Monday, June 30, 2008

While my Guitar (Hero) gently weeps

The last few weeks have had a lot of marketing and retail news that’s made me stop in my tracks and say, incredulously, “really? Are you kidding?” Despite a background in consumer research and design, I still consider myself a mere fly on the wall of marketing strategy. Still, there are some gleefully optimistic advertising campaigns that just call out for commentary. Here are three that Marketing Daily highlighted all on the same day, without a trace of irony.

First, the Corn Refiners Association has sponsored a new advertising campaign to try and convince women consumers that High Fructose Corn Syrup (HFCS) is not the evil substance behind the growing numbers of children and adults with type 2 diabetes. The ad campaign must convince consumers that HFCS is all natural (made from corn!) and no different than other sweeteners and that the American Medical Association has concluded that HFCS is no greater contributor to obesity than sugar. With my social scientist hat on, I’ve developed some critiques of the whole obesity epidemic scare and I do think most consumers are smart enough to realize that one item in their diet isn’t the cause. This is true no matter how ubiquitous the food is (just try doing your weekly shopping without buying HFCS and see what I mean). But HFCS has been deeply vilified by scientists, consumers, and policy-makers, while at the same time corn production has been heavily subsidized by the government. HFCS is a good stand-in villain for a host of larger problems within the food industry and culture. Any positive-spin ad campaign has to combat a whole combination of problems: a supremely bad reputation, a relationship to a non-sustainable public policy, the possibility that it’s probably not good to have any single food item appear so uniformly throughout our diet, and, the clincher I think, is changing women’s minds about what’s healthy for their kids. Unless HFCS is suddenly discovered to cure the common cold, I’m not seeing a whole lot of moms running out to buy more Lucky Charms based on this one, are you?

Second, an old but struggling stand-by has had a mid-life crisis: Sears has launched a new marketing offense aimed at bringing teens into the store, using LL Cool J and a new media blitz called “The American Mall.” According to the Associated Press,

“The American Mall,” produced by the team responsible for the tween-loved “High School Musical” series, is a massive cross-promotion between MTV and Sears.

Scenes for the 87-minute film were shot in a Utah Sears store. Characters wear Sears clothes, which shoppers can purchase. And the actors will appear in Sears advertisements and circulars. Meanwhile, Sears will sell the DVD and soundtrack in stores, while promoting the film and getting commercial time when the movie airs on MTV on Aug. 11.
While Sears may have some success with this approach, it’s not clear to me if it's going to distinguish their brand from the other mass of department stores and specialty clothing lines all vying for the mighty teen dollar. Even if Sears is no longer the place to get your washing machine or power drill, selling clothes to teens (in this tighter spending market, even) leaves the company with a fickle core consumer base and a lack of true retail purpose. Not to mention that it's Sears. And honestly, L.L. Cool J?

Finally, the one that gets me off the observer's wall is the news that two game companies are potentially vying to create a Beatles version of Rock Band and/or Guitar Hero. Sony, Apple Records and EMI own the rights to the majority of Beatles titles and they have been notoriously careful with licensing Beatles songs for commercial use, even keeping them off iTunes for an unbearably long time. (Remember all the flak Michael Jackson took when he owned a larger chunk and we got Revolution-backed commercials?) Rumors of licensing agreements reappear every few months -- when, for example, the original iPhone release featured “Lovely Rita” coming from the phone. Recently, American Idol featured a Beatles Week, where certain songs were performed with permission. Similarly, Cirque de Soleil’s LOVE show in Las Vegas was backed by a 78-minute collage of Beatles tunes, orchestrated by Sir George Martin. And then, of course, there was Across the Universe, a Beatles-inspired version of Hair for the Lion King generation. But if the rumors are true (and the rumors are, themselves, a pre-marketing campaign), many of you will be listening to Helter Skelter played by the wannabe rock star in your living room – before you’re able to download Lucy in the Sky with Diamonds onto your iPod.

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Wednesday, June 25, 2008

When the brand isn't enough

Following up on Annie's post yesterday about when brands matter (and specifically brand packaging, in that particular case), I came across this article at Media Buyer Planner that suggests that under the right economic circumstances, the "luxury" aspect of a name brand may outweigh the potential value that habitual buyers place on the brand. To wit:

A sizeable 42 percent of consumers say they have given up favorite food brands because of rising prices and economic concerns, according to a study from Information Resources, Inc. that shows the lagging economy is driving a dramatic move back to basics and a reversal of decades-long trends for convenient and healthier foods, writes MarketingCharts.

Though changes in shopping and purchase behavior vary based on life stage and presence of children, those with lower-incomes report being the hardest hit (see chart):

  • Roughly half of all consumers with incomes less than $55,000 per year say they have trouble affording the groceries they need.
  • Nearly a quarter of those earning between $55,000 and $99,000 also say so.
  • Among those with incomes over $100,000, 16 percent report having trouble.

As a result, consumers are increasing purchases of basic ingredients and meal components, reducing restaurant spending and decreasing purchases of “non-essentials” (see table):

  • 53 percent of consumers report that they are cooking from scratch more now than they were six months ago.
  • About 59 percent say they are buying fewer single-serving products.
  • 55 percent say they are buying fewer prepared meals.
  • 52 percent say they are buying fewer organic products.
  • Stores are seeing a resurgence in sales of frozen foods, perishables, and “center-store” items.
  • Private-label products show strong gains, with 50 percent of consumers saying they have stepped up their spending on such products in the last six months.
Despite America's love affair with food, at a certain point the economic pain becomes such that items that were once thought of as essential get reclassified as not really necessary, and thus, luxuries that can be cut back on.

What does that mean for the grocer or food retailer? Well, it depends on how they're handling their product segmentation, and who their target customers are. Obviously those catering to the upper-middle class will be hurt less, as fewer of these people have (so far) reported having any problems. That means they probably haven't cut back on luxury spending yet (or, more accurately, they haven't needed to reclassify brand-name food item purchases as luxuries yet). For the rest, though, the news might be more sobering. One possible exception is grocers with strong private label brands. For a lot of these guys, their private label is becoming a high-margin and increasingly upscale brand that can stand head-to-head with more established name brands while still offering strong value to the consumer. As consumers continue to tighten their belts (figuratively), expect to see more of them hold off on tightening their belts (literally) by trading brand loyalty and perceived brand value for the bona fide value that high-quality private label brands can offer (note that crappy off-brand goods probably won't get a boost in this case, which is as it should be, if you ask me).

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Tuesday, June 24, 2008

When brands matter

I’ve been trying to think of a catchier title today, but what I want to talk today about is as simple as those three words.

In a number of previous posts, we've written about the significance of trusted brands for certain niche groups of consumers: the “pink collar” shopper, men with high incomes, gays and lesbians, Latinos, and African Americans. Creating and building product recognition and reputation comprises the great mission of marketing, one that seems increasingly difficult in a world where advertising has all but imploded, social networking dominates the discussion, and economic conditions pressurize the creative process. It’s no surprise, then, that even with a great brand, companies have to follow some solid guidelines to maintain their spot in the collective imagination. Keep the design in tune with your target audience, keep the price in line with the perceived value, and keep the product itself consistently good.

When we think about advertising and marketing firms as products in and of themselves, it turns out that similar criteria matter for both steady profits and reputation. According to Media Buyer Planner,

Premium-price firms reduce uncertainty by focusing on profit and value and are more likely to use value-based pricing to price their services (43 percent versus 21 percent of the bargain price firms). These firms first consider the value they can provide, then back that up with the confidence and in their ability to provide that value.
This logic is slightly reminiscent of trends in college tuition pricing, where “second tier” schools (not Ivy League, but with solid academic reputations) – keep tuition high as much for the appearance of a premium value as for actual budgetary needs. Let’s keep in mind that we’re talking about high-end firms and products.

The specific relationship between a brand (be it a product, a firm, or a seat of higher learning), and its perceived value varies based on the niche to whom it’s being marketed. There’s a whole range of possibilities between luxury and discount that make up the vast majority of purchases in daily life. How can a firm remain creative in that vast landscape of possibilities? One other interesting finding was that the most profitable firms had the least pressure from their clients, a hard thing to manage in economic tight times, but a good one to remember.

Here’s a great example of how design and positioning matter: a study in the Journal of Marketing finds that people buy wine based on the appearance of the label. The study used photographs of wine labels to determine that buyers associated certain designs with different price and quality rankings:
They asked 125 experts — graphic or industrial designers — to analyze the aesthetic attributes of each bottle. Then, they sorted responses into five primary design types: massive (or bold), contrasting, natural, delicate and nondescript.
Next, researchers showed photos of the bottles to 268 consumers in Oregon. They asked 15 questions about each bottle’s “brand personality,” including whether the brands seemed sincere, exciting, competent, sophisticated or even rugged.
Not surprisingly, people associated delicate designs with competence, and “massive” designs with low price and low quality. The goal was to help a marketers think about matching design factors with premium customers, but unfortunately, the study operated on the presumption that all wine buyers only used one set of criteria (packaging) to choose a product. By contrast, Wine By Joe, one of the brands critiqued in the study, positions itself deliberately outside the “premium” crowd, arguing for people to “drink the wine, not the label.” This is an interesting back-end way around the reputation and design issue, creative and economical all in one. I’m almost convinced to go get a bottle and see what my brand personality has to say!

Wednesday, June 18, 2008

Dollar days and pink collar blues

Sometimes I’m an affluent shopper, roaming the aisles of Whole Foods and Macy’s, using my Banana Republic credit card and searching out deals on name brands. In tighter times, I’m cruising the dollar store aisles for generic sandwich bags and cheap liquid soap for the bathroom. Because I’m a woman and do most of the shopping for my household, my spending should matter a great deal to retailers, no matter which category I’m in.

Recently, Meyers Research Center highlighted a somewhat overlooked group of shoppers they called “the Pink Collar shopper,” who is generally a working woman whose income places her in a tighter budget bracket than either non-employed housewives or wealthier middle to upper income working women. I’m not sure what color collar we’d give these ladies (golf shirt for the first, white collar for the second?) but there are definite differences in their shopping patterns. In particular, it’s no surprise that the pink collar shopper is often working with a single income and has less resources to fall back upon in tight times.

Seidl and Friedlander of Meyers suggest that this demographic group will be growing as economic times make it tougher for everyone. As someone who’s moved between all of these categories in the last ten years, from single struggling wage earner to upper middle class professional couple to out of the paid workforce and back again, my shopping patterns mirror all of the groups that Meyers captured. Indeed, it’s worth noting that people do shift in and out of different categories throughout their lifetime. This helps to make sense of one of their findings, which is that the Pink Collar shopper browses a lot but doesn’t always buy. Here’s what they said:

While low-income working women use fewer specialty stores, they have a strong affinity for those they do visit. They tend to visit these specialty stores just as frequently—and sometimes more frequently — than do affluent career women. This is particularly noticeable in the apparel and sporting goods categories. Although she cannot compete with the affluent shopper in all aspects of lifestyle, the pink-collar shopper does commonly reserve some area of special interest, development or pride, and may spend hard-earned money and time in that area. Retailers can certainly appeal to such interest.
This gels well with ethnographic work on low-income women that shows that they are more likely to buy a product they perceive as being a longstanding value -- worth the money -- even if it costs a bit more up-front. A loyalty to brands is part of that mindset: after all, who wants to get something inexpensive if it doesn’t work? We also shop with our future selves in mind. We live in America, the Land of Opportunity, and no one wants to believe they’ll be stuck in a low-income life forever. And while we may not aspire to (or even believe in) the retail-worshipping world of the Sex and the City women, it’s worthwhile window shopping to know what you really want when that lottery check or Working Girl promotion finally comes through. It’s the same reason women are the target sales audience for “shelter” and fashion magazines. Some of it is vicarious living, some is future planning.

What’s interesting is that at the same time, these women are also more frequent shoppers at the Dollar Store. Tying these two thoughts together, it makes sense for dollar stores to start thinking more carefully about branding. Target, while certainly no dollar store, gets this more than many other retailers. Although they’ve had mixed luck with their lower priced designer goods, in general people describe the merchandise as high quality for a good price, despite the fact that Target goods are categorically less expensive than the name-brand counterparts sold on the same shelves, just a few slots away. The cache of Target, (say it “cashay of Tarjay”), is strong even if some product lines are more successful than others. (no one wants a skirt with giant polka dots even if a famous designer claims it’s hot -- I don't care how hard Target marketers try to convince me otherwise.)

People want consistency and quality when they worry about every purchase. They’ll return if they know they can get a well designed or reliable product for a small additional investment. Still, it will be a long time before the dollar store becomes a clothing boutique. Granted one-stop pharmacy stores like CVS and Rite-Aid have begun selling some clothing, but those that have ventured into marketing their own branded lines have struggled and typically collapsed after very lackluster sales. It’d take a very creative marketing campaign to shift sensibilities about clothing and the dollar store. One good example does spring to mind though - Payless Shoes, who needed to position itself as both designer friendly and inexpensive, did manage to substantially improve their image among non-sustenance shoppers. It'd definitely been a struggle for them.

Clothing at the Dollar Store would also compete with a well established set of retail outlets that have their own cool cache: Goodwill and Salvation Army stores. Developing a market sensibility and a following helps. Consider: among women, it’s no longer okay to say you’re on a diet (say “I’m doing Weight Watchers” or “Jenny Craig” and you’re okay) but it’s perfectly okay to say you shop at Goodwill. It's partly because college students, hipsters, and folks of all types converge in the aisles of vintage and not-yet-vintage goods. So, until someone develops a brand strategy that works, I think I’ll keep getting my plastic ware at the Dollar Store and buy my t-shirts elsewhere.

Monday, June 16, 2008

Love in the time of downloads: dating Netflix, Blockbuster or Red Box

I’m a big film fan, but I don’t go out to the movies much except during the summer, when I live in a little town with a refurbished classic theater. It’s the kind of place where they show offbeat first run and art house films in air conditioning. There’s a swanky coffee shop on one side, a grungier one down the street, and plenty of sushi bars, so it makes for a great night out. But the rest of the year, I do all my viewing through DVDs and downloads.

When we first got to Pittsburgh, the city offered Mega DVD stores inside the local supermarket chain, Blockbusters all around, and, in case you were sick of the top five releases, one good local alternative store. In Massachusetts, I’m loyal to a friend who owns a small local store and special orders Japanese anime for my kids and foreign films for me. When we left, I made a promise to avoid Blockbuster, as a token of appreciation for my friend and his amazing collection of old, foreign, and odd movies.

With the move to Pennsylvania, we signed up for Netflix and spent the winter in a new town catching up on past seasons of Deadwood and the Sopranos. I probably should have gone for something with a bit less death, but hindsight is, well, you know. Even so, the little red envelopes that appeared in my mailbox every few days made me happy.

Two years in, I’m less in love with Netflix. It’s definitely better as a monogamous relationship, where I’m not negotiating the top of the list with kids, weekend guests, and spouse. There’s also that whole category of times where, no matter how fast they are and how many processing centers they have, you can’t really wait a day or two for a movie you need. The teenage girl sleepover, the “hey, we’re stuck home with nothing to do” Sunday evening, and the “I have the flu and need something to watch” scenarios all require movies immediately. So, sometimes we peruse the "on demand" selections offered by our cable company. Not a bad solution, although it’s often the same limited selection as the big stores.

Being tech-savvy folks who like to travel, we got into the habit of downloading movies onto our computers for the kids while they’re in the airport or car. At home, the rest of my family is now addicted to a series called Chuck, which they watch in bed, squashed around the laptop. At some point we even figured out how to connect the computer to the television so we could watch it on a slightly bigger screen. Not bad at all, although the laptop-tv configuration is a bit cumbersome and requires the sacrifice of a computer when someone requests a movie. I still find myself running into a chain rental store every once in a while on a whim or a need (hoping my friend in the local DVD store in Massachusetts can’t sense my treachery from hundreds of miles away). Recently I noticed that the supermarket had replaced its Mega DVD Store with Red Box, but I am not tempted to try it. It's too much like the vending machines in highway rest areas – something you might turn to out of dire necessity rather than falling asleep at the wheel, fully aware that there wasn’t a Starbucks or diner for the next 60 miles. Apparently I'm not the only one who views my movie source as a kind of relationship: On TechCrunch, Michael Arrington claimed he was "breaking up" with Netflix for Blockbuster back in 2006! It's clear that some of these preferences are driven by convenience as much as romance.

But maybe my love affair with Netflix isn’t over. Although it’s already sold out of its first shipment, Netflix has teamed up with Roku to offer a $100 streaming video setup – a small box attached to your tv that allows you to download and order movies on line using WiFi technology. Early analysts were complaining that the back orders would take six to eight weeks, although now Netflix claims two weeks tops.

Well, for true love, I can wait a bit longer. Even with season three of Deadwood on the top of my list, it’s almost summer. After all, my friends in Massachusetts think there might be a gelato place opening up next to the local cinema.

Friday, June 13, 2008

Heinz: when marketing in red is good

I would be remiss if I didn’t comment on some good retail news related to my new home town. Although there are no longer ketchup processing plants in the city, the association between Heinz and Pittsburgh is strong, with the food giant lending its name to everything from the football stadium to a large philanthropic organization to a set of luxury loft apartments. Heinz is among the lucky companies reporting a steady increase in profits in the last eight months. According to comments made by Chief Executive William Johnson,

The company's top 15 brands, which include ketchup, sauces and processed foods, generate 70% of its revenue. It currently has 13 brands that bring in $100 million a year, and by 2009, Johnson said Heinz expects to have four more hit that mark. "We now expect to increase consumer marketing by almost $60 million this year," Johnson said. "This represents a more than 20% increase from last year and is well above our original commitment. We also expect to maintain our recent trend of double-digit increases in research and development spending."
While having basic products in economic belt-tightening helps keep them steady, it’s worth noting that Heinz’s marketing strategies are also critical. Their emphasis on core products in the US and Europe, especially at a time when food prices are steadily climbing and companies are competing even more fiercely for a wealthier consumer base awash in excess food.
For marketing purposes, it helps that Heinz has some tried-and-true packaging.

My vintage food t-shirt collection includes some bright red ones with the ketchup logo on the front. Everyone recognizes it. But on a more upscale note, Heinz is marketing their brand on clothing, cooking aprons, and European football shirts (that’s soccer to you Americans – and the jerseys are a hot item on both sides of the Atlantic). The ketchup bottle logo may be ubiquitous to folks in the US, but according to food and marketing experts, it’s well known and liked even in France!

Henry Miller once said “Americans can eat garbage, provided you sprinkle it liberally with ketchup, mustard, chili sauce, tabasco sauce, or any other condiment that destroys the flavor.” Despite the fact that Europeans have historically belittled our palates, and gladly bequeathed us the McDonald’s version of pomme frites (remember Freedom Fries?), the global taste for ketchup is not limited to fast food. Having originated as a spicy fish sauce in Southeast Asia, it’s no accident to see ketchup in Thai and Indonesian dishes. In Korea, Heinz has added a chili pepper to the ubiquitous ketchup logo and nonsensical English phrases: both the shirt and the product are selling like crazy. Indeed, some of Heinz’s growth markets are in China and India, where they are developing, producing, and marketing products designed to match regional tastes.

But Heinz is more than ketchup. Executives at the company also pointed to its European operations, which are being led by "encouraging results" in U.K. groceries, Weight Watchers, Heinz healthy meals and desserts, and strong volume growth in Italian infant feeding.

One other reason to like Heinz is that they do work on keeping food processing plants in areas that need the work. Despite closing some plants (including Pittsburgh not too long ago), Heinz has plants in Ohio and just announced it will be opening a frozen food facility in South Carolina. There’s still the issue of contracted tomato growers. This week’s outbreak of salmonella linked to tomatoes in Florida will certainly take its toll, despite the fact that most of Heinz's tomatoes come from California.    Luckily, Heinz claims that part of its mission is transparency in the food system. Working with the University of California at Davis and the Business Coalition of the Sustainable Food Lab, trying to develop farming and planting methods that are less environmentally draining and more consistently profitable for workers and producers.  In the future,  there's hope that they can mesh good labor, sustainable and/or organic production, and profitability.

So, while I’m going to stick to my favorite New Orleans hot sauces for most things, I think we may refill the freezer with Weight Watchers cookie covered ice cream bars and add some ketchup-red soccer jerseys to the family wardrobe.

Thursday, June 12, 2008

3G IPhone: Place-based advertising, whrrling through New Orleans and Atlanta

My daughters and I are just back from a trip that involved a lovely five and a half hour layover in the Atlanta airport. We had a lot of great things to eat that we’d bought in New Orleans, so the only food review I have is from the C Concourse is of the Ben and Jerry’s stand (milkshakes: B+ for thickness, A- for taste).

Swallowing my annoyance at having to pay for internet access in an airport (bad form and lousy public relations for arguably the busiest airport in the world), my daughters and I sat and watched streaming videos on my laptop until we were unceremoniously booted off for “excessive traffic.” As I told the tech support person on the phone, isn’t excess traffic what everyone wants from the internet? After a few irate phone calls and some more muffuletta, I calmed down and walked around the concourse. My mood improved considerably when my daughter found a kiosk where we could rent a dvd and return it by mail the next day. While we were hanging around, she kept pointing out all the folks around us with iPhones. I grimaced jealously and went back to “Be Kind, ReWind,” a celebration of older techniques and technologies in its own modern package.

Judging from this week's highly anticipatedWorldwide Developers Conference, our envy is only about to go up. The 3G iPhone is cheaper than the original version, but in opening the door to more carriers, service costs will likely be higher. With increased speed of data transmission and the launch of the App Store pending, many companies are busy developing downloadable applications for the iPhone. It’s a win-win situation because Apple plans on taking a smaller cut of the profits than other cell phone companies. Here's another interesting tidbit:

Goldman Sachs analyst David Bailey expects iPhone and iPod users to download 20 million applications from the App Store by the end of this year, about 110 million more in 2009, and 210 million in 2010. Broken down, that means the average iPhone user will download five applications in 2009.
The store itself has another neat feature: many of the applications available will be free, since it’s a source of great advertising. And for the pay-for-use applications, it’s the easiest form of selling in the world: credit card information is already stored on most people’s iTunes accounts, so iPhone users can shop quickly. With free stuff and easy access, I'm sure it wouldn't take me very long to hit my five-a-year average. That all depends on the applications, which, even at this early point, pique my interest. For example, according to Business Week,
One free, ad-supported application for Tribune that's expected to be available when the App Store launches keeps track of an iPhone owner's commute, estimates the travel time, and suggests alternative routes.
Other applications include: video games with motion-sensing technology, interactive study guides for medical students, and, of course, many GPS-based programs. Apple also announced "MobileMe," which creates a link between the iPhones and your computers, allowing you to standardize calendars and receive updates on both devices.

Pelago’s iPhone-only application, named Whrrl, has a GPS-like capacity to help you find bookstores and restaurants, but with a twist: the recommendations are based on what the people in your social media networks used and liked. Granted, the public availability of this information will generate some of the same consumer backlash being waged against other applications that gather roaming data on people’s habits. It’d behoove Apple and its partners to develop privacy-protection practices before we find out the drawbacks of treating the phone like an elk migration tracking device.

Even so, I hope the next time I’m stuck in the airport, I can avoid the pay-as-you-play, not-so-customer-friendly wireless network and do everything we need to keep entertained through my brand new iPhone. By then, you can give me a Whrrl and check out my favorite New Orleans restaurants. In the meantime, I think I'll keep them secret.

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Monday, June 09, 2008

Introduction to digital signage webinar coming up on June 12th

There's been a lot of talk lately about digital signage, and specifically, treating the store as a new medium for communicating everything from product advertisements to late-breaking news and important information. Regardless of where you stand on the issue, there's no doubt that the industry is growing at a fast clip, and a lot of retailers, brands and marketing agencies are clamoring to learn more about its efficacy as a marketing medium.

While there are a lot of proclaimed "experts" in the field, POPAI, the global organization for Marketing at Retail, has decided to start holding bi-monthly "Introduction to Digital Signage" webinars to get more of their members -- as well as interested non-members -- properly oriented in this complex and evolving field. The first of these webinars is coming up this week - Thursday, June 12, at 1PM EDT.

If you're already an expert in the field of digital signage, this webinar isn't for you. But if you're just starting out in the industry, or if you have a client or partner that is, it will give you an excellent introduction to the exciting world of digital out-of-home media.

Specifically designed to help newcomers see past the industry hype and focus on the projects, business cases and best practices that have been successful in the real world, POPAI's Introduction to Digital Signage webinar is a great way to spend an hour of your time -- and only $50 -- to jump-start your understanding of what works and what doesn't in the digital signage world.

The topics we'll cover include:
  • An introduction to the digital signage market with some basic market history and analysis,
  • A look at some of the most common usage scenarios,
  • An explanation of the components used in typical digital signage networks,
  • A discussion of the benefits and drawbacks of using digital signage, and
  • An examination of some of the most common pitfalls and problems that occur, and ways to avoid them in the first place.
So please join us on Thursday, June 12, 2008 at 1:00pm EDT

If you're interested, you can click here to sign up now! You have to sign up by the end of the day on Wednesday the 11th in order to participate, so don't wait too long if you want to check it out.


Friday, June 06, 2008

Corporate social responsibility - what's it worth to you?

Whenever I teach at the college level about corporations and theories of social organization, there are always a handful of students who will claim that even egregious misconduct by big companies is offset by their philanthropic acts -- I've come to call it “the Ronald McDonald House Effect.” The question is this: Does it matter how much a company’s practices damage the environment if they pour some of their profits into good works? And does it matter if corporate social responsibility is done for selfish (image polishing) as well as altruistic reasons (if there even is such a thing as altruism)? Judging from recent media output on social responsibility, it matters, but we’re not sure how, or for how much.

As I’d tell my students, when it comes to ethics, there’s no simple equation to evaluate the actions of institutions. These are big questions that have to be answered in context.

Two big economic and social trends have pushed the complex issue to the forefront of today’s business news. The first trend goes under the sustainability/fair trade and labor banner, which, as polls show, matters more and more to consumers of all types. As environmentalism goes global, socially responsible business practices become mainstream concerns.

The second trend is the economic downturn. Although people are making greater use of discount stores, an equally common consumer trend during tight times is sticking to the tried and true, the trusted and well regarded. Here’s an example: studies show that mothers on a restricted budget will buy more expensive brand name items because there are greater risks associated with spending the last few dollars on a generic macaroni and cheese that won’t be up to standards, a laundry detergent that leaves your clothes grey, or shirts that come loose at the seams after a single wear. This is particularly true with food, where convenience stores full of more expensive brands have greater neighborhood prevalence than supermarkets or wholesale clubs, which often require residents to travel a distance, usually outside of public transportation routes. Sometimes that brand loyalty is tied to ethics: not only is the product good, but also it’s produced with overt concern for the health and wellbeing of the environment, workers, and consumers.

A study done at the University of Ontario asked, "Does Being Ethical Pay?" and showed that consumers were willing to pay more for goods they believed were ethically produced than unethical ones or ones lacking information. People who claim to have high standards about fair trade and other social responsibility issues were the most willing to shell out, especially if the item was highly rated as ethical. Folks who had no predisposition were willing to pay a bit more, but didn’t care after a certain level the degree of ethical imprimatur. But we're still left wondering what counts as ethical or responsible in any given setting. A company like Seventh Generation is going to have a completely different profile and attitude than Proctor and Gamble but that doesn't mean the overtly environmental one wins the ethical game hands down. P&G has both overt and quiet versions of social responsibility going on.

To be meaningful, social responsibility has to mesh with either the corporate founder’s interests or the company’s overall culture. I’ve heard the term “greenwashing” bandied about more frequently in the last two weeks than I’d ever heard it before – one website allows consumers to post and rank commercials according to the degree of greenwashing. Greenwashing is almost as ubiquitous as, well, green. Maybe it's because Oprah used the word, or it’s on a “What’s hot/ What’s not” list in some grocery checkout magazine.

The point is: consumers know when a company’s faking it. It’s hard not to get a little cynical when the industry hands out awards (called the Halo, even) for philanthropic work annually by The Cause Marketing Forum, honoring the best communications programs between companies and their favorite nonprofit causes. Indeed, corporate dollars are spent on research on “how to achieve the maximum benefit” from social projects “while still increasing shareholder value.” Although Marketing with Meaning has its sights on the right ideas (building long term relationships with customer base), the University of Ontario studies pinpoint a key issue: social responsibility becomes less meaningful if we dilute ethics to a broader, more general idea like “meaning.” I doubt “meaning-washing” will catch on the way “greenwashing” has, but you get the idea…

Still, some of today’s better versions of corporate philanthropy do often have an interesting and generative cast to their activities. The best are educational and, while somewhat connected to the product line of the company, not so tightly connected as to appear self-serving. A combination of online and direct promotions strikes the best balance. One place where companies are finding success are websites that allow consumers to research information on related topics, make contributions of their own, or participate in outreach and fundraising events. I'm always happy to note that some of my favorite food companies, like Ben and Jerry’s, Stonyfield Farms, and Annie’s Homegrown, set the standards for this.

Ultimately, consumers will vote with their wallets on the degree to which causes -- green or otherwise -- matter to them and their purchase decisions. I expect that many will start small... now I think I’ll postpone my search for meaning, and go get some ethical ice cream.

Tuesday, June 03, 2008

Honing the pitch: niche markets during a downward trend

There was a cautionary article in last week’s New York Times Magazine about bloggers whose personal lives become too transparent in this public forum. That isn’t about to happen here, but anyone reading these posts will be hard pressed not to notice my penchant for chocolate and iPhones– and perhaps some of my biases about market research and advertising. One message I can't avoid is the delicate dance between mass and niche markets. There will always be magic products that sell across demographic lines, but in the current economic climate, most companies need to know who their real customer base will be for the long haul.

Of course, some big groups -- older people and teens -- will simply remain important because of their sheer size. It’s smart to target ads to baby boomers as they age and to teenagers, who set and build trends even when they aren’t spending at the same amazing rates. Just recently, three interesting stories pinpointed why niche markets need specific products and marketing campaigns:

First, Marketing Daily notes that while sales of home repair and yard maintenance goods are on the downward trend, sales of certain luxury goods remain high – and the buyers are men with money. It doesn’t mean it’s an easy sell. According to Mires+ Ball, these men require a particular sales pitch:

For higher-end clients, that means "you have to tell a pretty smart story, but then back it up with something tangible, and performance driven. Anything that looks like frivolous excess - visuals that show a house with eight cars in the driveway, for instance-just doesn't play." While affluent men are still spending, he says, all the dour economic headlines have also meant that they're likely to be far pickier, using higher standards to justify splurges. "Men will scrimp and save on everyday things, so that they can make that one big purchase that's really meaningful -whether it's a surfboard, a guitar, a wristwatch or a car."
Second, a new study confirms that gay brands are good business. Some companies, like Subaru, Absolut, and Levi’s have already recognized the power of brand marketing to gays and lesbians. While market research tends to overestimate the wealth and disposable income of gay households, it is true that gay and lesbian consumers are a loyal and vociferous group. A study for the ad agency Prime Access and media group PlanetOut found that advertising makes a huge difference in perception and purchasing decisions by gays and lesbians, who preferred gay-friendly companies. LGBT folks were also much more likely than their straight counterparts to boycott or reject products from companies with anti-gay agendas.

Add in two more facts: first, a large percentage of gay and lesbian consumers are perceived by their peers as influential because of their “ahead of the curve” knowledge about cultural trends and new products. And second, brands with gay-coded appeal are also almost always perfectly okay to straight markets. That is, gay consumers “read” products as gay-friendly while straight consumers are often oblivious to all but the most obvious gay tags. Even when the message is overt, straight consumers are generally neutral about companies that market to gays. In fact, sometimes LGBT branding adds cache to an otherwise ordinary item.

The third is the most misunderstood niche targeted by advertising: racial and ethnic groups. According to BIGresearch, African-Americans and Latinos use more new media and are often quicker to adopt new technologies (especially video games, text messaging, video on phones, and iPods) than Whites and Asians. But even this data makes the mistake of using homogeneous racial categories, which hide differences and nuances within groups. For African-Americans, age, social class, and geography create cultural differences that are glossed over even in traditionally black media outlets. Latinos are also a wildly diverse group, especially when linked back to particular national or regional cultures. Would it be too revealing to point out that almost none of my friends (even those of different races and ages) can relate to the stereotyped subcultures that are portrayed in popular media?

Video games are a great example of the inability of the companies to get African American interests and needs right. African Americans are heavy users of video games but very few games have black men who are not villains or criminals or black women who are not victims.
On potential reason for that is that almost no game developers are black. One of the few African American women professionals in the gaming industry, Shana Bryant said:
There are a number of games in which inclusive design — of both women and minorities — would constitute a significant improvement. It’s something as simple as including ethnic characteristics in a character creation engine instead of just offering a palette swap or allowing someone to create a female player in a sports title. In a lot of cases, there’s very little overhead, and the payoff is noticeable.
It’s also important to consider that African Americans and Latinos represent only a fraction of the academic fields of engineering, technology development, research, and marketing. In a recent MTV blog series, all the black professionals in the gaming industry who were interviewed mentioned that engineering, game development, and marketing were not thought of as career paths among young African Americans.

As the dollar gets tighter, these niche markets will matter more, as people will tailor their spending in directions that are less risky and less questionable in terms of defining themselves according to a mass market. And, remember, the great thing about niche markets is the boundaries are fluid: Even though lately I’m anything but trendy, there’s a Subaru in my driveway, some Levi’s in my closet, and an iPhone on my wish list. But for now I think I’ll hold off on the men’s luxury clothes and Grand Theft Auto III, and just make sure there’s enough chocolate in the pantry.

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