Coca Cola – Global Marketing Communications

The Coca-Cola brand has been ranked by Interbrand as the world’s most valuable at $77,839 million.  But what has lead to the creation of such a strong brand?

It would be next to impossible to name one reason for this; however, as suggested by Interbrand, the Coca-Cola corporation has managed to consistently strike a balance between leveraging the traditional values associated with the drink and supporting this with innovative marketing campaigns.

Heinz has also grown its brand through a very similar method: strong heritage, augmented by exciting campaigns and new products.

The latest innovation from Coca-Cola is the ‘Share a Coke’ campaign that has recently launched in the United Kingdom (U.K.). The said campaign entails bottles and cans being printed with customer names in place of the traditional Coca-Cola logo.  The aim of this is to primarily to engage consumers in the brand, particularly through social media.

Customisable Coke Can

Regarding social media, consumers are encouraged to share their bottles digitally on Twitter using the hastag ‘ShareACoke’ or through the ‘Share a Coke’ Facebook app.  The latter allows consumers to create their own digital bottle and share it with friends (see below).  Furthermore, kiosks, in town centres and shopping malls, will be created to allow consumers to create their own custom cans or bottles, in the case that their name is not one of the one hundred and fifty being mass-produced.

 

While the same programme has already been a success in Australia and New Zealand, will simple a ‘copy and paste’ of the campaign work for the U.K. market?  I think for the most part, it will.  However, despite  the below video giving the impression of an unqualified success there is not such thing as a perfect campaign…

Some marketers (see comments section) have criticised the campaign for simply being ‘lame’, while others – more constructively – allude to the idea being too novel.  As Coca-Cola Great Britain managing director, Jon Woods, identifies, there is an inherent risk of replacing the brand name.  According to Kotler’s model of a ‘product’, a given product is composed of not just the tangible item that is purchased, but also intangible benefits, such as branding.

Therefore, for this campaign to be a success, the increase in consumer engagement – generated by featuring a name on the product – needs to off-set the decrease in brand-derived benefits – lost via the removal of the ‘Coca-Cola’ logo.

Hence, given the power of a brand, particularly one of this statue, to influence consumer consumer behaviour this truly is a risky decision.

Additionally, I believe that the campaign’s call-to-action is rather weak.  Namely, it is a bit ambiguous whether you are supposed to buy a drink for yourself – with your own name on it – or a drink for a friend – with their name on it.

On this point, there may be a missed opportunity here to try and promote non-digital sharing.  Perhaps there could have been a multi-buy offer to support the campaign?  Such an offer might have re-enforced the encouragement to buy a drink for friends, rather than purely rely on the novelty of the campaign.

One last piece of criticism I have is regarding Jon Woods’ claim that ‘no other brand has gone to this level of personalisation’.  In fact, as you can read here, Starbucks has already used a very similar tactic on a global scale.

Share a Coke Facebook App

I think, simply, the question boils down to: ‘Do people care about having a name on a product?’.  In New Zealand and Australia this was a resounding ‘Yes’. As these markets are similar, the campaign will probably be replicated successful in the U.K.; consumers are starting to share their drinks over Twitter.

There is one final issue I will briefly touch upon.  Namely, will more and more companies start replicating national campaigns from one region into another?  To an extent this might be seen as a cost-effective way to ‘think globally, act locally’ and customise global campaigns more efficiently.

What do you think: will the campaign work and  will more corporations start to replicate national campaigns in several regions?

© Joshua Blatchford, author of Manifested Marketing, 05/05/2013

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Heinz and Glaxosmithkline – Balancing Diversification

While Heinz and Glaxosmithkline (GSK) appear to be two heterogeneous companies – the former is food processing company while the latter is a pharmaceutical-focused conglomerate  – they have both utilised diversification strategies in recent years.

As per Ansoff’s matrix, below, diversification is where a company launches – or acquires – a new product/brand in a different market.  Depending on how much experience the company has with the new product or marketing, ‘diversification’ can be considered to be related or unrelated.

However, while Heinz have thrived, GSK have turned their diversification strategy on its head with a planned sale of its Ribena and Lucozade brands.

But what lessons marketers learn from this?  What is the main success factor for the implementation of a diversification strategy?

I believe that – nine times out of ten – a successful diversification strategy depends on striking a balance between utilising a firm’s competencies while also expanding to take advantage of new opportunities.  If you like, this can be considered to be the ‘Goldilocks’ Zone’ of diversification: the strategy should avoid being too similar to current products/markets, and at the same time it should not be too dissimilar from current products/markets.

GSK, unfortunately, appears to be recognising that the firm’s Lucozade and Ribena brands are too-divergent from their mission to help people ‘feel better and live longer’.  Namely, it seems contradictory for a pharmaceutical company to sell and endorse products that have been criticised for their sugar content. This conflicting portfolio is only set to become more evident in the near-future as GSK plans to focus more on consumer health in emerging-markets, where Lucozade and Ribena are weak brands.

Heinz, in contrast, has become general food product giant through continuous diversification.  For instance, if we take a look at the firm’s history, Heinz started with horse radish in 1869, tomato ketchup in 1876 and baked beans and tomato ketchup in the 1910s.  The range of condiments and soups continued to expand throughout the 20th Century.  And still today Heinz diversifies with more bean-variants like Heinz Five Beanz; this product, as the name suggests is a new mixture of five types of beans.  Five Beanz is designed to target the new market – created by the pro-longed recession – of adults that can no longer afford to eat out but want an exciting, new meal that is easy to prepare at home.  Further to this, Heinz has also recently launched a range of spicy sauces.

Hence, while GSK has expanded beyond their core business of health, Heinz’s products are all supported by its original, founding principals.  For example, it does not strike one as unimaginable that a horse radish manufacture may also produce a spicy sauce; whereas, it does not appear logical that a malaria vaccine (GSK’s first research project) business would also sell soft and fizzy drinks.

However, I am sure many readers are ready to cite Virgin as an example of a company that has ignored the rules of diversifying not too little and not too much: the Virgin conglomerate is composed of numerous seemingly unrelated businesses.  Yet if you take a closer look at Virgin’s successful brands – Virgin Atlantic, Virgin Active and Virgin Media – at their heart is excitement and great customer service.  Interestingly, one or both of these components appear to have been absent from Virgin’s failed ventures, such as Virgin Cola, Virgin Make-Up and Virgin Megastores.  Therefore, the point I am trying to make is, although Virgin appears to have expanded into unrelated businesses, the successful brands have still retained Virgin’ core values and competencies.  In comparison to most other firms, Virgin’s key skills are highly applicable to a wide range of industries allowing the firm to diversify further than GSK or Heinz.  Thus, Virgin’s successful diversification strategies may be still be considered to be in the ‘Goldilocks’ Zone’.

© Joshua Blatchford, author of Manifested Marketing, 26/04/2013

London Olympics 2012 – Ambush Marketing

As the 2012 Olympics in London are set to begin, the media has been reporting on the London Organising Committee of the Olympic and Paralympic Games’ (LOCOG) huge crack-down on ambush and guerilla marketing.  In some cases, LOCOG have gone to extreme measures.

Ambush marketing, the main problem for LOCOG, is when a brand wishes to associate themselves with a sporting event, without having paid sponsor fees to become an ‘Official Partner/Supplier’.  To do this, guerilla marketing, may – but not always – be used.  Guerilla marketing essentially involves planning a form of promotion, or a PR stunt, that does not look like it is conventional advertising (see below).

How does ambush marketing work and what does it achieve?
Essentially, ambush marketing works the same way as, and achieves the same outcomes as, sponsorship.  The difference being ambush, marketing tricks people into believing a brand is a sponsor when it is not.  Hence, the same benefit of greater brand recall can be achieved through ambush marketing without paying for the rights to do so.

The reason why there is greater brand recall is because of a process called classical conditioning (see below).

Let me put this in the context of ambush marketing.  Brands repeatedly expose themselves to consumers alongside olympic-related symbols/people/colours so that consumers become conditioned to associate the olympics with a particular brand.  Consequently, when advertising from the brand stops, but consumers are still watching the olympics, they are reminded about the brand.  Given the importance of the olympics, you can see why this is something nearly every brand wants.

Example of ambush marketing at London 2012

Despite LOCOG’s best efforts, and the fact that the games have not even started, I have noticed some ambush marketing already:

Virgin Media and Nissan using Usain Bolt

Despite BT sponsoring the olympics, Virgin media have used Bolt and a subtle Union Jack logo to make a tenuous link to the olympics.

Again, Nissan have used a similar strategy regardless that BMW are the official partners of the olympics.  Although Usain Bolt does own a GT-R, the timing of the campaign makes this an obvious ambush marketing tactic.

Haribo Union Jack Sweets
Regardless that Haribo are German sweets, and that Cadbury is an official sponsor, the confectionary now comes in Union Jack packets (see below).  This packaging is to position the sweets at ‘key occasions in 2012’ – which really means the jubilee and olympics.


If you have spotted attempts at ambush marketing, please share in the comments below.

© Josh Blatchford, author of Manifested Marketing, 23/07/2012

 

3 Marketing Lessons from The Apprentice Series 8

The BBC’s, highly popular, ‘The Apprentice‘ series involves 16 candidates – divided into two teams – taking part in a series of business tasks, after which typically one person from the losing is fired.  The eventual winner of the show wins £250,000 to set up a business in partnership with Lord Alan Sugar.

Besides being great fun to watch, the show also has some great lessons for marketers.  Here are three that I think stand-out from the most recent series:

1) The importance of getting a brand/product name right

I have been a long believer that a good name of a brand can never be responsible for the success of the said brand, but a bad name is frequently the major cause of an unsuccessful brand. Unfortunately, Stephen Brady learnt this the hard way.

During episode 3, ‘Condiments’, and episode 9, ‘English Bubbles’, Stephen came up with two very poor brand names.  In the former episode, Stephen named an Italian sauce ‘Belissimo’ (below) – rather than ‘Bellissimo’, which is Italian for very beautiful.

The result of this was a product that looked very unprofessional, and was disliked when the team tried to sell the product to Italian restaurants; this meant that they could only target less-knowledgeable consumers, and not sell in both Business-to-Business markets and Business-to-Consumer markets.

In addition to this, in the latter episode ‘English Bubbles’ Stephen decided to call a new English Sparkling wine ‘Grandeur’, which is French for ‘splendor’.  This was a stupid decision, as it obviously contradicts the whole brand position of the English drink – see my post on Provenance Paradox.  A name does not need to describe the product – such as Google or Apple – but it must not be misleading and should be coherent with the other elements of the marketing mix.

2) The importance of interactive marketing

According to the services marketing triangle (below), successful marketing involves three facets.  External marketing involves marketing communications, such as advertising or public relations; internal marketing concerns motivating and training employees; lastly, interactive marketing is how front line employees interact with customers and the purchase/consumption environment.

The fourth episode ‘Junk Shops’ showed how interactive marketing can increase consumers’ perceptions of quality and allow firms to increase profit margins.  In the episode contestants had to source second-hand products that were considered ‘junk’ and sell them for a profit in London’s ‘hip’ East End.

To make these junk products appear to be trendy – besides making minor improvements to them – both teams created a retail space that had ‘hip’ connotations.  Some of the methods used included adding dead leaves to the store, using minimalistic merchandising and, lastly, all contestants had to truly admire and believe in what they were selling.  Showing true passion for the products is often what made consumers part with their money.

3) The importance of having a clear brand image

In episode 12, ‘Affordable Luxury’, the two competing teams had to create a new good-value luxury brand.  One team went for a new male grooming brand, while the other created luxury confectionary – or was it chocolate? – what about the cocktails? – and jelly was also being sold for good measure.  The brand under which these products were sold was ‘Sweet Thing’.

Although the team’s flagship store – which represents the brand – had great atmosphere and entertainment, there was simply too many products being sold.  This meant that no one product stood out and the overall brand was diluted.  Ultimately, the male grooming brand won .  Hence, despite the male grooming brand image was very dull in comparison, it was far more consistent and clear, which is critical when launching a new brand.

In summary the three points to take home are: 1) brand names need not be amazing, but can undermine other elements of the marketing mix; 2) interactive marketing is often more important than internal and external marketing; 3) clarity in brand images is critical.

 

Amazon – Should Amazon Open Retail Stores?

Please forgive me on being late on this subject, but I would like to return to some of the rumours that were floating around previously in February (2012).  Namely, Amazon reportedly has plans to open a retail store in Seattle before the end of 2012.  The said store would stock high-margin items such as Kindle e-Readers, Kindle Fire and a plethora of accessories – from cases to lights to screen protectors.  Moreover, as Amazon’s own publishing division grows further and multiple stores are opened, the stores could also stock books.

So is this a good marketing strategy for Amazon?

Before debating if they should open a retail store – with the intention of eventually having national changes across the US – I believe that if they do open a store the firm definitely needs to only stock Kindles and related high-margin products.  Stocking physical books, would incur far too many overheads to be worthwhile and confuse the overall theme of the stores.

There are definitely compelling reasons for Amazon to open stores.  One only has to look towards Apple’s success and their retail store design to see lots of lessons that Amazon can learn from the Apple stores.  Ultimately, I think that there are three marketing benefits that Amazon will gain from having its own stores:

1)  Product  Engagement

Firstly, by having a boutique-styled store Amazon can show case its Kindle products – and potentially a smartphone later this year.  Given one of the challenges for online services is reducing the tangibility of their product offering, if consumers could try-out products in store they would be much more willing to make large purchases.

Further to this,  it would help to speed up the adoption rate of Kindles.  Currently, the firm relies on early adopters spreading word of mouth.  However, by having Kindles on show for prospective customers to try, qualms and worries about reading on a screen that customers may have can be quickly over-come; also, having a physical store would help target older customers.

2) Improve Customer Service

There are a number of benefits that customers would gain from having the store: order products online and collect in-store, customer returns service and even a Genius Bar-inspired customer support desk.  Not only would these facilities allow Amazon to compete in the physical world against Best-Buy, Target and Wal-Mart, these are services that help augment their products with added-value.

This is in-line with CEO Jeff Bezos’ vision of ‘Building premium products at non-premium pricing’.  So in order to compete against Apple – which it is competing more and more directly as it launches its own technology products (See  Cloud below) – they need to offer the same level of service, without the huge price-tag.  Moreover, as Amazon’s own range of electronic devices gains popularity, there will be a greater need for after-sales service.

 

3) Brand Engagement and Publicity

As I mentioned in a previous post about Apple, a lot of their new product success comes down to lavish product launch events that generate lots of free press coverage.  It also lets customers show their devotion towards the Apple brand.  Amazon could potentially use the same strategy, which would work well for future tablet computer – and even smart phone – launches.

But, I can see two potential drawbacks of opening the stores.

Firstly, is copying Apple a good idea?

Of course, Amazon does not have to mimic Apple stores – albeit they probably will – but ever since the rumours emerged the two firms have been up for direct comparison.  Microsoft has launched stores and have been criticised – somewhat fairly – for copying Apple.  Also, Amazon do not have sufficient own-brand hardware to truly fill out a retail outlet.  This could be overcome by stocking other electrical goods – such as laptops, TVs and digital cameras, but it would weaken the differentiation between Amazon stores and general electrical retailers.  This is what Microsoft stores currently suffer from (see video below) by stocking diverse hardware brands.

 

Secondly, will a retail presence damage Amazon’s brand identity?

Amazon currently has the second highest retailer brand value of $28,665m (the firm is behind Wal-Mart who has the highest retailer brand value).  Accordingly, to the world Amazon is known as the world’s largest online retailer.  But what will the company be known as afterwards?  To many outside the US, this brand identity will remain the same; however, opening retail outlets does confuse its brand identity.  By having an online and offline presence, it just becomes more and more similar to its competitors and loses differentiation.  Moreover, as the firm will be in closer competition to other electrical retailers (Bestbuy, Target, Wal-Mart) and any short-comings in its offline service will be scrutinised against them.

What is the overall verdict?

Despite the issues I have just highlighted, I think that, on the whole, it is a good strategy.  Primarily because it supports Amazon’s related diversification strategy and potentially will allow it to offer greater customer service, which will make future technological product’s more likely to be adopted by consumers.

But there is a slight catch-22 dilemma: Amazon does not yet have sufficient own-brand products to open a viable store based on their high-margin and tech products.  But in order to successfully launch such products, such a smartphones later in 2012, they would probably need a physical retail presence.

I will be monitoring Amazon’s diversification plans over the year and another Amazon post will be coming on why cannibalising your own sales might be a good strategy – keep informed by subscribing!

© Josh Blatchford, author of Manifested Marketing, 12/04/2012

Research in Motion – How Branding Can Save BlackBerry

As you may have heard Research in Motion (RIM) is not having the best of times, to say the least.  The firm made a loss of $125m for the first 3 months of 2012 and had a decline in net profit for the full financial year of $2.2bn.  Moreover, this comes amongst major organisational change, with co-chief executives Mike Lazaridis and Jim Balsille only having resigned in January of this year.  Clearly,the new CEO, Thorsten Heins, has to make some serious strategic and marketing decisions.

The first of these decisions has been to focus less on the consumer market and focus more on their core – or orignal customers – of business executives.  It is important to note that RIM is not abandoning consumers, as many report, and there is plenty of opportunity to turn the business around.  The firm simply hopes this business-orientation will mean it will compete less directly with the likes of Apple, HTC and Samsung – to name a few.

Other business writers have already discussed whether or not this is a viable strategy.  Many have criticised it:

‘RIM chose a strategy based on how easy it would be to execute rather than how successful it would be’ – Macworld.

Others have said that the firm should focus on consumers, as that is where the revenue growth is.

But marketers have come out in favour of targeting business users.  According to the Elaboration Liklihood Model, for a high-involvement product like a mobile phone, it is the ‘Steak’ or the ‘Sausage’ (the core product) that persuades people – or businesses – to purchase a BlackBerry.  Whereas, the ‘Sizzle’ (branding and advertising), is less persuasive.  David Taylor, argues that BlackBerry phones have become all Sizzle and no Sausage.

The general consensus that BlackBerry phones, the core of the product,  are the problem has led to many business writers primarily focusing on the features and innovations that future phones need (see Sydney Morning Herald and Mobile Opportunity). But I think the critical issue is branding.

So to clarify there are the following combination (depending on market and whether to focus on the Sausage or Sizzle) of strategic options:

Blackberry’s current position is strategy 3 (see below), and has announced a return to strategy 2.  Which will hopefully allow it to use a combination of 2 and 4 in the future: keep its products up-to-date and add profitable value through marketing.

However, I think the strategy Blackberry needs is initially strategy 1, and then move to have a combination of strategy 1 and 4 once it has revitalised its product range.

Hence their strategy should be in three stages:

1) Look to consumers’ needs to develop new product features = improving the Sausage;

2) Use branding to target business users with these new product features = improving the Sizzle.

3) Ultimately, these two improvements will allow RIM to use Laswell’s (1948) triple appeal to encourage business customer’s egos to choose BlackBerry (this will be returned to later).

(There should be no debate about targeting consumers vs business users or having Sausage vs Sizzle – they need to be good at all four to compete in a saturated market.)

1) Improving the Sausage:
Now, this might seem contradictory to target business users by focusing on the needs of consumers.  But an underlying assumption that others seem to have made is the belief that consumers and businesses have different needs.  I strongly believe in order to be able to appeal to business users, the firm must firstly target consumers.

Part of BlackBerry’s problems is that they have attracted lots of teenage consumers (see graph, from Ofcom, below) who use the phone’s keyboard to send text messages – or use BlackBerry messenger – easily and quickly.  But this was once a feature that appealed to business users for sending emails.

At the same time the iPhone has become more popular among business users than BlackBerries:


So it would seem that BlackBerry have become popular among teenagers by making a phone designed for business use; and that Apple have become popular among business users by making a phone designed for consumers.  Therefore, both market segments must have converging needs.

Hence – and please hear me out – the features that BlackBerry needs to implement  are consumer-orientated even if it means loosing short-term brand identity with business customers.

This, like I said, is because consumers and business users actually have similar needs (after all, executives are only human!)

I would suggest the following changes to be made:

1) Introduce touchscreens for all phones – better for users playing games and watching videos;

2) Move to Android or Windows Mobile operating systems – allows more apps to be downloaded;

3) Ditch the keyboard – makes the device more portable/allows larger screen depending on the phone design.

Obviously, these would only allow BlackBerry to maintain market share in the consumer market, as these features are nothing new/innovative, but that would still be sufficient to improve their products for business customers.

The next part of my proposed strategy is taking the new Sausage and giving it a business-orientated Sizzle.

2) Improving the Sizzle:

Unfortunately for BlackBerry, as mobile phones are public necessities, the choice of brand is highly influenced by reference groups.

Therefore the trend of teenagers adopting the phone looks set to continue:  as teenagers seek self-verification goals within social groups, if they own a BlackBerry they believe they will popular;  as business users seek self-enhancement goals, they can improve their esteem if they own an iPhone.

According to Heider’s (1958) balance theory, teenage users of BlackBerry phones has changed  consumers attitudes towards BlackBerry

Original attitudes towards BlackBerry:

There used to be a strong positive connection between business users and BlackBerry and, as a public necessity, this was highly evident to potential consumers who could associate business men with the BlackBerry brand.

Thus anyone who believes that their actual sense of self is a business person, or their ideal self-concept is to be a business person, they would purchase a BlackBerry as it would be seen as appropriate group behaviour to be a business person, whom they have favourable attitudes towards.

Current attitudes towards BlackBerry:

Now, however, there is a strong positive connection between teenagers and BlackBerry.  Consequently, those who like BlackBerry for business reasons must also view teenagers positively or in the same light as BlackBerry.  Thus, if they saw teenagers unfavourably there is a good chance they now also see BlackBerry negatively.

So, in order to improve the brand or the Sizzle, BlackBerry need to get business users to start using their revitalised phones again and also act as opinion leaders.  They can replace teenagers with business people, as personifiers of the brand, by using any or all of these strategies:

1)  Use opinion leaders as the target market segment – approach select businesses directly and offer to supply their firm with company phones for free.  Using high-profile firms with a corporate reputation, such as IBM, would help re-condition consumers to associate BlackBerry and business people.  Ideally, BlackBerry needs to pair being a successful business person/company with using their phones.

2) Create opinion leaders – offer a referral scheme for work colleagues in professional jobs.  For instance, a BlackBerry customer, who uses the phone for personal use and work, can ‘introduce’ a colleague and they are both rewarded with BlackBerry Playbook tablets.

3) Use opinion leaders in marketing communications – RIM need to use advertisements that feature opinion leaders, whether or not it is clearly scripted.  This has recently been used by rivals HTC to target a youthful segment:

In addition to using word-of-mouth communications, I recommend RIM taking an upward brand stretch to make the product more exclusive:

1) Bring out a new brand name – this new brand name should be used to categorise RIM’s phones that are designed for business users; the existing BlackBerry name/devices should be left to target emerging markets as low-tech and cheap smartphones.

2) Premium price – to reflect the overall positioning of the new line of RIM phones for business people, they need to become a status symbol and, in our Western society, this can be easily done with a premium price.

Thus, by now RIM should have improved their Sausage with features consumers want, and, dressed it up with Sizzle to give it a business brand image.  The third and final step is to combine these seemingly polar strategies into a triple appeal.

3) Creating a triple appeal

According to Freud our personality consists of an Id, which seeks immediate pleasure (naughty side), a Superego that seeks to conform to societal expectations (nice side) and an Ego that balances the two.

In order to create a triple appeal RIM must appeal to the Id, Superego and Ego; this will have been done by giving their phones consumer features with a business brand image.

The appeals to the Id include: ability to download apps, play games, watch videos on a larger screen.  But conversely these can be viewed to also satisfy the Superego: download productivity apps to use on commutes and business trips, ability to play games is an indicator of hardware quality, larger screens makes emails easier to read.

Ultimately, these are easy to balance by the Ego through positioning the new phones as ‘naughty but nice’.  This is very important because there are two situations that RIM should sell their new range of business smartphones

1) Allow them to go on sale through consumer retail outlets to target business customers who want to use the phone at work and for personal uses.

2) Selling directly to firms.  Here the triple appeal is still important even in B2B markets.  Namely, although the deciders and purchasers within the firm will want the order for the Superego benefits, they will be heavily influence by others in the firm who subconsciously want the phone for its more fun/consumer benefits.

Further to this, the triple appeal strategy needs to be communicated explicitly to consumers, as well as being ‘baked-in’ to the product.  This means featuring the triple appeal in advertising, as successfully done by Aero chocolate and Maltesers (it is chocolate, but a ‘lighter’ option).

Thanks for reading a second in-depth post in a row!  To summarise: I think RIM need to make the phones better consumer experiences, use reference groups to target business users and combine everything to create a triple appeal.

What do you think they should do?  Leave your comments below.

© Josh Blatchford, author Manifested Marketing, 06/04/2012

P.S Happy Easter 🙂

Apple – An introduction to Marketing Strategy

This company almost needs no introduction.  Although I am not really a fan of their products, there is no denying the huge success of Apple: the technology company now has the highest market capitalization in the world at $573 billion, which is more than Microsoft and Google’s valuation combined; the firm is the most admired company in the world; and the Apple brand value is worth $153.3 billion alone.  The list is simple endless…

Having only briefly spoken about Apple before, this post will show how the firm’s success is based on simple marketing concepts.

The Product Life Cycle (PLC)

Apple’s iPod is a textbook example of how to manage the PLC from introduction through to decline.

The PLC consists of 4 stages: New Product Development, Introduction, Growth, Maturity, Decline.  But it is the introduction and maturity stages where Apple’s marketing ability really shows.

What sets Apple apart from every other technology company is how it utilises its Apple stores to create over-the-top product launch events and generate free publicity.  Every time Apple launches a product (not just iPods), all employees make an effort to ensure each customer is congratulate the new owners.  It is simple but effective:  thousands queue outside – even camping out for several days – just to experience a product launch by Apple.  This is entirely unique to Apple – one cannot even imagine consumers showing the same amount of passion for a Microsoft product.  The stores are simply great for free PR.

As the maturity stage is the most profitable time of PLC, it is crucial to extend this period to be as long as possible and delay a decline in sales.  This is very much true with the iPod.  The iPod has already experienced massive growth; now sales are stagnant and predicted to decline.  Hence, Apple continuously roll-out extension strategies, updating the iPod with more features, more colours, larger memory, faster processors, a smaller size – anything to keep on getting a short-term sales boost.  The cumulative effect of these short-term updates is that, combined, they actually increase long-term sales – see this great infographic on how the evolution of the iPod has grown sales.

Apple also recognise that decline is inevitable – one day they will have to stop selling the iPod.  But they are more than prepared for this – the iPhone is almost a direct substitute for the iPod, while the Apple Store is becoming more and more orientated to iPad and iPhone users.

Product Development

Product development is just one of the growth options in Ansoff’s Matrix, but perhaps the most effective for global brands.

As you can see (above), product development involves launching a new product to the firm’s existing customers.  If you, like Apple, already have a global presence, in major markets, and understand your customer inside-out, it arguably offers the best trade-off between risk and reward.  By launching the iPad, iPhone and operating systems to the same audience Apple builds up integrated customer relationships across multiple platforms and therefore creates brand loyalty.  This increases the likelihood of new products being a success.  Conversely, Google’s innovations have high failure rates.

The effect on sales of this product range filling strategy has had a cumulative effect on Apple’s sales growth:

The Boston Consulting Group Matrix/ Product Portfolio Management

The famous BCG matrix classifies a firm’s product portfolio into four strategic business units (SBU): Stars, Question Marks, Cash Cows and Dogs.  Within each SBU, there are again four potential strategies to take: build market share, hold market share, harvest (reduce investment) and divest (phase-out).

Star:  This would be the iPad because it has a high share of the rapidly growing tablet market.  As the iPad is in its growth phase of the product life-cycle, the product is beginning to lose its first-mover advantage as other manufacturers begin to launch their own tablet devices.  Hence, Apple should invest heavily into marketing the iPad in order to grow sales to maintain their share (sales need to grow at the same rate as overall market sales to maintain market share within a growing market).  But in the future, when market sales become stable, Apple should harvest the product to turn it into a Cash Cow to fund other SBUs.
Question mark: Despite Apple’s best attempts, PCs with Microsoft operating systems still continue to dominate the PC market.  Much of this is down to strong business-to-business marketing and high switching costs for businesses and consumers, alike.  Apple could potentially used three strategies for their Mac software:

1) Divest – this could allow Apple to devote more time on their most profitable products, but it is highly unlikely as the Mac is part of the firm’s brand identity.

2) Build – Apple could potentially invest lots and lots of resources to try to turn Macs into a star, however even with Apple’s huge cash pile, it is questionable if it is even possible to beat Microsoft-powered PCs.

3) Hold – this is the most likely strategy.  Apple will probably continue to develop new Macs and support existing customers, however investments will be kept at a minimum and be target towards the iPad.

Cash Cow: Apple’s source of steady flows of income are clearly the iPhone and the iPod; both the MP3 and mobile phone market have reached saturation and Apple has a high share of both these markets.

As the iPod is reaching the decline stage of the PLC, Apple is beginning to harvest the product.  That is, slowly reducing investment in marketing iPods to increase their profitability; by generating more cash, further investments can be made into question marks or stars.

In the future, Apple will probably only maintain their market share of the iPhone. It is a highly profitable to generate sales from existing customers from upgrades, which can be almost guaranteed after a consumer invests heavily in downloads from the app store.

Dog: Lastly, Apple TV – a device that allows media files in iTunes to be played on a TV – has never really caught-on.  By launching a second and third generation, Apple have shown they are committed to building sales.  However, unless the overall market for digital media receiver grows, it could be more profitable to divest the product.

Competitive Positioning

Apple have a clearly defined premium strategy: they offer more benefits for a higher price.  According the Value Proposition Matrix (above), any of the white squares are competitive strategies.  But, I personally believe a ‘more for more’ position is perhaps one of the more effective.  This is because it is highly profitable and hard for competitors to copy a premium identity.

Developing a premium, or luxury image, is incredibly hard for both new and existing brands.  Hence, it is highly unlikely any of Apple’s competitors will risk undertaking an upward brand stretch and gain a premium status.  Moreover, this type of branding allows a premium price tag to be attached to any product – regardless of the quality – with an Apple logo, allowing the firm to make huge gross margins.

This heavily links into Micheal Porter’s famous generic strategies:

A firm’s scope can be either to target a niche market (narrow scope) or a mass market (broad scope); and their strategy can be based on low-cost, or differentiating themselves, with additional benefits, from their competitors.

Apple has been very clever with their choice of strategy, depending on the product.  Initially – and for a long time – the firm used a Differentiation Focus strategy while Apple only sold Mac computers.  The firm was very niche and was targeting Innovators and Early Adopters:

According Everett Roger’s Diffusion of Innovations theory and Kotler, those who adopt new technological products act as opinion leaders and brand evangelists who spread word-of-mouth promotion about your product.  This then attracts the Early Majority, where the bulk of sales comes from.

After Apple used a Differentiation Focus strategy and masses of consumers where becoming more aware of the Apple brand, the firm has moved towards a pure Differentiation strategy.   This is seen by the iPod and iPhone that are used by wide range of consumers.

Many firms make a mistake these days of not targeting the Innovators and Early Adopters – they try to immediately win huge sales.  Seth Godin (and I) believe this is a poor strategy:

Branding – Corporate Branding / Family Branding

If you have read my previous post on Proctor & Gamble, I am a very strong believer in the power of corporate branding.  This is where a single brand image of the firm is used to promote their range of products, rather than developing a brand for each product category.  Apple is a great example of this.

Apple’s own brand values – innovation, simplicity, style – have been consistently emphasised across all of their products.  These have even been personified by former CEO Steve Jobs’ personality.

This is highly beneficial to the firm because it makes new product launches much more likely to be successful; it seems that Apple could launch an iWhatever and consumers would buy it.  Moreover, Apple customers have been so conditioned to Apple brand values that it is naturally assumed a new Apple product will be any of the above brand values.

Further to this, Apple also benefits from something called the ‘Halo Effect’.  This is where a customer purchases/likes one product from a firm and is then interested to try out other products the same company has to sell.

As the graph shows, after a big rise in iPod sales in 2003/4, Mac sales also started to pick up more significantly.  Many think this is down to the Halo Effect – consumers enjoy their experience so much with their iPods they decided to fully ‘make the switch’ to Mac computers.  It has been found by Apple Insider that almost 20% of Mac sales have come from once PC owners who first purchased an iPod.  More recently, the same Halo Effect is occurring because of the iPad

To reiterate: it is because Apple has such a good corporate brand that consumers believe if they like one product by the company, they will like all of their products.

Services Marketing

Although I have already blogged about the Genius Bar, it is worth mentioning it again here as it provides a good lesson in services marketing.

Ever since the end of WW2 services marketing has been given growing attention by businessmen and academics.  Now, in the 21st Century, offering additional services to a product has become a major source of competitive advantage and brand differentiation.  Apple, for example, achieves differentiation from other technology firms through having retail outlets that allow them to provide superior customer service.

The Genius Bar, offers Apple customers face-to-face technical support; a very welcome change to poor after-sales service provided by their competitors.  This helps augment their products and support their ‘More for More’ competitive positioning, hence it is an important way to add value to Apple products.

In addition to enhancing their value proposition, it gives Apple an unrivaled chance to practice interactive marketing – engagement between employees and customers.  Where as other technology firms often only practice external marketing, Apple can use interactive marketing to enable customers bond with the firm.  This is helped by the fact that employees are – or at least perceived to be – brand ambassadors that truly believe in what they are selling.

Marketing Communications

Lastly, there is no point in doing any of the above unless consumers know about it.  However, it is hard to say what makes great campaigns.  But one thing is sure: they have to be original.  There is no real strategy or science behind it, but Apple have managed to get it right on so many occasions:

I hope I have managed to cover the main theories, and used Apple to help explain these, but if I have missed anything out please let me know in the comments below.  I also hope I have highlighted how important the Apple stores are to the firm’s success as I feel this is something that is often overlooked by other business writers.

And thank you for reading the whole post!

© Josh Blatchford, author of Manifested Marketing, 29/03/2012

Quick Update

Hi readers!

I just wanted to quickly bring to your attention 2 things:

1)  The Manifested Marketing Facebook page is now live!  In addition to posting updates on the blog, I will be running competitions, sharing marketing news and engaging with fans via the Facebook page.

2) I have launched a more official service for providing coursework feedback under the ‘For Students’ page.  Feel free to get in contact with any help or questions you have related to studying business or marketing at any level, from anywhere in the world.

Thanks for your interest in the blog – March has been such a successful month!

Josh

Aston Marketing Society Event – Agathe Blanquart from Shell

Agathe Blanquart is Global Retail Category Manager at Shell. According to Forbes, Shell is the fifth largest company in the world by sales; and Agathe has progressed from being a graduate trainee to overseeing retail outlets, product launches and marketing campaigns for the firm. She recently came to visit Aston Marketing Society to give a talk on effective communications and media selection, one of the foundations of effective marketing.

Here are Agathe’s four key points from her talk:

1) Tell a story to achieve your objectives

This was particularly true when newspapers will be used as a marketing channel. For instance, in the launch of Shell Fuel Save, using celebrity endorsements from Andrew Flintoff and newspaper features all had a purpose beyond communicating the launch of the product. They told a story by sharing fuel saving tips with consumers and reported fuel-testing experiments conducted with Andrew Flintoff that created interest from readers.

2) Measurement of media will identify gaps in delivering your message

Through out the campaign, plans for measurements need to be in place to assess the effectiveness of the campaign and to adjust plans in light of new information. This is linked heavily to point number 4.

3) Be honest and avoid a reputation damage

As the infamous BP oil spill has highlighted, having an solid corporate reputation is crucial in a world where consumers are becoming more and more knowledgeable about the brands they purchase. Therefore, when using TV advertisements – where doing so you have to be selective on how you buy your time – it was decided to emphasise the brand more than the product (see below).

4) Follow up your campaign with a smaller one to refresh consumer’s minds. This is where point number 2 becomes important – not only can you consolidate the previous communications, you can correct any messages that have been interpreted incorrectly by consumers. Another piece of advice this links to is the power of support media and smaller channels that, when combined, become very influential. For example, Shell used mobile billboards on lorries, promotional products (air fresheners, which actually benefited consumers) and blogger’s engagement to augment their core campaign.

© Aston Marketing Society 12/03/2012

Written by Josh Blatchford, also editor of Manifested Marketing

Starbucks – Relationship & Services Marketing

As I am sure you will know, coffee shops have huge amounts of competition – the ‘product’ they sell is literally a commodity.  This has meant that the major cafes have had to augment their core product with a differentiated brand image, as seen with Costa Coffee, or diversify the range of services provided, like Starbucks have.  Neither of these strategies seem to have provided Starbucks or Costa Coffee with a significant competitive advantage over one another.  This may explain Starbucks’ latest tactic (below).

The basic idea is that orders will be read out by calling the customer’s name rather than their drink. The aim of this is to develop a deeper connection with customers, and therefore improve loyalty

Initially I thought this was a really good idea.  However, now I have had a few days to think it over, I am not so sure anymore; I think the ad might be good, but not for the obvious reasons.

Firstly, why this might not be such a good idea:

All the coffee shops have long had a tactical level of relationship marketing by using a simple loyalty card scheme.  But as this is easily copied by competitors, it is necessary to go one step further and offer social benefits and bond with customers.  This is what Starbucks have done right?  So this must be a good thing?  Not Exactly.

To offer true social benefits, employees must actually get to know customers over-time; not just ask for their name.  Asking for their name to put on the drink is a very artificial social bond.  I have talked previously consumers’ intelligence being insulted by marketing, and I think Starbucks’ latest decision is very patronising to their customers.  In fact, the only people who will enjoy it might be the elderly, who – from my experience as a Barista for Costa Coffee – love to chat.


Furthermore, this is just asking for trouble and bad publicity.  It would be no surprise to hear in a few months time that someone has pulled a Bart Simpson-esque prank on a Starbucks branch.

There is also huge potential for daily mishaps to occur.  This latest strategy has already been used in the US.  And bloggers have been quick to share some of their funny encounters with Starbucks employees.  As the blogger (link above) highlights, employees are constantly mis-hearing or spelling names wrongly (picture above).  Hence, the whole idea of this interactive marketing strategy – which is to connect employees and customers – is counter-intuitive.  Simply, the strategy in-fact highlights that there is little, or no, relationship between Starbucks and its customers.

So, you may be asking, if the whole idea of using customer names fails at its purpose, what is it good for?

Well in fact it is the campaign(the ad promoting this service change), I think, is good .  This is because it highlights Starbucks’ brand identity and positioning.  Namely, the ad shows that the company does care about improving their service.  Albeit they might have failed,  it lets customers know that the company is trying to innovate, do things differently and ultimately provide them with a better experience.  And that is definitely a good thing.

Overall, I do not think this is going to be successful, long-term move from Starbucks.  But, I do admire their campaign and I am sure giving away free lattes was a great loss leader to sell more expensive cakes and confectionary in the short-term.

Let me know what you think in the comments below.

© Joshua Blatchford, author of Manifested Marketing, 16/03/2012

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