If we could just go viral…

Word of mouth (now called viral marketing because “mouth” is only a small piece of the communication method today) marketing is highly effective. Making it happen is everyone’s holy grail. We have participated in countless conversations with customers that start, “How can we get this to go viral?”

Good question.

Several so-called experts claim to know how, but if they really did, they would make a lot more money than they do by using it themselves or taking a piece of the action. It’s like the touts who tell you which horse is the sure thing in today’s race.

Ad Age recently published the top ten viral ads of all time. Positions 2-9 are held by major brands with big bucks advertising budgets. However the #1 position is held by a company that made itself with one of the best viral ads of all time: Blendtec and its Will it Blend Campaign. I own a Blendtec blender because of that campaign. So do LOTS of people.

Going viral takes some amount of luck and some amount of creativity. The mix is unknown and probably unknowable. However, that won’t stop the experts from claiming to know the secret. Just remember that in the California Gold Rush of the late 1840s, it was the suppliers to the gold miners who made the most money, not the gold miners.

Mitch

Price, Service and Quality: Pick Two

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The idea that you can have only two of the choices between price, service and quality has been an oft-quoted aphorism for decades. It has allowed some companies to justify their inability to compete. Or has been the basis of unfortunate pricing strategies. 

As we wrote in our paper Value Priced: Achieving Profits at Any Price Point, price needs to reflect the value received by the buyer. If you remove all costs that don’t add value, it is amazing the level of “quality” and “service” you can provide, while maintaining low costs. Singapore Airlines is a prime example. 

Condé Nast awards a World’s Best Airline award annually. Singapore Airlines has won it 21 of the last 22 times. Skytrax named it Airline of the Year three times in the last decade. Their level of service is legendary among travelers who will usually select Singapore Airline when possible. 

In spite of this, Singapore Airlines is one of the lowest cost operators in the industry. According to the IATA study their cost per seat kilometer is 4.58 cents, by far the lowest of any full-service airline in the world. In truth their costs were lower than many so-called budget carriers as well. 

How do they create so much value and keep costs low? By not adding costs that don’t add value, and by making sure their required costs are kept as low as possible. It might be enlightening to understand how Singapore Airlines invests to serve the customer compared to its competitors: 

1. Their fleet is newer and kept newer than most other airlines. (Newer planes are in better condition for the customers and have lower maintenance and operating costs to Singapore Airlines)
2. They invest heavily in training their people. (As Jan Carlzon learned many years ago when he turned Scandinavian Airlines around, it’s about your people and those “moments of truth.”)
3. They staff their flights were more crew than other airlines to allow for better service, and use a bonus-based pay plan to reward their employees. This and the training help keep their staff looking for ways to cut waste.
4. Administration costs are kept low. As I learned from my years with Teledyne, you can run a very large corporation with a very small corporate staff if you remember where the value is supposed to be added.

If you want to be a profitable leader in your market, you just have to focus on what matters, remove costs that don’t add value and then your customers won’t have to “pick two.” Easy to talk about, harder to do … consistently. But then, that’s what provides the competitive advantage. 

Mitch 

Possibly the greatest long-format ad ever

Long format ads are generally longer than one-minute and often associated with direct-order television. However, there can be many other uses of long-format ads, especially in today’s Internet society. My friends Abe Walking Bear Sanchez and John Younker recently shared this Ford long-format ad with me. (It is a few years old, but I did not see it originally.) It is clearly not a direct-order ad, but I think you will agree that it is a strong message from Ford … especially 4 years ago before they did NOT take any government bail-out money.

Mitch

ReBrand, ReLaunch, Resign

A while back I posted about the 3-Steps in the CMO’s life cycle: ReBrand, ReLaunch and Resign. I was reminded of those three steps while reading about the battle going on between KFC (formerly known as Kentucky Fried Chicken) and a significant portion of its franchisees.

As you may have noticed, a while back KFC corporate decided to reposition KFC into the grilled chicken market. (I guess they figured if you turned the word Fried into “F” then you could also change the menu and its focus.)

To put it bluntly, grilled chicken has been a disaster … as far as the franchisees are concerned. Same store sales are off 7% and grilled chicken is only about 16% of chicken “on the bone” sales. Apparently the refocus (relaunch) has been on grilled chicken and sandwiches over the traditional Kentucky FRIED Chicken. The reason is because Yum! Brands (the corporate parent of KFC) claims they are trying to reach the health-conscious, on-the-go consumer. To which one of their franchisees responded, “…it’s one thing to be behind the big mahogany desk calling the shots and another to be down here in the trenches.”

This just reinforces a John Le Carre quote I have used for years to remind marketers where they need to spend their time: “A desk is a dangerous place from which to watch the world.”

Did you know this month is the 70th anniversary of Original Recipe Kentucky FRIED Chicken? Me neither. Apparently the corporate office didn’t think it worthy of a promotion.

I am not against necessary repositioning. Some are highly successful. Most notably the Marlboro cigarette brand. However, Kentucky Fried Chicken held a strong brand position. The world did not need it to be repositioned. Sure, some people prefer grilled chicken. They eat elsewhere. As Ries and Trout taught us many years ago … take a #1 position in the customer’s mind and hold it. Why did the corporate office think they needed a new position? Franchisees weren’t clamoring for it, and the public’s reaction indicates that they were right.

Maybe the franchisees will get lucky and the people responsible for this rebrand and relaunch will now resign.

Mitch

And the goal is?

My friend and master storyteller, Abe Walking Bear Sanchez, shared a story recently that I think bears (no pun intended) repeating.

There once was a warrior who prided himself in being the finest archer in the land. One day he came to a village and saw a bull’s eye on a tree with an arrow sticking out right from the center.

“Whoever shot that arrow must be a fine marksman” said the warrior to himself. He hadn’t gone much further when he saw another bull’s eye, and another, and another – and all of them had arrows right in the center of the target.

He found the village elders and said “Whoever that marksman is I must meet him, ask him to meet me today, in one hours time by river.” He waited by the river but the only other person there was a small child playing on the bank. She came over to where he was standing and asked “Are you waiting for someone sir?”

“Run along little girl, be on your way,” said the warrior. The little girl continued, “ I was told to meet someone here and you look like you are waiting.” The warrior looked at her and said, “It is true I am waiting to meet the great archer who is responsible for shooting all these perfect shots I see all over the village.”

“That would be me,” said the little girl. “I made all those shots.”

The warrior looked down at her and said, “Tell me how exactly you got a perfect shot every time?” That’s easy” replied the girl “I just point my bow very straight and let the arrow fly then I draw a bull’s eye where it lands.”

Do you have a goal or are you just on a walk? Can you measure what matters, or do you just declare victory? As our Principal, Bayard Bookman likes to ask about goals: “Are you getting closer to the goal or just further from the beginning?”

Mitch

It wouldn’t be so obvious if it wasn’t right under your nose

Removing waste from all of your processes is especially critical in today’s increasingly competitive, global market. Such streamlining not only includes the obvious supply-chain processes, but the demand chain (customer-facing) processes as well. In particular, finding and removing waste in white-collar processes can be a challenge, either because we are not used to looking for “waste” in these processes, or we just don’t open our minds to the idea.

Too many white-collar processes are designed from the inside out. They’re designed to make it ‘easy’ for the people working in the process (well at least some of them), and not necessarily effective for the process users … especially customers (designing the process from the outside-in). Many years ago we had a contract with a VERY large electronics company. To issue us a PO for the materials they needed took two weeks. However, there was a clause in the contract that required they give us at least 10-days notice to ship the materials, otherwise there was a significant penalty involved. This meant that the user had to start their process 24 days prior to their need, and usually 30 days to allow for slippage in their process. One day the user discovered they needed materials in 11-days. Somehow they were able to process the order internally in one-day. Apparently there was lots of waste in their process.

My best example of waste in white-collar processes is approvals, which are an example of in-line quality control. In the ‘old days’ of classic production systems, in-line quality control inspectors were common. Their job? To watch over the quality of the work being done and to reject work-in-process that did not meet spec; the idea being to stop working on out-of-spec product before it reached the end of the line and rework it sooner. Seemed like a good idea at the time. Until a better one came along.

The better idea? To have the next downstream person be the quality control inspector for the upstream work. If they received work-in-process that was out of spec, they rejected it. Otherwise, they added their value and the production continued. So how are approval processes waste?

Exactly what is the approver approving? We’ve all seen “check approvers” in retail stores who barely look at the check they are allegedly approving. What about the process that requires approval for spending on something that is already within the budget, which has been approved? When I ask companies why they need yet another approval for spending within a budget that has already been approved, the answer is usually that something may have changed and this allows for last minute “adjustments.” So the logic here is that we will slow down all projects in case something changes. Wouldn’t they be better off with a process that quickly identifies changes that affect budgets and modifying the approved budgets, rather than have work done on something that is will ultimately be cancelled due to a change?

Take a look at your white collar work processes and ask yourself, where has the waste crept in and how can we remove it?

Mitch

P.S. A special thanks to Dick Lee for help in editing today’s post.

Find a difference and leverage it

The world does not need another Wal-Mart. In truth it would not have needed Wal-Mart if Kmart had executed. Too many companies try to emulate a leader or compete head on in a market. Unless the leader has slipped, this is a risky strategy because you are not filling a need. Southwest Airlines is different from the other airlines. You can like them or not like them, but there is no question they are different.

The L.A. Times recently published an article noting that some coffee houses are specializing in NOT providing WiFi services. In other words if you want a quiet place to relax, not a “third place” or a remote office, they are the place for you … assuming you are a coffee drinker. Starbucks offers free WiFi and a “third place.” If that is what you want, they are tough to compete against. Why would you try? Why not offer something different?

What is your point of distinction? Without one, you are just going to sell on price until you can’t make any money.

Mitch

Nero fiddled while Rome burned

While that story may not be precisely true, the metaphor remains relevant. Back in 2002 we wrote a paper entitled: “Is Your Business Model Right For Tomorrow’s Market?” As the title suggests, this paper asked a critical question, which many companies are still not willing to answer. In truth, they ignore the question.

Brett Arends wrote a story today for MarketWatch, “Get ready for the bookstore massacre.” In this story he discusses the pending demise of Borders and Barnes & Noble. That potential outcome has been postulated by other pundits over time. However, according to Arends, B&N is now for sale and Borders’ stock has dropped 95% from its peak.

To be fair both of these “brick and mortar” retailers recognized the need for an online presence fairly early in the game. They just did it in a half-assed way. Almost as if trying to prove that online book sales were not a good idea. If your website is bad enough you can drive sales away.

The next business model change affecting this market is the shift to downloadable books (so-called ebooks which are read on an electronic book reader such as the Kindle, Nook, Kobo or iPad). Both B&N and Borders jumped on this trend a bit earlier and with better products than their initial web efforts responded to the first shift. Probably timely since Amazon reports selling substantially more ebooks than physical books in the last quarter. (You could argue that Borders and B&N are book stores so people shopping in their stores are most likely looking for a physical book. I agree and more on that later in this post.)

However, Kindle is now a materially better product than either Nook or Kobo and less expensive, so B&N and Borders will need to address that … if they can. But even if they do, they will just be an online e-book seller with, based on past experience, a less desirable buying experience. And their bookstores are having trouble sustaining themselves.

Which leads to another business model change and opportunity. I believe there may be a rise and revival in local bookstores. There are still a lot of people who prefer to own a physical book. Additionally, many people like to shop in book stores and/or spend time in a bookstore. Many specialty/local bookstores have survived on this model. If the big chain bookstores fold, then the local bookstores may be able to thrive again because they will have less competition. Time will tell.

Are you making sure your business model is right for tomorrow’s market … or even today’s?

Mitch

If you get the product right, “marketing” is a lot easier

It’s no secret that Buick car sales and the Buick brand have been on a downward slide for over two decades. This performance notwithstanding, Buick was selected as one of the surviving brands in the GM portfolio. In a post earlier this year I asked, “Is Buick focused or confused?”

In that post I pointed out that Buick had a very limited line of cars that did not seem to have a brand position behind them. I’m still not sure they do, but they are very good cars and people are buying them. Buick decided to position the brand up against higher end cars such as the Acura. In addition, they (for the most part) have gone to great lengths to make sure the Buick models are not simply rebranded Chevys or stripped down Cadillacs.

Big surprise, make a unique product that meets a need and people buy it. Wow what a concept. Buick sales are up over last year more than any other brand. And the cars are getting rave reviews from the industry and from buyers. It is also the #1 brand in China.

Their marketing communications efforts are also in sync with their new younger customer focus (the dropped their sponsorship of the golf tour and Tiger Woods). However, if you don’t get the products right, all the advertising in the world won’t really help. (If it did, GM would not have needed a government bail out).

Get your product or service offerings right for your market and the marketing communications efforts are a whole lot easier … and less expensive.

Mitch

Why some brands are losing relevance

Consumer brands are designed to create floor traffic for retailers (because the consumer wants the brand) and value over private label products because the branded products are innovative and worth the increased price the consumer pays.

Over the last 15 years two changes have conspired to decrease the relevance of some brands in the consumer market. First, the big boxes have so much floor traffic it is difficult for many brands to have an impact on that floor traffic, and simultaneously, many branded product suppliers have decreased their investment in creating innovative products, which are actually more valuable than their private label counter-parts. And, oh by the way, some of the private label suppliers are getting more innovative.

The result is decreased brand value, and whining by some branded product suppliers that the big boxes are squeezing them so they cannot maintain their brand value. A case in point is non-stick cookware.

The holy grail in non-stick cookware is easy release (highly non-sticky) and long life. Since abrasion is the enemy of the non-stick surface, getting great release and long-wear has been the trade-off the creators of the materials have struggled to overcome. Recently the innovation leader in this technology, Whitford Corporation of Pennsylvania has created a true breakthrough in this product category with their Eterna product line. (I know you think DuPont Teflon is the innovation leader. Actually no. They own a very valuable ingredient brand. Whitford did not follow an ingredient brand strategy, choosing instead to invest in continual innovation. Thus becoming the innovation leader in the category).

You would think that this breakthrough coating would first appear on high-end brands in high end stores such as Williams-Sonoma. Or perhaps in mainstream retailers like Macy’s. Actually no. The first user of this new coating was Tramontina who is supplying Costco. They have been selling a LARGE number of pans which use this breakthrough coating. And as is Costco’s policy, selling them at low prices, thus providing amazing value for their customers.

If you want to know what is causing brand value erosion it’s not price, it’s that the WalMart’s, Costco’s and Home Depots of the world are becoming more willing to be innovative with their private label and private brand suppliers like Tramontina, while the so-called branded product suppliers are becoming more cautious and less innovative.

How are you making sure your innovation is appropriate for your market?

Mitch