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Sunday, August 29, 2010

Hostile Brands

From day one in courses in Marketing, Branding, New Product Development, Advertising, or Consumer Behavior students are always taught that a marketer must separate their product from the competition. Before launching a brand at a company, the old pros instruct the rookies that above all you must be able to differentiate yourself from other entries in your category. A new book, “Different”, subtitled “Escaping the Competitive Herd” (Crown Business, 2010) puts a whole new and important spin on that old marketing saw. The author, Professor Youngme Moon, teaches at the Harvard Business School.

Professor Moon’s thesis is that if you only make direct comparisons on features you may have the “perverse effect of making you just like everyone else”. It reminded me of John Hartford’s lyric from the late ‘60’s—“What’s the difference being different when it’s different now that looks alike”. Professor Moon suggests that we hop off the competitive treadmill and do something that is MEANINGFULLY different. Lots of people promise that with every campaign but the author gives a good roadmap for doing it.

The book cruises along pleasantly with simple logic and some nice examples. Then the reader encounters a chapter simply entitled “Hostility” which hit me like a freight train. Her argument is that some brands differentiate themselves meaningfully by admitting that they are not for everyone but rather for a small minority. Their advertising deliberately tries to polarize people as do their products. Some people love them but an equal or larger group hates them. She states that they do not lay out the welcome mat. “Hostile brands don’t market in the classic sense of the term; they anti-market.” She gives several great examples with my favorites being Marmite, Red Bull, and Mini Cooper.

Marmite is a sticky brown food paste that has been around the United Kingdom for a while. You either hate it or are a true aficionado. I vividly remember staying at a British B&B some years back and watched people in the dining room slathering it on their “bits of toast.” I had to try it although it reminded of me of oil that had been sitting in the crankcase way too long. The stuff was dreadful or as the Brits would say “bloody awful.” But others in the breakfast nook scarfed it up with abandon. Their theme line is “Love it or hate it” and a TV spot of recent vintage has a blob of Marmite terrorizing a British town. As a boy in New England, there was a soft drink called Moxie which triggered similar polarized reactions. The great Ted Williams endorsed it so whenever we went to Fenway Park to see the Red Sox, I always ordered one and could never finish it as it struck me as having an awful medicinal taste. Finally, at the ripe age of ten, my father stepped in and stopped me from getting one saying “how about coffee milk (a great Southern New England tradition) or a Pepsi, Don? You know you won’t finish the Moxie.” Later that day, Ted Williams hit one of his last home runs which was thrilling and, to my father’s joy, he did not have to finish my Moxie for me. Moxie would have been a perfect candidate for a hostile brand. Instead, they took the high road and used New England’s greatest hero as spokesman.

Red Bull is well known to all of us. But the story behind the story may not be. Austrian entrepreneur Dietrich Mateschitz did his due diligence prior to launch and tested Red Bull extensively. Research results stated that the products coloring, sticky mouth feel, and taste were “disgusting.” One researcher wrote that “no other product has failed this convincingly.” Mateschitz’s response was a simple “great.”

He was not one to pander and as Dr. Moon put it refused to “even consider the possibility of modifying the product to sand away the rough edges.” Somehow the product caught on in clubs and select bars and was nicknamed “liquid cocaine”, “speed in a can” and “liquid viagra.” This spawned a consumer boycott by some worried about its health effects. Red Bull did no counter advertising. Their tone was “if Red Bull makes you nervous, don’t drink it”. The product has succeeded and has a hard core of devotees. To date, they have never flinched.

The final example is kind of a soft ball relative to the previous two UNLESS you saw their initial advertising. The Mini Cooper is a cult favorite which appeal to a certain class of driver. Early on they were strident. Initial ads were “The SUV backlash starts here”. To people who were worried about the small dimensions of the car, they simply stressed it especially on billboards. They were blunt and brazen with a very direct message.

What excites me about this discussion of hostile brands is that there is a world of media options available these days to allow a hostile brand to obtain awareness even if your budget is modest by traditional launch standards. Imagine a rollout into a few test markets. You could put together a package of cable channels with your local interconnect that would be a nice fit to the in your face or irreverent message that you were using. On line, the possibilities are endless. There are thousands of sites with an audience who might be turned on to your product and would not be offended by a “take it or leave it” positioning. New video options abound and would be inexpensive but nicely targeted. It almost makes me want to be a 28 year old media planner again.

Some brands are obviously too vanilla to be hostile brands. But, there are many like the Moxie of my youth that would be excellent candidates. Dr. Moon has done us all a great favor. Going forward her message of meaningful differentiation is sound but her defining the hostile brand and its applications is inspired.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Friday, August 20, 2010

A New Twist on Good To Great

In 2001, Jim Collins wrote a great business best seller entitled “Good to Great: Why Some Companies Make the Leap…and Others Don’t.” In general he defines “great” largely on financial performance several times better than the market norm over a fairly long period of time. Some of the companies that he singled out who made the transition from good to great were: Abbott Labs, Kimberly –Clark, Nucor (steel and industrial conglomerate), Gillette (now a division of Procter & Gamble), Walgreen’s, and Wells Fargo.

He described several characteristics of these winning firms:

1) Humble leaders who do what is best for the long term.
2) First thing is to get the right people on your bus and then decide where to go.
3) Always confront the brutal facts regarding your industry but do not give up.
4) Be disciplined in all things at all times.
5) Remember that small initiatives are additive; they act on each other like the wonder of compound interest.

The book made a lot of us think. I remember vividly at the time if I had the right people on my bus. Last week, I was speaking at length with a general manager of a TV station in a mid-sized market. He told me that things were much better than last year but lamented—“this used to be a great business.” It certainly was. Many years his predecessor in the job had profit margins of 40-50%. The station changed ownership several times in the 70’s and 80’s as financiers felt that TV station ownership was a sure thing. Buy it and flip it several years later for a nice profit was the mantra.

Well, times have changed. In many markets, it is no longer a great business. But, as I stressed to my friend, it is still a VERY good business. And, with a manager such as he who trains his staff well and is fair with them, has close ties to the local community and hustles like hell, it should stay that way for some time to come.

All conventional media are going through this but the stage of downward evolution varies significantly medium to medium. Newspaper was a great business thirty years ago and a good one 15 years ago. Now, with few exceptions, it is a tough battle for survival unless some new technology can bail them out and bring in younger users. Magazines are a really mixed bag with a blend of successes and failures each year with new titles and they all struggle to monetize their online product. Radio could become very good or even great again in some cases if the corporate bean counters go away and local ownership comes back strongly. Outdoor, the last true mass media type, may have a big resurgence as TV continues to fragment and digital options for video multiply over the next several years.

But TV can still do well in the right hands. My friend is a very decent fellow and a hard headed realist. He laughs about his station site which gets into many advertising packages although he cheerfully admits that he feels many of the site visitors are nervous 60 year olds worried about traffic or snow for their evening drive home. Still, he soldiers on, makes a nice living, and does his best to provide value for those to whom he and his staff sell advertising. The days of dropping huge sacks of gold back at headquarters are over. But his station remains solidly profitable for his company which has owned the property for more than 20 years.

The great to good concept is sneaking into other traditionally solid businesses. Someone who fancies himself a securities analyst told me that Coca-Cola and Pepsico have gone from great to good in recent years. My attitude is that there is some truth in his thesis if he is referring to their US business for cola which is quite mature and where the margins are paper thin. But overseas they are just getting started. Indonesia, which some pundits say will be the next BRIC country (Brazil, Russia, India, China) of dynamic economic growth, has a per capita Coke consumption similar to the US in 1910. So, growth overseas for these beverage companies and McDonald’s, among others, should be quite robust as a middle class emerges in what were third world nations only yesterday. The US is only about 5% of the world and we need to keep that in mind.

Finally, I stressed to my broadcaster friend that there is nothing wrong with running and optimizing a good business. The easy money days are over for a lot of us but there is no need to be depressed. If TV truly is doomed a decade or more from now, I bet my plucky friend and his station will be one of the last to fall.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Saturday, August 14, 2010

The Scary New Scenario of the Paradox of Thrift

On June 15, 2009, I posted an article entitled “The Paradox of Thrift.” In brief, I talked about the economic concept developed by Lord Keynes in the 1930’s. The idea is that in a downturn when people get worried about the future, they tend to consume less and save more. So, recovery can be slow as consumer demand lags due to largely to consumer fear. In the world of 2010, it is even more serious with a U.S economy that is now 70% consumer driven as compared to the 1930’s when the industrial base was a larger share of the economy that that of consumer activity.

When I posted the report on the Paradox of Thrift some 14 months ago, the U.S. savings rate was at 4.7% (it had been zero a year earlier!) and the official unemployment rate was 8.9%. Last Tuesday, new figures were released and the savings rate was at 6.4% which is the highest level in decades. People who have jobs are still uneasy and are saving aggressively. Back to school sales to date are 17% below last year’s levels! And, government unemployment levels have crept up to 9.5% from 14 months ago.

Now, over the years I have learned to respect the difficulty of working with a mass of information. And, looking at only two data points—the savings rate and the unemployment rate do not make a definitive economic analysis.

But my innate optimism was shaken and shaken hard in recent days when I considered two more facts. Our growth rate appears to be dipping back to zero. I will let the professional economists and pundits waste time on whether we are heading into a “double dip” recession or not. The other datum is chilling and not many people want to talk about it. Most economists agree that due to demographics and new graduates entering the work force we will need 3.3% growth rate in Gross National Product (GNP) to lower current unemployment levels. When the economy is sailing along as in the past at 4% growth and a zero savings rate in our 70% consumer driven economy, job creation was almost automatic. But now, with anemic growth at best and a very high savings rate, vibrant job growth is going to be a long time in coming.

So, if you are a broadcaster, cable executive or advertising manager, be realistic when the boss or headquarters asks for double digit revenue increases for 2011. There are some pockets of prosperity in a country with a few hundred media markets but aggregate consumer demand across the US will likely be tame for a while. Your sales teams may go at it tooth and nail but the increased advertising dollars will be hard to find in many markets.

Who is to blame? Many people point the finger at George W. Bush who lowered taxes for the affluent, Wall Street’s greed or President Obama whom they label as a socialist. All three have not helped much but the American consumer is largely responsible for what has happened. We had it too good for too long. For two generations, we saved less and less and borrowed more and more. If it took 60 years to get us into this mess, we are not going to be out of the woods in another six months. Recovery is going to be slow in my opinion and, for many, painful.

Am I afraid? No way. Concerned? You bet. And you should be too.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Sunday, August 8, 2010

The Old Metric Lives

Since the early 1960’s (before my time) many people used a very simple calculation and still do to determine whether a retailer should advertise on spot television. Fast food is where it has received the most acceptance but I have seen it work against several categories over the years.

The metric is very simple. Divide the number of retail locations (points of distribution) that an advertiser has in a Nielsen DMA in to the total number of TV households in the DMA (Designated Market Area). If the number is under 30,000 Spot TV has an excellent chance of paying out. If it is in the 30-50k range per point of distribution it is an iffy proposition. Over 50k per retail location and TV is very hard pressed to pay out other than with a destination venue such as a luxury car dealer or huge big box retailer. Keeping this metric in mind saved me a lot of pain over the years and won me the love of some radio stations who thought I was simply helping them. The reality is that TV is wasteful for some retailers and a bonanza for many others.

In the last few weeks, I spent a lot of time in New England. I was not in Boston or Hartford but spent most of my time split across the other DMA’s in the region. Something amazing was going on. I sampled the 6pm local news in each mostly to get the weather report for the next day. In a few markets, there were small retailers buying the local news. I do not know what they paid but was stunned simply to see them there. Once restaurant with two locations advertised across a DMA with 619,610 TV households. So, TV households per unit were not in the vicinity of 30 thousand but were nearly 310 thousand per location! How could that possibly pay out for the advertiser? Another advertiser, a marine supply company with one location advertised in the news in the same DMA. As I moved across much of the six state area, I saw other questionable placements but none quite as bad as the two mentioned above.

Don’t get me wrong. I applaud local stations for the chutzpah to bring new advertisers on the air in a difficult environment. Yet, realistically, the odds of some of these people succeeding seem very remote. These advertisers belong on local cable not on over the air TV. Period!

How does it happen? Many young planners and buyers do not do their homework. There is no analysis. They have never heard of the 30,000 TV households per store rule because no one taught them such simple rules which cover a multitude of sins. Perhaps their clients were eager to get on TV and pushed them to it. An experienced media person would tell the client what a long shot such a buy has of ever paying out.

As I have said before here, we need a back-to–basics approach with media planning. In my home region of New England, they clearly need it more than most. The old 30k metric remains a decent yardstick. It should be the first screen a planner makes before considering local television.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com