McDonald’s Internet: Points of Parity, Points of Difference

Yesterday McDonald’s announced that it would be introducing free internet access.  This is a good move and a long overdue one.

There are two important concepts when it comes to positioning: points of parity and points of difference.  When a brand establishes a frame of reference, or competitive set, there are obvious points of parity.  These are features and benefits offered by basically everyone.  They do not differentiate, but a brand that falls short on these dimensions will surely be hurt.  For example, all small cars have four wheels, a steering wheel, lights and pretty good gas mileage.  These are all points of parity.

Points of difference are the things that help a brand stand out.  These are the factors that drive purchase.  Small cars are all pretty similar but the Mini Cooper is uniquely sporty and fun to drive. 

For McDonald’s, internet access is fast becoming a point of parity.  In the world of coffee establishments, in particular, internet access is almost universal.  Starbucks, Caribou, Argo and my favorite local Chicago coffee shop, Intelligentsia, all offer it.  McDonald’s has to offer free internet simply to be a viable competitor in the space. 

This move will result in some lost revenue in the short run, as people no longer have to pay for internet access, but it will protect share.

Marketing isn’t always about growth.  Sometimes companies have to focus on improving the product simply to keep up.  This is one of those times for McDonald’s.

Timing is Everything

I spent the last week in Turkey teaching a course on branding.  While I was there a major snowstorm descended on Chicago. So I followed the storm, from a distance, by frequently checking the Chicago Tribune web site.  And as the snow flew, who bought all the advertising space on the Chicago Tribune home page?  It was Toro, advertising snow blowers.  The ad stated:

Shoveling is for amateurs.  Move more snow in less time.  Toro.

This is an example of effective marketing.  At the moment when everyone is thinking snow and shoveling, Toro shows up with the perfect message.  It was a case of the right message being delivered at the right time.  This is a good marketing lesson: timing is everything.

There was only one problem.  I did precisely what the Toro ad suggested and clicked over to the Toro website (www.toro.com).  And I found myself looking at a website featuring…drum roll…sprinkler systems.

Sprinkler systems?

Is there a category less appropriate for December?  As the on-line advertising kicked in, sending people to the Toro website looking for snow blowers, the site was firmly focused on an irrelevant category.  It wasn’t even obvious where one would go to learn about snow blowers.  

This is another good marketing lesson: execution is everything.

Tiger Sponsors Laying Low

It is always delightful when theory and reality align. 

I spend a lot of time in my courses at Kellogg discussing marketing theories.  I also spend time explaining why the theories don’t always work.  Every situation is unique, and sometimes companies violate basic marketing rules and succeed nonetheless.

In the Tiger Woods case, the theory suggests that Tiger’s sponsors should not walk away.  Tiger was and is one of the world’s great brands.  Companies that have invested in a sponsorship deal should stick with it unless there is compelling reason to change.  And while Tiger is in the headlines for all the wrong reasons these days, his actions don’t appear to be unusual or unforgivable (for the public at least…I can’t comment on the state of his family life).

At the same time, it doesn’t make a lot of sense to heavily publicize a Tiger Woods sponsorship at this moment, either.

So in theory companies that have deals with Tiger should continue to work with him, but temporarily pull back on marketing activities.  Once this has all settled down and Tiger’s agent has cut generous deals with all the offended parties to minimize the negative revelations, and once Tiger starts winning again, then the marketing campaigns can resume. 

And that is precisely what seems to be happening.  The Wall Street Journal is running a story today about how sponsors are responding to the crisis.  The basic message: sponsors are defending Tiger and standing with him, but pulling back on promotional campaigns featuring him.  You can read the story here:

http://online.wsj.com/article/SB10001424052748703558004574584211344741656.html?mod=WSJ_hps_LEFTWhatsNews

So, this time at least, reality and theory align.

That is one of the few good things about the disheartening Tiger Woods story.

GM: CEO Churn and Branding Problems

Yesterday General Motors CEO Fritz Henderson stepped down.  Apparently the GM board, concerned that things were not changing quickly enough under his leadership, asked him to step aside.  Fritz was CEO for less than a year.

Churning through CEOs is not the way to fix GM. General Motors has many, many problems.  But perhaps the toughest problem is that GM’s brands are weak and muddled.  GM can make wonderful cars but the company won’t regain pricing leverage until the brands improve.  It is very hard to sell cars with a negative quality perception and a generic brand image.

Fixing a brand takes time.  Changing the perceptions of a well-known one can take years, and in some cases it simply can’t be done.  You can’t just roll out a commercial saying, “Look, our quality is terrific.”  People won’t believe it.

Compounding the problem is the fact that GM has little credibility with consumers.  Quality has been spotty for many years.  Everyone in the U.S. knows that GM has very big financial woes.  Fritz Henderson, featured prominently in GM advertising earlier this year and host of the Tell Fritz web page (www.tellfritz.org), is now out.

There is no quick fix for GM’s branding problems.  Indeed, the way to improve short-term financials at GM, massive discounts, cost saving efforts and promotion gimmicks will only make things worse for the brands.  Bringing in a new CEO dedicated to making some sweeping changes and driving short-term results is not likely to fix the branding problems. 

Repairing GM’s brands, if it can be done at all, will take time and dedication and stability, not a string of new CEOs determined to have an immediate impact.

The Tiger Brand in Trouble

It is hard to imagine a stronger brand in sports than Tiger Woods.  He is the perfect athlete: incredibly gifted, focused, disciplined, well spoken and of high moral fiber.  The Tiger brand includes achievement, humility and a dedication to family. 

All of which makes the unfolding drama around Tiger’s car crash Friday morning very puzzling.  What precisely was going on?  And what is going on now?

It appears that Tiger crashed his car and got a bit banged up in the process.  Fortunately the injuries were apparently not serious.  This is not exceptionally big news; people get into car crashes all the time.

But there are some very odd parts to the story.  First, where precisely was Tiger going at 2 AM the night after Thanksgiving?  What is even open at that hour?  What is a father of young kids doing driving around at that time of night?  I have young kids and they are up and ready to roll bright and early. 

Second, there is the odd story of his wife smashing the car’s rear window in order to get him out, which sounds dramatic and all but somehow doesn’t quite make sense.

Third, and most puzzling, why won’t he clear things up?  Tiger could end all the drama by saying, “I was off to get some Tylenol because I had a terrible headache,” or even “I couldn’t sleep so I was going to the pub for a nightcap.”  Instead, today he released a very odd statement:

http://web.tigerwoods.com/news/article/200911297726222/news/

The statement really doesn’t clear anything up at all.  It only makes it clear that there is more to the story than we know at this time. 

Now perhaps this is all inappropriate peering into someone’s private life, as Tiger implies in his statement.  But when you are a well-known brand like Tiger the intense scrutiny comes with the glory and the big bucks. 

This will be an interesting story to watch in the coming days.  Will the Tiger brand take a hit?  It certainly appears to be in trouble now.

Does the Black Friday madness make sense?

We are just days away from the biggest retailing day of the year in the United States: the day after Thanksgiving, Black Friday.

It is a huge retail day for many reasons: people have the day off, Christmas is just a few weeks away and everyone is feeling content and happy after spending a day giving thanks.  People are ready to buy.  The other dynamic, of course, is the wave of Black Friday discounts.  Virtually every retailer will run an impressive discount Friday morning to lure in shoppers.  These are sometimes terrific deals.

Should a retailer discount on Black Friday?  This is an easy question: of course. When all your competitors are discounting you have to keep pace.  People are focused on finding great deals on Black Friday, so retailers have to play along.  The ones that don’t might as well just extend the Thanksgiving holiday and take another day off; without discounts there won’t be much in the way of traffic.

However, retailers should think carefully about Black Friday discounts.  The offers should have broad appeal.  Promoted prices have to be competitively strong; running a promoted price that is likely to be beaten by a competitor is a bad idea.  The offers should also have a short time fuse.  It should be a notable, quick discount with a clear goal of driving excitement and traffic.

For shoppers, it only makes sense to hit the stores on Friday.  The deals will be terrific and things will be festive.  It is a good time to enjoy the chaos and support the economy.

The Lufthansa Mystery

This weekend I flew from London to Frankfurt on Lufthansa, and I am now very puzzled.

The flight was terrific.  It left on time, the plane was clean and shiny, there were free newspapers at the gate, the flight attendants were friendly and helpful and the in-flight service was excellent.  Despite the fact that it was a short one hour flight departing after 7 PM, I enjoyed a tasty sandwich and an excellent, free German beer.  I could have had two beers if I was really feeling wild, but I held off.  And this was all in economy.

The mystery: how is this possible?

In the United States, all the major carriers are struggling to survive.  As a result, they have cut back on service as much as possible.  If you’ve flown in the past couple years you know what I mean: lean staffing, harried flight attendants, no free food and definitely no free beers.

Why hasn’t Lufthansa cut back, too?

There are low-cost airlines in Europe, as in the United States.  Lufthansa is having financial trouble, just like virtually every big airline around the world.  People are scrambling to make ends meet in Europe, as in the U.S.  One would think the impact on Lufthansa’s service would be similar, too.  But so far Lufthansa hasn’t cut service to deal with short-term financial pressure.

This is an impressive bit of brand stewardship; Lufthansa is protecting the brand despite profit challenges.  Let’s hope Lufthansa is able to keep it up.  The fine service makes flying around Europe a joy.

Maclaren’s Challenge

Things are not looking great for Maclaren.  The British stroller company announced this week that it was recalling more than a million strollers that it had sold over the last 10 years because there are 12 reports of finger amputation due to the strollers.

The recall news has spread quickly all around the globe; it was headline news in the U.S. and Europe. 

You can read more about it here:

http://cityroom.blogs.nytimes.com/2009/11/11/stroller-recall-stirs-unease-in-park-slope/

 

One big problem is that the company apparently can’t keep up the consumer calls and web contacts.  This makes Maclaren seem poorly prepared.

Maclaren now has to recover from this rather striking bit of bad news.  To do so I recommend that Maclaren do several things:

1.  Hire more people to answer the phones and expand website capacity as soon as possible.

2.  Communicate, communicate and communicate some more.  Let parents know that the company takes this seriously and is doing everything it can to address it.  Use PR and advertising to get the message out and own the discussion.

3.  Create a process to make sure this doesn’t happen again.  I’m sure the company already has processes in place but I would create some more to reinforce safety and to have something to talk about.

4.  Treat people equally.  In Europe people are upset because they feel Maclaren has different standards; the company is doing a recall in the U.S. but not everywhere.  This is not a smart approach.

5.  Dial back on marketing spending for several weeks, but then promptly return with support highlighting the positives.

Brands can bounce back from negative news.  But it isn’t a given; Maclaren needs to be bold and quick.

Starbucks: Segmentation and Profits

This week Starbucks reported some very strong financial results.

Overall operating income for the third quarter improved from $14 million in 2008 to $199 million in 2009. In the U.S, profits more than doubled. This is very impressive because revenues in the U.S. were down during the same period by -4%. Operating margin in the U.S. improved dramatically, from a paltry 1.7% in Q3 2008 to 9.3% in Q3 2009. This is impressive indeed.

There were clearly a number of things that contributed to the strong results. One of the important drivers was segmentation based pricing.

Earlier this year Starbucks made some  significant pricing moves; the company rolled back the prices on regular coffee drinks and increased prices on fancier drinks such as caramel macchiatos.

I suspect this pricing move aligned perfectly with customer segmentation. Traditional drip coffee drinkers are a more price sensitive bunch. They appreciate both quality and price. Reducing prices for this group will sustain loyalty. The caramel macchiato crowd appreciates the customer experience. These folks are willing to pay. Increasing price for this group is a good way to build margins with little volume risk.

Segmentation is a powerful tool. When a company uses the technique to modify pricing and optimize margins, it can become a key profit driver. The strong results at Starbucks demonstrate how understanding and capitalizing on customer segmentation can drive impressive results.

The Fading Brett Favre Brand

There was a remarkable scene in the NFL yesterday: Brett Favre was repeatedly booed at Lambeau Field.

It was notable scene because for many years Brett Favre was a much-loved character in Wisconsin.  He played for the Green Bay Packers for 16 seasons and went to two Super Bowls with the team.

Favre’s awkward departure from the team and his subsequent decisions to play for the New York Jets and now the Minnesota Vikings, have enraged Packer fans.  In short order Favre has destroyed much of the good will he built up over almost two decades with the Packers.

Branding is critically important for NFL players.  Careers in the NFL are short, and when a player leaves the league he is left with memories, some money in the bank and his brand.  In the long run, his brand is usually the most valuable of the three.

A much admired player like Brett Favre has an incredibly powerful brand.  In Denver, John Elway went on to open car dealerships and was a part owner of the Colorado Crush, an arena football league team.  In Buffalo, Jim Kelly opened a restaurant and created prominent foundations.  Favre could do the same in Wisconsin.

But with a couple of rather poor decisions, Favre has significantly damaged his brand.  Being booed at Lambeau was an unfortunate milestone.

Brett Favre is a gifted football player but he clearly doesn’t know much about branding.