The Milk Marketing Machine

The milk mustache is just the beginning.

Behind the endless “got milk?” T-shirts and bumper stickers, and beyond countless celebrities sporting milk mustaches, exists a powerful dairy promotional apparatus. Of course, that’s not much of a surprise—the upper Midwest is the nation’s leading dairy region. But seeing tangible evidence of the machine’s muscle proved, nonetheless, a bit jarring.

A couple of weeks ago, I was able to get my hands on the “Dairy Sports Nutrition Toolkit” presented to school nutritionists at their annual get-together in St. Cloud (not nefariously, of course; I happen to have a “connection” in the audience—and even so, the information was by no means confidential, just enlightening).

It was a #486W plain white Smead folder stuffed full of the ordinary promotional jibber-jabber. A color brochure touting the “New Look of School Milk”—flavored to entice kids who would otherwise shun milk in favor of the latest energy drink or sports concoction. A cute milk bottle cutout of helpful (read: promoting milk and dairy) websites. A small stack of printouts highlighting the benefits of whey protein. For anyone who plays the channel marketing game, this is normal stuff.

The striking pieces were the two discreet fliers promoting “chocolate milk” as a superior sports recovery drink.

Huh?

Clearly, I must have nodded off during that lecture in sports physiology.

But here on the page was the new evidence.

A study in the “International Journal of Sports Nutrition and Exercise Metabolism” found cyclists consuming low-fat chocolate milk were able to ride as long or longer than cyclists drinking traditional sports drinks.

An additional study found that whey protein (found naturally in milk) could lead to bigger, stronger muscles.

The third citation excerpted an article from the “American Journal of Clinical Nutrition” examining the positive affects of drinking milk after heavy weightlifting. Apparently, milk helped burn fat and build more muscle than other drinks.

There was more, but I think you get the point.

Presented with this information, we could—if we wanted to—begin to ask some critical questions (not critical in the negative sense, but rather critical in the academic sense): What did the control group look like? Does the study methodology support a reasonable expectation of reliability in the findings? What information are we not seeing in the one paragraph write up? Who paid for the study?

But while valid, these questions miss the larger point.

What do any of the above conclusions have to do with elementary, middle, and high school kids drinking milk during lunch?

And therein lies the real question. To many observers of the presentation, this was the most “authoritative” segment—it was backed up with real “data” and not just “promotional” claims. The journals cited were not Science or Nature, but that was hardly the point. This is the classic research shell game: Use hard “numbers” to shift attention—to borrow credibility as it were—from a presumably accurate (albeit unwarranted) argument to promote a particular point of view. In this case: That milk is good for you, and scientifically better than the average sports drink.

I don’t fault the dairy council from presenting information that promotes their position and their products. That’s their job. To do otherwise would be a fiduciary breach with those who contribute to the fund. And the image of milk has been pummeled by sports drink bottlers.

But this is different, isn’t it? This is sophisticated channel marketing that directly impacts school-age kids—your kids—and their meals at school.

To be fair, I can think of worse things to promote to school nutritionists than the benefits of milk and dairy, even if the evidence is a bit obtuse. (Also, members of the audience in this case have heard more than their fair share of “food pitches”, and are pretty savvy consumers of information.)

But answer me this: Would you feel the same way if the information presented instead touted the benefits of Coca-Cola products? Or M&M Mars? Or Pizza Hut?

And if you think the dairy folks are good at marketing...

From Breast Implants to Flat Roof Repair

Everything old is new again.

The rough economy blues have spawned the resurgence of a very old idea. Only this time, the classic barter network is back with a new twist. Reincarnated as a way to drive new business, firms such as Pittsburgh's Green Apple Barter have gained considerable airtime as of late touting itself as a path out of broader economic woes.

It works like this.

Barter networks are - essentially - closed commerce networks. As such, when you join, you have a direct incentive to do business with others in your group. For illustration, let's pretend you are a roofing contractor. When you perform the service for another member of the barter network, you don't receive money. Rather, you receive "barter credits". (Each network works a bit differently, but this is a common approach). The member who receives the service pays for it in cash - or if they have them - barter credits of its own. In turn, you can use the barter credits you receive for goods or services you need within the group. The network manager takes care of the tax implications of the transaction, sending 1099 forms to each member at the end of the fiscal year, as well as takes its own cut (somewhere between six and 10 percent).

Got all that?

I know what your thinking. This doesn't sound like a "barter" at all. I remembered bartering quite differently. When I was a boy, we had a barter network (of sorts) for baseball cards and the like. You had a player's card I wanted. I had a player's card you wanted. We struck a deal. End of transaction. That was a barter.

But this is different. Webster's defines "barter" as "the exchange (goods or services) for other goods or services without using money." And by that definition, they are (technically) correct. However, that same dictionary defines money as "a current medium of exchange in the form of coins and banknotes" and secondarily "the assets, property, and resources owned by someone or something." I think barter bucks qualify as money. But that's just semantics.

What is really going on here is somewhat of a rebirth of micro-economies - groups of people getting together, separating themselves from the larger economy, and transacting amongst themselves.

The benefits, on the surface, are clear.

The barter network is, as it is being promoted, a closed system. Psychologically, we are wired to want to "belong," and the barter network plays to that need. The larger the network gets, the more choices you have (yes, Green Apple Barter sports plastic surgeons as well as flat roof repair, funny as that might sound). That means, in contrast to my baseball card story, you and I do not need to have exactly what the other wants. Finally, and perhaps most alluringly, if your company has unused capacity (read: missed opportunity cost) you can sell services to the barter network rather than see them go unused. It is not money, but at least you get something.

From a "green" perspective, localized barter networks could also reduce the micro-economy's impact on the environment by reducing transportation and fuel costs.

Still sound a bit fishy? Yes. But.

Closed buying networks can work. Case in point: I have a client in a niche B2B industry. Their company is a member of a semi-secret closed buying network. At first suspicious, my client has enjoyed considerable success. The network is well organized, well managed, and tightly knit. In stark contrast to the vast variety of goods and services promoted in other barter networks, this group handles only goods and services directly related to their specialized industry. In other words, they are not trying to remake the broader economy, only make their niche more efficient.

Outside of situations like that one, does the barter network tickle your suspicious bone?

It should. Here's why.

Companies drawn in by barter networks at this economic time are likely to be struggling (especially given the way barter networks are promoting themselves). In much the same way multi-level marketers prey on people down on their luck, barter networks seems to be dredging the bottom of the barrel for those firms capitalism would consign to failure.

It comes down to this. The real economy defeated the older barter economies for good reason: Efficiency. Not just in the dollars and cents, but in weeding out companies, products, and services that compete poorly.

If you are having trouble selling your product or service in the real economy, a secondary barter economy is unlikely to help. Problems in your business likely are fundamental: poor market targeting, value proposition, ineffective sales, product/service issues. All of the above.

So before you're tempted to join a barter network to improve your business prospects (and burden your financials with an additional 6-10 percent "tax"), take a hard look in the mirror. And fix what you see.

Geek Squad: Best Buy’s Jiffy Lube

They have been called the "Peep Squad."

Allegedly, certain members of the Geek Squad organization have been caught pilfering private customer information during home service calls.  (A simple Google search will yield a myriad of specific examples; I will not indulge them here.)

Certainly, the label is not fair.  The Geek Squad boasts thousands of employees, the largest organization of its kind in the United States.  While there is almost certainly some truth to the charges for a tiny fraction of all employees, the vast majority of employees have never - and will never - do anything wrong.  (The same argument for limited malfeasance could be made for any organization of its size.)

But the facts do not seem to matter, do they?

Bad news always travels faster than good news, and being the top organization of your kind is akin to giving the bad news engine premium fuel.

It really comes down to this: Has Best Buy made a strategic mistake bringing the Geek Squad into its stores?  Has the nation's largest electronics manufacturer put its reputation in the hands of a group of modesty-trained 20-somethings?  Should the company rethink its decision now?

One side of the argument says "no."  The Geek Squad is a sound long-term investment.

From its humble beginnings in the brain of Robert Stephens, the Geek Squad essentially created the brand name computer service industry.  Anyone over 30 remembers what it was like before then.  If you did not work for a large organization (with its own internal IT staff), you were at the mercy of the Yellow Pages.  Sometimes, you got someone who knew what he was doing.  Most of the time, you did not.  Getting your home computer serviced was a game of poker where the house had all the face cards.

But Stephens changed all that.

He made fun of the technicians' reputation (called them what everyone else did: Geeks), made them dress the stereotype (pocket protectors and all), and made them drive around in dorky little cars painted to look like police squads (the VW bug is quite dorky).

And it worked.  People could remember the Geek Squad.  It stuck in your head.  And the business itself backed up the rhetoric.  Agents - as technicians are called - were very smart. Better yet, they communicated well.  They understood people's reluctance and fears regarding home computers and made the service experience comfortable and satisfying.

By 2004, Best Buy recognized a very good thing, as well as a panacea to a vexing (and growing problem).  As computers took up a larger and larger share of Best Buy's sales (and home theater systems were beginning to get just as complicated), the company knew that its customer satisfaction index was at the mercy of the support experience.  What's more, Best Buy saw the Apple Stores' successful model of melding sales, service, training, and support.  So it took the plunge.  Best Buy bought out the (still tiny) Geek Squad chain and brought it completely in house.

Today, nearly all Best Buy locations serve as "precinct" locations for the Geek Squad.  A nice value proposition, really.  Trouble with your computer?  The Geek Squad is just an in-store visit away.

It seemed like a perfect marriage.

But the Geek Squad is almost a victim of its own success.

In order to grow to the critical mass Best Buy required, the Geek Squad needed to expand.  Fast.  Literally, the company needed to hire hundred of new agents almost overnight to staff hundreds of Best Buy stores.

In the early days, Geek Squad agents could be carefully chosen.  Agents had a much longer time to indoctrinate into the Geek Squad culture.  They had a solid culture and experienced mentors.  But these new agents were thrown into the mix, given some training, and thrown into the field.

And therein lies the problem.

From our business case days, we remember a similar situation of rapid expansion: Jiffy Lube.

While the specifics differ, the basic facts remain the same.  Until Jiffy Lube came around, getting your oil changed was an all day affair at your corner service station.  Service was slow, unreliable, and expensive.  You never knew if the greasy technician under your car was actually doing what he was supposed to be doing, and you secretly (and sometimes explicitly) thought he was cheating you.

Jiffy Lube changed all that.

In about 30 minutes, your car was in and out.  Jiffy Lube standardized the process.  They instituted service checklists.  They made the process understandable to the average person.   They dressed in clean uniforms.  They had clean waiting areas.  Heck, you could even look trough the window to watch them work!

The concept took off.  Clones followed, but it was Jiffy Lube who transformed the industry.  It made auto dealer service departments more responsive and (nearly) put the corner service station out of business.

But much like the Geek Squad, Jiffy Lube was a victim of its own success.  Thinking that it was the process - and not the people - who mattered, the company expanded too quickly for its own good.  With a breakdown in controls, nefarious Jiffy Lube technicians would use the company’s brand trust to their personal advantage - overcharging and cheating customers.

It got ugly, to say the least.  Only now is Jiffy Lube climbing out of its hole.

The real parallel is simple: Can the Geek Squad crawl out of its hole?  In their rapid growth, they have expended significant reputation capital for not only themselves, but their corporate parent as well.

In the end analysis, I believe the Geek Squad can recover.  Best Buy has the cash as well as the long-term commitment necessary.

But I am not sure it will be worth it.

Here's why.

Most people do not, and will not, understand computers or computer repair.  That lack of understanding leads to the explicit and implicit feeling they you are bring "taken," even if in the end your computer gets fixed.  Much like the Jiffy Lube case study, owning a computer is, today, analogous to owning a car.  Most people really don’t understand most of what goes on under the hood, and have only fleeting trust for their mechanic.

As their market matures (I would argue the computer service market largely has done so), it will become less and less possible to "thrill" customers as it was in the heady early days of the home computer.  The computer has become an appliance, like any other in your home, and few people are likely to be "thrilled" with the service on their dishwasher.

Look at it this way: Imagine a continuum with "Ecstatic" on one end, "Content" in the middle, and "Disgusted" on the other.  In an immature service provider market, consumer information is so poor, and most service providers fall into the right side of the scale, that it is possible to develop a system that - for a time - moves the bar far to the left, delighting customers and building solid business.  That is what Geek Squad and Jiffy Lube were able to do.

But the advantage doesn't last.  As the market matures, it is harder and harder to "delight" customers. Expectations increase as clones copy your model.  While the bottom of the satisfaction index tends to stay put, the left side gets harder and harder to economically achieve.  As time goes on, what remains is "content" at best and "mad" at worst (essentially the midpoint to low end of the continuum).  In other words, over the long term, the best a company like this can do is make customers feel "OK" about the experience.  Worse yet, the law of averages tells you the overall index will trend negative.

If I were Best Buy, I wouldn’t like a business unit where the best I could hope for is "OK" customer satisfaction.  But is that a bigger risk than not being in control of service at all?  Probably not.

If Best Buy is really lucky, perhaps the Geek Squad can rewrite the rules of the game one more time.

An Applebee’s Answer to Higher Food Prices

Many of us could stand to eat less.

That is not a pithy recitation, but a hard fact.  Studies conducted by the USDA (among several other groups) consistently find that most of us consume an extra 500 to 700 calories per day (or about 25 to 30 percent extra based on an average diet).  The health implications are obvious, far-reaching, and well documented.

Clearly, we did not get there overnight. Since the end of Word War II, advances in agricultural technology have (largely) meant the end to boom and bust food commodity availability. Today, like no other time in history and like few other places on the globe, food in the United States is plentiful, good, and cheap.

And therein lies the problem. As many of us struggle with portion control and a healthier relationship with food, we are likely to get some economic assistance.

Put simply, the price of food—nationally as well as globally—is going up. Fast. According to the World Bank, the price of rice (a global staple) has increased 183 percent. Corn and wheat are at record highs. The Commerce Department's seasonally adjusted compounded rate of inflation for food products in the United States passed 5.3 percent (more than every other category except energy) and shows no signs of letting up.

In general, while food consumption is largely immune to minor fluctuations in price, at some point on the demand curve economics tells us that persistent price pressure will push consumption down.

As observers in the market, where are we likely to see the trend first? Discretionary restaurant spending would be a logical guess - especially spending at mid-tier restaurants where you find chains like Applebee's, T.G.I. Friday's, Ruby Tuesday's, and Olive Garden.

These mid-market chains face tremendous price pressure. Fast food squeezes them from the bottom. A new generic chain crowds into their middle market nearly every month. Raw economic reality pushes down from the top. Food input costs slice into margins. These chains have nowhere to go.

Until now, their answer has been pretty trite: To provide more value, simply increase the portion size.  Filling the plate with additional food was cheap, and if it made people feel like they were getting a better value, all the better. Restaurants could always make up the lost margin on drink sales (both hard and soft), so no need to worry.

But that old crutch has become untenable.

Given the eventuality of higher input costs, downward price pressures, and shrinking margins, restaurants in this segment have a couple of options.

The first is simple: test the elasticity of the demand curve and raise prices. This strategy involves educating customers about the rising price of food inputs and then passing along the higher prices. It is a short-term answer at best. Customers will not tolerate this kind of whining for long; they expect a better answer.

And they are getting one.

Applebee's has taken a different approach. Instead of fighting the good fight and trying to beg its customers to accept its sad state of affairs, it has fallen back on its strongest asset: The Applebee's brand.

Think about it for a second. Is Applebee's really about food? I would argue no. Rather, the company built its brand around getting together with friends and having fun. Food is the catalyst, but not the core. That brand strength allows Applebee's the flexibility to attempt something very different: Making people feel good about getting less to eat.

A radical solution, yes, but necessary if you think about it. If people stop coming (or find some other place to connect with others and have a good time because eating out costs too much), your local Applebee's is finished. They understand that. The company is using our collective anxiety over our waistlines to its advantage in this situation, rather than its detriment. The biggest innovations at Applebee's in the last five years have little to do with food quality (although that is not completely lost; they have taken the "Target approach" and introduced celebrity chef menu items), but rather with portion size and strategic alliances.

Several items now come in scaled-down versions (at only slightly scaled down prices). Vegetables, fruits, and quasi-cultural items dot the menu alongside chicken wings and mozzarella sticks. Additionally, Applebee's had the foresight to forge a partnership with Weight Watchers International, offering Point-counters on several ready-made options (quite tasty, by the way, and worth trying even if you don't subscribe to the program).

Applebee's understands that at the core of its brand are good feelings. If you feel like a sweaty hog after eating at its restaurant, you may not come back, no matter how much fun you had. If, on the other hand, you feel like you are doing something good for your body, that will amplify the brand association you were already getting spending time with family and friends in a relaxed atmosphere.

Certainly, Applebee's is not alone here. Its competitors are trying quickly to catch up. But as the industry leader, Applebee's knows its future is on the line and has astutely leveraged its brand position.

They say necessity was the mother of invention. For Applebee's, I think scarcity and economics work just as well.

From Strangely Unique (Gluek’s) to Positively Ordinary (Cold Spring)

Being in the brewery business today is not easy.

The competition for the U.S. alcoholic beverage market remains intense. Beer is a core product, followed closely by wine and other spirits.  It all depends on who you are, where you live, how much you make, and in which circles you socialize.  Suffice to say, big beverage has you pretty well pegged.

Older consumers are bombarded with advertising from massive beverage conglomerates.  Tastes and habits tend to be pretty well entrenched by the mid-thirties, and getting people to switch after that age is difficult.  (It is not just the difference between "wine drinkers" and "beer drinkers." Think much narrower:  A Bud Light drinker is not a Miller Lite drinker, etc.)  Given that reality, large beverage marketers (Diageo, Anheuser-Busch, etc.) can and do pour billions into developing new product extensions, infiltrating the bar/restaurant business channel, and providing direct incentives - all to move a few percentage clicks into someone else's market share.

Brutal.

The younger consumer market is no easier.  While their tastes may not be as well defined, they trend much more fickle.  If Guinness is "in" for the youth set, its sales are up.  If Guinness is "out," its sales are down.  Simple, and unpredictable.  To make matters more complex, the traditional "beer, wine, and spirits" options - while popular - are no longer an exhaustive set of choices.  Hard ciders and lemonades got their start here.  Coffee mixers are on their way.  And alcoholic energy drinks are a huge niche market (e.g. Red Bull and Vodka, etc.).

So what is a small competitor to do?

Little Gluek's Brewing Company, a Minnesota-based brewery (one of the only ones left), is making a good show of it.

As a small competitor (not small by "ultra-microbrew" standards, but a speck on the eye of Anheuser-Busch), Gluek's ran with the only viable strategy available: Niche marketing.

Banking on the micro/local-brew strategy as a wedge issue in its regional market, Gluek's has the product lines people in this area want: Pale Ales, an Ebony Wheat, Honey Almond, Pilsners, Lights, Ices, and Lagers.

Add to that a line of Pub Pints and Hard Lemonades, and Gluek's has an answer to these sustaining trends in the industry.  Better yet, from a product management perspective, the company has staked out a solid position in the energy drink market.  In fact, if you play with the math a bit, Gluek's maintains almost a dominant position in this sub-market.  Clearly, Gluek's is no Red Bull, but they have a good answer to a popular trend.

Any way you look at it, Gluek's offers a very complete line.  It gives its distribution partners ample ammunition to sell within both major and niche retailers, bars and restaurants, and specialty resellers.  In the Minnesota regional market, both older and younger consumers can find something they like.  And they know it.  Gluek's, astutely, plays its local card to maximum advantage.  The company is well positioned to capitalize on the "buy local" trend made popular, in part, by organic foods and farmer's markets.

You could make an argument Gluek's makes all the right decisions.

Save one.

Changing its brand name.

In 2008, after over 150 years, Gluek's Brewing Company changed its name to Cold Spring Brewery.

The company's stated reasons were pretty clear, and on their surface, sensible.

A proud and grateful corporate resident of pretty Cold Spring, Minnesota, the company wished to forge a deeper tie with the town.  What better way than to name itself after its host?  Seems reasonable.  Additionally, the name "Cold Spring" highlights the purity of the water source, and by association, the quality of the beer itself.  Again, a reasonable assumption.

A phonetics expert could even make a solid case against the name "Gluek's."  It is hard to say correctly unless you have heard it before.  And besides, most naming experts would advise against building a brand name containing embedded negative words ("lick," "ick," "eck," or "ook," depending on your pronunciation).  Finally, Gluek's sounds too "Northwoods," effectively limiting its overall market potential.

Besides, new management had just saved the family of brands from a slow, painful death at the hands of their disinterested corporate owner (G. Heileman Brewing Company of LaCrosse, Wisconsin).  The new owners wanted to make some changes.  Infuse some fresh energy.

It all sounds very sensible.

And all faulty.

First, dispensing with over 150 years of history should not be done lightly.  The name and the tradition are a source of pride and uniqueness is a sea of bland corporate shells.  Gluek's has character built in.  Cold Spring does not.

Second, phonetics rules are made to be broken.  It is the Northwoods character that made Gluek's unique.  Yes, it may limit its overall market potential, but the Gluek's name is not responsible for that.  The answer in niche marketing is not to try to copy the number one and number two in the industry, but rather to make yourself stand out.  Gluek's stands out.  Cold Spring does not.

Third, in order to reach into the youth market, especially with an aggressive push into the energy drink sub-market, you need something special.  Something that will make people feel unique when they are drinking it.  Without a multi-million dollar advertising budget, word-of-mouth is your best friend.  And word-of-mouth requires a memorable catch phrase.  Gluek's, you remember.  Cold Spring, you forget.

The underlying theme is simple: The cardinal sin in branding is not pronunciation trouble, or campy regional flare, or a patchy corporate history.  It is being forgotten.

Naming is actually pretty simple.  There is only one rule: Never be confused with anything else. Cold Spring? Bottled water or beer?  Without knowing better, my money would be on the water bottler.

Cold Spring, as a name, was the safe choice.  It sounded nice.  It made people feel good.  But it was not good branding.

And that's too bad.  If we don't want our every beverage option to come from our friends at Anheuser-Busch, I wish Cold Spring good luck.