Archive for April, 2013

A Long Shot

April 29, 2013

Last week Michigan furniture retailer Art Van Furniture announced it was entering the Chicago market. The company will apparently invest about $40 million in real estate and marketing as it opens up five new stores and a new distribution center. Art Van is planning to capture 10% of the Chicago furniture market.

I’ll paste the link to a recent article in the Chicago Tribune below.

Will the company succeed with its Chicago strategy? I suspect not.

Furniture is a tough market for new entrants. It is a mature industry with limited growth. The market isn’t changing much. Customers have many options and little motivation to learn about new alternatives. There are lots of established players who will defend their market share.

Art Van seems to be a very respectable retailer and quite successful in its core market in Michigan.

The problem is that Chicago is full of very respectable furniture stores. Walter E. Smithe is a strong local player. Crate & Barrel has terrific products. IKEA is inexpensive and practical. The list goes on and on.

Art Van will have to spend a ton to build awareness in Chicago; it is a huge city and an expensive media market. Share will build, but slowly. Repeat purchases will come but only with time. The company will lose significant money just getting off the ground.

Even established players have struggled in Chicago. John M. Smyth Homemakers failed, as did Wickes and Plunkett. Just recently Chiasso, a trendy retailer with stylish products, gave up and liquidated its Chicago store.

So why is Art Van making this move?

CEO Kim Yost explained it recently, noting “Our chairman made it clear to the leadership team that we needed to continue to build and grow the brand.”

Entering Chicago is a logical move and I am certain the opportunity looks good on paper. But breaking into an established category with an “attack the core” strategy is always a challenge.

I suspect this won’t end well.

 

http://articles.chicagotribune.com/2013-04-26/business/ct-biz-0426-artvan-furniture-20130426_1_art-van-furniture-outdoor-furniture-distribution-center

*  *  *

This week I’m leading the Kellogg on Branding executive education course in Evanston. The class is an interesting mix of marketers from all around the world: Brazil, Peru, Germany, Belize and Mauritius. It should be a fun week.

A Branding Lesson from France

April 17, 2013

This week France provided a very important branding lesson: full disclosure is not the best way to build a strong brand.

After a rather embarrassing political scandal, France’s top political leaders released financial statements detailing all their assets. The reports are remarkable. You can read them here:

http://www.declarations-patrimoine.gouvernement.fr/

Stephane Le Foll, Minister of Agriculture, for example, reports that he has two houses, one with a value of 150,000 € and another with a value of 250,000 €. He also has a life insurance policy with a value of 29,000 €, a BMW motorcycle he bought in 2001 worth 300 € and a Renault Clio that he purchased in 1994 with no value at all.

Is this a best practice? Should we all follow suit and publish our financial information?

No.

This information damages everyone’s brand. It certainly won’t enhance the stature of government leaders in France. If you have a lot of money you seem out of touch. Why should some fat cat be setting policy for the country?

If you don’t have much money you look underpaid and unsuccessful. Why should someone who hasn’t managed their finances well be setting policy for the country?

You can’t win. Disclosing this information doesn’t enhance anyone’ brand.

Some things are better left unsaid.

For individuals, this is certainly true. You don’t want to reveal all your financial information. You also don’t want to air all your views on social policy or your siblings. Shedding all your clothes in public is not a good idea, either.

This is also true for brands; some information is best kept private. Should you publish all of your customer complaints? No. Should you release your latest competitive analysis? No. Should you tell people every time you change a product formulation to reduce costs? No. Must you announce every change to your pricing strategy? No.

Marketers have to walk a fine line. It is important to be open with customers; people like to feel connected with a brand. But this should only go so far.

As the French showed this week, more transparency is not always better.

*  *  *

The sad events in Boston are tragic and puzzling. As a marketer, I’m always interested in behavior. Why do people act the way they do? What is the motivation? What are the benefits?

The odd part of the Boston tragedy is that the motivation is totally unclear at this point. Why would someone do that? What is the point? I hope we figure it out soon; the first step in preventing future attacks is uncovering the motivations.

*  *  *

This Saturday I’m speaking on the topic of Super Bowl advertising at Northwestern University’s “Day with Northwestern.” The program is for Northwestern alumni and the general public. It should be an entertaining event.

Three Things We Can Learn from Ron Johnson

April 9, 2013

Ron Johnson is out at JC Penney. His seventeen month stint at the retail giant will go down in history as one of the great leadership fiascos of the decade.

We can learn a lot from Ron Johnson’s tenure at JC Penney. Here are three of the key lessons.

 

- It is easier to lose your existing customers than it is to gain new ones.

JC Penney proved that it is pretty easy to lose your customers. The company basically told people that the days of deep discounts were over and anyone looking big sales should go shop at Kohl’s.

They did.

It is very hard to attract new customers, especially to a well-established brand. JC Penney tried to bring in people who were younger, more stylish and less price sensitive. They made some progress, apparently, but not very much and certainly not enough.

This isn’t a surprise; getting someone to rethink a brand takes time. Repositioning is an enormous challenge. It takes time and money and success is never certain.

 

- Set low expectations.

People evaluate results by comparing them to expectations. Is profit of $500 million good? Well, if the goal was $400 million, a profit of $500 million is terrific. If the goal was $800 million, a profit of $500 million is a disaster.

Johnson failed to set low expectations at JC Penney. His plan was going to hurt sales and profit in the short run but he didn’t predict the size of the drop. When results were weak investors lost patience.

Meg Whitman at HP has embraced the idea of low expectations. As she began her tenure as CEO she basically said HP won’t make anything for many, many years to come, perhaps ever. This is a good approach; it gives her time to make changes and adjust course.

 

- Don’t get too confident.

Ron Johnson and his leadership team at JC Penney were very confident. After a successful stint at Apple, Johnson believed he knew the answers. Johnson and his team also apparently thought the people working at JC Penney were somewhat clueless and pathetic.

So Johnson fired many of the existing executives and rolled out a plan that was deeply flawed. Did anyone tell him the plan wasn’t going to work? I suspect so. Did he listen? No.

Assuming you know all the answers is dangerous.

The Switzerland Puzzle

April 8, 2013

In late March I spent several days over in Zurich leading a program for a global pharmaceutical company. I found Switzerland to be a surprising place.

The first surprise was that the prices are remarkably high in Switzerland. I had perhaps the most expensive cup of coffee of my life at Starbucks across from the central train station in Zurich; my small regular coffee was over $6. My hotel room was about $300 per night. I spent over $40 on a simple dinner with no salad or dessert. Real estate is expensive, too.

To compensate, salaries are high; according to the executives I met with people get paid much more in Switzerland than in Germany or the UK. Apparently the best approach is to work in Switzerland, live in France and shop in Germany.

The prices are not high simply due to exchange rates; the Swiss National Bank is working very hard to prevent the Swiss franc from soaring in value versus the Euro and other currencies.

The second surprise was that the economy seems to be booming. Restaurants and shops are full and there are construction cranes everywhere you look. Building projects are in full gear.

This is a bit of a puzzle. High prices usually lead to lower demand. But companies are investing heavily in Switzerland despite the cost. With Germany, France, Italy and other countries so close, why is pricey Switzerland booming?

The answer seems to be simple. People are nervous and Switzerland is safe.

I had an interesting conversation in London with a former Goldman Sachs banker. He is deeply concerned about what is happening in Europe; the economy is lurching from one crisis to the next but the core issues remain and just grow bigger and become more complicated. It is a bit like a pressure cooker with no release valve. The recent Cyprus deal is a new and unfortunate milestone. He doesn’t know when things will fall apart but he is quite convinced they will. I heard the same view from several other executives; people are generally concerned.

If you are nervous about the global economic situation there aren’t many great investment options. Where do you put your money?

One answer is pretty easy: Switzerland. The country is safe, orderly and secure. Assets in Switzerland are solid. Whatever happens in the Europe, Switzerland should be ok.

So investors and companies move funds to Zurich and Geneva and the result is that these cities boom even as prices soar. It is all impressive to watch. It is also a bit concerning.

*  *  *

Last week Expert Marketer Magazine named my book Defending Your Brand: How Smart Companies Use Defensive Strategy to Deal with Competitive Attacks the 2013 Marketing Book of the Year.

There is still time to sign up for the next session of the Kellogg on Branding executive education program. It runs April 28 to May 3. I’m teaching in the program along with Greg Carpenter, Alice Tybout, Julie Hennessy and many other Kellogg professors. It is a terrific opportunity to learn about building and managing strong brands. You can learn more about the program here:

http://www.kellogg.northwestern.edu/execed/Programs/BRAND.aspx

Branding Kevin Ware

April 1, 2013

I suppose this isn’t the moment to be thinking about Kevin Ware’s personal brand.

After his spectacular and horrifying injury at yesterday’s NCAA game, the Louisville basketball player should focus on his recovery. I’ve had a little experience with orthopedic injuries myself and can only imagine the road ahead. Physical therapy, it turns out, is slow and painful.

Still, it is hard not to consider Kevin Ware’s branding opportunity.

Everyone is talking about him today. The injury was astonishing; the video of it is shocking. People are discussing the game, of course. But the interesting moment, the scene that sticks, is the injury.

The situation is terrible but is also is a remarkable opportunity. With thought, Kevin Ware can build a strong brand; he can emerge from this as an inspirational person that people want to hear from, associate with and hire.

My advice to Mr. Ware is simple. Don’t miss the opportunity. If you play things correctly over the next few days you can set yourself up for many years to come.

In particular, he should do three things.

First, focus on the team. He is off to a great start. As Coach Rick Pitino said after the game, “It was very difficult to look at and watch. But he’s a brave young man, because all he kept saying was ‘Win the game.’” The more Kevin talks about supporting the team, the stronger his brand will become.

Second, associate with the right people. Kevin can meet with anyone he wants. I’m pretty confident Barack Obama would happily fly down to see him. So would Oprah and Tiger. Lindsey Vonn might provide advice on dealing with recovery from traumatic sports injuries. People are probably lining up. Kevin should think about who he meets with and when. Great brands tend to partner with great brands.

Third, keep the story going. The risk for Kevin is that later this week people will focus on other things. He has to think about opportunities to extend the attention. So he should space out the celebrity visits and let people know about the milestones on his recovery.

Mr. Ware might play basketball again. I hope he does. But his bigger opportunity is building a brand that he can count on for years to come.


Follow

Get every new post delivered to your Inbox.

Join 1,483 other followers

%d bloggers like this: