Let's Be (dis)Honest: How Short-Sizing Can Impact Your Brand

Vs.
Deception
De*cep"tion\, n. [F. d['e]ception, L. deceptio, fr. decipere, deceptum. See Deceive.]
1. The act of deceiving or misleading. --South.
2. The state of being deceived or misled.
3. That which deceives or is intended to deceive; false representation; artifice; cheat; fraud.
Usage: Deception usually refers to the act, and deceit to the habit of the mind; hence we speak of a person as skilled in deception and addicted to deceit. The practice of deceit springs altogether from design, and that of the worst kind; but a deception does not always imply aim and intention. It may be undesigned or accidental. An imposition is an act of deception practiced upon some one to his annoyance or injury; a fraud implies the use of stratagem, with a view to some unlawful gain or advantage.
Webster's Revised Unabridged Dictionary. MICRA, Inc. 30 Sep. 2008. http://dictionary.reference.com/browse/deception>.

DECEPTION
Today I decided to talk about something that has been all over the media lately. Consumer deception. In regards to marketing, deceiving the customer is not generally viewed as a healthy practice, or something that gives you any sort of competitive advantage in the marketplace. So why is it many major companies use deception on a regular basis (whether or not they acknowledge they are doing it)? And why would these companies resort to such measures that could have a negative impact on their brand's reputation?

The answer is (surprise, surprise) M O N E Y. Most companies have regular, focused efforts towards cost cutting to help improve their bottom line and keep them competitive in the market place. Although this is a common exercise, in times of economic hardship and rising raw material costs, an organization may struggle to find creative ways to reduce costs without impacting their customers. Since the bottom line becomes the primary focus for survival, when all of the "good" ideas are used up, a company is forced to move on to the “tough choices.” I worked at an automotive company for seven years and am very familiar with the concept of cost reductions – and the fact some decisions are very difficult to make when keeping the end consumer in mind. For example, did you know leather seats in most vehicles aren’t 100% leather? If you have ever see the phrase “leather seating surfaces” or “leather trimmed” or “leather appointed” in regards to seats, that pretty much means the places your back and bottom touch on the seat will be leather, but the backs, lower trim and possibly sides of the seat are made out of vinyl. Through reducing the amount of leather in a seat, the manufacturer is able to save a ton of cost while still providing a durable seat that “appears” to be 100% leather. Is this deception? Definitely. The key here is in the way the seats are described to the customer. The wording doesn't clearly call out that synthetic materials are also used in the seats.

Deception is an embarrassing practice that companies have grown to rely upon. And it’s definitely not something that helps obtain or retain customers. So how often do we as consumers have the “wool pulled over our eyes?” More often than we might think. The automotive leather seats an... just one example. Another? In 2006, there was debate in the meat packaging industry over the use of carbon monoxide to help keep meat look bright red. Consumers were upset thinking this practice was going to "trick" them in to purchasing meat that wasn’t as fresh as it appeared. Recently, we have been reading and watching news reports talking about food companies short-sizing products to help protect their bottom line as the cost to produce products continues to increase. Andrew Martin of the New York Times reported (“Ate a Whole Pint? Check Again”) about a study Consumer Reports had done on this practice. "The magazine surveyed consumers in July and found that 75 percent had noticed that packages were smaller and that 71 percent believed that the main reason for the change was to hide price increases from consumers.”

Short-sizing isn’t a new phenomenom. In January of 2001 (yes, almost 8 years ago), Greg Winter wrote an article entitled “What Keeps a Bottom Line Healthy? Weight Loss.” In it, he discussed how Frito Lay had been putting fewer chips in a bag to help cut costs – i.e. conducting "weight-outs." He stated “It is a subtle way of earning more from everyday products without scaring off price-conscious shoppers, and it is quite legal as long as the package accurately describes what is inside.” But even if the box says how many ounces it contains, is the practice really ethical? Currently, when looking at some short-sized products placed side-by-side to their former model, you can't immediately discern a difference. An Apple Jacks box, for example, is the same height and width but is thinner on the sides and Skippy Peanut Butter looks the same unless you turn over the jar and compare the indentations at the bottom.

The sad thing is not only are these companies being deceptive in their short-sizing, but they aren’t even admitting they are doing something wrong. In fact, many claim these actions have been demanded by the customer. Back in June of this year, ABC 7 News in Arlington, VA conducted an investigation on products that had been short-sized. Kris Van Cleave reported on the following statements from companies. Karen May from Tropicana said the new 89 oz (ilo 96 oz) juice container “makes it easier for any consumer, especially children, to pour a glass of juice.” James Malone, spokesman for Georgia Pacific in regards to Brawny reducing the number of paper towel sheets from 110 to 88 per roll said “It’s a thicker towel…what the research showed us is they (the customer) needed to use fewer sheets per task.” A couple of weeks ago, CNN Money ran a story called the “Incredible Shrinking Cereal Box” They reported “many food companies say their customers accept, and appreciate, the choices they must make to maintain a quality product in the current economic environment." In March, Brandweek quoted Paul Chibe of Wrigley’s with saying that customers wouldn’t mind smaller sized packages of gum because "To them the value goes up because they're getting a better tasting product in a better package. Price is not the way the consumer is looking at this.”

Not too long ago, I remember purchasing cereal that advertised “20% More Free!” at the top of the box. With the latest weight-outs that have been occurring, I wonder why these food companies haven’t been advertising “Now – with 25% less!” OK – I don’t wonder…that’s not something you want to advertise. So if you don’t want to advertise it (or want a bunch of people blasting it all over the web, on the news, etc. when they find out), why do it? Unless you’re talking about a waist-line, most consumers do not think of shrinkage as a good thing. This is America where portion sizes at restaurants are often enormous, fast food meals can be super-sized, and people buy food in bulk at places like Sam’s Club and Costco. So is this practice of short-sizing good for business? Carol Tucker Foreman of the Consumer Federation of America once stated ''If you want to keep faith with the customers, be honest with them.'' As marketers we know sometimes we tend to s t r e t c h the truth. We know that sometimes our ads contain fantasy and dreams, glitter and make-up. We airbrush out flaws. Why? Nothing really looks as good as we want it to and to the customer (we think) bigger, more, flashier is better, right? But is some of this deception harmful to our brands? The answer is a definite “yes.”

Walletpop quoted Harry Balzer of the Consumer Research Firm NPD Group. "People typically spend 10 percent of their income on food and that won't change, he said, so instead they're looking for deals, eating less or changing brands.” So if we think customers may start to switch brands, we panic. We can’t up the price on the current box (we think). So we choose to put less in or change the package so it holds less and see if the customer notices. But when consumers find out about this practice they may feel cheated and start thinking your brand is dishonest. Maybe this isn't the only thing you're hiding from them. Could your plant conditions be unsanitary? Maybe those natural ingredients you list on the box aren’t actually so natural. We know that due to the internet, consumers are now more educated than ever and aren't afraid to share their reviews of products/companies with everyone. So it will be interesting to see, as more and more of these short-sizing actions occur, which consumers will actually bite and which ones will bite back.

When Your Brand is a Teenager - Literally

Alright, so I admit part of this blog entry will border on something you would find on celebrity blogger Perez Hilton's website. But today I wanted to remind fellow "marketeers" of the risk of building a brand tied to an actual person – especially if that person is a teen who is growing up in front of the public eye. Prime example? Disney’s billion-dollar “Hannah Montana” brand.

Sure, many of us business types would love to have the golden touch as it appears Disney has had over the years. They are, first and foremost, very in-tune with their target market(s) and seem to have a knack for taking unknown actors/actresses and turning them into “the next big thing.” Not only this, but they are very good at copying successful models. For example, Disney tends to use a very similar franchise model for popular shows, expanding a lead-character's brand into clothing lines, dolls, DVD releases, novels, bedroom sets, perfumes, board and video games, soundtracks and even McDonald's Happy Meal toys. They've used this model for such characters as Lizzie McGuire, Raven Baxter and now Hannah Montana.

So what's the deal with Hannah Montana? For those of you who don’t have kids and don’t know much about the show, here’s a brief background. Debuting on the Disney Channel on March 24, 2006, Miley Cyrus, the daughter of Billy Ray Cyrus (who also plays her dad on the show) plays the role of Miley Stewart a.k.a. Hannah Montana. Miley lives a double-life, as a teenager (Stewart) and as a rock-star (Montana). If you've ever watched the show, it's definitely not geared towards adults (I'll admit I watched it once just to see what they hype was about and think most adults would find the characters and story lines annoying). But to kids, the allure of being able to change from a normal teenager into someone who is popular and cool is very appealing. In 2006, the show attracted 4 million viewers per episode, growing to 4.4 million viewers per episode in Season 2. Its popularity drove Disney to release Hannah Montana branded products (clothing, jewelry, apparel, dolls, greeting cards, iPod accessories, etc.) in December 2006. And in 2007, Hannah Montana went on tour in the United States, with Disney morphing her from a make-believe TV star into a real-life pop star...one who caused concert venues all over the U.S. to sell-out and tickets to go for over $2500. Hannah's self-titled CD went triple-platinum.

As teenagers grow up, they start experimenting with their own image, interests, etc. Resultantly, tying a brand to a person, specifically a teen, makes it very difficult to keep control over brand image. Hannah Montana is a perfect example of this struggle. Over the past year, there have been several "scandals" involving Miley Cyrus. The first consisted of scantily clad (i.e. Miley wearing only underwear) photos posted on MySpace (later rumored to have been fakes). Then Miley posed for Vanity Fair wearing a bed sheet wrapped around her partially naked torso, outraging parents of fans. Disney had Miley issue a public apology and according to Page Six, a high ranking Disney employee was overheard saying: "You won't be seeing her for a while…The company is keeping her away from events and wants her to keep a very low profile for the next four to six months. They're trying to keep her contained." In an ABC News radio interview mentioned by the New York Post, Hilary Duff (a.k.a. Lizzie McGuire) was quoted as saying, "It's not something that I would choose to do, but if she did them, that's fine. I don't know how her fans would feel about it, but maybe they won't mind." But the point goes back to – this is definitely the risk for a company when banking their brand on a person.

Though Disney has relied on teen-based brands in the past (Raven-Symoné’s Raven Baxter and Hillary Duff’s Lizzie McGuire), a brand image being "scandalized" hasn't really been an issue. Why not? Perhaps it's because the teens playing some of Disney's other successful characters were wise...they knew the business of a brand image, what it means to be a role model and what it takes to appease fans (and their parents). We look at Raven-Symone who at the age of 3 played the role of Olivia on “The Cosby Show.” She then moved on to “Hangin’ With Mr. Cooper” and then to Disney’s smash “That’s So Raven,” a kids show that ran for an almost-unheard-of 4 seasons. Her Raven Baxter character was even spun off - Raven became the lead singer of Disney's hightly successful "Cheetah Girls." Raven-Symoné is now 22 and enjoying a successful career post-Disney which includes a slew of music, TV and movie credits. Throughout her career she has led a pretty low-key life, avoiding the spotlight/gossip headlines and keeps her personal life what it should be – personal. Hilary Duff follows a similar mantra. In an OK! Magazine interview she states: "Everybody makes mistakes, but I just don't think it's for everybody to watch. It comes down to that I want people to focus on my work and I want to have my life completely separate from that."

So back to Miley Cyrus. As of late, Disney appears to have another Hannah Montana brand preservation issue on their hands. Miley, (who recently turned 16), is rumored to be dating Justin Gaston. An aspiring singer who appears as Taylor Hicks' love interest in her "Love Story" video, Gaston is 20 and an underwear model. (I'm guessing the fact that he's 20 and appears in photos half naked won't sit well with parents of teenage girls. What do you think?)

Sure kids need some guidance (so some of this brand image control should belong to Miley's parents). But as we all know, teenagers don’t like to listen - and tend to do the opposite of what we want – especially in cases of dating. So if you were Disney, what would you do? Would you work to hype up the next best thing and hope for the best (i.e. hope these new protegees are more like Hilary and Raven)? Or cling on to the successful Hannah Montana empire for a couple more years, teaching Miley (and her parents) about brand image sustainability (i.e. how she should learn to keep her personal life more personal)? My bet's on the former rather than the latter...

Picking a Buyer for Your Brand - The LÄRABAR Story

Let's say you own a small yet growing brand but unfortunately lack the resources and infrastructure required to help the brand become more mainstream. However, you've recently been approached by a large manufacturer who has offered to purchase your company. This manufacturer will be able to take your brand to the next level. Should this be a no-brainer decision? What do you do?

In this entry I decided to briefly talk about a few major things a brand owner needs to consider when deciding whether or not to sell its name/products to a larger company. A perfect example of such a case is Humm Foods, makers of LÄRABAR and founded in 2003 by Lara Merriken. LÄRABAR had been pursued by several larger manufacturers in the past. However, in June of this year, Merriken finally agreed to sell the company to Minnesota-based General Mills (Merriken will remain on board as LÄRABAR's Creative Director). I happened to stumble across an interview from July with Merriken on http://www.welikeitraw.com/, a site managed by Dhrumil Purohit and home to raw foods enthusiasts.

For those of you not familiar with LÄRABAR, it is one of the few snack bars out there only consisting of a couple of ingredients. For example, the Cashew Cookie bar contains only dehydrated dates and cashews. Each type of LÄRABAR is made up of simple ingredients (dried fruit, nuts, spices), are a good source of fiber, provide omega-6 fatty acids, and contain no added sugar or preservatives. They are sold as single serving, healthy snack bars.

When the sale of Humm to General Mills was announced, many members of the raw foods community seemed concerned that the product, brand, etc. might change and took this announcement as very bad news. However, in reading the interview with Merriken, I thought this was a perfect example of well-thought out decision-making in considering what impact the sale could have on her brand and its products. Merriken took into consideration three major factors (amongst other things) when deciding to sell her company/brand:

• What is your brands' vision? Will selling to this company help your brand achieve its vision? - In the case of LÄRABAR, the brands' vision is to help enrich lives by giving people access to wholesome foods. General Mills helps LÄRABAR achieve this by providing them with a wider distribution base and the ability to increase production.
• What are your brand's values? Does the company interested in purchasing your brand hold the same values? - Merriken states that General Mills "really 'got it' and 'got us.'" In other words, General Mills holds similar values regarding natural, organic, and healthy food offerings through their Small Planet Foods division which has been around for almost 10 years. (General Mills also has expertise in reaching consumers and changing to meet their needs/wants based on the fact it has managed to stay in business since the 1800's).
• Will selling your brand change its image? - Since General Mills does not plan to change LÄRABAR's ingredients, name, etc. in any way and Merriken and her 25 employees will be joining General Mills with Merriken holding the Creative Director role for the division, there is little risk of LÄRABAR losing its strong brand image.

Excerpts from the "We Like it Raw" interview are listed below (for the full interview, click here); A press release related to the sale of Humm to General Mills can be found here.

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Dhrumil: LÄRABAR is the most successful raw food bar. Your products are in so many stores and you have such a wide reach. So why did you sell?

Lara: I started LÄRABAR because I’m passionate about healthy eating and how it can enrich everyone’s life—not just the lives of those deep-rooted in the raw and natural foods communities. I believe the whole world, people from all walks of life, should have access to wholesome foods. There is no better company on the planet than General Mills to broaden the access to LÄRABAR worldwide. We feel proud about the job we’ve done growing our business, and we’re equally proud that General Mills has recognized the magic of LÄRABAR and, through its tremendous resources, wants to take us to a higher level and a greater reach that we could have never achieved on our own. Reaching people is what it’s all about. Natural, organic and raw food should not be a luxury for only a certain group of people. At LÄRABAR, we’re committed to sharing knowledge about positive food choices, improving not only the lives of people who enjoy our products, but also the lives of farmers who grow the quality ingredients that go into our products. That commitment will never change.

D: A few vocal voices in the community have raised questions about General Mills specifically. They feel that their products are not in alignment with the raw food movement and by selling the company to them you're "selling out." What does General Mills bring to the table that empowers the mission of LÄRABAR. Why go to General Mills or why did they come to you? Did you ever consider going to other companies?
L: LÄRABAR, over the years, has caught the eye of a number of large companies. But it was General Mills who really “got it” and “got us.” In the end, the caliber and integrity of its people really won us over. It’s impressive to consider that General Mills has been around since the 1800’s, and you don’t stick around that long without understanding and, more important, respecting the ever-changing needs of your consumers. In 1999, General Mills launched a new division of its company called “Small Planet Foods,” dedicated to natural and organic foods. You probably have seen its brands in grocery stores: Muir Glen and Cascadian Farm. LÄRABAR will be part of Small Planet Foods, and we’re thrilled to help expand more natural and organic food offerings available in stores.

D: Did you ever have any concerns that selling to a public company like General Mills would jeopardize the LÄRABAR product line?
L: No concerns whatsoever. I believe “stewardship” is a better word than “ownership” in describing the involvement of General Mills with LÄRABAR. This is my baby, and I would not have turned it over to just anyone.

D: This is the first major sale of a primarily raw food company to a larger public food company. You and your team are paving the way and a lot of people don't know whether they should be happy or concerned because this is all so new. Do you see this as a growing trend? Do you see more mainstream companies wanting to get involved in raw food products? Is this good for the overall health of the country.
L: Consumer awareness about the importance of good food choices really began to grow about a decade ago when retailers—both natural and conventional—started understanding and catering to the wave of the future. And what a great thing! I’m humbled to know that LÄRABAR is truly making a difference in the quality of people’s lives; the more people, the better. Is this a growing trend with other companies? I hope so!

A Question in Mixology - Should you tie politics to your brand name?

The brand-impact question of the day...Is mixing politics with your brand name a good idea?

Example #1: The world’s largest producer of frozen potato products, McCain Foods, is making an attempt to steal market share in the U.S. from Heinz’s Ore Ida (the current National leader). How do they plan to accomplish this? Through a new, politically themed ad campaign: “Why McCain should be in the White House.” Although most people may be reached by the campaign through print ads, the home-base for the campaign is McCain's website. Below are some "direct-quote" snapshots:
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Whether you are a democrat or republican, we hope you are hungry because we’re about to change the way you think about McCain.

McCain Deals with the Big Issues

• Defense – McCain potatoes will protect mealtime from the axis of ‘evil-doers’ –namely boredom and repetition.
• Environment – Deliciously different McCain Potatoes means a clean plate, free of leftovers that compromise the fragile ecosystem of the dining table.
• Economy - When you buy more McCain Potatoes, it creates more jobs. For us. What did you expect? Another stimulus check?
• Energy - We’re not afraid to tell big oil “enough is enough.” That’s why every variety of McCain Potatoes is 0g trans fat.
• Education - With McCain Potatoes, there will be no fry left behind. We promise.
  Democracy - McCain promises to stand up against all dic-taters and produce only good, honest potatoes.
• Ethics - McCain will stand up for right vs. wrong. And serving the same old, boring potatoes is just plain wrong.
• Faith - If you insist on waiting for some other brand of potatoes to wow you, we suggest praying.
  Immigration - Anyone who wishes to migrate from their current brand to McCain Potatoes can do so freely, and without any red tape.

Blue Vs Red: Why you should go for the blue bag

• We believe everyone has the right to better potatoes. Don’t sit idly by while the other guy keeps rehashing the same old spuds.
• We stand up against big oil. Every McCain potato product is 0g trans fat, and requires zero offshore drilling.
• We don’t believe in business as usual. With so many unique flavors and cuts, McCain is clearly the anti-establishment.
• We believe in America’s youth. With so many fun products for kids, there will be no fry left behind.
• We’ll never, ever go negative. One look at McCain Smiles and you’ll know we’re not mudslingers.
  We believe in family values.
• There’s no sense living in America if you have to pay an arm and a leg for good frozen potatoes. We believe in cuts for everyone.
• Tax cuts are great, but crinkle cuts and wedges are so much tastier.
  

Join McCain Potatoes in our campaign for change! We have a big challenge ahead of us, and we can’t do it without you. Sign up now to get the latest campaign updates delivered right to your inbox, including press coverage, fun photos, hilarious videos, new product info and more. It’s quick, it’s free and it’s easy.
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Example 2: In another case of tying a brand to politics, just today, Ad Age.com ran an article about Captain Morgan entering the presidential race. Ad Age states "the Captain's economic message calls for five-day weekends, and he's ambivalent about global warming because he wants to 'ensure the party stays hot, hot, hot.'...The alcohol behemoth is the official wine and spirits company of the Republican National Convention and the preferred wine and spirits company of the Democratic National Convention." In a campaign I believe is similar to something they ran in 2000, Captain Morgan is "putting the party back in politics." Besides Captain and his "entourage" attending key events, the main points of contact are a Facebook page and YouTube videos.

Campaign Analysis:

So...back to the question of the day. Should you tie your brand to politics? And if so, which is the better execution - Captain Morgan's -or- McCain Foods?

McCain Foods

Let’s start with the McCain campaign. Sure, it’s a clever play on current events and an overall more creative advertising campaign. However, in my opinion, tying your brand to a political candidate is probably not the best idea for long-term brand appeal. Why? Sometimes advertising does not send the intended message. The problem here is that the brand name is too closely tied to a political figure and some ads are using an impersonator of the political figure (McCain foods plans to run video clips and a national media tour featuring professional impersonator Frank Caliendo as John McCain). Why is this an issue? Although McCain Foods is not owned by Arizona Senator John McCain, some consumers may wonder. Also, McCain could lose appeal if John McCain loses the presidential race –or- even if he becomes President. Sure there is significant name recognition that has been built up by the John McCain for President campaign. However, recognition does not mean customers will buy your product. Another reason this is a risky move for McCain Foods is due to the consumer they are intending to target. Yesterday, David Shipley from the Telegraph-Journal quoted Mike Grossman, managing partner of SCC/Grossman, the firm handling the PR portion of McCain Food’s campaign. Grossman states, "Our brand positioning is designed to surprise and delight today's active mom…She's not home watching television. She's juggling lots of things, probably a job, certainly community interests and at the same time she feels like she needs to do something special at the dinner table to surprise and delight her kids." Identifying the target customer (busy mom, probably ages 30-45), it's essential McCain Foods knows how she feels about Senator John McCain before launching this ad. According to polls by Fox News, Lifetime Television (Every Woman Counts Campaign), ABC News/Washington Post and EMILY'S List , women currently prefer Obama over McCain.

• Fox News (late July) - Reported Obama is winning among women under 40 by 13 points.
• EMILY'S List (early August) - Regarding women voters, "Obama leads Senator McCain by an incredible 30 points among Gen Y, 11 points among Seniors, 8 points among Gen X and 6 points among Boomers."
• Lifetime (early August): "More than half the female electorate (53%) hold mostly positive views of Obama...Women like Obama largely because of his personal attributes (35%), such as his intelligence, youth, speaking ability, honesty and energy....31% hold unfavorable views (of McCain)....Obama also holds an advantage among Independent women, who favor him by a twelve point margin (42% for Obama)."
• ABC News/Washington Post (late August) - Obama has a 55-37 percent lead among women .

Although on the McCain Foods website, in small, almost-camoflaged, white font they do list a disclaimer ("Disclaimer: McCain Foods is Not Affiliated with John McCain For President," the disclaimer isn't prominent enough for most readers to notice. Yet another reason the company is taking a risk of a misinterpreted message. (If the reader clicks on the disclaimer a box pops up and states: "U.S. Senator John McCain is the presumptive Republicannominee for president. We are McCain Foods, the world’s largest producer of frozen potatoes and manufacturer of other quality food products. We share the same name as Senator McCain, but the connection ends there. Founded in 1957, McCain Foods is privately-held by a Canadian family that is not connected by commerce, kinship or any other way to the U.S. senator from Arizona. If you see Senator McCain associated with our brand or products, rest assured that it is just an election year marketing spoof and nothing else. Thanks for paying attention. We’re in the business of selling potatoes, not participating in politics. And the only endorsements we’re prepared to make this election season are for the products we produce. Vote for change. Go for the blue bag: McCain Potatoes.")

Captain Morgan

Next, let's look at the Captain Morgan's campaign. Although it doesn't garner marks in creativity (repeat of previous campaign?), the brand is continuing to convey a consistant message - i.e. offering up a campaign that matches the brand image (a promise of fun times, having a "little Captain in you", etc.). Besides this, Captain Morgan's campaign doesn't tie itself to a political candidate (i.e. people won't question whether or not the company/brand is making a political statement/ recommendation), and the company knows no one will really believe "The Captain" is actually running for president. The campaign is humorous, matches the intended audience's interests (uses Facebook and YouTube, promotes partying/a good time, etc.).

Final Conclusions

After looking at these ad campaigns, we are provided with one example of how mixing politics and brand name could be fun/effective and another that could be very degrading to the brand image. On Friday, the McCain Foods campaign kicks off nationally with a print ad in USA Today. So, "Soccer Moms," who will you be voting for? Do you have a "little Captain in you?"

On Thin Air - Destroying Airline Brands Across the U.S.

OK...just a word of warning...this is going to be a long one.

The U.S. Airline Industry...a lesson in what to do if:

• You don’t want a sustainable competitive advantage


• You say "screw brand power"


• You don't think consumer loyalty is important

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Plan to nickel and dime your customers? Say goodbye to a positive brand image. In a survey conducted by the University of Michigan in early 2008, U.S. airline companies were found to have a 62% approval rating – the lowest given by consumers since the terrorist attacks on September 11, 2001. Jaunted.com reported on the survey results stating “some airlines received survey scores in the low 50’s, which makes them less popular than the IRS.” J.D. Power and Associates also rolled out a study – The North American Airline Satisfaction Study - in 2007. The top airline according to the report was Continental, scoring a below-average 704 out of 1000 or, in grading terms, a C-. I’m sure any consumer who has flown recently is certainly not surprised.

For fun, I conducted a simple Google Search based on the key phrase “Airlines Suck.” There were >9000 search results. It’s no secret customers feel like the airlines – service providers if you would still call them that - are at war with them. And they’re not happy. But although everyone’s talking and complaining, no one seems to provide the airlines with an answer of how to fix this problem. Additionally, airlines aren’t exactly asking for help or realizing how badly their brand power has dissolved. Airlines have become brands we hate. So what’s the deal? Can any domestic U.S. airline turn itself around to become a brand we love and gain our loyalty? As a frequent traveler, I know if there was one airline that treated me like they cared and like a human being, I would probably pick them over the others, even if I had to pay a little more in the base ticket price.

Airlines are essentially a service company. But lately they seem to have forgotten what service means since they are so focused on their bottom line. Faced with rising fuel prices, airport take-off/landing fees, etc., they are losing money. We have seen multiple mergers and many bankruptcies and as customers, we know that they’re all struggling to keep their heads above water. But the problem is their passengers are struggling too. The U.S. economy, amid the housing crisis, fuel prices, rising unemployment rates, etc, is not exactly a picture of perfection. And since travelers don’t have any other options when it comes to getting to far away places quickly, they are forced to suck it up. Anyone want to try to figure out the confusing matrix that the airlines have created? Can you figure out which ticket price actually ends up being the cheapest?

Who’s Charging What and Why?
A little over a week ago, USA Today ran an article outlining the various fees U.S. airlines are currently charging. Below is a summary of what you can expect to pay...with some charges topping out at $250 on up. Just this morning, CNN Money reported United plans to start charging for meals on select international flights. It's definitely gone beyond the point of being ugly.

As consumers, many people wonder why airlines are all of a sudden charging these fees. Many airlines attribute it to the rising fuel prices that are consuming around 50% of the price of an average ticket. Regarding baggage fees, Heavens-Above.com reports “…most of these transportation vehicles earn profits by transporting both people as well as cargo. Their profitability is dependent on striking an optimal balance.” Delta, for example, announced in July it would start charging $50 for a second checked bag. They claimed it wasn’t an effort to raise money, it was to discourage travelers from bringing a second bag. In other words, the fee is to get passengers to leave bags at home so they can sell more cargo space. One person, known only as “angry passenger,” commented on a message board. “These are passenger planes not cargo. If you want to haul cargo, get out of the passenger business.” I'm sure many passengers these days would say "Amen" to that.

These “a-la-crap” fees as I have heard them called, have become completely out of control. But what are some other non-U.S. airlines doing that have yet to be added to this list? British airline EasyJet has been offering a speedy boarding service allowing passengers to pay extra to be one of the first in line to board the plane – and thus have a larger choice of seats. AIRASIA X, in an announcement that (smartly) hasn’t been made by U.S. carriers, is reportedly considering charging passengers depending on their weight. Oh Lord. Next thing you know they’ll start charging us to use the restroom. Adult diapers anyone?

In the land of U.S. carriers, Southwest appears to be one of the only exceptions to the rule. CEO Gary Kelly stated “To survive, the industry is charging, for everything…and anything. Pillows, blankets, bags, paper, and even conversation with a human being…we still have affordable fares and we don’t nickel and dime our customers. You get free snacks, you get free soft drinks, you get free pillows…you get two free checked bags…and there’s no charge to talk to our wonderful reservation agents.” At least somebody remembers what customers mean to their brand.

Why Are Customers Angry?
Let’s look at some basic human insights to figure out why customers are so angry at U.S. airlines:

• No one likes to suddenly be charged for something that was always “free” in the past. If it was always in the base price and it isn't really an option the customer "wants" to check the box for, why offer it up as one?
• When you pay more for something you expect to get more. At a minimum, when you pay for a service, customer service reps who actually smile and act friendly, act concerned if your baggage is “lost,” are helpful when you need booked on a new flight, etc. shouldn’t be that difficult to come by. This is at the minimum...
• Everyone likes having choices. The key here is in providing desirable choices – not “hold a gun to my head” choices. This is the age of consumer customization and co-creation and people are used to being able to customize their own experiences...in a positive way. Why are consumers upset about being charged for their first checked bag? If you’re going on a trip for more than a couple of days, you will probably need a razor and more than 3 oz of some of your toiletries. Due to safety regulations, you can’t carry razors on board, liquids are limited, etc. So customers don’t feel like they have a choice – they have to check their bag and they’re being forced to pay for something that’s a safety regulation.
• Remember the old phrase K-I-S-S? Keep it simple stupid? People don’t like information overload or too many combinations because it confuses them and makes them frustrated and angry. Having too many boxes to check when traveling is already perceived as a hassle? Probably not a good thing for satisfaction.
• No one likes excess baggage – emotional or physical. Sure some travelers over pack. But some customers don’t want to (or are unable to) carry their suitcase around the airport during layovers, struggle dragging the luggage down the narrow airplane aisle where it constantly catches on seat armrests, or knock people out when trying to lift it over their head into the overhead compartment. For an average-sized woman or the elderly, the overhead bins are not exactly at an ideal height in which to place a 15+ lb suitcase. Telling them they have to pay when it's a physical issue for them makes them feel discriminated against.
• Having easy access to water is pretty much seen as a given in America. Since you cannot bring your own bottled water/beverage through the security checkpoint and sometimes timing is tight for your flight, you really have no choice for a beverage unless you pull out some cash and hand it over to a flight attendant. Charging people for water, something they could have gotten for free from a water fountain, just because they’re a “captive audience” will surely cause some customer dissatisfaction.

Why You Don’t Hear About Customer Complaints in Airports
The International Herald Tribune quotes Mary Gilly, a professor of marketing at the University of California at Irvine. She states “…passengers have learned that venting their anger at an airline employee means that they may be escorted off the plane by the authorities, Gilly said. "You complain at Starbucks, you get a freebie," she said, "If you throw a fit at an airport, you could be picked up by the TSA.” No one wants to get kicked off an airplane or escorted out of the airport in handcuffs, especially when they’re in a hurry to get somewhere. So airlines, it isn't that we all are OK with your fees, we're just afraid of being "that person" who gets kicked out.

Competitive Advantage Anyone?
Anyone who has taken a basic course in business knows what competitive advantage means – earn revenues higher than costs. This competitive advantage can be achieved through cost or differentiation. In other words, offer the same services/products at lower cost or offer unique services/products. But what happens when you compete solely on price and you don’t have any differentiating factors? You can enter price wars and run the risk of pricing yourself out of business. You also haven’t come up with a business model that offers a sustainable competitive advantage – i.e. something that cannot be duplicated by your competition.

My first question is who is working in finance and marketing for these companies? Don’t they realize the importance of brand and how to optimize profits without turning off your key revenue driver – your customers? I’ve written about how customers these days value customizing their experience, but what the airlines are currently doing is not really the right translation! Mary Gilly states: "I think the airlines are being pretty disingenuous calling it 'à la carte pricing.' Please. This is not a Chinese menu."

Some Ideas for a More Business Savvy, Customer-Friendly Airline:
But wait!!! Edward Bastian, President and CFO for Delta, says "Airlines need to have a way to recover the cost of their product.” According to a World News investigation, around half the cost of many airline’s flights go to jet fuel alone. So I don’t think any customer would argue with the fact that airlines need to make some money to stay in business. We’re not saying to not charge for things, just do it in a different way...as in the old way.

I know some companies would argue that if it's baked in their ticket price is higher and customers will walk to low-price/discount carriers like AirTran. Sure, you may have some customers who do this. However, right now, customers are so confused by the various fees, etc, and customer service is so bad, selecting an airline is like throwing a dart at a board where everything appears to be in the center. By moving towards some of these actions below, you're starting to separate yourself from the competition. Why else should airlines make the number of "choices" fewer? Most marketing and pricing folks know that when you are trying to figure out what to make "standard" on your product versus what to make into an "option," depends on how much you believe consumers will pay for that item. In other words, if it's something very desirable -and- it isn't something the competition offers as standard, you can guarantee it'll be offered to consumers for an added price. Looking at the airline selections, I don't believe any of these fall into this category. They should be standard.

Now on to the good stuff. For fun, let’s look at a small example, using United Airlines, to see what might help strike a balance between profits and customer satisfaction. These are just a couple of solutions to issues customers currently find the most annoying. So some fast facts:

• On August 18, The International Herald Tribune reported United believes it can raise $1B in revenue for its various fees.
• According to International Air Transport Association published figures, in 2007, United had 68.4M scheduled passengers carried. For the sake of simplicity, let’s round down and call that number 68M passengers.
• United is currently charging $15 for the first checked bag. Thus, if every passenger checks a bag, it’s around $1.02B.
• Since not everyone checks a bag, to get to the $1B marker, United is banking on people paying some of the "other" fees. I'm going to argue that they could actually earn more revenue by not having as many pick-and-choose options.

On Board Experience
Snacks
I doubt any airline customer ever thought snacks were really “free.” They just assumed it was baked in to the price of the base ticket. Most people when they’re traveling don’t want to have to get into the overhead compartment or wrestle to get into their back pocket while elbowing the person next to them in order to get money out for a (generally crappy) snack choice. Also, many people these days don’t carry a lot of cash due to how many places now readily accept credit cards. And I’m sure the airline employees, specifically the flight attendants don’t really want to be cashiers. So what to do?

United currently offers a snack on flights at a price of up to $4. On the 20+ flights I’ve been on over the past few months, I have only seen a handful of people paying up for a snack (I generally have one flight each week, one during breakfast hours and one during prime dinner hours). So, for the purpose of this analysis, let’s assume 40% of the people on the flight opt for the snack (I haven’t been able to find a study that actually shows the take rates of snacks on a plane, but it probably would be interesting). Doing the calculation, $4x40%x68M = ~$109M. Not shabby. But, say there was $6 baked in to the price of a basic ticket to help cover snacks and non-alcoholic beverages. That’s $6x100%x68M = $408M. In other words, by going back to the “free snack” option and accounting for it in the base fare price, you’ve almost quadrupled what you would have received for snacks, you’ve reduced labor (flight attendants don’t have to handle money, airlines don’t have to go deposit that cash into the bank), you’ve appeased your customers who still want “free” snacks, and you now have a more accurate estimate of how many snacks you will need per flight.

Another way to enhance the snack experience is to give customers a choice. One of the highlights of flying the now defunct Independence Air is they would pass around a snack basket containing a variety of granola bars and special snack foods. The customer selected what they wanted on their own and due to being able to choose, it was an unexpected surprise and delight.

At the Airport
Baggage Fees
Although airlines may think charging people for their first bag is good thing and believe it may make people pack less, USA Today reported that having more baggage go through security makes the security process longer – and thus results in a higher risk of something getting through security that shouldn’t. As a passenger I also find it a major annoyance as overhead bins become extremely full and flight attendants ask passengers to even bridge-way check their laptop bags. C’mon airline people – if you’re carrying around a laptop with a bunch of important work information on it I am not going to be giving it up to be handled under the plane.

If airlines feel the absolute need to charge for the first bag, it should be included in the upfront price of the ticket. They could then do a program rewarding people utilizing online check-in, making it carry-on baggage only and crediting $15 back to a customer’s credit card when they use this service. It would also help give carriers a better estimate of how much freed up cargo space they may have many hours prior to each flight. I think by doing this, United would get closer to that $1B than by just counting on passengers to automatically check their first bag.

Check-In

When airports are busy, check-in lines do not move along quickly. Why is this? Generally the airlines have minimal staff behind the counters (another cost-cutting measure). Things run fairly smoothly with the self-check-in kiosks until one person at the front of the line has a question that consumes an agent's time or one agent alone has to walk back and forth between 12 stations pulling out luggage tags and yelling out a customer’s last name and their destination. Sure the kiosk system is a step up from the agent handling everything, but why not take it a step further? Why can’t your luggage tag print out from the kiosk as well? People are intensely concerned their bags getting to the appropriate destination. We hate lost luggage. We're going to make sure we're holding the right destination in our hands. Through moving to this type of system, kiosks can be completely removed from the counter. The counter would then have two lines - one for dropping off baggage and one for issues/problems. This would help the process go along quicker and result in more satisfied customers.

One Final Idea That's Kind of "Out There"
Anyone who has used the internet is familiar with the use of banner ads. Since the airlines really don’t appear to care what happens to their brand names, then the issue of another brand name on their airline or seating area at the airport, etc. does not seem like it would be a major issue for them. As a result, what if the airlines started selling ad space? For example, for a fee, a company could “decorate” the outside of a plane with their image. Or an airline could display ads on the backs of tray tables. Might be an easy way to keep base ticket prices a little lower than the competition. Of course, on second thought...with how low customer approval is for airline brands, it may be a challenge finding companies who actually want their brand name attached to an airlines...

Just my thoughts.

What? This Olive Isn't Extra Virgin?

A Case of Unwanted Celebrity Promotions...

The Wall Street Journal published an article yesterday on the case of a rogue brand ambassador. The less than pleased brand? Olive Garden. Their biggest celebrity fan? Kendra Wilkinson, one of Hugh Hefner's girlfriends and a star on the televison show the "Girls Next Door." Needless to say the chain does not appear to be telling Kendra, an adult-entertainment star, "when you're here, you're family."

Other brands have had their share of rogue ambassadors, a promoter, according to the article, who is "genuinely, publicly devoted to a product or service, even if he or she doesn't quite embody the values that the brand's managers may be trying to convey." WPP Group's Grey advertising fim who handles the Olive Garden account stated that this (Kendra's love of the brand) presents a "complicated issue for the brand." Or is it quite so complicated?

In their interview with Kendra, WSJ reported that she calls Olive Garden her "soul food." Wilkenson states "I love the Olive Garden so much because I grew up going there...That used to be the place we would go for Mother's Day, for birthdays. My grandpa just died, and right after his funeral, we went to the Olive Garden." Sure Kendra is known for being in the adult industry, living in the Playboy Mansion, and being on T.V. But anyone who has seen even one episode of the show knows she is very close with her family. Isn't that the core of what Olive Garden is all about? I'd be curious to hear your thoughts on how you think this will impact the restaurant chain. My opinion is Olive Garden should have just ignored it and moved on. You don't want to offend a vocal fan. And most people aren't going to think the restaurant is now going to be crowded with scantily clad Playboy models.

As a side note, Kendra recently launched a competition for Olive Garden waitresses with the top prize being a nude Playboy spread. This isn't the first time "family-friendly" chains have found out their employees had been photographed by the magazine (Home Depot, Wal-Mart, McDonald's). And those brands don't appear to be hurting because of it. I guess time will tell.

Pet-Smart or Stupid?

Brand Differentiation in the Pet Care Industry

Some of you may not remember, but close to three years ago PetSmart used to be PetsMart. In September of 2005, the company changed its name and, according to Phillip Francis, CEO, they made the change because they wanted to become, in the eyes of a customer, less of a mart and more of a smart place to shop.

Now that several years have passed since the "re-branding," I decided to check back on the pet retailer. Findings made by myself and two former classmates from the University of Michigan (Jake Chapman and Lisa Schoder) confirm the argument that changing their name still does not give PetSmart enough brand differentiation to create a competitive advantage in the market place. For example, let's look at the company's top competitor - PETCO. PETCO has similar a name, their logo looks very comparable to PetSmart's when you squint at it (both start with the word "Pet" and are styled in red, white, and blue). And when you visit the stores of both of these companies, there is no unique experience to be had.

So first of all, what do we know about the "Pet Economy" in the United States?

• The “Pet Economy” in America now exceeds $41 billion per year
• Around 63% of all U.S. households own at least one pet
• The two largest competitors in the pet supply industry = PETCO and PetSmart (combined market share of 53% in 2006)
• PetSmart, in their 2006 Annual Report claimed: “our business is about relationships. It’s about the bond our customers have with their pets. It’s about our ability to understand those emotions, and to help the people who shop in our stores enrich that bond. It’s about providing our customers with superior service, understanding their needs and helping them find solutions that make them better, smarter and more confident pet parents. Today, pet parents want to provide the best level of care for their pets, who are valued members of the family.”

What did our team find when investigating the two largest pet supply competitors? We discovered PETCO and PetSmart were lacking in brand differentiation. The stores (and websites for that matter) had bland layouts, a cold feel, similar products, and, surprisingly, a major lack of customer service. All three of our group members visited various PETCO and PetSmart stores in the Detroit area with our dogs. We all discovered a complete lack of attention from store employees. For example, when I walked in the store and proceeded to wander around the store like I was lost, no one offered to help me or even greeted my pet. I felt like I was just visiting any old store. Looking at various rating sites, it appears that other pet owners also weren't impressed with their in-store experiences. Some common customer themes/complaints about PETCO and PetSmart include:

• Products in various stores aren't always located in the same places which makes them difficult to find.
• Customers aren't sure if they're getting the best deal on products. Several noted they could order some of the products on-line for a better price.
• Store visitors did not like the pressure sales (specifically from food reps).
• Some stores seemed to lack knowledgeable store employees and some did not appear to employee people who were interested in or even liked pets.
• Customers seemed to have mixed results with grooming services and some stores grooming areas were overbooked/overcrowded.

Although these were common complaints, some customers raved when:

• The employees recognized them as a regular customer and remembered their pet's name.
• The store provided them with unconventional surprises and delights. For example, one store’s employee actually ate a gourmet dog biscuit to show how tasty it was.

So how do you take these various consumer wants, add in some surprise and delight features, and differentiate yourself from competitors? Jake, Lisa, and I had many ideas in a report we produced entitled "Experience Co-Creation in the Pet Care Industry." Although the report is too detailed for a blog entry, here are some of the suggestions we had that were focused on actions affecting the customer experience in-store and via services.

In Store

• Strategically-placed Information Kiosks: Adding kiosks where customers can access online reviews and product ratings will assist customers in making informed decisions and also help employees become more knowledgeable about products PetSmart carries. The kiosks could also include an interactive store map to help customers find products within the store and be used to help customers research breeds, pet care providers, listings of pet-friendly parks, and local pet events. There could even be a breed-matching program installed here to help potential pet owners identify animal breeds that fit with their various lifestyles.
• Add “Pet Introduction” areas to the front of stores: Allowing pets to join in the shopping experience is a unique feature of PETCO and PetSmart stores. People who bring their animals into the store are aware of their pet's demeanor, and in most cases the animals brought into the store are friendly with both people and other animals. Presently, the aisle ways cause problems when pets are overly eager to meet and knock products off of shelves in their attempts. A solution to this issue would be a central open area within the store where pets could do a "meet and greet" and be able to interact in a safe environment. This would allow a more relaxed introduction and would foster the sense of community within the store.
• Add In-Store Pet Play Spaces: Upon registration/shot record approval, owners can sign-up online (or in store) to bring their pet to free, supervised play dates. PetSmart could create a distinct play environment in-store - more "home like"/less-cold. This could make the local store a community destination in addition to a retailer. While in the store for a play date, owners are able to purchase food, toys, or other necessities for their animals.
• Increase interaction between store employees and customers: As revealed by our visits to various PetSmart stores, the employee-customer experience leaves much to be desired. To improve this and create a solid relationship with customers, PetSmart could position a Wal-mart style greeter at the front of the store with a treat pouch. This greeter would address pets and their owners when they are entering stores. A surprise and delight feature could be accomplished through adding RFID tags built in to customer loyalty cards (with the customer name) and the pet's ID tag (with the pet's name). When the customer enters the store, an RFID reader would transmit onto a handheld device allowing employees to instantly have info on who the person/animal is, their common purchases, etc. This would help to connect the employees to the individual customers to help in the relationship building opportunity within the store.
• Expand pet sales strategy: Due to some of the boycotting of PetSmart and PETCO for selling "overpopulated" pets, what if PetSmart took an initiative to act as a shelter in lieu of allegedly selling pets from "puppy mills?" The company could partner with purebred rescue organizations and establish partnerships with non-commercial breeders. Another opportunity would be to provide information about training particular breeds or a breed-match program to assist in selecting a breed that suits people’s needs. By assisting in matching pets to owners, PetSmart can help to reduce the number of unwanted animals that end up in shelters.

Services
Services are a unique area that provide a natural connection between the in-store and on-line experience platforms. Many Americans love to pamper their pets with luxury services ranging from massages, to pedicures to designer clothes and accessories. Services provide a great growth opportunity for PetSmart. Some stores have already expanded to offer overnight/boarding for pets. According to a 2007 IbisWorld report, services currently represent about 9% of overall industry revenue, and are supported by an annual growth rate of approximately 7%. This category is currently highly fragmented. Here are some ways PetSmart could expand into the pet services business:

• Create “Lose Weight with Your Pet” Programs: According to a 2004 CDC survey, more than 66% of Americans older than 20 are currently overweight or obese! A walk through the park reveals that many dogs suffer the same conditions as their owners. PetSmart could sponsor weight loss exercise groups, potentially even partnering with a local weight loss organization. Participants could meet at a local PetSmart store to go on a walk with friends and their pets with the stored providing poop bags, water/treats at end of trip (for the pets), and information about pet nutrition. This would foster community spawn friendships and also create an extra visit to PetSmart for customers.
• Create local pet parks: In cities / suburbs, PetSmart could sponsor pet parks. These would be safe-fenced areas that could also be used for pet exercise and socialization, PetSmart dog obedience classes, as well as outdoor pet competitions (obedience, agility, etc.). Brand awareness and community goodwill would be the primary benefit of this initiative, which could help to improve customer store visits and brand loyalty.
• Grooming on the Go: Access to services is another area where PetSmart could innovate. While the company currently offers a wide variety of custom grooming services as well as the option to use the store’s equipment to groom your own pet, PetSmart could offer a mobile grooming service for busy pet owners. Improved access (saved time) would be greatly appreciated by busy professionals. A premium could be charged for these services. The mobile grooming service could be scheduled on-line and the vans could also be used to deliver food and other products purchased by the customer on-line at the time they scheduled their service visit.
• Vacation Planning for Pets: For any pet owner, vacationing with or without a pet is a challenge. Utilizing the in-store kiosks and their website, PetSmart could assist owners in finding pet care when they go on vacation or work trips. This service could be enhanced by including such things as pre-screened "foster homes" complete with photos of home/other pets/amenities (fenced yards, living areas, etc.), availability calendars for pet sitters, the sizes of pets pet sitters accept, and recommendations from other pet owners who have used a specific sitter’s services. PetSmart could also offer travel advice, certifying places/ hotels/ airlines/ etc. for pet friendly travel. Additionally, they could offer tips as to which airlines are the most pet-friendly, which crates are the best for carry-on, tips to surviving layovers, etc. PetSmart could also work with select major airports to create brand-sponsored pet rooms or courtyards within the secure area (airports have smoking rooms, why not a pet room). This would be a major convenience factor to pet owners. Presently, pet owners must take their pets outside to "do their business," requiring them to go through the security screening process all over again.