Lairig Marketing

Should Target’s 2013 Target Be Your Target? (Part 2)

Here we are, a day late with Part 2 of our three-part series on Target’s business and marketing strategies for 2013. (See Part 1 here.) As a reminder, the underlying theme of this series is the advantage a strategist gets from reading a company’s quarterly earnings transcript.

It would be a definite advantage if you took a look at an article on Ad Age yesterday, in which some daft woman recommended that bricks and mortar retailers institute a Black Friday EVERY DAY so they can survive. Target’s recent earnings call reveals such advice as idiotic (unless a retailer was looking to go out of business as quickly as possible).

“Whoa,” you might say, “didn’t Target just announce it would 'match any price' - even of some online retailers (read: Amazon)? Isn’t that an indication it will take the daily-Black-Friday race to the bottom?"

Yes. And no. Dig this part of the earnings transcript:

“…that [price match] is such a very low portion of the total transactions…”

Stunner, eh? To think that very few customers, according to Target, actually force the issue on price at the register.

So, there goes your “showrooming” bullsh&t right with it. But we’re not done. Here was a bonus “showroom killer” comment:

“…following the launch of free wireless in all of our stores in the fourth quarter, Target.com was, by far, the site most commonly accessed by guests while they were shopping in our stores.”

Ponder that one, showroomers. Not Amazon.com. Not BigAssDealOfTheDay.com. Target.com

Better yet, Target understands the in-store experience is, will, and has to be, its competitive advantage over Amazon, et al. Again, to the earnings transcript we turn:

“…[we are] ending our current relationship with Radio Shack in our mobile phone business, and begin working with Brightstar…as our new in-store labor partner; demonstrates our continued commitment to mobile as a key element of our electronics offering, and we believe it will enhance Target’s position in the wireless retail marketplace.”

How come people don’t buy their new smartphones online? Where’s the showrooming there? Why aren’t we reading about “The End Of The Apple Store”? Ha. F&cking. Ha.

And even more:
“…last October we launched a test with Geek Squad to provide in-store service agents in 20 Denver Target stores. Based on positive feedback from our guests, Target expanded this test by offering Geek Squad service and replacement plans in 20 stores in Kansas City beginning February 17.”

Genius! Target takes the only thing Best Buy has going for it!

So take that, digital digerati. We say Target has taken the “showrooming” target off its back.

Yelp Should Be Scared…But Not Of Facebook’s Social Graph

The Hooded One did it again. Here we were, slowly crawling back to the $42 we squandered on May 18. Facebook’s “big event” this past Tuesday was certain to give us another $3 kicker. Hell, we would get out if Facebook stock got back to just $38 a share, take the $4 loss, and call it even.

But no. A typically grueling, confusing, wonky and hubristic ZuckerPresentation left Facebook shares down for the day. And even lower the next day.

Yet, reading the media reports from the “Social Graph Search” big reveal (of which, of course, there are tens of thousands), one would think Facebook was onto something important.

When, honestly, all those reporters and bloggers should be saying just one thing: “We have no idea what the Facebook team was talking about.”

Worse, or “worst” perhaps, the words that investors wanted – needed – to hear were not spoken: sales, commerce, revenues, advertising.

Instead we got ludicrous examples of how one might use what is now a stream of effluent, mostly useless posts coming at Facebook users nonstop from their hundreds of “friends.” Here are some illustrations of what you can do in the near future with Facebook Social Graph Search (FSGS, shall we?) that some reporters heard, or made up (with apologies for grammar):

- Who are my friends who live in San Francisco?
> How could you possibly be “friends” with people…and not know where they live?

- Zuckerberg says that when he wanted to look for friends who would be interested in watching “Game of Thrones” with him…he did a search of friends who lived in Palo Alto and enjoyed the show. The result were 17 of his friends, including his sister…
> Do you have room for 17 people in your living room? And what a sad day it must be for a sister to know she can only be known to her brother digitally.

- Are you dying to know which friends appeared in photos with you before 2006?
> In a word, “no.”

- You can look up "friends of friends who are single."
> What if they are not on the market? Isn’t this what others might call “stalking” ?

- …to look up new product managers for Facebook, he might look up “people who have been product managers and who have been founders”
> That only works if those people are already in your network. LinkedIn would be much more useful for this.

And here was the supposed Yelp killer:
- What matters more – restaurants a site like Yelp says are good, or restaurants your friends think are good?

Within minutes, Yelp’s stock plunged 6%. And it fell another 4% the next morning. It was probably the only example anyone at Facebook’s event could understand, but it is a complete misread on reality. If our money wasn’t wasting away on Facebook stock, we’d pick up 100 Yelp shares ASAP.

Let’s say you are traveling to Dubuque and want to eat at a Mexican restaurant. Using FSGS, you might – might – find “friends” who have “liked” Mexican restaurants in Dubuque. But you wouldn’t know why, nor would you know if the results covered the entire set.

As an alternative, go to Yelp, type in “Mexican” and “Dubuque IA” and you’re pretty much done. How a stock can drop 10% on this scenario is beyond comprehension.

Yelp’s CEO and co-founder Jeremy Stoppelman, although way better looking than Mark Zuckerberg, hasn’t been “out there” enough, and certainly hasn’t exuded the confidence or gravitas, or whatever it is that ZuckerHoodie has, to put investors at ease.

If we ran the place, the Yelp blog, Twitter feed, and – why not? – Yelp's brand page on Facebook – would be churning at full tilt, explaining how much better Yelp is than the “social graph.” As of now, though, they sit, in a sort of deafening silence.

Without defending itself against Facebook, Yelp’s real issue – the inability to scale the business in the medium term – will become more apparent, sooner than investors would like to see. That’s the kind of real “scare” that can take a stock down. A lot more than 10%.

Maybe Jeremy Stoppelman should start wearing a hoodie.

Single-Cup Coffee Industry’s Jitters

It’s another version of the “razor blade” marketing metaphor – give away the coffee maker and make a killing on the beans.

Keurig upped the ante several years ago with its wondrous single-cup brewing machine. Besides requiring a degree in mechanical engineering to operate, the Keurig brewer needed more than just beans. Now, the consumer needed to purchase loads of environmentally unfriendly “K-Cups.”

Brewer = razor. K-Cups = blades. Green Mountain Coffee smelled profit, so in 2006 it acquired Keurig. Consumers were a little slow to catch on, but by 2010 Green Mountain’s stock price began doubling, tripling and quadrupling.

One big problem, though. The patent on the K-Cup had a near-term expiration – 2012. Everyone and his brother lined up to get into the business, giving us recent announcements like this:

“Kroger Co, the biggest U.S. supermarket chain, is planning to introduce store-branded single-serve coffee cups compatible with Green Mountain Coffee Roasters popular Keurig brewers…”

And an even bigger announcement, one we predicted way back in March 2010:

“Keurig’s patent expiration in a couple of years seems to be its lone weak spot. We wonder if the bean counters at Starbucks have circled that on the calendar.”

They have.

“Earlier this week, No. 1 coffee chain Starbucks said its stores will begin selling single-serve K-Cup coffee pods for Keurig brewers on June 12, months earlier than some on Wall Street had expected.”

Analysts tell us to fear not. That single-cup still represents less than 10% of coffee consumption, even though its growth has doubled each of the past three years.

We say – be afraid. It won’t take more than 12 months before the supply of these little plastic pods outstrips U.S. demand. Green Mountain’s stock has already collapsed. Everyone’s K-Cup prices will plummet. Margins will follow, as will industry consolidation. Another marketing goose slaughtered.

In the meantime, folks like Kroger will believe the single-cup future is one big arrow pointing up and to the right, and will come out with new flavors of brew every month.

Proving once again that coffee is indeed a drug.

What Does The USA Not Get About Microsoft ?

If you read yesterday’s post – and shame on you if you did not – you would have been linked through to an older story in which we highlighted how Microsoft was awarded the #1 ranking in the Australia “Authentic Brand Index” for 2008. (The world – or Australians at least – are still waiting for the results to be released from the 2010 index research.)

What’s up down under, oi?

There must be something funny in the water in Canada too. In late January, Adweek and researcher Ipsos Reid released their first ever (and, based on the results, maybe last ever) “Brand Influence Index” covering Canadian companies. Guess which brand is the most influential up dair, eh?

• Tim Hortons? No.
• Loblaw? Not even top ten.
• The Ottawa Senators? No. And please lose game 7 tomorrow night, you bums!

Once again, Microsoft. Eh.

Eh?

Better than Apple? Better than Google? Why don’t we Americans hold Microsoft in anything near the same regard?

The Influence Index was based on consumers’ ratings of brands in six areas, including “Relevant,” “Leading Edge,” and “Engagement.” Again we ask, how could Microsoft rank higher than Apple? Or Facebook, for that matter?

This really ought to signal the death knell for brand rankings. All of these attempts – Interbrand, BrandZ, Ipsos Reid, et al. – are just variations on a mash-up of objective and subjective “measures” that call for the loudest “So What?!!?” possible in response.

With these types of measures, a brand can only be compared to itself – a la “is our brand getting stronger and more influential over time”?

In other words, stop sweating over those brand rankings.

Recession Stares – Retailers Blink

If you didn’t like our Great Recession Part 2 forecast a couple of weeks ago, maybe this AP article from yesterday will do the trick.

A seasoned marketer might have moved right past the dopey headline: “Price Matters For Holiday Season.” That’s been true for three holidays in a row now. No news there.

For example, from the article:
“In a recent poll of 1,000 shoppers by America's Research Group, 78% said they were more driven by sales than they were a year ago. During the financial meltdown in 2008, that figure was only 68%.”

Note the use of “only,” when the number in reality represents TWO-THIRDS of shopping public. This is just a little more recess for your recession.

This time around, I fear, the numbers are driven by consumers seeing the fear in retailers’ collective eye. The AP article lists several examples of big-name retailers promising not to be beaten on price. (To show how limitless its dysfunction is, Sears promises to beat any price BY TEN PERCENT!).

Remember, too, these holiday strategies come in the midst of forecasts for a banner Halloween, as if anyone cares.

In describing its plan to give consumers gift cards if they find a better price elsewhere, a Walmart exec had this to say about what he called the other guys’ “promotional intensity and gimmicks.”:

“[our gift card plan] gives customers peace of mind that we are an advocate for them…"

No. It shows consumers how panicked they should feel, a full month before Black Friday.

Another retailer was quoted as saying “The days of marketing the stuff in your store because it was a hot brand are over…"

I’d say that the day you call the stuff in your store “stuff” is when you should pack it in.

Congratulations retailers, for not even trying. You might have just marked the tipping point for Great Recession Part 2.

Netflix: Two Brands Are Lesser Than One

We didn’t plan on writing about Netflix again, after our post three days ago. But loyal Lairig Marketing reader Denis wrote, curious about the naming decision Netflix made. “Why not just call them Netflix Streaming and Netflix DVD?” Denis asked.

Excellent question. And not one you will see addressed anywhere else. The articles are already stacking up about the “PR debacle,” criticizing CEO Reed Hastings’s public apology. A much bigger issue is what the new brand-naming convention means to Netflix’s future. So, bravo to Denis for asking.

Netflix would have done what Denis suggested if it had wanted to create a strong “branded house,” like our friends at Virgin. But Hastings’s letter is clear, almost strident, in stating the company sees no synergies at all between a DVD business and a streaming one: “that need to be marketed differently, and we need to let each grow and operate independently.”

The die was already cast, then, for an act of brand suicide. The business (not brand) names doled out were just additional blocks of concrete tied around the legs, to ensure drowning.

The logic to call streaming “Netflix” makes sense from a business perspective. But not from a marketing one. Now, 20-million-plus subscribers need to be re-educated about TWO brands, versus one. Hundreds of thousands of customer service hours squandered, needlessly. So much for being worried about “cost structure.”

But there can only be one reason to take “Netflix” away from the DVD business and give it a name that three monkeys and one typewriter could have outdone, a name illogical since streaming is “Qwikster” than the post office: the DVD business is going to be spun off or sold off.

Hastings and team were able to cut the Netflix stock price in half. With this branding decision, they’ve outdone themselves, cutting the business to ribbons.

Hulu, Amazon, Blockbuster, et al. must all be in a state of shock, in disbelief that Netflix handed them this gift. Which one of them will be “Qwikest” to pounce?

Gilt Groupe Guilty On Two Counts

Let’s call it Groupon for the “Upper Crust.” Except that becoming a member of gilt.com protects you from those tacky coupons for 50% off a meal at the local pancake house. Instead, you log on to the site to find what high-end designer fashion and home furnishing items Gilt has “curated” at a special price for its 3-million-plus members.

Since gilt.com is part of a private company (The Gilt Groupe – add the “e” for “elite”), we don’t know its sales nor its profitability. "Annual sales are estimated at $500 million” is a constant line in the press. We do know that whatever revenue Gilt earns is largely eaten up by the salaries of its powerhouse management team.

Just look at the “Groupe’s” team page. Seventeen of the sexiest names in e-commerce. Multiply each one by a nice $250,000 pay package, and you’re out of head room for office space, data center costs, and curators’ travel expenses.

A sure sign of a “profitability squeeze play” is rapid launch of business extensions. And Gilt has it all. A recent addition is a traditional menswear e-tail business, Park & Bond. Oddly, the apparel and accessories here are priced for kings. Maybe Gilt knows something about the economy that the rest of us don’t.

A second interesting observation (guilty charge #2 if you are keeping score at home) could only be made if you follow the local press in the Hamptons. You see, Gilt attempted to rent out a swanky home there and turn it into a “pop up” store – another move away from its core business proposition.

Except that neighbors got wind of this blatant and willful violation of zoning code and put an end to it. Yet, there is still an invitation to the Gilt “Hamptons House” on its site (dated July 27th, prior to the shutdown). Go to the given link (giltcity.com/hamptonshouse) and see this:

“The page you have accessed does not exist.”

However, something else DOES exist – a strong threat to Gilt, driving all of this to-ing and fro-ing on its business model. The so-called “pioneer of online flash sales,” Vente Privee, announced in May its intentions to launch in the U.S. before end of year (under a new name of course).

Vente Privee’s U.S. partner? American Express.

Never mind a rented “pop up” house. Vente Privee just found its way into every wallet in the Hamptons.

Do As Your Competitors Think, Not As They Do

The late, great George Carlin had a million memorable bits, one of which was “words you never hear together,” such as “Hand me that piano.” Here is the CMO’s version:

“Things that keep me up at night include the quality of our competitive analysis.”

Or…

“Next year we plan to significantly increase our spending on competitive research.”

You won’t hear these kind of statements in marketing. Keeping tabs on the competition is simply one of those things you are expected to do. 99 times out of 100, though, competitive assessments are backward looking. Like the old metaphor of driving while looking in the rearview mirror.

At the moment, I am working with a client executive who goes nearly batshit when told what any of the three main competitors happen to have done. An all-hands-on-deck effort ensues, with lots of ideas generated to answer the question, ”What do we do in response?”

By the time “we” figure out what to do or say, the competitors will be on to something else. And the above scenario repeats itself, nearly every month. As a result, this client has become inefficient, ineffective, and unable to keep adequate resources focused on the future.

Instead of tracking what promotion or new product introduction the competition did LAST MONTH, here are some “early indicators” you should consider monitoring:

• Senior management hires or reorgs
• Financial condition – revenues and profits
• Trends in media allocation
• The Q&A portion of the quarterly earnings call
• Presentations or webcasts available on the investor relations web pages
• New partnerships with other companies
• Interviews with executives in the trade press

Note that none of the above are consumer or customer communications. By the time the latter take place, it is really too late.

It wasn’t George Carlin, but Wayne Gretsky who came up with this memorable line:

"I skate to where the puck is going to be, not where it has been.”

If you’re not thinking, and looking, ahead…you might not get a chance to shoot the puck at all.

L.L.Bean Is Giving Away Free Ship

If you are like 75% of the online population, you have had the following experience. You visit the website of an apparel retailer, enjoy the navigation, selection, and the product reviews. You are satisfied with the prices, and you especially love how easy it is to load your items into the virtual “shopping cart.”

You even get over the fear of submitting your credit card number (even though you just read that one of the biggest email service providers on earth was embarrassingly hacked of millions of addresses linked with real names). You click the “you’re almost done” button on your $73 order.

Then it hits you in the eye like a big pizza pie. Shipping charge. $15.95.

“Holy F!,” you say. “What the F?” That’s like an additional, unexpected, tax of more than 20%!

You point your cursor way up high to the right and click on that little “x.” The etailer’s website disappears.

You have just “abandoned” your shopping cart. You were inches from the finish line, but because the retailer was elusive, evasive, and greedy about its shipping fees, it lost your business. Perhaps for good.

So you make yourself nuts, scouring the Web for occasional discounted or waived delivery fees. By God, you will sacrifice the brand you really want in order to save $15. Crazy.

Last week, L.L.Bean called bullshit on the whole situation. The company (who, unfortunately was one of dozens whose Epsilon email file was hacked) announced that online orders will be shipped for free. Always and forever.

With that, L.L.Bean has delivered an excellent illustration of the marketing concept of Play, Differentiate, Win. It is a simple framework, a pyramid with Play at the base. In here are all the things a marketer needs to do just to show up, i.e., simply to be allowed to play. Basic features that every competitor has. For an etailer, providing images of products is a Play item, for example.

Above that are Differentiate items, things a marketer does that most others do not. An example would be making the product images referenced above in Play available in a 360-degree view. Notice we said “most” don’t do this – which means that many competitors do. So you need to step it up even more to be successful.

This requires delivering benefits no one else in your category does. This is the third layer. At the top. For the Win.

L.L.Bean management decided last week that “free shipping forever” goes into its Win layer. We’ll get confirmation soon if it did the right thing:

• If L.L.Bean’s online revenues increase in the next quarter.
• If even just one of L.L.Bean’s competitors match the free shipping offer.

If so, L.L.Bean will call that a Win Win.

High Fructose Trade Group Gets Its Own Sweet Surprise

The battle over what kind of sugar Americans should be wolfing down has been raging for a few years now, exacerbated by recent “eco” and “health” trends, and propagated by Mommy Bloggers.

High fructose corn syrup (aka HFCS) is out, plain old sugar is in.

The Corn Refiners Association (CRA) is fighting back, with a vengeance. It has launched broadcast TV spots, cranked out the press releases, and launched a website with the name and url “Sweet Surprise.” Across these touch points, the trade group has attempted to debunk each and every anti-HFCS story that’s hit the wires. (For fun, Google “bad HFCS” and see what site pops up in paid search results.)

In a nutshell, the CRA claims that HFCS is manufactured and metabolized in pretty much the same manner as sugar, thus is in no way a cause of the 20% obesity rate among U.S. teens and 25%+ among U.S. adults.

On the one hand, you feel their pain. Americans are beyond fat for more than a single reason – and our quick-fix, silver-bullet society makes HFCS an easy target.

On the other hand, you can see that all this is getting the CRA nowhere. A little more than half of Americans now claim to avoid high fructose if it is prominent in the ingredient list. And the trade group’s petition to the FDA last fall to change the name of HFCS to “corn sugar” was a CRA critic’s wet dream. (The association set up what is essentially a mirrored site of Sweet Surprise at cornsugar.com.)

Two problems with the Corn Refiners strategy. First, playing whack-a-mole with critics prolongs a story line of “we’re no better or worse than sugar.” All that does is ensure that consumers couldn’t care less.

Second, the focus on consumers neglects a key player in the value chain – the food manufacturer. And those guys are pulling HFCS out of their products faster than you can shuck an ear of corn. Kraft, Heinz, Hunts, Fresh & Easy, Whole Foods, Pepsi’s Sierra Mist, Sara Lee…the list gets bigger every month.

HFCS consumption is shrinking, and is now at levels last seen in 1990. By the time the Corn Refiners Association convinces the public HFCS is OK, there might not be many products left that actually contain HFCS.

At that point, the CRA might try making ethanol with it.