Insights Blog

Every day in large corporations around the world, hundreds of decisions are made about products (what is offered) and marketing (the customer experience). Individually, these decisions may seem benign, but in the aggregate, they are bet the company decisions.

A high profile marketing mainstay was recently dropped by a well-known brand. Hawaiian Tropic has officially retired their famous bikini pageants. Considering Hawaiian Tropic’s target customer, this move was a long time coming. Even without detailed purchase information, it’s reasonable to guess that the majority of people purchasing suntan lotion are women in the 20-45 age range. How many of these women are big fans of bikini pageants?

This story got us thinking: Why do brands often wait so long to change when something is broken? Because an event is popular? Because they’ve always done it that way? Because they’re celebrating a significant milestone (5 years, 10 years, etc.)? None of these are good reasons, but we’ve heard them all. We’ve also seen brands make seemingly arbitrary changes to investments that are performing flawlessly.

2013 is a tough year for marketers. Competitors are slogging it out in insipid growth markets. And marketing budgets are under pressure, getting downsized just when they are needed the most to drive demand and pull ahead of competition. If you own any portion of a marketing budget you are likely starting with a number lower than what you expected and living under the gun for further cuts if top-line numbers are soft during the year. Here are some ideas we are seeing some marketing leaders use to defend their marketing budgets:

In our daily conversations with marketing leaders, it’s amazing how often we’ve found this simple two by two matrix useful. Obviously, marketing budgets are allocated to help companies meet their revenue plans, but all too often the two fail to match up. This tool makes it easy to see whether your marketing investment truly makes sense.

By filling in details about your marketing budget and anticipated revenue in each of these four areas, you can quickly establish a clear picture of how well your investment is aligned with your business objectives. We have used this tool with clients at many levels, from the corporate entity to the business unit to the brand or product level. In most cases, companies have the information, but they have never connected the financial forecast to the marketing plan at this level.

As we approach this year’s Super Bowl, I’ve been thinking about the anticipation that will reach a crescendo just before game time. Of course, in addition to the game itself, the commercials have become an event to observe in their own right. Due to the enormous volume of eyeballs that will be glued to their screens, advertisers are seduced by the opportunity to expose their brand to consumers in creative new ways.

Some companies spend their entire year’s television advertising budget on the Super Bowl (think Tabasco’s exploding mosquito or Groupon’s controversial Tibetan commercial). For these companies, this single day is critical because it represents an enormous proportion of consumer exposure to their messaging.

Growth. It seems these days that everyone is trying to find some. How can we drive growth? Can we grow the category at a faster rate by increasing usage occasions? Can we find new customers for our product? Should we acquire a competitor?

The digital marketing game is always changing, but some trends are unmistakable. This month, we offer a quick round up of the major shifts we’ve noticed, all of which add up to ever-increasing levels of sophistication and unprecedented results.

1. From Customer Loyalty to Customer Advocacy

Xerox’s photocopiers. GE’s electric light bulb. These are famous examples of the “first mover advantage,” in which companies or brands are able to retain a dominant position in the market largely due to the fact that their innovation was a first of its kind.

In their 1987 research paper, Marvin Lieberman and David Montgomery of Stanford Business School discuss three basic reasons for the first mover advantage:

1. Technological advantage – Patents, unique understanding of the learning curve, or other proprietary R&D.
2. Preemption of assets – Access to critical assets required for production.
3. Buyer switching costs – Monetary or non-monetary inhibitors that discourage buyers from changing from one brand to another.

James E. Burke, the former chairman and CEO of Johnson and Johnson, passed away last week. By all accounts, Mr. Burke was an exceptional leader and American. While his contributions to public service and business are many, he is probably best remembered for his handling of the cyanide-laced Tylenol tampering tragedy in Chicago in 1982.

I’m one of the lucky ones. I have an unlimited data, text, and calling plan with my wireless carrier. I signed up with early iPhone and have yet to change my device. My family is also on the plan. But I know if any member of my family wants to change their device, I’ll get the hard sell to switch from an unlimited data plan to a limited one.

Profit-Motivated Pricing

A few months ago Verizon announced that they would no longer sell a discounted device to anyone unwilling to change to a tiered data plan. AT&T has said that anyone wanting to use Facetime on their network needs to be on a tiered plan.

It’s obvious why they are doing this. They built a 4G network, and they want to recoup the investment. At the same time, usage patterns are changing dramatically. While texting and calling are falling, data is increasing at an incredible rate.

We believe that a fair price is appropriate for increased value. But we also believe Verizon and ATT missed an opportunity. Their very visible pricing moves scream that they are all about growing their profits at the expense of the consumers.