Thursday, October 15, 2009

Upgraded Extensions May Make 'Basic' Version Look Worse

Consumers Don't Like Choosing Between Quality and Price

A recent trend in marketing is the downgrading of established brands by upgraded line extensions.

Take Budweiser Select. According to Anheuser-Busch, "When it comes to brewing beer, the prevailing assumption is that you can't have it both ways. You can either aim for the best possible flavor, forgetting about calories and carbs; OR you can keep the calorie count in check, and sacrifice taste along the way. Budweiser Select is the exception to these brewing rules." So what does that make Anheuser-Busch's other low-calorie beer? "Bud Light Mediocre?"

Kroger, the country's largest supermarket chain, has opened new superstores in Dayton, Cincinnati and Atlanta, called "Kroger Fresh Fare." So what does that make regular Kroger stores? "Kroger Stale Fare?"

Well, you might be thinking, nobody pays attention to words like "fresh fare" or "select" anymore. They are just part of our daily routine of pleasant promotional puffery. It's true. The language of marketing has had the belief squeezed out of it. Years of hyperbole have wiped out the meaning of many of the words used in brand names and advertising.

There are, however, a number of examples of line extensions that could seriously damage the core brands.

Take Vitaminwater10, Glacéau's latest extension of its Vitaminwater brand. What do you suppose most consumers think when they see Vitaminwater10, a name that implies the brand has only 10 calories? "What? Regular Vitaminwater has calories?" It's water, for goodness sake, and everyone knows that water has no calories. But sure enough, when a consumer looks at the label of a bottle of regular Vitaminwater, he or she finds it has 50 calories per serving. The fitness crowd isn't going to be happy about that, especially when they find out that all the calories come from sugar.

It gets worse. Glacéau also plays the "per serving" game, which can make any product look like a diet product. As it happens, the 10 calories in Vitaminwater10 is per-8-oz. serving, which means that a 20-oz. bottle contains 25 calories. And a 20-oz. bottle of regular Vitaminwater contains 125 calories. That's going to really upset that fitness crowd. What's next? Coke12 with only 12 calories per serving? Serving size: one ounce.

It's odd. Consumers seldom read the fine print on product labels unless companies give them a reason to. For years, Miller High Life ran a "Miller Time" campaign to attract the blue-collar crowd who apparently never bothered to read the "The Champagne of Beers" slogan on the High Life label.

Take Clearly Canadian, the first of the New Age non-carbonated beverage craze. Introduced in 1988, sales took off like those of the iPod.
1989: $5.0 million.
1990: $17.0 million.
1991: $61.2 million.
1992: $155.2 million.

With net profits of $14 million in 1992, Clearly Canadian looked like a clear-cut winner. It never happened. The next year (1993), sales dropped to $90.9 million and the company's profits disappeared. Sales continued to fall every year until they reached rock bottom in 2006 at $7.5 million. Where is Clearly Canadian today? In deep trouble. In the past eight years on sales of $124.7 million, Clearly Canadian managed to lose $54.7 million.

What happened to Clearly Canadian? Back in 1992, Tom Pirko, president of Bevmark consulting firm, accurately predicted the reason for the product's rise and fall: "Clearly is the first product that works on the basis of mimicry. People buy it as a mineral water and it's a soft drink. Will the consumer continue to believe in the mimicry?"
Not after the consumer read the label. An 11-oz. bottle of Clearly Canadian contained 100 calories. And the word got around. A hundred calories for a clear, non-carbonated beverage? Whoops. Back to Diet Coke.

Speaking of which, perhaps you have noticed the slow erosion in the per-capita consumption of cola in the U.S.
2004: Down 0.2%
2005: Down 1.5%
2006: Down 2.1%
2007: Down 3.6%
2008: Down 4.1%

Why didn't the launch of Diet Coke stem the decline of the Coca-Cola brand? (If you like cola taste, but not the calories, you had an alternative.) Two reasons: (1) Regular Coke is perceived as a brand with "too many calories." (2) Diet Coke is perceived as a brand that "doesn't taste as good" as regular Coke. The introduction of the mid-calorie colas, C2 and Pepsi Edge, only added to the confusion. Consumers don't like sacrifice (calories or taste), nor do they like compromise.

And so consumers looked for alternatives. Hence the rise of Clearly Canadian, until it too fell into the calorie trap.
Nor did the 1994 launch of Clearly 2, a version of Clearly Canadian with only two calories, stem the decline of the brand. In my opinion, Clearly 2 probably accelerated the decline because it reinforced the idea that the base brand, Clearly Canadian, has too many calories. Someday I expect cola to make a comeback, perhaps with stevia as a natural non-calorie sweetener. (Coca-Cola with Truvia and PepsiCo with PureVia are obviously exploring this possibility.)

Another interesting upgrade is Scope Outlast, Procter & Gamble's latest extension of its mouthwash brand. "Breath feels fresh up to 5X longer," says the label. Great, but at Rite-Aid, Scope Outlast costs 45% more per ounce than regular Scope. So the consumer is stuck with an unpleasant choice: Buy the obsolete product and save money, or buy Scope Outlast and get ripped off. (Reminds me of the pain of flying. Sit in coach and suffer physically or sit in first class and suffer financially.)

Then, too, I wonder how many consumers are going to read the fine print under the slogan, "Breath feels fresh up to 5X longer?" ... "Vs. brushing alone." What? Any normal consumer would assume "5X longer" means that Scope Outlast outlasts regular Scope up to five times longer. So, Procter & Gamble, how much longer does my breath feel fresh after using regular Scope vs. brushing alone? 1X? 5X? 10X?

It's almost an article of faith among marketing people that the more varieties the better. That's why there are five varieties of Charmin. Ten varieties of Cheerios. Sixteen varieties of Wheat Thins. Thirty-one varieties of Tide.
Then there's Gatorade Tiger, with three flavors. Gatorade A.M. with two flavors. Gatorade Endurance Formula with three flavors. Gatorade Energy Bar with two flavors. Gatorade Nutrition Shake with three flavors. Gatorade Thirst Quencher with seven flavors. And Gatorade G2 with three flavors. Total: 23 flavors or varieties of Gatorade.
And why would Starbucks introduce its own brand of instant coffee? Even worse, promote a "taste challenge" inside Starbucks stores to see if consumers can tell a cup of brewed coffee from a cup of instant? "We're convinced a majority of people won't be able to tell the difference," said CEO Howard Schultz. So how does it help Starbucks to switch consumers from Fourbucks to Onebuck?

Years ago, I was an agency account executive working on the launch of the first Peugeot automobile in the U.S. market, the Peugeot 403. It's the same car Peter Falk drove in the Columbo television series. A dowdy-looking vehicle to be sure, but Road & Track magazine named the Peugeot 403 as one of the "seven best-made cars in the world." The first year, the car sold quite well and the client was pleased. The next year, we got the word that Peugeot was going to introduce the 404, a better-looking car with a slightly larger engine. Great, I thought, replacing the 403 with the 404 could substantially increase sales.

But we're not going to that, replied the client. We're going to sell both models side-by-side in the showrooms.
I was appalled. And for months I argued with Peugeot's U.S. general manager. The old model, the 403, is going to look outdated next to the 404. And the 404 (which was 15% more expensive) is going to look too expensive next to the 403. I tried to offer options. You can either bring in the 404 and discontinue the 403 or stick with the 403 and don't bring in the 404. Finally out of sheer frustration, the general manager said to me, "Please, Al, stop it. These decisions are made in Paris."

When the second model hit the showrooms, instead of doubling sales as the client expected, total sales actually declined. Saturn is a repeat of Peugeot. Initially, the Saturn was available in one model only, the S-series. (You could have it in a two-door, a four-door or a hatchback version.) Four years after its introduction, Saturn hit its high-water mark, selling 286,003 vehicles in 1994. By 1998, Saturn had a problem. Sales had declined to 231,786, a result that could have been expected since the S-series was getting a little long in the tooth. Solution: The introduction of a larger, more expensive Saturn, the L-series. Headline of an April 5, 1999 article in Automotive News: "Saturn expects new model to double sales."

The article featured Cynthia Trudell, president of Saturn Corp: "With a new mid-size sedan and wagon, Trudell is betting that she can double Saturn's sales to about 500,000 units within a couple of years." It never happened. Sales never again topped the 286,003 vehicles Saturn sold in the year 1994. And last year, with five models to sell (Astra, Aura, Sky, Outlook and Vue), Saturn sold just 188,004 vehicles. Saturn's S-series and L-series were like the Peugeot 403 and 404. The older S-series cars looked "outdated" and the newer and larger L-series cars looked "too expensive."

Marketers should study history. The world's largest-selling vehicles were often a single model with only minor updates on an annual basis -- Ford's Model T, for example, with more than 15 million sold. Then there's the Volkswagen Beetle, with over 21 million sold. There was no Basic Beetle, Super Beetle, Family Beetle, Turbocharged Beetle, Economy Beetle. There was just one model. I bought a Beetle in 1965 for $1,645. One price, no options.

No automatic transmission. No power steering. No air conditioning. No radio. No undercoating. No cash back. No financing. No discounts. No driving instructions. No sales pitch either. I gave the salesman a check and he gave me the key.

In architecture, less is more. In marketing, more is often less. 

Why It's Time to Do Away With the Brand Manager

P&G, Unilever Among Those Embracing New Roles in Social Media Age

BATAVIA, Ohio ( -- Managing a brand has always been a slightly odd concept, given that consumers are the real arbiters of brand meaning, and it's become increasingly outmoded in today's two-way world. That's why a new report is going to recommend changing the name "brand manager" to "brand advocate," and fundamentally changing marketer organizations in response to the onset of the digital age.

The report, due out next week from Forrester, finally puts the onus on marketers to change their structures -- a welcome conclusion for media owners and agencies who keep hearing how they should change, but often complain that their clients have done little to shift their organizations to cope with an increasingly complex world of media fragmentation and rising retailer and consumer power.

The new "brand advocates," as Forrester suggests renaming the role, will be seemingly more powerful and consumer-centric, much nimbler, and more real-time-oriented than the brand manager of today -- and they will be a lot more opportunistic in creating media partnerships, and a lot less loyal to their agencies.

Among the specific recommendations in its report, "Adaptive Brand Marketing: Rethinking Your Approach to Branding in the Digital Age," Forrester suggests "brand advocates" be responsible for rapid adaptations of global brand platforms and programs, charging centralized global brand strategists with ensuring what local managers do conforms with the brand equity and strategy. It also advocates ditching the formal annual budgeting process and upfront media-specific allocations in favor of frequently updated, on-the-fly plans that adapt quickly as conditions change and money earmarked upfront for initiatives, not specific media.

Forrester recommends giving market research and analytics, dubbed "consumer intelligence" in the report, a much more prominent and central role, while focusing more on newer "predictive modeling" providers than on historical marketing-mix models to target spending.
Moving in-house
The report also finds that "brand advocates" should shift emphasis from long-term external "partnerships" with agencies to rapidly shifting alliances with media and other content creators, and it says companies need to bring in-house some of the planning, research and creative functions they've outsourced in the past.

It also advocates recognizing the brand isn't the only organizational structure that's important for multibrand companies, but that structures aimed at marketing to demographic or other segment cohorts are equally important. And it also maintains that marketing executives should think less about anchoring annual plans around one or two big hits and more about doing many smaller things quickly and adapting based on real-time consumer feedback and other data.

Executives of big marketers Procter & Gamble and Unilever note that they're already doing much of what Forrester recommends. The global brand strategist/local brand advocate breakdown, for instance, resembles how they and other big household and personal-care marketers already organize.

P&G recently started organizing its beauty business along male and female lines rather than product groupings and is preparing to organize other divisions around different customer cohorts, too. And Global Brand-Building Officer Marc Pritchard pointed to such multibrand programs as My Black Is Beautiful for African-American women and BeingGirl for teen girls as examples of marketing to consumer groups rather than individual brand consumers.

Likewise, Mr. Pritchard said budget flux has become something of a way of life, too. "The volatility of the marketplace," he said, "has really caused us to have to look at things on a monthly minimum, sometimes [on a] weekly and daily basis. Digital gives you even more flexibility in your spending, but even TV is now being much more flexible on when you can spend."
In an e-mail, Unilever CEO Paul Polman compared his company's global brand directors more to orchestra directors than traditional managers, who are, in turn, more open to different types of partnerships. "Maybe the most extreme example of this is to be found in consumer-generated content, where we have invited consumers to develop communications for Omo and Vaseline as a complement to those generated by the company, and in the case of Peperami, we have even dispensed with the agency in favor of exclusively 'crowdsourced' content.

"However well traditional advertising agencies read the signals and recognize the need for radical change in their capabilities," he said, "few agencies can address all the communications needs of a brand. ... This is making the management of agencies increasingly complex, and raises challenging questions on how best to measure the value added by the respective partners and consequently how to manage remuneration."

Web-enabled consumer intelligence may be one of the biggest benefits of social media for marketers, Mr. Polman said. It's not clear that means a stronger role for research, he said, but "harnessing the power of the net can often render new forms of traditional research (such as advertising pretesting) that are faster and cheaper. And, again [as with ad agencies], it is not always the traditional research agencies that are first to pioneer new methodologies."

Forrester analyst Lisa Bradner, principal author of the report, hopes for marketers to move away from what she calls the "magic eight ball" approach of keeping research staff out of the loop except to periodically answer questions.
Many researchers and analysts would no doubt welcome such a move, but Rex Briggs, CEO of research firm Marketing Evolution, isn't sure changing structures or roles is the answer, as opposed to changing the people, specifically marketers who lead the effort.
Number-crunching skills
He believes marketers in the digital age need to be more "numerate," with more training in research and analytics even if they still rely on staff for help. Marketers today need to balance art and science, he believes, not unlike architects, musicians or cinematographers.

It's not yet clear that digital media in itself is important enough to marketers in many businesses to justify tearing up their organizational charts, he said. But even though no marketer gets paid today for what's going to happen in the fourth quarter of 2014, big marketers need to start changing now to be ready for then, Denuo CEO Rishad Tobaccowala said, simply because it takes at least two to three years for them to implement a structural change. Organizing around specific media makes less sense than organizing for rapid change, he said, since the future media landscape is in such flux.

Organizational behavior is still holding back change at many marketers, said Bob Gilbreath, chief marketing strategist at WPP's Bridge Worldwide and author of the new book "Marketing With Meaning."
Some of the organizations that have changed most have also changed their marketing the most, he said, pointing to Nike in its move from a heavy emphasis on TV to a much heavier reliance on digital and services and experiences for athletes. Unfortunately, he said, Nike has been mum on exactly how it's rearranged the organization.
Key to any change, the former Tide brand manager said, is a return to marketing as the focus of brand management, "rather than one of six things a brand manager does."

"So much of [brand managers'] time is subsumed by internal management, and so much of the creative process and planning is outsourced to agencies and other parties," Forrester's Ms. Bradner said. Brand advocates, she said, "really need to be in charge of the heart and soul of what the brand stands for. It does move you off the generalist track to be more of a pure marketer."

What will the new model be?

Denuo CEO Rishad Tobaccowala, a longtime thought leader on digital marketing, believes the brand-manager model of the future may be adapted from venture-funded startups or political campaigns than established marketers.

The growing complexities of digital marketing, social media, fragmentation and tracking all those things in real-time require bigger marketing departments, he said. Yet the reality is that big marketers generally are trimming marketing staffs or looking to squeeze more productivity from them at what he believes is the worst possible time. "You have this tsunami of challenges and opportunities at the same time you have a low water mark for staffing and resources," Mr. Tobaccowala said.

Venture-backed startups lack that big-company imperative to grow earnings twice as fast as sales, so are more likely to staff and organize as the job requires. But he also believes political campaigns -- which run on rapid iterations, real-time data monitoring and full recognition of the interplay between public relations, social media and advertising -- may provide another model for the future of marketing organizations.