Archive for the ‘Re-Positioning’ Category

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.

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.