams that represent major or independent record labels with the goal to create marketing strategies to grow their business from these two perspectives.

This is no small feat when you consider that the music industry was disrupted by peer-to-peer and other technologies that have empowered listeners with capabilities to distribute and secure music for FREE, and it committed suicide by suing customers and refusing to adapt. Who could have predicted in 2002 that a computer company, Apple, would operate the most successful legal digital distribution system, iTunes? Extraordinary!

How do you compete against FREE?, and make money at the same time?, is the knotty challenge, and there could be no conversation about this in class without taking a look at the visionary band that understood it all so long ago, and built a business and marketing model that made it happen, and happen on a grand scale.

A Bit of Historical Perspective

In 1969 I had the great good fortune to get a job at the best rock club in town called The Boston Tea Party. How I got the engagement is the story for another posting. It was a winter weekend in January that I started and the band, a little combo from Britain, was making their debut in Boston.

For the next year and a half or so, I had what I would describe as a front-row seat to one of the most creative periods in music, at least in my lifetime. Artists I was able to see, hear and hang out with ran the gamut from Ricky Nelson, The Who, Jeff Beck and Pink Floyd to B.B. King, Rahsaan Roland Kirk, Big Mama Thornton, Eric Clapton and yes, the Grateful Dead, the band that redefined marketing for me.

Since one of my duties was to help these bands load in (up two flights of stairs!!!) and set up their gear, I would really get to know the roadies, road managers and other behind the scenes facilitator of the music, as well as the artists themselves.

The Dead were unusual even then. They were as far out as you can go… very smart and very unique, obviously. More than anyone else they embodied the “be ‘hear’ now” hippie spirit… and expressed many dimensions through the music.

Their road manager whom I got to know a bit was a fellow named Owsley, otherwise known as the Bear. Bear was also a world-famous chemist and from what I now know, an all around Renaissance man and resident genius.

Looking back I don’t know how The Dead could play sometimes, especially once Owsley had done his thing. And yes, there were moments when they really couldn’t, like the first they night they followed the The Bonzo Dog Band (another story) in the Fall of ‘69. There was no way to follow this rock and roll musical circus, which was part of the extended Monty Python family, that had the audience freaking out and running for the exits by the time they finished.

Then there were the nights, when it all came together… and the music, created on the fly just for and with the audience, transcended everything. Electrifying. So when it worked, it worked… and when it didn’t, oh well, there was always tomorrow.

Hippie’est to Highest Grossing Concert Band of All Time: An Amazing Transformation

So how did The Dead go from hippie’est of the 1960’s hippie bands, to the highest grossing concert attraction of its era well into the 1990’s?, an era of Rolling Stones, Michael Jackson dare I say Neil Diamond, another huge draw?

Leesons for us all, 40-years later!

Of course it’s the marketing!

David Meerman Scott and Brian Halligan give us great insight into this with their recent book, Marketing Lessons from The Grateful Dead. They identified the genius level marketing developed and adopted by the band… best practice and learn’able lessons that are applicable to all products today.

I will argue that what The Grateful Dead understood, perhaps intuitively at first, was the sense of community they were a part of and had the power through the music to create, nurture and grow.

A 360-degree business perspective

As you can see from this pie chart, from the article in Rolling Stone*, A New Life for the Dead: Jerry Garcia is Checking Cash Flow Charts, from way back when in the November 22, 1973 issue, they were able to see themselves not only as a concert band, but as a business from a 360 degree perspective that included concerts, importantly, but also the totality of their business. They then created a variety of companies including a record label, a sound design and production company, a travel agency and much more to support the enterprise.

Building Demand

Around & Around It Goes: More demand = Larger Halls, More Equipment, More Gigs, Larger Overhead, Bigger Organization -- Repeat

At its center or core, was the live music itself, the concerts. As it turned out, this was where when the 60’s ended and the 70’s and beyond began, the overall Dead experience could be monetized as they played bigger and bigger concert halls.

They consciously realized that since each performance was basically improvised and different, it was possible that demand for tickets could be increased, where fans would come night after night, market after market, and invite their friends to share a unique musical experience each and every time.

The other, was the understanding that the music once played was no longer theirs alone. In other words, the notes once in the air, were no longer owned by the band or anyone for that matter. This was and still is counter-intuitive, in stark contrast to how the rest of the concert/music business views it – where the music in all forms is still considered the property of the artists themselves and fans are prohibited from “capturing” it in any and all forms, except for artist-authorized versions, and of course in our memories.

Live Music Creates a Connection between Artists and Audience

In creative terms, the one thing I learned by having had the opportunity to watch bands play multiple night engagements at the Tea Party over a two-year period was see how instrumental the audience is to the creative process.

There would invariably be a night, THE night when the connection between the artist and the audience would be at a more intense level. Bands were “on”, and we the audience didn’t just passively hear the music, we actively listened and a two-way connection was made that fed off and built on each other.

These were the nights we lived for and there was no doubt that the audience was integral to the creation of that night’s music. The Dead always understood and respected this connection and surrendered control.

Who Owns It?: Let “Remarkable Content” Loose…

Knowing this also allowed them to open up the concerts themselves freely to “tapers,” die-hard fans who wanted to record a living document of the show. These tapers, were then free to share the recording with friends and other fans as well, and in doing so foster and feed a community of friends and fans, who in turn would fuel more demand for the live, real thing and so on, round and round it goes, growing all the time.

Yikes!

You would think that considering their extraordinary success, other bands, and even products and services would surrender control and follow down this road. But sadly, this has not turned out to be the case, at least not yet.

…And a Community Flourishes

Today we need to understand that music is in a way like “information is free” (to quote Stewart Brand) and by that I mean not necessarily free relative to cost, but free in terms of being un-tethered by artificial restrictions. The marketer’s way is to let it loose, let the audience control it and in doing so give them a reason to share, to connect and then experience the real thing for themselves.

As the Dead proved with music, letting it loose unleashes the marketing power of the music (information), the more compelling and in today’s terms “remarkable”, the more the demand, the audience will grow and the more opportunities to monetize the total experience will emerge.

In today’s world with tools like social media where such a strategy based on collaboration with the audience aligns perfectly with transparency and customer control, who knows how much “further” the Dead could have and would have taken it!

Part II to come: How it all worked… From What I Could See, Owsley was The Guy who made it happen.

* I wanted to acknowledge the Rolling Stone: Cover to Cover, the DVD set that includes every issue, every page of Rolling Stone from 1967 to May 2007. You can read it all, as it happened, and see music and music journalism evolve from those heady days of the late 1960’s to today. If you love the music, you will love this!

I also wanted to call out the Grateful Dead Archive now housed at the University of California in Santa Cruz. They are in the process of digitizing massive amounts of the Dead’s memorabilia and making it available to all, in the same spirit that made this all happen to begin with.

Doing Good… Is it Good Marketing?, Good Business?… or Just Crazy?

September 9, 2010

Knights Apparel is paying its workers in the Dominican Republic three and half times the going rate. Can they thrive when their shirts cost 20% more to produce than everyone else?

  • Introduction
  • Investing in better working conditions and worker salaries in Dominican Republic so that product costs are higher than the competition… are they crazy?
  • Why it can work… applying marketing principles to counter the drive to lower prices and commoditize the product
  • How “doing good” can be good business

Introduction

One of my roles is marketing professor at a great college in Boston. A foundation of all of my courses is to have students comb traditional and online media to find and share marketing-related stories in each and every class. There are a number of reasons for this including the fact that business is dynamic and literally evolving on a minute by minute basis sometimes, a fact that no textbook, at least in the print format, can ever keep up with.

What this means for me as a teacher is that I have to “eat the dog food” as well, if I am to keep up, let alone lead such a research-based activity in a classroom.

So it is that earlier this summer I came across an article in the New York Times last month by Steven Greenhouse, Factory Defies Sweatshop Label, but Can It Thrive?

I was very excited when I read the article and have not been able to get it out of my mind since. This is because contrary to the implication that “doing good” cannot lead to business success as implied by the question “Can It Thrive?” in the headline, when looked at it through a marketing strategy and positioning lens, we can easily see it is very likely this business can and will survive, thrive and perhaps be a model that other more well known consumer brands can and should adopt.

Lowering Costs Drives Business, Doesn’t It?

No, I am not trying to buck the research that typically asserts doing good for its own sake does not necessarily move customers or prospects to act and buy a product or service. There was much discussion a few years back about “green” business initiatives and would customers pay extra for them, and if so how much. Was Green enough on it’s own to drive a marketing program and deliver results?

Perhaps not.

We may have, want and maybe even expect a “green sensibility”, but we see again and again that when it gets to the pocketbook, we don’t want to pay more, at least too much more. We may penalize a product for say a lack of “green-ness” but we don’t necessarily reward them for it either.

In this mindset, the negativity implied in “Can It Thrive?” may make some sense.

The answer however, is far different from a strategic marketing perspective when doing good is positioned as added value.

First a little background.

Introducing Knights Apparel

The company in question is Knights Apparel, based in Spartanburg, South Carolina. Knights is, according to the article, “the leading supplier of college-logo apparel to American universities, according to the Collegiate Licensing Company.” The factory discussed in the article is in the Dominican Republic and produces high quality, college/university logo’d t-shirts for sale under the Alta Gracia label in campus bookstores across the US. The cost of the actual shirt is $4.80 with a wholesale price of $8 and retail cost of up to $18.

What is unusual here is that Knights pays workers a living wage. Where other factories may pay workers $147 a month in often harsh working conditions, the lucky workers at this factory earn $500 a month, up to 3 and a half times more. Not only this, workers are allowed to unionize and work in a clean, friendly, modern and safe environment, which is unheard of at most factory locations.

Shirts of this quality which may cost others $4 to produce, costs Knights $4.80, a 20% premium, so there is an added cost.

Sounds crazy, doesn’t it? Whereas in today’s globalized manufacturing world companies are on a constant quest for countries and workers where they can pay ever lower wages and cut overhead costs in order to maximize profits and value to investors, here is a company bucking the trend and going in the opposite direction.

Plus if the research is to be believed, what customer in their right mind will pay a higher price for a commodity item like a T-shirt?

We do, and we do it all the time.

Positioning Can Be Used to Support Different Business Strategies

It comes down to positioning, brands and value. Using the product adoption lifecycle for a model, we can see the following:

The Early Majority supports leadership and works like a herd… if my friends and peers do it, so will I. And not only that, this audience will pay a premium for a leading product, for its perceived value. This is where brands come in and why they can be very successful. If my friends see value in Nike, so will I. And yes, we all know that cool little swoosh will cost me more, sometimes much more.

To the Late Majority, a t-shirt, is a t-shirt, is a t-shirt. Lowest price wins their purchase. And if we can get a branded shirt at a lowest price in say a discount store, we are not fools, we will buy it. But if it costs more, forget it. Cost, lowest cost is more important to here.

The game here is added value. If Alta Gracia shirts were focusing distribution on say Wal-Mart or other discount channel, the strategy would fail. Pennies matter to the cost of the product, and the higher production cost would not be able to play out in this arena.

But as we read, Knights strategy is to not play in that space. In fact, they are reverse positioning themselves to play in the Early Majority segment, and quite cleverly.

Reverse Positioning For Added Value

Here’s how.

1. The shirt is a high quality shirt. The facility is not manufacturing a commodity quality, no label generic t-shirt.
This alone is not enough.

2. Alta Gracia has not yet built awareness and value for itself as a stand-alone brand, although apparently there will be point of sale merchandising in college bookstores to raise awareness.
However, by providing the academic market with college/university branded product, they in effect are partnering with colleges and univerisites to offer a high quality, high value, co-branded product.

3. Students (and therefore their parents) are known to care about social concerns and they do support with their wallets.
These customers will pay a premium for products that they consider to fair traded, if the value is clear and the cost is in line.

Have you checked out the price for a Nike T-Shirt lately? Alta Garcia’s wholesale and retail pricing is well in line with other high value branded t-shirt products that can often cost $20 or more.

Add it all up and Knights has done its work to strategically position this product right where it needs to be, so it can, and I will argue almost certainly will meet its social and business objectives.

Does “Doing Good” Make Sense?

Are there lessons here for the Nike and Reebok’s of the world, whose logos have high brand value in their own right?

It seems like they have a choice.

A few years ago, Nike and others (remember Kathy Lee Gifford’s clothing line?) were slammed by the media, and customers for simply the appearance of allowing sweatshop conditions in some of their out-sourced, off-shore factory operations. They felt the pain of lost sales and as a result developed and imposed higher standards and better working conditions over time since then.

Left to balancing the quest for higher profits against the public’s expectation of social responsibility, it seems likely this kind of back and forth may continue. Companies will try to cut costs all they can, and consumers will respond if it appears they have crossed some ill-defined line and gone too far. At what is too far?

Is there a business value to a more pro-active posture like the one taken by Knights?

Costco Thinks So

As it turns out, there is a best practice we can look at here as well courtesy of Costco, the leader in the warehouse store category, outlined in a 2005 article in the New York Times, How Costco Became the Anti Wal-Mart.

For many years Costco has been a leader in the retail industry paying its workers “liveable” salaries well in excess of those paid by another leader, Wal Mart (and others) where associate salaries are pegged to the Minimum Wage.

At the same time Costco’s management has been under pressure to lower employee costs, something that Costco’s management has resisted. As noted in the article, one analyst even complained that with Costco “it is better to be an employee or a customer than a shareholder.”

Why then does Costco resist this pressure?

Costco has found that fairly compensated employees are loyal, honest and stay with the company longer. Churn is down, retention high, training costs reduced, and productivity enhanced. Throw in that Costco’s affluent customer base appreciates that lower costs do not come at employee expense, well we get the idea, there is a monetary benefit.

As Costco’s CEO Jim Sinegal put it, “This is not altruistic, this is good business.”

Sound familiar?

Our marketing model shows that companies can do good, quantify its value, serve customers and in the deliver more value to customers, if they live in the right place on the Product Adoption Lifecycle.

The Marketing Lesson of the Product Lifecycle… You Can Choose Where You Live

Then think of the transformative impact this has on the actual workers. One of the workers at Alta Gracia put it this way, “We never had the opportunity to make wages like this before. I feel blessed.” Feel good now?

Here is the recipe that adds value and re- or reverse positions Alta Gracia T-Shirts from a commodity to value product:

1.    The higher quality of the product itself

2.    “Borrowed” Brand Value that leverages the affinity of the College/University

3.    Added Value of a Good Deed that in fact is also doing “Good Business”

4.    Opportunity to build Alta Gracia as a stand alone brand recognized by students

5.    Natural brand extensions to other intersecting markets (parents, etc)

6.    Other affinities, such as sports, music and others can build on model

Add it all up and it means higher value, the kind of higher value customers are willing to pay a premium for.

Marketing The New Gillette Pro Glide: From a Positioning Perspective, Is this The Best A Man Can Get?

July 11, 2010

Today we will explore how we can use positioning best practice to engage the full range of the product adoption lifecycle simultaneously in order to:

  1. Capture the larger Early Majority segment
  2. Extend the reach to the Late Majority/Commodity buyer at the same time
  3. Provide a compelling value proposition and pathway to convert many of these commodity customers into more profitable premium buyers
  4. Lift the whole product category.

I have to admit it. When it comes to Gillette razors, I am a classic early adopter. I just have to get their latest and greatest right away. Why?

Maybe it goes back to when I was a kid. I remember watching my dad shave in amazement morning after morning. Such an arcane process that never seemed to change: shaking up his can of Foamy and slathering that creamy stuff all over his face. And then the razor. The heavy chrome handle that would pop open by turning a knob on the bottom. Slide in a Super Blue from the special dispenser, twist the handle closed and then let the shave begin. When completed he’d sprinkle Aqua Velva on his hands and slap it on. Done!

I also remember feeling his face. He had a heavy, scratchy beard, something I inherited. After the shave, his face felt smooth as glass.

Is it any wonder that at 10, I desperately wanted to shave too. Dad would always say, no rush, no rush. It really isn’t fun. And if you don’t do it right… ouch. I remember those little dabs or two of toilet paper on his face to staunch the bleeding on a bad day.

As you can see, there is deep connection I have with the process and the Gillette brand that transcends the actual experience itself and sets me up as a classic Early Adopter in this category.

In this light I recently found myself excited when Gillette announced that it’s latest and greatest Fusion Pro Glide System featuring 5 thinner blades with a special low resistance coating and a suspension system that would eliminate that pesky tug and pull. I couldn’t wait. My excitement mounted as the launch day, June 8, 2010 approached.

Needless to say, I got one right away and the product does not disappoint. It’s awesome! It really feels like the razor is literally gliding as I shave, and afterwards my face, well it feels smooth as “glass,” even smoother than my Dad’s.

The Right Message for the Wrong Audience?

Now regarding the marketing… Yes, it’s slick, it’s integrated… And it’s old hat. Not to say that this is bad. Or not effective, at least as far as it goes. After all, the previous flagship blade in the Gillette line, Fusion with its Turbo style imagery, was the most popular razor in the world. But is there more?

Here is a screen capture of Gillette’s today.

As you can see, in the current state, the message is all about the product and its features and the primary message is turning Shaving into Gliding. As an Early Adopter, see arrow, I am sold. And in truth, it didn’t matter what the claim or message, I was sold even before the blades hit the market.

It All Comes Down to Connecting the Dots

The goal in positioning is to connect dots and answer questions for the customer, not pose them. And as we have learned from Apple and other marketing virtuoso’s, linier time as far as the Product Adoption Lifecycle goes is often a self-imposed obstacle. So why wait if you don’t have to, especially when there is so much at stake on a global scale?

With this in mind, and stepping outside of my Early Adopter mindset, what do we see with Gillette’s Fusion Pro Glide?

Product Lifecycle: A Quick Review

Just to make sure we are all on the same page, here is the famous Product Lifecycle bell curve made famous in Geoffrey Moore’s landmark book Crossing the Chasm.

Early Adopters like me love a product and it’s features. We are not price sensitive and are always on a quest, in this case, for a better shave. We have to have the latest and greatest right away.

However, Early and Late Majority buyers, where the heart of the lifecycle (and greatest profits) resides, have no interest in product features.

The Early Majority is concerned with “what does the product do for me” coupled with market leadership and peer adoption. If my friends buy, so will I. These buyers are also willing to pay a premium for the acknowledged leader.

The Late Majority is concerned about price… getting the product for the lowest price. They also don’t want to be bothered with the rest.

Positioning to Win for Maximum Impact

As we all know, Proctor and Gamble, Gillette’s parent company, is a brand and marketing powerhouse. And Gillette is an established market leader in the razor space and has been so for decades.

This means that a big part what it takes to capture and exploit the Early Majority is in place already with brand leadership and millions of satisfied users around the globe.

In it’s current state, you can see that the current product messaging is actually talking to Early Adopters, NOT the Majorities. The marketing question is, is this it for now, or is there more we can do to exploit the new Fusion Pro Glide product?

If we look at positioning best practice, the answer is yes!

Here’s a structural model of how this can work (by segment):

1. Early Majority

A. Leadership
These buyers appreciate and will pay a premium for the leading product in the category, making this is a clear sweet spot for this particular product now.

As mentioned earlier, the key to effective positioning here is connecting the “what’s in it for me?” question in the clearest terms possible that yields maximum results. In this case, Gillette has opted for a “Turn Shaving Into Gliding” message, which begs the question, “What does Gliding mean?” It glides, perhaps, but so what? What does Gliding do for me?

And yet buried deep in the current presentation, there is an answer… all the wonderful product features, YouTube videos, NASCAR endorsements, and Dream Job promotions are designed, perhaps indirectly to support the message that Fusion Pro Glide delivers “Gillette’s most comfortable shave ever.”

That’s what Early Majority buyers looking for. Now we get it! The big benefit, the compelling reason to buy. It was there, but buried by the Gliding message. All we need to do is call this message out front and center. And if you want to be slick about it, again from the current messaging, add… “Guaranteed.”

Roll it all up, here is what’s in it for the Early Majority buyer. Pro Glide Fusion is: Gillette’s most comfortable shave ever. Guaranteed.


B. Peer Influence
The next element to drive this segment is peer influence. “Do my friends have it, and do they like it. If so, I want one!” This is where endorsements fit. Gillette is a master of professional endorsements and has been so for decades. Today it’s in the form of NASCAR personalities and the “Young Guns” Challenge.

Even more interestingly perhaps is Gillette has begun to masterfully use social networks to get the “every man” endorsements that most likely will be more important as a marketing activity moving forward.  It takes a lot of guts to surrender control, which is essential for authenticity to address “Do guys like “me” use it, love it, etc.”

This is where Early Adopters come in. If we love the product, we are natural advocates and influencers, and can be one of these authentic  guys “like me” who heartily recommend the product to our “Johnny come lately” friends. What we need is some help or incentives to voice our feelings. In other words a promotion.

Example:
Right now men are invited to vote for their favorite “NASCAR “Young Gun.” The winning driver gets to donate $10,000 to their favorite charity. What do we get? How about adding a Win Blades for Life! premium? This could be for the vote if the person registers. And if we are looking for real endorsements by real men, it could be for submitting the funniest Pro Glide testimonial. And the prize, along with the charity donation could be presented to the winner at say, a NASCAR event.

2. Late Majority

Research I found seems to indicate support my Dad’s feelings about shaving. It is a necessary evil, something we have to do due for social conventions, but inconvenient at best. This attitude sets up commodity-style, low-price “just get it over with” thinking.

As it stands, Gillette has a dizzying array of lower cost blades and razors from earlier category leaders Fusion and Mach 3 to a whole slew of disposables. “Dizzying” is the operative word. Extremely complex.

What we need here is a clear roadmap of products, perhaps broken down into 1. blades and 2. disposables from Good to Better and Pro Glide in the role of BEST… with a blade price of “lowest” to “more” to “most” expensive. Your Choice.

And since Fusion Pro Glides fit in millions of Fusion handles already in the market, it is easy to slip in a free blade and coupon for later purchase in the package to engage these established buyers and get them into the pipeline.  We have to assume this is in the works already.

3. The Best A Man Can Get: Positioned for Growth Across the Lifecycle

If we go back to Gillette’s core brand, we can see we have the platform we need to cut across the whole razor line… “the best a man can get.” I was surprised to see that it is still alive and core… embedded right in the logo treatment itself. As one would expect with a brand of this caliber, it was like seeing an old friend. Powerful indeed.

This offers up a value platform with the opportunity to move customers up the ladder from “cheap” to Better and Best products and from a commodity buyer to a premium one. I call this Marketing JuJitsu. Here is where positioning focused on costs per shave and other metrics commodity buyers think about can come into play to demonstrate brand value to the these buyers too.

Example:
Let’s assume we can get two-weeks of shaves out of one Fusion Pro Glide blade. (Note: I have gotten up to four weeks, even with my heavy beard). Two weeks of comfortable shaves at $3 per blade equals approximately $.21 per shave. Let’s assume you can buy a disposable for $.20 per razor that safely delivers a shave, or two. Now the value proposition to this segment can be turned around to something like…

“For just pennies extra a day you can move up to Gillette’s closest, most comfortable shave. Take the challenge to see and feel the difference for yourself. Low(est) cost and most comfort from Gillette… The Best A Man Can Get.”

Here is what the structure looks like all together with above.

As you can see, now we have a Strategic Framework capable of positioning Fusion Pro Glide in multiple segments across the Lifecycle simultaneously under the Best A Man Can Get Brand Platform:

  1. Early Adopter with Glide
  2. Early Majority with Comfort
  3. Convert Early Adopters to Influencers building on incentives and promotions
  4. Create simple and understandable tiers of lower cost products for Late Majority
  5. Drive a Cost per Shave Value Message and convert Commodity into Premium buyers


3-D Movies: How to Kill the Golden Goose Before It’s Time… Coming Soon to a Theater Near You!

April 2, 2010

I want to preface this posting to say I don’t like to look at movies as a horse race or the “who wins the weekend box office $’s derby.” I realize this is one way to measure popularity and success… and if movies are a popularity contest, don’t we like to invest, ooops, I mean spend our hard earned cash on the winners, the ones we know we will enjoy? But is volume the real measurement of goodness? In the herd mentality, of the if everyone else likes it, it must be good, kind of thinking, yes. But of actual goodness, perhaps not.

Earlier in the week, I was reading Lauren Shuker’s article in the Wall Street Journal entitled ‘Dragon’ Movie Fails to Tip Scales as Price Increases go Into Effect (March 29, 2010), which has gotten some great reviews, and am once again struck by the apparent marketing incompetence that seems all too inherent in the entertainment industry.

Here’s why.

It appears that there is no doubt that audiences very much enjoy today’s 3-D film experience. Huge 3-D successes such as Avatar and Alice in Wonderland, and the IMAX sales of each testify to this.

Now of course, in the sequel style, copy-cat mania that seems to be Hollywood these days, everyone and his brother wants in the bonanza. I gather that How to Train Your Dragon was filmed in 3-D, but for example, but Clash of the Titans, which will be released next week, was enhanced after filming was concluded and is not a native 3-D film, as Avatar and Alice were.

I have no problem with the studios tripping over themselves to milk the 3-D train for all its worth. But the operative word here is CARE. In the drive for revenue (greed?), it is becoming clear that if studios and exhibitors over reach, sales will be diminished and the technology reduced once again to fad status.

When looked at through our marketing lens, there are a couple of things to remember to prevent the latter while maximizing the revenue generating opportunity 3-D presents:

1. It is and I think always will be the story. James Cameron and Tim Burton are at their core master story-tellers which, love them or not, informs all of their work. 3-D is an enabler to the story, not the driver of it.  In other words, if you are going to charge a premium, it probably won’t work for lesser fare, at least until the film has built a core audience.

2. The last few years haven’t been all that kind to the movie industry. And we are still living through a recession. The market is price sensitive. The new price for 3-D movies under the new structure is approaching $20 a ticket! This can easily add up to  $100 per outing for a family of four, which makes a night at the movies a very pricey, special purchase, not a casual and affordable date night type of event.

3. Seeing a movie in a theater has some communal benefits and people love to go out.  However, part of the audience dip these last few years has been a convergence of sorts… where home movie systems with surround sound offer a near multiplex movie experience at a lower cost. And if that isn’t enough, 3-D capabilities are coming to a flat screen TV in your home, very soon!

So considering these elements, what should the exhibitors do to maximize this technology in a manner that makes marketing sense?

Make Sure That 3-D Adds Value to the Communal Theater Experience!

Central to the exhibitor point of view has to be exploiting the positive elements of the communal viewing experience and doing everything possible to add value to it.

I live in the Boston area, and one of the pioneers of the multiplex phenomenon is a locally based company called National Amusements.

Multiplexes were great for revenue generation, but with ever smaller screens and smaller auditoriums that result, the exhibitors themselves over time have diluted the big screen viewing experience thus opening the door for home theater to be a competitive threat today.

So much so, perhaps, that National Amusements itself is now leading the charge of such innovations as stadium style seating to enhance the comfort and viewing pleasure of their guests in such a way that is very hared to duplicate at home. They also created Cinema De-Lux, a first-class section in selected theaters offering food & beverage service and plush seating that audiences happily pay a handsome premium for.

The dilemma for 3-D is to add value without adding price resistance. The way to do that is to understand and then compress the product adoption lifecycle.

How can we do this successfully — Grow the audience for films and exploit the revenue generation potential?

There are a couple of ways this can happen.

The Simple Method

  • Keep prices low and raise them gradually for general screens.
  • Raise prices and focus marketing activities on IMAX and De-Lux venues, where movie goers expect to pay more.

The trick to remember is that 3-D is a positioning “ace up the sleeve”, something that can be compelling and different that makes the communal movie-going experience special versus the home theater and other options available today.

This in essence creates a tiered pricing structure. And of course prices can also be adjusted should say another Avatar-style blockbuster come along. The key then is not raise prices prematurely until the audience demand is established.

The Complex Method
Don’t raise prices for 3-D films shown on “standard” screens for an initial period, say the first week or so.

This offers a couple of extra powerful benefits:

  • The Power of Choice & A Sense of Urgency
    By setting up “Popular Pricing” now with a higher price later, an incentive, is applied to drive business for that first critical weekend that offers the audience a choice—go now pay less, or wait and pay more.
  • Audience Empowerment
    In this way the public can literally join the critics and other influencers to help decide the fate of the film, especially by getting the word out through social networks to their “friends” and support films they love.

Option #1 focusing price increases on the self-selecting premium segment piece is easier to adjust with the already high priced options such as IMAX and De-Lux in place. In other words raise the first class price and gradually raise coach fares over time.

Option #2, however, offers a variety of counter-intuitive tools that can help launch new films, stimulate choice and create a great reason for the public to join with others to get the word out that can also serve as the basis for a whole variety of promotional activities.

In either case, once the public is used to a staggered pricing schedule it will be easier for prices across the board to rise over time.

Care however, must be taken to matter what directions are taken (or not) to exploit 3-D as a value added tool to support the movie theater experience first. This is the golden goose that must be nurtured and protected at all cost.

Otherwise audiences will turn in other directions, which will negatively impact each new film’s success as we have just seen with Dragon, a worthy effort where it seems great notices are not enough to overcome resistance to new, steep and sudden price increases.

Clash of the New Titans… Is Google’s new Nexus One an iPhone Killer?

January 7, 2010

Yesterday (January 5, 2010) was a day I had been waiting for… the launch by Google of its own quote unquote game changing Nexus One smartphone. Already the pundits are proclaiming that Google will depose Apple as the smartphone leader… Long Live Google!

And we all know what Apple’s buzz machine has been up to. It seems that there will be big announcement at the end of this month where it is likely, quite likely that Steve Jobs himself will launch another game changing device, an iTablet kind of thing.

So how do these products intersect?

A couple of things are clear. In the portable music player space, Apple, the undisputed leader, has reached a turning point. Sales of iPods, the most popular music player on the planet are declining, perhaps for good reason. Using my students as a non-scientific focus group, I have seen again and again that not only do 99+% have an iPod, many have two and some even have three or even more! Could the market be saturated?

The iPhone which as we all know is only available on the ATT network, has proven to be a game changer and massive success, not only surpassing sales goals and a critical element to shareholder value, with Apple shares now pegged at $200+, but also the catalyst to the current generation of wi-fi enabled, touch screen iPods, the disruptive app store with over 100,000 applications available, and yes Mac sales, especially the latest Mac books with the 1-piece “aluminium” chassis/case.

I don’t know about you, but I also hear about more and more “windows” folks making the switch to Mac these days.

I bring this up because right now Apple’s marketing is working at virtuoso/best practice levels. Assuming this is the case, and knowing full well Apple’s penchant for keeping it’s cards close to the chest, I see a strategy here where there is more that meets the eye.

The iPhone is too important to simply let slide. And Apple has shown time and time again it has learned from its past and will not go down without a fight.

So here is an outsider’s perspective of what I expect.

1. Yes, there will be a tablet announcement. And if lead designer Johnny Ive still has his “touch” to create usable, game changing devices, this will be a hit, and will function on a number of levels, including as a book reader. Assuming color and the ability to highlight and add notes and such, let alone offer interactive and collaboration capabilities, the textbook market is ripe for the picking, today.

2. There will also be an iPhone announcement. If I read the tea leaves right, Apple will announce that the iPhone will be available on Verizon and perhaps other carriers too. This is essential and will allow the iPhone to maintain its first mover advantage and current leadership position. Apple has been here before. Remember that iPod was one of many until it became Windows-compatible. And yes, we have a number of articles that the ATT network is overloaded with data usage generated by the iPhone. This is signal for this change if ever there was one.

And to go a bit further out on a limb…

There will also be a next generation iPhone announced with longer battery life, perhaps expandable memory and a better camera, plus the ability to run multiple apps at once. And yes, there will be a software update for those using older versions.

Those are the big ones. And there is more…

3. There has been a lot of noise about an iTunes upgrade. Subscription, Movies on Demand, etc. This may impact all of the above.

4. Lastly, my guess also is that Mac books in particular will also get something new to add more premium value to the product line. Perhaps the addition of the new low voltage chips we have been hearing about that will extend battery life to up to 8 hours, and dreamer that I am, how about quad core chips on these machines?

Add it all up. Apple has been on the “to kill” list for quite some time, and has always stayed at least one step ahead, to ensure leadership in segments it created. I have no reason to expect anything less this time.

That said, Google’s entry is a welcome addition and great for consumers, but an iPhone killer… probably not, if the Apple marketing machine is half what I believe it is. The only wrinkle is that sustaining type of improvements won’t do it. The good news for Apple is that disruptive game changers are what they are all about.

Don’t know about you, but I am looking forward to the next announcement at the end of the month.

HULU Contemplates a Lulu

December 6, 2009

OK. This harkens back to those internet “go-go” days of the late 90s – get first-mover advantage and scale and the money will follow. Sounds like the script for the movie Field of Dreams… “build a better product and the customers will come,” which as a marketer often working in the tech sector, is a line I hear all too often.

If what I just read in Business Week (“HULU’s Tough Choices”, Dec. 7, 2009) is any indication, HULU, the very popular free video streaming site with 40 million downloads per month (second only to You Tube) has run up a $35 million annual loss and is suffering just such a fate as the web bubble did.

HULU is not just an ordinary site. Funded in part by NBC, Fox and ABC, HULU was the film/video industry’s response to the technological disruption of FREE that had obliterated the music industry and with the prevalence of cheap bandwidth and storage, was heading it’s way. They saw how the music industry not only lost control of the new now dominant digital distribution channels but also found itself rendered obsolete, and did not wish to suffer the same fate.

One of the experiments put forward was HULU and lo and behold, I can get yesterday’s episode of 30 Rock and all sorts of video and film content on demand (1,700 titles) playable on my computer any time I want. And with WiFi-enabled LCD flat screens upon us, let alone the ever easier ability to integrate TVs into our home networks, this free content on your HiDef TV is nearly a reality. Or is it?

If the Business Week article is to be believed, the era of premium content at HULU is upon us. In other words, content we will have to pay for. And what is to be the price for this content? Your premium cable service!

Wow! Let me see if I have this right. Here comes this disruptive force of free streaming video content sponsored by the broadcast and film industry. It’s ad supported model is not really sustainable, at least right now. So yes, those happy days of free content appear to be coming to an end. And now the industry in its wisdom is telling us we may have to pay, and the way we will pay is in support of the what were soon to be disintermediated cable TV interests!

I mean after all, do we need cable anymore if a thriving online channel is delivering this content through our medium of choice through our server, versus the cable box? I guess the cable industry saw the handwriting on the wall too and isn’t about to go quietly into the night.

We could spend all day trying to figure this out. Is the Comcast acquisition of Universal (and NBC) from GE a factor in this equation? I will leave this to others to decipher.

My beat is marketing, and the question on the marketing side is, is this the best you can do, HULU? You have built a brand, you have scale, you have content and now you want to punt, snatching defeat from the jaws of victory while the experiment is in process? What a waste for you and the viewers who love you, and if my students are any indication, many do.

We all know that it is one thing to point out problems, another to pose solutions. Marketing is all about solutions, so let’s see what we can come up to get HULU out of this mess, knowing their ad model as currently in play isn’t sustainable.

Recommendation #1.
Up the value of the advertising.

How so?

As I see it from the outside, HULU has been a pioneer of offering choice to visitors? Watch the long ad and see the show uninterrupted… or choose the shorter ads sprinkled throughout. This is a great start.

How about going further and offer viewers even more choice? Offer a menu of ads by type and even product. Let the viewer self-select their ads of interest.

You can be high or low tech about it too. Low tech… base the ad offerings by the show, or if you want to be more slick, apply behavioral information to narrow down the choices based on each visitor’s clicking habits.

How does this improve value?

  1. You are empowering your viewers with more, not less control
  2. Ads are more relevant as a result
  3. And in doing so, viewers actually act and “raise their hands,” which direct marketers know is the most costly and difficult part of the customer acquisition process

What this means is that response and conversion rates should be higher and I will argue in the absence of evidence either way, at least worthy of testing. And should indeed response/conversion rates improve, the value of the advertising will go up and command a higher premium.

And one other point. Advertisers could be charged based on actual visitor selection and or performance. If viewers don’t click, they don’t pay. And when visitors do engage, they pay more. Integrate some interactive promotions and calls to action for those that do select and powerful interactions can take place.

Recommendation #2:
HULU Ju Jitsu

I see HULU as more than a platform for streaming video… free streaming video on demand. I call it a Network of One. It is our own personal Video network, programmed by us just the way we want it, with the content we love, when we want it and hopefully soon, where we want it too.

The motor that has driven it’s success to date as the second most visited source of streaming video content is the fact that it is free. Don’t kill it! Use it! Since Fox, NBC and ABC are principals, create premium content that bring fans closer to the shows, films and actors they love with interviews, webcasts, blogs, tweets, contests, and even closer interactions and behind the scenes access. Create opportunities and other reasons to join fan clubs and other communities and pay for the privilege based on the degree of proximity and interaction.

Peel off some percentage of 40 million for tiered service and subscription packages that supplement the free streaming content, and some interesting numbers come into play. 1% of 40 million is 400,000 prospective customers. Find reasons to get them to pay up to say $100 per year for something special above the free content… well you get the idea.

For one thing, HULU is no longer operating at a deficit. Up the percentages… every .1% is 40,000 customers afterall, and the return can be even more radical. Personally, I would love the opportunity to win a lunch with Tina Fey, a comedic genius if there ever was one.

The “Bucks” Ends Here…

June 10, 2008

One of the core principles of our 5 Laws at Marketing 2.0 Win is the Law of Process = Chaos. What this principle says is in simple terms is that process in the service of strategy is a good thing, however if it is the driver or central organizing principle of a company’s marketing or in this case public face, take care, take very good care.

We can see this playing out on a grande scale right in front of our eyes with coffee giant Starbucks. After an incredible run of phenomenal growth on a global scale, we see the symptoms… declining stock price and unhappy investors clamoring for relief, bringing visionary Howard Schultz back into the CEO role at the company. His self proclaimed goal… to help the company get back to its core… the coffee/community experience that in today’s Starbucks’ corporatized environment seems lost.

How? Howard himself gave us a couple of examples… of this disconnection: fresh-locked packaging, where you can’t smell the product anymore. And “goof proof” espresso machines. Machines that make it simple and fast to “build” a specialty drink, while put a wall between the customer and barrista and taking the artistry out of the drink making process.

I agree with that these are customer disconnects. But do they disconnect with the brand that Starbucks is?, enough so, so as to flatten sales in existing stores, like we have seen with Wal Mart, Dell and others?

In this case I am going to argue the answer is NO. The issue is not a brand conflict here.

Yes, these changes matter to some degree… but they are fixable and incremental issues, touch points that need to be aligned, indeed, but not a commodity-busting strategy that they really need to fix the problem.

You can see this in action in the Got a Great Idea/Tell Us, community function that now is front and center on their web site. I love the concept. Surrender control and open up the floor for your customers to offer their insights and then respond back, with action.

Some popular customer generated ideas… Free WiFi, a Loyalty card (buy 10/get one free) and others are incremental ideas… and sound hardly new or radical. My advice… implement them. However, don’t expect they will turn the tide.

The real issue is that the Starbucks concept is now approaching the mature phase of the product lifecycle, as these ideas so clearly demonstrate. The reality is that the Starbuck’s concept is now a commodity, which in fact the company with its “goof proof” drink making process helped bring about. This means that price, lower price and greater non-differentiated competition are the business drivers.

Look at it this way. MacDonald’s is now rolling out espresso/specialty drinks. Dunkin Donuts, one of the big winners in the Starbuck’s phenomenon, has been offering these lower cost specialty drinks for the past couple of years. Soon enough it seems every fast food chain will offer them. So now what?

Let’s take a closer look at Dunkin Donuts, because here is where the solution lay. At the outset, I admit it, I am a Starbuck’s regular. It is not my favorite, but with locations it seems at every corner nationwide, Starbucks delivers a consistent and premium product that meets my expectations almost every time.

Last week I offered to make the office coffee run, and one of my colleagues ordered not a Starbuck’s but a Dunkin Donuts coffee, medium vanilla. It was then that my mind was blown.

We know that Dunkin is not a premium coffee but a more everyday product, a blend I am told of Arabica and other less expensive coffees. It is a lower wholesale cost, more generic product. But when I saw the price for the cup at Dunkin which was $1.79 or in essence $.10 less that a similar size Starbuck’s, I was floored… generic product at a premium price! The folks at Dunkin must be smiling all the way to the bank! Thank you Starbuck’s!!!

So Starbuck’s is in an interesting position… its premium product is being attacked by generic products and commoditized… forced to concede on price or lose customers, because as we know, you can get a specialty drink anywhere… for less!

What is Starbucks to do?

Howard Schultz, if you read this… incremental, process-oriented activities focused on your existing customers are good but in fact cannibalizing, because these kinds of activities are pulling revenues from your existing audience. I will argue that the way forward in this case is to reposition Starbucks and counterattack to build market share.

In other words, Loyalty is important, but it comes at a cost and won’t drive growth. Look at it this way, “free WiFi” and “buy 10 get one free” are tactics and I will argue not nearly enough. Nor is “watch the barrista” or “smell the coffee.” Although appropriate, these tactics do not a growth strategy make.

Just as Dunkin and others offer what we can argue is an inferior product at a better price thanks to you, Starbucks now needs to execute a jujitsu strategy and show consumers in simple and clear terms the added value of their premium product over the competition. This is a classic re-positioning strategy.

So… ladies and gentlemen, the drum roll please… time for the Pepsi… ooops, the Starbuck’s challenge. Put your product up against the competition in “blind” tastings and build a campaign around it… Wow! This really is better!

As it stands, an espresso is an espresso is an espresso, and it will stay that way until Starbucks does something about it. That time, I will argue, especially if I was an investor and I am not, is NOW. And by doing so, the company can carve out MacD’s and Dunkin customers who in fact are ready to appreciate the difference premium makes. The key is to connect the dots positioning wise and make it clear to them what this difference is where the rubber meets the road, and for Starbucks that is in what is a better tasting cup of coffee every time.

The Case for the Negative Brand?

April 11, 2008

What a week in the airline industry! We all know the airlines are suffering. High fuel costs have decimated profits and now it appears many carriers as well. Just today Frontier went into bankruptcy in attempt to reorganize, and Aloha and a number of others out of business entirely.

Now add to it the FAA and the “inspection crisis” plaguing American Airlines in particular and their MD80 airplane which makes up more than half of their fleet. For the last couple of days, this fleet has been grounded for apparently long overdue wiring inspections in the wheel wells of each plan, causing thousands of flights to be cancelled and over a quarter million customers inconvenienced at best, often stranded in locations they didn’t intend for hours and even days.

Passengers by law can be compensated for hotels should they be stranded overnight, and of course American will rebook passengers on any carrier and will even issue vouchers for cancelled flights as long as you initiate your next flight by April 17.

And if you go to their web site at http://www.aa.com/index_us.jhtml, you can see crisis control marketing in action… notably an “ADVISORY: AIRCRAFT INSPECTIONS AFFECT SOME AA TRAVELon the home page and special jump page at dedicated just for this at http://www.aa.com/aa/pubcontent/en_US/urls/md80.jsp.

If you look carefully you will see that American is terribly sorry, its not our fault, safety is concern #1 and please e-mail us if you are stranded overnight. It appears to be written by a team of lawyers to mitigate liability, nothing else.

Are you kidding!!!

E-Mail us with your travel info and we will get back to you… it doesn’t appear that effected passengers are buying it either. Phone lines are jammed, and customers have been know to try to get through for hours on end with no luck. And ticket lines at airports are no better. Passengers are waiting for 4 and even more hours just to talk to an agent!

What a mess! I will argue, especially in light of the inspections, our trust is shaken, passengers are having vacations ruined, businesses are being disrupted, and all American can do is offer an apology and tell us to e-mail them. The only thing that’s even more surprising to me is the apparent lack of outrage by the public and government officials.

Now let’s go back to Valentine’s Day 2006. A snow storm hits the east coast of the US, shutting down JFK in NY, hub to another airline, in this case a brand that is beloved by its customers. This disrupts Jet Blue to its core. Thousands of passengers are stranded again, some for days. In other cases, they are actually stranded on planes on the tarmac, without electricity, running water and other amenities for hours, in one case up to 14 hours. Not good.

On top of that, their phone systems went down, planes and crews that could have been mobilized to take up some slack, were not utilized and sat idle. There was no apparent recourse and outraged customers went ballistic.

The media also took up the charge. Business Week, which was getting ready to announce their Top 25 Customer Service Champs, had just enough time to publically eliminate Jet Blue, who was ranked #4 overall, from their list entirely. And the talk shows went crazy, with Leno and Letterman all over it.

In this particular case, here was a darling brand in trouble, and Jet Blue rose to the challenge. CEO David Neeleman responded authentically and quickly to the challenge as you can see in this You Tube video produced in response that you can see at http://www.youtube.com/watch?v=-r_PIg7EAUw.

First you can see Mr. Neeleman is tieless and clearly upset. He is not rehearsed or smooth at all. It looks and feels authentic. He apologized, of course, immediately, and then takes responsibility… and potential liability as well. Then he announced 3 steps they were taking to attack the problem immediately and to top it all off, announced their new, groundbreaking Customer Bill of Rights to ensure better performance in the future.

Talk about getting ahead of a crisis!

Contrast that with American. JetBlue messes up and creates outrage, the far bigger American messes up on an even grander scale, they blame the government, seek to minimize liability and we just yawn and thank the powers above that it wasn’t us on one of those flights.

The difference from our Marketing 2.0 perspective… is brand. American’s brand along with the other once platinum carrier brands is tarnished, almost an anti-brand. When we think of major carriers today, we think delays, inconvenience, lousy service, and with all this FAA stuff going on, minimal trust at BEST.

So a problem like this comes up for American, and from a brand point of view, its business as usual. We expect it. Yikes! No brand conflict here, clearly.

Jet Blue on the other hand was another story. People love flying on it for a number of reasons and have a strong brand connection. That was why when they stumbled back in 2006, the brand was in conflict and we were outraged.

I will argue that in the long term, JetBlue understood that they had to act, and that action, pro-active action would have a cost and a short term negative financial impact on the business. I will argue that these kind of issues can be considered a marketing issue and fixing it marketing spend, which as we now see has strengthened customer loyalty and is likely keeping the business healthier in these times.

American has no brand, nothing to protect. Their quote unquote marketing is all about damage control at best and placing the blame on others. This is not a good indicator of American’s marketing prowess, and long term health of that and other similar airlines.