Category Archives: New Products

The Perfect Storm, Part 2. Fixing “Pale, Stale and Male”

  • The mood at last week’s Miami Boat Show was sunny, like the weather.  Enthusiastic shoppers, lots of shiny new boats, and based on conversations with manufacturers, not enough new boats to meet demand.

Miami Show Crowd

However, as previously posted, some clouds on the horizon foreshadow the powerboat industry’s vulnerability in a way that will redefine the landscape over the next 10 years.

  • The core buyer base is aging. The 55-60 year old buyer base (let’s generalize and call them Boomers), are committed and usually repeat buyers.  And they look a lot alike  (in the words of one industry executive: “pale, stale and male”).
    But there aren’t enough younger first-time buyers (generalized as Millennials) to replace their unit or dollar sales.  Over the last 15+ years, the share of new boats sold to first-time buyers has dropped dramatically.
    It’s the same old dudes buying more boats.
  • Recession bites. The next recession, like the last one, will flood the market with used boats when owners sell, crushing new boat sales – – a sales circuit-breaker if enough Boomer owners exit the market permanently.  Remember, older buyers generally buy the more expensive boats.
Older fisherman

Typical core new boat buyer

This post tries to explain why there are not enough younger boat buyers, and offers some ideas of what can be done to prepare for the future.  While a bit longer than my typical post, there are lots of pictures, so please read on.

Boater_Age_NMMA

Source: NMMA

Following our Miami visit we circled back to get input from senior leaders representing manufacturers, dealers, Freedom Boat Club (the leader in this segment) and the NMMA, the leading trade association.

The upshot:  the core appeal of powerboating is not going anywhere, but the industry will need structural changes to address some fairly major challenges to sustain health (read: sales) over the long term.

And the current pace of innovation is not enough to drive the changes necessary.  Disruptive innovation is needed in everything from boat design, mode of power, sales/distribution channels to marketing.  This is not about reducing price or offering new colors or more horsepower.

Disruptors transform the way a basic demand is delivered.  Myopia has led to the downfall of many former market leaders.

  • Home Video: Blockbuster (VHS/DVD) yields to Netflix (streaming)
  • Personal photography: Kodak (film) yields to digital / smartphones
  • Books: Borders (bricks & mortar) yields to Amazon (online)

Based on appearances, the powerboat industry seems headed this direction – – focused on maximizing revenue with the current model (largely fiberglass gas-powered outboard boats sold through dealers).

There are signs that disruptors are at work — but there is a long way to go.

Buying Cycle - Boating

To explain where the industry has been and where it needs to go, we compared the buying process of legacy (Boomer) core buyers with considerations of potential Millennial buyers, in a 4-step process.

INTERESTEXPERIENCEPURCHASEHABIT

So what are some paths to long-term growth? 

Here are some ways the industry can take action (with some examples):

  • Before addressing new buyers, the industry must keep current owners around as long as possible.
    Slow down defections – – aggressively court current owners and build relationships through CRM, owner events and personal outreach – build loyalty and maybe get another purchase

To encourage Millennial first-time buyers:

INTEREST

  • Accelerate development of more agreeable, alternative power sources:
    • GM’s experimental marine division, Forward Marine, introduced a 100% battery-powered boat. With a max speed of 20mph and a range of 1 hour at that speed, it’s not ready for prime time yet, and won’t get you many dates, but this is the direction some of the industry will go.  Think Tesla.  Maybe a hybrid as well.
GM Boat

GM Forward Marine prototype

  • Indmar just introduced EcoBoost, the marine version of Ford’s EcoTec engine – gets the same horsepower and torque with 4 cylinders as a typical V-8. More environmentally friendly.

    EcoBoost

    Indmar EcoBoost

  • Torqeedo is an established German company offering quiet, efficient electric motors. Due to relatively low gas prices and a maximum of 100 hp, growth is slow but it is steady.  They’re getting traction.
Torqeedo

Torqeedo Deep Blue 80R

  • BlueGas Marine has developed economical natural gas power for boats. Traction is difficult for the above reasons as well as infrastructure (need the gas equivalent of charging stations), but the equation can change quickly if oil prices spike.

More aggressive marketing

  • Cross-market! Boating should not just be for insiders anymore!  Visibility must be increased by pursuing prospects with related affinities:  skiing, hiking, etc.  Not just a booth at the boat show.
  • Be more inclusive, diverse and experiential. Feature a range of age, ethnicity, interests.  Leverage social media to reach prospects beyond the familiar core demographics.

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Wakesurf photo

 

  • Innovate beyond current offerings – materials, design, features
    • New boaters don’t have the burden of tradition and will likely be more open to unconventional but more functional approaches (after all, someone had to buy the first Prius)
    • RIBs – Rigid Inflatable Boats (Axopar, Technohull) offer more efficient performance using different hull design and materials. They are really cool, perform great, look different, and that’s ok.
Technohull

Technohull (top); AxoparAxopar

  • Powered catamarans look different but offer advantages of smooth ride and more space

EXPERIENCE

Leverage technology to reduce fear as a barrier to purchase

  • Self-docking boats will be available in 2020
  • On-board digital video tutorials can provide much more effective learning than paper manuals
  • Controls are shifting from analog to digital, to mimic/integrate with smartphones

 

 

OWNERSHIP

  • Offer more versatile/multi-use boats at attractive price points – not single purpose (e.g. fishing) but can handle a variety of activities on any given day (analog: SUVs), making purchase more acceptable
    • Sea-Doo introduced a jet ski that converts to a fishing craft – – and it starts at $15k

 

 

  • Yamaha’s 2018 Boat of the Year (the FSH 210) is an affordable, do-it-all boat that is an excellent choice for first-time boaters.
  • Don’t require purchase to participate
    • Freedom Boat Club is a franchisor with 178 locations, with a model based on eliminating some key barriers to purchase (includes lessons, takes care of maintenance and insurance). The goal – make participation frictionless.
    • Members pay a monthly fee for unlimited access to a variety of boats in a huge number of locations, rather than committing 6-figures for a single boat.

FBC logo

  • Other similar models such as peer-to-peer rental, fractional use, etc. will undoubtedly increase as there is less reliance on solely purchase
  • More fully integrate the internet in the shopping/buying process – as in the auto industry, reduce reliance on aggressive final-mile dealer salespeople.

HABIT

No surprises!

  • Full transparency in the sales process, specifically costs/ obligations of ownership
  • Continuous on-boarding/learning  from the dealer, not just 2 hours when the boat is picked up
  • Aggressively encourage new boater networking to share tips, experiences, and create peer communities
  • Mentoring programs linking experienced boaters with new boaters.  Older boaters would love to pass along insights; a no-judgment setting makes it a win-win.

Mentor

These are just a few things the industry can do to mitigate unavoidable changes.  It will take foresight, patience, and investment – – and may not pay off immediately.

lots-of-boaters.jpg

But an industry that proactively and creatively adapts to the needs of new boaters with great product and a great experience, will be much more successful than what we currently seem to have – – an industry that asks potential new buyers to adapt to the way things have been.

How Do You Reinvigorate a Mature, Cyclical (but still really fun) Industry? Part 1: The Challenge

This is a story about a great industry that was extremely hot…until it suddenly wasn’t.
It presents a unique challenge in how to navigate long-term growth in a world with changing values, attitudes and demographics – – in an unpredictable economic and political climate.

This is Part 1 of a two-part post.  Part 1 sets up the challenges to the boating industry.

In Part 2 we’ll discuss some things the industry is doing to meet these challenges, based on observations at the industry’s premier annual event, the Miami Boat Show – which begins on February 14, 2019.

Perfect Storm - Title

Powerboats are indisputably lots of fun, whether it’s to fish, ski, dive or just to cruise around.  It’s no surprise that about 140 million Americans participate in boating annually, and that in 2018 the industry generated an estimated $170 billion in annual economic activity (Source: NMMA).

Boating-NMMA

Source: NMMA

But as we’ll see, even with several years of growth, the powerboat industry is facing some real headwinds in countering demographic shifts and bracing for the inevitable next recession.

Please read on, and if you’d like, post your ideas on how you’d attack this challenge in the comments section.

———–

The Ultimate Discretionary Purchase

At the very far endpoint of the need-want continuum (aka 0% need, 100% want), beyond ice cream, puppies, personal Zambonis or large screen TVs, there are recreational boats.  Unless you make your living on the water, you don’t need a boat.

And with considerable entry costs leading to ongoing expenses (fuel, insurance, dock space, maintenance, accessories, etc.), this is an industry that is inextricably linked to economic ups and downs.

As a CNBC commentator put it: “Boating is perhaps the most cyclical consumer sector imaginable. Vessels are expensive to purchase, time consuming and completely discretionary.”
https://www.cnbc.com/2014/04/01/yachts-a-practical-investment-for-regular-investors.html

Boat Slip

Entry-level recreational boats can be very affordable, but prices can easily push six or even seven figures as size and complexity increase.  A relatively ‘entry-level’ 25-foot recreational boat can cost $200,000 or more.  A 40-footer can be well over $1 million. This is an industry that has historically tried to push the envelope during optimistic economic times.

Boat_Sales_NMMA

National Marine Manufacturers Association

But the seas are not always smooth.  Powerboating, in particular, is vulnerable to a perfect storm.

  1. Not counting the very wealthy, most people considering a major discretionary purchase will delay or just not buy in an unstable economy
  2. Like the tide drawing out, when economic uncertainty hits, many existing boat owners sell their boats, creating a large pool of relatively new and very affordable used inventory. Anyone still interested has ample reasons to buy used, which is crippling if you’re trying to make or sell new boats.
  3. The average age of boat owners is relatively advanced (currently around 55), meaning that a lot of purchasers (many of them Baby Boomers) from earlier growth years are permanently exiting the market. There are new, younger buyers, which is great, but currently not enough of them to sustain continued growth.
  4. In an economic downturn, related personal factors such as existing loans, lack of available credit and home sales come into play as people make decisions – and cutting boat expenses can be considered a less painful way to try to balance the family books.
  5. As powerboats generally use internal combustion engines, they can be subject to the political climate and resulting legislation. The ‘un-green’ optics of boating are a turn-off for a certain population segment, and ‘greater good’ legislation can create negative real consequences for marine (one example: ethanol is widely mandated but causes expensive damage in marine motors which are run more sporadically).
Boater_Age_NMMA

National Marine Manufacturers Association

This perfect storm was on full display in the few years leading up to 2010.

The Great Recession – all kinds of ugly

In the early 2000s, economic optimism drove strong unit growth, with about 375,000 new powerboats sold in 2006.  Dollar growth was even higher, as convenience features like stereos and refrigerators, the conversion from 2-stroke to cleaner/quieter 4-stroke motors, greater available horsepower and resulting higher prices all increased industry sales markedly.

And while there was some softness in 2007, when the stock market tanked in 2008, the industry nose-dived.  Annual sales dove to about 150,000 in 2010.  Even with several recent years of strong market growth, as of 2018 it has not fully recovered, with sales of new powerboats reaching 280,000 – – still below levels of a decade earlier.

Boat for sale

As one industry official put it in 2015: “We fell off a cliff about five years ago.  Homes were going into foreclosure, and people were making hard choices. On top of that, manufacturers didn’t build many boats in those years. But we lived through it.” https://www.sacbee.com/news/business/article8801072.html

Numerous manufacturers and dealers simply closed up shop.  One estimate had the boat manufacturer workforce reduced by 50-75% as a result of the recession.

In some ways, boating faces a long-term challenge.

  • Many current boaters will eventually age out of the market
  • New younger (and less affluent) boaters are interested in experiences but less interested in possessions — including single-family homes where possessions (like a boat in the driveway) can be stored. They are also influenced by ecological considerations.
  • A multitude of other factors complicates things: consumer confidence, rising student debt, an increasingly diverse population that may not have boating as a shared experience – – even concern about fuel price stability

Make no mistake, as of now the industry continues to grow, it is expected to grow further in 2019, and there are several bright spots of strong growth – – like the emerging wake sports segment, and personal watercraft (aka jet skis).

Malibu_SeaDoo

Brands pictured:  Malibu, SeaDoo

And the economy still appears strong, consumers appear to be confident, and the boating industry is continuing to extract growing revenue from ever more big, exotic and outrageous products (a 627 HP, $90k motor was introduced a few years ago, and immediately a 53-foot, $3 million luxury fishing boat was introduced deploying 4 of them – along with 50 neon-ringed speakers.  Rumor is that there will be a six-motor boat at this year’s show).  So making hay while the sun shines is definitely a current strategy – take advantage of consumer confidence and feelings of wealth.

53 Suenos

Pictured: HydraSports 53 Sueños

But the next recession is not a matter of if, it’s a matter of when, and Boomers will continue to exit the market.

SO – WHAT CAN BE DONE TO ENSURE SUSTAINABLE GROWTH IN THIS MARKET?

Maximize growth with current products?  Introduce game-changing products?  Hedge with counter-cyclical products?  Double down on technology?  Pivot to something else entirely?

Would love to hear your thoughts.

For Part 2, we’ll report back within a week, including some evidence of the current (greater luxury and features) and future (laying the groundwork for the next few decades).

See you at the show!

MIBS - 2019

Don’t Be Something You’re Not

This week a woman named Federica Marchionni was eased out of her position as CEO of Lands’ End after only 19 months on the job.

federica

Federica Marchionni

This illustrates (fairly predictably) what can happen when a brand tries to be something it’s not.

Ultimately, brand-building success is driven by meeting customers’ needs, not by trying to teach them to want something different. And loyal customers have this peculiar habit of resisting (resenting) signs that they’re being taken for granted.

lands-end-1981

Lands’ End 1983

landsendgroup

Recent Lands’ End

 

 

 

 

 

 

 

 

 

In the case of Lands’ End, since its 1963 founding by Gary Comer as a sailing supplies business, it developed a heritage as a casual sportswear business that was eventually bought by Sears (and spun off in 2014).  Mr. Comer was fond of saying “Take care of the customers, take care of the employees and profits will take care of themselves.”

But Lands’ End had recently been stumbling, so Ms. Marchionni, with a background at high-style retailers Dolce & Gabbana and Ferrari, was brought in and offered an experienced, glamorous executive who could help reshape Lands’ End “into a meaningful, global lifestyle brand”.

That’s when the trouble started.

federica-kate-hudson

Marchionni and actress Kate Hudson

New lines were immediately introduced, meaning loafers were sold alongside stiletto heels. Ms. Marchionni dropped low-profitability catalog shoppers and hired prominent fashion photographers to shoot elegant catalogs at exotic locations. She insisted on working out of New York City rather than the corporate headquarters in Dodgeville, WI, and was often seen hobnobbing with celebrities.

lands-end-canvas

New Lands’ End Canvas Line

lands-end-shoes

Lands’ End shoes – traditional and new

 

 

 

 

 

 

 

 

 

 

 

 

All of this alienated not only customers but employees, who were used to casual access to top management in Dodgeville and who would be critical in execution of plans. And unfortunately sales lagged spending, creating a lot of red ink. Ultimately the board decided it was time for another change.

old-spice

Successful reposition – Old Spice

While there are success stories about brands repositioning to catch a younger/new demographic (think Old Spice or Target), this is not the first time a brand has suffered from trying to fly too close to the sun.

JCPenney famously failed recently; going farther back, the breeding ground (figuratively) of nerds, Radio Shack, tried and aggressively failed to get more hip by calling itself ‘The Shack’. And even staid Dolly Madison snack cakes invented a character called the ‘Snackin’ Dude with a Snackin’ attitude’ to try to become somewhat more hip. Another whiff.

radio-shack-the-shack

Radio Shack unsuccessful reposition

Back to Lands’ End, the acting CEO (COO James Gooch) spends all of his non-traveling time in Dodgeville and is odds-on favorite for the permanent role.

We’ll see how the company and customers respond to an expected return to tradition. On the other hand, Mr. Gooch was recently CEO of the S.S. Radio Shack. Hmm…

Conclusion #1- – ignore loyal customers at your own peril.

Conclusion #2 – – just because a brand isn’t hip, doesn’t mean it isn’t great

Inward Focus is not Customer Focus

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velveeta1

The apocryphal story goes like this:  at the old Kraft, the Velveeta brand manager crowed during Brand Review (think: Inquisition without the charm) about his 95% market share of ‘pasteurized process cheese spread’.  The senior marketer, Yoda-like, then asked “but what is your share of all cheese used for cooking?”, to which the Brand Manager burped out “around 5%”. The senior manager suggested that maybe there is more to marketing than just comparing yourself to your own internally defined category.  And she was right.

Sometimes as marketers we forget that not everyone (read: no one) thinks about our product as much as we do.  This myopia unfortunately translates to missed opportunities.

Marketers need to consider each product interaction as an opportunity to intrigue and possibly inspire a new user.

What are hardwood pellets?
During a recent Costco expedition I went to grab the traditional, if unexciting, big blue bags of Kingsford for the summer.  My 40 lb snatch and heave into the cart was interrupted when I noticed an appealing orange bag with copy that excitedly extolled the virtues of what was apparently an alternative – – gourmet hardwood pellets!  They promised ‘superior quality you can taste every time’ and ‘food infused with flavor’!

PelletsPellets2

 

Curious about a potentially new way to spend even more money in the vain hope of improving my grilling, I looked further at the package to see what these ‘pellets’ were.  I was up for it!

Unfortunately, there was no explanation of what pellets are, no visual of what they look like, nor any indication of how they might be used.  Nothing.  You apparently were either a Pellet Person or you were unimportant to the manufacturer, Traeger Wood Fired Grills.

A quick smartphone check revealed that there is indeed a unique type of grill that uses pellets instead of charcoal.  These devices are also made by Traeger, which features grills from about $400 to $1200, along with a huge array of accessories.  Cool looking stuff.

Pellets!

And it appears that pellet grills are a growing segment, presumably stealing share from traditional charcoal or gas grills.  Because they require less effort.  Of course!  God Bless America!

Raichlen

According to the aggressively coiffed Steven Raichlen, the host of cable’s Barbecue University and writer of the Barbecue! Bible blog, “the Hearth, Patio and Barbecue Association (HPBA) reports that wood pellet grills are one of the hottest trends in the industry, offering consumers the primal flavor of wood smoke coupled with the turn-of-a-knob convenience of gas. Roughly 300,000 units were sold last year—less than 2 percent of total grill sales—but the popularity of pellet grills is surging.” (http://barbecuebible.com/2015/02/20/new-pellet-grills/)

Presumably those people in the pellet grill business would be interested in inspiring avid grillers, like…me.  But they whiffed on this chance.

There is a basic lesson here – – don’t waste a valuable potential messaging opportunity.

TFB88PUB_BLU_01

If you are in a position where potential future users may be exposed to your product or service, don’t breathe your own exhaust – – remember that there are people there who might be interested – – if you just give them a little information.

So even if you consider yourself the king of your particular pellet hill – – remember that there’s probably a bigger mountain to climb out there.

I Know, It’s Only Rock ’n Roll, but…

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We try to refrain from simply reposting articles but this is a great example of how basic business principles can apply pretty much anywhere.

BN-NW458_Stones_J_20160504165415

The Rolling Stones – Masters of Their Universe

The Wall Street Journal recently ran a short article highlighting keys to the remarkable success and longevity of the World’s Greatest Rock ‘N Roll Band.

Ultimately, following these guidelines (with some caveats) are a pretty good prescription for success.

  1. Choose the right name.  We’ve commented before that a company shouldn’t try too hard on finding the perfect name.  If the product is excellent, the name will seem genius in retrospect  (witness Death Cab for Cutie and the Arctic Monkeys – – or the Beatles for that matter).  So, really, there are 4 tips here, not 5.
  2. Find a unique position in the market.  The Stones realized that they could be the bad boys relative to the Beatles’ wholesomeness.  Everyone loves a bad boy.
  3. Creatively beg, borrow or steal.  The Stones’s early hit “The Last Time” was gently lifted from the Staple Singers’s “This May Be The Last Time”  – only with a more catchy guitar riff and decidedly different lyrics.  They made that song their own, unlike Robin Thicke, who more blatantly ripped off Marvin Gaye.  Be inspired, but don’t plagiarize.
  4. Shed barriers to success before it’s too late.  The Stones’s arguably most talented member, Brian Jones, became unreliable and disruptive.  The group decided they needed to kick him out if they were to succeed.  They did, and a month later he was found in the bottom of his pool, another member of RnR’s infamous 27 Club.

5.  Continually reinvent.  Markets change, competition changes – – to survive long-term you must be able to anticipate and change.  Madonna and David Bowie are great examples of morphing to meet the need.  The Stones’s 1978 album Some Girls was a direct response to the threat of the burgeoning punk scene that included new artists the Sex Pistols, Ramones and the Clash.  Definitely different product than “The Last Time”.  As Keith Richards remembered, “It moved our ass, boy”.

Perhaps not something you’d hear from Peter Drucker, but still illuminating.

Not all Innovation is High-Tech. Not all High-Tech is Innovation.

To borrow an old punchline, sometimes companies innovate around technology ‘because they can’.*

A recent visit to the Hertz facility at the Denver airport illustrates the point – – innovation can only work when it is designed around the user experience.  Innovation that requires the user to adapt to technology, at the expense of experience, is not usually a blueprint for success.

My key car rental criteria are price, convenience and how fast I can get my car. At the counter, I preemptively say I don’t need an upgrade, don’t need insurance, and will fill it up myself. I also tell them they’re on the clock and my personal record is out the door in 3 minutes (although I had a wonderful 1:30 experience just this past week). It works, and it’s not nearly as jerky as it sounds. (really)

photo-1

So I was eager to experience the Denver Airport Hertz facility, which is huge (2500 s.f.) and bristling with open format desks, high-tech kiosks, and bumblebee-colored employees. The car rental facility of the future, right?  I’d be out of there in no time.

It was a disaster.  First, 25 minutes in a standard Disney-style winding line; then left the line and went to the separate line for a kiosk on the recommendation of a Hertz employee.  10 minutes to get to one of the kiosks, which needed assistance to operate.  The disembodied head on the kiosk video screen informed me that while I had a reservation, my car would not be available for at least another 30 minutes.  Except, of course, if I wanted to upgrade (at extra cost).  (we’ve seen this before)

I got mad and tracked down a manager, who finally gave me an upgraded vehicle without the upcharge (duh).  That was 45 minutes of hell in a facility that was presumably built on research and smart engineering.

The expensive technology and fancy building did nothing to help this experience.  The difficulties I had (kiosk operation, being held hostage for an upgrade) were resolved with the human touch.  The same human touch that gets me in-and-out of low-tech counters in under 5 minutes (often with a high-five to the counter person).Hertz charging

(Perhaps I should have thought more when I passed the cute ‘recharge’ station – under what conditions would you be using one of these at a car rental place?!).

photo 3

On the other hand, a recent Delta flight showed how smart innovation made the experience much better.  This was on a newly refurbished plane.

The overhead compartments had signs asking passengers to load their rolling bags vertically rather than horizontally, which gets more bags on the plane, and therefore keeps me from gate-checking.  Smart!  I win!

photo 1-1photo 5

Facing me on the bottom of the seat in front was an electrical outlet. I’ve seen these before but they’ve been awkwardly placed in a hard to reach place around my ankles, presenting the constant danger of feeling up my seat mate’s leg.

In both situations there was an outlet on each seat.  Delta figured out it’s better when you can see it.  Smart! I win again!

Technology has transformed our world and has fueled amazing innovation.  But this innovation has only worked when it has improved the user’s experience.  

Technology with no benefit is usually not lasting.

*it’s a guy joke.  If you don’t know it already, you probably wouldn’t appreciate it.

Donald Trump and Bernie Sanders are Bags of Chips

…and the other candidates are furniture.

There is a marketing lesson here; allow me to explain.

Everyone and their mothers and the horses they all rode up on have already weighed in on what’s driving the surprising dominance of Trump and Sanders in the polls to date.

Donald ChipsBernie Chips

The Armchair MBA looks at this as a lesson for marketers:

There is a clear difference between an impulse purchase and a considered purchase, demanding different approaches.  Depends on whether your goal is short-term or long-term (or maybe both).

  • Impulse purchases (like chips):
    – immediate consumption, no long-term commitment, low-risk, who cares
  • Considered purchases (like furniture):
    – longer-term implications, significant commitment, meaningful risk

As chips and as candidates, Donald Trump and Bernie Sanders present the most powerful, clearly articulated and differentiated propositions that are intriguing to a segment of the population.

With virtually no risk in trying a chip (or answering a poll), the chips (and candidates) that stand out as different are more likely to get early trial and short-term success.
Other chips (candidates) have less extreme claims, are consequently less differentiated, and thus any one is less likely to gain a majority of trial (poll votes).

Candidate Chips

After trial (polling), however, things could change.

Trump chips, while very spicy, might present an unexpected burning sensation after ingestion.
And Sanders chips, while appealing conceptually, might not be particularly palatable or affordable.

In both cases, these chips will still likely retain loyal users, but would likely represent a smaller niche
– as candidates, the same might also be true

Chips that may be designed for more long-term market success will necessarily be positioned to garner a broader share of the population and have staying power. While less overtly exciting, they may have a more balanced combination of ingredients and claims.

As election time nears, candidates become viewed less like chips and more like furniture: a longer-term commitment that demands (at least hopefully for most people) more thoughtful consideration, doing research, shopping, weighing benefits vs. cost and risks.

NET: For short-term impact (trial), claims must be clear and differentiated.

For longer-term success, both claims and performance must be carefully crafted to meet the needs of a meaningful portion of the population.

Barbie-Glam-Dining-Room-Furniture-Set

Hopefully our voting public exhibits at least the same care in choosing their candidates as they do in picking furniture.

SAP spells ‘Trust Me’: S-I-M-P-L-E

Say ‘SAP implementation’ to someone who has been through one and you are likely to get a look conveying some combination of pain, pity, terror and dread (and perhaps schadenfreude).

Enterprise Resource Planning (ERP) giant SAP recently announced an approach and suite of applications called ‘Simple’.

For a company with a reputation of being anything BUT simple, this casting-against-type positioning could be tricky business; successful transformation will not be immediate.

And one look at their recent 2-page WSJ ad indicates they may not yet be fully embracing this ‘Simple’ concept.

SAP

5 years ago Domino’s acknowledged that it didn’t taste as good as it should, and used this acknowledgment to justify a reformulation that was the focal point for a new campaign.  By many accounts, this bold ‘we sucked, now we’re better’ approach has yielded good results.

DominosCombined

But ERP software is not pizza – – with pizza, a $10 or $15 mistake and you’re on to someone else.

Do a search for ‘SAP Implementation’ and it’s obvious that the stakes are quite a bit higher – – not only $100 million or more, but years of organizational churn and resources, as well as lost opportunity if/when things go awry.  You can’t say ‘we know we’ve messed these up in the past, but going forward we’ll be awesome – trust us’.

A few examples here, some others below:
Avon Products halts an SAP implementation, leading to write-down of $100-125 million
– Waste Management and SAP in $100 million lawsuit
– HP claims $160 million damage from flawed SAP implementation
Select Comfort abandons SAP ERP implementation
SAP issues at Hershey prevents $100 million in shipments for key holiday
While client’s management often has a hand in screwing things up, at the end of the day, it’s SAP’s name in the headline.

SAP has chosen to own ‘Simple’ as its defining principle going forward.  In the ERP space, this is a compelling proposition. And some industry experts are cautiously optimistic.

But based on SAP’s history, it’s a tall order – – and prospective clients will certainly have a ’show me’ mindset.

Requiring 2 full pages to explain Simple is not a great start.

A Wilde Affair – 5 Lessons for Marketers

By now you’ve seen Chevy Sales Executive Rikk Wilde’s cringe-worthy presentation of the World Series MVP Award to the SF Giants’ Madison Bumgarner, as reporter Erin Andrews and Commissioner Bud Selig both looked to be trying to flag down a cab.

Wilde

Not surprisingly, this clip immediately lit up the Twitterverse and generated a remarkable amount of media attention (and references to Chris Farley, with whom Mr. Wilde was frequently compared).

Farley2

But perhaps unexpectedly, rather than distancing itself, GM took advantage of it with a wink and a smile, embracing Mr. Wilde’s performance and his instant classic utterance “Technology and Stuff”. Within a few days of the event, there was a full-page ad in USA Today playfully referencing the World Series MVP ceremony.

T&S-tweet

Chevy Tweet

T&S - USAToday

USA Today Full-page ad

So of course, The Armchair MBA has decided to spoil the moment by trying to extract object lessons from this episode.

And there are clear lessons from L’affaire Wilde that today’s marketers need to keep in mind:

1) Expect the unexpected.   Speed is key, so be ready.

2) Serendipity can be your friend – be open to improvisation to marketing plans.

  • Even the best plans need to be able to stretch sometimes to take advantage of marketplace events
  • The Chevy Colorado pickup had just (Oct. 3) been named in a large airbag recall, which was limiting sales
  • The publicity surrounding Mr. Wilde’s presentation drew new attention to the Colorado, and the recall went from front burner to a secondary issue, at least temporarily

3) Consumers like authenticity and the little guy.   And they hate to be manipulated.

  • Wilde’s memorable performance, while not pretty, was also clearly not slick corporate-speak, and therefore broke through the clutter, arguably much better than if a senior executive, or GM CEO Mary Barra herself, had presented the award
  • We will use ‘little guy’ in the figurative sense. Mr. Wilde, by virtue of his stammering, sweating performance, reminded us that we’re all human, and if faced with a global TV audience, might be a little nervous ourselves.  So in an unplanned way, this helped connect the audience to the product.
  • This was 100% authentic. If it turned out that it was at all scripted, it would have backfired on GM in a huge way
  • (As a side point, apparently Mr. Wilde was selected to give the award mostly because he was a long-time Royals fan and his management thought it would be a thrill for him — even though he was obviously not a media trained spokesperson.  Good for you, Chevy!)

4) Consumers like humility and a sense of humor

  • “Technology and Stuff” was a perfect way for GM to gently poke fun at itself
  • In contrast, denying or attempting to spin would have been futile

5) Branding is very powerful for people too

  • Unless you, as new parents, know with 100% certainty that your precious child is headed for a career path involving heavy metal bands or the adult film industry, for heaven’s sake, do NOT name him Rikk Wilde.

Unexpected game-changers for our future food supply

[NOTE:  If you are getting this post in an email, click on www.thearmchairmba.com to see the accompanying graphics.]

I recently participated in an IFT (Institute of Food Technologists) workshop on the long-term future of our food supply.  These are the same food scientists that midwived the difficult births of Count Chocula, Betty Crocker and Chef Boyardee, but they have also developed fortified, functional and better for you foods and beverages. And they play a critical role in defining our food future. (I previously wrote about IFT’s FutureFood2050 initiative).

chipotle2

Supply Chain as rendered by Chipotle

You may think: How complicated can food be? Haven’t we been farming, shipping, making and eating for quite a while now?

It turns out that managing the food supply to meet future consumer, economic and regulatory needs is about as simple as airline scheduling logistics.

ComplexFoodSystem

Supply Chain – Actual

And as the workshop revealed, it will only get more complicated going forward.  Why?

First, consumer demands continue to increase: lower cost, variety, customization, easier/faster shopping, nutrition, natural, sustainable…and of course great tasting. Not all simultaneously compatible.

Second, farmers, manufacturers and distributors are pressured to meet these needs and still make a profit.

Finally, innovations, often seemingly not food-related, will play a critical role as the food industry evolves.

This future could be very interesting.

Consider these trends /technologies that might impact the future of food, all of which are happening now:

Farm drones/robots/blimps – – to monitor crop conditions continuously, greatly increasing farming efficiencydrone-corn720x540

Resource-sharing – – rather than time-sharing a car, how about meat-sharing a cow?   More accurately matching supply to demand.

CowShare

Crowdsourcing product design – – leading to higher success rate of new products

CrowdSourceFood

Versatile manufacturing – – economical short production runs, allowing more customization

Urban farming – – new technologies enable repurposing declining urban areas (Detroit-like)

VerticalFarming

Automated delivery – – driverless delivery to homes (drones, copters) – taking cost and time out of supply chains

Rise of B Corporations – – (“a new type of company that uses the power of business to solve social and environmental problems.”) Transparency in social benefit, an additional differentiator.

B-Corp

Shorter IP protection – – forcing faster innovation and creating increased competition

Remote smell – – transmitting tastes/smells through the internet, making product development quicker and more successful. (Were this previously available, we may have been able to avoid Brussels sprouts.)

o-phone-smell-text-message-designboom03-300x200

oPhone

Genetic consumer cohorts – – low-cost genetic typing enables segmenting consumers by health-driven factors like allergies, facilitating meeting needs of key segments.

DNA

Expanded definition of acceptable food – – e.g. ground insects as source for cheap, high efficiency protein, creating an affordable ingredient for billions, and one heck of a marketing challenge for some.

Jiminy

What does all this mean?
Well, we don’t know yet.  That’s why they call it the future.

One set of outcomes could be:

  • Greater ability for consumers to quickly get foods customized to their wants/needs
  • More tools for farmers, manufacturers, retailers and distributors to drive down costs

A parallel set of outcomes could also be:

  • Benefits limited to those who can afford customization and speed (and the tools that enable them)
  • A more commoditized supply chain complementing the customized offerings, with lower cost, slower delivery and less choice – – for those who cannot afford (or just do not value) the more tech-enabled offerings

There would likely be huge collateral impacts, like increased complexity in regulation, labeling and distribution; new retailing models, etc.

Like it or not, food science and technology professionals will need to be prepared to meet these potential future challenges.

The rate of change in the food industry is accelerating.  I’m all for it, as long as there’s still bacon.