Archive for April, 2011

Why Green Products Don’t Sell

April 22, 2011

The New York Times has an interesting article on the front page this morning: “As Consumers Cut Spending, ‘Green’ Products Lose Allure.” The article notes that sales of a number of environmentally friendly products such as Clorox’s Green Works have fallen sharply.

http://www.nytimes.com/2011/04/22/business/energy-environment/22green.html?_r=1&hp

The article presents the results of a study done by Sanford C. Bernstein looking at sales of green products across 22 different product categories. The results are astonishing; green products now have less than a 2% market share and are declining. This includes green niche brands and green versions of traditional brands. Perhaps the most interesting finding: green products have never had more than a 2.5% market share.

This raises an interesting question: how can this be? Isn’t everyone concerned about the environment?

I think the answer is easy: perceptions. People believe that green products are less effective and more expensive. Which would clean better, a regular toilet cleaner or an environmentally friendly toilet cleaner? For most people, that would be a pretty simple question: the regular version.

Of course I’m not certain this is true; I have absolutely no data. But to make a green product, you presumably have to remove the toxic chemicals, the ones that really work well. Green matters, but efficacy matters more.

I predict that things won’t get better for green products anytime soon.

One reason: the entire green movement took a hit with the launch of the new phosphate free dishwasher detergents. New government regulations recently forced manufacturers to remove phosphates. The result is a rather shocking decline in cleaning quality; the move is very noticeable and it reinforces the perception that environmentally friendly products just don’t work very well.

Perceptions matter.

Flip: Time to Update the Slides

April 13, 2011

I am always looking for examples of great marketing to include in my different courses. For the past few years, one of my favorite examples in the area of new business strategy has been Flip.

Flip is a wonderful example of a company changing the rules in an established category. When Flip entered the video camera market, the existing products were expensive, high-tech devices, and category leaders such as Sony focused on making cameras with more and more resolution, features and technology.

Pure Digital Technologies launched Flip in 2007. It was a completely different sort of camera, with low resolution and few features. But Flip was simple, cheap and easy to use. By looking at the category differently, Pure Digital created a very unique and appealing product. Flip quickly became a huge success and Cisco bought the company for $590 million in 2009.

Yesterday, however, Cisco announced that it was killing Flip.

This is astonishing. It is remarkable that Cisco would be scraping a product it paid almost $600 million to buy just two years ago. It is also remarkable that Cisco couldn’t sell the brand; if someone wanted to buy Flip I am very confident Cisco would sell it: a bit of money is better than nothing.

Did Cisco mismanage Flip? Perhaps: it is clear that the brand didn’t flourish under Cisco’s stewardship.

I suspect Flip died primarily because technology changed; Flip is now fighting against very strong competitors including Apple’s iPhone and iPad. Cisco presumably decided there was no way Flip could compete long term.

Regardless, I suppose I have to stop talking about Flip in my courses.

Or not! Looking back, it is clear that we need to give even more credit to people at Pure Digital than we thought; they created a successful new product and then shrewdly sold it at the right moment. Flip is actually an example of two things: how to innovate and then how to monetize.

I will have to update my slides, but I’ll keep talking about Flip. It remains a great example of smart, strategic marketing.

P&G’s Pringles Sale: Bad News for PepsiCo

April 7, 2011

Yesterday P&G announced that it was selling the Pringles brand to Diamond Foods. This is a good move for P&G and Diamond. It is bad news for PepsiCo.

Pringles is a fascinating marketing story. Despite a very slow start, P&G supported Pringles for many years and eventually the brand caught on. P&G created great advertising and invested in innovation. According to The Wall Street Journal, Pringles had sales of about $1.2 billion in 2010.

For the past several years, however, it has been quite clear that P&G has no real interest in Pringles. The company is investing in areas such as health and beauty. P&G sold off other food and beverage brands including Crisco, Sunny Delight and Folgers.

Selling Pringles to Diamond makes perfect sense; Diamond has recently acquired snack brands including Pop Secret and Kettle Chips. Pringles will substantially strengthen the Diamond portfolio.

The sale is clearly bad news for PepsiCo, owner of Frito. In the Pepsi portfolio, Frito is one of the gems; Pepsi has long had a dominant position in the market, with no real competition. As a result, PepsiCo has been able to count on Frito very consistently delivering great results. Life is much easier when you don’t have any serious competition.

Diamond is now emerging as a viable competitor. With a portfolio of well-known brands, Diamond is in a position to put pressure on Frito.

This will be an interesting battle to watch. Frito might spring into action and blunt the Diamond advance. Indeed, Frito has a history of successfully defending its business. But if Frito is a bit complacent or distracted, Diamond could fundamentally change the competitive dynamics in the category.

The folks at Frito should be scrambling.


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