Archive for January, 2011

Ford Gets it Right

January 27, 2011

Every once in a while you see a piece of advertising that just works. The commercial grabs your attention and delivers a message. It all looks easy.

Ford’s new truck campaign is a great example of this. The spots do everything a piece of advertising needs to do. First, the campaign has enormous breakthrough; the visuals are sharp and unique. Second, there is a clear message: each commercial explains precisely why you should buy a Ford truck. Third, the branding is very stong; the Ford brand comes through.

You can watch one of the spots here:

Importantly, the commercials reinforce the Ford truck equity. The tonality is strong, powerful and tough.

If Ford can continue creating solid advertising like this, the company’s rebound should continue for many years.

Lessons from Losing a House

January 21, 2011

Over the past few weeks, my wife and I have been bidding on a rather nifty house in Chicago.  We finally reached an agreement with the sellers but at the last instant another buyer showed up with a significantly higher offer and got the house.

This was a huge disappointment for me.

When I look back on how my wife and I handled the bidding process, it is pretty clear that we bungled things: we didn’t decide we wanted the house until too late in the process.  We took too long to commit and we didn’t make remotely credible offers.

The real issue, however, was that we didn’t know what we wanted.  We weren’t looking for a house; this one just came along.  We had no goals and no plan.  My wife and I didn’t even agree on whether we should be looking at houses.  As a result, it took months for us to finally decide that it would be a great house for our family.

We won’t be looking at another house until we have agreed on some goals and a plan.

Many people approach marketing decisions the same way we approached our recent house question.  An attractive marketing tactic comes along and then people study it and try to decide if it is a good idea.  These days someone might march into a meeting and exclaim: “I think we should do a Groupon offer!  That is an incredible program.”

The problem is that this approach doesn’t usually lead to a good outcome.  It is hard to evaluate the different programs and difficult to get internal agreement.

Before looking at marketing ideas and tactics, it is best to have clear objectives and strategies.  When the overall plan is clear, it is much easier to make smart decisions.  If you know that building repeat business is your top priority, for example, then it is pretty easy to conclude that a frequent buyer program might make sense, and Groupon isn’t likely to be the best tactic.

A marketing plan creates clarity and builds alignment.  It should drive the marketing process.

A discussion about goals and plans helps when making life decisions, too.

Stretching the Prius Brand

January 10, 2011

Toyota announced today that it was launching a family of cars under the Prius brand name.  The company will add a new larger hybrid, the Prius v (a mini-SUV) and the very small Prius-C.  Toyota will also add the Prius PHV, a plug-in variety.

You can read about the full line here:

Is this a good idea?  It is easy to argue it both ways. 

On the one hand, by adding more vehicles to the Prius family, Toyota can capitalize on the power of Prius to drive growth.  All of the vehicles use hybrid technology, so there is some consistency across the line.  The vehicles are fairly small, too, so that is consistent as well.

The problem is that by stretching the Prius brand Toyota will water it down.  Yesterday, when I thought of a Prius I knew exactly what it was; a small, environmentally friendly hybrid car.  If I walked into a Toyota dealer and asked for one I knew what I would get.  It was a brand with very clear associations.  Today, I’m not sure what I would get if I went to a Toyota dealer and asked for a Prius.  Would I get the Prius I know?  Or would I get a bigger one, or a smaller one?

Historically, Toyota has supported its brands with remarkable consistency.  Toyota launched Camry in 1982, Highlander in 2000 and Corolla way back in 1966.  Sticking with the brands has worked well for Toyota; the company has built a strong brand portfolio.

Broadening the Prius will drive short-term sales, certainly, but I think it will significantly weaken the Prius brand over time.

Clorox Stumbles with Burt’s Bees

January 3, 2011

Clorox released second quarter earnings guidance today and the results were not good.  Clorox also announced that it was taking a goodwill impairment charge of about $250 million due to the Burt’s Bees acquisition.

The Clorox press release quoted CFO Dan Heinrich stating, “The Burt’s Bees business remains a very solid contributor to Clorox’s results, with sales growth and profit margins above the company average….  Despite the impairment, Burt’s Bees remains the fastest growing business unit in the company, with double-digit fiscal-year-to-date sales growth, and our revised estimates continue to project low double-digit sales growth for this business over the next several years.”

This is all very odd. 

Clorox purchased Burt’s Bees in at the end of 2007 for $925 million, net of an additional $25 million payment for tax benefits.  Now, three years later, the company is writing off about $250 million, over 25% of the purchase price.

At the same time, the CFO is proclaiming that Burt’s Bees is the fastest growing, highest margin part of the company.

There is a substantial disconnect in the story.

I think there are two possible explanations.

First, it could be that Clorox vastly over-paid.  If Burt Bee’s is indeed performing as well as the CFO suggests, then the acquisition must have been based on some rather extraordinary assumptions.  Double digit sales growth for consumer product staples like shampoo and lip balm is quite an achievement, especially when combined with company leading margins.  The fact that this is way under the acquisition forecast indicates that the team at Clorox must have optimistic indeed when valuing Burt’s Bees.

Second, things at Burt’s Bees might not be as cheery as the CFO suggests.  Indeed, today’s announcement is a bit over the top in its praise for the brand.  It could well be that the business is struggling in a tough economic environment.

Either way, the Burt’s Bees acquisition is clearly not going well financially for Clorox.  There isn’t a lot of obvious synergy with Clorox’s other business units, either.  Indeed, Clorox is running Burt’s Bees as a totally distinct business.  If you have some time, try finding Clorox branding on the Burt’s Bees website.

The lesson in this: be very careful when acquiring exciting little brands.  Optimistic assumptions can lead to bad business decisions.


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