The Brand Man Speaks

Free shipping becomes commodity offering vs benefit for holiday shoppers

For the past number of years, many millions of consumers had chosen to buy online vs in brick and mortar retail (Including on Black Friday) because of two reasons. First, no sales tax (in most states). Second, free shipping. Not all online sites had offered free shipping in the past. It might have required a minimum expenditure of say $50 but it did entice people to shop one place versus another.

This year it appears that "Free Shipping" has become a commodity offering. This means that it is offered by a much larger number of online only retailers and is being matched by many brick and mortar retailers on their online sites. It has in marketing parlance become "a price of entry" into the online shopping game. You have to offer it to survive and compete.

This is very good for consumers but could pose financial problems for retailers. Shipping costs are not inexpensive for retailers to absorb and could hurt profitability numbers at the end of the holiday season when all is tabulated.

One online retailer that appeals to young urban hipster types, Karmaloop.com, throws "free shipping" and percentage discounts out to its loyal buyers pretty frequently all year long. However, when you click through to final payment terms on your purchase you find they charge a $1.50 "handling" fee and don't see that has a shipping charge. I have expressed to the CEO that I feel this is a bit disceptive to consumers. The company's response has been they need to offset the huge costs of free shipping and this is how their bean counters told them to do it. Bad idea.

Personally, I have become a heavy Amazon.com shopper because of free shipping and very low cost two day and overnight shipping options as a "prime" member, (which costs $79 a year and is worth it in my opinion). I also have found from the comfort of my beach side lounge chair better deals on Amazon then some advertised Black Friday offerings at brick and mortar stores with the added bonus of no sales tax and no shipping fees. Pretty hard to beat without facing the vicious Black Friday crowds.

Watching out for you everyday.

Eli

 

Netflix isn't Doomed.

So says Holman Jenkins Jr. in an opinion piece in the Wall Street Journal today. I do not agree. His conclusion? Despite the huge fall off in subscribers and the costs involved in obtaining more streaming content (of value to subscribers---not just stuff nobody wants to watch) he believes both investors and subscribers will see that no one source will meet their needs because of a fragmented marketplace for at- home entertainment content and that Netflix is still a good value and will survive.

The Netflix premise that took consumers on a "journey" was for a very good price (less than going to the movies) you had a bunch of choices that you could order online delivered right to your door sometimes next day for viewing for as long as you wished. Brand loyalty was built on this premise along with a very identifiable icon, the red Netflix envelope. Streaming was the next order of business but there were many subscribers who wanted both, one or the other, but wanted the choice their way. I am one of the those folks who wanted it his way. Both DVDs and streaming at a fair price. I was a huge fan of Netflix so much so that I bought the stock because I believed the vision and the journey was exciting to many millions of people despite the other options out there and on the horizon.

However, (and I will keep reminding people for some time to come) great companies should not fail to understand that building that brand loyalty is as important (if not more so) than what may appear to be great strategic business modeling to analysts. Many analysts said that Netlfix couldn't maintain the value proposition they had given consumers for much longer and the price increase was a necessity for survival. That may be true. Unfortunately, when a key element of your brand strategy involves price-value you have to be extremely careful when you increase your pricing structure not to go to the point (too quickly) where price elasticity of demand along with sheer shock value hits consumers hard in the face.

Many companies deal with increasing prices all the time as a course of doing business. When you do so in such a way to make the consumer stop in their tracks to say, "wait wow that's a big increase do I still need or want this service?", you are in trouble. If you don't have a very demonstrable plan to show those consumers the value they are getting (as well as if you are smart--adding more value along with the price increase) you are taking a huge risk that likely will alienate your core audience and destroy your business.

In my opinion that is what has happened to Netflix and although I would love to see them fix this mess and get their stock price back up (for me to break even) I just haven't seen or read anything that convinces me that this will occur. I also know that the company's cash flow has been greatly weakened by the greatly devalued stock and huge subscriber base loss over the past few weeks and there is now question if they can survive to pay their current bills, forget acquiring more content.

Lesson: Never underestimate your customers, their emotional connection to your brand or their expectation of your product or service.

Watching out for you everyday.

Eli

 

Why the Print Version of Newspapers needs to exist: Even tech wizard Steve Jobs was a fan. [Second in a series]

Steve Jobs loved newspapers. He was obsessed with how consumers should and would consume news. But he was convinced the printed newspaper would be dead by 2011.

In a recent Wall St Journal article by Gordon Crovitz, Jobs was noted as someone who felt the printed newspaper was once an important tool but felt that the newsprint version of news lost its way, failed to take consumers on a journey (something all great brands must do) and was easily replaced by new media versions of information dissemination. The issue was one of print quality as Jobs was known for being obsessed with excellence especially when it came to the quality of printer matter, especially for his ads. If the ads in print form weren’t glossy and beautiful he wouldn’t use the medium.

 Although Jobs said newspapers would be obsolete by this year, he was to a great extent challenging the newspaper industry, according to Crovitz. Although Jobs is no longer with us, he leaves an important assignment for the news business.  Our lives have changed but newspapers have failed to evolve with us. What the newspaper industry has forgotten is the internet is just a new distribution tool, not a new brand, and the industry needs to better understand the relevance of the print form to consumers better than it does today, ( For example you can be reading the news with a newspaper on a plane without interruption when the flight attendant says TURN OFF ALL electronic devices when preparing to take-off and/or land. A case of print being more convenient than electronic!)

I contend there is something very special about holding and reading a newspaper (or a magazine for that matter). It is a combination of a vehicle of information mixed with the cultural experience of reading through the pages. One thing the glitzy online versions of news (as exampled on the iPad) lack is the tactile sense of going through the news and ads where the eye may pick up on stories (or ads) adjacent to ones you plan to read but would not have done so directly without the adjacency. Personally, I find the online version of news can create a sensory overload and finding the stories you want to read can be challenging in its own right and those you might have not known you want to read are not discovered. Some graphic versions of news online is so glitzy it is actually too hard to read.

Jobs said the quality of the newsprint was a problem. I realize it is expensive to make newspapers look like glossy online presentations of information. However, the lesson, if there is one to be learned, is that the print medium has important value in our culture and the newspaper industry has to figure out how to improve the quality of this distribution channel as well as remind people how meaningful this channel of information dissemination really is.

Watching out for you everyday.

Eli

PS HOT NEWS: Just read that the Newspaper Association of America is launching a new ad campaign that extols the virtue of newspapers with the slogan, "Smart is the new sexy". Now only if the print medium is made a bit more sexy they have a story to tell!

Why Netflix is failing: CEO Hastings doesn't understand branding

In an interview with the New York Times (appearing in the magazine section today), Netflix CEO Reed Hastings proved why Netflix is failing. As is common with most CEOs, he (admittedly) fails to understand what makes a brand in the first place and what makes one successful in the long term.

In the interview, Hastings says describing the major screw up that Neflix has encountered, "I think it was just a mistake in underestimating the depth of emotional attachment to Netflix". You think? Companies try (mostly unsuccessfully) to build emotional attachments with consumers. It's called brand loyalty and a very key ingredient to long term success. Not understanding this concept is a fundamental admission that one does not know how to market a product something CEOs arrogantly won't readily admit since they mostly think branding is an expense not a revenue builder.

Hastings also puts himself in a comparative role to Steve Jobs (hardly) and Jeff Bezos of Amazon saying his mistakes are all short term and CEOs understand the measurement of success is long term. However, and a big however, Jobs and Bezos understood and understand (respectively) how to build great brand loyalty and nuture it. Jobs was the master at it because he had a vision and took consumers on a "journey" which all great brands do. Hastings was on the right track, but missed an important station stop and went way off track to the point he may not be able to get his business back in gear.

I for one would like to see him resign and hire a more marketing savvy CEO to take the reigns and get the brand somewhat back on track by creating a new "journey" for consumers. It is going to take some great creativity and some concessions (to the brands most loyal consumers). Unfortunately, Hastings says he will not resign.

Watching out for you everyday.

Eli

Newspapers and their future: From Masters of the Universe to near extinction in less than a decade . [First in a series]

The newsprint version of the newspaper business has cancer but it was preventable and it may be still treatable. It was self-inflicted not caused by changes in the marketplace as the industry asserts. The top players were threatened by the new medium of the internet and instead of turning their fears into a triumph they succumb to them. Why? The newspaper industry’s “Old Guard” didn’t understand it and didn’t make any effort to master it. Instead of embracing the internet quickly they fought it, mismanaged it and forgot a very important element of great branding.

During the late 80s and early 90s I was a branding consultant to the newspaper industry.  Unfortunately, I rarely saw eye to eye with the traditionally minded senior executives of the day. It was at the time the internet was just starting to be recognized as a new force in communications and newspaper companies were trying to figure out how to deal with this game-changing tool. We know today most missed the boat and in an attempt to play catch up ended up using the internet medium poorly or incorrectly. While devoting so much money and energy to the new medium newspaper companies lost sight of reinforcing what made a newspaper in print form special and meaningful accelerating its rapid decline to where we are today.

What fascinated me was how many newspaper companies feared the internet and wanted to approach their re-branding efforts from that point of view. It seemed akin to the time when radio met television and radio broadcasters feared TV would eliminate their medium.

We know today that did not happen. Radio serves a place in both the information and entertainment world as does television. Companies became involved with both businesses and learned to use them for the unique elements each presented instead of trying to have one dominate the other. Radio thrives today along side television as two different mediums that deliver different kinds of experiences successfully to broad audiences.

The same should have been true for the newspaper industry.  Here’s why it wasn’t.

The key is the concept of branding is not often well understood by top executives primarily interested in the bottom line. They see marketing, especially branding efforts, as expenses and not investment spending. In the case of the newspaper industry, brands are not about the delivery systems they use. Newsprint, smart-phones and tablets are distribution channels. Brands are conceptual emotional contextual in nature. In the case of newspapers, the brands are the New York Times, Wall Street Journal, Chicago Tribute all in the information dissemination business and for years the masters at it. Many newspaper companies failed to integrate the internet as a new distribution system reaching new audiences (and eventually current audiences as well). Instead they saw the internet as a new brand and started building from scratch loosing focus on what a brand is.

In my opinion newspapers allowed the internet to become an entity beyond their control when in its infancy they could have become dominate players.

Today the internet offers thousands of new sources of news and information using the unique tools of this delivery system to reach all types of audiences all over the world 24/7. Today newsprint versions of newspapers are disappearing like dinosaurs but this didn’t have to be and just maybe this erosion can be stopped as they serve an important role in the information business and as a part of our way of life. Part of the problem likely lies in the fact the newsprint version of news hasn’t evolved in terms of quality and production values over the decades. It’s been cheapened to save money which has made it less attractive and competitive. The user experience has suffered.

Over the next few weeks I will examine other aspects of the decline of the newspaper business and what options might still be out there for its revival. Great brands weather storms even if they are deadly hurricanes. One aspect I will examine is the user experience with newspapers on the web, smart-phones and tablets. The news is not very good and I will explore why.

Next in the series: What did one of the world’s greatest techies think about newspapers and their future? What can we learn from his vision?

Watching out for you everyday.

Eli

 

 

 

 

What's wrong with the under 35 set? Common courtesies out the window

Normally this blog column focuses on brands, mostly products and services. On occasion I write about individual people as brands. Today, I am compelled to go slightly off-track and write about some of the issues I see with young people (classified here as under 35 years of age).

The issue? A complete lack of common courtesy behavior with their peers and more importantly with older folks like myself.

As part of understanding brands and brand building, one has to also understand human behavior as it impacts consumer decision making. A significant change I see between baby-boomers and their children and grandchildren is how they handle day to day interactions with other people.

These young people who increasingly socialize not in person but through online social media seem to have lost the understanding (and the art form) of how to deal with people one on one. It is so common for a younger person to make commitments (professional and personal) and break them or not live up to them as it is for them to use texting as their main form of communications.

I am astounded how often I personally experience this and how often corporate managers complain about their younger employees. They expect the world to be given to them but seem to also think failing to live up to a responsibility or an agreement as "no big deal". Making an appointment and not showing is not something a baby-boomer would do without (generally) contacting someone in advance to explain why the appointment would be missed. Or, in a extreme case, follow up immediately afterward to explain. Young people very often do neither. They expect their elders to respond to them quickly give them immediate feedback and answers but they see no reason to do the same in return.

For a group facing lives that likely for the first time since World War II will not be better than their parents, they are contributing in my opinion to this situation beyond just the economics of the world. A lack of reliability and dependabilty does not bode well for anyone in a world where jobs are increasingly harder to find and keep. It is no surprise that many employers would now rather hire retired "older" people than younger ones because of this behavioral situation.

I am not sure what has caused such a notable change in behavior but one thing I am sure is this seems to be another example of the decline of society as we know it.

Watching out for you everyday.

Eli

Apple iPhone4s...ugh. Some nice upgrades but overall a let down and disappointment for many brand loyalists

Apple failed today to excite brand loyalists with its humdrum launch of another iPhone, the iPhone 4S, not the iP5 most had been hoping for. It adds some cool features that are certainly upgrades and notable improvements, however, I believe it won't be enough for the rush of customers that came with the initial launch and that of the iPhone 4. I for one after reading the details on a notable tech blog updated live during the news conference, no longer feel any rush to get the new phone. First of all it will look exactly the same, so the "look what I just got" factor is zip.

Apple's stock dropped rapidly today as well as a result of broad disappointment. Whether it's the loss of Steve Jobs or the lack of excitement from the brand AND new management together, I sense most tech reporters thought the news was a yawn vs. what they had expected and hoped for.

Is this a sign that Apple has lost its midas touch? Maybe all goods things need to come to an end sooner or later or at least become more "normal" and "average" like most products made by American companies.

Watching out for everyday

Eli

Netflix: What are they doing with their brand? Destroying it? And this Qwikster DVD brand?

It was no surprise (full disclosure I own their stock) that Netflix's stock took a nose dive after the rather arrogant price raising strategy they took some weeks ago.

To anyone who has studied economics the law of elasticity of demand reigns supreme today as it has for years. To raise prices dramatically and NOT offer some value added to offset the price increase was clearly a very poor strategic move. Not only did Netflix lose many customers, many downgraded their services (including myself) and felt hurt by their actions. This brand had developed somewhat of a cult following. People were extremely loyal...to a point...but found this action unacceptable and insulting.

Today Netfix spun off its DVD by mail division into a new brand to be called Qwikster. Why you might ask? I asked the same question. For those of us who still have subscriptions to both DVDs and streaming the idea that one would have to deal with two different operations is just another nail in the coffin. Making it more time consuming to do business with this company will only serve to make more people drop the service and go elsewhere. More work less convenience, ugh. Not a good strategy.

I don't even like the idea that my familiar red DVD pack will no longer say Netflix but some obscure new name Quikster? Another ugh.

Some speculate that Netflix intends to sell off the DVD by mail business because that business model no longer works economically. Meanwhile, the stock plunges again down over 150 pts in recent weeks and there is nothing coming out of that CEO's office that makes anyone in my opinion think this business has anywhere to go but out of business as consumers lose all faith in this brand.

I believe we will see this as a case study of success mishandled turning a game changer into a game loser permanently. Sad, I don't think if the changes had been managed better, specifically rewarding customers who stayed even with big price increases with some meaningful value added experience that this would have blown up so fast and furiously.

The only way out now is mea culpa BIG TIME doing something fantastic for what customers remain, especially those using both services. Other than that, even I am ready to move on and take my loses.

Watching out for you everyday.

Eli

Missoni for Target launch wildly successful. A true lux brand goes mass

Target Stores launched another limited edition designer line on Tuesday this week that proved Americans want truly lux brands at cheap prices. The line from Italian textile fashion house Missoni included apparel, beauty, home goods, luggage and bedding among other categories.

The consumer response was overwhelming with stores selling out in a matter of hours and Target.com shutting down due to traffic overload.

Why the craziness? Missoni is one of the old guard true luxury brands that has not made any effort over its history to discount or offer cheaper lines to aspirational consumers. The quality of their designs and manufacturing is top notch. For such a lux brand to offer a large collection of goods at "flash fashion" prices is unprecedented.

I am familiar with Missoni through family friends in Italy who over the years brought us various apparel gifts on visits to the US. Scarfs and sweaters that cost many hundreds of dollars ( I have a sweater given to me 20 years ago that cost $1200 then) are still in our family because the products are timely in design and crafted to last.

I called to several local stores and was immediately told by noon on Tuesday that all Missoni products were "sold out" with no idea when the stores would be re-stocked.I was able to finally get online and buy a few things to see (in a few days) how good the low priced items are in terms of quality. I truly was shocked. I expected a good turn out but not a sell out this quickly.

Most Americans have never heard of Missoni as the family run company has not pushed to brand their products as household names in this country. They have preferred to be a bit off the radar for most consumers and cater to a smaller well-heeled audience who appreciate the quality of their fabrics and their unique patterned designs.

With the mass PR that this "sell-out" has garnered in the past 24 hours, it is clear the Missoni name will be far better known across the US by week's end. Additionally, products are already showing up on Ebay and other sites for re-sale at quite inflated prices given the limited edition of the entire collection. (The plan was to offer the line through October...depending on inventory. It seems unlikely there will be enough merchandise to keep the promotion going that long.)

A good question I am being asked is, "will this damage Missoni's brand image among its more elite customers?" Honestly, I do not think so. The designs look similar to the "real" McCoy, however, the quality is likely substantially lower end and good for limited wear and durability. I highly doubt the dresses and other fabric designs will have the same hand down generation to generation quality the originals do which will keep the loyalists buying the high end. Missoni has successfully reached a broader audience with this one move which could assist it with greater distribution (if desired) in the US for its luxury products assuming the economy improves (at some point in the future). Overall, a smart brand building move by Missoni and Target.

Watching out for you everyday.

Eli

 

Online shoppers increasingly rebelling against shipping fees

Consumers are increasingly turning to online shopping for all their needs from day to day basics to exotic offerings. With the cost of driving going up rapidly and forcasted to remain relatively high for some time to come, shopping from the convenience of ones home or office is very appealing.

What consumers say is NOT appealing about the experience is shipping fees. Numerous studies including one my firm recently conducted show that online buyers are increasingly making decisions based on shipping costs. In addition to price shopping specific goods across sites, people are investigating shipping costs before clicking the "buy now" button.

Consumers say if it is hard to find out the shipping costs in a few easy steps, they assume they will be high and look elsewhere for the goods. Obviously, sites that offer flat rate low cost or free shipping options are getting more play these days. Amazon's Prime club which costs $79 a year ensures its loyal shoppers that a high percentage of items shown on Amazon.com will be offered with a free two-day shipping guarantee or for $3.99 next day service. This is proving a valuable tool to keep consumers shopping at the online retail giant's site.

Consumers are most upset with online retailers who charge shipping fees that mount up to more than an incremental 25% over the item purchase price to deliver the item to your home or office. They particularly are angered by high fees combined with extremely slow delivery times (7-10 business days or more) which can mount to nearly three weeks in some cases. Additionally, some sites won't process and ship an order for upwards of 3-5 days further delaying receipt of the item selected.

Other concerns include difficulty tracking the shipment process of orders. Most sites do an above average job providing consumers with access to details about actual shipping and delivery times. However, to save money, an increasing number are using dual services to send out your purchase. One example. The initial item is shipped through UPS but UPS drops it off at your local post office for final processing and delivery. This can add a day or more to a normal UPS shipment and increase the likelihood you will not easily be able to track your shipment because two services are involved. Companies that use this shipment method give unsually long delivery windows (I've seen up to two weeks between the first day of possible delivery and the last) which only serves to frustrate consumers.

Based on the recent study results, it seems important that online retailers pay more attention to shipping as an important driver in the purchase decision process and not treat it as having little relevancy to buyers.

Watching out for you everyday.

Eli