Shelf Space

Now that we're underway in the simulation, things haven't exactly gone according to plan so far. My team is humbly bringing up the rear, and a big reason for that is my ill-fated decision to try to optimize Allround's distribution channels.

Allround started with a competitive advantage in two channels, Mass Merchandise and Convenience Stores. Considering that these were two lowest grossing channels industry wide, it seemed like it was in the brand's best interest to reallocate the shelf space budget toward higher grossing channels, such as drug stores and grocery stores. However, the end result of this was simply to concede a large amount of existing shelf space, gain a much smaller amount in the higher grossing channels, and barely get additional sales from this endeavor while tanking in Mass Merchandise sales in particular on the flip side.

This is the first of what is bound to be many real world lessons learned from the marketing simulation. Shelf space isn't guaranteed if you throw more money at retailers, and giving up existing positive relationships to attempt this can end up with absolutely disastrous results for distribution prowess and overall sales. These things should clearly be tweaked for improvement rather than blown up entirely, and it is certainly not something I'll forget if I end up in a position that makes similar decisions in my career one day.

Here's to hoping the next lesson learned is how to successfully reverse a major distribution decision error!

Vicks: the New Blackberry? Hopefully Not

Now that we're starting the marketing simulation portion of the course, it's set up an interesting situation for us students to approach. Vicks cold medicine (AKA Allround) is without question the market leader, ranking first for crucial stats such as market share and brand awareness. The problem is, however, that the lead the brand has accumulated is starting to slowly slip away when it comes to sales. In an ever changing world full of competition and innovation, even the strongest market leader will eventually capitulate and crumble into oblivion if a culture of complacency starts to sink in. As an example of this, you could just ask the former executives of Blackberry back when it was in its prime. They ruled the market not too long ago, but failed to foresee the direction the industry was headed and became completely irrelevant within a few years.

It's up to us, as students, to curb the trend that is beginning to occur for Vicks. It's a known brand with high consumer satisfaction ratings and a pretty reasonable price, but consumers are slowly starting to move on. It will be very interesting to attempt to diagnose what the reasons are for this decline, and what the most effective and impactful marketing solutions are to initiate a trend back in the right direction.

Brand Repositioning and the Role of Advertising

For my brand project this semester, my biggest focus ended up being Audi's shift in positioning from marketing just to the power elite to also including younger, urban consumers. The Simmons data told a really interesting story about the shift in demographics toward this new demographic, with Audi's median age of 40 being one of the youngest on the American luxury car market. After researching Audi's brand messaging, it became obvious it was a conscious and successful effort to achieve this brand repositioning strategy. However, the manner in which Audi did it is pretty interesting to say the least.

It's no secret that one of the best ways to target younger consumers is to have an effective social media presence. Younger demographics are heavy users of this medium, and you would have thought that Audi probably forged a competitive advantage in order to help target affluent but young individuals. However, its social media usage is really conventional and not very differentiated from other competition, with the big focus simply being on the different models available and the highlighting of utilitarian features that make Audi a high-performance car. This can certainly be a safe but solid strategy, however it's not something that would likely turn a younger person's head. In fact, when viewing the social media metrics in the kodiak folder for Audi, their engagement is actually pretty underwhelming except for at one point: the Superbowl.

Audi has done a great job of launching high profile and captivating Superbowl advertisements that seem to resonate with younger viewers. Ads such as https://www.youtube.com/watch?v=cdwWONi2FrI and https://www.youtube.com/watch?v=diU_09jb4bI are Superbowl ads that caused a positive stir after being aired, injecting a sense of excitement and inspiration to the Audi brand that was previously not as present.

What I find really interesting about this approach is Audi actually used a classic (and some might even argue outdated) approach to try and connect with a younger audience that tends to be more receptive of newer wave, digitally focused marketing tactics. Audi's increasing sales and decreasing median age just go to show that classic strategies can still work on the younger consumers that many companies have struggled to reach; as long as the right message and right execution are demonstrated at the right time.

The Rise of Personal Services: B2B Included?

When doing one of the required readings for class, "The Changing Face of Marketing", one bullet point in the article really got me thinking about the evolution of the services market since the article was published in 1966. The bullet point noted that "There has been disproportionate growth in the market for personal services, including recreation, education, and travel. Depending on whose statistics you choose to believe, consumer services now account for 40 percent to 50 percent of all consumer purchases."

This caught my attention because of the knowledge from a previous marketing class that services now make up about 70% of total consumer purchases. While it's unclear when the trend started upward in the very beginning, it's pretty clear that it continued long after the article was published. Of course, many services are of the B2C nature during the gradual rise. Consumers like to spend money on dining out , travelling, attending college, and countless other things. But one aspect of this trend that might get overlooked is the fact that companies are starting to offer new services to other companies too.

B2B services have seemingly always been around, with consultants and agencies helping other companies with specific areas that they excel at. However, companies are starting to get creative too. I interned for a company called Circles North America Group this past summer, a subsidiary of Sodexo. Circles is a B2B service provider that offers concierge services both in-person and remotely for employees of companies who decide to purchase its services. The concierge services help boost employee morale and productivity while greatly decreasing turnover, by fulfilling work orders received from employees. Concierge can run errands for employees, plan vacations, book concert tickets and much more upon request. In hospitals, concierge also helps the often overwhelmed nurses by taking care of many non-clinical issues that pop up, relieving work overload. The idea is that with concierge taking care of all the non-work related worries and distractions that may make employees less focused and productive, the employee will deliver better results and want to stay at the company longer.

This is a really creative B2B service operation that benefits both parties. Sodexo found a new way to increase its revenue, and companies that hire Circles have a more productive and stable workforce that helps those organizations improve themselves and further develop a positive reputation. Consumer services will always be available everywhere you look, but maybe more companies will take advantage of B2B service partnerships and drive the 70% figure up even more in the future.

Brand Perceptions & Customer Loyalty

If there's any one thing that probably demonstrates the power of effective marketing, it very well might be the over-the-counter drug industry. The way new drugs are introduced is that the founding company is able to file a patent for their specific type of drug, in which they get to reap the dividends for their innovation and profit off of it. The caveat, though, is that the patent lasts for 20 years. After the expiration date, any company is free to make a knock-off version of the drug and sell it on the market.

With this being said, after 20 years, there is nothing preventing companies from replicating an exact carbon copy of a drug and masking it as its own product. This is exemplified by pain killing over-the-counter drugs such as Advil, with many stores such as Target selling their own "Target brand" product that is literally the exact same product in reality. The catch is that these store brands and other knock-offs will sometimes cost half as much as it would to purchase the Advil brand, despite receiving identical benefits from either one. Despite this, lots of consumers still buy Advil and other similar "name brands". Why is that?

I think you can tie this into what we have read and talked about regarding brand equity. A specific section of "In Search of True Brand Equity Metrics: All Market Share Ain't Created Equal" talks about customer loyalty, the ultimate driver of the repeat purchase behavior that marketers desire so greatly. According to Reynolds and Phillips in their article about brand equity, "loyal customers are defined by the strength of their quality and price perceptions, and how those perceptions relate to purchase behavior". Clearly, brands like Advil have acquired loyalty through reputation, being a top-of-the-mind brand if you have any kind of aches or pains. This contributes to their overall brand equity, supporting the sustainability of their sales and continued success. What's interesting to me is the bit about price. Strength of price perception in this situation would imply the implication that consumers are getting a higher quality painkiller when buying Advil over a knock-off or store brand, considering they are paying a premium in comparison. However, as we know, this is not at all the case. The overarching point here is the power of brand reputation and tradition when considering brand equity. Even when a known brand charges a higher price for a product literally without any competitive advantage at all, many consumers stay loyal to the brand's reputation and perceived high quality because of the historic trust they have in the product to relieve them of pain. All you can say is hats off to companies who market products like Advil, who are successfully tapping into an important aspect of brand equity and profiting as a result without the benefit of actually selling a better product.

Brand Salience: How Audi Stood Out From the Crowd

The article "Differentiation or Salience" brought up a very interesting point when it comes to brand differentiation. In some industries, brand image and values don't actually differ much for mainstream competitors. The brands will often preach similar messages and tout the same features, but paradoxically some brands still have a much greater market share than others. According to the authors of this article, the main reason behind this is something called salience. 

Brand salience specifically refers to how a consumer feels about a brand. These positive feelings don't come from just competitive advantages or better prices, but also from an emotional differentiation too. The more strongly a person feels positively about a brand, the more salient that brand is considered toward that person. So the natural question is: how can a brand achieve salience among consumers within their market? One of the answers to that question is effective advertising. 

Advertising, when done right, can be truly memorable and keep a brand's name in the back of consumer's minds for a very long time. A perfect example of this was Audi's 2016 Superbowl commercial (https://www.youtube.com/watch?v=yB8tgVqmKzw). The commercial is not only an Audi advertisement but a tribute to the late singer/songwriter David Bowie, a beloved global icon. The commercial deviates from Audi's typical commercials that highlight Audi's superior sport car features while retaining the comfort and image of a luxury car. It inspires adventure, as evidenced from the former space explorer feeling alive again when viewing the Audi (as "Starman" fittingly plays in the background). The execution is dramatically brilliant, and the ad as a whole is a moving one that inspires the freedom of adventure while honoring the celebrity who embodied this quality more than any other. Judging from the millions of views and top comments on Youtube, people absolutely loved it, with many going as far to say it gave them the chills. 

This is a perfect example of achieving brand salience. The commercials that hype of car performance mostly don't last in the memory, but it's safe to say this commercial will. It gives Audi an extra feather in its cap when it comes to its overall image, conveying a sense of freedom and artistry that other luxury sports cars don't have. As consumers are impacted by the commercial, Audi very well may reap the rewards of increased market share, despite not really changing its overall positioning strategy in the long run. This is the power of utilizing brand salience.  

When Listening to Your Customers Can be a Bad Thing

One of the articles read for Tuesday's class is "Market Segmentation: a Strategic Management Tool" by Richard M. Johnson. It made a lot of great points about perceptual mapping and how that knowledge can lead to effective positioning or repositioning, but I fundamentally disagree with one of the points made toward the end of the article.

Johnson describes three main strategies for increasing market share by repositioning: positioning closer to companies that have achieved substantial market share (imitators), positioning farther away from all competitors (innovators), and determining positioning strategy almost exclusively by consumer preferences. The first two are certainly legitimate, successful innovators achieve huge amounts of market share and other companies make up lost ground by adapting to whatever competitive advantage the innovator established early on. But if a company were to position themselves according to their market research of consumers, I think they would find it increasingly difficult to survive.

The photography company Kodak is a perfect examples that illustrates this. Kodak's bread and butter was always film-based photography, and thrived on this specialty for a while. However, as always seems to happen in any market, a disrupting factor came about eventually. That disrupting factor was digital photography, and ironically enough it was Kodak that invented it. However, senior management's reaction went something like this: "That's great and all, but we're a great company because our consumers love our high quality film-based pictures. Don't tell anyone about this" (http://onforb.es/1T6bfTw).

This is why in my opinion, Johnson's third repositioning option is flawed. When Kodak examined a potential repositioning moment, their conclusion was to listen to their customers for direction: they loved what Kodak was offering them. This is such a flawed decision making structure because consumers can only ever know about what's currently on the market when they provide feedback on their wants and needs. Companies always have to be keeping a watchful eye on market trends, because digital photography did get developed elsewhere. As companies realized the overall trend of digitization, it eventually became an industry standard. By this point, the vast majority of consumers would now be indicating that their desire for the photography industry was a high-performing digital camera. But at that point, it's too late for Kodak.

Companies should always listen to their customers, that kind of feedback is critical for understanding what they do well and what they could improve upon. But when you focus your offerings and positioning strategies solely based on that feedback, you're stifling any potential of innovation your company may have. And by doing that, as new technology develops and market needs eventually shift, you're bound to have your Kodak moment at some point in the future.