What You Sell Is Not What They Are Buying

violinWhy would people pay more for something that is provably the same as another thing that is less expensive? Two pairs of jeans can come off the same production line, one gets a “private label” and the other a “designer label,” and people will pay more for the designer labeled product. Clearly they value the label and the cachet they perceive it imparts. Why else would you wear the label on the outside anyway?

However, that strategy is not universally true. Many years back General Motors was “found out” for building virtually identical cars and putting different brands on them. This tarnished the perceived value of the supposed higher-end brand. They then changed their approach.

Could be that if people were made broadly aware of the identical-ness of their beloved jeans in my example above, it would tarnish that brand too.

All that being said, people buy more than the “thing” and even if you show them their choice is “wrong,” they are likely still going to make the same one. I was reminded of this again in reading about a recent study published in the Proceedings of the National Academy of Sciences. The journal reported on a study of violin choices by world-renowned violinists. Most, if not all, master violinists would love to own an 18th century Stradivarius violin. These “gold standard” violins are believed to be superior, for unknown reasons, and can command millions of dollars when sold.

The study reported that in a controlled, blind test in more than one playing environment, violinists actually chose new violins over the Stradivarius most of the time. They felt the new violin was a superior instrument.

Can we expect this valid, repeatable study to diminish the value of the Stradivarius and cause violinists to choose the new violin over the Stradivarius given a choice? Can we expect the market value of the Stradivarius to drop? I doubt it.

It may seem to be irrational to pay more for an 18th century instrument, which is provably inferior to the newer instrument that costs materially less money. But to believe that you show a lack of understanding of what is being bought.

If you want to get higher prices for your products and services, stop being rational. People are irrational about their pricing decisions, but they are predictably irrational. And one thing is flat-out true: People will pay more for what they are buying than what you are selling.

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Brand Extension Rejected

superchixlogoYum Brands is testing a concept called Super Chix in Texas. The short version is that it’s a premium chicken sandwich, fast food store. It also borrows from In-N-Out by having a very limited menu, but it’s chicken not hamburgers.

The target seems to be Chick-fil-A. A difference, besides the limited menu and possibly taste, is that while Chick-fil-A claims to have invented the chicken sandwich (not the chicken, just the sandwich), Super Chix claims this is the last true chicken sandwich.

Will the concept be successful? I don’t know, as it’s too soon to tell, and I have not tried it as it’s a single store test in Arlington, TX. The concept sounds excellent however, but execution is key.

What strikes me positively is that Yum Brands owns KFC and is making no mention whatsoever of KFC. They are working hard NOT to create any brand connection between Super Chix and KFC. Good for them.


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Back to the Future Redux

mmsintubesIn October of 2009 I posted about the revival of so-called 1-1 or personalized marketing, and my suggestion that it was not really “new.” And I don’t mean just because Peppers and Rogers published The One on One Future back in 1993.

However, while the promise of personalized marketing has not been fulfilled, it continues to be the “future.” (Reminds me of an expression we had in the semiconductor industry, that Gallium Arsenide was the technology of the future and always would be. Of course with the advent of LEDs, the material did finally have its day, but I digress.)

In a recent study by Adobe, CMOs said that personalization was a key to the future of marketing. Maybe this time. However, it should be noted that in the same survey almost half of the CMOs say they are trusting their gut to drive their marketing investments.

The more things change, the more they stay the same.


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If You Can’t Fix It, Feature It

buicklogoA while back, Roy Fields, a Corporate Vice President for Teledyne, said those words to me. Over the years, I have decided it was one of the great pieces of advice and “lines” I have ever received. Turns our Buick understands this; at least now they do.

In their latest commercial, which began airing last week, the accept the position that Buick holds and recognize they are going to have to work hard to change that perception. They have done an excellent job of changing the product, but as Ries and Trout taught us decades ago, it is tough to change a mind once it has been made up.


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Do Tag Lines Really Matter?

gotmilkWhenever a company replaces their CMO or otherwise needs a new “something,” they often change their tag line. Problem is, not much else changes, just the tag line. Makes the company feel better, but often it is just rearranging the deck chairs.

Recently the The Milk Processor Education Program (MilkPEP) decided to drop “Got Milk.” In this case it’s for strategic positioning reasons, which makes sense, assuming the tag line helps drive sales.

Sales of milk in the US are described as sluggish and the new strategy is designed to increase milk sales by tying it to health. The new tag line is “Milk Life.” While nowhere near as good as the original health related milk tag line, “Every Body Needs Milk,” it’s clearly a return to that positioning. (Unfortunately for the American Dairy Association, every body does not need milk, so the campaign was quashed long ago.)

Will it work? Can’t say, hard to tell. People eat less breakfast at home and those that do, use less milk (not eating cereal as they used to). However, this also affects the cereal industry so look for them to jump on board in some way as they need to work to increase cereal sales.

Do tag lines matter? Maybe, but the issue is driving milk sales by refocusing people on a reason to drink milk. However, that will require a behavior change, and whether a tag line change will help, I do not know, but in this case it shouldn’t hurt.

All that being said the creators of Got Milk, the California Milk Processor Board, are sticking with it.


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JC Penny’s 360 turnaround continues

If you have been following my JC Penny critiques, the title is self-evident, as there is no need to comment further on this article, which speaks for itself about the new/old JC Penny.


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Has JC Penny Rediscovered a Business Management Secret?

I posted a bunch last year (search the blog archives for keyword Penny) about my feelings about JC Penny’s actions in abandoning their repositioning strategy. Bottom line was that if the old strategy was not going to achieve the company’s goals, how does bringing it back make sense? I even hypothesized that the company might file for Chapter 11 after the holiday season. (I was wrong on that one.)

Let’s review quickly the facts of their history since returning to their old strategy: Their 2013 holiday sales were up over 2012. Their outlook is positive, their stock price is up and they are re-attracting lost customers from the “failed” repositioning strategy. Simply put, they are getting lots of positive press.

Why? They have not even returned to the levels they were at when the Board decided their original, and now return-to strategy, was insufficient to achieve their goals. Answer: Make things worse for a while and then the old, unacceptable situation doesn’t seem so bad.

Reminds me of the old story about the guy beating his head against a wall and when asked why he was doing it he replied, “Because it feels so good when I stop.”

I reiterate my original position from when the Board fired their repositioning CEO, Ron Johnson: The Board is incompetent, in my opinion. Either the company did not need a repositioning to achieve its goals or it did. You can’t have it both ways. But then again, if you make things worse, then striving to get back to a previously unacceptable position can seem a positive.


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