The Hype Begins

January 20, 2014

Tomorrow the build-up to the 2014 Super Bowl begins in earnest.

It used to be that Super Bowl advertising was just that: Super Bowl advertising. Companies would buy some time, develop a spot and hope it generated some discussion and buzz the following day. The more sophisticated advertisers would add a bit of print into the mix, perhaps running an ad in the USA Today the following morning.

Things have changed.

The Super Bowl is now a multi-media marketing spectacle. Companies advertising on the game will work very hard to get attention and discussion in the two weeks leading up to kick-off. They will use teaser television spots, social media campaigns, promotions and PR efforts.

Last week I spoke with a notable Super Bowl advertiser who reported that he now thinks of the Super Bowl as a month-long event.

A few advertisers have already gotten started. Jaguar and Axe rolled out campaigns last week. Soda Stream announced its spokesperson. And it was impossible to miss the teaser spots from Bud Light on yesterday’s playoff games.

Here is one of Bud Light’s many teaser spots:

This is the teaser spot from Butterfinger peanut butter cups:

I suspect Super Bowl advertisers will be fairly quiet today; it seems wrong to launch a splashy new advertising campaign on Martin Luther King Day.

Tomorrow, however, the frenzy will set in.

If you want to see the state of marketing today, follow a few of the Super Bowl advertisers and watch what they do. Look at how they use Facebook, Twitter, promotions, a website and PR.

The stakes are very high and every Super Bowl advertiser wants to win the next two weeks.

*  *  *

This weekend I’ll be taking a break from tracking Super Bowl advertising to help lead the Kellogg Healthcare and Biotech Case Competition. Eleven teams of students from business schools around the world are coming to Kellogg to compete. It is a global event with teams from the UK, Mexico and Canada. This year’s case is about reducing childhood pneumonia in Uganda, a major global healthcare challenge.

Soda Stream’s Super Bowl Challenge

January 13, 2014

Last year Soda Stream ran its first Super Bowl ad ever. The spot was mediocre; the Kellogg Super Bowl Advertising Review panel gave it a C.

Here it is:

 

Soda Stream was smart to advertise on the Super Bowl. The brand was growing quickly and needed to accelerate adoption. A Super Bowl ad is a great way to build broad awareness and spark adoption.

The issue: Soda Stream had a strategy problem.

Soda Stream’s 2013 spot featured exploding bottles. As people carbonated water, plastic soda bottles blew up. The key line was this: “With Soda Stream you can save 2,000 bottles a year.”

This would have worked well if saving bottles is a priority for people. Unfortunately, for most folks it isn’t. I’m certain it scored well in consumer tests because people like to think they care about the environment. It probably did even better in focus group studies. But it isn’t a strong enough benefit to drive a behavior change.

Saving bottles is not why most people will use Soda Stream. If someone really wanted to save bottles they would be drinking regular tap water from a reusable jug.

As a result, the 2013 Super Bowl ad fell a bit flat. You can only do so much with a flawed strategy.

Soda Stream is advertising on the Super Bowl again in 2014. This year the brand needs to do better. This is particularly the case in light of its weak earnings announcement this week.

The most important task: find a benefit. Soda Stream has to put forth a more compelling reason for people to use the product. It could be quality, experience, convenience or value. The brand has to find something.

Soda Stream announced over the weekend that it had signed Scarlett Johansson as a spokesperson and she will appear in the brand’s Super Bowl spot.

This is a good first step; a celebrity endorser is a great way to spark interest.

Now Soda Stream has to find a benefit and make a compelling case.

Heinz Steps Up

January 9, 2014

Yesterday Heinz announced that it would be running an ad on the 2014 Super Bowl. This is a big surprise; Heinz hasn’t advertised on the Super Bowl in more than a decade.

The brand isn’t an obvious candidate. It is a mature, stable business with little competition. In addition, this is off-season. People aren’t buying ketchup for picnics in early February.

But this is not a normal time at Heinz.

In June, an investment group including Warren Buffet and Brazilian private equity group 3G Capital purchased Heinz.

Since then, the company has been in disarray. The new management team fired almost 2,000 people from staff roles and announced the closure of three plants in North America.

McDonald’s dropped Heinz in October.

Fortune Magazine ran a long story the same month attacking the new management team.

Sales have been slumping, with revenue down about 6% in North America in the latest period, a notable figure for a company with big, mature brands.

The Super Bowl buy is clearly a move to stabilize the company. It is a symbolic gesture. The unspoken goal is to let employees, customers, suppliers and partners know that the new executives at Heinz aren’t just determined to slash costs and fire people. They also want to invest and build the business.

It has been a rough few months for Heinz. The Super Bowl ad is a bid to shift the focus and generate some positive news.

*  *  *

Over the next few weeks I will be focused on the 2014 Super Bowl (the advertising, not the football). This is my 10th year leading the Kellogg Super Bowl Advertising Review. I’ll be posting some updates here. You can follow all the posts by following the Kellogg Super Bowl Advertising Review blog. Here is the link: http://kelloggsuperbowlreview.wordpress.com/

Six Brands to Watch in 2014

December 30, 2013

This will be a critical year for many brands. Here are six that I will be watching with particular interest in 2014.

 

-Russia

There is intense focus on the upcoming Winter Olympic Games in Sochi. Russian President Vladimir Putin has made the event a top priority and invested billions in constructing the facilities. One important goal is to enhance Russia’s brand.

It is not at all clear how things will go. People around the world are denouncing Russia’s anti-gay legislation and its approach to human-rights. Terrorist attacks are a significant concern.

Will Sochi build the Putin and Russia brands? Or will it be a branding disaster?

 

-Tesla

Tesla is one of the most exciting brands in the world today. The new automaker is generating incredible buzz and attracting thousands of buyers, many of whom rave about the cars. The stock soared in 2013 to $150 per share.

There are concerns, however. Some people are worried about safety after a series of battery fires. There is also a more basic question: is Tesla a reasonable vehicle for the masses? Or is it just a toy for the affluent?

In 2014 we will learn much more about the potential of Tesla to change the automotive world.

 

-Samsung

Korean-giant Samsung has become a leader in the technology world and a key challenger to Apple.

The company has enormous scale and technical capabilities. Last year Samsung did a tremendous job building its brand and ran some terrific advertising.

Can Samsung continue its momentum? Or will it struggle and face shrinking margins with undifferentiated products?

 

-JC Penney

Can JC Penney recover?

Under CEO Ron Johnson, JC Penney launched a bold effort to reinvent its brand, cutting discounts and updating its product assortment. The plan was a disaster.

The JC Penney board tossed out Johnson in April, 2013 and brought Mike Ullman back to be CEO. Under Ullman, JC Penney is returning to discounts and its more traditional product mix.

Things are getting better at JC Penney. In 2014 we will learn whether the improvement is enough to save the company.

 

-Sears

Sears is struggling. This is not a surprise. It also isn’t new; Sears has declined for years.

The question for 2014: just how long can Sears continue along? Will the brand just gradually fade away, like a setting sun? Or will the brand finally collapse in 2014?

 

-Reeses’ Peanut Butter Cups

There is nothing like a good competitive battle. In 2014, we will see a massive fight play out in the peanut butter cup category.

The established player is Hershey, which owns Reeses’ Peanut Butter Cups. The new entrant is Nestle which is launching Butterfinger Peanut Butter Cups.

This will be a huge fight. Nestle is spending aggressively on its new product with a launch that includes a spot on the 2014 Super Bowl. Hershey is likely to mount a ferocious defensive effort and do everything it can to limit Nestle’s gains.

This will be a very entertaining battle to watch.

 

Best wishes for a productive and healthy 2014.

The Remarkable Chobani – Whole Foods Fight

December 19, 2013

You don’t see manufacturers and retailers attack each other very often. Everyone has an interest in keeping disputes hidden from view.

Today, however, Chobani and Whole Foods are fighting it out in a nasty battle.

Here is the story. Whole Foods announced yesterday that it was kicking Chobani out of its stores. The reason, according to an article in the Wall Street Journal, was “to make more room for smaller, exclusive brands, especially those that are organic, or don’t contain genetically modified ingredients.”

Whole Foods basically said Chobani, a spectacularly successful brand, wasn’t actually so special after all.

Chobani responded by saying Whole Foods wasn’t very important, either. Chobani’s founder and CEO, Hamdi Ulukaya, declared “Of course I would love to be available everywhere, but it won’t hurt our business.”

He explained to the New York Times, “I come from a dairy farming part of Turkey and grew up with yogurt and eating this simple kind of food, and when I came here I couldn’t understand why in order to find good-tasting yogurt you have to go to some specialty store to find it. So the foundation of my business model and my philosophy is that we are going to make yogurt that is delicious, nutritious and accessible to everyone.”

In other words, Chobani is accusing Whole Foods of being expensive and elitist.

This is brutal. Whole Foods says Chobani isn’t healthy or special. Chobani says Whole Foods is an irrelevant niche business for rich people.

So what is going on?

Behind this dispute is the fact that Chobani and Whole Foods are facing serious business issues. After years of spectacular growth, they are both struggling to defend.

Whole Foods is dealing with a host of competitors eager to portray the brand as expensive. Whole Foods is clearly concerned about this because it is now focusing much of its marketing budget on an economy message. For example, I received an email the other day from my local Whole Foods pointing out all the low prices. This is a questionable move and indicates that the executives at Whole Foods believe they are vulnerable.

Chobani is struggling with competition, too. The big yogurt brands ignored Chobani early on but now they are fighting back. Dannon, in particular, is defending aggressively and effectively.

The brands then collide.

Whole Foods doesn’t want to carry the standard Chobani flavors because it is very easy for people to compare prices. Whole Foods has three options. It can match Target and Costco on pricing, which destroys its margins, carry unique items that are not easy to compare on pricing or drop the brand entirely.

Chobani doesn’t want to invest money to produce unique items for Whole Foods, especially as it deals with the onslaught from Dannon.

Dannon will do whatever Whole Foods wants. The company is panicked about Chobani and eager to please. I suspect if Whole Foods wanted to buy yogurt in a container made from organic carrots Dannon would be happy to provide it.

The result is one of the nastiest competitive battles I’ve seen in a long time.

It will be fun to watch how this all unfolds over the next several months.

Super Bowl 2014: 53 Days Away

December 11, 2013

The 2014 Super Bowl is less than two months away. This is the time when marketers all around the world are putting finishing touches on their Super Bowl marketing campaigns. Some are shooting commercials this week; others are meeting with senior management to secure approvals and almost are plotting social media strategy.

The stakes are high: on Super Bowl Sunday millions of people will gather to watch and evaluate the ads. There will also be a football game that day, but for most folks the advertising matters more.

It is shaping up to be a record Super Bowl in terms of advertising.

-Prices are at a new peak, with each thirty-second spot selling for $4 million. This is serious money even for big advertisers.

-Demand is high. The Wall Street Journal reported this week that the Super Bowl is sold out.

-Pregame buzz will be intense and early. Advertisers are already putting out press releases about Super Bowl advertising. This is different; a few years ago few advertisers released much before Super Bowl. Then marketers started capitalizing on the buzz by putting out information the week before the event. Now companies are active months ahead of time.

The Kellogg Super Bowl Advertising Review will be back again in 2014. This is our tenth year of reviewing the spots. Our focus, as always, will be on business impact: which of these advertisers built the brand and the business. This makes our ratings unique; our panel focuses on what really matters. Creativity is nice but is of no use on its own. The advertising has to work.

In the weeks leading up to the game, Professor Derek Rucker and I will be blogging. You can read the posts on the Kellogg Super Bowl Advertising Review blog or on my blog. Sign up to see all the posts.

Kellogg Super Bowl Ad Review blog:  www.kelloggsuperbowlreview.wordpress.com

My blog: www.strongbrands.wordpress.com

We will also be on Twitter. We will look at who is advertising and why, the business challenges they face and what they have to do to succeed. And after the game, of course, we will be out with our rankings.

This year we will also take a look back at 10 years of the Kellogg Super Bowl Advertising Review.

It is a fun time of the year and there is a lot to learn about marketing, strategy and our society.

Lands’ End and Sears

December 6, 2013

Sears today announced that it had filed paperwork with the SEC to spin-off Lands’ End. This is very good news for the Lands’ End brand.

Lands’ End is a retailer based on Janesville, Wisconsin. Chicagoan Gary Comer started the company in 1963. It began selling equipment for boaters.Lands' End

By 2000, Lands’ End was a thriving company. Customers loved the brand and the business did well; Lands’ End had a distinct voice in the crowded world of retail. It was a bit like L.L. Bean with less of the rugged Maine feel. Lands’ End was comfortably sporty and nautical with great quality and service. I was a loyal customer.

In 2002, however, Sears purchased Lands’ End for $1.8 billion. The concept was that Lands’ End would help revitalize Sears and make the brand more upscale. Sears quickly opened up Lands’ End departments in Sears stores.

The combination of Sears and Lands’ End was a disaster. When a small brand joins with a huge brand, the larger partner will carry more weight. So instead of pulling Sears up, the combination just pulled Lands’ End down.

I visited a few of the Lands’ End stores in Sears locations. It was a painful experience. First, I had to wander through Sears, which was difficult enough. Then I found that the Lands’ End department was in disarray with little service and selection. It was totally counter to my image of the Lands’ End brand.

So I, and many people, moved on to other brands.

Things may change once Lands’ End becomes independent. The new brand (hopefully) won’t have to sell at Sears locations. It can attract employees committed to building a special, unique brand. It can reward employees with stock options that actually might be worth something.

Short term, Lands’ End may do poorly on its own. Sales will fall as the brand retrenches, invests in service and branding, and cuts retail locations. Many customers will leave, especially those looking for low prices.

Long term, Lands’ End may emerge as a thriving merchant, a special brand in the crowded world of retail.

I’m looking forward to the transition and becoming a Lands’ End customer again.

Volvo, Van Damme and the Future of Marketing

November 27, 2013

The world of marketing is changing. Traditional media vehicles are losing effectiveness as people communicate in new and different ways. Mass audiences are fragmenting into small segments. Developing a point of difference is harder than ever.

Many business leaders are uncertain about the future. What will great marketing look like in the years ahead?

Volvo’s new spot shows the way.

The ad features Jean-Claude Van Damme doing a remarkable stunt to dramatize a new technology, the Volvo Dynamic Steering system. You can watch it here:

 

The spot works in many ways.

First, it breaks through the clutter. It is visually arresting, surprising and beautiful. After watching it once I wanted to watch it again and again.

Second, it has solid branding; it is clear that this is for Volvo.

Third, it communicates a benefit. The entire spot revolves around Volvo’s remarkable new technology. It is very clear that Volvo has something special and remarkable.

The ad has generated an astonishing amount of buzz. In just two weeks, more than 52 million people have watched it on You Tube. There are dozens of parody spots.

It is engaging, well branded and product focused.

It isn’t perfect; there are two notable issues. First, it is not clear why this technology is important. The Volvo Dynamic Steering system provides great stability and is easier to drive. Is this a significant benefit? Does the technology solve a major problem?

Second, there is a basic branding problem. This is a spot for Volvo trucks. The Volvo car business is a completely different company. This shared brand ownership is a challenge. I suspect many people will visit their local Volvo dealer looking for a car with that impressive steering system.

Still, the problems here are minor compared with the overall impact. This is the future of great marketing.

*  *   *

On Thanksgiving I will be in Chicago enjoying the day and some wonderful food with my wife’s family and giving thanks for a great year.

On Friday I will be out visiting stores. I won’t buy anything of note; I will just enjoy the frenzy. It is an exciting day for anyone in marketing. The deals are not as remarkable as they seem but the energy is contagious.

Have a wonderful holiday and give thanks for all the good things in your life.

Reality Comes to U.S. Colleges

November 22, 2013

One of the reasons I find it challenging to teach marketing strategy is that the theories don’t always seem to work in real life.

I teach that companies need to build profits, for example, but Amazon contradicts the point. Snapchat doesn’t even have revenue to speak of and is apparently worth billions.

I tell students that it is difficult to attack established markets but Emirates is quickly becoming the dominant global airline.

I frequently drop back to Michael Porter’s core lesson: in a competitive market you have to be different or cheap but mid-tier U.S. universities thrive by charging the same price as Harvard.

Eventually, however, things make sense; the fundamental laws kick in.

The latest example is U.S. colleges.

The Wall Street Journal is reporting today that many schools are seeing slumping revenues as student numbers decline. The problem is particularly acute at institutions that don’t have a strong brand.

This isn’t a surprise. Colleges in the U.S. have long relied on price increases to fund programs. This has driven up tuition significantly, forcing students to take out bigger loans.

The system works fine as long as there is more demand than supply. When students are scrambling to get in pricing doesn’t drive the situation.

Everything changes, however, when demand softens, as is currently the case. Students get to choose between institutions. And then schools have to choose whether to be cheap or different.

This isn’t a big issue for schools like Harvard and Yale. They are differentiated providers with enormously strong brands. The current tuition at Harvard is $38,891 (not including housing, meals and such) and it is a deal.

It is a big issue for smaller schools. The University of Dayton, for example, is a fine institution but it doesn’t have a brand like Harvard. The school charges $35,800 for tuition, about the same price. This is not sustainable.

There are two ways to play the value game. The first and easiest is to provide discounts. Schools often do this today by awarding merit and financial aid scholarships.

The problem is that enormous discounts distort pricing; the official prices become meaningless. At the University of Dayton, for example, apparently 70% of students receive at least a 33% discount on tuition in some form. This is remarkable. Big discounts also create price confusion. This works well for schools trying to differentiate but it is a problem for schools trying to compete on value.

Which school is cheaper? It isn’t clear until students sort out all the financial aid.

The second way to build value is to reduce list prices. This is not easy; a reduction in tuition has an immediate revenue hit and an increase in students will not quickly offset the hit. As a result, it requires a more efficient model. For many schools, however, this is the proper course.

Some will argue that reducing tuition will reduce quality perceptions. Price does indicate quality, but only to an extent. Few think University of Dayton is comparable to Harvard despite the similar prices.

One note: cutting tuition and eliminating all financial aid and scholarships is not a good idea. J.C. Penney recently illustrated what happens when a firm cuts all discounts.

Many U.S. colleges need to rethink their basic model. The current approach of promising top quality, consistently raising tuitions by 5% a year and then boosting financial aid and scholarships won’t work for everyone in the years ahead.

India: Six Surprising Things

November 12, 2013

I am just back from a three-day trip to India; I was in Kolkata to speak at the 2013 Brand Conclave. It was a terrific event. Here are a few things that surprised me:

- Low income consumers in India generally buy the most expensive cement. I had an interesting conversation with a marketing executive from one of the large players in that industry and he explained that people with low incomes seek out quality when it comes to cement. They avoid the lower priced products. When they are building a house, they want to do it right; it is an important investment. So they buy a brand they trust, which also happens to be one of the most expensive options.

This is a good reminder that brands matter to everyone and people with lower incomes sometimes buy premium brands.

- India’s retail system is incredibly fragmented. There is an astonishing number of small stores in Kolkata; on every block, it seemed, there were a dozen or more little stores, each one selling a few items. This is a massive barrier to entry for the manufacturers; it would be almost impossible for a new entrant to get distribution in so many little stores.

- Retail margins in India tend to be very small, perhaps 10%. This is much less than a typical retail margin in the U.S. or Europe. The system works, however, because inventory turns are so high; many companies call on retailers every day, replenishing stocks. If can turn over your inventory every few days, which many of the retailers apparently do, a 10% retail margin turns into real money.

- Mortgages start at over 10% in Kolkata. In the U.S., a similar load might be 4%. This is very strange. It also suggests that there is an enormous pressure to grow; it is hard to make the payments on a loan with 10% interest if the economy is weak.

- Many companies in India have a negative working capital. Retailers pay many companies immediately; when they take possession of the product they immediately pay cash. This is a terrific model for the manufacturer; you get cash immediately and pay your suppliers later. This means you have no working capital; you generate more cash as you grow. Just imagine how this works for a company like Mondelez which is stretching out some payables to 120 days.

- There is only limited health insurance in India but the system seems to work. Many patients pay at the time of care. This leads to more price shopping and negotiation. The hospital executives I spoke with didn’t find this a problem; they were proud of their efficiency and quality of care.

*  *  *

I am back in the U.S. this week after my quick trip to India. It will be another busy week; in addition to my marketing strategy classes in Evanston, I’m teaching a session on developing great marketing plans in Kellogg’s Strategic Marketing Communications program and leading a seminar on new product strategy for a global healthcare company in New Jersey.

Saturday I’m moderating a panel at the Kellogg Healthcare Conference. You can read more about that event here:  http://www.kellogg.northwestern.edu/conference/healthcare/


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