Current Issues in Marketing Strategy

The much anticipated launch of TIVO in Australia has been a disaster, with sales a proverbial lone firecracker in comparison to the full-on pyrotechnics display they were budgeting for. The product has been plagued with problems from the start in product composition, distribution, & Pricing. This has led to growing speculation that seven media is going to drop the once revolutionary TIVO product. So what went wrong with their marketing plan?

Product composition
The main reason for purchasing TIVO is to cut out ads & record television to a hard drive...they fail to satisfy this need. The product only works on free to air television in Australia, can only record 32 hours of HD TV or 64 hours SD TV.

Distribution
A key success factor of the technology market is distribution. The purchase decision for some consumers is an impulse, for others it is a convenience and for the rest it is a luxury item. This means that by having a wide distribution (all the major distributors JB, Harvy Norman, Dick Smith), you can attract the early adopters (groups 1 & 2) with minimal effort. JB hifi refused to stock TIVO, leaving Harvey Norman to go it along. Major problems!

Pricing
First mover advantage is worth a lot in the technology market, usually price skimming tactics target early adopters and helps to fill the coffers quickly (pay off the advertising budget), yet without satisfying key success factors like distribution, price skimming restricts many from purchasing it and leaves you with no sales and in need of a clearance sale to move the stock.

TIVO came into the market prices at $699 retail. In comparison, "Nero who has been around longer than Tivo said that consumers who already have a tuner-equipped PC, can buy similar software for around $99. Buyers will also get a one-year subscription to TiVo's program guide updates. Renewal will cost $99 per year".(Smart House)

Josh Strawczynski's Opinion
Sensational flop! They really are trading off their name at this point, one that obviously does no have as much carry in Aus as in the USA. Don't forget that TIVO got big because it came with pay TV in the US, here you have to fork out your hard earned folding stuff to get it. The product will not be generating too many favorable reviews and I doubt many referals will come of it.

Sam Berringer's Opinion
I was really looking forward to TIVO being launched in Australia, but like many marketing strategies, this one has failed to deliver. I doubt that they are down and out, but if I were in that board room, I would be cutting prices and adopting a new positioning strategy ASAP!

I am continually amused with how many organizations use the internet poorly.  60 minutes news stories try to connect with their viewers through an online chat room, they ask one of their guest expert to stay online after the show and answer questions.  The strategy is sound, the implementation is extremely poor.

For those not interested, just read some supercoach advice

Condoms are a difficult thing to promote. Improving the product awareness, societal willingness to use them and actually making people listen is a task all in itself. The National Health Service (NHS) have launched a very successful viral campaign that simply and effectively promotes the use of prophylactics well. The humorous viral ad can be found here. Today we take a brief look at the marketing strategy behind their campaign.


Servant Of Chaos wrote probably the most insightful comment about viral marketing in 2008: How many times have you been in a meeting and you have heard "let's make a viral video"? You know what happens next -- a bunch of half-conceived ideas are thrown onto the table and a hasty decision is made in an effort to "get something out there". Obviously what he means is that viral is not just something you do to gain exposure, in the same way that you don't just stick up a poster on any street corner, you need to do it strategically.

The NHS has taken this strategic angle, targetting the younger generation with their love for travel and everything that goes along with that. The ad doesn't glorify condoms, in fact, long after you have given it our attention do they even hint about condoms and therein lies the effectiveness. Particularly gen Y is not interested in being told what to do, but they will absorb messages if they are cool. Almost like dealing with your boss, make them think it is their idea.

The strategy revolves around a few basic factors:

• Market segmentation (Younger generation)

• Advertising medium that will connect with them (Viral)

• Message communicated (imply connections, don't force it)

There is nothing revolutionary about what they have created, it simply goes back to the age old adage, Rome wasn't built in a day. More precisely, don't rush, understand your market and in today's market, don't always tell them what to think, sometimes subtle is better.

So the question remains, is it effective use of resources or should they have gone down the track of the TAC vicitims of drink driving / speeding advertisements?

Josh Strawczynski's Opinion
I really like the campaign, it wouldn't have taken a huge budget, it has worked virally (on account of everyone I know having seen it before I forwarded it) and the message is conveyed effectively. I really like the subtle message they have used, it connected the dots between travel and condoms and I tend to agree.

Sam Berringer's Opinon
I would like to see a range of support information situated around the place, maybe some statistical information about STD's, just to give the campaign a little punch!

Vodaphone have taken a bold leap into the music industry releasing a new offer that allows mobile customers to stream live music to their phone for only $2.75 per week. The product directly competes with iTunes and although a live stream and not a download, it works on the same principle. So what is their strategy? What is the key driver of this move?

A month after Sanity released its load-it service, Vodafone has entered the fray with MusicStation, a subscription music service for mobile phones which claims to offer more than a million tracks. (Hats of to Life Hacker for this). With 89% of youths between the age of 13 and 19 owning a mobile phone, it is no wonder the cellular providers are falling over themselves to get a piece of the action.

The strategy is simple, offering consumers a product alternative. Streaming lowers the consumer buying decision process, keeps up to date with trends and tastes and directly targets the 'golf fish' like attention spans of Gen Y. For a remarkably low $2.75, which music savvy youth wouldn't jump onto the proverbial band wagon?

Josh Strawczynski's Opinion
First mover advantage is going to be important in the cellular market. The issue is not getting people to adopt the new technology, the key is leveraging it to attract more customers to Vodaphone (locking them into contracts). Increased competition has led to even more cut throat retention tactics, the barriers to exit are high, so offering exceptional products and service value is essential.

Sam Berringer's Opinion
A bargain, defiantly a bargain. Even if I wasn't all that into music, I can see the value in this one. I love it as a product extension and who knows, if trends follow that of the USA, digital streaming could be a cash cow in the long run.

David Jones are forced to fight a tough battle when it comes to brand positioning. On the one hand, they need to be seen as an upmarket provider of Boss, Armani & other luxury brands, but on the other, they must remain accessible to the bulk of the population... and therein lies the rub. It is nearly impossible to have a brand that is both affordable and luxury, but that is the fine line that the department giant is treading in 2008.

The current 'Pay No More At David Jones' campaign is the latest in a string of position focused marketing drivers that address the way DJ's does business. No doubt wary not to become the next Myer (can't sell anything unless they are having a sale), DJ's needs to appeal to the masses, but offer them a differentiation point from providers of the next rung down (this includes Target if you are looking at that group of consumers).

Affordable Luxury: It is a contradiction, isn't it! I would argue that it can not be done. Although, I have heard my colleges argue that Mercedes and BMW are affordable luxury, still I rebuke their claims and DJ's is no different. What I believe DJ's is really positioning themselves as: affordable experts.

Take suits for example. I went with Dan Hunter (Monash University post-graduate marketing tutor) to purchase a suit from DJ's today. Dan tried on a number of suits from a number of price points and what he found was that DJ's were the experts in suit fitting within every price point. They were no trying to up-sell him, rather find him the correct solution that fitted his needs. As we discussed latter that day, it was this very positioning that lead him to shop there. He knew what he wanted and could have gone to the boss store, but DJ's offered a range (including his desired suit) and hence opened his options for no additional spend.

Josh Strawczynski's Opinion
I have to admit that I was impressed with their setup. The store is broken into segments that are catered for by specific sales staff therein insuring that customers are segmented and served appropriate to their price point. They offered a huge range of alternatives and catered for the rich guy with armani all over him, as well as the 15 year old pimply nerd with in spare change in his pocket. It does fit the positioning strategy well.

Sam Berringer's Opinion
I love that no matter what department I go into, they know what they are talking about. That sort of expertise makes the experience, although I have to say, I still feel like I am paying more for it.'

PPC advertising is becoming increasingly important as part of your marketing mix. Statistics revealed at a recent Yahoo conference suggested that companies that were listed on the first page of search in both organic and PPC links had 50% more consumer awareness associated to their brand. So what is it and why pay for people to visit your website?

Pay Per Click (PPC) Advertising is a relatively new phenomenon in the marketing world. It is internet advertising that allows all business to compete head on with the biggest competitors in the market. Looking at the picture below, the PPC advertisements are the ones highlighted in blue and listed under sponsored links on the right. These are paid ads, positioned on a bidding system, whoever pays the most gets top spot and so on.


Why pay for someone to visit my site?
One of my clients asked me why she should pay for people to visit her site. The whole reason she set it up was to benefit from free advertising she said. This is a typical response from modern day business, it is slow adoption of new technology and resistance to change that restricts their willingness to understand PPC advertising.

PPC ads allow you to directly target people in the buyer decision phase and direct them to your website, even land them on the page of your site that is most relevant to their need. For example, if you sold flowers, you might bid on the key word (term user types into google) "flowers in toorak". When a user types this into a search engine, your ad shows up with information about what they are searching for:


Josh Strawczynski's Opinion:
The value of PPC ads are undeniable, users are taken to the information that they are actually seeking and hence more likely to use your site to make their purchase. A great example came up the other day when I was looking for a cheap flight to Bangkok. Instead of going through the painfully slow webjet or working my way across several different airlines, I search 'melb to Bangkok cheap', the first PPC ad to come up said "Melb to Bangkok from $600", the perfect solution to my need...I was very satisfies.

Sam Berringer's Opinion
Where PPC falls down is that many business's do not set their web site up well enough to make a sale. The first thing that gets blamed is always the advertising. If only marketing execs put as much capital towards creating a website as they do a new product, the online world of marketing would be a lot bigger.

Nescafe are implementing a cunning positioning strategy to enter the growing green tea market. Tapping into consumer health consciousness, Nescafe will be positioning their product as having 70% more anti-oxidants than regular green tea, despite actually being a coffee. So lets look at the value of positioning strategy v.s product composition.


Do people drink green tea because of the flavour or the health benefits?
If you surveyed all green tea drinkers, you would find that there are a mixture of reasons for drinking green tea but a large percentage of them do it for the perceived health benefits. Today more than ever these health benefits 'pull' consumers into buying their product. I use the word 'perceived' because weather the product is good for you or not is beside the point.

Last year Nestle released a line extention of Milo infused with viatmin B, they called it 'Milo B Smart', needless to say the positioning behind it lead to it being a prefered option to the many substitute products that mothers could be buying their children. Keep in mind, the gatekeeper (usually mum) is the one that makes the purchases...would you buy your kid Nestle Pure Hot Chocolate or Milo B Smart? Health benefits will win overall.

The product composition
The new Nestle product benefits from brand awareness, leveraging the Nestle brand as the worlds best know coffee. The brand comes with a halo effect, passing on positive brand attributes to the new product lines. The question is, what is stronger consumer need for anti-oxidents or do they really want traditional green tea?

Josh Strawczynski's Opinion
Positioning is the key differentiator of modern marketing. Today more than ever consumers are seeking easy health options at the supermarket, many are willing to pay the extra for the perceived benefits. Nestle's positioning strategy will gain them market share, there is no doubt in my mind and I'm sure that most of their customers will be none the wiser that they are drinking an alternative product.

Sam Berringer's Opinion
Anti-oxidents are such a boom right now, you could release anti-oxident infused beef jerky and probably find a market. I like that they have not stretched too far from the existing market, this product will find addittional growth pockets...I like it.

Toblerone has implemented an aggressive Fathers Day product strategy and it has paid dividends. As a throw back to the days of old, the company released it's shamelessly positioned "The Best Dad" packaging on special near the front of every major supermarket and chocolate provider. Surprisingly enough, none of their competitors really went with them and to the aggressors, the sweet spoils of chocolate market share was won. So lets look at the marketing strategy.

Toblerone has been experiencing huge success all year through its product based growth strategy. A Fruit and Nut variant, has added 27% incremental sales since its launch last year, reads ‘Just For Dad’. It begs the question, is growth as simple as creating new products? Look at McDonalds or Gillette Razors, they are constantly coming out with new variations on what is essentially the same product. Surely this is the answer?

I'd love to say yes. I would be a wealthy man if that were the case, but the truth behind Toblerone's success comes down to market segmentation alone. Ask yourself, who eats more chocolate women or men? Now ask yourself who is the gatekeep (actual purcahser). Regardless of your answer to number 1, the latter is women (overall), this is due to many factors, the most obvious is that there are just more female supermarket shoppers. So the purchase intent comes down to rational:

Around fathers day, shameless product composition like "The Best Dad" promotion is obviously a directly targeted ploy to attract your dollar. However, how about the other 50 odd weeks of the year? The very nature of it being targetted at men means that not only is is purchased for special occassions, but the gatekeeper can buy guilt free chocolate under the guise of a present for her loved one. Brilliant!

Josh Strawczynski's Opinion:
I will be honest, I bought one for my dad and priced at $7 I felt like I had got a bargain. I love the concept and hope that there is more demand created product composition to come.

Sam Berringer's Opinion:
I am very surprised there was not more competition, next time mothers day rolls around have a look at how much discounting goes on. I once had it explained to me that even reducing the profit margins by 50%, the companies made more in one special week (eg mothers day) than the whole previous month. Here's the hot tip, design a product right and you don't even need to discount....brilliant.