Wednesday, January 30, 2008

Friday, January 25, 2008

Starbucks coffee for a dollar... strategic?

Who would have thought that upon his return to the company Howard Schultz, the visionary behind the great Starbucks success, would have authorised a sales promotion that may be one more factor adding to the company's current troubles.
Starbucks are set to release a coffee that will retail at $1 and provide free refils in some of their stores as a (ill thought out) response to increased competition in the premium coffee market.
Pricing is a huge part of marketing, and certainly an aspect of the marketing mix that Starbucks has exploited in the past to convey an image of superior quality and service etc.

This was written a while back by john moore a previous marketing employee for the coffee giant:

“Starbucks fiercely protects its pricing power because it knows a low-price strategy is the quickest pathway to commoditizing and marginalizing coffee back to being, well, just coffee. It also knows if it lowers prices, it will have a hard time ever raising them again. Most important of all, Starbucks knows higher prices bring them healthier profit margins, which fuel the cozy experience customers enjoy."

The past success of Starbucks was based on the fact that its coffee was not for everyone, it was its exclusivity that earned Starbucks most of its reputation (and profits) and by trying to make it an "everybodies coffee" the brand will lose part of its magic and appeal (think of what happened when "chavs" popularised burbery design) to those who are die hard fans of the brand.

As I see it this move smacks of flagrant short-termism in a bid to claw back visitor numbers and share prices but in turn has jeopardised the long term relevance and health of the brand.

Thursday, January 24, 2008

Thursday, January 17, 2008

What a difference a fridge makes

The orange (flavoured) drink Sunny Delight, the meat product Pepperami and the most soy milk products found in supermarkets all share three traits with each other.
The first is that they are poor excuses for their “parent products” (REAL juice, meat and milk respectively). Secondly they are all found in the refrigerated section of a supermarket. Finally, none of them need to be there, they don’t need to be stored in a cold environment, so why the fridge?

One of my lecturers used the example of sunny delight to highlight the concept of positioning of a product, both physically on the shelves and mentally in the mind of a customer. Due to negligible quantities of actual orange juice in sunny delight it does not require refrigeration during storage, and to begin with Sunny D was place on regular non-refrigerated shelves across the land. Well at Sunny HQ they noticed something was wrong… no one was buying their product, it seems people didn’t want to buy warm orange drink, and furthermore weren’t too keen on paying a price that often exceeded that of its chilled and more healthy alternative. The team up at Sunny D central designed special promotion fridges to put the drink in, and shortly after that the stuff started flying off the Refrigerated shelves.

Seth Godin gives the example of “Silk” soya milk in the United States, it was a great product and had a known market who wanted the product… but no one bought it, why? It was just on regular shelves, who buys warm milk of shelves?... no one. As soon as they convinced supermarkets to stock it along side the milk displays it suddenly gained greater credibility and acceptance with shoppers and resulted in a whopping 300% increase in sales.

My current vice of choice is Pepperami, a cured meat snack which through the amount of processing it endures no longer really qualifies as a meat product is also stored in fridges alongside its meaty ancestors, despite the instructions on the pack which remind consumers that refrigeration is unnecessary. Putting it with the meat, rather than the crisps and popcorn gives it a bit more credibility as a meat product and in turn allows them to charge us customers a bit more money.

What a difference a fridge makes...

Friday, January 11, 2008

Working Long vs. Working Smart

My Basketball coach always used words to these effect while explaining to us the theory of practicing in a more smart and intense manner, very applicable to many other things too.

iPod earphones - marketing tool?

I remember when the Apple iPod first hit the shelves and started becoming THE must have item in Ireland. In my secondary school days I remember people would stride down the corridor with the distinctive white headphones on show and people would know exactly what they had in their pocket, and as an obvious result how unbelievably cool, hip, with-it etc they were. Eventually everyone wanted an iPod and saved up their money to buy one, soon the earphones could be seen everywhere, even those who didn’t have an iPod would try and procure themselves a set.

It is a little known fact that the iPod earphones that Apple so kindly provide “rely on Neodymium transducers, a rare earth magnet that significantly enhances frequency response and overall sound quality”, but this is not why people wanted iPod earphones. In my opinion primarily the earphones served as a means to show off that you were one of the few who had an iPod, and later became a symbol of being part of the group. A side effect of this and more importantly to Apple in the long term it acted as a marketing tool.

Marketer extraordinaire Seth Godin speaks of the “purple cow” his belief in the concept of making succeeding by making your product as remarkable as a purple cow. Prior to the iPod earphone colour followed the Henry Ford motto of "You can have any colour you want, as long as it's black.", Apple’s WHITE product changed all this and created a trend and a signature that would allow essentially free indirect advertising of their mp3 player.

Seeing as the white earphones have become so synonymous with the iPod brand I find it odd that they are so poorly constructed and seem to break after what many would consider fairly minimal use. Without fail every iPod user I know has not retained their original pair of earphones, instead replacing their easily broken pair with another manufacturers product.
There is a reason why there is a Dell logo on the back of my laptop screen, and a badge on the front of a BMW and it isn’t to remind the owner of what he or she owns, its is a means to advertise the product and brand to OTHERS, and this is exactly what the unique Apple earphones did. However with such a short lifespan I believe that Apple forgoe the opportunity to benefit from the meaning that they communicate to others, and what is more annoy the heck out of current iPod owners that they have to go and pay for new ones.

I understand that as we stand today post-iPhone and iPod touch the threat of diminishing uniqueness and market share is not currently an issue for Apple, however it is marketing laziness as seen here that could see them lose their leader position in the face of fiercer competition.

Thursday, January 10, 2008

Can McDonalds beat Starbucks?

In a recent survey in the US consumers have voted new McDonalds coffee blends as being superior to competitors such as Dunkin' Donuts and even Starbucks whose coffee is generally thought to be the markets best.

This coincides with the news that McDonalds intends on installing coffee bars with baristas in many of its fast food outlets in an attempt to take a share of the premium coffee market dominated by Seattle based Starbucks, "We're competing for customers wherever they may be - not from any one brand. If customers are looking for coffee, we want ours to be the best value and the most convenient.". I am not sure that a McDonalds coffee bar has a particularly great chance of success in this market, and the main reason is that the offering just isn't consistent with what McDonalds is. McDonalds is... Big Macs, Happy meals, free toys, fast food, burgers, fries... not mochas and lattes. Starbucks on the otherhand is THE coffee shop, the first brand to have found the correct mix of ingredients both tangible and intangible that lead to premium coffee becoming mainstream.

Although Starbucks have experienced a large slowdown in growth in the last year it doesn't mean that just entering the market will ensure success, some brands due to what they have become are almost incapable of entering certain markets, would you buy a Skoda car that was billed as "luxurious" and cost €200,000? Probably not.
With Howard Schultz back at the reins of Starbucks and a refocusing on the "Starbucks experience" in progress entry to the market will be at best very challenging.

McDonalds premium coffee? I cant see it going far...

Wednesday, January 9, 2008

Monday, January 7, 2008

Canadian Santa not as polite as elsewhere

Supervision of staff can be a difficult and at times impossible activity especially when they know they can't get caught. I remember during stockroom duties on one of my many stint at Marks&Spencer that staff would regularly come down to the stockroom, open up a packet of biscuits, crisps etc and start munching away at them to my disbelief. However at the end of the day they knew that nobody would be able to prove it was them and if anyone was going to get the blame it was going to be me the stockroom worker.

Over Christmas my internet addicted other uncovered a news story from Canada that reminded me of the staff misbehaviour during my M&S days. I have fond memories of the service that the Irish postal service used to have (and may still do) which took the form of a special letter delivery to Santa, in the run up to Christmas children could send off their wish list to “Santa Claus” and this would be delivered to some central post office in the city and a week or two they would receive a letter (albeit mass produced) through their door from Santa Claus, much to the hysteric delight of any children in sight.

It seems the Canadian Postal Service run a similar service however with slight less well behaved staff in charge of the programme. This Christmas there have been several incidents reported of foul mouthed replies to young children from a seemingly disgruntled Mr. Claus. One Canadian mother recalled how she told her daughter “There's a letter from Santa just for you, let's read it” only to find that Santa had determined that "This letter is too long, you dumb shit." Another offbeat Christmas message received by another unfortunate child read “Your mom sucks d*** and your Dad is gay."
The postal service advised that parents “Open your childrens' letters first”

Saturday, January 5, 2008

Apple don't like advice, girl cries

Taken from the Fortune website:

Nine-year-old Shea O'Gorman sends a letter to Apple CEO Steve Jobs suggesting ideas for improving her beloved iPod Nano, including adding onscreen lyrics so people can sing along. She gets back a letter from Apple's legal counsel stating that the company doesn't accept unsolicited ideas and telling her not to send in any more suggestions.

Now I know usually only have praise for the guys and gals up in Apple HQ, but this to me is an absurd action to take for a couple of reasons.

I understand that it was probably not a specific response to the girl in question and more of a general “cease and desist” they send out to people, but this is bad marketing, and aided by the internet, very PUBLIC bad marketing.
Secondly, since when it is wise to turn away advice, especially when it is from your customers, and they are telling you what they would like on the next product that they would like to buy from you. “Grassroots R&D” has been instrumental to the success of many a company, and allowed companies to know exactly what their customers want rather than just guess. Actions like this will ensure that customers stay far away, don't share their ideas FOR FREE and stay uninvolved in the whole process... not good.
Poor show Apple.