Tuesday, January 23, 2007

Do You "Rent Or Own" Your Customers?

Understanding The Difference Can Improve Return On Marketing Investment

By David Miranda

Is it better to buy or rent?

Normally, this question is one generally associated with major capital expenditure decisions in categories such as real estate and automotive. The question is also appropriate in making marketing expenditure decisions.

Today, with few exceptions, preference is perishable. This is primarily the result of two key factors - the relentless promotional landscape and the commoditization of brands. The synergy of these two factors encourages consumers to expect, all others things being equal, to purchase on price incented by continuous sales, widespread couponing, and other incentives. This promotes a high level of switching as consumers gravitate back and forth for the latest promotional offer. This is rented revenue. No sooner that the promotion ends, however, this consumer goes away.

Promotional offers may move the revenue needle in the short term, but they do not sustain growth or create brand loyalty - unless, however, you are Wal-Mart, Southwest Airlines, Costco, or Target and your brand strategy is "everyday low pricing". These companies share something in common with brands who forego relentless promotions for a strategy to "own" the consumer such as Apple and Starbucks.

There is nothing wrong with promotions. There is something very wrong with continuous promotions. Financially promotions are expensive, thereby, increasing the cost of marketing at a discounted price. The result is reduced margins. Many marketers justify promotions by arguing it generates increased traffic to stores or web sites which can then be converted from a promotional shopper to a loyal shopper. This is, however, wishful thinking. To prove the point one only has to conduct analyses on how many promotional shoppers continue to shop after the promotion. And like Pavlov's dog, once you have trained consumers to buy during promotional periods or with a coupon, they will do just that.

Marketers should carefully consider the use of the promotional tool. It should be the exception rather than the rule in tweaking revenue.

In marketing, it is far better to own rather than rent the consumer.

Monday, January 22, 2007

5 in 10 - A Formula For An A.D.D. World

Optimizing Success In The Ten Minutes Allotted

By David Miranda

Someone once said success is where opportunity means preparation. Whoever said this should have added another caveat - when the opportunity presents itself, make your case - and do it quickly.

Today, most of us, whether we like to admit it or not, suffer from attention-deficit disorder. This pandemic A.D.D. is exascerbated by time poverty, i.e. too-much-to-do in so little time. The result is people gravitating to simpler, faster communications - those that quickly get to the point. Today in business, who has time to read voluminous reports and marketing collateral, wordy emails; listen to rambling voice mails or sales pitches with tedious powerpoints?

Andy Warhol once said everyone has their fifteen minutes of fame. In business today, we only have about ten minutes (or less) - ten minutes (or less) to make our case on whatever we are communicating to a third party. It is a world of elevator pitches and sound bytes.

Too often the most common mistake we make is erring in providing more information than less. A 5 slide powerpoint quickly becomes a 20 slide powerpoint. A business presentation typically spends more time getting to the point, than making the point. There is little wonder why those who are pitched to, i.e. potential clients, investors, partners, etc. typically begin with the caveat, "I'll give you ten minutes to make your case". How many of us can make a clear case in 10 minutes? The answer, more often than not, is not many.

The answer lies in the "5 in 10" approach. In journalism, reporters are taught to get answers to the the 5 W's - who?, what?, when?, where?, and why? These are the questions one must answer in the 10 minutes (or less) allotted.

  • Who? - Introduction of who you are and who you represent.

  • What? -Brief contextual explanation of what you and/or your company does and how this is relevant to your audience. Explanation of the opportunity, i.e. size, scope, etc.

  • When? - Window of opportunity, e.g. near, mid, or long term.

  • Where? - The contextual market scope of the opportunity. Macro, micro, global, national, regional, local.

  • Why? - Why the person should consider you versus competitive alternatives. Providing compelling reasons to do business.
In summary, it is important to keep things brief. Your audience can always ask for more information once you have tweaked their interest and they generally prefer this option.

Saturday, January 20, 2007

Marketers Are The Investment Bankers Of Brands

Is Your Brand Gaining Or Decreasing In Value?

You have no doubt heard the term, R.O.M.I (Return On Marketing Investment). It is the critical metric on the success of a brand's marketing investment. Just like an investment banker's success is measured on the increased value of investment portfolios, a marketer is responsible for increasing brand value for the company. The CMO of a company is really a CMIO (Chief Marketing Investment Officer).

For the past six years, for example, BusinessWeek and global brand consultancy, Interbrand have produced its annual rankings on the most valuable brands in the world. The report identifies the top 100 global brands that have managed to create and sustain strong performance in today’s competitive market. (The Top Ten Global Brands are shown in the chart above) Brand values were determined using the method Interbrand pioneered nearly 20 years ago and has since used to value more than 4,000 brands. Brand value is calculated as the net present value of the earnings the brand is expected to generate and secure in the future for the time frame from July 1, 2005 to June 30, 2006.

BusinessWeek 2006 Best Global Brands Highlights

Turnaround Performances: After year over year decline from 2000 to 2004, Nokia (#6) has regained its leadership position in the mobile telecom industry with growth in both the high and low ends of the market. Nokia’s scale has always made it competitive in the rapidly growing low priced segment, but a resurgence in design and a concentration on desirable features has meant that Nokia is now able to maintain its average selling price and reinvigorate its brand image with the high end consumer. Likewise, Motorola (#69) has historically struggled in the high end of the market…until the Razr. A hero product, it has in recent years helped the brand maintain its solid number two position in the category.

Top Gainers: The top gainer with a brand value increase of 46%, Google (#24) creates growth under with the strategy of "do no evil" positioning itself at the opposite end of the spectrum from the more corporate Microsoft. Overall growth of Internet commerce has perpetuated consumers’ acceptance of purchasing goods and services online enabling eBay (#47) to skyrocket in value up 18% and the third highest gainer this year. In the second spot with a value increase of 20%, Starbucks (#91) has found financial success by leveraging the brand with a premium fast food and extending its product offering into music and publishing.

Top Decliners: The growth of mass retailers has taken market share from traditional apparel brands such as Gap (#52). Losing the most brand value with a decline of -22%, Gap has been unable to clarify its brand image and with a less distinct positioning the brand has been less effective at selling clothing causing reduced long-term stability. Ford (#30) continues to lose money on every car sold – and brand value year after year. Down -16% this year, Ford’s American heritage is an insufficient brand attribute to hold off growing competition from Japanese and German automakers. Down -12% this year, Kodak (#70) has made valiant strides to catch up with the digital world, however the reality is that competition is fierce and profitability is thin compared to Kodak’s film business and thus the brand’s value continues to decline.

In summary, it is important to understand that every marketing decision for a brand is an investment decision. Invest wisely.

Thursday, January 11, 2007

We're Not In Kansas Anymore And Three Heel Clicks Won't Get Us Back

The Tornado Of Change Has Plunked Us In A Whole New World

By David Miranda

Like Dorothy, we wake up one day and find a tornado of change has deposited us in a whole new world world. A world of Google, YouTube, the blogosphere, MySpace, Facebook, iPods, eBay, cell phones, Blackberries, chat rooms, text messaging, wi-fi, TiVo, broadband internet, Skype, VOIP, XBox, Wii, Playstation 3 and on and on and on. In the blink of any eye, these innovations have dramatically changed our lives.

A just released survey from Pew Research Center found that people increasingly view more items as necessities rather than luxuries. It also found that the need for gizmos and gadgets has accelerated, even compared with a 1996 survey conducted by The Washington Post, the Kaiser Family Foundation and Harvard University. A home computer, which 10 years ago was considered a necessity by 26%, is now considered a necessity by 51%. Cellphones, not even included in the 1996 survey, is now considered a necessity, "New technologies not only give us something new we can covet and feel like we can't live without it, they transform the way life is organized," says Robert Thompson, a professor of media and popular culture at Syracuse University. "What used to not be a necessity because nobody had it first becomes a luxury, and then it becomes a necessity. Things that you lived without before they were invented — they really do become necessities."

These changes, both individually and collectively, have important implications for marketing. Communicating with consumers has become complex and vexing. Consider what the U.S. Census Bureau is predicting in its "Statistical Abstract of the United States: 2007." including commentary from forecasters and research contributors.

Next year, Americans will spend 3,518 hours with their beloved media, including 1,555 in front of the TV. That means the average American will spend roughly 146 days, or five months, consuming media. However, the numbers don't mean we're just sitting in front of our machines; we're multitasking. "I know people who use television as wallpaper," said Paul Saffo, a technology forecaster based in Silicon Valley. But, he added, "The news means that America is making a smooth transition from a couch potato to a mouse potato. Put another way, I suspect the only exercise Americans are getting is walking between their TVs and their computers."

"The numbers mean that people want to have — and almost need to have — information and entertainment at their fingertips now, 24 hours a day. They also mean that technology tools are continuing to shift our "social, political and economic lives," said Lee Rainie, director of the Pew Internet & American Life Project, which also supplied data for the report. "In the past decade, the Internet and cellphones have changed the way people interact with each other, the way they work, the way they spend their leisure time," Rainie said. Also changed: "The way they maintain and grow their social networks, and the way they share their stories with others through blogs (and) social networking sites."

The new landscape demands that marketers take a more holistic view in order to intelligently invest their limited resources to achieve their objectives. This requires both horizontal and vertical perspectives. Horizontal meaning across marketing channels based on media consumption patterns of the desired audience. Vertical meaning having the expertise per channel to be successful in that channel.

Use your brains. Be courageous. Put your heart into it. There's no going home again.

Thursday, January 4, 2007

Leadership: America, We Have A Problem!

Lessons From The Life Of President Gerald R. Ford

Management is doing things right; leadership is doing the right things.

The National Study of Confidence in Leadership (NSCL) is a social science research program examining the attitudes of the American public toward the nation’s leadership. The study includes the National Leadership Index 2006 (NLI), a multidimensional measure of the public’s confidence in the leadership of different sectors of society. Launched in 2005, in collaboration with U.S.News & World Report, the John F. Kennedy School of Government at Harvard University and Yankelovich, Inc., the national study brings new insights to our understanding of the public’s confidence in America’s leadership. The results of the recent study should be sobering for anyone in leadership positions.

The results should come as no surprise to any of us considering the corporate scandal du jour, Katrina, the war in Iraq, etc. etc. etc. It is times like this that require those in leadership positions in all sectors to look in the proverbial mirror. According to the study, few sectors are spared from criticism by the American public. Business leadership, as shown below, ranks just above Congress, the Executive Branch, and the press - all trending down from the previous year.

Over the holidays, I like many Americans, mourned the passing of our 38th President, Gerald R. Ford. I was deeply moved by the many eulogies from the people who knew him well - from both sides of the political spectrum, as well as, the press who covered his political career. Although he served only 895 days in the Oval Office, this was a man of honesty, integrity, and strong values - a man of courage and sensitivity. Every eulogy reminded us that he was a man who had adversaries, but no enemies. He could disagree, without being disagreeable. He was self-deprecating and never lost his sense of humor. He was a man of substance, not rhetoric - a man of conviction, not convenience. Gerald R. Ford was a true leader.

Unlike the partisan politics of today, he sought advice from both sides of aisle. He made thoughtful decisions - not based on polls, focus groups, or consultants - but on what was best for the American people. In his own words, "in order to bind the wounds of a nation" after the resignation of President Nixon over the Watergate scandal, he decided to grant a pardon to the former President. It was a highly unpopular decision at the time and despite the fact that he knew it would probably cost him the election (which it did), he made the courageous decision in the best interest of the country. History has proven it was the right decision.

In 2001, President Ford was presented with the John F. Kennedy Profile In Courage Award for his courage in making that decision. Senator Ted Kennedy, at the awards ceremony, a critic of the decision at the time, said the following:

At a time of national turmoil, America was fortunate that it was Gerald Ford who took the helm of the storm-tossed ship of state. Unlike many of us at the time, President Ford recognized that the nation had to move forward, and could not do so if there was a continuing effort to prosecute former President Nixon. So President Ford made a courageous decision, one that historians now say cost him his office, and he pardoned Richard Nixon. I was one of those who spoke out against his action then. But time has a way of clarifying past events, and now we see that President Ford was right. His courage and dedication to our country made it possible for us to begin the process of healing and put the tragedy of Watergate behind us. He eminently deserves this award, and we are proud of his achievement.

Despite the fact that his decision would cost him the Presidency, he did the right thing. We could all learn a lesson in real leadership from our 38th President.

Farewell, Mr. President, and thank you.

Wednesday, January 3, 2007

What Happened To "Keep It Simple, Stupid"?

What The Ad Copy Giveth, The Fine Print Confuseth

By David Miranda

Today, there is no doubt we live in a more litigious business environment with frivolous lawsuits sometimes making headlines for their outrageousness. Remember the person who sued over spilled coffee because it was "too hot" or the person who sued because fast food made them obese? Ridiculous, yes, but the response to this insanity is just as insane. The fine print wordage in ads now exceeds the ad copy. Good marketing has been hijacked by corporate legalese. One frustrated marketer told me his company is now "a law firm that sells stuff" and it takes longer for a marketing program "get through legal" than it took to develop the campaign in the first place. The "legalese" that is intended to clarify, actually confuses the prospective buyer.

Here's an example.

Thumbing through USAToday, I stopped at a 3/4 page color ad from United Airlines including some attention-getting sample fares with the following lead headline and copy:

Our low fares come nicely equipped.
Get a free rental day from Hertz when you book a sale fare on United.

Book a low fare on United, rent a Hertz full-size or larger vehicle for three or more days and get one day free*. You'll always find the guaranteed lowest fare* at united.com, pay no booking fees and earn up to 500 Mileage Plus bonus miles. Go online or call 1-800-UNITED-1 today.

The bottom 25% of the ad, in microscopic fine print, contained the terms, conditions, caveats, disclaimers, etc. The following is how these terms, conditions, etc. qualify the offer.

Fares are each way on required round trip purchase. Tickets must be purchased at least 14 days in advance and ticketed within 24 hours of making reservations, but no later than 1/09/07. Reservations and tickets purchased on united.com must be completed simultaneously. Fares shown are valid on Tuesday, Wednesday, and Saturday. Fares are not valid for travel 2/16/07, 2/19/07, and 2/25/07. Seats are limited and may not be available on all flights or dates. Fares require 2-night minimum stay. Fares do not include a $3.30 per flight segment tax or $2.50 per flight segment September 11 Security Fee. Fares do not include Passenger Facility Charges of up to $18. Tickets purchased through United reservation offices are $15 per ticket higher and tickets purchased at airport ticket counters are $20 per ticket higher. Fares purchased through other distribution channels may also be higher. To qualify for the Hertz free rental day, one must book a qualifying United flight and rent a Hertz full-size or larger vehicle for three or more weekend days, or five or more days. The offer may not be available at some times in some locations especially during periods of peak demand. Blackout dates may apply.

The above fine print is an edited version of the actual, but I challenge anyone to make heads or tails of it. Considering the ad was touched by many at United and its agency, wasn't there anyone in the food chain who spoke up and said "this is too confusing and may defeat the purpose of trying to sell airline seats (and Hertz vehicles)"?

Brands should make a New Year's resolution that the wordage in the fine print should not exceed the wordage in the offer. A less confused consumer is more likely to purchase something.

Tuesday, January 2, 2007

Does Your Brand Have Cult Status?

Creating The Ultimate Consumer Engagement

By David Miranda

cult –noun

  1. an instance of great veneration of a person, ideal, or thing, especially as manifested by a body of admirers.
  2. the object of such devotion.
  3. a group or sect bound together by veneration of the same thing, person, ideal, etc.
  4. Sociology. a group having a sacred ideology and a set of rites centering around their sacred symbols.

Some of our most successful brands are those that have achieved a cult status in society such as Starbucks, Nike, Volkswagen, and Apple to name a few. Consumer loyalty for these brands has achieved enviable status by their competitors beyond coffee, sportswear, automobile, and technology. They have become cultural icons that inspire emotional engagement. This cult status is reinforced in all aspects of their marketing. They understand their brand identity; develop and execute a precise brand strategy that includes both functional (tangible) and emotional (intangible) benefits. The following chart illustrates what each marketing person in the organization should utilize to ensure a one-mindedness throughout the enterprise.

Starbucks, for example, sells coffee (the tangible benefit) but also markets its locations as the "third place to socialize" after the workplace and home (the intangible). Nike sells sportswear (tangible) but also markets athletic ideals as in "Just Do It" (the intangible) which is reinforced with sports icons such as Tiger Woods, Michael Jordan, etc.

The benefits of achieved brand cult status are considerable - strong brand loyalty and word-of-mouth, price premiums and higher margins, and strategic competitive advantage, to name a few.

As clutter and noise continue to muffle marketing messages, it is critical to clearly define the brand's identity, strategy, and its functional and emotional benefits in pursuing the ultimate goal of achieving brand cult status.

Monday, January 1, 2007

Power To The People - "You" Are TIME's Person Of The Year

Recognizing The Marketing Implications Of The "You-niverse"

TIME magazine recognized what marketers have known for some time. Consumers are a force to be reckoned with in today's marketplace. Equipped with "weapons of mass connection" -namely the personal computer, the Blackberry, and the cell phone - they have the power to instantly communicate with millions of other consumers on their own terms - in chat rooms, on MySpace and Facebook, on the blogosphere. They have employed new technology to "self program" their media consumption with the likes of TiVo, video-on-demand, and video on the Web. They are creating their own user-generated content and deploying it on sites like YouTube. They have also "techno-barricaded" themselves from invasive marketing messages through the use of TiVo, Pop Up blockers, and spam filters.

In this "You-niverse", marketers must make a choice, as the adage goes, to lead, follow, or get out of the way. Marketers who are slow to embrace the new marketplace will see agile insurgents fill the void with better "mousetraps". And it will happen at warp speed as was the case with YouTube, an enterprise, only a few years old, with a market value of almost $2 billion and with an audience major media networks would now lust for.

Here are the major marketing suggestions for the "You-niverse":
  1. Zero-base your marketing perspective based on your target audience. Understand what media they are consuming, how they are consuming it, and when they are consuming it.

  2. Build your marketing strategy from the ground up and allocate resources accordingly without the bias of the status quo. New options exist today (and will tomorrow) that weren't even on the radar screen yesterday.

  3. Throw more money at success (the things that work) and pull the plug on what doesn't. The phrase "we need to give it more time" does not work in the You-niverse.

  4. Get advice from people who understand the new media landscape. These are the "innovators" and "early adopters" required to evangelize change to the "early majority" both in the marketplace and within the organization.

  5. Create an agile and athletic marketing organization, one that can "turn on a dime" without missing a step in the quest to achieve measurable results.

In summary, the You-niverse is a world of constant change, unlimited channels, and instant communications. Is your brand prepared to exceed in this new landscape?

You determine the outcome.