Archive for September 2011

What’s the Gang of Four (Amazon, Apple, Facebook, Google) Really Up To?

September 29, 2011

All the talk in the past few days has been about Amazon’s Kindle Fire and how this will impact the Apple iPad and the 7 Dwarfs, which is what I call the other tablet products on the market (RIM Playbook, Motorola Xoom, Samsung Galaxy, HPTouchPad, etc.).

Media Focus.

Many have been focusing on the product features – what it has or doesn’t have. Others have been focusing on the Price – the fact that the Kindle Fire is being listed at $199 – $300 below most of the others (with the exception of the Best Buy fire sale price of $99 on the HP TouchPad).

What is Amazon Really Doing?

However, the real issue is the fact that Amazon seems to be employing the Gillette product strategy of giving away the razor and selling the blades. In this case, the real objective is not the product or the price. It is distribution. The Kindle Fire is a device to drive business to Amazon’s store and away from other online stores, such as iTunes/iBooks, Google, etc. Of course there are differences in the stores. Amazon sells just about everything and Apple is more focused on digital entertainment and education (books, movies, TV shows, …). The Kindle fire is also not positioned directly at the iPad (at least for now) since just about everyone that has tried to overtake the iPad has gone down in flames, with the iPad taking about 80% of the market. Instead, the Kindle Fire is both an offensive and defensive move to drive digital business away from other stores and toward Amazon. Every purchase on iTunes and iBooks is a sale that Amazon does not get. Conversely, every sale on Amazon is money that does not go to Amazon’s competitors.

The Real Objective of the Gang of Four.

Eric Schmidt, Google’s Chairman, coined the phrase the Gang of Four in reference to Amazon, Apple, Facebook, and Google – the companies he believes will define the Internet economy from now into the future. Notice the word “economy” is used. If you really read between the lines, it appears that this “Gang” is really striving to turn themselves into a bank as Warren Buffet and IBM did with their businesses. Once you have a bank, you have the cash on which you can earn interest, invest, and do all sorts of wonderful things. This seems to be the real focus of these titans, and it will be interesting to observe all the moves they make to move toward this goal. Watch out Paypal. You had a good idea, but you don’t seem to have the content or the scale of the Gang of Four.

What do you think? What marketing and business strategies can you employ to turn your business into a bank?

Ira Kalb is president of Kalb & Associates, an international consulting and training firm, and professor of marketing at the Marshall School of Business at University of Southern California (USC). He has won numerous awards for marketing and teaching, authored ten books and over 60 published articles, created marketing inventions that have made clients and students more successful. Various media frequently interview him for his expertise in branding, crisis management and strategic marketing. Follow him on Twitter.

image courtesy of flickr users, Claudio Andres + zolierdos.

That’s the Way the Cookie Crumbles: How Better Marketing Trumps a “Better Product”

September 18, 2011

Sunshine Biscuit, Inc. introduced the Hydrox cookie in 1908. Nabisco copied the idea and introduced the Oreo cookie in 1912. Those that knew Hydrox preferred it to the Oreo. It tasted crisper, was a little less sweet, and was made with vegetable shortening rather than animal fat (Note: Due to health concerns, at some point, Nabisco stopped using animal fat). Nabisco’s superior distribution and promotion gave it a far greater fan base, and turned the Oreo into an American cultural icon. In fact, their pervasive marketing gave most the notion that Oreo was the original and Hydrox was the copy. How did Nabisco do better marketing?

Corporate Image

Nabisco started in 1898 as the National Biscuit Company. A former member of Nabisco’s board, Joseph Loose, started Sunshine Biscuit, Inc. in 1902 with two others. From the start, Nabisco had the name advantage since it is sounds more descriptive and substantial.

Positioning

Since the Hydrox cookie predates the Oreo, it had the advantage of being uniquely first to the position – a cookie sandwich formed by two chocolate biscuits and white icing in the middle. However, Sunshine lost this positioning advantage because Nabisco spent much more on promotion to get into the minds of the buyers. Research shows that even though Sunshine later reminded the marketplace they were first, buyers did not believe it because Nabisco got into their minds first with more pervasive and superior promotion and distribution. This is reminiscent of IBM and Univac. Univac made the first computer, but IBM was first to get into the minds of the greater public as “The Computer Company.”

Already with a weaker corporate name, Sunshine further eroded its first mover positioning advantage by creating a weaker product brand name. The founders came up with the name Hydrox using some flawed product-driven thinking. They wanted the product to evoke goodness and purity, and water was the purest substance that came to mind.  So they combined the names of water components – hydrogen and oxygen – to form Hydrox. Many years later, when market research was used to test the name, most associated the name with a cleaning fluid rather than a cookie.

Brand

With both a lead in the Corporate Image and Positioning, Nabisco’s Oreo because such as successful brand that it is now given iconic status along with Coca Cola as part of the cultural fabric of America.

Product

Once the brand is firmly implanted in the brain of a far greater number of buyers, the product is perceived to be better. For example, by 1998 sales of Oreo had grown to $374 million compared with only $16 million for Hydrox. In 1996, Keebler (the company whose mascot is a bunch of elves) acquired Sunshine, and in 1999, renamed Hydrox “Droxies.” Kellogg’s acquired Keebler in 2001, and took Droxies off the market in 2003. As a result of thousands of petitions and phone calls to bring the product back, Kellogg’s brought back Hydrox under the Sunshine label in 2008 for the product’s 100th anniversary (using a separation strategy since they did not want to risk any damage to their corporate image). Within a year, due to insufficient sales, Hydrox was removed from Kellogg’s product line.

Price and Distribution

Given the much smaller numbers, Hydrox did not have the economies of scale to enable any price advantage. Faced with much smaller demand, resellers in distribution channels with limited shelf space were less inclined to carry the brand that consumers believed to be the copy (even though it was the original). Therefore Hydrox and Droxy numbers slowly disappeared, and were eventually eliminated from even the Kellogg’s web site.

Promotion

Without the scale and demand, it becomes harder and harder for both the manufacturer and resellers to justify large promotion budgets to reverse the decline. When companies don’t spend sufficient resources to promote the product, the sales and profit numbers erode further.

Marketing Information System

With dwindling numbers, both the manufacturer and resellers looked at their return on investment and eliminated the product even though those that know the product believe it to be superior to the market leader – Oreo.

What Marketers Can Learn

This is how the cookie crumbles and how a superior product (in the view of those that tried both) loses to the product that was better marketed. Inside-out, product-driven thinking can greatly limit the sales and profit potential of high-tech products. With consumer packaged goods, such as cookies, such thinking is usually devastating as it was with Hydrox. Other examples: Nike versus ASICS; Windows versus Mac; IBM versus Univac.

Ira Kalb is president of Kalb & Associates, an international consulting and training firm, and professor of marketing at the Marshall School of Business at University of Southern California (USC). He has won numerous awards for marketing and teaching, authored ten books and over 60 published articles, created marketing inventions that have made clients and students more successful. Various media frequently interview him for his expertise in branding, crisis management and strategic marketing. Follow him on Twitter.

images courtesy of flickr users, Like the Grand Canyon and basykes

Nokia’s Sinking Brand: A Nasty Side Effect of Being Product-Driven

September 6, 2011

Nokia announced it is slashing 7,000 jobs or 12 percent of its workforce, to trim operating costs by $1.47 billion while competitors, such as Ericsson and Apple, have seen their sales and profits climb. Nokia plans to increase the cuts to 17% by the end of 2012. The reason given is that Nokia failed to capitalize on the smartphone boom. That is only a very small part of a bigger problem – Nokia’s unwillingness or inability to do effective marketing.

Hired their first CMO in 146 years

While Nokia has been in business since 1865 and making portable phones since 1984, the Company hired its first Chief Marketing Officer, Jerri DeVard, on January 1st of this year. Surprisingly, Jerri’s background is primarily with consumer brands. Why is that a problem? Consumer brand marketers have had less than a stellar record after they joined high-tech companies. John Sculley (from Pepsi to Apple 1983-1993) and Cammie Dunnaway (from Frito-Lay to Yahoo! 2003-2007 and Nintendo 2007-2010) come first to mind. Nokia’s hope is that Jerri’s past position with Verizon Communications and her familiarity with U.S. wireless carriers will help Nokia to re-establish meaningful distribution in the U.S., where it has little if any presence in the smartphone market. With Verizon’s acquisition of the iPhone and continuing sales of Android-platform phones, Nokia is going to have to do a lot more than hire a former Verizon marketer and partner with Microsoft to get U.S. cell carriers to focus on its smartphone products.

Using numbers instead of names confirms their brand immaturity

Instead of giving their phones names to help the brand identity, such as competitors iPhone, Android, and Blackberry, Nokia continues to number their phones. For example, Nokia’s flagship smartphone model is called N8. Catchy isn’t it? When asked, why they use numbers instead of names, Nokia executives have told me they do it because it is hard to create names that are not already taken. Apple doesn’t seem to have problems naming their products. They even named the cover of the iPad2. Even Google, in spite of their penchant for perpetual beta, was savvy enough to come up with a non-Google name for their smartphone OS platform. I think it is a lot harder to lose billions of dollars in market share and slash your work force by up to 17% than it is to come up with a decent brand-name platform.

Not listening to the marketplace

Good marketers have a marketing information system to monitor, analyze, report and take action on what is going in their marketplace. Research in Motion introduced the Blackberry in 1999. It was so popular with users that some jokingly called it the “Crackberry.” Apple introduced the iPhone in 2007. Its popularity skyrocketed. Don’t you think someone in Nokia’s marketing department would have taken notice and been more proactive about developing a competitive product?

Marketing communications

While traveling between London and Helsinki, Finland, I saw a Nokia ad in the British Air flight magazine. It was for the Nokia 9000. This was a great product that many friends in Finland owned and loved. It was an early smartphone that could access the Internet, send and receive e-mail, and send and receive faxes in addition to be a full-functioning phone. The headline of the ad was “Pocket Phone… Pocket Fax.” It did not have the company or product name in the headline and it did not tell you that it could do e-mail (which is more important to most than fax capability). Upon reading the body text of the ad, which data shows that no more than 1 out of 6 people read, it had a great line that read, “It’s an office in your pocket.” This marketing communication did not reach its potential because the most important part was buried in the body copy that most readers (83.3%) don’t read. Too bad that the person that approved the ad did not know this data.

Product-driven rather than market-driven

The tragedy of Nokia is that, like too many technology-focused companies, they were product-driven rather than market driven. Instead of listening to the marketplace and hiring people with sufficient marketing expertise to properly brand and communicate the benefits of their product, they focused on making a better mousetrap. They made great mousetraps, but the problem is that the market preferred mousetraps from others that knew how to market them.

The lesson here is that to be successful in an increasingly competitive marketplace, being customer focused, or market-driven, is likely to give you a big advantage over being an inside-out thinker that is product-driven.

What do you think is the reason Nokia has gone form the top cell-phone maker to a distant follower in the smartphone market?

Ira Kalb is president of Kalb & Associates, an international consulting and training firm, and professor of marketing at the Marshall School of Business at University of Southern California (USC). He has won numerous awards for marketing and teaching, authored ten books and over 60 published articles, created marketing inventions that have made clients and students more successful. Various media frequently interview him for his expertise in branding, crisis management and strategic marketing. Follow him on Twitter.

image courtesy of flickr user, markomni