Compass Points

Toyota: Deer Caught in the Headlights—the High Cost of Doing Nothing.

2010-02-02T13:50:00.001-05:00

I’m sorry about what is happening to Toyota. I drove a Camry for a couple of years and it worked just fine. And I have friends working in Toyota marketing. But right now, Toyota seems to be doing just about everything wrong.

1] The company and the world was on two weeks-notice that something was very wrong with the gas pedal. The company shut down manufacturing and stopped selling cars on dealers’ lots—but it had virtually nothing to say to the public and press about what was going on.

In such a crisis, the first priority has to be to analyze the problem and come up with a solution. But ofttimes, as in pharmaceutical or food tampering cases, this process can take weeks or months.

Toyota at first refused to talk to the world. That’s a shame because there were a lot of Toyota owners out there who were scared to take their cars out of the garage.

If the car has a bug, you have to explain that to the public –- right away—and try to fix the bug. Toyota could have said a lot more beginning in early January on what was going on –- and what theories they were testing, if nothing more than to boost its credibility. Instead in late January it simply announced it was recalling 2.3 million cars—leaving everyone with all kinds of questions. To wit:

[a] Why were the Toyotas built in the U.S. (and Europe) experiencing the gas pedal freeze – but not the ones in Japan? It turns out that some genius decided to change the specs on the gas pedal assembly from metal to plastic. I thought the Toyotas in the U.S. were exact copies of Japanese cars. Though Toyota still won’t admit the U.S.-made cars are inferior, common sense tells you otherwise.

[b] Why did it take Toyota so long to wake up to the fact it had a problem? The National Traffic Highway Safety Administration (NHTSA) has been investigating reports of sticking pedals and floor mat interference since March 2007. [Source Automotive News, 2/1/10]. Toyota should have fashioned some kind of apology for being late to the realization that its gas pedals were subject to sudden acceleration—even though I’m sure its lawyers told the company not to talk about that.

[c] There was lots of talk about floor mat interference—something Toyota in its unfortunate wisdom calls “entrapment.” But in August 2009 a family of four was killed in a runaway Lexus ES 350 driven by an off-duty California highway patrolman. All the floor mats were found in the trunk. So Toyota has known for at least four months it wasn’t the floor mats.

[2] This week the company decided to recall all affected cars and install a metal shim next to the gas pedal to give it more tension. OK, after you’ve diagnosed the problem and begun your fix, how does your communication strategy change? You have to get someone very senior to make the proper explanations. Here, Toyota did a pretty good job, introducing on Monday, Toyota Motors North American president Jim Lenz to make some weasily apologies for their poor engineering, then to promise fixes. That must have been hard for Lenz to do—but at least he got out there on the TV news shows.

Then I think, after they get the new cars and trucks on the dealers’ lots cleaned up, Toyota should do something over-the-top wonderful to re-open the sales spigot: dropping prices 20% + for the next six months would be a start. When PR had finished its initial push to reestablish communications and build credibility, and sales had begun to climb, you can turn your attention to advertising.

[3] Advertising—put it on hold at least for four or five months. Obviously advertising people know how to make a brand shine—but if they tried anything right now the company would be a laughing-stock. And don’t expect miracles. It took Audi decades to wash away the sour taste people felt with their perception that the company had a similar sudden acceleration crisis in the ‘80s.

[4] How much will putting in the new pedal assemblies, settling lawsuits, etc. cost? We’re talking a recall in the U.S. of 2.3 million cars. Automotive News says Toyota’s weeklong shutdown could cost Toyota $450 million in lost sales. They think fixing floor mats and pedals could cost another $450 million. So let’s round that up to $1 billion. Then I would plan on starting an intensive ad campaign that starts around May and keep it going for the rest of the year—at a cost of roughly $400 million. Toyota already has a U.S. advertising and promotion budget of almost $1 billion, so the extra spending could easily fit present budgets. But the other extra $1 billion the company will lose this year will force the company to show an operating loss for 2010. And they will be lucky if it’s only $1 billion.

The long-term costs, of course, are incalculable. Toyota needs to get outside help and get this right. It’s kind of like Tylenol. If you do everything right you can save the brand, but it might take five to 10 years for the public to forget. Meanwhile, in order to draw on the reservoir of goodwill built up over the years, Toyota must take care to tell the truth and be as open as it can. Some say the problem is not mechanical but electrical. Should that prove to be the case someone more senior than Lenz is going to have to fall on his sword.

“Ultimately Toyota stands for quality, and this is the antithesis of quality,” Chris Richter, an analyst for CLSA Asia-Pacific Markets in Tokyo, told Automotive News. “They still have a lot of public good will. But at the end of the day, the customer’s patience is not infinite. I’m less worried about the impact on earnings and more concerned about their brand reputation.”

Desperation as the Mother of Invention

2010-01-27T11:45:00.002-05:00

These are tough times for brands and the people who nurture them. CMOs and their bosses are being pressed for ideas that a year ago would have been unthinkable but are worth considering because they may move the (sales) needle.

Let’s start with Dominos. Shortly after Christmas they launched a new ad campaign that went by the name of “Turnaround.” Apparently they had hired a new ad agency (not surprisingly: Crispin Porter Bogusky & Partners, Boulder, the agency that famously did a “Truth” campaign against the big tobacco companies). Crispin did some testing of consumer attitudes and came back to report that customers felt Domino’s pizza “sucked.” That it’s crust tasted like “cardboard,” and it’s sauce like ketchup.

Nothing new there. But then the ad agency suggested, first of all that the client improve the product—and then that the effort to improve the product better form the basis for a high profile ad campaign: New sauce, new way of making crust, new mix of cheese. New guarantee of quality

Then they started having two of the company’s two top chefs personally deliver the new pizza to people who had dinged it in focus groups. This made for pretty interesting TV – especially because the campaign was touched off with Domino’s president Patrick Doyle, admitting that for years the company had been pushing a tasteless, less than wonderful product onto customers.

It will take awhile to learn whether the ad campaign was strong enough to get people the company had lost to mom and pop pizzerias back into the fold.. But early indications are that sales are higher than ever in U.S. Domino’s history. The campaign even caught the fancy of news celebrity Stephen Colbert, who devoted the opening of a recent show to sampling a couple of pieces of a new, improved Domino’s pizza and then named the company an Alpha Dog for admitting that historically the company’s product sucked.

The second example of down-in-the-trenches innovation comes from Burger King, another Crispin client. Down at the company’s store in Miami’s South Beach, beginning in February, Burger King will offer hamburgers and beer at a “Whopper Bar.” More Whopper Bar outlets are planned to be tested in New York, Las Vegas and Los Angeles, according to BK’s North American president Chuck Fallon.

Served alone in the company’s own aluminum bottles, a brewski is $4.25. But if added to a Whopper combo it’s only $2.

Marketing specialists who follow food chain antics say that BK is attempting a very dangerous move – not because beer is controversial, but because BK is known for its fast food. Now it’s going after 30-year-olds in the “fast-casual dining” category. That means they are trying to get diners to come in, order dinner and a beer, and enjoy it in the store.

Interestingly, in the beginning the restaurant will test both Anheuser-Busch and Miller Coors beers. “You can have America’s favorite beers with America’s favorite burger,” says Fallon, brimming with enthusiasm. Eventually other, niche beers may be tried, he said.

Initial blogosphere reaction was not friendly. Some parents said they would no longer be able to bring their kids to a BK store. Others complained about how the beer would add 145 calories to a meal, even without the fries, that comes in at 990 calories. “What a deal!,” rants blogger Sighard. “For only 7 bucks, you get to almost max out your entire caloric intake for a day!”

Ah my, it takes some guts to take brands, especially big hairy brands like Domino’s and Burger King in new directions. But without experimenting you start to slide. That’s what caused McDonald’s to begin offering premium coffees to go up against Starbucks and Dunkin’ Donuts. That’s why the two big beer companies are snapping up niche brands almost as fast as they roll out.

We may miss the dependable quality (or lack of it) in the old brands. But kids coming along don’t want their “father’s Oldsmobile.” So I say good luck to the innovators. We’ll watch to see if any of their experiments result in real innovation.

Meanwhile a word of encouragement to CMOs everywhere who are clawing their way through this recession, wondering how to drive revenue back to its old trajectory. First tell the truth about your brand. Dollars are too dear to be wasting them on expensive campaigns which don’t catch on with consumers.

Go into the attack with crazy strategies and weapons never before tried. You probably can’t lose whatever wacky new product or customer experience you introduce. And you may connect in new, meaningful ways. Consumers still have money to spend. It’s just that they’re being bloody careful with their dollars.

Finally listen to your ad agencies. They probably know more about your brand than they are telling you—partly because they’re afraid you will fire them for delivering a negative message. That’s nonsense. When brands are in trouble, anyone with experience with the brand and your customer, is a valuable source for new thinking.

Pulling off a real turnaround is one of the most difficult efforts in business today. It’s going to be as hard for GM to convince consumers it’s cars are of high quality and value, as it is for Domino’s to convince pizza lovers its pizza no longer “suck.” But it’s worth a try.

The Soul of That Intrusive Duck: Who Owns It?

2010-01-14T10:36:00.003-05:00

When NY ad agency Kaplan Thaler won the Aflac account ten years ago it was given an interesting challenge: Make employers subscribe to Aflac as a premium auxiliary health plan for their employees.

Most agencies would have rushed to come up with a B2B solution. But Kaplan Thaler had a better idea: How about going direct to employees with a big-budget TV campaign and get them to “ask about it at work,” in other words bug their bosses to take on Aflac as an added benefit.

Today few people in America don’t associate the name Aflac (the company until recently was formally called the American Family Life Assurance Co. of Columbus, Georgia) with that intrusive duck which became the singular icon of the campaign.

Awareness is sky high, but more important Aflac has enjoyed double digit sales growth almost throughout the entire period – at least up until the 2007-2009 recession, which resulted in companies cutting back in benefits across the board. But there has always been grousing inside the company that many people responded to the duck – but didn’t have the faintest idea what the duck would do for them.

In recent years the Aflac campaign tried to be less entertaining and more descriptive: Aflac pays cash benefits to people who are unable to work due to sickness or injury. But a lot of people just enjoyed the way the duck got in the way.

Sales recently have been way down with Aflac as with almost everything else employers are asked to give away. So the decision was made by Jeff Charney, senior vice president and chief marketing officer for Aflac, to call a review in order to solicit ideas.

Charney enlisted the services of a first-rate search consultant, who immediately learned that Kaplan Thaler wouldn’t be defending. That’s written in stone at the agency and is probably a good policy. [The agency won’t be suffering having recently won the Wendy’s account; the lead agency on NAPA Auto Parts; and is now a finalist in the rush for Ikea.]

Time will tell whether the new agency, the Zimmerman Agency in Tallahassee, Fl., will be able to get the sales meter zooming again.

“We wanted to make sure we have the agency that could portray the duck in the most relevant way,” said Charney, complimenting Zimmerman for a new campaign – that appeared on giant billboards in Times Square—that drove people first to one site, youdontknowquack.com, and then to another, knowquack.com. Zimmerman has come up with elements that include an Aflac presence on Facebook, YouTube, a line of duck clothing (?); a Quack energy drink, commercials during NBC’s coverage of the Winter Olympics; and on and on. It almost wears me out just listing where you’re going to be asked if you know quack.

But wait a minute. Go back a frame. Charney wants to portray the duck – and therefore Aflac –“ in the most relevant way.” Aflac is a brand owned by American Family Life. No question about that. But what’s intriguing and what hasn’t been spelled out in the NY Times coverage of Zimmerman’s win is who owns the duck.

You could say, “Well, eh bien, the duck is generic is it not?” Sort of, I think the IP lawyers would tell you. But not when you add that voice and its other attributes. (Wikipedia credits the famous voice for the duck to Gilbert Gottfried. The idea for the voice supposedly came over lunch when one of the agency’s creatives kept saying, “Aflac. Aflac.” And realized the name sounded to him like a duck’s quack.).

Anyway the duck is a package of IP. Some agencies have been able to resist client demands that anything they produced for a client in connection with the advertising belongs to the client. That’s too bad. Normally the advertising, and perhaps any advertising the agency produces after the icon first appears, should be the client’s.

Or so says the Association of National Advertisers. But some would argue as I have in my book, “Chasing Big Ideas,” the IP rights to characters, graphic ideas, etc. should reside with the agency. If the client wishes to use it after leaving the agency—a rights fee should attach. And even while the client is with the agency, if the client wishes to use the agency-created icon in any medium other advertising, further payment should be made—at least I believe so: You make that duck into a line of clothing or an energy drink, you pay.

It’s hard to be firm with a client who is dangling a multi-million dollar assignment and playing hardball. It starts with agencies early in the pitch process establishing the own ground rules. You want us, with our dynamite ideas and new thinking, then there are certain things we demand.

Jay Chiat is the last guy I knew in American advertising who would have walked after winning an account if the terms weren’t right or the client tried to change the deal. There ought to be plaque put up to honor his orneriness.

Toyota Finds Itself in the Brand ER – and Most of Its Wounds are Self-Inflicted

2009-12-14T11:34:00.002-05:00

Irony of ironies, now Toyota is a poster child for brand neglect. Having bested GM for two years running to become the largest sell car company in the world, Toyota finds itself losing market share in key markets; losing its reputation for quality for the first time in the U.S.; being criticized for faulty engineering, making ho-hum cars with no zip; and losing touch with its customers.

The December 12^th issue of the Economist has a cover story entitled “Toyota Slips Up” arted with a big fat banana. It details many of Toyota woes. In China, for instance, where it lags behind VW and GM, it has been “slow off the mark” to compete on performance and pricing—with market share dropping two points.

In Europe it is criticized for offering too many boring models. In the U.S. it is experiencing a series of image and engineering problems across a wide spectrum of measurements, including those of J.D. Power, Consumer Reports and Strategic Vision, which bases its “Total Value Index” on feedback from 48,000 buyers. In an annual study of three-year-old vehicles J.D. Power placed Toyota behind Buick and Jaguar.

But what is not mentioned is Toyota’s long history of lackluster marketing, which in the U.S. has been particularly pathetic over the last 10 to 20 years. People working at Saatchi & Saatchi and DentsuAmerica, Toyota’s current agencies, will not talk about Toyota’s marketing.

But I know from research on my book, “Casting for Big Ideas,” that Toyota’s North American management has little interest in creating impactful advertising, saying that it could virtually sell out its inventory of Camrys and Corollas without any advertising and post its near $1 billion in media expenditures towards sales discounts and profit. When asked why Toyota didn’t do that, my source merely shrugged his shoulders, and told me: “They don’t want to be accused of not understanding the value of good advertising—but they don’t want to commission it either.”

The fact is part of the loss of a halo effect around Camry and Corolla has to do with the failure of Toyota to upgrade styling and in-car features to keep pace with market gainers Hyundai and VW. But also to Toyota’s failure to re-enforce brand loyalty and perception with memorable advertising. You can’t keep pumping out semi-annual Toyotathon marching bands and silly commercials with balloons and stupid sales patter and expect to have any lasting emotional impact. Toyota’s advertising at all levels is predictable and forgettable.

Toyota’s new CEO, Akio Toyoda, 53, grandson of the founder, was blunt in speaking to the Japanese press that the company could be locked into a spiral of decline. And certainly some of Toyota’s problems have to do with how any big company ossifies as it reaches No.1 and begins to regard itself as a Master of the Universe. We here in America have lived with that realization while we watched our three great automakers, GM, Ford and Chrysler, slowly slip into irrelevancy over a 40- to 50-year period.

But improving Toyota’s reputation in the U.S. is not just a matter of better engineering—although for a brand whose bedrock values quality and safety its problems in these areas must be immediately corrected. Brands also need nurturing. I like to compare mature brands to great singers such as Paul McCartney whose new CDs are still very much in demand. Like McCartney, legacy brands must be continually re-invented and renewed with the creation of new sounds and ideas, new kinds of connections in the digital space and old kinds of promotions such as a national tour to spark interest. Most of all they need to have their contribution to the culture trigger excitement and interest.

When you talk about cars you may be talking about simple utility – four wheels and a motor to get you to the grocery. But you can’t help wanting more than transportation. We choose a car that makes us happy every time we crawl behind the wheel and becomes such an extension of ourselves that we are proud to show it to others.

Toyota has somehow forgotten that simple lesson. You can be sure it has been told about its failings by countless consultants, ad agency gurus and car magazine writers. But I don’t hear Mr. Toyoda including marketing in his calls to the troops. At the Tokyo motor show he said, “I want to see Toyota build cars that are fun and exciting to drive.” Great if you can do that. But meanwhile start selling the inventory of Camrys and Corollas sitting on dealer lots right now. And down the road, re-discover Toyota’s core values and find innovative ways to communicate those values to the car buying public.

Toyota should expect more competition from Ford and GM—if not the newly reformed Chrysler-Renault partnership. And VW and Hyundai are not far behind. So Toyota has to make cars that fun to drive in a hurry. And I’m looking for advertising that is fun to listen to and watch. It might take three years for Tokyo to begin spitting out a new generation of Toyotas. I believe a new attitude toward brand communication should start right away. For a brand that is already caught up with a failure to live up to the brand promise it took half a century to build, starting this new kind of conversation with consumers can’t start soon enough.

When It's Time to Pass the Baton

2009-12-08T16:31:00.008-05:00

Compass Points today is about the fine points of building an agency brand, with a salute to the life’s work of my good friend Mike Hughes.

In the early ‘70s Mike was a newspaper writer who was bored with being “an ink-stained wretch” and was starting to think advertising might be an interesting career. He walked his news clips around Richmond, Virginia to show Harry Jacobs, then the legendary creative director of the South’s only interesting agency, Cargill Wilson & Acree, then to David Martin of the Martin Agency, and finally to a little Richmond office of Chicago agency Clinton E. Frank, where they put him to work writing ads for Reynolds Metals.

Finally Harry Jacobs, who had just moved over to the Martin Agency as a full partner with Martin, called Mike in for another look and hired him. In those days the Martin Agency was a swinging Southern hotshop, where writers and art directors like Luke Sullivan and Cabell Harris would put in a day’s work, and then repair to a bar or someone’s home, and do ads for non-profit clients. Their after-hours agency had a several names like Drinking Buddies Advertising, and Harry tolerated it because he was getting good work from these “kids” – and because their clients were no threat to the Martin Agency’s trajectory.

In the ‘80s the Martin Agency had the standard roster of accounts like banks and utility companies – but where it excelled was in ads for agricultural BtoB clients who wanted to sell their herbicides to farmers in obscure publications—and didn’t mind what the agency did in their ads as long as they worked. Suddenly the Martin Agency’s quirky work for cattle feed was winning metal in the big national shows.

Then, about 1990, Harry and Dave decided it was time to sell the agency to a big national or international agency – and settled on becoming a wholly owned subsidiary of Scali, McCabe Sloves, which, in turn, had become part of Ogilvy. About this time, Martin Sorrell bought Ogilvy to fill out his other network purchases and inherited Scali and the Martin Agency. Marvin Sloves had some issues with Sorrell and arranged for the agency to buy back its stock; only to turn around and sell it again to Frank Lowe, whose London-based agency had in turn become part of Interpublic. (Dizzying, isn’t it.)

These deals couldn’t happen in today’s universe, but Martin Sorrell had been beat up by another creative shop he bought—and didn’t see how letting Scali/Martin go would interrupt his longer term strategy.

It’s not clear why Frank Lowe wanted Scali and its Southern appurtenance—other than that he admired the work being produced by these agencies.

As things settled down, David Martin took his money and pushed off—leaving the agency to Don Just and Harry Jacobs. As the ‘90s wore on, Don handed off client service and administrative duties to John Adams, who took the title CEO, and Harry became chairman and handed off creative to Mike, who took the title President/CCO.

Mike was able to light up the creative sky again—thanks to a campaign starring a wily, green lizard with a funny British accent, which [along with some cranky cavemen] made Geico the country’s top automobile insurance company, and, then again, when he made drab, dependable UPS a talking point, with the campaign “What can Brown do for you?”

At the same time, in his off hours, Mike was serving as chairman of the board of the “The AdCenter,” the country’s only masters-awarding, creative advertising graduate program, at Virginia Commonwealth University.

Mike recruited Rick Boyko from Ogilvy to run the AdCenter. Under Rick, some new faculty members and a distinguished board, the school suddenly became the leader in portfolio-based, creative advertising training. The school (recently renamed The BrandCenter), continues to rank high not only as a creative center but against the MBA programs at the leading business schools which increasingly are adding a creative branding component to their curricula.

Now, almost 40 years after joining The Martin Agency, Mike has brought in John Norman from Wieden & Kennedy to be his successor as chief creative officer. Mike will continue as president of the agency to help John Adams, try to begin to make it a global creative shop—similar to what Wieden, Fallon and Bartle Bogle Hegarty have become.

“Establishing distance offices has always been difficult for me,” says Hughes, “because I was anal and wanted to watch the work all the way through [from concept to execution].” But Hughes says it’s time. He and John have named three younger partners-- Beth Kelley, head of HR and “manager of creative:” Matt Williams, a senior planner and John Norman-- to begin the transition to running an international shop on their own.

Mike is a gentle giant, known the world over in creative circles, but hardly a household word among clients. That’s, in part, due to the way he generously credits others for the agency’s successes and, in part, due to his seemingly light but firm management style. He says he isn’t disappearing from the agency scene and if anything is more "motivated" by his new duties. But he has earned almost every accolade the agency world has to bestow, because of who he is and what he and John Adams have accomplished from their out-of-the-way, red-brick-and glass base in Richmond.

Mike gets the Compass Points 2009 award for brand building—both the agency’s and his client list (which now includes Wal-Mart), hands down.

One of the hardest tricks in all ad-dom is to manage this kind of transition. We’ll see if he and John can pull it off. There was nothing sadder for me this year to see Cliff Freeman have to close its doors and go out of business; and, earlier, to see Fallon/Minneapolis essentially become part of Saatchi & Saatchi. There should be another way to keep great agency brands alive.

Building Brands Online: A Contrarian View and a Wal-Mat Whopper

2009-11-30T15:40:00.003-05:00

I’ve never felt comfortable with specious arguments, pseudo-science and voodoo-thinking that has sought to prove that brands can be built online with the same speed and depth of feeling as occurred in “old” media—or, as I call it, “legacy media.”

I agree that a brand should have roughly the same message wherever consumers touch it: in advertising, through customer-service, on a website or when they meet a brand at an event or in the social media jungle now growing up around Facebook and Twitter. But merely giving the consumer a clean, honest interaction – even if it leads to a sale—isn’t the same as engaging consumers and connecting them to the brand, long-term.

Or at least I’m skeptical of that claim.

Now the Interactive Advertising Bureau and Bain & Co. have combined to produce a report, based on an in-depth survey of 700 brand marketers, that shows most online sales organizations have lacked the “sophistication” to turn perceptions and encounters into real brand building as opposed to direct response transactions or sales.

This must have been a hard report to release for the IAB, which has argued for years that the Web is a premium brand building territory. But Randall Rothenberg, the IAB president and a trusted writer and editor who toiled on the edges of the industry back in the legacy heyday of the ‘80s and ‘90s, said that most brands are missing the opportunity for “engagement” and other interactions that will create long-lasting bonds with consumers.

So this segues nicely into a solid analytical piece from Adweek by Brian Morrissey on how brands have to be more careful in cracking the code to becoming a treasured iPhone App.

“Many brands have tested its waters,” he writes. “[But] brands face an uphill battle getting noticed in the iTunes App Store.” And even when they do, it’s amazing how many of them stumble into the trap that they are creating their own media properties, according to Eric Litman, CEO of Medialets, an iPhone analytics ad platform.

Says Ken Wilner, CEO of Zumodi, brands that hire an outside developer and end up with nothing more than a glorified ad are kidding themselves if they think they have built a meaningful connection with consumers. “There are a lot of snow globes and novelty-type ideas [in the Apps space]. They don’t sustain usage,” says Wilner.

Morrissey singles out Amazon Mobile; Bank of America; Kraft; The North Face; Virgin Atlantic; Volkswagen; and Pizza Hut, as brands which best delivered the critical value of “utility.” MasterCard’s Priceless Picks; Budweiser’s Bud American Ale Finder; Puma’s Puma Index; Burger King’s Burger King Now; and General Motors’s GM Mobile were among the Apps he tags as having missed the real opportunity in this space.

It seems to me a no-brainer what can be done with Apps. If I’m looking to book a flight, some airline should give me easy access to what they charge on that route—and if appropriate, what the competition is charging—and what are the times. That’s utility. But what happens if you’re Coca-Cola? Then I think Coke should help me get involved with some of the great events they sponsor—like the Winter Olympics—or just do something that is obviously fun and, if possible, refreshing in its wit, so at least the brand’s “tone of voice” and core message is maintained.

Footnote: Wal-Mart gets caught in one big fib.

Wal-Mart makes the claim in its advertising (out of The Martin Agency, Richmond, VA.) that the “average family” will save more than $3,000 a year shopping at Wal-Mart.

It turns out, according to a report from “Marketplace” on National Public Radio, this calculation is based on a study by IHS Global Insight. But what it doesn’t say is that the IHS study showed the “average family” would have to spend more than $83,000 a year shopping to achieve such savings. And that a family earning closer to the national average of $51,000 would only save $640 a year.

Furthermore, in making its claim, Wal-Mart is taking advantage of the way it screws down manufacturers to the lowest possible price point, creating a “floor price” that competitors (Target, Home Depot, Amazon, etc.) then have to meet. According to Charles Fishman, author of the book, ‘The Wal-Mart Effect,” “the headline number is technically accurate but misleading.”

Getting Wal-Mart to tell the truth has, historically, been a problem. But the brand is supposed to have mended its evil ways, under the watchful eye of Richard Edelman and his PR gnomes—who for a time, reportedly took in a hefty $10 million fee. Having paid that kind of penalty to rejoin the family of “civilized” brands—it would be a shame if Wal-Mart started getting slimey again. Come on, Wal-Mart, make an honest connection with consumers that stands the test of time.###

Hot off the Compass Points ticker...More on Starbucks, Maurice Levy!

2009-11-23T15:10:00.005-05:00

If you’ve reading this blog these updates will make sense to you.

1] Nescafe Fights Back. The instant coffee field may be a $17 billion market, but there are already some established players and they aren’t going to let Starbucks in without a fight.

Nescafe has been spotted in New York setting up tastes tests where Starbucks’ Via is presented in a Starbucks-like cup and Nescafe’s Taster’s Choice in a mug. A poster behind the table reads, “A lot of hype OR a lot of flavor?”

It still seems wacko to me that Starbucks, while giving Via another name and separate packaging, is having its baristas try to hondle Starbucks customers into trying it. Why not just put it on grocery shelves and promote it on its own?

Well anyway now we’re in the middle of an Instant Coffee war. You can be sure this war will soon be extended into advertising and street promotions. That reminds me. Our troops in Iraq and Afghanistan have to drink instant coffee as part of the MRE (meals ready to eat) packages. Who makes it?

Writes blogger rubberbrandman (Chris DiAlfredi):

“The Starbucks board of directors, and the brand decision-makers that answer to them, will happily continue to dismantle everything that was good about the brand. "Via" dumb moves like foraying into instant coffee.

“The sheer magnitude of the Starbucks investors' greed, versus the sanctity of the brand defies logic. These short-term goals and thoughtless brand extensions, like Via, represent a new lesson for what not to do with a successful brand.   

“Howard Schultz is practically a marketing genius, but his biggest mistake was letting Starbucks go public. His second biggest mistake was coming back to his baby after his eight year break. This is really just sad to watch.”

2] Maurice Levy feeling the heat from client procurement officers.

Levy, of course, is not alone. I’ve seen data that up to 75% of the very big (over $200 million) advertisers are using procurement officers, and obviously their job is to keep pressure on agencies to cut their fees. Why? Because to them it’s a commodity business.

Levy is quoted in Media Daily News as saying: “There is huge pressure on procurement. I’ve seen a few heads of procurement in 2009. And they’ve said it is not a job anymore. It’s a mission. I am on a mission. I need to cut by X, Y, Z percent…we are facing serious difficulties.”

But he was happy to report that his “sophisticated” clients are moving their business to Digitas and Razorfish, his two leading digital agencies. “What will happen in the future – which could be very good news for people like us—is that we may come to a solution where we will be paid not on service, but on value and on deliverables. And deiiverables are measureable…which will be highly, highly positive for us.”

Levy said at Razorfish, his newest purchase, it’s seeing a rather pathetic 6% to 8% margin this year. He didn’t give the margin on Digitas, his biggest play. So his optimism here seems to be for the near future. He also said while the two shops might share tools and practices, he planned to keep the brands.

Starbucks: How to Squeeze the Value Out of a Treasured Brand Without Killing It

2009-11-17T10:50:00.003-05:00

Starbucks has had its ups and downs over the last couple of years. And now the market seems to be making a rough judgment on the company every day.

That’s the problem with taking a wonderful idea and building it to the point that you can launch an IPO and cash in on the goodwill you created.

But once you bite that IPO apple and allow your company to be publicly traded there are few secrets to be kept as you try to manage the brand over the shoals and storms of the world’s economies.

Starbucks saw amazing growth in the late ‘80s and ‘90s as CEO Howard Schultz built out his retail footprint to 16,000 stores in 50 countries and his revenues to over $10 billion.

It was one of those few iconic super-brands, because Schultz was able to create a category where none existed: The idea that we would pay around $4 for a fresh cup of coffee and steamed milk, and, in many cases, enjoy the special respite Schultz was able to provide customers in comfortable chairs drew customers from Palo Alto, California, to the shadow of the Forbidden City of China.

Then things got sort of wacko. Though Starbucks still called its servers baristas and delivered on taste, the new management ripped out the huge, evocative copper coffee grinders, tightened store space with all kinds of extras—like selling music and coffee accessories-- and gradually kept hiking the cost of its product. Starbucks was served on United Air Lines planes and stores started appearing in airport concourses. Then it was packaged to sit on grocery shelves and you began to wonder what happened to freshness.

Suddenly, when the economy started to tank two years ago, the board fired president/CEO Jim Donald and brought back Schultz who said, he was returning to restore the ”distinctive Starbucks experience.”

Now, even though profit has increased nicely this year to a forecast $150 million for the 4^th quarter, and the stock is up from $11 last November to the present range of $19 to $20, Schultz seemed to have abandoned his commitment to building brand value, as he introduces first an instant variety of his coffee, called Via, and then has begun exploring the horizon for a fast-food partner like McDonalds or Subway.

Schultz defends his decision to enter the $17 billion instant coffee category, saying it was ripe for innovation and Via will set new taste standards. But, according to Business Week, the blog meisters are saying the baristas are finding the pressure to sell Via “intense and unwelcome.”

The current climate is challenging. Quarterly sales have dropped 4 percent to $2.4 billion. Same-store sales have dropped for seven consecutive quarters, but this quarter it will be down only 1% which is an improvement on the 5% in last quarter and a 7% decline a year ago.

Starbucks has been smart about using its cash to buy up other franchises, such as Seattle’s Best Coffee (which is making a deal with Subway and is already in many Border’s book stores in the U.S.). It is exploring entering the energy drink market. And it’s overhauling its daytime menu to include salads and baked goods without high-fructose corn syrup or artificial ingredients.

These are all good moves. If Starbucks is going to offer food why wouldn’t it be healthy, tasty and inviting. (Unfortunately it’s airport sandwich line tastes like cardboard.)

But though such a global brand is durable and elastic to a point, it still needs to be defended—most importantly by Schultz who, because of his special place at the company, can decree things with virtually no pushback from his management team.

If Starbucks was a widget, say an MP3 player or a line of sunglasses, then maybe it wouldn’t matter whether you were pushing your product in a Wal-Mart or a Nordstrom’s. But Starbucks is stuck: It’s both a product and an experience, and it needs a certain kind of retail environment to deliver on that brand promise. It is also facing competition now from Dunkin’ Donuts and McDonalds which have their own line of special coffees – at half the price of a comparable Starbucks cup.

Faced with consumer resistance to splurge for a high-priced coffee break, Starbucks more than ever must defend its premier position, while always exploring ways to innovate and expand, similar to the way Apple has been able to build out its line of computers at a premium price.

“I came back…. because I had an intuitive sense of the equity of the brand and the experience of customers,” says Schultz. But he may still need to hire a brand policeman to keep his tinkering from threatening the core brand.

The “All-Digital Agency All the Time” – Part Two of Compass Points’ Agency of the Future Series.

2009-11-10T09:55:00.003-05:00

Maurice Levy is perhaps the most underreported, undervalued person in advertising. In the span of 20 years, he has taken a smallish European network of agencies based in Paris and built it into a colossus.

Publicis Groupe today owns Publicis, Saatchi, Leo Burnett, Fallon, 49% of Bartle Bogle Hegarty, Droga5, Starcom, Mediavest and now the digital giants, Digitas, the largest digital agency in the world, with Razorfish and VivaKi, Denuo and on and on.

But, though we hear all the time from Martin Sorrell of WPP, Michael Roth of Interpublic and occasionally even from press-shy John Wren of Omnicom, the American business press features Levy. When it came time for Business Week to do a cover story on advertising’s current problems, it bypassed Levy for the flamboyant (“Love Notes”), Australian-born CEO of the Saatchi network, Kevin Roberts.

One reason Levy has outdistanced his rivals in terms of turning in solid, quarter-on-quarter revenues and profits, is that he saw the downturn coming 10 or so years ago and began buying up digital assets. Today 25% of Publicis Groupe’s revenues come from digital advertising and media services. Levy saw the future, bet the farm on digital and now is worth a careful hearing.

A week ago MediaPost.com reported that Levy plans to transform Publicis Groupe into an “all-digital agency.” “We have very good numbers for growth in digital,” he said. “And this is something which is offsetting the decrease of some other activities.”

So I’ve been trying to figure out what Levy means by “all-digital agency.” First of all, I wish had he had been challenged on whether he was talking about just letting Digitas and his other digital assets grow and prosper, or whether he was speaking as head of the holding company, and meant that all his properties were going to become “all-digital.”

And then I started thinking about what that phrase would mean—if by it you really wanted to change mission statement of his three big traditional networks, Leo Burnett, Publicis and Saatchi.

Would that mean that these great monoliths would dare to call themselves All Digital—and jettison the layers of people they still have trying to shoehorn their clients into big branding campaigns played out in TV and print and in radio?

Or did he mean that he was going to force them to think of digital first, and come up with digital solutions that then could be applied in appropriate ways to other platforms and other media?

Or is All Digital a new language in branding—so all he was talking about was literacy in this new tongue? Or is it a strategy? Or is it just the natural evolution of where the business is going?

When Business Week in the Kevin Roberts’ cover story noted the drop in revenues at Saatchi and asked Levy what he was going to do about it, he responded that he wasn’t going to do anything about it—that that was Kevin Roberts problem. Quoting Business Week:

[Levy wondered] if a creative agency like Saatchi should continue to manage a client's branding efforts. Perhaps the digital specialists should do it….Levy expresses nothing but affection and admiration for Roberts. But he warns: "It is no longer necessarily the creative agency dictating what's best for the client."

Here I think Levy, visionary that he is, is pulling our leg. Saatchi has a number of major clients—led by global duties on Toyota. Until Toyota is ready to demand an “all digital agency”—I don’t think Roberts is ready to change its spots—nor is Levy about to demand it.

Ah me, sometimes we can see the future so clearly. But we have to wait months or years for what we see in our crystal balls to become reality.

Everyone is changing gears as fast as they can, led by clients who helped Internet advertising grow 37.5% in the second quarter of this year. But when and if Toyota is ready to make its big move, say transforming Prius into a separate division rather than a couple of hybrids, will it rely primarily on digital to make the change?

I think not. I think we are still in the nether world where it’s going to take us 10 years or so to resolve all these issues. Digital may be just a language, which becomes second nature to all of us. But it certainly is not a strategy. The strategy still is to build in consumers a feeling for the brand and a need for the brand. We know, then, that the Prius must act a certain way over time—and respond to consumers wherever they touch the brand, either in an ad, in a call to customer service, in the showroom, or on the Web.

I think where Levy is going is similar to what Bill Gates did at Microsoft, when he told his minions 10 years ago that from now on everything at Microsoft would be built to live on the Internet. Windows 7 still comes in a box. You still can buy it in a store (in fact soon you’re going to be able to buy it in a Microsoft store). But it must be available on the Web, and everything it does must easily move back and forth over the Web to other users. Levy, I think, is trying to take his empire to a similar place and he’s agnostic whether Kevin Roberts leads the charge or Laura Lang, CEO of Digitas Worldwide, leads it.

These are important real-life issues for agency heads, especially right now as they re-engineer their agencies and budgets for 2010. Unfortunately there are no hard answers. So they can either follow Levy, and seek to make major changes now, or take baby steps and let the future take care of itself.

But tens of thousands of jobs and tens of millions of dollars in revenue depend on each agency head making the right call. And All Digital, to me, is an intriguing concept.

What Will It Take to Make Google Eat Slower…or At Least Take Time Out for a Burp?

2009-11-03T11:34:00.001-05:00

Google is obviously searching for new revenue sources—and more often than not focusing on the ad world.

It already owns most of the world of search. Microsoft’s Bing is a good play but its inroads into Google’s main ad business is really just a little ant bite in the side of the Giant’s furry mane.

Then with very little fanfare last year something called Google Voice began offering free telephone service. It had sought to dodge regulation by the FCC arguing that it was not a traditional telecom. AT&T, however, complained when it discovered that Google Voice was blocking calls to rural exchanges. But Google said that “net neutrality” rules only applied to Internet service providers, not to companies that created Web-based software apps, such as Google Voice.

But Google will probably be hoisted with its own petard, because on the one hand it says it wants to ensure open broadband networks, and on the other it is blocking rural service connections because rural telcos add high “termination rates” for calls and partner with adult sex chat lines and conference calling centers.

Google has just revealed more of its plan for next year’s launch of an ebook store, Google Editions. This service will make books the million or so books in its database searchable. Publishers will set the price of books and Google will take in its share of profits and share them with retail partners. The thinking is that Google Editions will initially threaten Barnes & Noble.com’s Nook and Amazon.com’s Kindle, but theoretically it could cut them in on the take.

But the more interesting play is whether Google will have success finding some ways of integrating ads into its book downloads—say through in-text ads or some way to cram code into a home page when users sign on for additional downloads. Michael J. Gyulai, of the Transfer Media Group, sees Google having a wide open field. “In the beginning, it will be too difficult to add ads in a manuscript,” he told MediaPost.com, “but I could see a Google Editions home page that analyzes ebooks bought. When you load up the My Google Editions library, I can see ads on that page from the start.”

Google has major competitors now on both the telco and ebook fronts who are beginning to cry foul to the Obama Administration Justice Department.

But so far, even though lawsuits here and in Europe have occasionally reined in Google, no one has forced it to abandon a business it is intent on developing. Getting Google to “play fair” in these new sandboxes will be a major headache.

What Will It Take to Wake Up These Dogs?

2009-10-23T07:20:00.006-05:00

Let’s look at some brands that are in dire need of freshening.

Let’s start with cars. Everyone loves to talk about cars. Is Bob Lutz really shaking up GM advertising? Not yet—but his team recently did put Modernista! on notice and put Cadillac in review. For some reason the trades don’t seem very excited about it.

Who’s going to win VW? We don’t know yet—but the list has narrowed. DDB/New York (my pick) and Wieden got tossed. That leaves Deutsch L.A. and Goodby Silverstein & Partners, S.F. I guess the smart money has moved to Deutsch. Both agencies in recent memory had Saturn as a client, both have had other car accounts. But their cultures are very different.

VW marketing is now helmed by an Italian, Luca De Meo, who for a time ran Fiat and then Alfa Romeo. The automotive press says he’s a bright young car executive with very good instincts and the ability to make up his mind quickly. Expect a decision in the next two to three weeks.

Well enough silly topicality. What about those dowdy matrons hiding in the back of the room, afraid that no one will ask them to dance?

Case No.1: Mitsubishi. When was the last time you saw a memorable TV spot for Mitsubishi? Remember the girl trying to herky jerky in the front seat to some interesting music? Well that was out of Deutsch L.A. 10 years ago. Traffic won the account, previously at BBDO West, a year ago, in a shoot-out with Wong Doody Ignited Minds and DDB. Traffic is a new agency backed by Tom Cordner, previously the creative leader of Team One (Lexus) and investor Bob Farina.

But what have they done? You can be sure that Traffic is frustrated that it hasn’t been able to give the brand a higher profile. If you go to YouTube there are plenty of highly-viewed videos of Mitsubishi’s EVO IX and EVO X. These are so-called drift cars that do zero to 60 in four seconds and are evenly weighted enough so that you can go into a 360 spin without losing control. In other words, an exciting car. Unfortunately, you can’t make TV commercials selling speed and the Mitsubishis for sale are much less exciting cars with names like Lancer and Galant. Anyway Traffic has yet to crack the brief.

Case No.2. Eddie Bauer. When last heard from (in 2008) Eddie Bauer Apparel Stores was a subsidiary of Eddie Bauer Holdings, Inc., a publicly traded company, with stores in North America, Germany and Japan. There were Eddie Bauer Signature Eyewear; Eddie Bauer sponsorships with National Geographic of “Radio Expeditions” on NPR; an Eddie Bauer line of home furnishings with everything you would need to be cozy in a winter cabin, right down to the thick blanket and wool rug; a line of Eddie Bauer mountain bikes launched with Giant Bicycle, Inc.; and the Eddie Bauer Edition line of S.U.V.s from Ford.

Then earlier this year, everything came crashing down when Eddie Bauer filed for Chapter 11 bankruptcy. It is currently waiting for court approval to sell itself to a private equity firm for $200 million. Meanwhile Publicis West in Seattle is no doubt waiting to hear if it’s still the brand’s agency.

If it is able to wiggle out of its financial problems, then much needs to be done before the brand attempts a return to its “adventure roots.” After all, this was the company which invented the quilted down jacket and military down sleeping bag but so what?

There are already plenty of outdoor and/or adventure apparel companies which own the space—many of them doing business either online and/or through a catalog with virtually no brick and mortar stores weighing down their balance sheet. What man or woman who enjoys the outdoors can’t find several L.L. Bean or REI catalogs stuck around on a back shelf somewhere? But of those, how many have ever been to an L.L. Bean or REI store? (If you are in California or Washington, substitute Orvis for REI).

It used to be that Patagonia was just a store for kayakers or mountain climbers. Today their stores are everywhere, selling t-shirts, fleece sweaters and vests, rain jackets and daypacks, all with a lifetime money-back guarantee.

So where will Eddie Bauer fit into this Gore-Tex landscape with a distinctive positioning that make their products stand out? If you could figure out a USP then you could fashion a memorable ad campaign—but it has to be long-running. And the owners will probably have to double their pre-2009 $10 million budget if they hope to make a dent.

Send me your nomination for brands—not dogs without a pulse, but brands which with a little prodding and some energy bars could get back in the game.

An Urgent Letter to Alex Taylor III

2009-10-13T09:05:00.003-05:00

Fortune Magazine deserves an ASME elephant for the journalism of senior auto writer Alex Taylor III. He’s the only writer-reporter-analyst left, other than my good friend David Kiley at Business Week, who knows where the bodies are buried in Detroit.

So when Taylor writes a cover story, “It’s Clutch Time for Fritz Henderson and GM” (Oct. 12, 2009 issue), we all should sit up and take notice. The question is whether even Taylor has been in Detroit too long. His “Special Report” is balanced, well written and full of hope. Henderson is obviously a breath of fresh air in the executive suite. He can manage an online press conference, answering 30 reporter’s questions in 45 minutes. Wow!

But even though GM has slimmed down considerably through the last year, has lost many of its onerous structural and legacy costs, and has been able to cut back on brands, factories and non-performing dealers, the question still remains: is it capable of making great cars that Americans want to buy?

Sure, it’s clutch time. Certainly that isn’t news. It’s been clutch time at least from the day nine years ago when Rick Wagoner took over the company and began saying that, with just a little bit of this or that, GM would be just fine. (Remember when Wagoner had dinner with Carlos Ghosn of Renault-Nissan and said later that GM could snap back without foreign help?).

Meanwhile Henderson has surrounded himself almost entirely with GM old-timers. Sure he’s capable of saying no to them. I’m glad to hear that he turned vetoed Bob Lutz’s plan to rename a Pontiac G8 as a Chevrolet Caprice. But can he teach GM to tell the truth?

His first mistake may have been naming the charismatic, 77-year-old Lutz his chief of marketing. Lutz is the ultimate car guy; he was brought in several years ago with plenty of authority to put some pizzazz into GM’s styling, and, to my thinking, he failed. [The Malibu was a hit before he got there.] Lutz said he planned to shake up GM’s advertising—and last week he fired Modernista!, Boston, as Cadillac’s agency. But it will be another six months before we see what Lutz can do to give the Chevy, Buick, Cadillac and GMC brands better definition and punch.

Never mind doing great advertising. For starters, can Lutz just make GM’s marketing credible. But he is such a gung-ho type he may be able to take that first baby step. Take the latest campaign to be produced on Lutz’s watch: chairman Ed Whitacre’s money-back guarantee TV spot.

None of us had heard much about Whitacre before he came over last spring at the U.S. government’s invitation from AT&T to take command of the GM board.

In this spot, he strikes a Lee Iacocca-like pose, challenging people to buy GM cars and trucks for 60 days to see if they like them. “Like a lot of you I had misgivings about GM cars,” he says before assuring us that “car-for-car” they’re better than the competition.

Huh?

Such a statement isn’t even close to true. Alex Taylor, who strangely didn’t comment on the Whitacre ad, writes, even Korean-import Hyundai “outpaces ever GM brand in quality and outsells every GM brand except Chevy.”

I’m glad that Chairman Whitacre is offering to let us test drive a GM car and, if we’re not entirely satisfied, to return it for a full refund. What he fails to mention are the conditions—notably that you have to drive a GM car for a minimum 30 days before you are eligible for a buy-back.

Worse, isn’t it a little early to be challenging Americans to test drive GM cars? Aren’t there better reasons—like their price and value, warranty, some of their more competitive features—to consider buying a GM car? And what is GM doing wasting money on ads for GM anyway? No one drives a GM car. The closest you can get to that is a Jimmy—a GMC truck. So why isn’t GM spending its media dollars that on its individual car brands sitting on the dealers’ lots?

The point is that a company which can’t even get its communications right is unlikely to be trusted to get its design and manufacturing quality right. Even during the transition period from the Wagoner to the Henderson eras, there are a lot of GM cars to be sold. GM should start learning to tell the truth about them now and slowly, carefully rebuild its relationship with the American consumer.

Alex Taylor – you’re our last best hope. Don’t let Fritz take you on any more test drives. Don’t spend too much time in the GM executive lunchroom being amazed by the change in the hidebound customs of its Renaissance Plaza headquarters. GM under Fritz has a chance to get it right. But it’s a long odds game. And we’re counting on you, Alex, to make sure to keep honest book on the lot of them. Especially because, as taxpayers, we own a huge piece of GM and want our money back.

THE DECLINE AND FALL OF THE ADVERTISING AGENCY (AS WE’VE KNOWN IT)

2009-10-05T08:39:00.000-05:00

I’ve spent the last week worrying about the affairs of the industry I love—and to which I’ve devoted the last 25 years of my working life.

As we enter budget-planning season, management of some mid-sized and some very large agencies are currently going through the excruciating exercise of trying to envision what 2010 will look like. Just about everyone in this business knows how to get through a bad year. What they are not trained to do is to hang on for four or five years, waiting for the Great Ship to right itself.

I was moved by what General Electric CEO Jeffrey Immelt had to say, in a recent issue of Fortune (Aug. 31), about what he’s doing to drag his brand out of the muck. Immelt has put out the word to managers, when they come in to forecast 2010, not to start by explaining what caused the decline in 2009. He said he wanted the presentations to go from “The market’s slow” to “There’s an 80-locomotive order in Egypt—let’s go get it.”

I think we have to be quite brutal about continuing to pare down costs and jettison slow-moving efforts. There may not be a great demand in the near- to middle distant-future for copywriters who know how to construct a great magazine ad. But there is no doubt a continuing demand for creatives who understand the new world of fragmented media and who enjoy doing something unusual in the digital space. I’m thinking about the Toy’s “Elf Yourself” work for Office Max (now getting ready to go into its third year), and Pereira & O’Dell’s “Go Miniman Go” blog for Lego.

But the larger issue continues to be the koan sent me last week by “Hal” about how our great creative agencies should re-engineer themselves to deal with this ever-changing, media- and brand-reality. It’s going to take some very brave, deep-pocketed managers to plan and fund such a transformation.

Essentially agency owners are going to have to forego profit participation for a year or two, while they rebuild their agencies from the ground up. Either that or go out and acquire a strong, young digital partner and then quickly meld the two cultures in an agnostic way that does not force the digital agency into a submissive, inferior role that snuffs out its value. The last time we re-engineered like this was back in 1991 to 1992. I know because Stuart Sanders and I ran conferences on the subject—and we were always sold out. But it’s painful and scary.

Can mid-sized creative agencies muddle through? Perhaps, at least for a while.

I’ve been reading about the decline and fall of the Roman Empire. Rome reached its zenith, Wikipedia tells us, in the second century. Then its fortunes slowly declined for another 200 years, ending on September 4, 476 when Romulus Augustus was deposed by Odacer, the Visigoth king, who led a band of German mercenaries into Rome and sacked the city. (Others would quibble that this is only the fall of the Western Roman Empire, and the so-called Eastern Empire didn’t collapse until the fall of Constantinople in 1453). Was that how sausages made their way into Italian cooking? I wonder.

I remember in 1990 when Ken Fadner took me to breakfast to tell me that he and his partners had sold Adweek to something called Boston Ventures, later to become BPI, then VNU and now Nielsen. I was pretty bummed out. “This is the end of the dream, Ken,” I told him. “No, not necessarily,” said Fadner. “Maybe the conquered will conquer the conquerors.”

Hey, I love contrarian theories. And, sure, it’s always possible that a company like Citibank would acquire or merge with a company like Travelers Group and that Sandy Weill of Travelers would work gradually, as a “co-CEO” with Citibank’s John Reed to reform Citibank and turn it into Citigroup. But that isn’t what happened. After an interim period, Sandy Weill overthrew John Reed and pushed him into retirement.

You get bought, you’re toast.

So we’re all going to have to tread lightly here. This, by my reckoning, is the fourth inning of at least a nine inning game. I would say the Romans are losing to the Goths right now. And a lot of great agency brands are going to disappear in the next two years. But it’s not all bad. We’re going to see some exciting new agencies –- call them strategists, widget makers, creative planners, or what you will—take their place.

“Hey, waiter! Bring me an 80-locomotive order.”

Agency of the Future: Does It Even Exist (Yet)?

2009-09-28T14:44:00.003-05:00

A friend of mine, we’ll give him the fictional first name of Hal, writes this deceptively simple query [and let me quote his intro because it was so flattering that I, oh-so-briefly, thought I might have the answer]:

Dear Andrew:

“You are so “well traveled” in this advertising industry and so wise, I thought to write this request of you. The world is changing around us inexorably. The advertising you and I have grown up on is diminishing, becoming eclipsed by the digital revolution which to me is really “the revenge of direct marketing”. Much more one-to-one communication than mass communication. Real and actual dialogue between companies and their consumers. Consumers are getting the upper hand. Companies HAVE to be completely transparent, or risk “getting pantsed” by their not-so-loyal consumers in a scathing blog. Mobile device media placements. Social networking…..

You know the rest. You know it all. I don’t have to beat this [dead] horse. But I have a simple request: Who do you think is “there” or ahead of us? Who should we study, model ourselves against? What agencies are leading the charge?

Regards, Hal

---------

Dear Hal:

After giving this question a great deal of thought--well at least an hour's worth--I discover that I have only glimmers of a new day aborning to offer. First there is no perfect agency of the future--just as there wasn't five years ago, when I wrote the reasonably perceptive, modest little book, “Casting for Big Ideas.”

One issue you have to address is how well do you want to “speak digital” without losing your leadership in traditional advertising, something Robert Greenberg of R/GA diminishes as “old line story telling?” If you really wanted to become thoroughly literate in digital, then you would have to remake your agency to go up against the likes of AKQA, AvenueA/Razorfish, Tribal DDB and Digitas. And as my favorite Irish Catholic priest would say, even on a good day they would kick the bejesus out of you.

So I'd be careful about following this path. So far the only mainline agency of size to take this route is Crispin. If you're a client and you give them an assignment, you can be sure that they're going to come back with a multi-layered, multimedia idea, that probably will start on the Web and finish in traditional as an afterthought.

A second line you could pursue is as a hybrid, as I believe Goodby, Wieden, TBWA, and to a lesser extent Martin, Mullen and Lowe/ New York are doing today. Hybrids have the ability to come up with “story-driven” ideas that live in traditional media as easily as they can come up with innovative, Web-based campaigns. And clients are comfortable paying full fare for their ideas and work--at the same time they may hire a digital agency to carry through on the digital part of the campaign--to assure they are getting the best of both worlds.

Then there are many agencies which really haven't made the adjustment to digital -- and are still swimming happily in the old world--because more often than not they are paired with strong digital players, and don't want to tread on another agencies “turf.” In fact, in many pitches these kind of agencies--which for the purposes of this blog will remain nameless--are invited to pitch paired with “their little brother” [translation: digital agency] in a joint effort, where the big, networked, old-line agency will be responsible for integrating all the work across all platforms.

In other words, Hal, if you were really to break with your profitable past and totally remake your agency, you would be one of the first to do so successfully.

A decade ago, I would have thought that one or two of the new “hot” boutiques in New York-Anomaly, Strawberry Frog, Taxi, 72andSunny, would have made this leap. But they didn't, really. Like I say, Crispin is the closest example we have of a successful big, medium-sized agency which is truly media-neutral. If there is another I don't know of it.

Signed,

Baffled

Brand Loyalty – A mile wide, an inch deep.

2009-09-21T16:36:00.003-05:00

The news for brand managers was not good. A study by the CMO Council. which represents chief marketing officers, and Catalina Marketing’s Pointer Media Network, found that by this year more than half of a typical U.S. brand’s most loyal shoppers in 2007 had switched brands.

Based on a study of 685 grocery- and pharmacy-stocked brands, using data from 32 million consumers’ supermarket loyalty cards, found that in 2008 the average brand lost about a third of its highly loyal customers.

Of course every recession pressures consumers to start looking for deals. If for no other reason than the credit card and bank cards that fuel their purchases changed the rules and either raised interest or required maintenance of higher balances. Meanwhile, many people lost their jobs or felt threatened with loss of a job, and that along with media hype about the recession, caused consumers to cower in fear.

But still the loss is serious, because many of those customers will never return. “Defection is top of mind for brand managers,” says Eric Anderson, associate professor of marketing at the Kellogg School of Management at Northwestern University in Chicago.

At the same time, Brand Keys, a research consulting firm, found that there were still plenty of brands which were able to recruit and hold loyal customers, providing that the brands didn’t change their message or value to core customers and they delivered or over-delivered on their brand promise.

The 2009 winners of Brand Keys annual Customer Loyalty Engagement Index included Jet Blue and Southwest Airlines, which tied in the airline category; Nike in Athletic Footwear; Toyota in Automotive; Sam Adams in Beer; Cheerios in adult Cereal and Frosted Flakes in kids’ Cereal; Allstate in Car Insurance; Olive Garden in Casual Dining; J. Crew in Clothing Catalogues and Retail Apparel Stores; Dunkin’ Donuts in Coffee; Apple in Computers; Canon in Digital SLR Cameras; Samsung in DVD players, HDTV (Plasma and LCD); ABC in Evening News; BP in Gasoline; W in Luxury Hotels; and Embassy Suites in Upscale Hotels/Motels; Tide in Laundry Detergent; Verizon in Long Distance Carriers; Konica Minolta in Office Copiers; Amazon.com in Online Books & Music; FedEx in Parcel Delivery; Domino’s in Pizza; McDonald’s in Quick Serve Restaurants; Avis in Rental Cars; Walmart in Discount Retail Stores; Best Buy in Electronic Stores; Staples in Office Supply; True Value in Home Improvement; Google in Search Engines; Pepsi in Soft Drinks and Diet Pepsi in Diet Drinks; Grey Goose in Vodka, iPhone and Samsung, tied for Wireless Handsets; and Verizon Wireless in Wireless Phone Service.

Looking over that list there are not too many surprises. For all that Starbucks has tried to do to put back an emphasis on experience and reward into a cup of coffee, Dunkin’ Donuts still holds sway, having been able to serve the same quality cup of joe for half the price.

United, American and Delta have tried to improve the service they provide for their still overpriced cost of travel, but, in the end, Jet Blue and Southwest beat them on price and service.

GEICO has sold itself well on providing a price break for car insurance, but Allstate still has given you the feeling that they’re going to give you better service for the price, especially when something awful happens and you suddenly need help.

Cheerios, Pepsi, McDonald’s and FedEx—these are American brand icons which have been careful to continue to maintain the quality of their service or product while supporting the brand with consistent communications.

What’s interesting is that Jet Blue is still in the money. The airline two years ago received a lot of bad publicity when its passengers were trapped in Jet Blue planes for hours at several Northeast airports due to a snowstorm . The incident cost founder David Neeleman his job as CEO. But the airlne apologized for the unusual service lapse, embraced a new passenger Bill of Rights that involved giving free tickets to passengers who were inconvenienced and took measures to improve operations.

It reportedly cost Jet Blue $30 millionl. But the cost was relatively small if as the current survey shows the airline was able to save its good name.

"Don't Wait. The Time will Never Be Just Right."--Napoleon Hill

2009-09-15T10:45:00.001-05:00

One of my hobbies is to follow firms which are making a killing in a down market. Fortune in its Aug. 31 issue has done the heavy lifting. So let me focus on a couple of companies that seem to be making a joyful noise in these terrible times.

First up, Research in Motion [RIM], makers of the Blackberry. There seems to be no denying this great player, whose earnings per share grew at an annual rate averaged over the last three years of 84% with actual revenue for the past four quarters of $11 billion, making it No. 1 in Fortune’s Top 100 rankings. This is a tremendous achievement and shows what can happen when a leader decides to build on its existing franchise, to the point that it even outdistanced Apple, which had only 46% EPS growth over the last three years, with revenue in last four quarters of $33.6 billion. This despite the fact that in that period Apple introduced different versions of the iPod, upgraded its computer offerings and improved the iPhone (which had sales of 5.2 million in the quarter ending June 30).

After telephony, my attention turned to media which is in such a state right now that it wasn’t even represented in the top 100. The closest contenders from media’s sister tracks were first Dreamworks which because of its distribution deal with Walt Disney came in at 63, followed by Marvel Entertainment, creators of Spider-Man and the X-men, which managed to rank 64.

Retail, as you might imagine, took a pounding. There were only two apparel manufacturers listed: Deckers Outdoor the shoe company that makes those super-warm UGG boots topped out at 35 followed by Guess, the global retailer that is having such success in Europe, at 36.

In the fast food category, two chains made the rankings: Buffalo Wild Wings a sports-themed restaurant chain, at 82, and Chipolte Mexican Grill, which features 100% naturally raised chicken and had EPS (earnings- per-share) growth over three years of 40%, at 83.

Garmin, maker of portable navigation devices, many of them installed by car-makers at the factory, saw earnings grow 36% and was ranked 84. The company sold just under 17 million units last year, a 38% increase over 2007. So they are a brand to watch.

Many of the top 100 are technology and engineering companies you probably never heard of. But many are companies, which with improved marketing could do even better.

We don’t know what most of these brands are spending—but we know most of them [and I’m not including Apple here] are spending a lot less than they should.

For instance, according to the Brandweek 2009 Directory, Chipolte Mexican Grill only spent $5 million in measured media in 2008—most of it through its lead agency, DeVito Verde. By contrast, Buffalo Wild Wings, based in Minneapolis, spent a respectable $20 million through agency 22quared, Inc. in Atlanta.

UGGs isn’t even on the Brandweek radar yet, so it’s hard to know what they’re spending on advertising and marketing, if anything.

On the other hand, Garmin, with offices in Olathe, Kansas and Georgetown in the Cayman Islands, which has been a favorite of mine for several years, spent $51 million in measured media in 2008, all of it through Fallon in Minneapolis. Obviously they sense the opportunity to drive revenue by increasing consumer demand for their interesting product line of dash mounted GPS locators, and, through intelligent marketing, they are supporting the decision of some automakers to install their products at the factory.

Another brand I have recommended that agencies follow is Green Mountain Coffee Roasters, and I’m delighted to report they came in at 11 in the rankings—with revenue growth of 51%. Their coffees are sold in single-cup servings that require an investment in Keurig-like coffee brewers. But they’ve discovered that not only convenience stores like to stock their coffees—people want them in their homes. But they are not allocating enough dollars to marketing. According to Brandweek, in 2008 they spent only $36,000 [through Brandbuzz, an agency that specializes in word-of-mouth]. Obviously this is an exploding brand that needs to drive sales in the next three years by dedicating more dollars toward more traditional marketing.

Anyway I encourage you to get a copy of Fortune or download their rankings from the Web. Because these fast-growing, smaller brands are the kind of companies that ad agencies and marketing service companies should nurture early in their trajectory.

Business development people are always asking me what tomorrow’s hot brands will be. It’s interesting that few of them realize the answers have already been published for all of us to know and act on. So read this list and get going. These brands are hungry for smart marketing help.

Proof, if any was needed, that 50 years after Woodstock we live in a very different, not-so-Mad, Mad, Mad world.

2009-09-07T14:31:00.001-05:00

There has been a lot of wingeing recently about the way the world of advertising is changing. And perhaps it’s evolving even faster than we imagined. Several disparate proofs of this have crossed my desk in the last week:

Consider a report from the Gartner Group predicting that mobile ad spending (worldwide) will grow 74% this year to just under $1 billion and then in 2011 will take off and by 2013 will pass $13 billion.

Can you imagine the trajectory of such a medium? The line on the graph is pointed almost to the vertical.

What is going on to drive velocity-fueled usage? The number of hours people spend on their handhelds is increasing because the new smartphones allow you to do so much: make and receive phone calls, receive and send email, download music and short videos, book a restaurant, check the news, Twitter a friend, check the stockmarket and your Facebook page, surf the Internet and on and on. There are already 50,000 apps for my iPhone. I’m going to need an app just to decide what apps I want.

But in order for this forecast to be realized three things need to happen.

First, the per month usage cost of a smartphone or iPhone needs to come down from just under $100 to an affordable $50 or so a month.

Second, Internet browsers like Yahoo!, Google, Microsoft and AOL need to incorporate new ad formats into their content or open up new templates, that allow people to access ads when they want to without interrupting tasks like Web access and GPS positioning-related activities.

Third, ads either have to deliver a service or product or be so entertaining they rank up there with the best of YouTube.

Meanwhile, the business model for TV, magazines, radio and outdoor will continue to self-destruct and constrict as less and less ad dollars are available to support content—or the content will have to get better, as is happening with the stories in my Economist and New Yorker, to justify a higher sub price for the consumer.

Old media will be able to find a place in the digital world for some of its content. So Sports Illustrated can deliver scores and player profiles and betting tips. But not long features.

Vogue might be able to capture some readers who want up-to-the-minute celebrity gossip or deals on shoes and clothes between monthly issues. But not long-form.

It’s a digital world. There are still great fortunes to be made. But not in the old way at the old levels. So where does that leave sex, drugs, alcohol and rock-and-roll that used to fuel this industry?

For that we need to turn to that iconic raconteur and culture maven, Jerry Della Femina.. Now, at 73, chairman of what, by my count, is the fourth agency bearing his name, he talks vibrantly, in the August 30 issue of USA Today, about the time when three martini lunches were standard.

He recalls how he and his colleagues at Della Femina Travisano & Partners in mid-town Manhattan would go to the Italian Pavilion (now Michael’s) and, as they walked through the door, the bartender would automatically mix their first round. Everyone would down that, and then as they started to look over the menu, the second would arrive. That would be downed and then as they were placing their lunch order the third would arrive. To me that’s Hunter Thompson’s definition of perfection: drugs are dripped into your system at a constant rate without any need for communication.

As for sex, there was always lots of that going on. Della Femina says the agency even had an “agency sex contest” at the end of the year, where in a blind vote, the winning couple would get a weekend at The Plaza Hotel.

“Nobody drinks or screws around like that anymore,” says Della Femina who today is chairman of Della Femina/Rothschild/Jeary and Partners. “It all stopped [by the mid 1980s] when the financial guys took over. Maybe agency chairmen can still drink, but not the soldiers. Today it’s about people looking at the bottom line. It’s changed as a business. Mad Men is celebrating a time that no longer exists.”

Today, all the license for abuse that was underwritten by the 15% commission is gone. But there is still room to have a lot of fun in advertising and publishing or broadcasting, and I know a lot of people who do. Jerry Della Femina thinks it was “the financial guys” who ended the Bacchanal. I think it just ran its course and now all things digital are forcing on us a new communications model for a different age.

A Sad Story: The Rise, Fall, Rise and Fall of Motorola

2009-09-03T13:17:00.001-05:00

Motorola is one of America’s proudest brands. Started by the brothers Galvin in Chicago in 1928 as a battery company, it moved to manufacturing car radios, hence the name a combination of “motor” and “Victrola.” In 1943 the company went public, after producing the first walkie-talkie for the military and all kinds of cellular infrastructure that made possible the cell phone of today.

It pioneered developments of solid-state technology which led to the transistor radio. Beginning in 1958, it developed two-way radios for NASA space flights, allowing Mission Control to communicate with astronaut Neil Armstrong as he stepped on the moon in 1969. It began manufacturing televisions in 1947 developing the first truly rectangular color TV, a business it later sold to Panasonic.

In 1983, it came out with the first commercial cell phone, a DynaTAC 8000X. Along the way, it also invented Six Sigma, a quality improvement process Jack Welch at GE made famous.

But with all these inventions, Motorola was perpetually developing products which ultimately some other company did better—often after buying the brand, a team of engineers and their management from Motorola.

Nothing is sadder than the tale of what happened to the RAZR. This amazingly thin, handsome clamshell phone was developed by Motorola in July 2003 and introduced a year later. Shortly before that, I remember being at a board meeting of the VCU Brandcenter when Geoffrey Frost, Motorola’s marketing chief, slyly opened his fist and passed around this most intriguing jewel. Geoffrey, who unfortunately died two years later at age 56, planned and executed the “Hello Moto” campaign that launched this product, and was around long enough to see it sell 110 million units worldwide, boosting Motorola for a time to second only to Nokia in handheld phones.

But before long competitors began to come out with better features--rich 3G phones that cut into its sales. Manufacturers, including Motorola, began slicing prices in a battle for market share. Though some people still swear by it—Israeli’s former foreign minister Tzipi Lini still carries one—even before Steve Jobs introduced the iPhone in June, 2007, the RAZR was doomed.

Motorola, under CEO Ed Zander, never was able to get a second act. Today Co-CEOs Greg Brown and Sanjay Jha are trying to save the company, now based in Schaumburg, Illinois, as it moves away from producing cellphones to other phone-related technologies. But its revenues fell last year to $30 billion and it had negative net income of $4.2 billion.

This is a case where marketing can’t save a brand, no matter how revered. As Sony has discovered with micro digital music storage and delivery systems, it’s no good being almost as good. You either have to be cheapest or the best.

Cheapest means allowing price to overcome value and turning your inventions into commodities. Being best lends itself to great marketing, but only if you can maintain that top-of-the-hill technology ranking. Even Apple has had either to cut the prices of its new iPod-like devices, or keep innovating and introducing new technologies. But Apple now has another advantage that will confound competitors. It owns “best of class” ratings in two separate categories, digital music storage and delivery and 3G “smart” cell phone telephony. And all its devices synch to one another. So it’s very hard for competitors to outdistance it.

At the beginning of this decade, the field in handheld technology was wide open. There were Nokia, Sony Ericcson, Samsung and Blackberries, among others—fighting Motorola in cell phones. For Motorola to have gained the lead not only in image but volume and then lose it due to a failure in innovation and vision seems particularly unfortunate. And the blame must be laid first at the feet of Zander and his management team.

Some in the blogosphere say that the RAZR killed Geoffrey Frost through overwork. Maybe so, but one thing is certain: whatever Geoffrey did to carry Motorola to the mountain-top, it wasn’t in his remit to keep it there. The story of Motorola’s collapse only makes Jobs’ accomplishments at Apple all that more astonishing

Motorola. What a treasure. Will it end up like Schwinn bicycles, Polaroid cameras and Frigidaire refrigerators, with a place in America’s brand pantheon—but without a dominant entry in today’s marketplace? Or is there still time for Motorola to stage a comeback? If it does, the brand’s heritage will be waiting.

Is P&G Cranking the Compensation Screw Too Tight?

2009-08-25T14:48:00.002-05:00

P&G, which is known as one of the best clients to have in terms of longevity and marketing rigor, has over the last decade been moving from the commission-based compensation to a fee-for-service model. Now it has come up with a new hybrid system which, though well intentioned, is sure to frustrate everyone –- especially those who were applauding as P&G under former chairman A.G. Lafley began to foster creativity and innovation in the making of more effective brand connections with consumers.

Beginning this summer, and perhaps in some cases earlier than that, P&G has begun to assemble all its roster companies on a particular brand for internal pitches. In the past, the “winning” firm got to roll out its own idea and got bonused for its creative thinking. But that’s no longer the case.

Under a new system denoted with the shorthand BAL (Brand Agency Leader), all roster agencies will get paid an hourly rate for their work for P&G. Then, in a creative scrum, they are given a problem and everyone posits ideas for the brand. The ideas become P&G’s intellectual property. The brand then can ask any of its “vendor” entities to become a BAL and lead the others to insure that the idea is translated into effective brand communications. And all participating roster agencies have the opportunity to receive a small bonus of 5% to 10% based on whether the brand increases sales and market share down the line.

“[Agencies] are more accountable now,” P&G finance director Rich DelCore told Bloomberg news service last April. “It’s about total consumer engagement and brand building.”

Well BAL certainly is a way of fostering team spirit and, you could argue, it’s just creative collaboration on a grand scale. But it strikes me that P&G, which at $8 billion now has the largest annual marketing budget for any company in the U.S., is really creating a system that prices creative thinking as a commodity. And it’s a system that is not only unfair to the different players but bound to fail.

Advertising and intellectual property lawyer Rick Kurnit, of the New York’s Frankfurt Kurnit Klein & Selz PC, believes that this new system merely reinforces the myth that brilliant creative and strategic thinking can be purchased on an hourly basis.

P&G has already ratcheted down its “retainer” payment to agencies of from 15% (of mediaspend) of yore to a reported 8.5% equivalent today. And it can be assumed that procurement officers will ratchet that fee even lower if agencies agree to stay in the game.

As for collaboration, everyone is teaching this today. But by collaboration trainers in creative thinking mean that people should work on problems as teams and not fight with each other for mediaspend and revenue.

But it’s never been proposed that brands should be blind to who was coming up with the best ideas. At collaboration training sessions, teams are given a brand problem. They retire and return, and the team with the best solution is recognized as the “winner.”

It’s bad enough that brands won’t allow their different elements retain ownership of the intellectual property (IP) of what they devise—based on the argument that they are working “on the client’s clock.”

But in the new P&G model, agencies will only be rewarded minimally for winning ideas. “For the key people who make a difference in creative thinking and strategic thinking to get an extra 5% of profit margin for the agency does not reward them or the agency sufficiently,” says Kurnit. “These kind of stars need to be brought up to a competitive level with other creative endeavors or they’re going to leave the business.”

P&G has over the years consolidated its advertising from a roster of many shops down to a few global networks, basically Saatchi & Saatchi, Grey and Leo Burnett. These networks can’t afford to stay around for skimpy retainers. When their ideas do prevail they expect and deserve not only ample rewards but enough longevity to assure that their early efforts for a brand compensate for their investment.

We are still waiting for a model that pays an agency a premium for great ideas and still gives roster agencies the security and fair payment they need for maintaining manpower and overheads to be great.

What are these great ideas worth? “A man will turn over half a library to write one book,” said Samuel Johnson. P&G may have to pay “half a library” just to get one very powerful, enduring idea—but whatever it takes to launch and sustain brands over time it is worth it.

Flash: Volkswagen Fires Crispin! Is It Worth Having a Review?

2009-08-18T16:02:00.004-05:00

What does it mean when a car brand fires an agency?

Perhaps not that much, unless you happen to be living with one of the principals of the incumbent, in which case you might as well pack up and take a long vacation in Kenya or the Antarctic, because your significant other isn’t going to be fit to live with for some time to come.

Volkswagen this week called a review on its $200 million-plus account at Crispin, Porter & Bogusky, Boulder, CO, after almost five years together.

There will be those who claim they could see it coming. The brand has new global and U.S. marketing directors and the parent is anxious to see the brand grow market share everywhere and certainly in America.

Sales here are down this year, but only 13 ½% compared to an industry average of 30%. But maybe sales alone don’t tell the whole story.

Tim Ellis, vp/marketing for Volkswagen of America isn’t giving very many clues on what sparked the decision. He issued a statement saying: “Our goal of rapidly increasing our volume in a mature market requires the Volkswagen brand to evolve into a more relevant mainstream choice.”

I suppose the emphasis here is on “mainstream,” raising questions about Crispin’s sometimes oddball work for a brand that didn’t seem itself sure of what it wanted to be in the competitive United States market. Sometimes it stood for safety, sometimes for value. Its cars other than the Beetle at the low end and the Touareg at the high end were mostly mid-market.

So what kind of agency is Volkswagen looking for? Ellis didn’t say. Most commentators are handicapping either another creative agency or something a bit more safe.

David Kiley, the respected Business Week auto specialist says in a post to B/W’s website Monday, when the story broke, that he is expecting Omnicom’s DDB, Volkswagen’s agency in most other markets, “to pull out [all] the stops to win the business.”

He rates IPG’s Deutsch/L.A., which has handled Saturn and Mitsubishi, as a top contender. [Saturn has just been bought by Penske and it’s expected that spending will be cut way back and the account moved or done in-house.]

But IPG may get a signal from GM to hold Deutsch out of the VW pitch on the chance that GM’s new marketing czar Bob Lutz will put Buick, now at Leo Burnett, or Cadillac, now at Modernista!, up for review later this year.

Another IPG agency hungry for a car account is Lowe/New York, led by British creative star Mark Wnek. Wnek’s team did the “born from jets” campaign for Saab, only to see GM move the account several years ago to McCann/Detroit.

Moving down the IPG ladder is the Martin Agency, with Saab and Maserati in its DNA. The Martin Agency won Wal-Mart’s stunning $400 million business over a year ago and has managed to digest it nicely. So maybe VW could lure it into the scrum.

If Volkswagen finds itself locked out of the IPG stable, there are still plenty of other great agencies on the horizon—namely the three “old” creative sisters: Goodby, Silverstein & Partners, San Francisco; Wieden & Kennedy, Portland; and Fallon, Minneapolis.

Fallon lost BMW several years ago to GSD&M, Austin, TX, where it rests, apparently safely, today. Goodby lost Saturn to Deutsch/L.A. and then had Hyundai for a time, only to find the brand moving its advertising in-house. Wieden hasn’t had a car for decades. It’s perking along nicely with Nike and some Coca-Cola business, and no doubt would be interested in a car. Its London office has done iconic work for Honda, but there’s no sign the marque is thinking of moving the U.S. account from Rubin Postaer & Associates, Santa Monica, CA.

But all of them should ask how beat up VW felt by Crispin’s sometimes famously quirky work. All good creative agencies get cranky at times; how else can they come up with work that’s interesting and breaks through the clutter? But unless VW is ready to give its agency some room to breathe, none of these fine, creatively-focused companies would want the business.

VW AG has named Fiat marketing chief Luca De Meo as its new global marketing chief. If he wants to insure the brand communicates the same values in its advertising all over the world, he’d be better off directing Tim Ellis to go with DDB.

According to press reports in Detroit, Volkswagen of America wants to quadruple its 800,000 cars and light truck sales by 2018. Besides the lower-priced Beetle, the mid-range Tiguan, GTI and Jetta and the $30,000-$40,000 range CC and the Touareg (over $40,000), it will introduce a new compact sedan next year and begin producing a new mid-size sedan soon in its new Chattanooga, TN, assembly plant. So the pressure will be on to step up the pace.

This blog is written on a Tuesday, only a day after the review was announced – and six days before the trades publish their in-depth look at the pitch. I don’t like to compete with the weeklies. But for my money, it’s DDB/New York’s account to lose. I’m not sure Eric Silver counted on pitching a major car account six months after taking the creative helm of DDB/NY. But with DDB’s awesome global resources and its closeness to the parent in Wolfsburg, it’s hard to imagine any other agency having much of a chance.

TOYOTA FLIRTS WITH GOING IT ALONE

2009-08-10T16:05:00.003-05:00

AdAge reports that Toyota is thinking of firing its ad agencies and doing everything in-house. And what a bonanza that would be for the bottom line. Toyota spends $900 million in measured media in the U.S. alone, according to Nielsen. That means they’re probably paying $90 million to $100 million a year to their several ad agencies including, by my count, Saatchi & Saatchi/Torrance, Team One/El Segundo, Attik/ San Francisco, DentsuAmerica, New York and some dogs and cats who probably work on a project on an occasional basis. I’ll bet someone told Yukitoshio Funo, CEO of Toyota Motor Sales USA, Inc., that he could create an in-house agency that could produce the same amount of work with the same punch for one-third the cost.

Who wouldn’t want to save $60 million on ideation and production and $100 million on media in an economy like this?

Right? Wrong. This is the latest in an unhappy series of examples of client impatience with the high cost of advertising, as search and other digital forms of communication become more important and agencies have increasing problems with proving the ROI of what they do. Clients want communications that are measurable, have more punch, are produced faster and with less cost and that can be repurposed across multiple formats as audiences multi-task and become more elusive.

That’s a worthy goal. But, if in trying to meet it, you conclude that advertising can best be made in the same kitchen that manufactures and sells Corollas, then you’re missing the whole point of using arms-length creative resources.

Creative people--the men and women who actually unlock the puzzle of how to communicate brand messages in fresh ways that people hear and remember—are hard to recruit and retain. Coming up with ways to make the oddly shaped Scion or the pricey Prius seem as charming and appealing as a square Taurus is not an easy task.

Toyota makes great cars at a great price, sans doute. As a result, according to a senior Saatchi executive I interviewed for my 2003 book, “Casting for Big Ideas,” Toyota USA executives “have contempt for just about everything that we do.”

How many ubiquitous American brands have felt the same way? Howard Schultz of Starbucks, after all, launched his brand by just building stores without any advertising. As a result, his customers have forgot that what he was really was selling is a personal reward and have begun to think of a Starbucks as a $2 cup of a black, caffeinated beverage. Wal-Mart kept their ad agencies on a tight rein, limiting them to cheap commercials featuring yellow smiley faces, until the anger consumers felt for the way Wal-Mart stores destroyed the retail environment of their small towns and pretty suburbs grew stronger than the desire to go into a noisy, dirty, giant warehouse and buy something cheap.

Eventually brands have to communicate not only price and availabiliy but value and emotion. Even as our attention moves to the Internet, where brands are often accessed as a button on a search page, there still has to be a reason for picking a J.Crew wedding dress over one bought at Macys.com. We have plenty of research proving we’re not really rational animals when it comes to shopping. If we were, then I suppose Toyota is right: it’s a lot cheaper to hire several 100 20-somethings and lock them away in a windowless office with plenty of free coffee and pizza, to grind the work out 24/7, then it is to deal with a number of different agencies, each with their prima donnas and occasionally over-the-top notions of great ideas.

But it won’t take long, as it did for Wal-Mart, for Toyota to realize there is something very wrong with the captive agency model. That, in fact, it’s better to have professionals knock themselves out—and even trash half of what they present--then to try to shoot “junk” and run it so often, the Toyotathon message finally gets stuck in people’s brains. Even if you saved $50 or $100 million a year this way, sooner or later your sales department is going to complain that the work is not “making the cash register ring.”

I wager that before long you’re going to hear from Toyota that the press release about firing its agencies “was an exaggeration.” And all Toyota Motors USA wanted to do was have a little in-house design agency in Torrance that could knock out an occasional sales brochure. Fire their agencies? Where did the “media” come up with such a bizarre idea?

Wendy's: Still Mourning the Passing of Uncle Dave?

2009-08-04T14:41:00.003-05:00

For 20 years or so Wendy’s rocked along at Saatchi & Saatchi Advertising, a confident player in the fast food stakes, behind McDonald’s and Burger King, safe in the knowledge that its fare was fresher tasting and sometimes cheaper. So all the advertising had to do was deliver an appealing message to keep Wendy’s “top of mind. That it did, built on the shoulders of a genuine celebrity, founder Dave Thomas who even well into his 80s gave us a reason to want a non-frozen, freshly grilled, square burger, with plenty of fixings.

Then Dave died in 2002. And Wendy’s has been lost in the wilderness ever since. Someone came up with the idea of building the brand around the iconic red-haired, pigtailed woman in its logo. Not a bad idea, but by itself neither a marketing nor an advertising strategy, as the people trying to make this character come alive quickly learned.

So they tried jokes and added some new lines. “3conomics” for three sandwiches for 99 cents, and “It’s Waaay Better than Fast Food.” Then they had a red-haired, pigtail-wig wearing white man walking in a forest, crying out “I deserve a hot juicy burger!” And later a red-haired, pig-tailed black man sitting next to a white guy eating a less than appealing “air supply” burger.

None of this really worked. While McDonald’s menu outdistanced the other two for innovation and breadth and Burger King tested a line of new sandwiches, Wendy’s pretty much limped along at the back of the pack.

Now investors Nelson Peltz and partners, who bought Wendy’s and Arby’s from the Thomas family to form the Wendy’s Arby’s Group (NYSE symbol: WEN), have called for a review and moved the $300 million advertising account from Kirschenbaum & Bond across town in New York to the Kaplan Thaler Group, an agency known for building Aflac from nowhere with an intrusive, quaking duck.

Kaplan Thaler beat out an impressive list of finalists: the Martin Agency, Bartle Bogle Hegarty, California’s Venables Bell & Partners and the incumbent. That’s because Linda Kaplan-Thaler’s people not only know how to entertain with the sensibilities of musical comedy, they are smart, strategic thinkers.

I predict that Linda Kaplan and her gnomes will figure how to crack this brief. I expect they will build red-haired, pig-tailed Wendy into an icon that delivers a smart, memorable message, not a sense of “What was that about?” irritation. You only have to look on YouTube for all the riffs on what’s been wrong with Wendy’s to realize that the under-30 crowd really doesn’t like the advertising, but is still intrigued with red-haired icon and just about anything from the fast-food chain named after Melinda Thomas’s nickname. So there’s still a lot of heritage to build on.

All fast food today still tastes like cardboard to me. But some of it is more appealing than others. And all of it is fast and cheap. You just have to pull a few aces here to strike a winning hand.

What's Wrong with Bob Lutz Taking a Vacation Before He Wields the Axe?

2009-07-27T14:49:00.001-05:00

Everyone in the ad world is atwitter about Bob Lutz being given the reins of General Motors marketing and advertising. And that certainly will be the main event for a couple of years to come. Being responsible for the $600 million that Chevrolet spends on advertising every year; Buick’s $100 million; Cadillac’s $200 million; GMC Trucks’ $200 million; and GM corporate other $100 million – for a grand total of $1.2 billion—is nothing to sneeze at.

But the bigger problem revolves around what Lutz and his boss, GM CEO Fritz Henderson, are going to do to make these marques best sellers. And already a drumbeat has started in the industry saying Lutz isn’t up to the task, either because he doesn’t have the training, or, at 77 is too old to understand how to spin a good idea through the new media matrix. As marketing strategist Al Ries wrote in AdAge this week, “Bob Lutz seems to be on the wrong track when he immediately focuses on fixing the advertising….Advertising at GM is not broken. Marketing is.”

What set everyone off was Lutz’s first move, which was to call in each of GM’s half dozen agencies for a 20-minute review of their work. Apparently he didn’t find any of it very inspiring. And then he decamped for a long-planned holiday on the Caribbean island of Montserrat.

Well first of all, I think the guy deserved a rest. He’s just survived seven grueling years trying to retool GM’s product line, six months of Obama administration-ordered, GM downsizing and a 60-day journey through bankruptcy.

But Ries and others, I believe, are selling him short if they don’t think he’s enough of a marketer to get things moving. As he told veteran car writer David Kiley in Business Week, “Most people assume I’m an engineer. Actually my MBA is in marketing from the University of California….[and] I was head of marketing and sales at BMW in Munich when ‘The Ultimate Driving Machine’ tagline was born.”

Can Lutz and his colleagues unlock the power of these venerable old car brands? I don’t think anyone can say. What we know is that the new team at GM has only three or four years to get this right—and they have just about every force imaginable working against them.

Besides the clock, they have to keep an eye out for government [U.S. and Canadian] which now owns a majority of their stock—but really doesn’t know anything about making and marketing automobiles. Second, for every brand in almost every category they’re losing market share. Never mind that this has been a terrible time for cars and trucks in general and that money is tight, making consumers windy of making big purchases and GM’s board and banks less than ready to fund any new products. And even if they had some good cars in the pipeline, it’s still not known how important fuel efficiency will be or where they’re going to find affordable new battery designs to help them catch up with the Japanese in hybrid manufacturing.

Al Ries is right about one thing: the biggest challenge facing the Lutz team is how to position Chevrolet, Cadillac and Buick-- and how to make each of them “best of class” in their individual market segments.

Cadillac can’t just occasionally have a good model. People have to start perceiving it as the equal of Mercedes, BMW and Lexus. And then Buick has to be up there fighting BMW, Audi, Acura, Infiniti, Hyundai and Ford and Chrysler in the “just under premier” class of mid-priced luxury cars.

Then Chevrolet has to go up against Ford, Chrysler, Jeep and the giant imports, Toyota, Honda, Volkswagen, Hyundai and Nissan. [And, of course, many of these “imports” are manufactured in the U.S. so “made in the U.S.A’ doesn’t necessarily point consumers at a GM car.]

So let’s give Lutz his couple of weeks off the radar in Montserrat. Then he has to come back and make some decisions, fast. Either stay with the current agency line-up or bring in fresh blood. Either keep the CMOs he inherited or retool his own internal team. Either leave the muddy positioning of his three main car brands where they are or sharpen their positioning overnight. Lutz told Ries: “I think you will very quickly see a drastic change in the tone and content of our advertising. And if you don’t, it will mean I have failed.”

This is not a game for the feint of heart. Let’s hope Lutz is as feisty and sure-footed as he sounds. He needs a vision, a plan and then near perfect execution.

The Enduring Power of "Old Media"

2009-07-21T08:22:00.002-05:00

There is lots of excitement about social media and increases in spending on online display and search advertising—especially as a means for growing new brands and maintaining sales of established brands in this most difficult year. But in the rush to embrace “new media,” there seems to be an almost obscene push to discount the strength of old media, especially as it involves print and TV. Certainly newspapers seem to be in a free-fall this year, and many leading consumer print titles are showing major advertising drops. But that doesn’t mean old media has completely lost its punch.

If new media can be said to command 15% or so of U.S. media spend this year, that still leaves 85% of a $260 billion or $160 billion pie—depending on your methodology –- devoted to building brands the old-fashioned way.

It’s hard to be specific about where things stand, because someone has moved the goalposts. Usually at this time of year, the industry depends on Interpublic’s venerable director of forecasting Bob Coen to call the field. But Coen has just retired and his successor at Interpublic’s Magna unit, Brian Weiser, has changed the way Magna is going to keep score.

In the shorthand of media forecasting, Weiser says he’s going to use a deductive “top down” methodology, based on reported revenues of media companies and other factors; whereas Coen used a so-called “bottoms-up” methodology, that projected volume based on spending estimates and rate cards.

As result, whereas Coen was forecasting a $258.7 billion U.S. media spend in 2009, Weiser predicts it will finish at $161.0 billion. That’s a decline of almost a third. But using Weiser’s methodology for the entire year, declines within some categories are much more modest. While Weiser said online spending would come in at $23 billion, a drop of 2%, he still forecasts magazines at $16 billion, national TV $32 billion; local TV $15 billion; radio $14 billion and so on. Overall he says spending will be down due to the slowdown in the economy and some marketers need to slash costs, but actual declines for TV will be only 14%, and should expand on an average annual basis through 2014. According to Joe Mandese in Mediapost.com, “Weiser said the U.S. ad economy declined 18% during the first and second quarters of 2009, but expects conditions to improve during the second half of this year, leading to an aggregate decline of 14.5%.” And the turn-around is supposed to come in 2010, when indicators for many traditional media categories (but not newspapers) are headed north.

Net-net: If I were a marketer looking to learn how to capitalize on the growing interest in social and online media, I might set aside a quarter of my budget for new media placements—but I’d still count on old media to be an underlying driver of my business.

Reports of the death of TV and magazines are, in the words of Mark Twain, greatly exaggerated.

When a Brand Changes Its Spots

2009-07-13T12:54:00.007-05:00

Strong brands are hard to change. Take Starbucks. Howard Schultz has retaken control of the company and is trying to return the Starbucks store experience to his original vision: a place where people can enjoy the sensation of slowing down and contemplating life’s simple rewards. He wants you to be able to “smell the coffee.” The problem is that since he bought and built Starbucks in the mid ‘80s, the company has grown from a tiny regional brand to a $10 billion, global colossus, dependent for its revenues on many extensions, including express drive-thrus, where the only thing a consumer smells is another car’s exhaust.

So while it may be difficult for Schultz to replicate the original impulse that drew people to his brand, it’s not impossible. Likewise for people. If, like me, you are a fan of Danielle Sacks pieces in Fast Company you may have read her profile of former Wal-Mart marketer Julie Roehm and how she is gradually overcoming her image as “The Scarlet Woman in Bentonville.” http://www.fastcompany.com/magazine/137/the-scarlet-woman-of-bentonville.html

In 2006 Wal-Mart fired Roehm as its chief marketing officer for, among other things, receiving gifts—including a sushi dinner and some vodka—from DraftFCB, the agency to which she ultimately awarded the company’s $580 million advertising account. Lawsuits were exchanged.

As the article points out, when Roehm arrived in Bentonville, she was already a celebrated marketing strategist—having won “Automotive Marketer of the Year” accolades from Brandweek and been named to Ad Age’s “Advertising Hall of Achievement.” In fact, she had carved out quite a reputation in Detroit, where she led the successful U.S. launch of the Ford Focus and later, as director of global marketing communications for DaimlerChrysler, oversaw $1.6 billion in advertising for Chrysler, Jeep and Dodge.

In other words, Roehm made her marketing bones as a gear-head. But what could she do moving denim and salt lamps? She probably never should have tried the switch to retailing—especially when the job required embracing the generally humorless, rigid middle-American values represented by Wal-Mart. In the last three years, the lawsuits have been dropped and Roehm has formed her own consulting firm, Backslash Media, and worked on projects for Credit Suisse and interactive marketer Acxiom.

But ironically, due to the vagaries of the housing market in Bentonville. she and her husband have not been able to sell their $1 million mansion and, therefore, been forced to stay on in a company town where she has been unofficially been branded a “scarlet woman” –- enduring the kind of vilification once suffered by Sarah Good and Mary Eastley in the witch trials of Salem, Massachusetts, in 1692. Roehm, of course, hasn’t been put to the stake—but she and her family have been exorcised from the local social scene. A serious hiccup for Roehm’s career?

Maybe not. Most people in business have second acts and recover from setbacks. Nationally, most executives would be inclined to overlook Roehm’s missteps at Wal-Mart in order to enlist her significant marketing skills. Wolfgang Bernhard, Chrysler’s former chief operating officer recalls how she rejuvenated the Dodge brand with the in-your-face campaign, “Grab life by the horns.” “Normally from marketing people, you never get a message so powerful,” Bernhard says. “She did it.”

Lessons learned: Besides paying attention to salary or titles, high-fliers need to get over past epiphanies and take a cold, hard look at the challenges a new job in a new town for a new company requires. And companies need to do a better job explaining culture and goals to new executives and prospects. That aside, you could say the culture of marketing in America is itself kind of limiting and cloistered. Just about everyone at the Association of National Advertisers annual meetings knows one another. They follow each other’s careers and have opinions about peers strengths and weaknesses. That’s what getting a reputation at the top of American business is all about. Times change. Someone branded a rebel in one era, might be regarded as a bold, innovative thinker in another. I doubt that we’ve heard the last of Julie Roehm. Hopefully her next berth will be a better fit and her tenure a little bit longer.

Killing the Goose: How AT&T Frittered Away Its iPhone Advantage

2009-06-23T08:50:00.001-05:00

Everyone knows the key to a successful brand is differentiation. Two years ago this month, when Steve Jobs introduced the iPhone, he made AT&T the exclusive service provider for the iPhone. Since then 8.5 million iPhones have been activated. Today some 12% of AT&T’s total subscriber base uses the iPhone—a revenue generator worth $799 million a month. Not only is it a differentiator, it’s a new business engine. Roughly 40% of AT&T’s new customers come via the iPhone.

By every measure—revenue per customer, cancellation rate, etc.—AT&T’s iPhone customers are worth well above the average wireless subscriber. Today thanks to the continuing excitement over the iPhone and its exploding world of 50,000 downloadable apps, AT&T enjoys twice the smartphone usage as all other carriers combined.

But while Apple has refreshed and improved the iPhone twice in the last two years, AT&T has not used this window to improve its service. Though AT&T claims to have the fastest 3G network—users know how slow downloading can be. And, though AT&T’s advertising touts “more bars in more places” its users live with the frustration of dropped calls.

As a result, if Apple doesn’t agree to extend its contract for service exclusivity with AT&T in 2010, it’s hard to calculate how many iPhone users will escape to a competing service—but the loss, in most cases to Verizon, will be substantial.

But this is crazy. AT&T will never have this kind of opportunity again. A subscriber, after all, isn’t a one-time charge, but a cash cow that keeps on earning revenue and profit, month-after-month, year-after-year.

Here’s what AT&T needs to do in a hurry:
• Come up with a higher service standard. [Example: “If we drop your call, the next call is on us.”]
• Come up with a better response mechanism that indicates you’re serious about service. [“We have real live operators standing by to answer your complaints.”] Ten years ago the cable companies had a service/ image problem. Today, you have an outage and call your cable company. Someone not only takes your call but either fixes the problem over the phone or makes an appointment to send out a technician the next day – and then doubles back to be sure the technician appeared and you’re satisfied.
• Meet expectations on the value proposition. You can be sure that AT&T will not be alone with 3G for very long. Either raise the speed of downloads or give customers a break on subscription fees. If AT&T’s service is not demonstrably faster and better than the competition, it better be cheaper.

Just saying you are the best doesn’t work anymore. Customers know to discount braggadocio. And eventually state attorneys general will begin filing lawsuits if a carrier doesn’t live up to its promises.

Certainly someone at AT&T senses the problem and is working on a fix. The question is whether improvements will be strong enough and appear soon enough to give the AT&T brand some luster before the clock runs out. It’s going to be an exciting race to watch. Meanwhile, though AT&T reportedly isn’t happy about paying Apple $10 a month for every subscriber, it’s hard to believe they wouldn’t extend that fee or even raise it to get Apple to give them another three year contract.

David v. Goliath; Little Southern Agency Cocks a Snoot at the Big Guys on Mad Ave

2009-06-16T09:38:00.004-05:00

This blog is about brands and how we can learn from the way they do a few things right and a lot of things wrong. But I can’t resist today celebrating a brilliant piece of self-promotion by a small, highly creative agency down in Charlotte, North Carolina.

John Boone and David Oakley are not some backwoods good ole boys, but two very smart creatives with big city credentials. John has put in some 20 plus years as an art director including stints at Team One where he helped launch Lexus and at Chiat Day where he worked on Nissan. Dave has worked in New York as a writer and creative director at Y&R and TBWA/Chiat Day. Both have a collection of statues from Cannes, the Clios and The One Show—the world’s leading creative competitions. In 2000, they decided to hang out their own shingle and see what kind of big brands would fight their way to Charlotte, a city known for banking but not advertising.

In the last nine years they’ve done some memorable work for clients like Ruby Tuesday restaurants and CarMax, but somehow those big tasty accounts—even the few that when they got fed up with the big agencies in New York and were ready to look “out of town”—haven’t made the turn to Charlotte.

Recently I met them at a digital conference in New York and it was apparent that they were hungry to make it into the big leagues. I do some consulting in this area and we were preparing to do a phone session, when I discovered that….they didn’t need me at all.

Instead they had come up with a story on their website about “Billy,” the fictional marketing director whose boss wanted an ad agency. “So Billy went to where all the agencies were (Madison Avenue). Each agency he found claimed to be different even though all were owned by the same four companies,” the narrator tells us. “So Billy picked one.”

Then the work was produced, but “no one noticed it. Because it was like the work of all the other agencies that were owned by same four companies. So Billy got fired. So Billy didn’t have a job. So Billy’s wife killed him.” [Sound of shots being fired.]

Now that’s a nice little story that has some elemental truth to it given that today 90% of the big agencies are owned by the same four holding companies and do often produce work, that for various reasons—often because big clients and their legal departments nibble good ideas to death—doesn’t get noticed. But as charming as this tale may be, just putting it on their website wouldn’t necessarily win John and David any business. First they had to figure how to get this message out to the world and they’re dirt poor.

So instead of buying ads in the Wall Street Journal, Adweek and Ad Age, they came up with a way of distributing their homily….for free. They just loaded the whole thing up on YouTube. It’s been about five days since their story went up, and, by my count, it’s already won 328,760 views on YouTube and probably 100,000 from other reference points. http://www.youtube.com/watch?v=Elo7WeIydh8

The bloggers loved it: “BooneOakley’s new website made us grin wryly and raise a glass,” said AdRants. “The work is joyful, the animation crappy and the humor shameless.”

“Points to BooneOakley for self promotion and experimentation and risk taking….,” says Adhack.

Of course bloggers don’t pay the bills. But the work now has caused enough of a buzz that the media is starting to pick up on it, and, yes, says John Boone, they have started to get queries from actual clients.

Will they go on to win $20 million pieces of business and be able to buy Jay Leno’s collection of vintage 1940 Chevys? Not yet, but maybe. For my money, they win the prize in just knowing how to use their craft and wit to build their brand utilizing the challenging new frontier called social media, where brands have to be so interesting and entertaining, people are drawn to them instead of the other way round. It’s a “pull world” and Boone Oakley has broken the code on how to get it done.

Preparing for Your Master Class Final: Saving Old Brands

2009-06-09T15:49:00.003-05:00

Q. Pick a sagging, 144-year-old brand and make it vibrant and relevant to a broad market segment today.

John B. Stetson started making hats in 1865 with $10 worth of fur, some tools and a rented workroom. Go to www.stetsonhat.com and you’ll learn that when he founded the John B. Stetson Hat Company, hatters were considered a lazy, unreliable lot. John B. changed all that establishing a reputation as a premium hat maker. Family members built the company right into the 20th Century, where at its peak it was known as the American leader in brimmed and straw chapeaux, selling 2 million hats a year.

But demand started to fall off in the ‘50s and ‘60s and in 1970 the Stetson trademark was sold to a Brooklyn jewelry shop owner, Ira Guilden. Guilden wanted to bring back Stetson as a hat maker, so he set up a licensing agreement with a southern manufacturer and gradually nursed the company back to health. But, as we all know, it isn’t enough for a great brand to be limited to a core product. The question is what can you do to extend the brand to other products and categories?

If Breitling is a superior luxury watch—can it lend cache to a Bentley motorcar? Can fashion brands like Nautica and Ralph Lauren not only be leaders in apparel but in eyeglasses, bed linens and, in the case of Ralph Lauren, paints and home furnishings? Manufacturers may own the trademark to a brand—but brands live in our imaginations. Honda sells motorcycles and cars of high quality. Would you trust Honda to sell you an annuity or let it insure your home? The answer is maybe you would.

In 1981 Guilden provided Coty with a license to start a fragrance line that did well at the low end of the market. After Ira’s death in 1983, the company was passed to his sons Richard and Paul. Richard managed it until his death in 2006 when Paul took it over. But anyone visiting www.stetsonhat.com will see that the hat side of the company isn’t in tip-top shape. The site has year old descriptions of "new products" like the “RealTree Camouflage” a straw hat for would-be commandos interested in a little shade on patrol.

Over at www.stetson.com however the brand is more vibrant and having a lot more fun. Here Stetson CEO Pamela Fields is building a whole eyewear and apparel line, doing all kinds of promotions and through careful licensing pulling in $200 million a year. Jeans, shirts and boots build on the brand’s Western wear heritage. Fields has adopted a “Made of America" theme, targeting members of the U.S. military and trying to leverage overseas interest in cowboy related American gear.

In other words, here is a treasured American brand that probably should have died long ago. But thanks to the careful nurturing of an Eastern family and the vision and imagination of Pamela Fields, the brand has won new currency for the enjoyment of a new generation, more interested in Facebook than rodeos. I for one salute them. Turning around a brand twice is hard enough; three times is the trifecta.

Saving one of the world's biggest brands

2009-06-03T08:16:00.000-05:00

GM. General Motors. Other than perhaps McDonald's and Coca-Cola, there probably isn't a better known brand in the world. But for the last 20 to 30 years GM has been making cars and trucks the people don't want. In the U.S., its marketshare has fallen from 49% to 19% and now it has filed for bankruptcy. Can this great iconic car brand be saved?

The answer is yes. Other car brands have suffered in the U.S. Audi, for instance, was almost destroyed 20 some years ago by evidence that it had chronic transmission problems causing the car to suddenly accelerate. The investigative TV show, "60 Minutes,"did a segment on it that was devastating.

But Audi took certain deliberate steps to rescue its good name. First it investigated the charges and, though the difficulty occurred in only a few cars, it up-engineered its transmissions and engines to insure that the problem wouldn't re-occur. Second, it conducted a careful, well-orchestrated PR and advertising campaign to re-assure Audi drivers that Audi was one of the best-engineered cars on the road. And finally it didn't give up.

It took years for Audito recover but today most car buyers don't even recall the kerfuffle. Audi receives one of the highest ratings by J.D. Power for car owner satisfaction. And Audi has continued to refine its engineering and develop new models that can give others in the luxury class, brands like BMW, Mercedes and Lexus,a run for their money.

GM must follow a similar route at the brand level. Cadillac, Chevrolet and GMC must protect their good names and dealer networks by building on the equities they already own. GM has to invest in R&D to assure that these marques will have access to the best new low-mileage, post-fossil fuel technologies. It must bring out new models that excite the marketplace. And at the holding company level, it must continue to re-assure the marketplace that it is capable of managing costs and tracking demand, so that it can become profitable again and repay the U.S. and Canadian government investments.

Damaged brands can be turned around and regain lost equity. IBM did it. Hewlett Packard and Xerox did it. Johnson & Johnson did it with Tylenol. But it is a tortuous process. Unless the new GM board and its management are committed to the long haul, they'd be better off collapsing the company. It will take anywhere from five to ten years for consumers to decide whether GM can be trusted again to make great cars. This will be one of the most exciting corporate brand rescues ever and it will be closely followed by the business school and consultant communities who teach and preach good governance. It all starts with remaking the GM culture that created the slide in the first place. Lou Gerstner called his best selling account of his turnaround of IBM, "Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change."

Can GM CEO Fritz Henderson make his elephant dance? Time will tell.

Why P&G Should Save Max Factor

2006-04-03T13:31:00.000-05:00

It takes years to build a brand like Max Factor. Ninety-seven years, to be exact. No one cares any longer who Max Factor was. But the company he founded gave us a brand that became "makeup to the stars." Hollywood embraced the brand. With tons of advertising, people actually believed they were using the same brand as the stars of the Silver Screen and, later, the small screen. The brand fell on hard times long before Procter & Gamble bought it. Since then, women have come to realize that most of the stars use expensive niche brands formulated by special make-up artists. And other premium brands have pushed it aside in the mass market. So Max Factor, which reportedly had $170 million in sales last year, has lost market share in face and eye makeup and lipstick and found its way onto the shelfs of low end marketers like Wal-Mart. But a reformulation and smart marketing could still save this brand. It has a great heritage. It just needs to deliver on the promise that it's still the "makeup to the stars" -- for stars that today's young generation wants to emulate. Who can save this brand?

Why I have trouble getting to sleep at night....

2006-04-03T13:11:00.000-05:00

Am I the only seeing this? Delphi declares bankruptcy and asks the judge to break its contracts with the U.A.W. by lowering hourly wages. ....The U.A.W. says if the judge approves (and he must-- the company is losing billions this year) they will go out on strike....The strike will force General Motors into bankruptcy....That, to my reckoning, is enough of a trigger to cause the Market if not to crash then to take one helluva correction. Down from low 11,000s to high 9,000s...That might sharpen the pin to the Real Estate Bubble....By this time, will any of us want to be in the Market. ....Or am I being a silly pessimist and forgetting to take into account the underlying strength of the American economy?