Retailers Perplexed :Branded Products Vs. Private Label

Guru marketers in the corner offices of major retailers continue to throw darts when it comes to merchandising private label vs. branded products.

Maybe everyone should take a hint from today's WSJ profile of Cott Corp--the private label soda manufacturer whose shares are falling flat--much in part because Wal-Mart has determined that its customers are more interested in branded products vs. the Sam's label.

We all know that manufacturers have been hammered over the past several years as retailers seek to introduce lower cost, higher margin goods. Private labeling necessarily accomplishes that goal, especially when faced with declining revenue from slotting fees that are part and parcel to many chain store business models.

But a funny thing seems to be happening on the way to the checkout counter--other than the most rudimentary staple items (i.e. napkins, nails, or the most highly commoditized), consumers still cherish a branded product--and the lower priced "house brands" within the food, beverage, personal care categories are simply not appealing, even to the most price sensitive shoppers.

Marcomm 201: Its All About The Customer

Stellar observation from JEFFREY FOX of Fox And Company:
Too many companies that sell directly to consumers think marketing is advertising. Too many business-to-business sellers think marketing is trade shows and literature. Marketing involves the profitable identification, attraction, getting, and then keeping of the most highly desired customers. It is the heart and lungs for every organization. Without customers, members, patients, parishioners, donors, the organization will die. Every single function, every single job, in every single organization must, directly or indirectly, today or tomorrow, be laser-beamed on the getting and keeping of customers. Every single job in every business must be a marketing job. Every single job must be tied to profitable revenue- without exception. If someone does not know how his or her job gets or keeps customers then, that person is either ill-managed, ill-trained, or, as the Europeans say, redundant

1800 Flowers-Redeeming Response

Lo and behold--within 24 hours of my e-venting my frustration via email to senior execs at 1800 flowers for a total breakdown in customer service in connection with a special delivery for my 21 year old daughter's birthday--I received a personal call from Monica Woo, the President of the company's consumer floral division.

Not only did Ms. Woo express her apologies and acknowledgement that the company's system had failed to meet their standards during the most important week of the year--she insisted on sending both my wife and daughter a bouquet--both of which arrived exactly when she said they would.

Thank you, Monica!-You've re-affirmed my belief that the best executive leaders are those that focus on every customer complaint. I'll look forward to renewing my relationship accordingly!

Its ALL about Customer Service! Don't You Understand That Yet??

Thank G-d that BusinessWeek is keeping its eye on the ball and keeping a scorecard about the absolute most important element to any business--start-up, turnaround or the grey, old battleships--CUSTOMER SERVICE.

It befuddles the mind when reading business plans for start-ups that fail to include a line item expense for customer service, and enrages the intellect when being subjected to the absolute worst customer service from companies that are purportedly brand leaders. Telecoms and high tech have been infamous for failing to appreciate that they have an obligation to deal with customer complaints--and many, even Dell, have recognized the error of their ways.

Although many figured it out after they lost their customers--and subsequently, the keys to the executive washroom (and all of the other keys to the building), there is actually a universe of corporate managers that understand that customer experience, satisfaction and loyalty are the lifeblood of any business.

Unfortunately, based on personal experience, I don't think that 1800Flowers falls into the category of "we get it"--and if you believe Warren Buffet when he suggests that poor customer service is a tell tale sign of a poorly run company, then 1800Flowers' revolving door of senior execs says something about the company's board of directors.

On Feb 10, my wife placed an order via the 1800Flowers call center--flowers to be delivered on Feb 13 to our only child ( daughter) in honor of her 21'st birthday. When it was obvious the flowers hadn't been received by 7pm on the 13th--we phoned 1800 flowers to discover the phone lines were overwhlemed, and no matter how we attempted to naviagate, we kept encountering insturctions ot leave a voice message. Then we tried submitting a complaint by email--and received an auto reply that our inquiry would be addressed within 24 hours--which by then would be almost a full day after the birthday presented was suppposed to be delivered--and five days after it was ordered.. We tried phoning on the 14th, but what a surprise, the automated answering system indicated they were not accepting any calls--as they were overwhelmed. We tried calling on the 15th---same thing--no matter how much we tried to speak to a human--all ports were blocked.

Finally on the 16th--6 days after the order was placed and 3 days after the birthday--we were able to connect to a live customer service representative--who explained the reason the flowers were never delivered was because "the local vendor they had designated was too busy." The customer service rep believed that was a reasonable explanation and when asked if thought it would be a good idea for 1800flowers to find another local vendor--as opposed to simply dropping the entire thing--without bothering to call us, he therwsie said''hey, this was our busiest week of the year--so I'm sure you can understand..."

What I understood is that the customer service rep could have the stupidiest person ever put on a customer service line--and when he offered to provide a 20% discount card on the next purchase, I became convinced he was from another planet (or a former customer service rep from Dell).

When I asked " Why in thew world would I ever purchase anything from your company again when they failed so miserably on this purchase, and made absolutely no effort to resolve the problem, and had absolutely no customer service available for 4 days...??".. The customer service guy had no response--and when we asked to speak with a supervisor, we were told that none were available, and "it wouldn't be any better--but we could still have the 20% discount on the next purchase. " I politely suggested that I'd never use 1800flowers again (I' probably used them 1-2x a year for the past 10 years)--and under no circumstances did I want him sending us any solicitations.

What a surprise that the following week, I received a form letter apologizing for our not being satisfied, along with a 20% discount offering on my next purchase.

What should have happened: the customer service rep should have been trained to understand english and customer frustration. Who in their right mind is going to be appeased with a "sorry--here's 20% discount discount card when a special flower arrangement for their only child's 21'st birthday is bungled so completely??....

What he should have done was immediately offer a free something--as in "can we send your daughter a bouquet right now?--or can we not only credit you, but can we keep an additional credit available for the next time you'd like to send flowers to anyone anywhere?" Not a measely discount on a purchase--and he made zero effort to keep me as a satisfied customer--or to prevent the situation from turning ugly-which I clearly forewarned him about: -includingthe liklihood of my lamenting on a blog that's read by hundreds of media and marketing industry execs--and emailing everyone in my family and universe of friends that they should never do business with 1800flowers.

OK--the birthday was the day before Valentines Day--the biggest flower day of the year (or is it Mother's Day?)--And shit happens. But to have no customer telephone support for 3 straight days--and to have voice recordings that suggest that if you leave a message, someone will get back to you within the next day is lunacy. On the biggest day of the year, a smart company would OVERSTAFF with customer support to make sure those customers come back for next year's busieest day of the year. This isn't rocket science .

Jim McCann--I hope you're reading this--because I doubt anyone on your staff really cares.

Guru Marketing--from Guru Energy-Consumer Products 101

We always enjoy reading profiles of upstart entrepreneurs, and today's NY Times Small Business section courtesy of Andrew Martin brilliantly spotlights yet another one of New York's "Eight Million Stories in the Naked City". You'll need to have an online subscription to read the entire article, but I've extracted the more poignant observations...(article title is Stumping for Shelf Space

By ANDREW MARTIN

CRAIG MARGULIES is hoping to strike it rich in the grab-and-go beverage cases on the Upper East Side of Manhattan.

A 36-year-old with a master’s degree in industrial psychology, Mr. Margulies left a corporate career to become a sales representative for Guru energy drinks, a new company started by a bunch of old Canadian high school pals.

It might seem like a strange career switch, until you consider that the investors in the last beverage sensation in Manhattan — Glacéau, the makers of Vitaminwater — split $4.1 billion last year after Coca-Cola bought it.

“Bust my hump and get some equity in the company,” Mr. Margulies explained. “That’s what we are all here for.”

Guru, which is already selling in Canada, is trying to crack the New York market by zipping around the city in electric minicars painted like Guru cans and hiring cheerful, attractive young women to offer samples at convenience stores, health clubs, supermarkets and delis.

But most of all, it is relying on the skills of salesmen like Mr. Margulies, who in three months on the job has received a quick education on how to win coveted shelf space in beverage cases around the city. It requires a gift for schmoozing, a comfortable pair of shoes and armorlike skin.

The nonalcoholic beverage market, in New York City and elsewhere, is tough. For decades, it was dominated by the soft-drink giants Coke and Pepsi, with a few other brands scrambling for the leftovers.

An enormous variety of drinks, a hundred or more even in small delis, have picked up the slack. And energy drinks, where Guru believes it has found an opening offering products with all natural and organic ingredients.

The explosion of new beverages has been marked by stories of regular folks who started small and made it big with a new drink that they hustled to local stores. Three New York friends created Snapple, which was sold to Quaker Oats Company in 1994 for $1.7 billion. Arizona tea was mixed up by a couple of Brooklynites who first tried flavored seltzer and malt liquor.

Glacéau’s Vitaminwater was the brainchild of J. Darius Bikoff, who insisted on selling his vitamin-spiked flavored water beside regular bottled water rather than in the soda section.

The four founders of Guru Beverage have a pretty good story, too. But the ending remains far from certain. While creating a drink in a blender and finding a bottler is relatively easy and inexpensive, making it a successful brand is difficult.

“Frankly, some of it is luck,” said Gary Hemphill, managing director of the Beverage Marketing Corporation. “Being at the right place with the right product at the right time.”

Bankrolled by the founders’ savings accounts, the company sold its first can of Guru at a small deli in Montreal in 2000. By the end of the first year of production, nearly one million cans had been sold, mostly in Montreal.

By 2005, Guru was being sold throughout Canada, and the company was looking to sell in the United States. New York City was selected because it was the largest market, it was fairly similar to Montreal in terms of its many independent retailers

“If it doesn’t make it there, we would rather know up front rather than later,” Mr. Jolicoeur said. He said it was important for the company to prove to itself “that the Guru concept has legs.”

The company’s strategy in New York was similar to what worked in Montreal: trying to get the product into as many retail locations and company cafeterias as possible in a small area to create buzz, and then expanding.

That kind of small-scale approach works to a point. But eventually you need to have a good distributor.

When he started, Mr. Goldman was driving cases of his tea around in a van, trying to persuade retail stores to try it. He realized that to gain any scale he needed a distributor who had a fleet of trucks and well-known relationships with retailers.

“You go into a store, and you’re asking a guy to take a brand on,” Mr. Goldman said. “Who are you? How are you going to get in there?” But if you are connected with an established distributor, he said, the relationship is already reputable.

Guru chose Exclusive Beverage as its distributor, hoping Guru would receive more attention with a smaller company...Steve Gress, Exclusive’s president, said his portfolio consisted of small start-ups like Guru. Asked what makes a hit, he said, “I wish I knew because I’d be a lot better off.”

Mr. Gress credited Guru as being “very hands-on” and willing to listen to advice on how to succeed in New York. “You need the company support,” he said. “You need to get it in people’s hands and get them to try it.”

The company started selling its drinks downtown last July. It has advertised in The Village Voice and Time Out New York, sponsored art and fashion shows, and scooted around the city in its electric cars to promote the idea that the car and Guru offer “clean energy.”

The reviews were mixed.

David Kessler questioned whether Guru was distinctive enough to rise above the growing pack of beverage choices. “We’re marketing guys,” Mr. Kessler explained. “I don’t know if it’s differentiated enough to get my attention to say it’s really unique and I’ve got to have it.”

Mr. Kessler’s comments crystallize the challenge for Guru’s salesmen, who must convince the managers of company cafeterias and health clubs, vitamin stores and bodegas that they must have Guru on their shelves. “There are so many drinks out there,” Mr. Margulies said. “The only niche we have to play off is that it’s an all-natural product.”

Yet Mr. Margulies exhibits considerable skill as a salesman. “The product is the product, but if you don’t sell yourself it makes no difference,” said Mr. Margulies, a Long Island native who is newly married. “You’ve got to make an impression in the first five minutes or you are done.”

Social Media Campaigns Have No Flight Dates

Superb insight courtesy of Joe Marchese at Online Spin!
Social Media Campaigns Have No Flight Dates
By Joe Marchese

Your social media campaign is always on -- like it or not. The only question is whether you are paying attention or not. Marketing Daily's Sarah Mahoney does a great job of highlighting the key findings of a study by OneUpWeb in her piece "Social Media Marketing's Disease: No Follow-Through." The finding that social media efforts positively influenced sales, while vastly underappreciated, is not the study's most interesting finding. I would instead direct marketers' attention to the rapid loss of return on social media efforts as those efforts lose support.

I know it doesn't sound surprising (please hold your calls to the Harvard Business Review). But what if someone told you that you might NEVER see a positive return on social media efforts without consistent monitoring and management, forgetting the traditional notion of campaign start and end dates. Effective social media campaigns incorporate community creation and communication. They incorporate various forms of B2C communication and dialogue, as well as enablement and monitoring of C2C communication. All this means that the creation of social media campaigns can require a significantly larger outlay of resources and patience upfront, while not returning in the typical time frame (re: in time to see how these efforts impacted this quarter's results).

This is because you don't "launch" a social media campaign. You begin a social media effort. You don't just create a campaign message for social media distribution; you test various messages and enable a dialogue with those people who will carry your message. This adds up to a greater upfront cost without seeing the typical returns associated with marketing spend. You never had to test messages so that they would get media distribution, you just bought media distribution and your message of choice reached its intended audience (but then again you've never been able to watch media distribution to determine message effectiveness or find a product enhancement -- these required separate efforts).

What this means is that abandoning a social media effort that has any traction is like rolling a gigantic bolder up a hill, then, once you get to (almost) flat land, giving up and letting the bolder roll back down the hill. Looking back on the exercise, it is easy to conclude that you did not see the return on the effort it took to get the bolder up the hill, because it's the ongoing return on maintaining the social media effort that shows far greater return on effort. But once you have found the mix that gets your social media momentum going, it's much easier to recognize a positive ROI on social media efforts, even if you are considering marketing objectives in a vacuum and ignore the potential for social media to provide brand and product feedback

Out of the Mouths of Babes-Email Marketing

Having just executed 3 different (list-based) email marketing campaigns on behalf of a consumer product company with a line of kid friendly, alcohol free hand sanitizers--I'd argue that the age of email marketing is dead and kapoot.

The emails were nicely designed, the subject field(s) were compelling, and the call to action shout outs were green-lighted by 4 unrelated email marketing advisors that received no compensation for their pre-launch opinion.

We sent out at 'best day of the week (tues and thurs), we provided tools that would encourage referrals (we included testimonials and discount coupons). Although the last of the 3 campaigns yielded somewhat better results than the first two, the overall results were abysmal.

With that said, Marc Lore, CEO of Diapers.com has demonstrated that email marketing can work--as long as it conforms to the discipline of leveraging lists that are acquired in-house--NOT acquired lists. And there are necessarily certain nuances to keep in mind. Attached article is from May, Marc was profiled in today's NY Times business section

Generation MySpace Is Getting Fed Up

BW's Spencer Ante and Catherine Holahan are the most recent media experts to observe what we pointed out back in December, and that advertising performance (clicks, purchases etc) is a fraction of what advertisers hoped, and that ad revenue projections for social networking sites are proving grossly over optimistic.

It doesn't take a social scientist to know that the value of a social networking site is predicated exclusively on the loyalty of its members--and obviously its that loyalty which inspires the aggregate traffic counts for the platform.

Facebook has quite the track record for introducing innovative ideas, but at the same time, they've imposed these innovations without asking the most important people if they would support it--and they've never invited them to participate in the enterprise value that these members created for its founder. And on more than one occasion, the members rioted , causing Facebook to lose face and retreat. God forbid they should actually conduct member surveys before introducing major releases.

In the case of advertising, this weeks BW article shouldn't come as a surprise to anyone i.e. the that social networking sites are proving to be grossly overrated insofar as a vehicle for advertisers, or as the next gold mine for those looking to make billions in advertising revenue.

We already know that the return on investment i.e. CPM based banners has been diminishing more rapidly than the value of subprime mortgage debt. That's why pay for performance (i.e. PPC and CPC applications are the bread and butter to Google's bottom line. But with that said, the actual # of clicks vs. impressions will always remain insignificant. But Google's Adsense program is exactly the type of application that should be introduced to social networking sites.

Why an advertiser would think that advertising on a social network site would be a panacea merely demonstrates how little most advertisers know about peer-to-peer marketing---and the BW article points that out.

Members on a social network go the site to communicate with other members, not to be inundanted with 3rd banner ads.. They don't click those ads when they're actually surfing the net, so they aren't about to click them within what is supposed to be a 'protected comfort zone'.

Yes, marketers know that products are best promoted via influencers--and a social networking site is by definition, a hotbed of influencers. But unless the member is doing the influencing, any third party advertising strategy is not only going to fail--its going to backfire--and negatively impact the loyalty of its members. Simple logic that any VC should understand before plucking down the next five cents of investor capital.

Facebook claims that allowing its members to advertise products of their own choosing on their own profiles wil make the page 'too cluttered'. Instead, Facebook is imposing what ads display where, including scrolling across member profile pages. That's the equivalent of inserting billboards on the side of my house, without asking my permission, and the fact that I'm not even being offered a piece of the ad revenue is almost incomprehensible.

My 22 year old is a senior in college--and I've polled her, along with two dozen of her peeps. They're all ready to graduate, and to leave Facebook behind them, for the simple reasons noted herein. With that said, if there is going to be ads on the platform, it only makes sense that individual members could select "My Favorite Stuff" and be allowed to maintain their own proprietary 'billboards'--and share in the revenue accordingly.

Out of the mouths of babes.