Thursday, April 28, 2016

J.Crew Admits It Made Two Critical Mistakes

J.Crew sent an e-mail to its customers this week acknowledging and apologizing (well not really apologizing) for the two big mistakes it has made over the past few seasons:

  1. Drifting the fashion style too far away from the brand core
  2. Raising price above what the brand value proposition can support.


The email was sent as an informal memo from CEO Mickey Drexler and carries a very casual tone.  Take a read...


The refreshingly simple and conversational style of the e-mail definitely caught my attention.  I believe the messaging does the trick in terms of getting lapsed consumers to at least give J.Crew another look and may even help put J.Crew back in their consideration set the next time they are browsing for new clothes.  Based on a quick trip to J.Crew's website, the styles do feel more aligned with the brand equity than the past few seasons.  That said, the ticket price still feels more premium in many categories than I'd expect many customers to pay full price for.  Sure J.Crew may have invested in the quality, but observing that requires consumers to take a trip to the store and feel the product for themselves.  Given how reliant J.Crew has been on promotions over the past few season, one has to also wonder if they have trained their consumers wait for sales and not pay full price.

Tuesday, April 26, 2016

The Paper and Packaging Board Creates A TV Advertisement, And It's Great!

The Paper and Packaging Board is an association I never expected to see an advertisement from, let alone get me to stop and notice it.  However, that's exactly what its "Letters to dad" advertisement recently did around the campaign theme of "how life unfold".  The advertisement was created back in 2015, although I only saw it for the first time this past weekend.  Take a look...



There is no doubt that the advertisement grabs your attention and pulls at your heart string, in this way its a great commercial. One could argue that despite the advertisement being memorable, it fails to drive strong brand recall.  But in this case the Paper and Packaging Board isn't trying to make a branding play or even convince anybody to make a specific purchase, but rather remind consumers that there is still an important role for personalize, physical communication in an increasingly digital world.

Thursday, April 21, 2016

Coca-Cola "One Brand" Approach Likely To Fail

Facing declining soda category trends in the United States and flat category growth globally, Coca-Cola is launching a new go-to-market strategy aimed at securing its market share and growth prospects.

The heart of this new strategy is unifying Coke, Diet Coke, Coke Zero, and Coca-Cola Life under a "one brand" marketing brand campaign and packaging architecture design. Historically, the company has treated the variants more as individual brands. The new design will be rolled out in Mexico first this May, with other markets adopting the new packaging throughout 2016 and 2017, with the US likely at the tail end of the transformation.

The marketing campaign will be based on the "Taste the Feeling" concept and supported by 10 TV ads, digital, print, out-of-home, and point of sale materials. The objective of this effort is to have all variants of Coca-Cola will be unified under this message and speak together as one voice instead of separate marketing for Coke, Diet Coke, Coke Zero, and Coca-Cola Life.

The packaging design is also aimed at driving a greater sense of brand unity and halo across the business.  All of the Coke variants will now all display the signature Red Disc, although the different variants will still feature a splash of their own unique colors: black for Coke Zero, silver for Coca-Cola Light/Diet Coke and green for Coca-Cola Life.  Marcos de Quinto, Coca-Cola CMO explained this decision by saying "Packaging is our most visible and valuable asset, . . .The Coca-Cola Red Disc has become a signature element of the brand, synonymous with great taste, uplift and refreshment. By applying it to our packaging in such a bold way, we are taking the next step towards full adoption of the 'One Brand' strategy, uniting the Coca-Cola family under one visual identity and making it even easier for consumers to choose their Coca-Cola with or without calories, with or without caffeine."  Although the company admitted it is still working to determine the exact packaging execution of this vision in the US where Diet Coke has a large market share and utilizes "Coke" on its packaging vs. the other variants, which use the more formal "Coca-Cola".



My take on this brand strategy approach is simple - it's a mistake and will likely fail.

The objective of this strategy is to clearly drive greater scale, which from a marketing standpoint traditionally means driving greater efficiency in advertising spending (e.g., getting a bigger bang for your buck because any advertisement should now drive sales across the broader brand portfolio vs. just one Coke variant like the historic marketing was targeted).  Accepting this premise would obviously seem very financially attractive as it would allow Coke to reduce its overall marketing budget because it no longer needs to run four independent advertisements to support the four different variants, it can now look to drive all four behind one advertisement.  However, I would argue that any shorter-term cost savings will be more than offset by longer-term revenue declines because the effectiveness of the 'one brand' advertisement will likely be lower than Coke's historic variant focused approach.  This is the case because to make this strategy work, Coke effectively needs to dilute its messaging to the least common denominator that halos across all four variants.  What made Diet Coke and Coke Zero so powerful is they each spoke to two very different target consumers than original Coke and I worry that one advertising campaign will soften the brand's ability to both target and resonate as deeply with each individual target, instead opting for being a bit of everything for everybody.

From a packaging standpoint, the company is also clearly trying to make a scale play by increasing the visual brand block at shelf with a sea of red.  This in theory should grab more consumer attention in store.  Additionally, for a design purist standpoint, the simplicity of the new brand architecture is far more beautiful than the current disaggregated design.  However, sometimes the uglier solution is the more effective solution from a consumer standpoint.  What consumer has ever complained they cannot find Coke on the shelf?  I have real worries that the new packaging will lead to significant confusion at the shelf and in some cases will lead to the consumer either walking away empty handed or with the wrong item.  Simply put the packaging is just too similar across variants to allow the consumer to quickly find their variant of choice - especially in a category dominated by a grab and go mentality.  Additionally, from an on-pack communication standpoint, the variant name is in the wrong location on the can and bottle.  It should be below the brand name where consumers eyes are trained to expect it, as opposed to up top.  The location on the top of the label is likely to be missed by many consumers based on the fact that the packaging pulls their eye directly to the brand logo and consumers are trained to read down, and not glance back up.  Finally, I'd argue consumers have a strong affinity for the can color of their personal favorite variant.  In many ways, what can color can you prefer has come to express something about your personality to yourself and others in our society - not necessarily good or bad - but something about who you are.  I'm a black can (Coke Zero) guy.  I don't think consumers will ever articulate this, but I expect the black can people and the silver can  (Diet Coke) people to have some hesitations about picking up a new red disc can.  I think they'll miss how their old can helped expression a very small piece of their personality.  In this way, Coke will be a victim of its own historic success.

Tuesday, April 12, 2016

Canned Beverages Making a Come Back?

One of the trends I'm anticipating over the next few years is the revival of canned beverages.  The twist is that this time we should expect to cans popping up in beverage categories where the packaging form was previously not leveraged on a broad scale. I believe two categories in particular are primed for growth: canned wine and canned water.

The case for canned wine is simple - single serve and convenience.



The case for canned water is also simple - the increasing backlash against plastic bottles.  I'm a big fan of this resealable cap execution that Noah's is currently offering:



Monday, April 11, 2016

Victoria’s Secret Takes One Giant Leap Forward, Followed By Two Steps Back

Victoria’s Secret has made two big announcements recently, the first I believe will set the brand up for long-term success, while the second will likely compress sales until the decision is reversed.

Victoria's Secret's first announcement was to combine the store and direct-sales (online and catalog) businesses into one formal organization and P&L.  This is a move every retailer should make as soon as possible. The move will create a more seamless omnichannel shopping experience. Consumers do not put up artificial walls between a retailer's physical stores, catalog business, website, or mobile/digital vehicles - and neither should retailers if they want to serve them effectively.  Separate organizations and P&L's create misaligned incentives to maximizing a customer's journey across channels and hence risks hurting purchase conversion, compressing basket size, and limiting the ability to drive longer term loyalty and lifetime value.

The second move was to announce the brand was discontinuing its paper catalog.  This I believe is a large mistake.  On the surface, it's easy to understand why the Victoria's Secret management team made the move.  In past years, the company has mailed up to 22 issues per year to over 15 million consumers and fans alike, which in some years likely total to more than 300 million catalogs per year.  Printing and shipping all these catalogs is no doubt quite expensive, even accounting for the brand scaling back the number of total catalogs it sent out in recent years.  In fact, according to recent Citi retail analysts estimates the company could save up to $100 million with this move.  Couple the large cost savings opportunity with the fact that sales coming directly from the catalog have likely fallen significantly over the last several years as consumers shift their spending to online and mobile channels, and its not hard to imagine how the brand completed the math to decide to eliminate the catalog.  Victoria's Secret will look to reinvest much of this savings into its loyalty program and "brand-building engagement".

Still, I believe this move to be a mistake for a few key reasons.  

  • First, the catalog is an iconic element of the brand identity.  Yes, the Victoria's Secret fashion show that's televised world-wide is pure genius in terms of generating priceless media impressions, social media commentary, and brand engagement outside the point of transaction, but nothing says Victoria's Secret like it's catalog.  It is a critical element that brand leverages to reach inside of consumers' homes and showcase what the brand stands for.  

  • Second, the catalog's ROI or effectiveness can no longer be measured in terms of sales it drives directly.  It's role has shifted to driving awareness and consideration, which ultimately pushes consumers to purchase online or in store.  This creates real challenges with directly measuring ROI and effectiveness, especially if the catalog has not been full optimized from a format and content style to fulfill this new role.  It is also very hard to optimize the catalog for this role or accurately measure ROI or effectiveness, when the store and direct division P&L's are split.  

  • Third, digital awareness vehicles, while highly efficient from an ROI standpoint, typically reach a saturation point in terms of effectiveness (e.g., driving revenue). So I have a hard time believing redeploying the savings to digital vehicles will drive the same amount of sales either online or in stores.  

For these reasons, I believe that brand sales will suffer, at least to some degree, with the elimination of the catalog.  That said, I'm all for scaling back the catalog to some degree (both in terms of frequency of the mailings as well as the number of pages in each issue) to save costs and redeploying some of this money to digital vehicles.  I'd also potentially recommend revising the style and content to ensure it fills its new role of driving brand equity and traffic to the stores and digital channels vs. direct sales.