Ries' Pieces

Under Armour: Too Big for its Shirt?

    It's amazing how many of the world's most successful entrepreneurs quickly forget what made them famous.

    The latest example is Kevin Plank, CEO of Under Armour.

    What made Under Armour famous? It wasn't a Super Bowl ad. It wasn't a massive marketing campaign. It wasn't ego or hype. What made Under Armour famous was "performance apparel" a new category Kevin created and carefully nurtured. 

 

    As an ex-Maryland football player, Kevin Plank was sick of wearing sweat-soaked cotton T-shirts. So he visited New York City’s garment district and found a polyester-Lycra blend that didn’t trap moisture.

    His next step was to create undergarments made with this high-tech blend that could wick sweat through the fabric to the surface instead of absorbing it. He theorized that if athletes could be dry and cool they would be able to perform better. This is the core concept of Under Armour and the idea that made Kevin Plank and his company famous.           

    Under Armour started slowly with a narrow focus.

        One product = shirt

        One market = football

        One target = athletes

    After 12 years, that strategy built the Under Armour brand into the $725 million business it is today.

    But, hey, nobody wants to keep doing the same thing over and over again. Entrepreneurs are naturally restless and thrive on challenges. Which is why they often get themselves into trouble after an initial success.

    What keeps a brand and company successful over the long haul is sticking to what made them famous in the first place. But too often that is not what companies end up doing.

    Like a successful athlete, a successful brand can feel invincible. Pumped up by delusions that no matter what they do or what they try, they will be successful. Ego takes over for marketing sense. Feeling invincible led Michael Jordan into baseball and Under Armour into running shoes.

    The key to remember is that Under Armour isn't just a great brand; Under Armour pioneered and dominates a great category. Its power comes from the category it owns in the mind, not the brand name it puts on the package.

    "Under Armour" are the words that represent that category in the mind. So putting the Under Armour brand name on another category is not going to guarantee success, especially if that category has little to do with performance clothing. Unfortunately, Kevin has learned this the hard way as many do.

    Under Armour owns performance apparel. It started with football and shirts. Then slowly expanded into all types of performance apparel for men, women, children and sports of all types. This kind of slow expansion over time is fine. It dug Under Armour deeper into its performance-wear focus.

     What got Under Armour into trouble is veering too far from its focus. Kevin's first big move came in 2006 when Under Armour started to sell American-football cleats. This is a small market ($250 million in the U.S.) so the big athletic-shoe players (Nike and Adidas) more or less ignored the threat. His next moves took Under Armour into the baseball and softball cleats market where the company managed to capture a small share.

    Then in 2008 Under Armour really started to get cocky and entered the big leagues of footwear with the launch of its Prototype trainer. Unlike its slow and stealthy moves into cleats, Under Armour made a big and flashy move in non-cleated shoes with a $25 million campaign that broke with a Super Bowl ad declaring "The Future is Ours!" a full three months before the shoes were even in retail stores.

    The arrogant and garish launch infuriated Nike which promptly launched its own SPARQ trainer (for Speed, Power, Agility, Reaction and Quickness.)

    Nike was not going to let Under Armour be the future of footwear. You beat a leader like Nike by being slow and sneaky, not shouting to the world we are going to beat you. Especially if you don't have the product or brand to do it. Under Armour is an apparel brand. Nike is a footwear brand. Each might sell other stuff too, but the brands are rooted in these categories and can't grow too far from them. Look at the numbers:

Under Armour
    $752 million in sales
        Mens apparel = 53%
        All apparel = 80%
        Footwear  = 12%

Nike
    $19.2 billion in sales
    Footwear = 54%
    Apparel = 27%
    Equipment - 6%

    That is why it makes no sense for Under Armour to go toe-to-to with Nike in non-cleated athletic shoes. Here is a company with no credibility in athletic shoes attacking one of the world’s most iconic and dominant brand for athletic footwear. Furthermore, Under Armour was doing so with no clear-cut product advantage and with a name that defined a totally different strategy.

    Not surprisingly the financial results from the expansions have not very encouraging. Even though athletic shoes are an enormous market, Under Armour sold only $85 million worth of footwear in 2008 and much of that was under aggressive markdowns. 

    In addition, Under Armour’s year by year results show a definite downward trend.

2006 . . . Sales were up 53 percent from the previous year.
Net profit margin: 9.1 percent.

2007 . . . Sales were up 41 percent from the previous year.
Net profit margin: 8.7 percent.

2008 . . . Sales were up 20 percent from the previous year.
Net profit margin: 5.3 percent.

    Sales growth is slowing, profit margins are declining and the stock has been pummeled. You might think these factors would have deflated some egos and shocked management into realizing their strategic errors, but apparently not.

    This year, the company launched its first line of running shoes.

    Will history repeat itself? I think so.

Brand Makeover for the Swift School

  

    I am proud to announce that the branding makeover of the Swift School is almost complete. The process has taken many months but the results are extraordinary.

    Just to recap, back in April 2009, I was part of the On The House team that donated a total of $100,000 worth of services to a local non-profit organization in Atlanta. The winner of the prize was the Swift School, a non-profit school that serves elementary children with dyslexia.

    The mission of On the House was to give a branding makeover to a non-profit that was doing great work, but was not reaching its full potential due to weak marketing materials. The winner would get a strategy consulting from me, brand identity work, logo design, website design, photography, video production, brochures, printing and trademark counseling all for free.

    It is all too common that companies think that the name, logo, color, tagline, website don't matter. That if you have a good product or service you will succeed no matter what. Well, this is simply not true. Succeeding without a strong brand is enormously difficult.

    The changes that are being implemented right now at the Swift School are going to go a long way in helping to increase the school's visibility and credibility in the community.

    Like most brands, the Swift School is trying to find a way into the mind of the consumer. The way into the mind is always the same, the way in is with a narrow focus.

Here is how the team helped the Swift School:

1. The Name

    Originally the full name of the school was "The Swift School." But the "The" was an extra and unnecessary word that just made the name/logo longer.

    The emphasis should be on the one word that differentiates the brand and that is "Swift." It was recommend that the "The" be taken off the name. And for "Swift" to be the word that is the largest and most visible in the logo.

    Removing the "the" also allows for a shorter and easier to remember website address. I purchased www.swiftschool.com which amazingly was still available. Before the school was using the much longer www.theswiftschool.org.

2. The Word

    Every brand needs to focus on one word to own in the mind. This is difficult for most for-profit companies to do. It is even more difficult for non-profits which are concerned about being inclusive not exclusive.

    But focusing on a word doesn't mean necessarily leaving anybody out. Brands need to focus on a word so that people can file the brand in the mind. It is easier to file a specific idea than a general idea. Walgreen's is called a "drug" store even though they sell a lot of other stuff and could more appropriately be called a "personal items" store.

    Before the Swift School talked about "serving children with dyslexia and language-based learning differences." While that might be correct, it is way to long. And "language-based learning differences" is too vague. They needed one word that would cover almost all that they do.

    That word is "dyslexia." After all what is dyslexia? Dyslexia is a learning disability that is neurological in origin and is characterized by difficult with accurate and/or fluent word recognition. In other words, dyslexia is a difficulty with reading.

    Dyslexia is the one word that covers it all. It is a word that is already in the media and in the mind. And it is now the word that Swift is focused on.

3. The Tagline and Battle Cry

    Never underestimate the importance of a tagline. A good tagline should become the battle cry for your brand. A memorable call to action for employees, consumers and prospects alike.

    The use of alliteration, repetition and rhyme are all good ways of making your battle cry memorable. For example: Shop till you drop, Toys for Tots, or Loose lips sinks ships.

    The new battle cry for Swift is: Success with Dyslexia Starts Here.

    Obviously the alliteration of Swift, Success and Starts makes it memorable and drives the Swift/Dyslexia connection into the mind.

4. The Color

    Before Swift's color was dark green. But the uniform colors also offered a choice of green, blue, burgundy, or white shirts. That is way too many colors. A strong brand should focus on one color.

    The color selected to focus on was royal blue. The uniforms will only come in a choice of white or navy blue each with the swift name/star.

 

5. The Symbol.

    The guys at brand identity house Matchstic developed the "Star" as the symbol for Swift. It is very helpful if you can have a visual for your brand. And not just a squiggle that has no meaning but a visual that reinforces an idea in the mind.

    A brand like Nike can get away with just a swoosh, but only because Nike was first in a huge new category and they then backed up that symbol with hundreds of millions of dollars in advertising every year.

For most brands, it is best to use a symbol that has specific meaning and relevance to your brand and sets it apart from the pack. The "hut" for Pizza Hut. The "ticket" for Blockbuster. The "lime" for Corona. The "cowboy" for Marlboro. 

The star is perfect for Swift. The has the alliteration again with Swift. And the designers make it unique my overlaying the "s" and star. The star speaks to the potential of each Swift student to achieve success in school.

5. The Logo.

The logo takes the brand name, symbol, tagline and puts them together in a visual nugget that is then used everywhere. One of the most important things not to forget in a logo is legibility. Way too many designers try to make a logo pretty and forget that people also need to read it. Especially from a distance.

Here is the logo designed by Matchstic:

6. The other elements

If you have kids in school, you know how critical car magnets are. New Swift car magnets may seem like a trivial element but they are something that will have an immediate and important impact in the community. The magnets are being made by Branders.com and will arrive next week.

A new blue uniform shirt will be given to each student for the photography and video sessions which will be in November. Kids will still be allowed to wear the old logo shirts for the rest of this year. But all new uniform orders will have the new logo. And next year only the new logo will be allowed.

The website design has been created and is absolutely amazing. When you have a focus and a visual to play with creativity flows. The star is going to be something that can be used across many platforms. A star had such an emotional and relevant impact. The new website will go live in January.

It has been a wonderful project to be a part of. On the House has given an amazing school the brand strategy and brand identity it deserves.

Here is a recap of where the Swift School was in terms of its brand identity to where it will soon be.

 

 

 

Related posts:

Overview of the On the House Project

The Situation at Swift: My analysis of the branding issues

The Strategy for Swift: A summary of my strategy report

On the House Website

Matchstic Website

Ries & Ries Website

My general advice for marketing a non-profit.

How Crocs Crashed

  Success is sometimes your own worst enemy. Just ask the management and stockholders at Crocs.

  A hot brand ends up in one of two different ways. It burns bright too fast and fizzles. Brands like this are known as fads. Or a brand burns hot then continues at a steady simmer. Brands like this are known as iconic.

  Believe it or not, whether your brand will become a fad or an icon depends on your strategy more than you think. The good news is the fate of your brand is very much in your control. The bad news is it may be too late for Crocs.

  While it’s true that no strategy could have turned the “Pet Rock” into an icon, many brands could have been saved from the fate of faddom.

  Brands like Crocs and Cabbage Patch could have been saved by better strategic decisions.

  Let’s start with the story of how Crocs took off. Then we can cover how Crocs crashed and burned.

The Rise of Crocs

  In the Western Rockies of Boulder, Colorado, in 2002 three longtime friends and created a lightweight antimicrobial foam they called Croslite using a technology created by a Canadian laboratory in 1999. They molded it into a boating and water-sports shoe they named “Beach.” Thank goodness, they abandoned the Beach name and the shoes became known as Crocs. The shoes quickly caught on and developed a loyal and vociferous following.

  By 2005, revenues were $108.6 million, net income was $16.7 million for a net profit margin of 15.4 percent.

  By 2006, revenues jumped to $354.7 million, net income was $64.4 million for a net profit margin of 18.2 percent.

  That same year, the company riding a wave of success sold shares to the public raising more than $200 million making it the biggest stock offering in shoe history. The company used the money to ramp up manufacturing, diversify the line and acquire new businesses.

  Things were looking fantastic, or so management thought. In 2007, Crocs hit a high-water mark of $847.3 million in sales with a net profit margin of an astounding 19.9 percent.

  In 2008, the wave came crashing down. Sales dropped slightly to $721.6 million, but the company lost $185.1 million. Crocs had to slash 2,000 jobs and its stock price has plummeted 76 percent. Today Crocs has millions of dollars of debt and a huge surplus of shoes.

  What caused the collapse of Crocs? Many articles have blamed the economic slowdown. But could the recession really be the reason for the fall of $30 Crocs? I think there is a far more likely answer.

  When a brand is hot, it is hard to predict anything but a bright future ahead. It seems anything and everything you do is a good move. But nothing could be further from the truth. A hot brand must be managed very carefully.

Here are the keys to keeping a hot brand “hot.”

1. Dampen Demand.

  Suddenly everybody wants to wear Crocs, buy a Cabbage Patch doll or stay warm with a Snuggie. There are lines of prospective customers and mass hysteria.

  Every company's dream right? But what to do next?

  The worst thing to do is over-produce. If you flood the market with your product, it can lose its appeal. Some people will buy it who don’t really want it. While you may rack up some amazing short-term sales, long term you will undermine your brand’s specialness and exclusiveness.

  Crocs did just that. The company rapidly ramped up production in 2006 which led sales doubling in 2007 but also created a fad not an icon. Instead of patiently fanning the flames, Crocs added fuel to the fire. Overnight everybody was wearing them and then nobody wanted to be wearing them.

2. Resist Line Extension.

   Crocs didn’t just flood the market with a wide variety of its classic Crocs in a rainbow of colors, it quickly added many other styles. Flip-flops, sandals and an assortment of other types of Crocs were developed. Especially troublesome was the fact that many of the expanded styles were meant to be attractive. The idea of Crocs is not to look beautiful but to be functional. If people want fashion, there are many other brands to look at.

  In addition, Crocs spent millions buying up other companies in order to line-extend. They bought Jibbitz which makes the do-dads used to decorate Crocs for $10 million. Buying Jibbitz was probably a smart purchase especially they kept the unique brand name. But Crocs made other horrible purchases like buying EXO Italia which made vinyl shoes like Teva and Fury Hockey which made sports-protection items like sticks, gloves, pants and elbow pads. There was even talk of launching Crocs clothing. Not surprisingly the expansion efforts fell flat. The Fury business was liquidated last year.

  The expanded line turned Crocs into just another brand. At first, Crocs had an enormous advantage because it owned an idea and an image in the mind. The multitude of styles undermined that image and destroyed the power of the brand.

 

3. Control Distribution.

  Crocs went from being available in just a few retail outlets to being available in every imaginable retail outlet. While that fueled sales, it also hurt the brand’s power with the distribution. Retailers no longer saw it special being able to stock Crocs.

  We normally recommend that new brands start with exclusive distribution deals. That way the retailer has an incentive to promote the brand.

 

4. Focus on Core Consumers.

  Crocs went from a sports enthusiast shoe to a shoe for everyone. A brand that tries to appeal to everyone ends up appealing to nobody.

  Croc loyalists saw Crocs on everyone and said Geez, they don’t make me stand out and look different anymore.

  The key to making a brand an icon is having a base of loyal consumers. Instead of chasing everyone, Crocs should have resisted that temptation and stayed focused. This is the key to keep a brand becoming a fad.

  What are the core consumers for Crocs? Kids, athletes, workers. Forget the soccer moms/dads, grandmas/grandpas, fashionistas and everybody else.

  Kids in particular were a big part of Crocs’ success. Kids are also great customers because they have feet that grow. Sure, Crocs may be indestructible, but when your feet keep growing you need a new pair every six months anyway. Kids also love the Jibbitz which allowed each pair to be personalized.

  Athletes are the customers Crocs started with. Athletes gave Crocs a natural distribution strategy of sporting-goods stores like Sports Authority. The shoe is not just trendy but functional. The anti-Sex in the City shoes.

  Workers on their feet. Nurses, doctors, chefs and workers of all sorts are the perfect target consumer for Crocs and could have been a long-term steady market.

 

5. Expand Globally.

  Crocs did understand the power of going global. But you should not try to go global all at once. Crocs used its stock-market cash to build manufacturing plants in Mexico and China as well as distribution centers in the Netherlands and Japan.

  That was way too much, too soon. Going global is important, but should be done carefully, strategically and slowly. Instead, Crocs flooded the global market with its shoes.

  Too bad. Crocs is a great brand with a great name built around a great idea. The missing ingredient was great marketing.

Starbucks is Shooting Itself in the Cup

          Starbucks latest offensive isn’t against McDonald’s or Dunkin’ Donuts it is against itself. And if Starbucks weapon is as successful as it says it will be then they could be shooting themselves in the cup.

          Starbucks new weapon is its Via instant coffee, a brand that went nationwide this week after several months of testing in Seattle, Chicago and London. 

          To support the Via launch, Starbucks will be promoting a “taste challenge” in its own stores. The “taste challenge” aims to convince consumers that they cannot tell the difference between a cup of Starbucks instant coffee and a cup of Starbucks store brew.

          Instant coffee as good as store-brewed Starbucks? Sounds impossible.

But Howard Schultz is convinced people won’t be able to tell the difference. He has even been fooling people with Starbucks Via instant coffee for almost a year at home and at his office. Nobody including his wife, according to Schultz, realized it was instant.

          It’s a brilliant idea for a new gourmet instant coffee to set-up a blind taste test against the world leader in high-end coffee. Especially if the instant coffee wins the taste test.

          It’s an insane idea for the world’s leading gourmet coffee chain to set-up a blind taste test in its own stores that it hopes it will lose. Losing a taste test devalues the loser as much as it praises the winner.

          Weaker brands have used blind taste tests for decades to try to take market share from leading brands. The “Pepsi  Challenge” and the companion commercials of the 1980’s pitted Pepsi against Coca-Cola.

          Blind tasters overwhelmingly picked the sweeter taste of Pepsi over Coke. The humiliation of the taste test losses in part led Coca-Cola to launch the disastrous New Coke.  A key factor in the development of New Coke was that it should beat Pepsi in blind taste tests.

          Today, Starbucks is using a taste test that could lead to another disaster. If a cheaper, instant coffee can be easily made at home or work and it tastes as good as the real thing, why waste time and money going to a retail store?

          Starbucks really let the fox  in the hen house by hosting the taste tests in its very own stores. Starbucks is telling consumers exactly what they shouldn’t be telling consumers right in its very own stores.

          In the minds of consumers Starbucks is believed to be expensive but “worth it.” Consumers praise the high-quality of the coffee. Hosting a taste test in your own stores to tell consumers your product is no better than instant coffee is not a good message to send and not a good challenge to lose.

          Starbucks, of course, claims that its instant coffee will not damage its core store brand since “portability” and “value” are the important selling points of Via.

          Apparently, the inconvenience of long lines and extravagance of a high price are things consumers would not give up for a Starbucks instant coffee that tastes the same as the store brand?

          A brand can often be successful by being the opposite of the leading brand. Target vs. Walmart. Scope vs. Listerine. Pepsi vs. Coke. Monster vs. Red Bull. But there is no potential for one brand to do two strategies at once and succeed.

          A high-end brand needs to stay focused no matter what. Introducing cheaper versions of expensive products damage the credibility and power of the core brand.

          In the current economic climate Starbucks has been under intense criticism over its “$4 cup” image. Starbucks needs to flight that by promoting a simple pricing strategy to drive home the message that $2 is really the price of a cup of coffee at Starbucks and that it is worth every penny because it’s Starbucks.

          Suggested headline for a Starbucks ad:

“Two bucks and worth it.”

          Instead they are spending money on ads with this headline
“Instant coffee that tastes as delicious as our brewed.”

          This ad and Via instant coffee at $1 a cup isn’t likely to tempt too many Taster’s Choice drinkers who get a cup of instant for 10 cents.

          What the introduction, advertising and promotion of Starbucks Via is most likely to do is drive people out of Starbucks stores by denigrating the brand in the minds of the consumers.

          It is the law of unintended consequence. Saying that an instant coffee (even an expensive instant coffee) can taste just as good as the Starbucks real thing devalues the brewed high-end coffee category. 

          It is bad enough when your competition knocks your brand, it is worse when you do it to yourself. Yet it happens all the time.

 

GM & the Implication of the Opposite

           

               Sometimes the harder you try, the worse off you are. Why is that?

            Branding can sometimes be like trying to pick up girls. It is not what you say that counts. But the implication of what you say that counts.

            Asking a girl out for a Saturday night date on a Thursday afternoon doesn’t say you like her. It says “I’m desperate. Girls won’t go out with me.”

            There’s an important principle here. It’s what we call the implication of the opposite. What you say often implies exactly the opposite idea.

            When crafting their advertising messages, too many marketers forget about this principle. As a result, while even if they are telling the truth all they do is convince consumers of the opposite.

            Look at General Motor’s new campaign and you’ll see what I mean.

            GM’s latest television commercials with Chairman Ed Whitacre Jr. promotes a 60-day money-back guarantee on the purchase on any new car or truck. Only a company that is desperate and unsure of itself would do that. It’s no way to get a date or sell a car.

            GM thinks the money-back guarantee says it believes so strongly in its cars that it is willing to give you your money back if you’re not satisfied. But it is the opposite message that gets delivered. We are so unsure of our products we’ll give you your money back.

            Money-back guarantees have been around for a long time. And while they are very popular and many companies have used them, I don’t think they are effective. If a money-back guarantee was the key to success, almost every small company in America would be rolling in dough.

            Check the yellow pages or Google and you’ll see. Hundreds of companies use them to beg for business.

            A money-back guarantee says there is nothing really special or different about your company or your products. The way to be popular and get the girl is not by begging her to try you out and promising to refund her movie money if she isn’t happy with the date.

                The way to be popular is by being the best football player, the best tennis player, the best chess player, the best photographer, the best singer, the best dancer or the best looking-guy in the crowd. In other words, by being a leader in a category.

            The biggest problem with GM is that they don’t lead in any category. Ford is the leading truck brand. Toyota is the leading car brand. Lexus is the leading luxury car brand. BMW is the leading driving car brand. Mercedes is the leading prestigious car brand.

            What is a Cadillac? What is a Chevrolet? What is a Buick? What is a GMC? None of these brands lead in anything nor do they stand for anything.

            Cadillac used to be a very strong brand because it was the leading luxury-car brand. But no more. Cheap Cadillac models like the Catera undermined its luxury position in the mind. Cadillac used to outsell Mercedes, BMW and Lexus combined.

            Today, Cadillac is stuck in fourth place. Here are the 2008 sales:

Lexus ……..……  260,087

BMW …………..  249,113

Mercedes …….  225,009

Cadillac ……..… 161,159

            Then there is Ed Whitacre Jr. Who? Exactly. Nobody knows who this guy is. Sure, he ran AT&T as Chairman and CEO for 17 years. But his Wikipedia page is smaller than mine. Ed Whitacre Jr. is not a household name.

            CEO ads that work best are the ones that feature a company founder like Dave Thomas for Wendy’s, John Schnatter for Papa John’s or Frank Perdue for Perdue. Not a CEO who was just appointed by the government.

            Apparently, the Ed Whitacre Jr. ads were supposed to resemble the iconic Lee Iacocca ads of the early 1980’s. GM was hoping that Ed do for GM, what Lee did Chrysler. I’ll give you three reasons why this strategy will never work.

1. Lee Iacocca was a celebrity. Ed Whitacre Jr. is a nobody.

            Lee Iacocca was very well known before being hired by Chrylser. Iacocca was closely associated with the design and launch of the Mustang. During the Mustang launch at the 1964 World’s Fair, Iacocca appeared on the cover of many magazines including Time and Newsweek. Most people have never heard of Ed Whitacre.

 

2. Lee Iacocca was a car guy. Ed Whitacre Jr. is a phone guy.

            If you want to fix a car company, why would you hire a phone guy? Only the government could think something crazy like that. Iacocca was a car guy all his life. He spent 32 years at Ford and wound up as President before being fired by Henry Ford II. When he arrived at Chrysler, Iacocca brought many good ideas, many good executives and a deep understanding of the industry. Ed Whitacre Jr. bought very little with him when he arrived at GM.

3. Iacocca’s plan was specific. Ed Whitacre Jr’s is not.

            What made the Iacocca ads so powerful was not just him saying “If you can find a better car, buy it.” It was the Iacocca talking about the new K-Car. The K-Car was the way for Americans to beat the pump. The K-car was the first 6-passenger, efficient, front-wheel-drive vehicle. And it sold like crazy. Soon after the K-Car, Iacocca followed with the Minivan. And as they say, the rest is history. The success of these two cars turned around the Chrysler Company.

            The Ed Whitacre Jr. ads with talk about nothing specific, because GM has nothing specific to talk about. Saying “May the Best Car Win” is laughable. If they really believed they had the best cars, why would they need the buyback guarantee?

            If there was a best-car bookie in Vegas, I’d bet it all on Toyota. GM is a suckers bet.

Why stop at HealthCare?

     Must-see television tonight will not be a sitcom, a comedy or a reality show, it will be Obama TV. With the Administration, the media and virtually the entire country preoccupied with the HealthCare bill slogging its way through Congress, President Obama will deliver his "new-and-improved" HealthCare pitch to the nation.

     But if Obama truly wants to be a revolutionary leader, he should not overlook other major issues plaguing our people. After he installs nationalized HealthCare, there are many other programs he might consider adding. Why should Obama stop with Government HealthCare?

     How about food? You can live without health care, but you can’t live without food. What is Congress doing about making sure that every American has three meals a day?

      Sure, we have the food-stamp program. But it’s complicated and doesn’t cover everybody. If you’re talking about “rights” instead of privileges, I would think “food” would be on top of the list.

 

     So I propose FoodCare, an essential government service to make sure that no American goes hungry. Naturally, we would want to keep the cost as low as possible and avoid the paperwork that is strangling the food-stamp program. So I propose a flat monthly food allowance for every American.

     Nothing fancy, of course. Checking the cost of hot dogs, hamburgers, macaroni & cheese and canned corn, I figure about $6.50 a day should do it. Rounding things off, that’s $200 the FoodCare Administration could send in the form of a check once a month to every American. It’s a right, not a privilege.

     Then there’s the weather which we can’t do anything about. But what we can do something about is to make sure every American has a roof over his or her head. What’s the use of a full stomach if you’re freezing to death or catching pneumonia in the rain?

 

     So I propose ShelterCare, a program to make sure every American has not only a place to live, but also a place to eat his or her macaroni & cheese in decent surroundings.

     What would that cost, you might be thinking. It’s true that house costs vary considerably from region to region and it’s also true that some ShelterCare recipients would have to move out of expensive places like New York and San Francisco, but that might be a good thing, too, in terms of reducing overcrowding.

     Here in Atlanta, a family of four can find an apartment (on the Spartan side, to be sure) for about $1,000 a month. So perhaps the ShelterCare Administration can send every person a $250 check once a month to handle things. Remember: It’s a right, not a privilege.

     Then there’s HealthCare itself. It’s comforting to think that the HealthCare Administration will be taking care of your medical needs, but what if you have no clothes? What would you wear when you went to see the doctor?

 

     To solve that problem, I propose ClothesCare, a program to make sure every American has enough clothes to wear. Especially when they go to see a doctor. The ClothesCare Administration could be set up to search for less-expensive alternatives to Nordstrom and Saks, much like the Food & Drug Administration strives to promote generic alternatives to name-brand prescription drugs.

     You’re not an animal. You can’t live your life naked. Clothes are a right, not a privilege.

      There’s also a need to think long term. What’s the one thing a country needs if that country is going to have a future?

     Right, children. Any slacking off in procreation is bound to have a deteriorating effect on the future of America. The new administration in Japan, for example, has promised to give families cash handouts of $270 per month per child.

 

     So I propose something similar, ChildCare. Since things are less expensive here than they are in Japan, I would cut the subsidy for a taxpayer-in-training to $200 a month. That will still buy plenty of peanut butter to keep a kid alive and happy.

     Then there’s information, the life blood of a democracy. Without an open government and the free flow information between the government and its citizens, democracy would be impossible.

     But there’s a problem. Newspapers are going bankrupt. Magazines are being shut down. Radio stations are fading out. Because of the Internet, radio and television outlets face an uncertain future.

     Information is still available, but today you need a computer and a broadband connection to stay on top of the news. And that’s a problem for some families.

 

     So I propose ComputerCare, a program to provide every family with a relatively inexpensive netbook (around $300) and a monthly stipend to handle the telecom charges.

     What would that cost? The first year ($300 plus $20 a month) would cost $540. The savings would start in the second year when the ComputerCare Administration would only have to issue $240 checks, plus cost-of-living adjustments, of course.

     This is getting complicated. Perhaps we should get people to watch over all of these new agencies and programs. I suggest we install another agency to manage all the other agencies. We can called it PeopleCare. Motto: "These are your rights, not your privileges."

Of course, we'll need to install an ObamaCare Czar to watch over PeopleCare to make sure it is properly “caring” for all the people in the United States of America.

The Pitfalls of Misdirected Packaging

Never overlook the power and importance of packaging. It is the last chance for a consumer to say yes or no to your brand. You may have done an excellent job with your brand name, PR, word-of-mouth and advertising, but if that last piece of the puzzle (the package) doesn’t fit into the consumer’s mind, you are out of luck. No sale.

 

Strong brands in leadership positions should also not overlook the power of packaging. Too often instead of reinforcing its core strength a leader tries to use its package to extend its brand.

 

Big mistake. This is type of misdirected message is confusing to consumers who after hearing about a brand, reading about a brand and growing accustomed to a brand are perplexed by the change of message.

 

When consumers get to the shelf, the package should simply, clearly and emphatically reinforce what the brand stands for in the mind. Not doing this is tantamount to brand treason.

 

Nothing exemplifies this better than Cheerios. And no case of packaging misdirection infuriates me more. The entire Cheerios package is completely contradictory to what the brand is all about.

 

What is Cheerios?

 

If you have kids, know people who have kids or were ever a kid yourself then it is clear, Cheerios are a kid’s first food.

 

Cheerios represent simple, wholesome goodness that parents feel proud to serve as their child’s first solid food. Babies happily gobble them up by the fistful. No parent would dare leave the house without a Ziploc bag filled with them.

 

Until they experience crap like Coco Puffs Kids usually love Cheerios. But once kids go Coco, it’s hard to get them back. Which is why parents usually cling to the goodness and innocence of Cheerios as long as they can.

 

I don’t have the numbers, but I would imagine that the majority of heavy Cheerios buyers have children under 8 years old.

 

Yet when you take a look at the package there is no indication that a kid has ever had one. The entire package is devoted to telling you how Cheerios can lower cholesterol.

 

Kids don’t even get tested for cholesterol. Parents want their kids to eat healthy with lots of whole grains but cholesterol isn’t the issue, sugar is. I know our kids are getting fat, come on. Nobody is thinking how to lower their kindergartners cholesterol.

Yet in huge letters on the box, right under the Cheerios name, the Cheerios brand message is:

“helps lower cholesterol”

What!?! Have you gone cuckoo over at Cheerios?

 

First-time parents have been told for generations to feed Cheerios to their babies, yet these moms get to the shelf, they find a box that says: “Helps lower cholesterol, 10% in one month.” Any exhausted mother would shake her head and say, huh. This sounds like grub for grandma not a baby. I’m not buying that!

 

If Cheerios are good for babies, they are good for adults. I get that. And I have been known to eat many handfuls of Cheerios out of my kids bowls and Ziploc bags over the years. But Cheerios is not an adult food, Cheerios is a kid food. Thinking otherwise is foolish. Saying so in big letters on the box is foolish. Ignoring your biggest and best fans is foolish.

 

Not to mention if you really wanted to lower cholesterol there are much better ways of doing it than by eating Cheerios. Cholesterol is not and will never be the main selling point of Cheerios.

 

The arrogance of leadership is that what you have is often overlooked for what you don’t have and mistakenly think you can get. We got the kids, let’s get the adults. We got the women, let’s get the men. We got the high-end, let’s get the low-end. We got the regular market, let’s get the diet market.

 

Never overlook your position in the mind. And always reinforce it right there in on the box. Consumers like husbands, aren’t stupid, but a big reminder on the box and a hit over the head doesn’t hurt.

Bud Light: What goes around finally comes around

At last month’s beer summit it was the brew of choice for the leader of the free world, Barack Obama. It is the best-selling beer in the United States and a close relative of the world’s best-selling beer.

Yet, the headlines this week have been decidedly negative.

“How Bud Light lost its sense of humor-and, subsequently, sales. Wary of 3% drop for its biggest brand, A-B dials down ‘drinkability’” reported Advertising Age.

“Anheuser refreshes Bud Light campaign. Taking on weaker sales, brewer seeks buzz by pouring more humor into new round of TV ads” said The Wall Street Journal.

First of all, was it really humor that built the Bud Light brand? No.

Second of all, have Bud Light sales really fallen? No.

Lastly, should Bud Light switch its strategy away from drinkability? No.

 

What is a Bud Light?

 Bud Light is just a watered down version of Budweiser. That is what the average consumer thinks.

That is why line extensions are always intrinsically cannibalistic. The best prospective customer of Bud Light is a Budweiser drinker who wants to avoid the calories and bloat of regular Budweiser.

By drinking Bud Light, Joe Six-Pack gets to keep his Budweiser & Clydesdales and just loses some calories. Same applies to Jane Six-Pack.

Since all major beer brands used line-extensions to move into the emerging light-beer category, the leader of the light category is obviously a line-extension.

And because no pure light-beer brands were launched, the consumer sees light beers as a flavor variation rather than a different brand. Much like what has happened in cola with Diet Coke and Diet Pepsi.

Being first is usually best, but not always. Even though Bud Light was one of the last line-extensions launched, it has become by far the most successful. Which is exactly the same as what happened with Diet Coke. The last of the diet-cola line extensions became the leader.

But is the success of Bud Light driven by its advertising? I say no. The success of Bud Light is a direct reflection of the power and leadership of Budweiser, the world’s best-selling beer brand.

The formula is easy. Take the best-selling brand, line extend it into a hot new emerging category with no competition except for other line extensions and voila! A winner is born.

Let’s be real. It was not Spuds Mackenzie that built Bud Light, it was Budweiser.

But success has come at a great cost to Budweiser. After the 1981 launch of Bud Light, initially both Budweiser and Bud Light grew in sales. But the party didn’t last. In 1988, seven years later, Budweiser hit its high-water mark of 50.6 million barrels in the U.S. Every year since, for the past 21 years in a row, Budweiser sales have declined.

People don’t change quickly; it took twenty years for light beer to fully catch on. In 2001, Bud Light overtook Budweiser and since then hasn’t looked back.

Every year since its launch, Bud Light has posted sales increases. And currently Bud Light is coming close to being twice as big as its namesake. In 2008, Budweiser sold 23.5 million barrels and Bud Light sold 44.6 million barrels.

 

 Bud Light is still King.

Bud Light has been on fire since its launch. The decline of Budweiser has been overshadowed by the raging success of Bud Light. In 2008, Bud Light sold 44.6 million barrels up from 42.7 million barrels in 2007, a gain of 4.4 percent.

What the recent articles citing Bud Light’s so-called decline fail to mention is the raging success of Bud Light’s own line-extension brand, Bud Light Lime.

Bud Light Lime has been growing rapidly. In 2008, it sold 3.3 million barrels. If you add the 3.3 million to the 44.6 million accounted for by Bud Light you get 47.9 million. So the two brands together would have grown 12.2 percent last year, an astounding rate.

Given that Bud Light Lime has been a blockbuster, it’s no wonder that Bud Light went down in 2009.

After all, who is the best prospective customer for Bud Light Lime? A Bud Light drinker that wants a twist of lime for a change.

That’s the classic pattern of a successful line extension. The line extension kills the base brand.

So perhaps we are seeing the same thing with Bud Light and Bud Light Lime.

What all this proves is that Bud Light (with all its variations counted) is still the King of Beers and far ahead of the other beer brands.

 But it also proves that line-extension is dangerous and hurts the base brand. What Bud Light did to Budweiser, Bud Light Lime is doing to Bud Light. What goes around finally comes around.

(And Select is doing nothing to nobody since nobody is drinking it. )

 

Dumping Drinkability is Dumb.

With “drinkability,” Bud Light finally found a word to own in the mind. “Drinkability” is not exciting or funny or creative but it is a powerful strategy.

Drinkability communicated the brand’s core benefit. It connects the Budweiser brand with the drinkability of a light beer.

Why do people choose Bud Light anyway? Because it is funny? No. Just ask Obama why he choose it. Obama picked Bud Light because it is a light beer and the leading brand.

Powerful strategies are usually not very exciting. Driving for BMW. Reliability for Toyota. Cowboys for Marlboro.

What makes a strategy powerful is a narrow focus over an extended period of time.

A-B InBev has claimed it’s not dropping drinkability altogether, they say they are just dialing down the word drinkability. CEO Dave Peacock says they “going back to that familiar Bud Light voice and that the work will reference drinkability, but it won’t be as drinkability heavy.”

Sounds pretty watered down and weak to me.

Why the shoes don't fit at Amazon.com

 

With its purchase of Zappos for $847 million, Amazon will get free shipping but is it the right acquisition for the e-commerce giant?

 

Zappos is a tremendous brand. With its unique and memorable name and its focus on footwear, Zappos has become the #1 seller of shoes on the Internet with sales of $840 million and a 40% one-year sales growth rate, as reported in 2007. Zappos is a classic success story.

 

Founded in 1999, the Las Vegas-based company got into the mind first. Zappos focused on footwear with a simple offer of free shipping and free return shipping on all orders. Much like Amazon did with a focus on books, a memorable name and a discount of 30% on all books.

 

There is a great advantage to being first in the mind. You gain credibility, generate PR and establish authenticity. Amazon did it books. Zappos did it in shoes. eBay did it in auctions. YouTube did it in video.

When you are first in the mind, any company that tries to copy your success faces an uphill battle. The second, third or fourth brand in a category has little news value, little credibility and is never seen as the real thing.

 

For years, Amazon has tried to break into the shoe business with its Endless.com brand with dismal results. A me-too brand launched by even the best company in the world has little chance for success. Just ask Coca-Cola about the failures of its me-too brands like Fruitopia, KMX, Mr. Pibb, and Surge, to name a few.

 

In general, acquisitions can be a great thing for a company that wants to intensity its focus and its domination of a category. Buying another company and then merging its business into your own business results in a stronger brand with greater market share. It’s what happened to Chemical Bank did when it bought Chase. They even changed the merged company’s name to Chase since it was the stronger of the two brands.

 

A company can also buy another brand to give it distinctive multiple brands in one category. Coca-Cola bought Glaceau to get its hands on Smartwater and Vitaminwater to go along with its Dasani brand.

Acquisitions or mergers, on the other hand, can be dangerous when they are used to expand a company into a different industry in which it doesn’t have experience or credibility. Some examples are AOL/TimeWarner and Citicorp/Travelers.

 

I believe the Zappos acquisition is the wrong move for the book giant. Amazon is the Earth’s biggest bookstore, a position it owns in the mind. But since its incredible success in books, Amazon has expanded into many other categories and tried to become Earth’s biggest-anything store. This strategy rarely works with consumers.

 

Consumers buy specific things like books, computers, shoes, drugs and toys. Consumers don’t sit down to buy anything.

Despite expanding to sell everything from auto parts to home furnishings to apparel to drugs and to groceries, Amazon still gets the majority its $19 billion in sales from books/music/movies.

Amazon has had great PR with its Kindle book reader and should continue to pioneer other concepts connected to its core position.

 

The Zappos purchase goes in exactly the opposite direction. Books/electronics are quite different from shoes/fashion. One brand that does both, or one company that tries to conquer both, is likely to have a tough time.

To think Amazon can buy Zappos and leave it alone so that it remains vibrant, cutting edge and whimsical is foolish. It will never happen. Amazon might keep the Zappos name, but they will fold it into the Amazon way and system thereby losing that special Zapponess. Did Toys R Us feel like Toys R Us under Amazon? I think not.

Amazon should keep both its feet books and electronics. Too many feet in too many shoes isn’t a good thing for any brand.

The Demise of Dell

The personal computer is one of the most important developments of the 20^th century. Its importance as a product, category and industry continue today.

 

Hindsight is always 20/20. But try to imagine going back in time.

 

Back in 1980 if I asked a multiple choice question about the emerging personal computer industry, what would your answer be?

 

What company is most likely to dominate the personal computer market?

     (a) IBM, the company that invented the mainframe computer?

     (b) Apple, the leading home computer?

     (c) Sony, the leading electronics brand?

     (d) Digital Equipment, the inventor of the minicomputer?

     (e) Dell, a company started by a sophomore at the University of Texas?

 

Most people would probably answer IBM. With the rest answering Apple, Sony or Digital Equipment. I doubt anyone would have said Dell.

 

It isn’t logical, rational or reasonable to believe that a nerdy student from the University of Texas could take on some of the biggest companies and brands in the world and win.

 

But of course he did. He took them all on and won. Michael Dell built Dell Computer into the world’s largest computer company leaving IBM, Apple, Sony and Digital Equipment in the dust.

 

Marketing isn’t logical and marketing doesn’t follow the rules of common sense. Which is why the best way to understand marketing and to predict the future is by studying the past.

 

How did Dell come out of nowhere to dominate the computer market? It wasn’t an accident that Dell succeeded. They succeeded because unlike IBM, Apple, Sony, Digital Equipment or any of the other computer makers, Dell was totally focused.

 

Dell focused on one product: the personal computer.

Dell focused on one distribution system: direct.

Dell focused on one market: business.

 

And as a result, Dell became the largest selling brand of personal computers in the world and had the best stock-market performance of the 500 companies in the Standard & Poor’s Index in the decade of the 1990’s.

 

But success can go to your head. And a great stock performance can lead to intense pressure. And that (perhaps unreasonable) pressure to keep up the growth leads to expansion which can undermine a company and a brand. This is exactly what happened at Dell.

In 1997, Dell announced it would begin taking aim at consumers.

 

 In 2003, it announced it would be diving into the consumer electronics marketing.

 

Also in 2003, it announced it would be selling computers in Sears and other large chains. In 2007, Dell announced it would be selling computers in Wal-Mart. In 2009 Dell announced it would start to sell smartphones.

 

All of this has diluted Dell’s focus and eroded the strength of Dell’s brand. No longer does Dell stand for “direct” in the mind. Dell is just another computer company. The expansion of the brand hasn’t helped it gain market share either, quite the opposite, Dell lost its PC leadership HP.

 

Today Hewlett-Packard is the world leader.

HP              19 %

Dell            15 %

Lenovo       7 %

Acer            7 %

Toshiba      4 %

 

In 2007, Michael Dell returned as CEO in an attempt to right the ship. And while his personality and presence has helped the company. Michael has not made the tough calls necessary to refocus the company and brand.

 

Why is Dell still relentlessly chasing consumers. Dell’s consumer division accounts for 20% percent of sales and it operates at a dismal profit margin of 2.4% (far lower than Dell’s other divisions.)

 

Why isn’t Dell making money on consumers? Because the brand doesn’t have power with consumers.

 

The low-cost, no-frills, personalized, direct model isn’t appealing to consumers. Consumers like cool, consumers don’t know enough to personalize their computers, consumers like to touch before they buy and consumers are turning to laptops which are harder to customize.

 

Consumers have distracted Dell. Dell spends so much time trying to make itself more appealing to consumers that they become less appealing to businesses. “Dude you’re getting a Dell!” was the kind of advertising that doesn’t win over company procurement departments.

 

The Wall Street Journal blames Dell’s demise on the “faltering” of its direct sales model. I think it is just the opposite. I blame Dell’s demise on its drifting away from its direct sales model. Dell should have stuck to its focus on selling direct to businesses.

 

The Dell brand will never work with consumers. Dell will never be cool. The more it tries, the worse the results. And when a brand isn’t cool, a company is forces to sell on price which is why Dell will never make any money selling to consumers.  

 

Expansion is what got that got IBM, Sony, Motorola and many other companies into trouble. You can’t put your name on everything and sell to everyone.

 

That’s not the way to build a leader brand. Nor is it the way to make decent profits.

 

In the business world today there are dozens of Dells, all trying to expand their way to success when the only thing that really works is exactly the opposite.

 

Narrow your focus. Build your brand. Rake in the dough.

 

Enough said?