The Finch Post

Lincoln and American Luxury

Ford Motor Company’s relaunch of its luxury Lincoln brand involves checking all the right boxes – including re-branding the “company” to perceptually separate it from Ford, a new look/feel/message and campaign, dealer-level education and communications for the luxury consumer, etc.

But in such an emotional and textured category, this will never be a brand management 101 exercise. The question of how well it will work will come down to a host of factors including the vehicles themselves as well as macroeconomic conditions impacting the consumer market.

One additional – and we think dominant – consideration is how willing the American consumer is to buy into American-made luxury in the automotive category. As quality concerns and financial/labor issues stifled the “Big 3” US automakers throughout the 1990s and last decade, American car companies earned a shrinking share of the luxury vehicle market.

At the end of 2011, this rolled up market share is just around 25% – and lower if we remove certain popular SUV models in the marketplace under the Cadillac and Buick brand names. German and Japanese automakers earned a far larger piece and marketing efforts reflect this leadership – witness Audi’s aggressive positioning against its fellow German brands BMW and Mercedes-Benz.  

Country of origin plays a lot of different ways in consumer markets, and there are several reasons why we feel Lincoln may face a challenge greater than Lincoln itself:

• In many consumer categories, being made in America is a detriment at the upper end of the price register. From timepieces to fashion to some classes of electronics and appliances, imported brands have greater associations with technology, quality and style – while American offerings tend to fall more into the hardworking, value range. This has certainly been the case in automotive.

• The rebirth of the American auto industry has largely been accomplished via moderately priced, fuel-efficient small cars as well as continued strength in trucks and SUVs. While Cadillac, in particular, has modernized its image, it has been quite a while since an American automaker has made a major successful play in the luxury sedan space. In this vacuum, consumers have learned to look beyond our shores to build brand loyalty.

• The import brands that have emerged – a mix of established players in a modern package (BMW, MB) and luxury upstarts (Lexus, Infiniti, Acura) – represent a formidable competitive set that have already largely repelled well-financed competitors such as Saab (owned by GM from 2000-10) and Jaguar (owned by Ford from 1989-2008).

• With BMW plants across the southern United States and Chrysler’s Italian ownership (just two examples), the foreign v. domestic argument does not pack the punch it formerly did for those who place a high premium on “economic patriotism.” Further, this is a slice of the category in which such attitudes have not been prevalent except among the WWII generation.  

These conditions and others suggest that Lincoln not only has to make itself relevant again, but do so while facing the headwinds that challenge purveyors of American luxury. Perhaps, in these categories, it is not Lincoln that needs rebranding, but America itself.

Walmart Pushes the Boundaries of Taste

Walmart has launched a food subscription service called “Goodies.” For a monthly fee of $7, customers will receive 5-8 samples, ranging from organic to ethnic products not currently carried on Walmart's shelves. If customers like the products, they can purchase full-size versions online.

This is a fascinating strategic initiative for the world’s leading retailer/grocer to undertake. The product selection and value proposition is distinctly un-Walmart – and it would be outside of their traditional strategy to see this as just a nice little standalone business that could be profitable but not of game-changing scale. So what is the point?

• Could it be to step a toe into specialty foods in advance of something larger in store? Walmart’s traditional value proposition has been known brands at low prices, yet other retailers such as Wegman’s and Whole Foods have built profitable businesses going beyond staple items. So one can see this as an attempt to use Goodies as a testing ground for a more specialized offering while minimizing downside and not interrupting their carefully calibrated planogram.

• Could it be to evolve the understanding of the brand in non-traditional customer segments? Walmart has tended not to be the choice of the affluent or adventurous shopper, but one can see how other brands with a strong value appeal (such as Costco and Target) have been able to build some caché while still comfortably appealing to value-conscious consumers. Goodies could be a precursor to an evolution of the Walmart brand image away from price as the leading driver or, more likely, to assert uniqueness alongside value.

• Could it be a nascent effort to cultivate a new model? It is significant that @WalmartLabs, an innovation arm based in the Silicon Valley rather than the corporate HQ in Bentonville, AR, is behind this initiative. Other startups (Birchbox, Love with Food) have initiated gourmet food subscriptions, and this may be a test to see if they are onto something.

So will it work? Success has a very different meaning for Walmart due to its scale, and if Goodies simply becomes an effective way to vet products the retailer may offer in store or online, there is value in that. It is unlikely that Goodies will ever grow to become a meaningful profit contributor for Walmart, but it does offer the company some valuable proof-of-concept opportunities. It also may enroll consumers in the first stage of a relationship with the retailer, which could lead to greater utilization of Walmart.com (versus, say, Amazon) for staple goods.

Our major question is whether or not the Walmart brand has the potential to benefit. While Goodies certainly won’t hurt, we are skeptical that it can do much to help in the short or mid-term. An almost irrational opposition to Walmart runs deep among those who feel the retailer has crowded out local businesses, that it underpays its employees and squeezes its vendors. We believe this springs from more of a commercial elitism than anything else and Walmart PR has effectively pushed back against those who have protested new store openings for various reasons. Its vision – “to save people money so they can live better” – is an effective antidote to those capricious criticisms.

Yet if Walmart is seeking to reframe the brand in the eyes of a more sophisticated consumer or hoping to summon the gourmet that lives inside its current customer, Goodies would only be one step in what would require a long march. It is unlikely that a non-Walmart consumer who is compelled by Goodies would see this initiative as reason to visit the store any more than they have in the past or for it to lead to a full-scale reevaluation of the Walmart brand as a fit for them.

Target became “Tar-zhay” largely due to major investments in making home accessories and apparel appealing via exclusive deals with name designers and a product mix offering affordable “luxury.” Costco brought in major electronics, wine and furniture brands to give the assortment and environment a differentiated kick within a quantity club model. Most importantly, these initiatives provided a “permission slip” for the type of consumer who needs one to shop at Target/Costco and to believe it aligns with their taste level. And this certainly did not happen overnight.

High Times - The 'What If' Business Model

 

Colorado and Washington voters yesterday passed referenda to legalize marijuana and essentially treat it the same as alcohol (controlled, taxed, etc.). While these states still need to work some things out – including how to reconcile this with Federal law – the profusion of medical marijuana dispensaries and a generational shift towards more permissive attitudes means a strong likelihood that there will soon be a much larger legal marijuana industry in America.

What makes this an interesting business issue is that there are very few recent examples of consumer industries shifting from illegal to legal. The more widespread legalization of gambling is one relevant case, but it has been more of an extension (from the longtime bases in Nevada and Atlantic City) into new geographies and has largely been overseen by experienced operators and limited to fixed facilities that can be easily regulated.

So what we may have with marijuana is the near unprecedented situation of a nascent industry with mega-billion dollar potential coming from the darkness into the light – yet still facing a heavy societal stigma in certain circles.

The key questions – fascinating to consider – include:

1. How would the market form?

Looking at the somewhat similar alcohol and tobacco markets, we see dominant, vertically integrated major players who have built a full production capability and supply chain. Given the public’s polarized point of view on this issue, but also the demand opportunity and need for scale, who would we expect to jump in?

Would the concern about brand dilution and loss of goodwill deter big companies from seizing this new market opportunity? Would smaller and less sophisticated suppliers be able to master the supply chain as well as demonstrate enough quality control to please regulators and consumers?

Beer, wine and spirits are complicated categories comprised of large market players and geographically focused craft or micro-brewers. Would we eventually see this in marijuana, with mass, value and premium tiers?

2. What would be the prevailing brand image approach?

Marijuana has been treated in popular culture almost whimsically in recent years, with an emphasis on the attitudes of the user. How would marijuana brands – with a wide open playing field – choose to create their personalities, looks/feels, etc.? How would they segment and target high potential consumer groups?

If you look again at the "adjacent" alcohol and tobacco industries, you see very clear and differentiated brand images – even with the regulations affecting tobacco companies. Marlboro stands for American independence. Newport evokes urban cool. More accepted and heavily advertised are beer brands also having clear images among major and boutique players. So how would brand builders approach marijuana?

3. Beyond image, how are product lines and sub-brands built and differentiated?

Consumer categories invest billions of dollars in nurturing brand and product differences based on innumerable factors – just looking at major beer brands, we see full flavor and "light" options, different colors, flavors/rituals such as lime and many other modes of product differentiation.

What would be the major points of differentiation in marijuana? One could easily envision potency, place of origin, flavor, light/full and many other dimensional attributes as enabling brand developers to make unique product statements.

Whatever one’s opinion, helping this category (and its users) take flight would be fascinating for business and brand builders – an undisturbed but massive landscape filled with opportunity and risk. There are very few such categories in American business – so we’ll be watching.

 

Brand New View

Earlier this year, DC Entertainment (parent company of DC Comics) revealed a new logo, just seven years since their last revamp. Retailer JC Penney recently released a new mark—the first update in 40 years—in conjunction with a major business, pricing, and brand positioning evolution. Currently hipster styled logos for brands we all know and love—the brain child of German designer, Dave Spengeler, who launched the Hipster Branding Tumblr blog—are trending on twitter.

All of this activity begs the question, when does it make sense to refresh your mark?

Before answering that, however, companies should remember that there is a difference between strong, well known logos and strong, well-loved brands. Effective brands must stand for something substantial and meaningful. The best logos graphically evoke what those things are.

Updating largely recognizable logos for iconic brands can be particularly challenging as many people already associate those marks with their respective companies or products. However, as consumer behavior shifts, brands must keep up not only with competition, but also the changing nature of their core market.

Have their consumers’ values changed? How about their priorities? If so, brands are often compelled to evolve along with their market. When that happens, it frequently necessitates some degree of refreshing the logo so that a company’s or product’s mark remains aligned with its brand.

Trends in logo design change as quickly as the audience to which those logos are crafted to appeal. Ultimately, whether you choose to utilize “hip” icons, fonts, and design elements, or embrace a more established approach, the aesthetic of your logo matters less than whether it effectively reflects your brand’s core values—for what you want your brand to be known.

The Falling Star of Celebrity Endorsement - Part 1 of a 4 part series

Legendary art director, George Lois,  mused that “enlisting a celebrity to sell cat food, an airline, off-track betting, an analgesic, or a lube job would seem to be a delusionary strategy fraught with irrationality. But let’s face it, it’s a star-struck world.”

Sure, it’s a star-struck world, but with exorbitant high costs, bad behavior, and questionable credibility plaguing celebrity endorsements, is it any wonder that businesses are starting to look within to inspire campaigns and develop brands? 

This four-part blog examines the changing face of the spokesperson from gregarious celebrity to unassuming everyman, and how this shift in audience preference allows businesses to bolster their brand by celebrating the people behind their products.

Celebrity Losing its Fizz

 According to recent marketing research, one out of every four advertising campaigns in the US features famous faces. From magazine spreads to Twitter, television commercials to Facebook, the advertising industry is clogged with celebrity and is in desperate need of Draino.

Although most of us believe that our voracious appetite for celebrity is a relatively recent speedbump in social evolution, actors and athletes, musicians and models have been peddling products to eager audiences for centuries.

In ancient Rome, popular gladiators received handsome sums to endorse various products and services. In the 1700s, Josiah Wedgwood capitalized on the popularity of his products with royalty by promoting himself as “Potter to Her Majesty.”

At the height of the Cola Wars, PepsiCo also used ties to aristocracy to promote their carbonated product. The history-making partnership with the King of Pop made Michael Jackson the richest pitchman on planet Earth. With his unmistakable flair, Jackson touted the beverage to his fans as the choice of a new generation, resulting in Pepsi earning $7.7 billion in sales and edging out its competitor as the King of Soda Pop for 1984.

Throughout the ten-year commitment, Jackson earned tens of millions of dollars, while Pepsi enjoyed sole sponsorship of his concerts. Allegations of child abuse in 2003, however, burst the campaign’s bubble, and Jackson was quickly released from his contract.

Pepsi’s ill-fated promotion is one of many examples of star powered endorsements losing their shine. Although hitching an advertising campaign to a Hollywood cash cow can prove beneficial at first, it is wise for businesses to remember that if the spokesperson gets stuck in the mud, then so too does the brand tied to them.

Two-ply or not two-ply, that is the question

We at Finch Brands are a curious bunch. Like Socrates, we ask the really big questions, such as “what’s the point of single-ply toilet paper?” We imagine that the manufacturers’ intent is to create a perception of value achieved through savings—reducing consumer cost by cutting product characteristics.

This “no frills” approach is an interesting premise, and one that achieved wide adoption by many companies scrambling for footholds during the world economy’s descent into Recession. Can this method, however, be taken too far? How many features can be stripped in order to justify cost-cutting before a brand becomes blemished?

When too much is taken away, the “savings” achieved is often more illusion than reality. After all, who uses only one square of toilet paper? Firstly, eww! If you can see through it, we’re fairly certain that you can feel through it! Secondly, the moment you fold over at least two squares, you might as well be using two-ply.

We won’t go so far as to claim that pursuing price-pruning to establish your product’s key promotable benefit is the equivalent of flushing it down the toilet—several major businesses, including high-end brands like Vera Wang’s, have launched cost-conscious collections successfully—but we do think there are limits and that this topic warrants some discussion.

Where do you stand on this issue? Please comment and share your thoughts.   

Bottoms Up!

Amidst all the gloomy news out there, it’s important to remember there’s much to celebrate. Here’s to all of our clients who give us the opportunity each day to support their success in times that are tough for many.

Hello Brand? It’s me, your consumer.

As consumer behavior shifts, major brands such as Coke must keep up not only with heavy competition but also the changing nature of their core market.  According to recent reports, sales of carbonated beverages have been decreasing for 6 years straight.

That’s one of the reasons why we’ve seen Coke and other category leaders move so aggressively into alternative beverage categories in recent years. 

Coke is now exploring another strategy to address this by offering a smaller sized bottle for 89-cents, attempting to appeal to today’s budget conscious marketplace.  Additionally, with the attention of health advocates turning to soda, the consumer may permit him/herself an indulgence if the portion is controlled. 

Read the full article found here.

Will this strategy succeed?  Time will tell.  Ultimately, some degree of re-packaging can help energize a brand and reawaken a consumer base.  With issues like cost, health, environmental sustainability, etc. all weighing on the beverage industry, the trick is to unlock the triggers that really drive consumer behavior.  When it comes to new products or strategies, the answer is usually that those companies with the best consumer insights win.