Archive for the ‘Marketing Information System’ category

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.

Advertisements

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

Is Your Marketing Operating at Only 50% Effectiveness?

July 28, 2011

In my 38 years of practicing marketing and my 25 years of teaching it, I am amazed at the ineffectiveness of much of the marketing that is practiced. Of course, after thinking about why this might be, the reasons seem obvious. Most receive their marketing education from negative portrayals of marketing in movies and television or from professors that recycle the outdated concepts they have been taught using textbooks written by those that have little or no experience practicing marketing in the real world. In fact, there is a famous John Wannamaker quote in which he said, “Half of the money I spend on advertising is wasted; the trouble is, I don’t know which half.” One important reason why half of it doesn’t work is that most marketers learn the 4P’s of Marketing. In my view, the Marketing Periodic Table of Elements has 7 fundamental building blocks. This means that most marketers are missing some of the essential tools they need to create effective marketing.

The 4P’s of Marketing

I have taught for business schools at six different universities around the world — four in the US (USC, UCLA, CSUN, and Pepperdine) and two from Europe (Aalto University in Finland and the Copenhagen Business School). Most marketing professors I know teach the 4P’s of Marketing because this is what they learned when they went to school. The marketing they teach is stuck in the 1940’s when the 4P’s were invented. It is no wonder that too many marketers are unable to do effective branding, have trouble determining if their marketing strategies are working, and are finding it difficult to incorporate social media into their marketing strategies. The 4P’s, which include product, price, place (distribution) and promotion, are essential. However, there are 3 important fundamental concepts that are missing from this list – corporate image (P&G calls this projection to make it a P), positioning, and the marketing information system.

To do branding properly, it is critical to understand corporate image and positioning and how these two building blocks interact with each other in order to develop effective branding strategies. Furthermore, running a company without an effective marketing information system is similar to flying a plane or driving a car blindfolded and in handcuffs.

The Seven Building Blocks of Marketing.

I contend that to do marketing properly, marketers need to expand their fundamental elements to the following seven building blocks. I present them in the typical order in which they should be conceived.

  1. Marketing Information System. A system to research, monitor, collect, analyze, report, and take action on information from the marketplace. This system should be on 24/7, collect and report information in real time, and be able to distinguish legitimate information, or signal, from propaganda, or noise. The starting point for effective marketing is to research the market.
  2. Corporate Image. This is the image of the organization, division, or inventor that develops the products (goods and services) to be sold. Key CI strategies involve Creating, Protecting, and Enhancing this Image.
  3. Positioning. Positioning is comprised of two sub components that I call the lock and key. (1) Lock: Identifying the market segment with an unfilled need, and (2) Key: Creating an image of the product to fill that need better than competitors.
  4. Product. Products are goods and services you develop to meet the needs of your market targets and to achieve the goals of your marketing plan.
  5. Price. Price is the amount of money buyers are willing to pay and for which sellers are willing to sell their products. Once your product is defined, you can determine the cost to make and distribute it and use this information to devise your pricing strategy.
  6. Distribution (aka Place). Distribution is the process of making it convenient for market targets to find, buy and use your products. Organizations distribute products via well-defined channels that may or may not include resellers known as Distributors (Wholesalers) or Dealers (Retailers).
  7. Promotion. Promotion is the process of communicating the benefits of your “complete” product to the marketplace to generate a buying action. A complete product is one that incorporates elements of the other building blocks.

Good marketers use these building blocks (and their sub-components) to create marketing strategies to achieve the goals of their marketing plans.

Effectively using the 7 Building Blocks.

To create effective marketing that works, good marketers need to understand these building blocks and how they interact in the marketing mix much the same way that a good chef knows how ingredients interact to make customers happy.

Future posts will delve into more detail and apply these building blocks to creating effective marketing strategies that work to achieve the goals set forth in the marketing plan.

Related:

Structure of a Successful Marketing Communication

10 Steps to Building Better Brands

Memorable Mascots Make Marketers More Money

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 70 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 Ira S. Kalb’s book Nuts & Bolts Marketing.

Turning Customer Complaints Into a Powerful Marketing Machine

July 11, 2011

The way companies handle complaints can mean the difference between success and failure in our increasingly competitive world. Businesses that turn complaints into opportunities for building closer relationships with customers are the ones that are most likely to survive and prosper.

Complaints are opportunities to build a stronger business

The complaint is a signal that should not be ignored. When customers complain, they are giving your company an opportunity to fix what is wrong and improve your business. Why? Customers act in their own self-interest, and they are in a unique position to tell your company the unvarnished truth — something your employees are unlikely to do because it might reflect negatively on their performance or they may fear that you might “kill the messenger” rather than listen to the message. Just about every comprehensive study done on this subject points to greater success for companies that turn the negatives represented by complaints into positives.

TARP Studies

John Goodman did pioneering customer service research through TARP, the company he founded in 1971. He showed that, while customer service is typically a cost center in most companies, it could be turned into a powerful marketing machine to drive sales, repeat business and greater profits. His research showed that roughly 4% of customers (1 out of 26) that were “wronged” by a company complain. The other 96% (25 out of 26, or the silent majority) stop buying and tell 9 to 10 others within a week about their poor treatment. This means that a negative word of mouth pyramid averaging 250 is created. If the company is able to satisfactorily solve the problems of the 4% that complain (turn the negative into a positive), they will tell 6 to 7 others within a week that the company solved their problem and this will result in a positive word of mouth pyramid of 250 customers that say good things about the company. The positive group will also develop a closer relationship with the company. What can you do about the other 96%? You can go through your customer list and contact customers that have not bought products from you in a while and ask them why you have not heard from them. This will identify a good number of negatives that you can turn into positives. And, in cases where there were no negatives, the contact is another opportunity to generate more business.

Marriott research

In their book, Turned On, Roger Dow and Susan Cook describe the Marriott research done to identify which guests intended to stay at the Marriott again. They divided guest stays into 3 groups A, B, and C.

A = Nothing bad happened during their stay.

B = Something bad happened, but Marriott fixed the problem.

C = Something bad happened, but Marriott did not fix the problem.

The percentage of these three groups that intended to return to the Marriott were as follows:

A = 89%

B = 94%

C = 69%

This corroborated the TARP studies that showed that a fixed relationship creates a more loyal customer than one that was never broken. The more a company is able to fix what is wrong, the more they build a positive reputation.

Opinion Research studies

Opinion Research did studies that showed that when choosing between similar products, 87% of customers choose the product from the company with the better reputation. Companies get better reputations by taking exceptionally good care of their customers. Bloomsberg Business Week recently compiled a list of the top 25 companies in customer service.

Develop a system to handle complaints and turn them into positive outcomes

How can your company use this information to turn complaints into a powerful marketing force that improves your business and reputation?

  1. Train you people to look for complaints and view them as opportunities to neutralize negatives and build stronger relationships with customers.
  2. Record the complaint so that it can be electronically distributed.
  3. Send it to the appropriate person or department with the authority to fix what is wrong.
  4. Make sure they fix it as quickly as possible.
  5. Follow up with the customer to insure that they were satisfied with the fix. If not, expedite a solution.
  6. Give them a code to use when they purchase from you again or refer others (you can give them an electronic coupon or code so that when they buy again or refer others they will get a discount).
  7. Track their repeat purchases and referrals.
  8. Report statistics on repeat purchases and referrals stemming from the fixed problem.
  9. Calculate the ROI (return on investment) of the entire process.
  10. Use positive results and customer quotations in your marketing communications (after getting permission).

How might you turn complaints into a marketing force to improve your business?

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. He is frequently interviewed by various media for his expertise in branding, crisis management and strategic marketing. Follow him on Twitter.

image courtesy of K&A Press from Nuts & Bolts Marketing by Ira S. Kalb