A few weeks back in our “Slice Of The Sales” post, we used a Papa John’s pizza contest as an analogy for value-based compensation for agencies. We talked about how clients have to add a missing ingredient: More agency control over communications, as well as elements like product, price and sales force performance.

Papa John's Recipe Contest

Then we looked around to see if anyone else agreed with us. What we found led to an interesting potential solution to the value-based compensation issue – the “dessert” idea about licensing below.

How others are serving up the issue

We found agreement with our idea, especially in the responses to this Advertising Age article on Coca-Cola’s value-based compensation.
•   “Does this mean that Coke, in turn, promises to not interfere in any way, shape or form with the development of strategy and creative?”
•    “If the agency is going to be held accountable to results, then the client must be willing to go out on that creative limb with them.”
•    “My favorite client quote of late is: Can you give us a break-through idea that has never been done before and prove that it will work.”

We also found a broader view, a different kind of dissenting comment from Nat Slavin, consultant on law firm client relationships. See his comment on this Spin Sucks blog post: “The PR firm, ad agency, consultant, etc., is not the sales force. They are not commissioned employees in the traditional sales model sense. Rather they are critical tools in the arsenal of resources that companies pay for to give the sales force, the employees of the company, to achieve their goals. When the company shifts the burden to third-parties, they cede responsibility for “closing the deal” or “delivering the value” of their products.”

And we found a couple of interesting ideas that were only slightly off topic:
1.    On a NASCAR-related site (Why there? We don’t know.) we found an interesting comparison of architects and agencies, with the recommendation that agencies should either stop functioning as “ banks” for their clients, or charge for the service. But many clients and their agencies are already moving away from this kind of relationship.
2.    A blogger at a Swedish agency thinks that speeding up the internal agency process for idea generation may be part of the solution, because it would reduce cost. (Inarticulate clients could make this a problem – we remember one who kept insisting on the “big idea.” When he finally got what he wanted, it was a $1 refund on a shelf talker with a tear pad.)

Dessert is served

Unfortunately, these last two don’t directly address the real issue. A stripped-down version might read something like this:

How do you determine the value of an idea that doesn’t exist yet, that’s intended to drive a result that’s unpredictable at best?

Then, suddenly, a potential solution came to mind – the dessert for our second helping of compensation discussion above. Our possible, potential solution: If the value of an idea is uncertain, don’t “sell” it to the client.

Gyro Gearloose

License it instead. We’re not talking about some sort of Gyro Gearloose eccentric inventor scenario here, where the agency invents a better mousetrap in their basement in its spare time and then shuffles door-to-door trying to get pest control marketers to buy it.

Instead, what we envision is hybrid of the typical independent inventor situation with current agency/client relationships:
•    Client presents agency with marketing challenge.
•    Agency develops idea for solution to client satisfaction for agreed-upon minimal development fee.
•    Client pays agency a licensing fee to use the idea, for given time period, in specified geography, with specific audiences, etc.  Amount of fee may take into account amount of control that agency has in execution of the idea.
•    So the client gets what they (think) they want, and the agency gets paid fair compensation even without control they may need.

What do you think? Comments welcome – even extreme disagreement.

First there was the old saying: “Saw off the branch that you’re sitting on.”

Then “Destroy the village in order to save it,” from the Vietnam War.

And now we can see what happens when:
“More brands will compensate bloggers and social media users in an attempt to generate chatter about their products”…from a recent Brandweek article reporting that spending for sponsored conversations rose 14% to $46 million in 2009.

Does anyone else see what a bad idea this could be?

Marketers who pay for social media mentions may gain a short-term advantage. At the same time they may be setting themselves up for a long-term disaster. Imagine that Brand X is realizing the advantages of marketing through social media: The credibility that comes from having one “friend” recommend Brand X to another. But what happens if friend number two discovers that friend number one is being paid by Consolidated Megacorp, the makers of Brand X?

Using social media is one powerful way to build relationships with customers. Customer relationships are built on trust.  But trust will disappear when customers find out that you’re bribing their friends.   And before long, all social media users will be asking themselves: “Is this a real recommendation from a source I’ve always trusted? Or are they just getting paid to say this?” Everyone’s social media marketing – both paid and legitimate, unpaid conversations – will suffer for it.

But some marketers will go ahead and do it anyway, because they believe they can gain the elusive “sponsor control” that’s missing in marketing through social media. And because they’ve got organizations like Forrester Research telling them to “Add Sponsored Conversations To Your Toolbox – Why You Should Pay Bloggers To Talk About Your Brand.” (Evidently it’s OK if you say it’s a paid conversation, and identify the sponsor. But this makes it an ad, not a conversation.)

Some marketers have short memories. They forget the controversy and loss of credibility that rose from another kind of “paid conversation” when brands like Sony, Turi Vodka, and Freedom Tobacco decided to indulge in undercover marketing, initiating real life (not virtual) conversations between unidentified brand representatives and prospects in bars, clubs and coffee shops.  Malcolm Gladwell, author of The Tipping Point, Blink and The Outliers said: “My problem with undercover marketing is not what happens in the moment. It’s what happens a week, or two weeks, or a month down the road, when we discover we’ve been duped. And I think that the moment when we discover we’ve been duped causes a backlash. Companies who engage in this practice are courting that backlash. And that’s a very, very dangerous thing to play with.”

Are You On The Social Media Bandwagon?

Fortunately, not everyone’s jumping on the bandwagon. At Social Media Today Augie Ray says: “I’ve observed that discussions about paid blog posts tend to focus on the logical reasons why brands and bloggers believe they can engage in sponsored conversations. This approach to the topic is fundamentally flawed; it considers only brands’ and bloggers’ justifications, but since trust is imparted and felt by readers, our justifications are meaningless. We cannot create trust where it does not exist by presenting cogent and reasoned arguments.”

Imagine this: Your competition’s new loyalty program is a big success. Sales says some of your customers are already switching over, to get in on the rewards. You can see your share shrinking.

Should you launch your own program? Maybe not, if your definition of loyalty program is:
•    The all-too-familiar “earn points for purchases, then redeem them for merchandise items, gift cards or other rewards.”
•    Or the been-there-done-that “show this card and get a discount every time you buy.”
Because the biggest problem with loyalty programs today isn’t that your competition has one. Instead, it’s that everyone seems to have one.

According to Colloquy, participation in loyalty programs has jumped 19% in the U.S. since 2007, and over two-thirds of all U.S. consumers report that they still participate actively in at least one reward program. When it seems like most marketers have a loyalty program, and most customers participate in one or more, the perceived value of all the programs is diminished.

How do you break away from me-too loyalty marketing? Start by asking:
1.    What does it mean – how do you define and measure loyalty for your brand? It could be simple preference or willingness to advocate to your brand to friends. Or it may be a harder measure, like maintaining or increasing share or purchase frequency. Then ask yourself: Can a conventional points or card program really achieve these objectives?

2.    What’s the right balance between value and excitement in a loyalty program? Conventional points and card programs need to offer an array of gift cards, digital cameras, discounts, etc. because they need to assure obvious value to a wide range of customer tastes. But they also need a way to differentiate from all the other programs offering the same things – unique items and services and exciting experiences, even if their appeal is specialized or its quantities limited.  American Express does it by offering members concierge service to find gifts and hard-to-get event tickets. And the Chicago Tribune ChicagoPoints program all kinds of ways to earn rewards points: survey completion,  trivia questions…even for correctly answering questions stories in the newspaper.

3.    Can a program member generate enough revenue to support a program with meaningful rewards? This is a big problem for low-ticket CPG products, where annual revenue per customer is small. Tropicana may have solved it by using OPM – other people’s money – in a Juicy Rewards program that offers high perceived valued savings on partners’ products and services: TaylorMade golf clubs, Adidas shoes, Coleman camping supplies, Norwegian Cruise Lines and more. In this program, Tropicana supplies the communications/distribution network, and partners supplies the rewards.

But a true breakthrough will come from realizing that there’s more to “loyalty” than “bribes,” and that relevance is more important than rewards. The ultimate example of this comes from Nieman Marcus, where customer service, limited membership and soft rewards (exclusive services) are the foundation of a loyalty program. This is  a perfect fit for rDialogue’s definition of true loyalty marketing: Rewards are just a starting point, and the “the real value of loyalty programs lies in their ability to engage customers and enable relationship marketing.  This is where executing marketing activities based on customer data creates marketing excellence, not simply program excellence.”

Evidently Mark Twain was wrong when he said, “Everyone complains about the weather, but no one does anything about it.”

Recently Tropicana did something about the weather – the wrong thing. They announced they were reducing the size of the 64 oz. orange juice carton to 59 oz., in response to freezing weather’s impact on the Florida orange crop. But they’re still going to charge the same price. “As a result of those freeze-related costs and supply limitations, Tropicana, the biggest buyer of Florida fruit and juice, is announcing some pricing and packaging moves that we hope will minimize the impact to the consumer,” the company said.

Orange you glad Tropicana cares?

How nice of them to keep our interests in mind. But will the new cartons announce “Big New 59 Oz. Size – Now At 64 Oz. Price!!” in a bright orange promotional burst? Will a new ad campaign tell how Tropicana cares about its customers, how a smaller quantity is a better value for them than a higher price? I don’t think so.

I’m not pretending to be the Ralph Nader of breakfast values here. Instead, I’m looking at this from the marketer’s point of view, trying to get across the importance of the customer-centricity that more and more marketers are adopting as an operating philosophy.

Openness and integrity are part of it. Accenture’s Customer Centric Principles states that high performance organizations will “focus going forward on fostering trust-based relationships to the same degree they have focused, historically, on managing customer transactions efficiently.”

Hershey Bar history

But Tropicana is still focusing on “managing customer transactions efficiently” – for their own sake, not for customers. Saying you’re doing what’s best for customer and then doing what’s best for your business (and not telling anyone about it) has a long history in the consumer packaged goods business. The best known example is the incredible shrinking Hershey chocolate bar, which maintained the same price for years while it got smaller and smaller. (A famous paleontologist once wondered if this was an example of evolution in reverse, and that the Hershey Bar might someday disappear entirely.) You can find many more examples from Ziploc, Softsoap, Peter Pan and others at The Consumerist. Just enter “Grocery Shrink Ray” in their search box.

Today on Wall Street

Maybe there should be a new kind of economic indicator. Along with housing starts, retail sales, the consumer price index and the unemployment we could hear monthly reports on the Hershey Bar Index. On a brand-by-brand basis, it would measure how much less you’re getting for your constant-value dollar. So consumers planning their own economies could learn which companies were truly customer-centric.

The more things change, the more they stay the same. The old-time traveling medicine show has evolved into the “experiential” road show.  The obsolete cigar store Indian is now the giant inflatable display. And now Brandweek reports that the traditional Tupperware-type sales party has transformed itself into the new venue for high-tech and high-ticket products from Ford, Verizon and Microsoft.

But we believe there’s an even bigger opportunity for companies to be the life of the party, when they match their marketing with the right kind of party.  After all, you wouldn’t promote chewing tobacco at a wine and cheese party, or retirement communities at a rave, would you?

Party in a pigpen
So why should Tide detergent restrict itself to tennis superstar promotion, when it can go where it’s really needed? Tide can party hearty at down and dirty Mudfest events in Louisiana, Missouri, Texas, Florida and more.  Both participants and spectators are perfect prospects for Tide, and it’s the ideal showcase for the Tide Mobile Laundry truck.

Party with pride
For McCormick Spices, forecasting flavor trends is marketing that preaches only to the foodie choir. The people who really need McCormick are the cooks and the diners at the West Virginia Roadkill Cookoff. McCormick can party with pride, because they’ll be continuing a long historical trend: The Spice Trade was driven by the need to disguise the taste of spoiled food.

Companies can also create their own parties, especially if they’re marketing products that even satisfied customers are unlikely to recommend to their friends.

Provocative parties
One example that comes to mind is condoms. The Trojan brand’s recent advertising campaign has been pretty suggestive, but it’s difficult to turn that kind of attention into action. Even in our supposedly sexually-liberated times, guys’ locker room talk rarely turns to a detailed comparison of condom performance. But party marketing is the ideal opportunity for sampling. Should the parties be coed? Should the samples actually be “test driven” at the party, or just distributed there? We’ll leave that up to the condom company that pioneers this kind of party.

Hold a “party’s over” party
Another example of party-partial product categories is caskets. Brands like Batesville experience an insurmountable barrier to word-of-mouth advertising success, because even their most satisfied customers have nothing to say. Up until now the big news in casket marketing has been free next day delivery, and distribution at Walmart. But now casket marketers can invite Major League Baseball fans to game night parties, where they can try on a casket with their favorite team’s logo. Party marketing puts the “fun” into “funeral.”

Just when a marketing technique seems old, worn out and irrelevant, it comes creeping back in a new disguise.  If the lingering Tupperware association still bothers you, think of party marketing as social media marketing, with the “social” part being accomplished the old-fashioned way: Real flesh people interacting face to face.

Competition is supposed to be good for marketing. But sometimes it sucks, just like the grill of the 1957 Edsel that looked like “an Oldsmobile sucking a lemon,” according to Time magazine.  Bad design was only the beginning; Edsel’s problem went much deeper, giving us a classic example of how internal competition can drive external failure, in the marketplace.  That us vs. them approach can be for money and manpower resources, for the same customers, between marketing disciplines, between distribution channels and more.

In a recent New York Times article, Dick Brass, formerly a vice president of Microsoft, talks about internal competition and why it sucks.  “America’s most famous and prosperous technology company no longer brings us the future, whether it’s tablet computers like the iPad, e-books like Amazon’s Kindle, smartphones like the BlackBerry and iPhone, search engines like Google, digital music systems like iPod and iTunes or popular Web services like Facebook and Twitter.”

Brass focuses mainly on product development, but he could be describing our agency’s own experience with internal marketing competition:
•    An famous electronics brand whose new, measurably-superior product failed because consumer marketing and trade marketing not only competed against each other, but were located in separate buildings.
•    A consumer products company where managers of the leading premium brand and its leading discount flanker fought over which customers each could target in retail promotion and direct mail.  Meanwhile, other companies’ brands nibbled away at both of their shares.
•    A major telecom that had to spend months breaking down silo walls between old (landline) and new (wireless, Internet) products and between distribution channels (direct mail, Internet, call center) before they could finally run the kind of successful integrated marketing program that external competitors had been doing for years.

Internal marketing competition also sucks when:
•    New products must fight for resources against established products with long-standing but low-value customer bases.
•    Departments suffer from the dreaded NIH syndrome.
•    Sales and marketing, or national and regional/local marketing, continuously confront each other.
•    Customer acquisition and retention operate in two separate universes.
•    Clients’ agencies compete against each other, especially when the agency that owns the “brand” (read: maker of TV commercials) is entirely divorced from the realities of consumer promotion, direct marketing, trade communications and so on…but still sucks up all the resources needed to do these right.

The real reason Edsel sucked

Internal competition is one key reason behind one of the most famous failures in business. Yes, the Edsel was ugly, it underperformed, and it had quality problems.  But the biggest reason for its failure was even more basic. Edsel was priced to compete directly against other brands of the Ford Motor Company. Ranked bottom to top, they included Ford, Edsel, Mercury and Lincoln. But “the most-affordable Edsel (the Ranger) cost 70 bucks less than Ford’s top-end Fairlane, while the most-expensive model (the Citation) cost more than a Mercury Montclair.” Prospective customers couldn’t figure out if an Edsel was supposed to help them keep up with the Joneses, or show off versus the Joneses.

Say “neigh” to bad marketing ideas

Everyone’s heard about Edsel, but few have heard about Ford’s short term attempt at a marketing fix. It has little to do with internal competition, but it is a great “whatever were they thinking?” story.  After months of frustrating failure, Ford tried to promote Edsels by giving away live ponies – you can read about it here.

Read these three names – do they sound familiar?
1. Declan Mcmanus.
2. Ralph Lipschitz.
3. James Osterberg Jr.
Never heard of them? Actually you have – because all three overcame obstacles to marketing success.

As a rule, changing a company, brand or product name is risky business for marketers. But sometimes it can be necessary, and it can make an immediate measurable improvement in marketing. A recent Wall Street Journal article reports how some luxury hotels have increased their business in hard times simply by dropping one word -“resort” – from their names, in response to corporate sensitivity about extravagant spending on conventions and meetings.

What were they thinking?
They were right. But many marketers change names for the wrong reasons.
•    Brinks, the home security company, became Broadview. This one was necessary because they had to give up the Brinks name. But did they really have to choose such brand blandness?
•    Here in Chicago, we saw the Sears Tower become the Willis Tower (but you can call it “Big Willie”)– ego-tripping on the part of the new owner of the (former) world’s tallest building.
•    In an exercise of inexplicable corporate silliness, Radio Shack changed its name to The Shack. Now I think of a rundown building, or maybe a basketball player.
•    And in yet another demonstration of high-tech business mumbo-jumbo, Gavitec AG became NeoMedia Europe AG.

The Ballantyne Hotel & Lodge and the Renaissance Orlando – neither of them named “resort” any more – are only two examples of name change for the right reasons.
•    The New York Times reports how a venerable Canadian history magazine had to change its name to dodge online porn filters. (Bet you’ll click through to this one.)
•    A detailed case study shows how leading non-profit changed its name to Legal Momentum, to overcome confusion about its mission.
•    A professor at the University of Florida makes a case for marketing delicious (but negatively-perceived) goat meat as “cabrito.”

As for Declan, Ralph and James Jr:  Celebrities become brands. The wrong name is a barrier to brand success. So to market themselves more successfully, they became Elvis Costello, Ralph Lauren and Iggy Pop.

Ashley Bradarich, an R&M Art Director, and a darn good one, wins Miss Illinois 2010. Way to go Ashley!

If you pay more, is it automatically worth more?

That’s what many marketers seem to think, as reported by Bob Bly, Advertising Age and others. According to a recent survey by the American Association of Advertising Agencies, some clients pay their large agencies (over 500 employees) hourly rates over three times higher than those of smaller agencies (less than 50 employees).  For example:
•    Chief creative director: Large agency $964, smaller agency $27l.
•    Director of client services: Large agency $533, smaller agency $203.
•    Executive director for client planning: Large agency $601, smaller agency $240.

“What are we missing here?” we asked each other here at R&M. Are big agencies’ work that much more effective in the marketplace? Do they provide a really high level of responsive service that we can’t match? Did they take agency compensation lessons from lawyers? What do they know that we don’t?

To find out, we thought we’d run a survey of our own. To participate, just send us a comment with the numbers that stand for your top three reasons. Or create your own rationalizations reasons and send a comment.

The Semi-Official “Top 10 Reasons To Overpay Your Big Agency” Survey

“I’m ready to pay over 3 times higher hourly rates to a big agency because:”
1. They can put all those bodies to work on my business. Someone’s bound to come up with something.
2. A big “famous name” agency makes me look good to the people who’ll be hiring me for my next job .
3. They tell all these great stories about their big successes with other clients. And then they tell me again. And again. And…
4. I just bought a new 60-inch HDTV and want to show my neighbors how good my product looks.
5. I’ll get ideas that are three times better. Just look at all the awards that big agency has won!
6. They can take an incredibly lame and ridiculously stupid concept and turn it into a genuine, bona fide “big idea.” Because they’re a “big agency.”
7. Branding is what’s important, and that’s what big agencies do. We can leave stuff like selling things to the sales department.
8. Those big agency people deserve those fancy offices. Because fancy offices mean better ideas.
9. Our legal and operations departments have their expensive consultants. We don’t want to be left behind, here in the marketing department.
10. Hey, it’s not my money after all!

We know that some readers will object to this, and bring up the old adage that states “you get what you pay for.” Like most old adages, this one is true, some of the time. But this is probably not one of those times.

Having come to believe that the light up ahead is the end of the recession tunnel and not a train coming towards us, I believe it is time to start selecting the winners and losers in terms of business growth or value destruction. In the months ahead I’ll be posting about companies that are merely limping out of the economic downturn and those that are accelerating out of it, those that preserved their brand and those who abused it.

Three Award Categories

There are going to be three “awards” for this competition with multiple winners of each: Recession Diver, Recession Survivor, and Recession Thriver. The Diver Award goes to companies and brands that were hammered into the dust by the current recession. Some will have fought the good fight and failed. Others were just clueless. They not only couldn’t attract more customers but often made the few customers who remained unprofitable. I have a pool of potential recipients prepared and am just awaiting confirmation of the distress. It will come as no surprise that many are current or former portfolio companies of private equity groups where financial engineering is the tool of first and last resort. Entering the economic downturn up to your eyeballs in debt was just as bad for Linens & Things, Circuit City, Eddie Bauer and Extended Stay as is was for thousands of first time homeowners.

The Survivor Award goes to those who are emerging from the recession with their souls and brands intact. They may have been forced to employ some pretty extreme measures to maintain revenue and income but they didn’t bastardize their authenticity or quality. You will find a number of them in industries hit very hard by the housing collapse and the credit crunch. For many, survival was all they hoped for. They will still face a long climb back to black numbers but at least they have a solid base of untainted business.

The Thriver Award

These are the companies and brands that are accelerating out of the recession. They will be the case studies at B-schools in the years ahead and the examples everyone will point to in the depths of the next recession. They show why it is important to keep marketing efforts up while struggling to survive.

Some of the companies that have managed to thrive during the recession have done so because of steps they took before it started. Many eschewed high debt loads and had cash on hand. They are extremely well run companies that take laser-like aim at the customer. They understand that there are only three ways to grow: 1) find more customers, 2) sell more to the customers and 3) make more on what you sell them. In short, they are very Warren Buffett-like in their approach.

Panera Bread Jumpstarts the Award Season.

I had originally intended to kick off these awards sometime in the fall in anticipation of improving signals that the recession is on the wane. But a Wall Street Journal article this morning put this first Thriver front and center. The very first Recession Thriver Award goes to (drum roll please) Panera Bread.

In its recent quarterly report Panera Bread showed increases in revenues, gross profit, operating income and nearly every other measure of performance. What earns them the first Thriver Award is not so much what they did but how they did it. Other restaurant chains have taken a knife to costs in hopes of at least being able to report some profitability in the face of declining sales. As a result, quality has often suffered. At the same time they have resorted to significant and frequent discounting to maintain foot traffic. Panera, on the other very profitable hand, has improved product quality, raised prices and introduced new products. As a result, transactions may be down somewhat but check average is up. And while catering is down, breakfast business is up. Though the latter usually represents lower check averages, it does fulfill the Second Tenet of Growth: Sell Customers More. It might just explain where some of the customers of Starbucks have gone. Well done Panera!

Stay tuned for more Thriver, Survivor and Diver Awards.

You probably think of customer relationship marketing as a task that’s done by human beings. Marketing and sales people understand the product or service, understand the customer, then develop activities and communications that build the relationship. That’s how it’s always worked…until now.

Writing about Kindle, Amazon.com’s wireless reading device, ThinkEquity analyst Edward Weller said: “…Kindle firms up and solidifies Amazon’s connection to its most important customers, and not just the heaviest users, but a special class of heavy users who were at the beginning—and probably still are—at the very heart of the franchise: better-educated, higher-income, early-accepting, serious readers, the kind most motivated by depth of selection, the kind that seem increasingly dedicated to Amazon as the default go-to for media… and, increasingly, everything else.”

This is one small example of a trend identified by futurist and inventor Ray Kurzweil. He believes that machines will eventually take over the world: “If all the AI systems in the world suddenly stopped functioning, our economic infrastructure would grind to a halt. Your bank would cease doing business. Most transportation would be crippled. Most communications would fail….Of course, our AI systems are not smart enough — yet — to organize such a conspiracy.”

According to Kurzweil, this will not happen for another two or three decades. But it may be starting in marketing right now. Kindle is just one example; others include:

OnStar, the GM in-vehicle system that diagnoses mechanical problems and alerts owners to maintenance needs and recalls, disables stolen vehicles and automatically responds to crashes, uses voice commands for hands-free calling and provides turn-by-turn navigation.

MedSignals, the personal medication management device that alerts users to four different prescription-taking times and records them, announces warnings, uploads data automatically to a remote server, and communicates with caregivers.

And of course, the Apple iPhone – a phone, an audio/video/games entertainment device and an Internet device, all continuously personalized with each user’s choice of thousands of apps.

Could this be the future of customer relationship marketing? Will a product do it on its own, working with the customer to personalize itself and to initiate and sustain the dialogue that creates an individual user experience?

Will The Terminator be taking over from you?

Tim Hortons, the Canadian coffee shop chain founded in 1964 by hockey player Tim Horton, has the potential to take significant business not just from Dunkin Donuts but from Starbucks. Their authenticity, reputation for a good product, and mystique may be the motivation that pushes consumers to abandon $4 lattes for good $2 cups of coffee. Being able to brag about the new Tim Hortons that finally opened in your town can completely disguise the fact that you have traded down in price in the midst of a recession.

We had this great beer in Cabo.

The consumer products and services segment has numerous examples of  brands that have garnered that magic something by being unavailable to the general public or all areas of the country. Long before Corona Extra took off in the US, a buzz was created by vacationers returning from Mexico talking about the great beer in the clear bottle they were served with a wedge of lime. Coors generated a mystique by not being available east of the Mississippi. And this does not just happen in the beverage category.

Teens and young adults reserve copies of the newest version of their favorite video game months in advance of the release. People who have visited The Cheesecake Factory in LA stand in line for two hours when one opens in Milwaukee. Still others live in anticipation of a Wal-mart opening in their town because their cousin has told them how great the values are. In some cities, like Chicago, they wait and wait and wait.

A New York Times article on the changing of 10 New York Dunkins Donuts to Tim Hortons appears to be generating some buzz. Anticipation appears to be growing around the expansion of this venerable dispenser of good coffee and donuts to Canadians for over four decades. It has a cachet not of the nose in the air kind but of a place Canadians go for good coffee and good food. And Americans are doing it at 300 locations already in the US.

Fire up the Mirth Mobile. We’re getting donuts.

The key elements of the Tim Hortons mystique are based in popular culture and in cross-border traffic. Tim Hortons was the model for the fictional cafe “Stan Mikita’s Donuts” in the 1992 film Wayne’s World. Countless 20 and 30 somethings know that Garth preferred a sugar puck during their late night stops. The cross-border aspect is not unlike the Corona experience. Thousands of Americans have visited Timmy’s with good friends after a night on the town to “soak up the poison.” Now they can do it in Manhattan.

Being cool can be a heck of a crosscheck!

The reason that Tim Hortons will be able to pressure Starbucks is that they are going to be perceived as cool. And the hip nature of the discovery will bless the purchase of a decent cup of coffee for $2 in place of a $4 low fat latte status symbol. Saving money during a recession camouflaged by the “in the know” aspect is a recipe for success. McDonald’s isn’t cool. Dunkin Donuts isn’t cool. Krispy Kreme was in but now it’s down and out. Timmy’s is becoming hip! Watch for celebs showing up on TMZ after a night of partying and you will know it has been “discovered” by the beautiful donut munchers.

Later.

With all the none stop buzz about internet this and online that, it is refreshing to read about cases where someone seems to get it right instead of merely being a Black Hole for venture capital. That was my reaction when I came across a WSJ article on “private sales” of designer apparel. The topic alone made me stop and read. Who wouldn’t when the third paragraph discusses the availability of YSL “hobo” bags at darn near half price!

It seems a small group of online retailers have quietly and virally built a nice niche for themselves. Gilt Groupe, RueLaLa and HauteLook run member-only sales on limited amounts of merchandise. There are no member fees but you have to sign up. Sales are announced via email and merchandise quantities limited. Plus the merchandise list is expanding for some of them to cosmetics, spa packages and travel. If these folks find a way to get me Clarins at a discount they will have me for life.

“Is anyone working in this department?”

This member-only, discounted designer offering is one of the few bright spots in retailing, online or otherwise. This at  time when quite a few upscale retailers have locations that look more like museums than stores. I was in a Saks Fifth Avenue the other day and had the whole second floor to myself, literally. You can pretty much bet that this WSJ article made the rounds at headquarters by 9AM with a note demanding a plan of how to do the same thing. For some of the upscale stores, it might be too late.

“I just took the tags off to try it on. I want to return it.”

One consumer segment that may love the emergence of this online designer option is the “buy on Friday/wear Saturday night/return on Monday” crowd. Spend anytime working designer clothing in an upscale store and you will realize it’s a bigger segment than you would believe. Now imagine that you can buy online, wear it to a wedding and return it the following week saying it is too big. Some outfits may make appearances at several weddings across the country before finding a permanent home. Any of you in retail know this is a real problem. At one time it was easy to tell if an outfit had been worn before it was returned — the smell of cigarette smoke. With so many smoke-free environments, it is getting harder and harder to tell. Maybe these leading edge online retailers have found a way around the problem. I am sure I will find out when I fill out my membership apps at each in the next few minutes.

Happy shopping!

Right now big food – American agribusiness – is threatened by the same kind of decades-long trend that lead to the Big 3 automakers’ current sorry state. Will the trend to sustainable agriculture and locally-grown foods make Hamburger Helper and Hostess Twinkies go the way of the Hummer?  Will the Snickers bar suffer the same fate as Saturn?

My family became part this trend. Before we ever heard the term “localvore,” we were buying most of our fruits and vegetables from the farmer’s market a few blocks from home. And we joined a CSA (Community Supported Agriculture) farm south of Chicago; each week we receive an e-mail from the farmer and a big cardboard box full of assorted produce. No cultural or political statement was intended; we did it just because the product was good and the price was right. And we still eat our fair share of Kraft Macaroni & Cheese.

The trend is growing. U.S. Department of Agriculture data from 2007 reports that 12,549 farms in the United States market products through a community supported agriculture arrangement.  And between 1994 and 2008, the number of U.S. farmers markets increased from 1755 to 4685.

It’s a fragmented movement. Marketing is local, word of mouth and social media. But it all adds up: one family’s purchases can total several thousand dollars a year. Could this be a threat to agribusiness giants like Kraft Foods, Tyson, Nestle, Dole and others?

In the short term, probably not. But in the longer term…maybe:
•    My local supermarket, which used to sell sweet corn that was indistinguishable from feed corn for cattle, now sells really fresh corn at prices lower than the farmers market.
•    Eating Well magazine reports on how a poor rural town in Vermont has become foodie mecca, with a restaurant on Conde Nast Traveler’s 2009 hot list. In Vermont, the localvore trend extends into the mainstream, to the food service operations at local schools. This helps rebut the claim that eating local is a luxury that’s only meaningful and affordable for people with money.
•    And in New York City there’s now a local bottled water brand – Tap’dNY- that comes straight out of the city water system.

There are some signs that big food is responding to the trend. For example:
•    Kraft Salad Dressings ran a recipe contest that incorporated a “secret” locally-grown ingredient.
•    Canadian Pizza, a trade journal for pizzerias, suggested that readers create a featured “Hundred Mile Pizza” product using local ingredients.
•    Campbell’s “Help Grow Your Soup” campaign extends the company’s support for local farms, using ingredients grown within 100 miles of its production facilities.

But these responses are mainly me-too lip service:
•    They slap words like “natural” onto their labels, imitating GM’s attempt to market a compact luxury car by slapping a “Cadillac Cimarron” nameplate onto a Chevy Cavalier.
•    Instead of starting to align their mainstream brands with growing consumer preferences, they lock truly natural and/or locally-grown products into niche categories. (One reason why agribusiness is buying smaller organic food processors across the U.S. and around the world.)
•    Most important, big food companies do not seem to have any real business strategy for countering this competitive threat to their brands.  They behave as if customers can be satisfied with marketing tactics alone (like the examples in the previous paragraph), that it’s not necessary to make major changes in food production and distribution.

Over the next few decades, we see a gradual erosion of big food’s share of market.

Could this lead to a government bailout of big food, somewhere around 2029? Or will it be business as usual, as big food’s economies of scale prevail over the natural food and localvore trends?

While enjoying Mike’s post on the King of All (Social) Media, I thought I could hear echoes of the past or was I just experiencing a little deja vu? Today it seems like all marketers talk about is social media this and social media that. Everyone is talking it up, trying to find a way to jump in on it, looking to exploit it or rummaging around to find a way to make money off of it. But such wild exuberance should give wise marketers pause … especially if they remember the dot com hey days of the 90′s.

“Twitter has no current revenue stream to balance costs.”

Those were the words of Gartner Inc. analyst Allen Weiner in the May 26th Wall Street Journal. Sounds more like a hobby than a business. Then on Thursday morning I caught the interview with the Twitter founders at the All Things Digital D7 conference in Carlsbad. It didn’t reassure me that they know what the end game is. They also looked a bit concerned when the interviewer cited some recent research showing that 51% of Twitter members use it less than once a month and less than 1/5th use it at least once a day. Might be the old 20/80 rule without knowing much about the 20.

Is my Webvan account still active?

While listening to Evan and Biz I closed my eyes for a moment and thought I heard voices from the past. Just like in the 90′s the goal is to have an idea, run with it, convince investors to give you carloads of cash and then sell it for bigger carloads. Back then anything with a dot com after it was a money magnet. Seemingly smart folks with finance MBAs from the finest schools threw piles of cash at sock puppets selling pet supplies and grocery retailers with no stores … and no customers. Most of these ideas were sold with ginned up research and cute little anecdotes. As the bubble burst investors wished they had paid some attention to the man behind the curtain. But it was good for the consulting firms that harvested huge fees for months on end taking clients “on line.” To the cleaners may have been more accurate for many. How many of them are trying the same shell game with social media? How many agencies are?

2 questions and 1 simple sentence

Before following the other lemmings over the edge you might be well advised to ask a couple of questions when considering social media. The first one is To what end? It happened in the 90′s as everyone jumped on board the train without stopping to figure out if it was taking them somewhere they really wanted to go. Advertising people and marketers were sure it was a place called “cool”. During a recession it’s best to make profit the ultimate destination.

The second question is What else could I invest the money in? If you think of marketing as an investment, you always ask this one. But don’t fall into the cost-per-click ROMI model/trap. Use the only metric that counts: sales.

Finally, it’s always a good idea to follow the lead of someone with demonstrated success. The man that alternates between the top 2 spots on the richest in the world list might be a good choice. Before Warren Buffett makes any investment the acid test is one simple sentence that first appeared in his 1977 Letter to Shareholders. It described the businesses he would invest in or acquire outright. It has helped him make billions and reads,”We want the business to be one that we can understand, with favorable long-term prospects, operated by honest and competent people, and available at a very attractive price.” Come to think of it, it sounds like a pretty good way to select marketing tools or an agency.

If you would like to learn more from Berkshire Hathaway, here’s a white paper you might enjoy.

Later.

1793: Marie Antoinette, queen of France, is informed that the peasants are starving because they have no bread. She replies: “Let them eat cake.”

2009: Advertising Age announces that Alex Bogusky and Jeff Goodby – big agency principals – will be co-chairs of the judging panel for Ad Age’s Best Small Agency of the Year and Best Small Agency Campaign of the Year awards.

The bad news: Once again large agencies get an “A” for arrogance, as they presume that bigger automatically means better at judging other people’s work. The good news: At least they’re a little less arrogant than Marie Antoinette; they’re offering us some of their cake.

But no thanks. I think small agencies like ours can get by just fine without crumbs from the kings and queens of advertising.

Our small agency serves mostly large Fortune 500 clients; over the past 40+ years we’ve worked with, or parallel to, their much larger lead agencies. We’ve observed that small agencies like ours bring clients:

Accelerated speed to market. We’re nimble enough to respond rapidly to client needs without layer upon layer of approval process.
More innovation. Many clients choose us because we’re willing to take the risk of breaking the rules (starting with the rule that says the core of every campaign must be TV advertising).
Less attitude. Clients know that we know marketing. But they don’t ever hear that “we know better than you.”
Better talent. We get to choose from all the creative and strategic thinkers who can’t stand big agency politics any more.
Access to agency leadership. We call it “the principal difference.” Clients know that top level agency decision makers work directly on their campaigns, and respond directly to client (not stockholder) needs.
Cost control. We’re not carrying the enormous overhead of big agencies, and we work faster. So our clients see results faster and pay less.

In addition to their “A” for arrogance, large agencies receive a “B” for blindness. They don’t even know they’re arrogant. Example: We worked alongside a famous-name large lead agency, in an ongoing direct marketing initiative for a Fortune 500 consumer products company. After a few months, it became obvious that we were outshining the big agency in creativity, speed, cost-control and program results. The big agency’s response: They complained to the client, because our small agency was threatening their large agency’s client relationship by making them look bad.

What do you think? Are the Advertising Age Best Small Agency of the Year and Best Small Agency Campaign of the Year awards an opportunity for small agencies or an exercise in big agency arrogance? And are we just as arrogant, for questioning the awards, and for pointing out all the small agency advantages?

To marketing buzz words like “user engagement”, “success metrics” and “demand creation” we can now add the word “agnostic.” It’s showing up more and more in the marketing trade press, in blogs and on agency websites. Usually it’s coupled with the word “marketing” or “media,” and an agency’s promise to clients that goes something like this:

“We make marketing decisions impartially, without inherent bias for or against any one kind of communications channel – TV, print, online, direct mail, etc.”

Agnostic marketing is a response to the mass marketing mindset.

At least one agency –Naked New York- has made a religion out of not believing in any one communication channel. They say they’re “media neutral;” they don’t create ads or buy space or time for them.  According to one its partners, they “do not have any predisposition to recommend any channel.”

“Marketing agnosticism” is a good idea, as far as it goes. We applaud their efforts. But we also think they don’t go far enough. Read the rest of this entry »