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De-commoditize and Return to Profitability

August 20, 2010 by Gregory Dean

Your company has long been positioned as a leader in your industry.  The entrepreneurial and competitive spirit cascading through the organization inspires innovation. Without innovation, your company will find itself blending into the background with hundreds of other companies in the same market. Returning to profitability does not mean living in the past, but rather positioning for the future—without losing sight of how you got here.

From your early and humble beginnings, you realized that your products and services were becoming a ‘commodity.’ The moment when the majority of companies within a given industry can provide the same products or produce the same services—it becomes a ‘commodity.’ By leveraging existing or developing new technologies to make your products and services different from the competition, you ‘de-commoditize’ your business. In contrast, offering the services that make your company unique to other companies to add to their marketing mix ‘commoditizes’ your own services.

De-commoditization is a never-ending, full-time job. Most likely, technology has played an important role in your success. However, technology is also responsible for spring-boarding small companies onto your playing field—competing for your customers. Companies that leverage off-the-shelf solutions share the same capabilities, have identical advantages, and compete for business based entirely on price. Your company must establish a differentiator and separate from the pack to once again take the lead.

The window of opportunity for enjoying the exclusiveness of a new product or service is narrow. It is simply a matter of time before your closest competitors mirror your efforts. In many cases, your competition finds a way to offer the same services at a lower cost—making your services a ‘commodity’, and being in a better position to compete. You can combat this problem by making constant enhancements to your products and services—making it difficult for your competition to keep up.

Be aggressive and take charge of your organization. Do not become a spectator in your industry!

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An Ounce of Prevention Saves a Gallon of Gasoline

July 13, 2010 by Gregory Dean

Lightning does not strike twice, but thrice in the automobile industry. Over the past four decades, the automobile industry has been faced on three different occasions with consumer demand misaligned from automaker’s supply. Lessons from the first incident, in 1973, should have thwarted similar fallout from future situations. A short attention span, narrow focused direction, and greed are all responsible for the automobile industry’s inability to proactively produce automobiles that address the concerns of today’s consumer.

Making Decisions Without an Ear to the Ground

For whatever reason, the automotive industry seems to have a history of making decisions in a vacuum. The general public is sensitive to the aggressive increases in fuel prices, and yet the manufacturers produce automobiles with very low MPG ratings. The motive in the past, according to Paul MacDuffie in his 2008 Knowledge@Wharton article, was the irresistible profit margins on light trucks. Does greed continue to be the driving force behind the automobile industry’s selective hearing? One of the biggest mistakes any industry can make is to not listen to the consumer. With a deaf ear, the automobile industry repeated their mistakes again in the 1980s.

To combat the fuel shortage in the 1970s, auto manufacturers shifted to unleaded fuel, catalytic converters, and a recalculation of horsepower ratings (De Lorenzo, 2008). Of course, this did nothing for the actual rising costs of fuel. It did, however, mask certain sensitive issues such as MPG rating. As a result, consumers continued to purchase gas-guzzling automobiles. In the 1980s, automobile manufacturers perceived the fuel shortage as a temporary problem. They predicted that an aggressive drop in fuel prices would follow the shortage—and it did.

In 2005, Fox News reported that the latest fuel shortage would finally force the automobile industry to start developing fuel-efficient vehicles (2005). After surviving the affects of two previous shortages, the automobile industry felt confident that this too would pass. When the prices exceeded everyone’s predictions, analysts began to make predictions regarding the consumer’s tolerance. Automobile manufacturers were banking on the fact that Americans would probably pay nearly six dollars per gallon before giving up their sport utility vehicles. Fuel prices in Europe are nearly twice as much as in the United States.

The automakers gambled on the fact that the consumers would bounce back from the impact of high fuel costs and continue to purchase SUVs. One big mistake was to incubate the impression that the automobile industry is more interested in a profit than the economic welfare of the public. The lack of marketing research—an ear to the ground—during these times of crisis would have helped the automobile manufacturers develop products to combat the fuel shortages.

With the most recent fuel shortage, the automobile industry faced preemptive criticism. The consumers seemed to take the proactive role and demand better fuel economy. Avoiding a black eye, the automakers introduced several new hybrid and fuel cell model vehicles. The market conditions have changed. The industry is driven by the wants, needs, and concerns of the consumers as opposed to the arrogance of the industry. Pressure from several fronts has forced automakers to shift their focus.

As with any plan to change corporate direction, a formal strategy is necessary (Cateora & Graham, 2007). Automobile manufacturers can ensure success by conducting marketing research to determine the best array of products for the current consumer. Post-sales surveys are important to help fine tune the marketing mix. The most important tactic the automobile industry could add to their latest strategy is to become more sensitive to the concerns of society. Be a partner to the consumer and a friend to the environment.

The automobile is not entirely at fault. Without a demand for the gas-guzzling SUVs, automobile manufacturers would have no reason to produce them. The automobile industry could claim that they were simply satisfying the demands of the consumer, and it is the consumer that is thumbing their noses at rising fuel costs. While this may be true, it is the automobile industry that has thumbed its nose at the environment by not driving efforts and steering the public into environmentally friendly automobiles—until now.

The automobile industry is no longer behind the curve. Manufacturers are tuned into the pulse of the consumer. This is not the result of learning from their mistakes, or even proactively anticipating the financial burden of rising fuel costs. The automobile manufacturers realized that the consumers are demanding less dependency on fossil fuels. Moreover, automobile manufacturers have grown a conscience regarding the impact of internal combustion engines to our environment. And while an ounce of prevention can save a gallon of gasoline, an ounce of forward thinking can save a planet.

References

Cateora, P. & Graham, J. (2007). International marketing. New York: McGraw-Hill Irwin.

De Lorenzo, P. (2008). Rants #427 – Autoextremist ~ the bare-knuckled, unvarnished, high-octane truth. Retrieved July 12, 2010 from http://www.autoextremist.com/current/2008/1/13/rants-427.html

FoxNews.com (2005). High gas prices changing auto market. Retrieved July 12, 2010, from http://www.foxnews.com/story/0,2933,170297,00.html

Knowledge@Wharton (2008) Behind the curve: Have U.S. automakers built the wrong cars at the wrong time—again? Retrieved July 12, 2010, from http://knowledge.wharton.upenn.edu/articles.cfm?articleid=2012

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Pure Water Fuels Pure Marketing

June 28, 2010 by Gregory Dean

Very few products of nature can be processed and packaged into a form more appealing than the packaging provided by Mother Nature herself. The marketing strategy of Fiji Natural Artesian Water has proven the effectiveness of carrying forward the environment, beauty, and overall surroundings associated with their product—water. Fiji Water leverages every advantage of having a clean and pure product—including the source and environment where it originates—to maintain a branding strategy second to none.

The bottled water industry generates roughly 11 billion dollars in revenue each year (Alsever, 2009).  Companies conventionally versed in the production of soft drinks continue to test the waters hoping to cash in on a health conscience society. Dasani by Coca-Cola and Aquafina by Pepsi own an impressive share of the market. However, Nestle Waters is the industry giant with their many domestic brands dominating grocer’s shelves across the country. Nearly half of the 8.7 billion gallons of bottled water consumed by Americans in 2008 was produced using a purification process (Fishman, 2007). Most of the Nestle Waters brands, such as Zephyrhills, are produced from spring water. Fiji Natural Artesian Water is the only bottled water from an artesian source.

Fiji Water created a pure marketing strategy atop one of the purest products in the industry. The foundation for their three product level approach is the core benefits associated with their bottle water. Fiji Water is simply a pure tangible good as there are no accompanying services. Every consumer of this artesian water not only gets a superior product, but an experience as well. The consumer is buying an experience with the added benefit of great tasting, pure and clean water.

Second only to oxygen, water is very important to good health and well-being. Simply put—we need water to sustain life. Not just any water, but clean healthy water. The Fiji Water consumer is really buying—in addition to pure clean water—a healthy lifestyle enveloped by the idea of tranquility and beauty associated with a pristine tropical rainforest. Nature provides credibility to Fiji Natural Artesian Water.

Following the three levels of product, Fiji Water transitioned the core benefits into an actual product by identifying brand name, features, packaging, and quality level (Kotler & Armstrong, 2008).  Fiji Water created their brand by riding the coattails of brand equity already established by the Fiji name. Fiji Water benefits from the namesake associated with the pristine, pure, unindustrialized tropical rainforests of the Fiji Islands. With the name Fiji comes certain connotations responsible for the perception of their product. Fiji suggests a specific environment in much the same way a connotation suggests a rose signifies passion.

Fiji Water recognized the need to differentiate its product from others in the market, and created a distinct packaging strategy. If a consumer could first taste the water drawn from ancient artesian wells there would be little need be concerned with packaging. The majority of bottled water populating the store shelves is packaged in clear plastic containers. The content while diversely different looks exactly the same. The packaging influences the consumer. Moreover, the packaging narrates the contents by offering visual suggestions of the water’s origination.

Many bottled water brands, especially those produced from springs, include a label with images depicting a serene picturesque water source. None represent the contents better than Fiji Water. Starting with the basic shape of the packaging, Fiji distinguishes itself from others. The square bottle is easily recognized and positively associated with the product—Fiji Natural Artesian Water. The full experience associated with consuming water from an artesian aquifer at the very edge of a rainforest starts with a sophisticated label. Instead of a simple tag, Fiji Water draws the consumer into an environment of palm leaves and Hibiscus blooms. The multi-dimensional labeling technique entices the consumer to purchase and consume the contents.

Introducing line extensions, brand extensions, multibrands, and new brands are techniques associated with brand development (Kotler & Armstrong, 2007). Introducing an extension to the same line could dilute the current product offerings. For example, adding an antioxidant ingredient would create opportunities in similar markets, but at the risk of losing credibility with the current product. The consumers might begin to question the natural benefits of Fiji Water if other ingredients need to be added. Introducing a brand extension such as coconut milk would benefit from the brand name recognition and allow Fiji Water to expand into other markets. The Fiji brand has been developed to include a certain brand experience. It would not be a good branding strategy for Fiji Water to dip their toes into other areas outside their core competency. Any brand development strategy that uses the current brand name will be successful.

Fiji Water uses geography to their advantage. While the cost of distribution is far greater than competing products produced in the United States, distance is used in Fiji’s mainstream marketing. Directly from a rainforest hundreds of miles from the nearest continent—Fiji Water is the natural choice for a health conscience society. A cohesive brand development strategy compliments a pure marketing campaign promoting the purist of water—Fiji Natural Artisan Water.

References

Alsever, J. (2009). Bottled Water Sales Slow Amid Backlash. Retrieved December 20, 2009 from, http://www.msnbc.msn.com/id/34451973/ns/business-going_green/

Fishman, C. (2007). Message in a Bottle – Bottled Water – Luxury Water – Mineral Water. Retrieved December 20, 2009 from, http://www.fastcompany.com/magazine/117/features-message-in-a-bottle.html?page=0%2C0

Kotler, P. & Armstrong, G. (2008). Principals of Marketing. Pearson Prentice Hall. Upper Saddle River, New Jersey.

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IHOP: An American Icon–not exempt from marketing research

May 22, 2010 by Gregory Dean

Successful and accurate marketing research evolves from a structured eleven-step process. Understanding and solving a marketing problem, as with any problem, can be over or under engineered. Over engineering simply means that unnecessary steps are used in the marketing research plan. Moreover, using too few steps would result in limited information and potentially less accurate results. The challenge is to leverage only the steps necessary to deliver an accurate analysis. In some cases, there will be marketing research projects that require all eleven steps.

The customer landscape is constantly changing

Well-established companies sometimes forget the importance of understanding the demographic anatomy of their current customers. Without information harvested from marketing research, a company runs the risk of losing business to competition. This is especially true if the competitor uses marketing research to inspire direction and drive marketing decisions. Marketing research is not a one-time process. Cultures and sub-cultures within our society are constantly changing—and as a result, consumers do not respond to the same marketing as in the past.

It is irresponsible for a company to not periodically survey their customers so as to better understand their wants, needs, and desires. The International House of Pancakes (IHOP) is far too familiar with the economic rollercoaster caused by stiff and faster moving competition. While the traditional tabletop survey cards are sufficient for improving the quality of service at the local level, a structured marketing research plan is required to provide the information necessary to remain competitive in the market.

The International House of Pancakes is a restaurant chain with over fourteen hundred locations. There are a few locations with overlapping markets, but each market is burdened with its own unique set of challenges. The International House of Pancakes must design a marketing research plan that is managed at the corporate level and deployed at the franchise level, but provides information relevant to all. A plan of this complexity will leverage all eleven steps in the marketing research process.

Burns & Bush (2008) identify the eleven steps of marketing research as: (1) establish the need for market research, (2) define the problem, (3) establish research objectives, (4) determine research design, (5) identify information types and sources, (6) determine methods of accessing data, (7) design data collection forms, (8) determine sample plan and size, (9) collect data, (10) analyze data, and (11) prepare and present the final research report (p. 63). In every marketing research campaign the first step remains the same—establish the need. Both, the corporation and the individual franchises need marketing research. Without information gleaned from the data collected and analyzed during marketing research campaigns, marketing managers at both the franchise and corporate levels cannot make educated decisions. The need for marketing research is constant, and based on the reality that the customer landscape is constantly changing.

Create a structured plan

One of the most difficult steps in the marketing research process is defining the problem. In some cases, many people within the organization have their own interpretation of the problems facing the company. Step two, defining the problem, is critical to the success of a marketing research plan. The International House of Pancakes has enjoyed moderate success in the shadow of an unpredictable economic time. Additionally, they have become complacent as it relates to catering to a changing market.

At the corporate level, the International House of Pancakes needs to define new market areas and better leverage existing opportunities. Franchises need to have a clear snapshot of how they are perceived in the eyes of their customers. Retention of existing customers is the springboard for new business. Creating a profile and understanding the wants, needs, and desires of IHOP’s existing customers will help define the model for marketing campaigns to attract new customers.

The International House of Pancakes is recovering from a loss of 3.1% in the fourth quarter of 2009 (Shauk, 2010). With the majority of consumers tightening their belts, it is imperative for the corporation to find the right marketing mix to survive, prosper, and grow. Marketing research can help determine areas with existing franchises and a lower market share. Information is key in making marketing decisions. The overall marketing research plan is designed around addressing and solving the problem.

Establishing research objectives, the third step in the process, presents a few challenges. Considering that the overall business is down, surveying existing customers will provide only a fraction of the information needed to complete the marketing research analysis. An in-store survey will suffice for capturing information regarding the merit of service, diversity of the menu, and quality of the food. Each franchise will offer an incentive-based survey to each of their patrons.

The franchise-level marketing research campaign will be coupled with a corporate-level survey that is designed to reveal any hesitation by prospective customers to frequent their local International House of Pancakes. The questionnaire will be presented through on-line channels as well as telephone surveys. The overall marketing research objective is to poll a minimum of two hundred individuals in each market area.

The fourth step, determining research design, is significant to the accuracy of information captured during the research campaign. A descriptive research design will be used describe the current customer or prospect. A cross-sectional methodology within the descriptive research approach is the best solution for establishing a benchmark of a particular point in time. The information from these surveys will be used to help recognize and forecast trends.

As part of the fifth step, researchers need to identify information types and sources. The International House of Pancakes has been in existence for over half a century. From the beginning, the company has expanded through franchising. The holding company, DineEquity, also owns the Applebee’s Neighborhood Grill and Bar restaurant franchise (Meece, 2007). Applebee’s and IHOP appeal to two different markets with some overlap. Both restaurant chains operate in the casual dining and family dining categories. Therefore, it would stand to reason that some information from previous marketing research campaigns could be shared.

Secondary data, such as the information captured over the past several years, can be used to backfill missing information from current campaigns. Information from a data provider is necessary for creating a list of contacts for the telephone survey. This secondary data will be broken down into segments based on geography, age, income, and number of individuals in the household. The primary data accumulated during the marketing research campaigns will be joined with the secondary information provided by one or more outside list providers.

The methods for accessing the data, the sixth step, will mostly revolve around unobtrusive techniques such as self-surveys over the Internet. Additionally, a telephone survey will allow a more personal approach. The telephone survey campaign will allow the marketing researchers to cover a wider area in less time than an in-home survey. A savvy researcher can monitor inflections and emotions in the voice of the persons being surveyed to measure the integrity of the responses (Tyebjee, 1997).

The seventh step in the marketing research process involves designing the actual forms used to collect data. One of the challenges is creating questions that will generate responses to satisfy the marketing objectives defined in step three of the marketing research process. The franchise-level in-store surveys, for example, will use a combination of dual-choice categorical scale questions coupled with several synthetic metric scale questions. Questions regarding gender, or any question requiring a simple “yes” or “no” response, will be developed using a dual-choice categorical scale. Questions concerning the quality of service, frequency of visits, or overall rating of a consumer’s IHOP experience will leverage either natural or synthetic metric scale questions. In all cases, the questions will be brief and clear—not leading, loaded, double-barreled, or overstated (Burns & Bush, 2008).

Determining the sample plan and size is a very important eighth step in the marketing research process for the International House of Pancakes. The in-store table card surveys should be used throughout the year to ensure the individual restaurants are listening to the voice of their patrons. A timeline needs to be determined to as the extent of the survey for the marketing research campaign. Information captured within the survey time window will be combined with data from other research initiatives in the same timeframe for final analysis.

Several factors are considered when deciding how many individuals is to be sampled. While accuracy and confidence of the data is a concern, sensitivity to the marketing research budget is a factor. A larger sample equates to more accurate results. Time and budget constraints, along with the logistics of surveying everyone in the target audience, makes it necessary to establish a sample size that will best represent the majority. A stratified sampling approach is recommended for selecting the list of individuals to participate in the telephone survey. The optimum number of individuals to contact, or sample size, is determined by using the confidence interval formula. Variability, confidence level, and accuracy are the three elements considered when leveraging this formula (Birchall, 2009).

Collecting data is the ninth step in the marketing research process. The method by which the data is collected is directly related to the accuracy of the information captured. For example, it is nearly impossible to know for sure who responded to a survey hosted on-line. In contrast, information captured during a telephone survey seems to have more credibility. An in-person method would provide the most credible results, but time and budget for this particular marketing research project limit data collection to telephone surveys, online surveys, and in-store self surveys.

Each data collection method poses certain risks of error. An on-line survey can result in data skewed by bogus responders and a misrepresentation of the population. Telephone surveys are met with challenges associated with the overuse of this conduit by traditional telemarketers. A substantial percentage of telephone survey attempts typically result in a non-response. An individual might refuse to take the survey or break-off during the interview.

Bringing it all together

The tenth step in the marketing research process is data analysis. Interpreting the information collected during the research campaign is accomplished by choosing an analysis type that will produce results to meet the research objective. The research objective is to describe the target audience. The International House of Pancakes’ survey results from current customers combined with the sample data captured from the on-line and telephone surveys can be summarized into percentages and averages.

The data collected across all research channels will be summarized. Categorical questions can be summarized using percent distribution. Depending on the categorical data, a frequency distribution might be used to summarize the findings (Burns & Bush, 2008).            Further analysis could include cross-tabulation to better understand the relationship between variables recognized during the marketing research campaign.

The final step in the marketing research process is the preparation and presentation of the findings. The marketing research report is a document that will be used by the key decision makers within the International House of Pancakes executive team. Decisions regarding business direction and overall marketing plans rely on the accuracy of the information contained in the final report. The marketing research report will include a full analysis of the information and recommendations as concluded by the marketing research team. The results will be compiled and presented in an informative manner that will best reflect the efforts of the marketing research team.

The International House of Pancakes is an American icon. But longevity does not equate to success. The company needs to change as society dictates and continue to serve the public at a level that will ensure repeat business and continued growth. Franchises need marketing research to provide information regarding lifestyle, interests, and spending habits of their respective target audiences. Corporate headquarters needs marketing research to help determine the viability of expanding into other geographic areas. The pulse of the community is measured through marketing research.

The eleven-step marketing research process is neither over nor under-engineering a plan necessary to deliver information to help marketing managers of the International House of Pancakes set direction and devise a marketing strategy. Every aspect of the corporation can benefit from a well-designed marketing research plan. The International House of Pancakes’ greatest assets are their customers. Understanding the psyche of these individuals is invaluable.

References

Birchall, J. (2009). Sampling and samples. Retrieved May 16, 2010, from             http://www.marketresearchworld.net/index.php?option=com_content&task=view&id=23&Itemid=1&limit=1&limitstart=2

Burns, A. & Bush, R. (2008) Basic Marketing Research. Pearson Prentice Hall. New Jersey.

Meece, M. (2007). Can the IHOP Corp. do for Applebee’s what it did for itself? The New York Times. [Electronic version]. Retrieved May 15, 2010, from http://query.nytimes.com/gst/fullpage.html?res=9400E3DD173BF932A2575BC0A9619C8B63

Shauk, Z. (2010). IHOP owner’s earnings hobbling back. Glendale News Press [Electronic version]. Retrieved May 16, 2010, from http://www.glendalenewspress.com/articles/2010/03/03/business/gnp-ihop030410.txt

Tyebjee, T. (1997). Telephone survey methods: The state of the art. [Electronic version]. The Journal of Marketing, 43(3), 68-78. Retrieved May 15, 2010, from JSTOR: http://www.jstor.org/stable/1250148

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Is Apple too good to use market research?

April 27, 2010 by Gregory Dean

Apple Computer is basking in the warmth of success following the recent release of yet another technology widget—the Apple iPad. Apple’s CEO, Steve Jobs, has on several occasions downplayed the value of market research. Jobs argues that you cannot ask consumers to decree the next big thing. Moreover, customers cannot see the value or need until they see the product (Breillatt, 2010). While this philosophy has served Apple well, there are many aspects of marketing research that could assist in marketing decisions post innovation.

Consumers do not know what they do not know

Considering market research is as close as a marketing manager might get to a crystal ball, it stands to reason that without it many businesses are shortsighted. Conversely, Apple continues to lead the industry in innovative products without leveraging market research, but at the risk of alienating their cult following by not being prepared to accommodate the long lines of hopeful buyers at their retail stores. A blend of secondary data accompanied by information captured using a causal design marketing research campaign would have given Apple an idea of the number of units to produce and deliver to the individual retail outlets.

At the very least, and in lieu of market research, Apple should have eavesdropped certain social media channels to get a feel for the anticipation surrounding the release of their first generation iPhone. Apple aficionados were encouraged by the media to join a waiting list (Paulk, 2007). The waiting list idea was a reactive approach to predict the number of clients to expect on the launch date. The problem with this, of course, is that the information was collected too late to affect the manufacturing schedule. As a result, thousands of Apple iPhone early-adopters were disappointed.

Apple could enjoy greater customer satisfaction by using market research to help determine a branding and positioning strategy. It is true that many consumers are loyal to the brand, and will simply buy the products because Apple designs them. However, the iPhone and iPad cross into other industries and compete with well-established brands. A marketing manager at Apple must identify a target market before a campaign strategy can be designed. Consumers are fickle—especially technology enthusiasts.

Apple could use market research to determine everything from a branding and positioning strategy to a target market for their new iPad. An Apple iPad has been described as something between a laptop and a smartphone (Stone, 2010). Without running the risk of leaking intellectual property by using a focus group or conducting test marketing, Apple could employ a descriptive research study to better understand their market. Using experience surveys to current users of smartphones and non-apple laptops would provide information for a marketing manager to use to establish a message strategy for promoting the new trend-setting iPad device.

The what-if logic used in a causal design marketing research campaign could provide an early indication of the percentage of consumers willing to abandon their current devices for Apple’s new technology. The results of a survey based on the “Hierarchy of Effects” model can help isolate the hand-raisers from the naysayers and ultimately produce a roadmap for developing a marketing mix. Although the product has been determined, a well-informed marketing manager decides price, place, and promotion.

The emerging technology associated with the Apple iPad is in itself an environmental factor. A technology dependent society has directed cultural trends in favor of the Apple iPad. Without competition, Apple can take the same whatever-the-market-will-bear approach that was used to introduce the iPhone; or perhaps market research might reveal a better option is a skimming strategy. The iPad has enough differentiation to justify a higher price.

Market research would help a marketing manager determine the best positioning strategy for the iPad. Feedback from a needs analysis could support a decision to position the iPad using a use or application strategy. The new device offers a combined functionality of an Amazon Kindle, personal digital assistant, and a laptop. Touting the advantages of combining all of these capabilities into a single device would be the first step in establishing an application strategy (Burns & Bush, 2008).

Identifying the target market is one of the most important steps in ensuring the success of a product. Apple might have their pulse on their target audience vicariously through the visionaries within their own organization. However, not everyone is ready to abandon his or her smartphones, laptops, and e-book readers for the next great Apple innovation. Apple can use marketing research to make better marketing decisions without jeopardizing the entrepreneurial spirit of their innovation team. Even a marketing manager for Apple Computer can benefit from a well-defined marketing research strategy.

References

Breillatt, A. (2010). You can’t innovate like Apple. [Electronic version]. Pragmatic Marketing. Retrieved April 10, 2010, from http://www.pragmaticmarketing.com/publications/magazine/6/4/you_cant_innovate_like_apple

Burns, A. & Bush, R. (2008) Basic Marketing Research. Pearson Prentice Hall. New Jersey.

Paulk, W. (2007). Get on the iPhone waiting list! Retrieved April 26, 2010, from http://ezinearticles.com/?Get-­on-­the-­iPhone-­Waiting-­List!&id=591466

Stone, B. (2010). With its tablet, Apple blurs the line between devices. [Electronic version]. New York Times. Retrieved April 26, 2010, from http://www.nytimes.com/2010/01/28/technology/companies/28apple.html

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Dominos Pizza – Beyond the Dough

March 9, 2010 by Gregory Dean

Much like the soft elastic dough used as the foundation for which their mainstay product is built, Domino’s Pizza has shaped their marketing strategy into a juggernaut that has enjoyed nearly half a century of success. Currently a market follower—second only to Pizza Hut—Domino’s longevity and rapid rate of growth is due largely to their ability to establish, maintain, and remain true to their original marketing mix. Domino’s success, however, is due to the fact that they have been able to differentiate themselves on a very crowded playing field.

Most companies, at least the successful ones, concentrate on the four Ps that compose their marketing mix. Albeit product, price, place, and promotion are the cornerstone of many marketing strategies—Domino’s Pizza has leveraged the four Cs, or consumer’s viewpoint, to establish their marketing mix. Customer solution, cost, convenience, and communication are considered each time Domino’s Pizza introduces a new product or initiates a new promotion.

The science of marketing was the last thing on the minds of the Monaghan brothers when they borrowed $500 to purchase Dominick’s Pizza in 1960. With a down payment of $75, Tom and Jim Monaghan took ownership of a small pizza shop in Ypsilanti, Michigan. Their sights were firmly set on building a dynasty of three locations and monopolizing pizza delivery in a small concentrated area. From inception, the Domino’s logo contained three dots. These dots, still present on the current logo, represent Tom Monaghan’s original vision of opening three locations and develop a triangulation delivery strategy (Miranda, 2009).

In the early years of business, pizza was the only item on the menu at Domino’s. Side items were never considered to be a part of the menu. Remaining sensitive to competitors and allowing competition to affect product pricing is a classic trait of a market follower (Kotler & Anderson, 2008). Domino’s was eventually forced to add medium and extra large sizes to remain competitive.

Domino’s Pizza has chosen a market follower strategy. Product, one of the four Ps of the marketing mix, is an area where the market leader continues to influence Domino’s. Competition forces changes to the market followers. The first change to the product offering at Domino’s happened almost three decades after they opened. In 1989, Domino’s Pizza introduced a deep-dish pizza (Laukens, 2010). While it would stand to reason that the new addition to the menu was an answer to a competing product, Domino’s had entered a market where deep-dish was the only acceptable version of a pizza.

Market research had revealed that Domino’s market demographic was culturally diverse. Domino’s responded by adding several other variations of the basic pizza. Hand tossed and thin crust pizzas were added to the menu to satisfy demand in specific market areas and remain competitive. Domino’s keeps a watchful eye on the consumer reaction to specific product and pricing. The ability to see their company from the buyer’s viewpoint is a significant advantage for any company.

Domino’s Pizza listens to feedback from the consumers, and at the same time occasionally glances over the shoulder of their competition for inspiration and influence. From the customers’ feedback and buying habits, Domino’s is able to glean information to help influence direction.  Domino’s strengths, weaknesses, opportunities, and threats have changed many times over. The entire pizza industry has evolved into a highly competitive array of corporate giants. And yet, it remains important to perform a SWOT analysis as often as possible.

Domino’s strengths include their ability to remain unscathed, although influenced, by their competition. Moreover, their visionary approach to creating a better consumer experience by developing better manufacturing methods is at the foreground. Hard work, persistence, and thinking outside the pizza box have been Domino’s formula for success. Although not the market leader, Domino’s Pizza is recognized as the leader of innovation. The pizza industry is crowded with businesses trying to outdo one another with a product that is not well received if strayed too far from the original. Domino’s decided to create a value proposition beyond the product. Tom Monaghan’s goal of perfecting the pizza delivery was tested when Domino’s once again raised the bar. In 1986, Domino’s Pizza created a slogan and spawned an aggressive advertising campaign in an attempt to differentiate themselves from other pizza businesses.

Taking advantage of an impatient consumer base, Domino’s touted, “you get fresh, hot pizza delivered to your door in 30 minutes or less—or it’s free.” Competition scrambled to find an answer, but without the automation invented and deployed by Domino’s it would be impossible. Domino’s was the first to use a production assembly line method for producing pizzas. A belt-driven pizza oven produced a continuous stream of pizzas allowing the manufacturing and delivery process to become manageable, and for the most part—predictable.

Domino’s rode the wave of success for many years. Convenience for the consumer was a definite advantage. During this time, Domino’s Pizza opened several thousand new franchises and was taking over the market. Then as quickly as the innovative wildfire had spread, it was extinguished. The market momentum was quickly lost when a woman in St. Louis was involved an automobile accident with a Domino’s Pizza delivery driver. News turned into bad publicity and in 1993 the 30-minute guarantee was discontinued.

Domino’s strength, the ‘S’ in a SWOT analysis, was their ability to produce and deliver a product faster and more efficiently than their competition. Not promoting the 30-minute guarantee created a level playing field allowing the focus to shift toward product and price. However, Domino’s had continued the use of their belt-driven pizza production oven and therefore better positioned to compete in the pizza price wars.

Domino’s Pizza exposed several weaknesses, the ‘W’ in a SWOT analysis, in their approach to advertising and marketing. A short-lived villainous character named The Noid was used to promote the fact that Domino’s could deliver a fresh hot pizza even on the coldest days. They were able to perform such a feat, when others struggled, because they invented a different type of pizza box. The message was not that Domino’s Pizza recognized the fact that no one wants a cold pizza and offered a remedy, but rather an annoying fictitious character was lurking in hopes of ruining your pizza. The Noid was short-lived marketing trend that caused more confusion than confidence.

One important attribute of a good company is the ability to learn from past experiences and change with the times. Domino’s quickly recognized a need to innovate, and once and for all solve the problem of cold pizza delivery. This time, however, Domino’s Pizza would show the world that they are the trendsetters from which all others grasp firmly the coattails.  Crisper crust, bubbling cheese, and hotter topping were the new promise spoken loudly in Domino’s advertising. This was made possible by their invention of the HeatWave® bag. This new technology, and the creative marketing, caused Domino’s competition to sweat. Once again, Domino’s became consumer centric and focused on a better customer experience as opposed to getting caught up in product and pricing battles.

Opportunities, the ‘O’ in a SWOT analysis, are seemingly limitless for Domino’s Pizza. They have been able to succeed in non-traditional markets by creating a cultural-specific product mix. Today there are over 8000 stores in 50 international markets. Although only producing what is classified as consumer products, the marketing considerations in all markets are the same—convenience. It is rare for a consumer to plan days in advance to have a pizza, but instead decides at a moments notice. The core benefit, at least from Domino’s perspective, is convenience.

A market niche competitor, California Pizza, has attempted to attract some of the frozen pizza consumers by offering variations of their most popular products. This seems to be a shortsighted attempt at trying to capture some of the market share. If Domino’s Pizza were to manufacture and distribute their product in the frozen food aisle, their current business would change. As with the California Pizza Kitchen product expansion, the original product is not viewed the same. While there are plenty of opportunities for Domino’s to grow, expanding their product offering beyond what can be produced and delivered in the same timeframe as their pizza would have a counter-effect on success in the market. Chicken wings and various deserts were added as an answer to a competitor’s advantage.

The final element in a SWOT analysis is the identification of threats in the market. Every competitor is recognized as a threat. Becoming too diverse with the product offering can also be perceived as a threat. In both cases, it is wise to understand the cause and effect associated with adding product, making marketing promises, and expanding into too many markets. There will always be a tipping point from which recovery is futile.  A bad customer experience is no longer shared between a close-knit group of family and friends. Blogs can influence buying decisions and become a threat to the Domino’s brand.

Social media has become a huge part of society. The early adopters molded social media into a peer-to-peer communication channel. Unlike traditional broadcast mediums, social media offers two-way communication. An individual, or a business, can post information and receive instant feedback. This form of communication is a perfect fit for an impatient society. However, as Domino’s discovered in April 2009, social media can unravel many years of branding.

A video produced on a hand-held camera was posted on a popular social media site. The video contained disturbing footage of two Domino’s Pizza employees tainting products by various questionable unsanitary methods (Clifford, 2009). In only a few days, the video was viewed over one million times. The Domino’s Pizza brand was in serious jeopardy. Nearly fifty years after Domino’s Pizza was started, they found themselves under a microscope.

Domino’s marketing team used a proactive approach to thwart permanent damage. Quickly realizing the extent of the damage and the affected demographic, Domino’s created a Twitter account to handle the customer comments and introduced their own video featuring an explanation and public apology from the CEO. Domino’s ability to quickly adapt to a changing society afforded them the opportunity to devise a damage control plan and dilute a potentially devastating situation.

For the most part, the Internet has become the hottest new medium. Domino’s recognized the power of the Internet as a consumer conduit well in advance of their competition. They leveraged this new channel in 1996 by introducing the Domino’s Pizza website. Not nearly as sophisticated as the current website, and bound by the limited technologies of the early Internet, Domino’s used their first website to expand their brand and specific marketing messages across an untapped and unmeasured channel. In the same year the corporate website was launched, Domino’s boasted sales in excess of 3 billion dollars. Domino’s has become comfortable using the Internet as a marketing channel.

The ability to identify—and remain true to—the four Ps in their marketing mix is the primary reason Domino’s Pizza has endured and survived many decades of a fickle economy and a demanding consumer. Their product mix has evolved to include pizza, salads, sandwiches, chicken wings, and specialty desserts. The quality has been improved over the years, including a recent overhaul of their pizza crust and sauce recipes. Their brand name remains strong regardless of the recent challenges of managing public relations through social media channels.

Domino’s product pricing is competitive with others in the industry. Campaigns and promotions are designed to not only attract new customers, but also to retain existing ones. Over 8000 locations promise convenience for Domino’s consumers. It is difficult to find an area not identified serviced by a Domino’s Pizza franchise. Currently, Domino’s is positioned firmly within the market true to their original intention.

Consistency in products between franchises, reading the pulse of the consumer, and setting the pace for all others to follow is at the core of Domino’s success. The future will depend greatly on the ability of Domino’s marketing team to remain proactive, centered, and focused on the customers’ needs. It will always be important to realize shifts in the target market and leverage new opportunities to expand their customer base.

Domino’s has broadened and narrowed the range of ages of their target audience. During the second attempt at their “30-minutes or less” campaign, Domino’s concentrated on a target audience of 30 years old and younger. A critical marketing mistake was not realizing sooner that thirty percent of their original demographic—49 years old and under—remembered the first 30-minute guarantee in a positive light. The latest marketing efforts epitomize everything that Domino’s has strived to create. They will always position themselves to make decisions based not only on the traditional four Ps of marketing, but also from the viewpoint of their consumer. Using comments, criticism, and complaints as fuel—Domino’s recently introduced their pizzas reinvented. Domino’s has once again differentiated itself in the market. The pizza pendulum of success has swung toward Domino’s Pizza.

References

Clifford, S. (2009). Video prank at Domino’s taints brand. Retrieved January 25, 2010, from     http://www.nytimes.com/2009/04/16/business/media/16dominos.html

Kotler, P. & Armstrong, G. (2008). Principals of marketing. Pearson Prentice Hall. Upper Saddle River, New Jersey.

Laukens, D. (2010). The history of Domino’s Pizza. Retrieved January 23, 2010, from http://www.recipepizza.com/the_history_of_dominos_pizza.htm

Miranda, E. (2009). Internet marketing – Franchises: Domino’s Pizza. Retrieved January 23, 2010, from http://www.wsicorporate.com/article/Franchises_dominos_pizza

Posted in Marketing Strategy | Tagged , , , , , , , | 1 Comment »

Advertising – Then and Now

March 9, 2010 by Gregory Dean

Arens, Schaefer, & Weigold (2009) developed a timeline indicating the first known advertising message was created in 3000 BC. Although the actual message bore a closer resemblance to a classified advertisement, the evolution of advertising had begun. The nonpersonal, persuasive, structured communications we recognize today are a progeny of advertising efforts spanning the past few centuries. Early advertising and distribution was limited to a small geographic area surrounding a vendor. Everyday advertising, such as a merchant’s signage, used symbols instead of words to indicate the type of business and product or services offered.

During the preindustrial age, advertising was reaching far beyond the simple signage and word of mouth of local merchants. Handbill, posters, and signs became popular formats for advertising. The printing press was one of the most important developments in the history and evolution of advertising.  By the middle of the 1600s, the printing press was enjoying the bicentennial of its introduction by Johannes Gutenberg. Gutenberg’s invention was one of three major developments that can be attributed to the birth of modern advertising (Arens, Schaefer, & Weigold, 2009).

The first newspaper advertisement appeared in 1650. While a large percentage of the population could not read, the local newspapers were becoming recognized as a medium for delivering advertising to the masses. Merchants, vendors, and manufacturers used newspapers to extend their marketing boundaries beyond the small concentrated areas surrounding their physical locations. Print advertising first appeared in America within the pages of the Boston Newsletter–published in 1704. Ben Franklin is responsible for creating the structure and format of print ads. His techniques for making print ads more legible and easier to understand continue to be used in modern print advertising. Ben Franklin was the first in America to recognize the need to large headlines, white space, and illustrations in advertisements.

England had enjoyed several hundred years of advertising before the American colonies were born. English author, Samuel Johnson, recognized the oversaturation of advertising. In 1758, Johnson insisted that in order to stand out, advertisers needed to embellish their messages. Puffery, as recommended by Johnson, is the exaggeration of the benefits or capabilities of a product or service in an advertisement. While an accepted practice of the industrializing age, puffery is not tolerated in modern advertising.

The industrializing age began in America in the early 1800s—nearly half a century behind the Industrial Revolution in England—introducing machines to mass-produce goods. The sudden surplus of goods and products exposed a need for aggressive marketing and broad saturation advertising. Retailers assumed the responsibility of advertising to the consumers. The industrialization age was followed by the industrial age and once again the face of advertising changed. Advertising during the industrial age—recognized as the first seventy-five years of the twentieth century—focused on the promotion of consumer-packaged goods.

The postindustrial age of the 1980s through 1990s faced the challenges of marketing to an environmentally sensitive society. Demarketing techniques were used in advertising in an attempt to make consumers aware of a company’s environmentally responsible manufacturing and supply-chain methods. Consumers today are not only better informed about products and services, but also the companies that produce them. The modern consumer will research a company and absorb feedback from word-of-mouse channels such as blogs and forums to offset the positive-only hype from advertising. The green movement is represents a marketing potential of 500 billion dollars (Hopkins, 2009).

Modern advertising trends are constantly changing. Mostly driven by advances in technology, advertising media is becoming broader reaching and less expensive to leverage. The Internet has evolved into an advertisers low-cost playground. Email campaigns are less expensive to produce than traditional print campaigns. The Internet also allows a more strategic direct and targeted approach to advertising. Email is a less formal and more personalized alternative to traditional direct mail campaigns.

Regardless of the message and media, advertisers are spending more time identifying their target audience. The recent economic downturn has caused consumers to tighten their belts. Recovery takes longer than downturn (Libey, 2004). During the recovery, consumers strive to become better educated about the products they purchase. Advertising, using every popular medium, to a target audience in the only way a business can stand out on the very crowded playing field with their competitors. In modern advertising, every marketing dollar counts. A savvy marketer will use several techniques, such as predictive modeling, to select a target audience for a specific product or service. The marketing message, advertisement, and call to action will be written specifically for the target audience. Identifying a target market and creating an advertising campaign with relevant content and a compelling message positions a marketing manager for the highest likelihood for success.

The advertising industry has been redefined several times. The types of advertising agencies within the industry have grown. While there have always been local, regional, and international specialists within the industry, niche or creative boutique type agencies are beginning to become prevalent. Many companies are using in-house departments for concept, design, and creative while relying on traditional agencies for media placement. The purpose and definition of advertising has remained consistent across each ring of growth.

References

Arens, W., Schaefer, D., & Weigold, M. (2009). Essentials of contemporary advertising. McGraw-Hill Irwin. Boston.

Hopkins, D. (2009). Riches in niches: Connecting to true browns. Retrieved February 8, 2010, from http://www.targetmarketingmag.com/article/riches-niches- connecting-true-browns-403940/1

Libey, D. (2004). Signs of real economic recovery. Retrieved February 6, 2010, from http://www.targetmarketingmag.com/article/signs-real-economic-recovery- 28914/1

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Advertising Media: More Choices Than Ever

March 9, 2010 by Gregory Dean

Advertising media are the delivery mechanisms, or media vehicles, for all non-personal communication. Advertising media includes television, radio, print, and digital media. Each medium has several strengths and weaknesses. It is important to understand the different applications of each medium and the relationship of each communication channel to the target audience. Successful advertising is dependent on delivering a message to the target audience through the most effective advertising medium.

Advertising in the United States precedes the Declaration of Independence by three score and a decade. Advertising Age published a timeline (2005) revealing the past 295 years of advertising in America. The first newspaper advertisement appeared in a Boston Newspaper and was published in 1704. It was composed as a simple classified advertisement to sell an estate in Long Island (Advertising Age, 2005). Throughout the same century, articles and news stories gave way to advertising.

In 1843, Volney Palmer opened the first advertising agency (Holland, 1974). The agency, originating in Philadelphia, could only draw upon print media as a communication channel for their advertising campaigns. The first American-based advertising agency was formed eighty years before advertisers acknowledged the radio as a media vehicle, and over a century before television was invented.

At the turn of the twentieth century, newspaper and magazine advertisements were responsible for the lion’s share of revenue from print media advertising. In 1900, receipts from newspaper and magazine advertising topped 150 million dollars (Sherman, 1900). Advertising agencies found creative ways to position advertising for not only competing with other advertisements, but also vying for time against the articles. Compelling headlines atop an article were no match for a catch phrase and illustration in an advertisement. In his early twentieth century article, Sherman (1900) acknowledged that advertising had become a reader’s priority (p. 3). Individuals were actually reading the advertisements in a publication before they would read the articles.

A few decades into the twentieth century, the radio was beginning to be recognized as a viable alternative to print media. At the very least, radio could be used in conjunction with print media for enforcing a brand. The additional communication channel offered options to advertising agencies never before considered. The concept of cross-media advertising was born.

When television was invented, advertisers were already accustomed to creating advertising messages for electronic media. While it should have been a simple transition, developing marketing campaigns for television introduced several new challenges to advertisers.  The influence of both print and radio advertising is evident in early television advertising. Postwar television advertisements seemed to be nothing more than a spokesperson reading a script, but with the simple visual element of a printed sign or poster resting on an easel.

James Schwoch (1990) attributes the slow transition to the fact that radio performers were tasked with promoting a product on the new medium (p. 55). They were not accustomed to facing a camera while being illuminated by excessive lighting all the while surrounded by large production crews. As a result, television advertisements were nothing more than radio ads with the addition of a moving picture.

In much the same way as electronic media gained the advertising spotlight over print media, digital media has become the communication channel of the twenty-first century. Advertising agencies are only beginning to understand the extensiveness of digital media. Just over forty years ago, the Internet was discovered. The Internet of today in no way resembles the humble beginnings of four decades ago, but rather a powerful communication channel with the combined benefits of both print and electronic media to advertisers. With a plethora of options for delivering an advertising message, media planners are tasked with choosing the media best suited for the advertising campaign.

Depending on geography, a consumer may be exposed to several thousand commercial messages per day (Arens, Schaefer, & Weigold, 2009). Each message is competing for attention, and ultimately to raise awareness about a particular product or service. Every advertiser has the same advantages and disadvantages with advertising media. While advertising is a very crowded playing field, savvy media planners who understand the strengths and weaknesses of each advertising medium level the field. Technology has contributed to the expansion of advertising media from traditional print, through broadcast channels, and into the digital world. Early adopters of new media usually enjoy the benefits of a less crowded playing field, but at the risk of not reaching a broad enough audience. Riding the coattails of technology is a risky proposition usually reserved for the advertisers with products and services attractive to a digital audience. Companies are perceived as trendy or leading edge when using the latest technologies to host and deliver advertising messages.

With several advertising media options, a media planner is tasked with identifying the medium best suited for the campaign. Reach and frequency are considered for each media alternative—weighed against the strengths and weaknesses of each medium—and if deemed a proper fit, added to the media mix for an advertising campaign. The four top-level media alternatives include television, radio, print, and digital. Within each medium are contained specific ingredients of the media mix.

Print media encompasses any message that is produced on printed surfaces (Arens, Schaefer, & Weigold, 2009). Print media includes—but not limited to—newspapers, magazines, billboards, posters, and brochures. Print media is the oldest form of advertising communication. While evidence of print media used in advertising can be traced back to 3000 B.C., developments during the preindustrial age are responsible for the birth of print media in modern advertising.

Magazine advertising is a member of the print media mix. Magazines have been established as one of the best methods for communicating an advertising message to a select audience—second only to direct mail. The articles and editorial within a magazine are written with a particular audience in mind. As a result, any advertising within the magazine will be exposed to the same target audience. Additionally, magazines offer a longer shelf life than many other advertising media.

Magazine advertising, compared to other print media, requires a longer lead-time and advanced planning by advertisers. The frequency at which a magazine is published results in limited exposure and latency between campaigns. As digital media is becoming the preferred publication platform for both publishers and subscribers, hard-copy magazine circulations are declining. One ongoing debate surrounding magazine advertising revolves around the question of whether or not a consumer is willing to pay for access to extra advertising (Depken and Wilson, 2004).

Newspapers attract advertisers that are looking for more frequency and a concentrated reach. George and Waldfogel (2003) explain the importance of advertising in newspapers to consumers that share a similar preference (p. 765). Consumers will sometimes discuss an advertisement with other consumers. The cost of advertising in a newspaper is substantially less than advertising in a magazine. A daily newspaper offers advertisers the ability to reach a local or regional audience quickly and often. Newspaper advertising is not limited to printing within the pages of the actual newspaper, but extends into inserts and supplements using the physical newspaper as a carrier of externally printed content.

Newspaper advertising is idea for advertisers attempting to reach a mass medium. Newspapers are one of the few print media that a consumer may interact. It is not uncommon for a reader to highlight or circle classified advertising and clip coupons from an advertisement in a newspaper. Advertising in a newspaper is less competitive than in a magazine. One reason is because of market relevancy. In a publication such as a magazine, the reader demographic is narrowed to an audience interested in the variety of content contained therein. Every advertiser in a magazine is competing in the same market.

As with any advertising media, there are several shortcomings associated with newspaper advertising. Newspapers are printed on paper not suited for reproducing high quality images and graphics. Inconsistent and inaccurate color is a concern for an advertiser tasked with branding a corporate logo and imagery. A newspaper is responsible for delivering news and information to a local or regional area. Advertising, while an important revenue stream, takes a backseat to articles and editorial. Newspaper ads are typically placed at the discretion of the newspaper editor.

Television and radio are referred to as electronic media. Electronic media offers capabilities not available in print media. By using either television or radio as the media vehicle, advertisers can give their campaigns a voice. In the case of television, advertisements leverage the benefits of full motion and rich audio. Both television and radio have the potential to reach a large audience with an advertising message blurring the lines between informational and entertaining.

Arens, Schaefer, & Weigold (2009) polled adult viewers before concluding that television can stake claim to the most authoritative, influential, persuasive, and exciting of all advertising media (p. 328). The same survey reveals that radio is positioned well below newspapers and magazines in the authoritative and persuasive categories.  Television offers advertisers more options for the creative team to design and distribute an advertising message. Sight, sound, and motion are used in tandem to breath life into an advertising message. Prior to the Internet, television was the only medium that could reach a target audience and touch several senses concurrently.

Broadcast television advertisers can draw upon several advantages electronic media has over other forms of advertising. The mass coverage offered by broadcast television attracts national advertisers. The broadcast television medium has a low cost for exposure. Advertisers weigh the advantages—such as the ability to isolate a market segment by choosing the programming within which the advertising will air—against the various disadvantages associated with broadcast television.

Some disadvantages are not unique to broadcast television, or even electronic media in general. Ad skipping, bypass, or opt-out technology is prevalent in almost every advertising media. A newspaper advertisement can be easily overlooked as a reader chooses to concentrate only on editorial. Radio advertising is bypassed simply by station surfing during commercials. Digital media, the newest member of the media mix, is not immune to ad skipping techniques. An Internet user is in complete control of the browsing experience. They can easily click and move away from the advertising content. Broadcast email leverages automatic filters to trap unsolicited email messages.

Cable television advertising boasts a few advantages over broadcast television advertising. Considering the programming on cable television is more specialized, advertisers can compose a more relevant message and select a more specific target audience. Cable television advertising is also less expensive than broadcast television advertising.

One distinct disadvantage of advertising on cable television is fragmentation. The selection of channels and variety of programming on cable television reduces the audience saturation for each station. The quality of cable television, especially the smaller local stations, is a factor a media planner may consider when developing a strategy.

Satellite broadcast television is competing heavily with cable television for market share. Consumers are not concerned with which option offers less commercials, but rather more channels. When the competitive dust settles, the consumer is mostly concerned with price and value. The average household spends less than one-half of one percent of their budget on television services (Goolsbee and Petrin, 2004, p. 365). Revenue generated from advertising funds television programming.

Radio advertising shares many of the same benefits of television advertising. One difference is the fact that radio is considered a one-on-one medium. An advertiser can format a message and leverage the predictability of a listener. Radio stations concentrate on a specific genre, which in turn attracts a particular market. Satellite radio is a threat to traditional radio. Unlike television, satellite radio is a subscription service with many stations commercial free.

Cost and audience are the two main advantages of radio advertising. Radio stations typically have loyal listener base and the cost to reach the audience is less than television advertising. Considering that radio is only heard, advertisers are challenged with describing a product without the benefit of a visual element. Radio advertisements tend to sound similar, especially if the disk jockeys are the spokespersons on several advertisements.

The Internet has exposed several new concepts to advertisers. Unlike the other advertising media, the Internet requires a consumer to pull or request information. Whether through a link on a popular search engine or typing directly into the address bar of a browser, a consumer invokes a request. In marketing terms, the consumer skips several stages of the purchasing cycled and quickly becomes a prospect or hand-raiser.

The Internet is a fresh new venue for advertisers. The same rules that a media planner would apply to other advertising media hold true for digital advertising. The demographic of Internet user is very broad. A single advertising strategy for each campaign is not practical. Individual web sites have a specific target audience. Advertisers select web sites that attract a target audience within their market, and then purchase space for listings, banner ads, and hyperlinks.

E-Mail advertising is one of the most popular and least expensive forms of advertising. Irresponsible advertisers with a blithe disregard to the long-term effect of oversaturation have created undue challenges for future advertisers hoping to leverage this medium. There are several ways for advertisers to differentiate themselves from solicitors and make it past junk mail filters. Using a CAN-SPAM compliant email service is a must.

Internet advertising is interactive. Individuals can interact with content and provide real-time feedback. The Internet is global. Consumers are using the Internet to become better informed about products and services. Many consumers research a product on-line and compare pricing before making a purchase (Brown and Goolsbee, 2002). The disadvantage of Internet advertising includes the cost to reach a target audience. Search engines use a pay-per-click model and advertisers bid for positioning on the search term results page.

Several mainstream insurance companies advertise across all advertising media. Each campaign is targeted to a specific demographic and delivered using the communication channel most widely accepted by their market. While each advertising media is used concurrently during an advertising campaign, the specific strengths of each medium are leveraged. Brown and Goolsbee (2002) recognize that the Internet fosters price differentiation within the insurance industry (p. 482). Moreover, insurance companies actually encourage consumers to shop pricing of their competitors.

Insurance companies use print media and electronic media to enforce their brand and drive traffic to their web site. The corporate web site is positioned to be their best salesperson on their best day. The Internet has become a virtual extension to many businesses. In addition to a traditional storefront, many insurance companies created a click-and-mortar environment to reach beyond physical boundaries.

Doraszelski and Markovich (2007) report that more than $280 billion was spent on advertising in 2006 (p. 557). The ability of advertisers to recognize the advantages of one advertising medium over another creates measurable results and a guaranteed profit for agencies and the companies they represent. Digital media is currently enjoying the spotlight from advertisers. However, the traditional tried-and-true media vehicles remain a plausible option. Individually, each media is a powerful communication channel. Combined, as in a cross-media campaign, they become exponentially more effective.

References

Advertising Age. (2005). The advertising age timeline. Retrieved March 6, 2010, from http://adage.com/century/timeline/index.html

Arens, W., Schaefer, D., & Weigold, M. (2009). Essentials of contemporary advertising. McGraw-Hill Irwin. Boston.

Brown, J., Goolsbee, A. (2002). Does the Internet make markets more competitive?  [Electronic version]. The Journal of Political Economy, 110(3), 481-507. Retrieved             March 8, 2010, from JSTOR: http://www.jstor.org/stable/3078438

Depken, C., Wilson, D. (2004). Is advertising good or bad? Evidence from U.S. magazine subscriptions. [Electronic version]. The Journal of Business. 77(2) S61-S80 Retrieved  March 3, 2010, from JSTOR: http://www.jstor.org/stable/3663733

Doraszelski, U., Markovich, S. (2007). Advertising dynamics and competitive advantage. [Electronic version]. The RAND Journal of Economics, 38(3), 557-592. Retrieved March 4, 2010, from JSTOR: http://www.jstor.org/stable/25046325

George, L., Waldfogel, J. (2003). Who affects whom in daily newspaper markets? [Electronic version]. The Journal of Political Economy, 111(4), 765-784. Retrieved March 2, 2010, from JSTOR: http://www.jstor.org/pss/3555158

Goolsbee, A., Petrin, A. (2004). The consumer gains from direct broadcast satellites and the competition with cable television. [Electronic version]. Econometrica, 72(2), 351-381. Retrieved March 8, 2010, from JSTOR: http://www.jstor.org/stable/3598906

Holland, D. (1974). Volney B. Palmer: The nation’s first advertising agency man. [Electronic version]. The Pennsylvania Magazine of History and Biography, 98(3), 353-381.             Retrieved March 4, 2010, from JSTOR: http://www.jstor.org/stable/20090872

Schwoch, J. (1990). Selling the sight/site of sound: Broadcast advertising and the transition  from radio to television. [Electronic version]. Cinema Journal, 30(1), 55-66. Retrieved March 8, 2010, from JSTOR: http://www.jstor.org/stable/1224850

Sherman, S. (1900). Advertising in the United States. [Electronic version]. Publications of the American Statistical Association, 7(52), 1-44. Retrieved March 7, 2010, from JSTOR: http://www.jstor.org/stable/2276425

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SEO: More Than a Catch Phrase

November 10, 2009 by Gregory Dean

Recently, I have witnessed many new self-proclaimed Internet marketing gurus flooding the scene with a plethora of catch phrases and their own recipe for the secret sauce of success. Each time a new article is published or a book is released, my inbox is flooded with overzealous Internet consultants armed with the confidence fueled by their newfound knowledge.While I would never discount the knowledge that can be gained from someone with hands-on real-world experience, I am flustered by those that sell their ideas based on nothing more than theory. I say, “Show me a portfolio of more than one site, then your ideas may have merit… otherwise don’t waste my time.”

The thing that slips their mind is that all of the articles are public domain, and anyone in the business is actively seeking new ways to increase the exposure and marketing performance of their website(s). For those not afraid to do a little research, every search engine has extensive documentation, hints, tricks, and examples on techniques to optimize your website.

Google has done an outstanding job of writing documentation on how their system crawls and indexes a website. You can view the Google Basics site at http://www.google.com/support/webmasters/bin/answer.py?answer=70897.

As with Google, Yahoo offers detailed guidance for submitting your site for indexing within search engines. The instructions for submitting your site to Yahoo can be viewed at http://help.yahoo.com/l/us/yahoo/search/indexing/indexing-06.html;_ylt=Av3OleH86oCfgTXvyRcje4ZYqCN4.

Take control of your own Internet marketing efforts. Whether you create and maintain “description” and “keyword” meta tags or you hire a consultant to do your bidding, the results are the same. The search engines are not able to distinguish between text entered by you or someone else.

The “real” secret as with any marketing effort–Internet or otherwise–is to make sure the content is relevant. Moreover, the keywords and description meta tags need to contain words and phrases that best represent your site.

Of course, to remain one step ahead of your Internet competition, leverage other forms of marketing to drive traffic to your site.

Posted in Internet Marketing | 2 Comments »

Does it make a sound?

November 9, 2009 by Gregory Dean

We have all heard the basic philosophical question, “If a tree falls in a forest and no one is there to hear it, does it make a sound?” Similarly, there is a question posed to marketers, “If a campaign is created and deployed and the product is not relevant to the audience, will there be a response?”

The marketing philosophy question is much easier to answer. Never expect a response from an audience not properly identified as having a propensity to respond. Direct marketing is no place for the faint-hearted. Leave the scatter gun approach to marketing for the corporate branding saturation marketing teams.

Spend time researching and understanding ways to communicate with your target audience. Ask yourself, “Who are my potential customers?” Every market segment has their own preferred method of communication. Not only do we marketers need to use the appropriate conduits when communicating, the content within the communication should be relevant.

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