PAISA VASOOL

Thursday, February 26, 2009

Recession does lead to a windfall for marketers who thrive on affordability. But that does not mean companies should go for panic discounting, as it harms brands in the long run. Better options are available to improve your product demand...

“Four bucks is dumb Serving Espresso.” Smirks a billboard in Seattle USA. This was McDonald’s way of advertising for its coffee. Early 2008 McDonald’s had started unsnobbycoffee.com to promote the launch of its espresso drinks. McDonald’s was doing all it could to steal business from Starbucks, even though its advertising agency claimed that the fact that “Four bucks” rhymes with “Starbucks” was purely coincidental! It claims it was more to do with the pricing. At Starbucks, a cup of coffee costs $4, while you could buy a cup at McDonald’s at one fourth the price. McDonald’s and Starbucks have been at war for long in a quest to grab the larger market share. So McDonald’s started serving coffee and Starbucks started serving breakfast sandwiches. However there was a slight difference, after trying to outdo each other, we find Starbucks in the process of closing down up to 600 locations, while McDonald’s just can’t stop smiling at its balance sheet.

It’s surprising how some companies are thriving in times like these while their competitors are wilting away. Big retailers like Abercrombie and Fitch, Barney’s, Neiman Marcus, and even Saks Fifth Avenue say they have been hit by the worst holiday season in almost 40 years. Meanwhile, things couldn’t be better for Wal-Mart, as millions of consumers continued to flock into Wal-Mart to buy its low price, quality goods. According to Lee Scott its former CEO, founder Sam Walton built the company to thrive during downturns – something it surely has been doing pretty well this time round. What is it that’s made these companies and many more like them “recession resistant”?

The consumer is changing

The consumer is cash-starved. He needs to save money and given the first opportunity, would switch to cheaper brands. He is holding off big purchases but he still needs the basic necessities like clothes and medicines. He still doesn’t mind spending on a toy which will light up the face of his child and sometimes he does indulge into guilty pleasures of a rich, dark chocolate, a glass of wine or a puff of a cigarette. According to Mintel International, the US cigarette and tobacco market will grow by 28% to $132 billion from 2008 to 2011.

Yes impulse purchases are seeing a decline. People are asking for discounts even during the peak season. Retailers of all types, be they car makers, home builders are stuck with huge inventories. For survival they are slashing prices. Microsoft has cut the prices of its Xbox 360 Pro – its best selling version, to be able to put pressure on rivals Nintendo and Sony. Intel has slashed prices by up to 40% on its Quad-Core Chips. Top end designers of luxury goods and apparel are giving discounts as high as 70% to lure customers back into their outlets. Think about it; till just about a year ago, luxury stores couldn’t keep up with the wealthy’s appetite for extravagance.

From Jaguar to Apple, everybody seems to be cutting prices and it seems to be boom time for auctioneers and discounters. Gilt Groupe is a company that sends members e-mail alerts about a sale from a specific designer – and many big names like Valentino etc. are turning to it for help. Portero.com, an auctioning website is also doing brisk business by auctioning Chanel bags, Tourneau Watches etc.

Last Christmas created records when prices were cut the maximum by many retailers to woo the customer back. This traditionally is that time of the year when sales used to be maximum. This time it was different. So then is price the only solution? Not really.

Get your strategy right

Extreme discounting is not good as it erodes the value of the brand in the long run. If you really have to reduce prices, do it by taking away certain valued features from the discounted product. Your brand value will not erode and when times are better the consumer will be willing to pay higher prices for those valued features which he could not afford earlier. Also, you need to get your advertising and marketing strategies in order so as to change the perceptions of the consumers. He needs to feel that this money is well spent. Consider this – amongst all the airlines in India, Indigo seems to have no plans of reducing fares, rather it’s all set to expand and add new destinations.

P&G executives have declared that they would not have any major price rollbacks, rather P&G would work on increasing productivity and becoming more efficient. Not just that, its brands Tide, Dawn liquid dish cleaner etc. would be marketed as “value-for-money” options. Meaning you could get more washes with P&G products, as compared to lower priced options.

Agreed the purse-strings have been tightened, the budgets reduced but remember what Ogilvy said, “The consumer is not a moron, she is your wife”. The consumer is looking for a deal, which promises him his money’s worth and all those who succeed in doing this would find no problems in attracting the consumers back. This is where correct marketing & advertising strategies are going to play a vital role. You need to show the customer that when he is buying your product or brand, he is getting a “good deal”, which is not necessarily the cheapest deal. There are various ways of doing this. Hyundai is one company that has done this very systematically. It has positioned itself not as a low-cost product or a luxury brand but as a “value brand” and to prove its point, it offers great prices, and great warranties. This reinforces the value proposition.
Another product that’s become a surprise super hit in USA is “Snuggy”. It’s a blanket with sleeves. It is an example of a product that gave full value for money. When it was introduced, a lot of analysts, bloggers condemned it sharply and called it a product for “overweight, depressed and lonely couch potatoes”. Strangely it turned out to be a product which helped you keep warm indoors without having to turn up the heating (thus saving people those precious green bucks) and its sleeves gave you the freedom to move your hands as compared to a traditional blanket or shawl. Moreover you could use it outdoors & indoors. It was total value for money – consumers loved it & lapped it up. Also people loved its ads.

Today, its advertisements showing cozy family scenes are working much better. So the next time you plan your ad campaign, don’t forget the psychological state of mind of the customer. Anything that is warm, friendly, familiar, and comes with a feeling of security is working wonders. So go back and re-shoot your ads, do not get into panic discounting; rather think how you can convince the consumer that he is getting his money’s worth & he will be yours. Today the consumer is spending only where he feels it’s full “Paisa Vasool”.

HOW MUCH CAN A PRETTY DRESS DO?

Friday, February 13, 2009

First Ladies are known to dress with definite purpose. And an endorsement by them can help any fashion label beat recession blues

Barack Obama seems to have ushered in an era of hope. Every thing he does, every word he speaks, attracts huge feedback. There seems to be one more thing that generates similar response and that’s his wife Michelle Obama’s presence next to him. As the world hung on to every word that Obama spoke, it was Mrs. Obama’s dress that was driving people everywhere from fashion magazines to Internet chat rooms – in a total frenzy. Her black sheath dress with splashes of red had everyone commenting or her style. Some hated it and some loved it and, some called it “the look of victory”. For according to many, the Obama’s don’t do anything just for the sake of it – there is always a purpose. As the London Times fashion editor said, “You may like or dislike Michelle Obama’s dress but that’s not as interesting as the agenda behind it, because you can be sure there was one.” She may not be wrong, for the entire Obama family was colour coordinated. It was probably the most well choreographed First Family Elect Appearances in history with Barack Obama’s tie and his daughter’s (Malia and Sasha) red and black clothes matching Michelle’s dress! According to some, the red & black combination symbolised two things – black for mourning for Obama’s grandmother who died on the eve of the election while red stood for passion!

It is said that it was not a mere coincidence why Barack Obama chose Hart Schaffner Mart to make the suit he wore to accept the Democratic nomination for President. The company is one of the few that can claim their products are made in America. For a man who has always so vociferously opposed outsourcing of jobs, this was an interesting way of making his point. Keeping the same logic in mind, it is argued that Michelle Obama prefers to wear clothes by Chicago-based designer Maria Pinto, for Pinto built her brand from scratch and made it a success. She represented the American dream – a country where you could realise your dreams. Come to think of it, you thought clothes were just meant to make one look good – well they do a lot more than that.

DRESSED TO WIN

The First Lady with her simple and clean style seems to have won the nation over. She seems to have well understood the power of clothes and used it to her favour. Michelle Obama has an uncanny knack of understanding what appeals to the masses. Her choice of dresses has made it clear that she believes in looking stylish and also advancing the cause of American fashion. She appeared on the very popular TV show “The View” wearing a simple dress picked off the rack from a retail chain named “White House Black Market” (symbolic again!). Women came in droves to the retail chain store demanding the $148 dress. For the swearing-in ceremony, Mrs. Obama wore a lemon-grass outfit designed by, not Versace or Ralph Lauren, but a Cuban-American nobody, Isabel Toledo. From the choice of the designer to the choice of colour, everything seemed to emphasise her husband’s speech which said, “We are going to do things differently now.” Some even said it sent a message about a favorable foreign policy vis-à-vis Cuba. Some people sure know how to make their clothes work for them.

HOPE FOR THE RETAIL INDUSTRY?

The global economic crisis has made everyone sit up and tighten their belts. The fashion industry is no exception – with people spending more cautiously. Fashion experts worldwide have quickly changed their selling strategy by promoting “Investment” pieces, that is classic styles, which always remain in fashion. Michelle Obama, with her classic styles and good fashion sensibility that has a mass appeal seems to be emerging as a sign of “hope” on whom a lot of designers and retailers are now pinning their dreams.

Think about it; a dress from “GAP” sold out hours after she was seen wearing it. Many went and bought an “H&M” dress worn by her during the presidential election campaign. Michelle Obama could just be the American fashion industry’s biggest catch. In fact, the whole Obama family seems to be setting trends. After the Obama girls were seen in outfits from the kids line of “J.Crew”, the retailer’s web site was down for about half an hour as shoppers rushed to scoop up the clothes worn by them.

THE FIRST LADIES OF FASHION

Nearly half a century ago, a similar frenzy was created in the world of fashion, when John F. Kennedy became President and 31-year-old Jacqueline Kennedy the First Lady. An entire generation of women imitated the “Jackie look”. Fashion has been used by these lovely First Ladies to express themselves and sometimes even improve diplomatic relations between countries. Jackie Kennedy used her fashion to charm Americans & Europeans. She loved French fashion but knew it would not go down well with the American public, so she switched designers. For First Ladies, it’s not just enough to dress well, but rather dress “correctly”, which matters most. If Jackie could charm the two most crustiest leaders of the world – France’s Charles de Gaulle and Russia’s Nikita Krushchev, then it was the very controversial French First Lady Carla Bruni who won over the uptight British. How did she do it? Probably it was her clothes, which were so cleverly French (Dior) with a British twist (Dior’s designer is a British). Legendary First Ladies have been those who have been able to dominate headlines with intelligent dressing – think of Grace Kelly, Eva Peron – so beautiful, so lovely – all First Ladies of fashion.

BETTER THAN CELEBRITY ENDORSEMENTS

Carla Sarkozy is French fashion’s secret weapon. She showed what a diplomatically correct wardrobe can do. Her perfectly planned wardrobe made sure people forgot about her scandalous past, her nude photograph and much more. She has catapulted her status from the First Lady to world’s no. 1 style icon. Any brand she touches, any designer she sets her eyes on – it will turn to gold.

Marketers can just pray that some First Lady takes a fancy for their label. It would be enough for them to beat the recession. This time around, celebrity endorsements just don’t seem to be working. Kellogg’s had signed up with Michael Phelps. However when Anderson Cooper raided Phelps cabinet as part of his TV show “60 Minutes” interview he discovered a box of Honey Nut Cheerios – Kellogg’s biggest competitor! Kellogg’s has now decided to drop him & not renew the contract, which expires at the end of this month. Recently Tiger Woods (one of the most popular celebrity endorsees) ended his 9-year-old endorsement deal with GM. This was GM’s way of reducing its spending. The endorsement deal was worth $7 million a year and GM needs to save every precious penny. It is a difficult economy and every marketer is searching for budget efficiencies. During such times, many, especially clothes retailers would be turning to the First Ladies, wishing to be picked up by them. For it’s proved that they are the best endorsers a product can get. Next time you see a well turned out lady, think how much can a pretty dress do.