Lairig Marketing

Demand Trumps Supply. Still.

On the MarketingProfs experts forum recently, someone submitted a request for advice: I’m going to “launch a new online video guide/portal website worldwide & I'm looking for a tagline/slogan/website name.”

[Aside: The number of “slashes” in a sentence is inversely proportional to the strength of the idea.]

Later in the post, the requester says, “ive noticed that theres quite a few websites online that include online video guide or online video portal [sic, all of it]…”

It might seem like I’m picking on this guy, but this pretty much passes for marketing strategy nowadays. As an example - we don’t need any more health-related websites, but that didn’t stop the recent launch of “BeWell,” whose point of differentiation will apparently be its “high-profile” doctors. Ummm, does Dr. Koop ring a bell?

Here’s how most marketing strategies seem to develop in today’s world:

• See market.
• Enter market.
• Differentiate using “catchy name.”
• Wonder why business not succeeding.

Instead, the first few steps should go like this:

• See market.
• Conduct customer research.
• Conduct competitive research.
• Establish differentiation by delivering unique value.
• If prior point not feasible, go back to step 1.

We are overrun with too many video portals, health portals, blogs, social networks, even Twitter copycats. I call it the pedicab syndrome. Walk into Central Park any warm summer’s evening, and you’ll see a line up of pedicabs like so many mothballed aircraft in the Mojave. The drivers practically tackle unsuspecting tourists trying to get them to go for a ride.

I used to call it the magazine syndrome, where we have always had about 25% more journals than we needed. But the current economy is taking care of that one, in spades.

Supply and demand is a law, like gravity. You can’t beat it, not even with a “catchy name.”

The Bermuda Triangle - Starbucks, McDonald’s, Dunkin Donuts

By luck or by design, the overanalyzed triumvirate of Starbucks, McDonald’s and Dunkin Donuts have carved out distinct segments of the market. But you wouldn’t know that from reading “analysis” like this from Scott Rothbort of thestreet.com:

“Just today McDonald’s reported global comp sales increases of 8.2%, and I guarantee you that part of that surge was coffee, tea and breakfast sales coming from Starbucks customers.”

That’s interesting, because McDonald’s didn’t mention it in its earnings review - it credited sales growth to a Monopoly promotion and its new Southern Style Chicken breakfast item. Something tells me McDonald’s grand experiment with coffee is not going to turn out as hoped.

I’ll tell you where those McDonald’s customers are coming from, Scott. From the likes of IHOP and Applebee’s.

Dunkin Donuts, on the other hand, doesn’t need a journalist to misrepresent its situation. It can handle that duty itself. The company, which seems to have just about completely lost its mind as far as marketing goes, is in the middle of a “taste test” campaign, in which it claims to have beaten Starbucks.

Sort of like asking a beer drinker to give you some suggestions on what wine to serve.

And finally, Starbucks. Here is Brad Stone (stage name?) of the New York Times:
“But many people are now abandoning the product, if not the lifestyle that goes with it.”

The writer apparently divined this from Starbucks’ recent earnings report where comps were down 4% (I sent him an e-mail, as well as Rothbort, for clarification, but don’t expect to hear back).

You see, Brad, “lifestyle” is all Starbucks is really selling. If you walk by one, then compare the scene to the inside of a Dunkin Donuts and a McDonald’s, you’ll see what abandonment would really mean to the Starbucks customer. Ain’t happenin’.

So, to all you “coffee analysts” out there: calm down. The situation is under control. Three good companies, three good futures.

Lay off the caffeine for a while.

Could A $10 Box Of Cereal Be In Your Future?

You get both sides of the recession marketing coin with this post. On one side, the ready-to-eat (RTE) cereal manufacturers, nudging prices up (and up). On the other, the unseen response from cereal substitutes.

For about a year, the major RTE cereal manufacturers have been raising prices, literally or through a back-door move - reducing carton size while keeping prices the same. General Mills started it last June, and today Kellogg announced a similar move, on the heels of outright price increases just a few months ago.

http://www.msnbc.msn.com/id/25217848/
“Kellogg Co. is using smaller packaging while charging the same prices…The company started shipping the new boxes to stores in early June. Boxes were reduced by an average of 2.4 ounces for 14 items…We did an extensive analysis of all of our brands to determine what made the most sense for our business…”

I bet the winning “extensive analysis” had the maximum profit calculation. It certainly worked for General Mills, who today reported higher sales compared to last year. Through the first nine months of this fiscal year, it showed cereal growth at 3%. Not bad for a recession.

If this seems like déjà vu all over again, it is.

Cereal prices rose 91% from 1983 to 1994, double the rate of general food prices. Not surprisingly, demand started to fall for the first time in decades. Store brands and cereal substitutes (breakfast bars, etc.) were fans on the flame.

If you recall, the cereal guys tried an everyday low price strategy soon after. Since volumes didn’t jump and margins fell, we are now seeing a change in that strategy. (Rising input costs aren’t helping, to be sure.)

So, back to the future - people complaining about $6 boxes of cereal. This time Kellogg and General Mills don’t appear to be hurting on the volume front. It’s a risky recession play, but they have set a new threshold. Just like we’ll never see $3-a-gallon gas again…we won’t see a $4 box of cereal either.

The other side of the coin? Time for the cereal substitutes to go for the kill, assuming they don’t get stupid and simply jack prices also (one of the conundrums of course is that the big cereal manufacturers also sell substitute products). How about “Save Money, Live Better.”

Oops, that one’s already taken. Geniuses.

Have Generics & Private Labels Hit Their Max?

Citibank Global Markets released a very informative survey at the end of March. (That in itself could be a story, given the distractions going on at its parent company.) In sum, the study looked at the the ways grocery shoppers were modifying behavior in the face of the recession.

You can see the news release here:
http://publications.mediapost.com/index.cfm?fuseaction=Articles.san&s=79418&Nid=40941&p=907870/

Like most studies it contained some specious stuff. To wit: since most people surveyed believe Wal-Mart and Kroger have the lowest prices (the study was confined to two market areas), therefore everyone will go to Wal-Mart and Kroger if things get worse (?). I would need much more space than usual to blow that one up.

Here was the good stuff.
“The good news for retailers (although a major bummer for leading marketers) is that consumers are filling their carts with more store brands and private-label items…Not only did the vast majority--93%--say they routinely buy these generics, 46% say they represent up to 20% of overall grocery purchases, and another 48% say they represent more than 20%.”

This might be one of those times where a survey on behavior (versus a database sweep) matches reality. Kroger and Safeway claim 25% of business comes from private label.

Now the clincher:
“And if prices keep going up, 18% of those in the survey say they will purchase even more private labels. About 46% say they believe these products are just as good as national brands.”

Read that again. Are you as amazed as I was that the number was only 18%? Especially when almost three times that number believe in their heads that private label is just as good? How bad do things have to get before people will abandon $6-a-box Kelloggs? Or a $2 one-pound box of Ronzoni?

Is it because people actually value brands? Even though they believe in their heads that generics are “just as good,” in their hearts they favor branded products?

I think this is a testament to good brands everywhere. And a testament to all the people who work on quality manufacturing, innovative packaging, effective marketing, and tailored sales, to advance their brands just a little more each day.

You can never rest on your laurels, of course, Even though the economy will eventually improve and some of your private-label defectors will come back, don’t forget about another class of customers -the ones who go the substitute route, who go outside your category to fulfill their needs. For example, substituting breakfast bars for cereal.

“Substitute” defectors are the hardest to track, therefore the hardest to get back. Make sure you have at least a part of your marketing strategy focused on “substitute” competition.