Brand obsolescence was a bogeyman word to describe the alleged strategy adopted by manufacturers of consumer durables who built a failure feature into the design of their product. That way, products with new features would be bought earlier than needed, keeping the factories busy and the retailer’s tills ringing.
In reality manufacturers were not that clever or consumers that stupid. David Ogilvy over forty years ago said it best:”The consumer is not a moron. She is your wife.”
Now competition and market saturation has spawned a new type of innovation that is destroying markets and brands. Take the digital camera business for instance.
The market is large, worth about £800 million and still growing. The problems however are quite serious. The technology allows new companies not previously in the field of cameras to enter. Companies like Hewlett Packard, Sony, Fuji and Kodak are all major players. These new players have been very innovative, but as far as the customer is concerned, no manufacturer appears to have a competitive edge in terms of technological features, pixel capacity, ease of use or price.
And as pixel capacity, anti shake and red eye features are introduced, prices are falling. In 2003, the average digital camera offered 2 million pixels and cost £160. Now 4 million pixels with newer features will cost £120.
So, why would you buy a camera which will be outdated very quickly and when the newer models with greater capacity and more features will be cheaper tomorrow?
Any why then will the manufacturer invest in large runs of specific models when a high number of unsold cameras will fill up depot space? Small runs generate low promotional budgets, further exacerbating the long term health of the brand.
Part of the pressure on prices is also accounted for by the increase in distribution points. Sales in specialist shops like Jessops have declined, while Boots, Tesco and Asda now are significant in terms of sales. These generalist retailers are not interested in offering a range of products or indeed of brands. The internet however can provide both.
Grey importers now offer products at prices cheaper than the official ones given to the managers of the very brands in the UK.
Convergence of technologies mean that quality digital cameras can also offer ipod music, downloaded TV and video, and mobile phone services too.
More likely it will be the other way around with mobile phones taking the lead. Will Ericsson and Nokia become the new leaders in the converged market?
Analysts have warned that falling prices have affected the profitability of all brands. This year will be a test of resolve. For some famous brands it’s already too late as Minolta’s exit from the digital market indicates.
Monday, 23 April 2007
Friday, 13 April 2007
Brand Equity: Is it not worth thinking about?
Brands are not what they used to be. Once a brand was a symbol of reassurance. If a manufacturer put his brand on a product it indicated his confidence in the item to deliver if not quality at least consistency. The product delivered what it said on the package..
This appears not to be so as far as Ribena is concerned. Two Kiwi school girls discovered in their chemistry lab that Ribena, despite claims in its advertising contained virtually no Vitamin C. They took their findings to the company and were allegedly given short shrift. The New Zealand government took them more seriously and when their own tests revealed a similar lack of the vital vitamin, banned the said advertisement and imposed a hefty fine on top. The story was then reported on television stations and newspapers worldwide. You would have thought that adding some Vitamin C would have been inexpensive. I don’t know if Ribena in the rest of the world has the requisite amount of the vitamin but it should. That would be at least honest. Now much of the advertising investment of £5.7million in the UK in 2006 appears to be wasted and we‘ve played into the hands of those who think that advertisers and their agency advisers are all a bunch of charlatans. And grocery multiples, who take their own image seriously may refuse to stock the brand too.
Sadly its not only grocery brands that mismanage their brands franchise.
The Sunday Times reported the case of Charlotte Maltese. a young woman murdered in 2005.She had an insurance policy with the Norwich Union. who refused to pay out because she failed to disclose in her application form that she had had a smear test. Prior to this excuse they had claimed the beneficiary should be her boyfriend, but dropped this pathetic excuse when it was pointed out that as her murderer, he could not benefit from a criminal act. Incidentally, the smear test showed some abnormal cells, but nothing wrong with her health. Close friend Agostina Murgia said: ”Norwich Union seems to be trying every cynical trick to avoid paying up “
Last night on BBC1s Watchdog programme, its millions of viewers were warned that critical illness policies were the worst in paying up. Insurers apparently trawl through medical records, not just of the insured person but also of other family members. Over 1 in 5 claims are rejected. The programme warned that people who think they are covered against the onset of a dread disease should check their policies carefully
Imagine on top of the bad news about your health you are told that the money you were counting on to pay the mortgage and keep the family while you were treated will not be forthcoming.
Now no intelligent Marketing Director responsible for marketing and advertising budgets of several million pounds will deliberately let his brand equity be damaged by such callous behaviour. It follows therefore that company policy may be dictated to a greater degree by the financial people.
Some of them don’t appreciate the fragile nature of brands.
This appears not to be so as far as Ribena is concerned. Two Kiwi school girls discovered in their chemistry lab that Ribena, despite claims in its advertising contained virtually no Vitamin C. They took their findings to the company and were allegedly given short shrift. The New Zealand government took them more seriously and when their own tests revealed a similar lack of the vital vitamin, banned the said advertisement and imposed a hefty fine on top. The story was then reported on television stations and newspapers worldwide. You would have thought that adding some Vitamin C would have been inexpensive. I don’t know if Ribena in the rest of the world has the requisite amount of the vitamin but it should. That would be at least honest. Now much of the advertising investment of £5.7million in the UK in 2006 appears to be wasted and we‘ve played into the hands of those who think that advertisers and their agency advisers are all a bunch of charlatans. And grocery multiples, who take their own image seriously may refuse to stock the brand too.
Sadly its not only grocery brands that mismanage their brands franchise.
The Sunday Times reported the case of Charlotte Maltese. a young woman murdered in 2005.She had an insurance policy with the Norwich Union. who refused to pay out because she failed to disclose in her application form that she had had a smear test. Prior to this excuse they had claimed the beneficiary should be her boyfriend, but dropped this pathetic excuse when it was pointed out that as her murderer, he could not benefit from a criminal act. Incidentally, the smear test showed some abnormal cells, but nothing wrong with her health. Close friend Agostina Murgia said: ”Norwich Union seems to be trying every cynical trick to avoid paying up “
Last night on BBC1s Watchdog programme, its millions of viewers were warned that critical illness policies were the worst in paying up. Insurers apparently trawl through medical records, not just of the insured person but also of other family members. Over 1 in 5 claims are rejected. The programme warned that people who think they are covered against the onset of a dread disease should check their policies carefully
Imagine on top of the bad news about your health you are told that the money you were counting on to pay the mortgage and keep the family while you were treated will not be forthcoming.
Now no intelligent Marketing Director responsible for marketing and advertising budgets of several million pounds will deliberately let his brand equity be damaged by such callous behaviour. It follows therefore that company policy may be dictated to a greater degree by the financial people.
Some of them don’t appreciate the fragile nature of brands.
Friday, 9 March 2007
The Television Wars
Television is once again hot stuff. Two media barons are fighting a very public war for dominance of the airwaves.
Richard Branson, the people’s champion, is contesting big, bad Rupert Murdoch’s right to a swingeing increase in costs for Virgin Media, a cable operator, to carry Sky TV programmes. Sky apparently want a 75% increase and Virgin are allegedly prepared to pay 30% more. The result, an impasse, and Virgin now do not offer popular programmes like 'The Simpsons'.
Sky will lose up to £60 million a year income which it stood to earn from Virgin who now have a diminished portfolio of channels and programmes to offer its customer base. Both have taken their case to the public via press and television advertising.
Virgin, playing little David, complains of bullying, and Goliath in the form of young James Murdoch offers Virgin customers an opportunity to switch.
In reality the battle is much more than a negotiation hurdle. It is about control of the biggest commercial broadcaster in the country. ITV is the real prize. Branson wanted a stake in ITV but a surprise move by Sky resulted in them owning 17.9% of ITV. Mr Murdoch is now the biggest media owner in Britain with significant interests in newspapers in the form of the Times/Sunday Times and at the Sun/News of the World. His ownership of Fox in the States provides programme material and he also has rights to broadcast a number of key sporting events in the UK. So could it be a battle fought at Mr Murdoch’s convenience?
In the past his opponents have been complacent and underestimated the skill and energy this Australian outsider brought to the battlefield. Richard Branson will not make this mistake. His longer term objective now must be to acquire Channel 5 and invest in programme production and in the acquisition of broadcasting rights for sporting programmes, all of which will be very expensive.
The interesting thing is the money that funds Sky and Virgin Media as apart from the terrestrial broadcasters like ITV comes from different sources. Sky and Virgin get 90% of their income from customer subscription whilst ITV get almost all their income from advertisers. The advent of Freeview, set top boxes, satellite transmissions and cable delivery mean that viewers have more choice than ever before. The result is smaller audiences per channel. ITV has suffered particularly.
Despite what they think, ITV is not a strong brand. Popular programmes are the strong brands and these are increasingly being showcased on a variety of channels. If ITV is to regain some of its lost ground, it has to go back to its strong programming heritage. Michael Grade knows this. He may carp about the government’s lack of support and be rightly apprehensive of Mr Murdoch’s ambitions, but he knows that the glory days of monopoly and captive audiences have gone forever. Survival will depend on a strong franchise of popular programmes created by his own team of producers.
Like the Chinese curse: these are interesting times for the companies involved. However, when the dust has settled and digital television sets are in every home, will the prize be worth the effort?
Richard Branson, the people’s champion, is contesting big, bad Rupert Murdoch’s right to a swingeing increase in costs for Virgin Media, a cable operator, to carry Sky TV programmes. Sky apparently want a 75% increase and Virgin are allegedly prepared to pay 30% more. The result, an impasse, and Virgin now do not offer popular programmes like 'The Simpsons'.
Sky will lose up to £60 million a year income which it stood to earn from Virgin who now have a diminished portfolio of channels and programmes to offer its customer base. Both have taken their case to the public via press and television advertising.
Virgin, playing little David, complains of bullying, and Goliath in the form of young James Murdoch offers Virgin customers an opportunity to switch.
In reality the battle is much more than a negotiation hurdle. It is about control of the biggest commercial broadcaster in the country. ITV is the real prize. Branson wanted a stake in ITV but a surprise move by Sky resulted in them owning 17.9% of ITV. Mr Murdoch is now the biggest media owner in Britain with significant interests in newspapers in the form of the Times/Sunday Times and at the Sun/News of the World. His ownership of Fox in the States provides programme material and he also has rights to broadcast a number of key sporting events in the UK. So could it be a battle fought at Mr Murdoch’s convenience?
In the past his opponents have been complacent and underestimated the skill and energy this Australian outsider brought to the battlefield. Richard Branson will not make this mistake. His longer term objective now must be to acquire Channel 5 and invest in programme production and in the acquisition of broadcasting rights for sporting programmes, all of which will be very expensive.
The interesting thing is the money that funds Sky and Virgin Media as apart from the terrestrial broadcasters like ITV comes from different sources. Sky and Virgin get 90% of their income from customer subscription whilst ITV get almost all their income from advertisers. The advent of Freeview, set top boxes, satellite transmissions and cable delivery mean that viewers have more choice than ever before. The result is smaller audiences per channel. ITV has suffered particularly.
Despite what they think, ITV is not a strong brand. Popular programmes are the strong brands and these are increasingly being showcased on a variety of channels. If ITV is to regain some of its lost ground, it has to go back to its strong programming heritage. Michael Grade knows this. He may carp about the government’s lack of support and be rightly apprehensive of Mr Murdoch’s ambitions, but he knows that the glory days of monopoly and captive audiences have gone forever. Survival will depend on a strong franchise of popular programmes created by his own team of producers.
Like the Chinese curse: these are interesting times for the companies involved. However, when the dust has settled and digital television sets are in every home, will the prize be worth the effort?
Wednesday, 14 February 2007
The big hello and its effect on tourist numbers
Visitors to the United States of America have declined quite dramatically.
Even people in countries which ally themselves to the USA are finding other destinations more attractive. British visitors were 10% fewer compared to 2005,a surprising fact when one takes into account the value generated by an attractive rate of exchange.
One explanation is the problems of the new entry conditions and many of these could have been handled better. Another may be the real and growing unpopularity of the President.
Perhaps the overwhelming concern is the perceived unfriendliness of the American people.
On Sunday February 11th, a primetime BBC show “Top Gear” featured a journey by the show’s three idiosyncratic presenters, by road, from Miami to New Orleans. They behaved in the provocative way they always do, and were met by a great deal of aggression. Jeremy Clarkson ended the show by pointing out that the richest nation in the world had done very little to repair the damage done to New Orleans one year after Hurricane Katrina. To the Americans he said, " Shame on you", and advised British viewers not to go to the USA.
Over 4 million visits were made to the States in 2006 by the British and. this kind of publicity will make the task of the people responsible for tourism much harder.
Is it possible to brand a country?
Some countries have attempted to, and it is a very complex task. A country’s image is composed of its geography, history, economy, culture and position. Its brand identity involves foreign and domestic policy, business, trading patterns, religion, heritage as well as tourism.
It may not be possible to brand the USA in all its complexity, but it needs to address the problem posed by falling tourist numbers. My own experience in Boston suggests that most Americans are courteous and friendly. The perception of a lot of British people is, however, very different.
This perception needs to be addressed urgently.
Even people in countries which ally themselves to the USA are finding other destinations more attractive. British visitors were 10% fewer compared to 2005,a surprising fact when one takes into account the value generated by an attractive rate of exchange.
One explanation is the problems of the new entry conditions and many of these could have been handled better. Another may be the real and growing unpopularity of the President.
Perhaps the overwhelming concern is the perceived unfriendliness of the American people.
On Sunday February 11th, a primetime BBC show “Top Gear” featured a journey by the show’s three idiosyncratic presenters, by road, from Miami to New Orleans. They behaved in the provocative way they always do, and were met by a great deal of aggression. Jeremy Clarkson ended the show by pointing out that the richest nation in the world had done very little to repair the damage done to New Orleans one year after Hurricane Katrina. To the Americans he said, " Shame on you", and advised British viewers not to go to the USA.
Over 4 million visits were made to the States in 2006 by the British and. this kind of publicity will make the task of the people responsible for tourism much harder.
Is it possible to brand a country?
Some countries have attempted to, and it is a very complex task. A country’s image is composed of its geography, history, economy, culture and position. Its brand identity involves foreign and domestic policy, business, trading patterns, religion, heritage as well as tourism.
It may not be possible to brand the USA in all its complexity, but it needs to address the problem posed by falling tourist numbers. My own experience in Boston suggests that most Americans are courteous and friendly. The perception of a lot of British people is, however, very different.
This perception needs to be addressed urgently.
Thursday, 8 February 2007
Stupid cupidity and the exploiters
The credit card business thrives on the cupidity and stupidity of some of their customers who spend more than they can afford and delude themselves into believing that the minimum repayment makes the debt manageable.
What the borrower fails to appreciate is that not only is the level of interest much higher than a normal bank loan, but the fine print hides a far greater cost penalty.
Assume you owe £7821.00 and repay £6753.00 on the appointed day. At 1.385% a month interest, you would expect to pay £14.79 in interest based on the unpaid sum of £1068.00.
In fact you would be asked to pay £166.92. That represents an interest rate of 15.62% per month or close to 200% per annum.
Why?
Because you are charged for the entire outstanding debt - in this case the whole £7821.00, despite the bulk of it being repaid on the due date, and because the interest is charged from the moments the purchases were made. In this example three weeks before the credit card bill arrived.
The financial behemoths eagerness to lend money to people in existing financial difficulties is well documented. They thrive on Micawber type misery.
Banks also operate in the “sub prime” loans market. The HSBC, one of the top three banks in the world sensed an opportunity in lending money for house purchases, to people who wouldn’t otherwise qualify. In the United States, this has already backfired with fraud and defaults rising to record levels. Over here, the number of sub prime lenders tout their wares on television with offers to “consolidate” debts, or by remortaging their homes, allow borrowers to spend their own money on whatever they choose. The cost? More than their existing mortgage provider would charge.
And new predators are advertising their helpful services. They offer people with unmanageable debt a way out by exploiting a voluntary scheme whereby only a proportion of the sums owed needs to be repaid. Inevitably this service comes at a cost.
There really isn’t such a thing as a free lunch.
What the borrower fails to appreciate is that not only is the level of interest much higher than a normal bank loan, but the fine print hides a far greater cost penalty.
Assume you owe £7821.00 and repay £6753.00 on the appointed day. At 1.385% a month interest, you would expect to pay £14.79 in interest based on the unpaid sum of £1068.00.
In fact you would be asked to pay £166.92. That represents an interest rate of 15.62% per month or close to 200% per annum.
Why?
Because you are charged for the entire outstanding debt - in this case the whole £7821.00, despite the bulk of it being repaid on the due date, and because the interest is charged from the moments the purchases were made. In this example three weeks before the credit card bill arrived.
The financial behemoths eagerness to lend money to people in existing financial difficulties is well documented. They thrive on Micawber type misery.
Banks also operate in the “sub prime” loans market. The HSBC, one of the top three banks in the world sensed an opportunity in lending money for house purchases, to people who wouldn’t otherwise qualify. In the United States, this has already backfired with fraud and defaults rising to record levels. Over here, the number of sub prime lenders tout their wares on television with offers to “consolidate” debts, or by remortaging their homes, allow borrowers to spend their own money on whatever they choose. The cost? More than their existing mortgage provider would charge.
And new predators are advertising their helpful services. They offer people with unmanageable debt a way out by exploiting a voluntary scheme whereby only a proportion of the sums owed needs to be repaid. Inevitably this service comes at a cost.
There really isn’t such a thing as a free lunch.
Tuesday, 6 February 2007
Can the last person to leave, please switch off the lights?
You have to admire someone like Gordon Sato. A successful scientist in the United States of America, he now helps the government of Eritrea to grow mangroves.
In six years, 700,000 mangroves now grow on what was once a barren and treeless coast of Hergigo. Camels are fed the leaves, fish flourish in the sheltered shallows and a new eco-system is being created. Mr Sato is 79.
Indonesia has also embraced the benefits of mangroves. Their protection against the power of tsunamis is well documented. Over a thousand acres in Bali have been replanted with, on average, 1300 saplings per acre. And if you visit Mauritius, look out for the new mangroves growing in the south.
Countries currently benefiting from the tourism induistry need to do more to secure their future because many of them could be adversely affected by rising seawater levels. Planting forests including mangroves is one option. Reducing their own consumption of imported fuel is another.
Travel to New Delhi and you will be pleasantly surprised by the reduction in smog levels. They know that air pollution contributes to incidence of heart disease.
All tourist destinations must be seen to be doing something to counteract the effects of airline travel. Richard Branson's team is working to develop butanol as an alternative aircraft fuel, but that will take years to be adopted by airlines.
Even President Bush, perhaps for other legitimate reasons, has plans to reduce his country's dependence on fossil fuels. Ethanol type alternatives will produce less harmful emissions.
Scientists are examining ways of extracting energy from sand and making our most abundant fossil fuel - coal - more eco-friendly. And solar power is already making a difference in India.
One hundred years ago, the problem of a burgeoning population of horse drawn carriages caused concern in London. The petrol engine eradicated that problem, but left another, bigger, mess that cannot be fed to rose bushes. Human ingenuity should not be underestimated, and especially now there are financial incentives.
If we do not believe that something can be done to make this small planet survive a bit longer, then like the dolphins in Douglas Adams' "The Hitchhiker's Guide to the Galaxy", we should all fly off saying, "Thanks for the fish".
But we cannot fly off or be so selfish as to ignore a future of hazards for our grandchildren.
In six years, 700,000 mangroves now grow on what was once a barren and treeless coast of Hergigo. Camels are fed the leaves, fish flourish in the sheltered shallows and a new eco-system is being created. Mr Sato is 79.
Indonesia has also embraced the benefits of mangroves. Their protection against the power of tsunamis is well documented. Over a thousand acres in Bali have been replanted with, on average, 1300 saplings per acre. And if you visit Mauritius, look out for the new mangroves growing in the south.
Countries currently benefiting from the tourism induistry need to do more to secure their future because many of them could be adversely affected by rising seawater levels. Planting forests including mangroves is one option. Reducing their own consumption of imported fuel is another.
Travel to New Delhi and you will be pleasantly surprised by the reduction in smog levels. They know that air pollution contributes to incidence of heart disease.
All tourist destinations must be seen to be doing something to counteract the effects of airline travel. Richard Branson's team is working to develop butanol as an alternative aircraft fuel, but that will take years to be adopted by airlines.
Even President Bush, perhaps for other legitimate reasons, has plans to reduce his country's dependence on fossil fuels. Ethanol type alternatives will produce less harmful emissions.
Scientists are examining ways of extracting energy from sand and making our most abundant fossil fuel - coal - more eco-friendly. And solar power is already making a difference in India.
One hundred years ago, the problem of a burgeoning population of horse drawn carriages caused concern in London. The petrol engine eradicated that problem, but left another, bigger, mess that cannot be fed to rose bushes. Human ingenuity should not be underestimated, and especially now there are financial incentives.
If we do not believe that something can be done to make this small planet survive a bit longer, then like the dolphins in Douglas Adams' "The Hitchhiker's Guide to the Galaxy", we should all fly off saying, "Thanks for the fish".
But we cannot fly off or be so selfish as to ignore a future of hazards for our grandchildren.
Friday, 2 February 2007
The dangers of sponsoring reality television
Television reality shows are today’s equivalent of ancient Rome’s circuses. Instead of Christians being fed to hungry lions, naive and ill-prepared wannabees are exposed in all their frailty by so called expert judges. Many of them have monstrous egos.
Sometimes the contestants themselves are allowed to blunder into exposing their ignorance and lack of judgement, All this in the name of entertainment.
Why any right thinking person should want to see these embarrassing displays is something best left to psychologists. Much more interesting is why Advertisers would want to sponsor such shows. It cannot be for the quality of the audience. Lowest common denominator shows attract lowest common denominator viewers. So association by brand values isn’t the reason either.
Perhaps it’s the exaggerated reporting of the death of the 30 second commercial or persuasive selling by the sponsorship team that makes advertisers clamour to get on board. The dangers of supporting such high risk “entertainment” is now very clear and Charles Dunstone must be glad there was a get out clause in his contract with Channel 4.
Brands are such fragile things.
AXA Equity and Law do their sponsorship promotions very well. They support the nostalgic strand of programming on ITV 3,with specially written lines in programmes such as Rumpole of the Bailey: “I want to make sure my affairs are in order, order.” So successful is this campaign that it has been adopted by their sister company in India.
The lesson?
Make sure your brand really benefits with the programme by association, write clever strap lines, don’t rely exclusively on sponsorship and have a damage limitation campaign in place.
Sometimes the contestants themselves are allowed to blunder into exposing their ignorance and lack of judgement, All this in the name of entertainment.
Why any right thinking person should want to see these embarrassing displays is something best left to psychologists. Much more interesting is why Advertisers would want to sponsor such shows. It cannot be for the quality of the audience. Lowest common denominator shows attract lowest common denominator viewers. So association by brand values isn’t the reason either.
Perhaps it’s the exaggerated reporting of the death of the 30 second commercial or persuasive selling by the sponsorship team that makes advertisers clamour to get on board. The dangers of supporting such high risk “entertainment” is now very clear and Charles Dunstone must be glad there was a get out clause in his contract with Channel 4.
Brands are such fragile things.
AXA Equity and Law do their sponsorship promotions very well. They support the nostalgic strand of programming on ITV 3,with specially written lines in programmes such as Rumpole of the Bailey: “I want to make sure my affairs are in order, order.” So successful is this campaign that it has been adopted by their sister company in India.
The lesson?
Make sure your brand really benefits with the programme by association, write clever strap lines, don’t rely exclusively on sponsorship and have a damage limitation campaign in place.
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