This Document Contains Cases 1 to 9 Teaching Note Benetton Group: Evolution of Communication Strategy Case Overview This case examines the controversial “shock advertising” campaign that was used by Benetton, the Italian-based clothing manufacturer and retailer for nearly two decades. Thanks to its unusual communication strategy, the Benetton Group is one of the most visible specialty retailers in the world. Benetton has used some very controversial images in its communication campaigns. Masterminded by Benetton’s creative director and photographer Oliviero Toscani, the shock ads generated both criticism and accolades throughout the world. However, in 2000 Toscani went too far when he created the controversial “We, on Death Row” campaign which featured ads showing piercing pictures of death row inmates along with their names and date they were to be executed. The criticism surrounding this campaign was so intense that Toscani was forced to resign. Under the new creative director James Mollison, Benetton began using more traditional product-based advertising. This case examines Benetton’s unique communication philosophy and the controversy generated by it. The case can be used as a basis for a lively discussion on the use of shock advertising as well as ethics in advertising. Benetton has always been well known for its colorful and provocative advertisements. The company employs unusual, controversial advertising techniques and themes that use “shock value” and powerful images to grab viewers’ attention. Unlike most advertisements which center on a company’s product or image, Benetton’s advertising campaigns have focused on social and political issues such as racial integration, AIDS awareness, war, poverty, child labor, death, hunger, and pollution. Many of the these ads evoked controversy as critics have argued that the real goal of the shock ads has been to generate publicity for Benetton and the some have criticized the company for exploiting human suffering to sell its products. Following the controversy surrounding the “We, On Death Row” ads, Benetton realized that it had crossed even the boundaries of unconventional advertising. Various surveys suggested that some loyal customers had been put off by this campaign and some retailers refused to carry the company’s products. This case can be used with Chapter 22 which deals with social, ethical and economic aspects of advertising. This chapter includes a discussion of ethical issues of advertising and promotion and notes how companies such as Calvin Klein, Abercrombie & Fitch, and Benetton have received a great deal of criticism for their use of “shock ads” containing controversial images. The case can also be used with either Chapters 8 or 9 which deal with creative strategy. Benetton has used the shock ads to position the company as a cutting-edge, socially conscious marketer. Many students will be familiar with Benetton and its controversial ads as they are part of the company’s primary target market. Thus, the case should generate a lively discussion as to what Benetton’s was trying to accomplish with the ads, whether they had pushed the envelope too far with the death row campaign and whether the use of more conventional, product-focused advertising will be successful. Discussion Questions 1. What are the basic objectives of advertising? What are the advertising objectives of Benetton? Advertising may be used to achieve a variety of objectives including building awareness of the brand and/or company, informing customers about the product/service or company, providing information and developing an image Additional objectives include creating favorable attitudes and preferences for a brand, persuading the target audience to switch brands, and encouraging them to try new products. Advertising may also used to maintain top-of-mind awareness of a brand and/or company. The objectives of Benetton’s advertising appear to differ from those discussed above. Benetton’s shock advertising did not focus on the company or its products, choosing instead to address socially relevant issues that might concern the global audience such as war, poverty, AIDS, discrimination and the death penalty. Benetton believed that its advertisements could project the company as a supporter of social causes and that its customers would highly value that stance. Of course many would argue that while Benetton’s goal was to use the ads to position itself as a socially conscious company, the ultimate objective was to use this image to help generate sales of its products. 2. Discuss the pros and cons of the shock advertising campaign that Benetton used for many years. There are few companies in the world that enjoy the global brand recognition of Benetton. The unconventional shock advertisements used in this campaign evoked strong feelings among consumers and helped the company attract attention and generate publicity. One of Toscani’s quotes is appropriate here: “Most good ads are forgotten after six months, but who still remembers the Benetton ad with the priest kissing the nun? Ten years later and people remember! That’s immortality!” Benetton has always had an image as somewhat of a renegade in the advertising community because of the avant-garde approaches the company has used. However, the company is also known for being very socially concerned and trying to make consumers realize the realities of the world in which they live. Benetton’s goal with the shock advertising campaign was to raise public awareness of social issues and position the company as a cutting-edge, socially conscious marketer. However, one might argue that the ultimate goal of the campaign was to help the company sell more of its products. The controversy surrounding the various shock ads that Benetton used over the past two decades generated a tremendous amount of publicity and made many consumers aware of the company. Also, it is important to note that Benetton’s primary target market is teens and young adults who are likely to be more tolerant of the shock ads as they may identify with the issues and causes the company is raising in these ads. Thus, the campaign might have actually helped Benetton’s image and sales. There are also a number of negative aspects to the Benetton shock ads. Many critics argued that Benetton was exploiting human suffering to sell its products and felt that the company used the ads to create controversy and generate publicity rather than to address social issues. One might question whether the type of publicity Benetton was getting from its shock ads was really beneficial to the company. The Benetton ads were controversial even in more liberal European countries, and advertising self-regulatory bodies in Britain, France, and Spain condemned some of the ads and urged magazines to reject them. As long as the advertisements were just unconventional in nature, Benetton’s image was enhanced and sales grew. However, when Toscani resorted to using “shock techniques” from 1991 onwards with the pictures of a priest and nun kissing, a baby with uncut umbilical cord, etc., it generated huge furor among religious and social groups, not to mention the advertising regulatory bodies in various countries. Toscani argued that the company’s intentions were misunderstood by the public. While many thought the kiss to be inappropriate and the uncut umbilical cord to be disgusting, the position of the company was that all that was meant was to demonstrate love and motherhood. Unfortunately for Benetton, many countries banned the two ads. Another ad which created problems due to its intensity was the scene of a dying AIDS victim. The ad angered many viewers because they thought Benetton exploited the man’s suffering and intentionally made him look like Jesus Christ. 3. Oliviero Toscani has defended Benetton’s use of shock advertising by noting that it constitutes nothing less than a debate between advertising and art. He argues that potentially offensive images are acceptable in the world of art and journalism while in other realms such as advertising they are not. Do you agree with Toscani’s position? The position taken by Oliver Toscani, Benetton’s former creative director, is that advertising should be free from any type of censorship or scrutiny since it is often a form of art. When viewing advertising as art it becomes difficult to say where one ends and the other begins. If one views the Benetton ads as a form of art, this suggests that there should be a wide tolerance for the types of images used. The statement by Toscani which is shown at the beginning of the case summarizes his position very well: When Life magazine makes a cover about war, it makes the cover to inform, but also to sell the magazine and to sell the advertising pages inside the magazine -- Chivas Regal and all the others. So Time magazine and all the others make a cover to inform and to sell. To do what I do, I do that to sell but also to inform. And as soon as you inform, people point a finger at you and say, "You are exploiting!" No. It's the people who don't even inform [who are exploiting]. I don't care about the rejection; I'm not afraid to be rejected. Actually, it's a big honor in this world. There are other examples which support Toscani’s argument. For example, the December 22, 2003 issue of Time Magazine featured the Year in Pictures 2003 and showed disturbing images of the Iraq and Afghan war injured and dead -- not very different from Toscani’s image of the bloodied uniform of the Bosnian soldier shown in one of the Benetton ads. Ethical or moral standards are very subjective and relative as evident from reactions to the Benetton ads showing an image of a priest and nun kissing. While this ad was banned in Italy, it won the Eurobest Award in Britain. Some people question Toscani’s position, however, and argue that advertising is intrusive in nature and the public cannot decide what ads they will be exposed to in a medium. Advertising must often respond to a different set of standards since consumers often have no way of controlling their exposure to the images used in advertising and these images are often offensive to many people. Benetton has taken a novel approach and people are likely to disagree as to whether the ads are unethical. However, as noted discussed in question five, Benetton may have gone too far with the “We, on Death Row” campaign. The surviving family members of those killed by the inmates shown in the death row campaign were very offended by the ads and opposed to the idea of having the killers lionized in the national media. However, there were also those who feel that capital punishment is inhumane and praised Toscani’s effort to increase awareness of the issue. 4. Can you think of any other companies that use shock advertising? For what type of companies might this type of advertising be effective? Calvin Klein and Benetton are the two companies that are probably best known for using shock ads although there are a number of other companies that have used the technique. Calvin Klein has been using shock ads for nearly two decades and built the company and brand by tapping into both the charge and the cultural unease surrounding youthful sexuality. The company’s controversial ads have explored the taboo of youthful sexuality and appeal to the independent spirit of young people. Calvin Klein was willing to accept the controversy that accompanies its ads because the scandal and sex appeal surrounding them help differentiate CK products. It also helped generated hundreds of millions of dollars worth of free publicity. Like Benetton, CK handles its advertising in-house which means that an agency does not have to become involved with the negative publicity and controversy surrounding their shock ads. However, Calvin Klein also found that there is a limit to how far they could push could push the envelope with their advertising. Many retailers rebelled against the Calvin Klein ads featuring childlike models in provocative poses which was referred to as “kiddie porn” by many critics. Irate consumer groups also called for boycotts and threatened to picket stores carrying the brand. Another company that has used shock ads is FCUK (French Connection UK) who has been criticized for what many perceive as pornographic images in its campaigns. As discussed in Chapter 22 of the text, clothing retailer Abercrombie & Fitch has also been criticized for using shock techniques its ads as well as in other promotional materials such as its quarterly catalog. It should be noted that all of these companies are involved in the fashion industry and their primary target market consists of young people. Younger consumers are less likely to perceive shock ads as offensive or in bad taste and may even help create favorable attitudes toward these companies because of their edgy, rebellious tone. While other companies have used shock ads, Benetton’s use of the advertising genre is unique. While the ads of Calvin Klein and FCUK are meant to differentiate these brands and increase sales, Benetton’s goal (at least according to Toscanni) was to raise the public’s awareness and make them more conscience of important social issues. Few companies are brave enough to experiment to such a degree with their advertising. One exception is Egg Banking, a United Kingdom based online financial services group that has used campaigns based on stereotyping of men, women and certain ethnic groups. One advertisement shows a dark-skinned man in an orange string bikini that revealed the outlines of his small sex organ. The caption reads, 'Black men are well endowed.' Another ad shows a blonde woman studying a modern painting as the brunette next to her studies an exit sign. The caption reads, “Blondes have nothing in their heads.” However, while some consumers in the UK have viewed the ads as humorous, other have been offended by them and have protested. 5. Do you agree with Benetton’s decision to drop the use of shock ads and return to the use of more conventional ads? Benetton appears to have pushed the envelope too far with the “We, On Death Row” campaign as the ads generated very negative reactions and there were strong repercussions as a result. Families of the victims objected strongly to the campaign and accused Benetton of glamorizing murderers while ignoring the crimes they had committed. The state of Missouri filed a lawsuit arguing that it had been misled regarding the use of the photos. The lawsuit was settled in June 2001 when Benetton agreed to write letters of apology and to donate $50,000 to the Missouri Crime Victims Compensation Fund. In the US, retailer Sears canceled an exclusive $100 million contract to sell a line of Benetton clothes, calling the death row images “terribly insensitive.” Sears ended its contract even after Benetton agreed to allow the retailer to preview future ads. Toscani believed that the sharp criticism in the US was not justified as many countries in Europe had more already banned the death penalty. However, as a result of the increasing furor, Toscani resigned in May 2000. He was replaced by James Mollison, a graduate of Fabrica, Benetton’s cultural research and development center that backs young artists from all over the world. In 2001 Benetton began running a new campaign featuring product-focused ads that ran in print and on TV and billboards. The ads showed exuberant teen models clad in Benetton sweaters and jackets against a crisp white background and were designed to convey a sense of freedom and a positive, dynamic expression of the Benetton style. The impact of Benetton reverting back to more conventional advertising is yet to be determined, although given the way Benetton had built its brand image under Toscani, this approach does appear rather conservative. As noted in the case, Toscani dismissed the more conventional ads as a “waste of money.” In some countries such as Britain they were panned as “so innocuous as to be invisible.” Benetton may be able to capture the customer’s attention and interest with more conventional ads focusing on young people wearing its colorful clothing and emphasizing product qualities and perceived value. While these types of ads may not generate as much attention and interest as the shock ads, they may be effective in shifting attention to Benetton’s products and image as a retailer rather than as a social crusader. Rather than moving solely into product based advertising after Toscani’s exit, the company could still continue to address social issues like war, poverty, education, child labor and exploitation and the like but with less controversial ads. In fact, Benetton indicated that it would not be completely abandoning its social issues messages and planned to run ads speaking to the refugee issue. The subject is very important to James Mollison who wrote a book on Kosovan refugees in conjunction with the United Nation’s High Commission for Refugees as well as an earlier book on foreign workers in the factories of northeast Italy. In 2003 Benetton began a social issues campaign dealing with the problem of hunger that exists in many countries and promoting its work with the World Food Program. The “Food for…” campaign consists of ads promoting the important role the availability of food plays in relations to issues such as education, work, peace, and life. Examples of messages from this campaign, as well as other Benetton ads, can be found on the company’s web site at www.benetton.com. California Milk Advisory Board Teaching Note This case examines the integrated marketing communications program developed by the California Milk Advisory Board on behalf of the California Cheese industry. It focuses on the “Happy Cows” campaign created by the Deutsch LA advertising agency for the CMAB as well as the effective use of other promotional tools that support the award winning advertising. These successful initiatives have created broad awareness and dramatically increased sales of California-produced cheeses over the past decade. The case can be used to illustrate best practices in integrated marketing communications and the use of a variety of IMC tools including media advertising, public relations, consumer promotion, trade promotion, in-store and on-premise merchandising, and Internet marketing. It also illustrates the importance of consistency in marketing communications over time, particularly in light of all-too-frequent tendencies to do otherwise. Lastly, it demonstrates the different metrics that are used to evaluate marketing element effectiveness and identify program improvements. The case can also be used toward the beginning of the course to provide an overview of a successful IMC program or toward the end of the course as a summary of how various IMC tools are used synergistically to support an overall strategy. Students are introduced to the “Happy Cows” campaign in the opening vignette to Chapter 9 which focuses on the creative strategy for the humorous ads and how it has created a successful bond between consumers and Real California Cheese. There are also career profiles in Chapter 9 for Eric Hirshberg, the Executive Creative Director at Deutsch LA who helped develop the ad campaign, and Nancy Fletcher who is the Vice President of Communications for the CMAB and manages the public relations component. Classroom discussion of this case can be enhanced by showing the video case on the California Milk Advisory Board/ Happy Cows Integrated Marketing Campaign that is part of the video supplements package that accompanies the text. The video case can be found on tape on DVD 5 and includes interviews with several executives from Deutsch LA as well as the CMAB. There are also three commercials from the Happy Cows campaign on DVD 2 under Chapter 9. Discussion Questions 1. Analyze the “Happy Cows” campaign that was developed for the California Milk Advisory Board to promote Real California Cheese from an integrated marketing communications perspective. Why do you think the campaign has been so successful? The “Happy Cows” campaign uses a variety of IMC tools to create awareness of, and preference for, Real California Cheese. Advertising through various media including television, radio, print, outdoor and online is a major component of the campaign. However, the web site also plays an integral role as it includes links to the commercials as well as cheese recipes, nutritional information, interactive games, promotional offers and a merchandise store. Other important components of the IMC campaign include publicity/public relations, as stories about Real California Cheese and the state’s cheese makers have been featured in the a number of local, regional and national media. These stories have a strong impact on consumers and help awareness of Real California Cheese. Sales promotion is also an important part of the IMC campaign as both consumer and trade promotions are used extensively. Consumer promotions such as sampling, coupons, and premium offers are an important part of the campaign as are trade promotions with retailers and food service companies. The “Happy Cows” campaign has been so successful because it is a fully integrated program that connects with consumers at a variety of touch points and does an outstanding job of creating brand awareness and preference for Real California Cheese. The tagline for the campaign, “Great Cheese comes from Happy Cows. Happy Cows come from California,” provides a very strong creative platform around which the IMC program has been developed. From a creative perspective, the Deutsch LA agency has developed award winning ads that resonate well with consumers and have established an emotional bond between them and the contented California bovines. The campaign has established and maintains awareness of the Real California Cheese trademark and has created a preference for cheese bearing the seal. 2. What was the role and importance of the Real California Cheese certification mark in implementing the positioning and IMC program elements? How and where was it implemented? Do you think it made a difference to the program? The Real California Cheese certification mark was created for the industry as a unifying symbol that provided synergy for all promotional efforts. When consumers see it in one context, it draws upon other associations. It’s worth discussing all the places the mark has been utilized, as illustrated in the attachments (TV and outdoor ads, on foodservice boxes, menus, retail packages, coupons and premiums, and the website). The mark has also served to support smaller brands that couldn’t afford such an extensive marketing effort on their own. Unifying activities in support of the mark has also impressed trade intermediaries (a key to expanding distribution), by consolidating funds to create greater impact, and more marketing activity. Students can be asked if there are any downsides to this strategy. For example, could negative association accrue to premium cheese brands because of the broad association of the mark with lower-priced cheeses? Do students think awareness of the mark is more subliminal than conscious? Can subconscious associations build over time? 3. Discuss the role of advertising in establishing the Real California Cheese brand personality? What were the constraints the advertising agency had to work around in developing the campaign? How would you describe the personality that was created? What are the pros and cons of the advertising approach? Can the campaign be continued indefinitely? If not, how might it be changed or adapted going forward? The humorous “Happy Cows” ads have played an important role in creating a brand personality for Real California Cheese as they create an emotional bond between consumers and the product. The agency decided that rather than focusing on the cheese, the campaign would revolve around the idea that California cheese is better because it comes from happy cows. Deutsch’s creative team felt the campaign should be all about California and its life style, health consciousness, blue sky and great weather. It was a short path from there to the campaign big idea which is that if the people like California better, maybe the cows do as well. Thus, was born the tag line, “Great Cheese comes from Happy Cows. Happy Cows come from California.” The ad campaign has maintained a singular focus and has centered on the cows’ responses to the unique aspects of their California environment as the source of new creative ideas. The constraints on the development of Real California Cheese advertising include: •That the advertising cannot showcase any one brand, so none are featured •That because it represents such a wide variety of product attributes, specific attribute sell is difficult •That only broadly inclusive benefits can be featured It is not uncommon for a brand’s ad campaign to face constraints or obstacles to overcome. These might include the need to provide health warnings, address recent negative public relations stories, or reverse misperceptions. These issues must be communicated explicitly to the advertising agency creative department before they start to develop the advertising. The pros and cons of using humor to create an affectionate bond with consumers versus hard-sell, product attribute focused advertising can be discussed. The brand personality created for Real California Cheese is fun and loveable. The advertising makes people smile and feel good about the ads and this positive affect may carry over to the brand. The approach has resulted in high awareness and a positive emotional response toward Real California Cheese. You might ask your students if they feel that humorous, playful advertising is the best way to promote Real California Cheese. What are other examples of campaigns where humor has been used effectively to create brand awareness and sell a product/brand? You might ask students if they recommend keeping the approach going forward and how long they think the “Happy Cows” campaign can be used before consumer become tired of it. 4. What role does consumer promotion play in generating trial and awareness of Real California Cheese? How do the consumer promotion tactics reinforce or supplement other marketing elements such as advertising, trade promotion, or public relations? The CMAB uses a variety of consumer promotion tools including sampling, coupons, and premiums. The role of coupons and sampling in generating trial and awareness for the wide range of California cheeses can be discussed, as well as how consumer promotion has more effectively taken the place of traditional in-store merchandising. The importance of sampling should be highlighted, as it generates trial among consumers who otherwise might not try various types of cheeses. The combination and synergy of sampling quality products and accompanying the samples with coupons, significantly increases the odds of purchase (as evidenced by the very high in-store redemption rates). The cross-coupons on packages of wine, crackers, luncheon meats, bread and tortillas cost effectively create reminder advertising for California cheeses throughout the store. Students can be asked to brainstorm other cross-promotional partners. Mention should also be made of the self-liquidating premiums (such as the cow puppets, Janice and Diane, from the commercials) that reinforce the ad campaign in the home and the high-quality coffee table books about the state’s high-quality artesian cheeses, which have a positive halo effect on all California cheeses. 5. Discuss the role of public relations in the CMAB’s integrated marketing communications program? What type of press coverage and stories could be generated about Real California Cheese? What were the different public relations angles that were used to generate the interest of the different media? The objectives of the public relations campaign for the CMAB are to convince the various constituents including consumers, retailers, food professionals, restaurants, and the food media (magazines, newspapers, trade publications and television stations) that California produces high quality cheeses. Many of these constituents had long viewed the cheeses of Wisconsin, Vermont, and Europe as superior to California cheeses. To improve the image of California cheeses, dairies are encouraged to enter national and international cheese competitions. The awards won by California cheese producers are announced through press releases and various media run stories that reach consumers as well as the food service industry. The different types of press coverage, with correspondingly different public relations angles, should be discussed. These include the following: •Recipe-related stories that are sent to newspapers and food magazines •Business-related stories sent to trade publications as well as business and marketing media such as Business Week, Advertising Age, and Brand Week that focus on sales growth and marketing awards •Stories targeted to travel magazines regarding ideas for visits to state cheese makers (akin to winery visits) •Foodservice magazine stories about national account gains and successful in-store promotional programs A third leg of the public relations program has been the “influencer” program which has included cheese tastings for chefs, culinary professionals and the food media to create greater familiarity with individual products, and collateral materials or brochures such as “Entertaining with Cheese” and “Wine and Cheese Pairings” that are distributed through high-end specialty wine and cheese shops, as well as offered online. 6. What has been the role of the Real California Cheese website? How does it reinforce or support the other parts of the integrated marketing communications program? The home page of the Real California Cheese website, which is shown in Exhibit 7 of the case, should be used for this portion of the discussion as it shows the various sections of the site which include current commercials; recipes to encourage product usage; information regarding where to purchase Real California Cheeses; product coupons and Real California Cheese merchandise (T-shirts, mugs, aprons with the logo); dairy visit information, including a map of all the state’s dairies that are open for visits; an explanation of the product quality behind the RCC seal; consumer education information about cheese types, storage and handling; information for food professionals and pizza shops; and a library of past and present press releases. The web site is designed to be consistent with the imagery from the advertising campaign. Visitors to the site can see the products, learn about cheeses, view merchandise and even purchase it online. Various parts of the site cater to specific groups such as industry professionals, restaurant chefs, dairy farmers and the media. The most popular parts of the site are the sections where visitors can click and watch commercials as well as the recipe section. Another popular part of the site which is the kids section which includes cute drawings of the cows that kids have sent to the CMAB as well as the Happy Cows Farm Game. 7. Which marketing metrics did the CMAB use to evaluate their IMC program? Are there any others you feel they should focus on? Which do you feel are most important? There are a range of metrics that are used to determine the effectiveness of the CMAB’s marketing efforts and the IMC program. Marketing-related measures include Nielsen and IRI market share data which show how well Real California Cheese is doing in terms of sales and market share. Advertising-related metrics include aided and unaided awareness of advertising for Real California Cheese, brand awareness and message recall. The effectiveness of the various consumer promotions can be measured by coupon, rebate, and premium offer redemption rates. For direct marketing efforts, response rates and further inquiry requests can be measured by type of offer, mailing list, and creative message. Trade promotion effectiveness can be assessed by retail distribution levels, point-of purchase displays, and share of retailer advertising and displays. A variety of measures can be used to assess the impact of the web site including the number of hits, web link click through rates, the number of pages viewed, time spent on the site and keyword search draw. Public relations metrics might include the number of PR mentions by type of media, the number of stories run in various newspapers and magazines, and coverage on food-related television programs. Creative awards in the areas of marketing advertising, public relations, Internet marketing and consumer promotions can also be used to assess the impact of the IMC program. 8. In light of consumer trends (demographics, food trends, and media “consumption”), are there other advertising or promotion opportunities that should be pursued by the California Cheese industry? This question encourages students to utilize their own creativity and apply their knowledge of integrated marketing communication tools derived from the course material. Students can be asked to suggest ways to extend the “Happy Cows” campaign in a different direction or even suggest an entirely new campaign idea they feel might more effectively achieve the future growth objectives of Real California Cheese. They can brainstorm new promotional partners or consumer promotion program ideas. You might also discuss relevant demographic trends such as the growth in the Hispanic population, the aging of Americans (who experience calcium deficiency as they age), increased interest in low carbohydrate foods, and increases in out-of-home and on-the-go consumption. Students can be asked what types of integrated marketing strategies and tactics, as well as other product forms might capitalize on these trends? Chicken of the Sea International The Jessica Simpson Spokesperson Decision Teaching Note Case Overview This case examines Chicken of the Sea International (COSI), one of the major competitors in the canned/packaged tuna and seafood industry, and the decision facing the company’s senior vice president of marketing as to whether the he should hire pop star Jessica Simpson as a spokesperson. COSI received a tremendous amount of publicity in the Fall of 2003 and early 2004 following the famous fish faux pas that Simpson made on the MTV reality show The Newlyweds: Nick & Jessica. While eating a can of Chicken of the Sea tuna Simpson turned to her co-star husband and asked the whether the product inside is chicken or tuna. Simpson’s gaffe became the target of jokes and a myriad of media stories that resulted in a great deal of publicity for Chicken of the Sea. The company took advantage of the incident by having her make a surprise visit to its annual sales meeting in October 2003. The case focuses on whether COSI should try to capitalize on the publicity and hire Simpson as a spokesperson. There are a number of factors that Don George, the senior vice president of marketing must consider in making this decision including whether the company can afford to hire her, how her image will fit with the brand, and how 25-54 old women who comprise the company’s core target market might react to her as a spokesperson for the brand. It can be used with Chapter 6, Source, Message and Channel Factors, as it focuses on the use of a celebrity as a spokesperson and issues to consider in selecting an endorser. The case provides students the opportunity to evaluate Q scores for Jessica Simpson and see how they vary among different demographic groups. This case can also be used with Chapter 16 on Sales Promotion as COSI is a company that allocates most of its marketing budget to consumer and trade promotion. A decision to use Simpson will mean more emphasis on media advertising which will take monies away from the sales promotion budget. This case should be of great interest to students since many of them are familiar with Jessica Simpson and are probably aware of her famous fish or tuna faux pas. Many will feel that COSI should take advantage of her gaffe and hire her as an endorser. However, the case be used to show that the decision to hire a celebrity endorser requires the consideration of a number of factors. Classroom discussion of this case can be enhanced by showing the video case on Chicken of the Sea that is part of the supplements package that accompanies the text. The video case can be found on tape on DVD 5 and provides an excellent overview of Chicken of the Sea, the competitive situation in the tuna industry, the company’s new branding initiative, the various types of consumer and trade and promotions used by the company and the role the company’s web site plays in its IMC program. A Chicken of the Sea commercial that began airing in 2006 can also be found on DVD 1 under Chapter 5. Discussion Questions 1. Discuss the consumer decision making process for a product such as canned tuna and the response hierarchy model that is most likely to applicable in the purchase of this product. Canned tuna is a very good example of a product that is a low involvement purchase decision for most consumers. Tuna is essentially a commodity product with very little differentiation among the various brands. While the three major brands (StarKist, Chicken of the Sea, and StarKist) all claim to have superior taste, most consumers do not perceive significant differences in taste and quality among them. Moreover, many consumers recognize that private label brands are produced by the same companies that process and can the national brands and find them acceptable substitutes. The lack of perceived differentiation among the competing brands means that canned tuna is often purchased on the basis of price. Marketers of canned tuna must keep their shelf prices competitive with the other national brands as well as the private label brands offered by the various retailers. Sales promotion plays a very important role as consumers are usually looking for brands that are on sale or for which they might have a coupon. The low involvement response hierarchy is likely to be applicable in the processing of information and purchase of canned tuna. As discussed in Chapter 5, this hierarchy views the consumers as engaging in passive learning and random information catching rather than active information seeking. Consumers are likely to engage in peripheral processing of advertising messages and may focus more on elements such as music, characters, symbols, and slogans or jingles than actual message content. These peripheral cues become salient when the consumer is actually in the store and making a purchase decision among the various brands. All three of the major tuna brands appear to be marketed with the low involvement hierarchy in mind. Advertising for StarKist relies on the personality symbol of the Charlie the Tuna animated character (see Chapter 9 for a discussion of this execution technique). Chicken of the Sea relies on its iconic mermaid and the use of a catchy jingle (“Ask any mermaid you happen to see. What’s the best tuna? Chicken of the Sea.”) while Bumble Bee also uses its Bee character and a jingle as well (“Yum, yum Bumble Bee, Bumble Bee tuna”). A classic Bumble Bee commercial can be found on the company’s web site (www.bumblebee.com) under products. In discussing the consumer purchasing process for canned tuna it is important that you do not lead students to conclude that this product has become totally commoditized and no brand differentiation is possible. There are several key points you might want to make to students who try to draw this conclusion. First of all, the three national brands (StarKist, Bumble Bee and Chicken of the Sea) account for 82 percent of the market share in the tuna category. If tuna was indeed a commodity, one might expect that private label brands would have a greater share of the market. A second important point is that there is strong brand loyalty in the canned tuna category. Figure 4.5 of the text shows that 44 percent of consumers indicate that they are loyal to one brand of tuna. Moreover, brand preference for tuna is also somewhat regional as Bumble Bee does very well in the Northeast and Florida while StarKist and Chicken of the Sea are stronger in the North Central and West regions of the country. While there is a strong level of brand loyalty for the various brands, it is important to note that many consumers remain loyal to a brand only if it is priced competitively. Thus, marketers of the three national brands recognize that it is important that they maintain shelf prices that are the same or within a few cents of their competitors as well as the store brands. This means they will rely heavily on price oriented types of sales promotion such as trade and promotional allowances. One area where the tuna marketers have been able to break away from the heavy emphasis on price and promotion is with new pouch products such as the tuna salad kits and Lunch To-Go. 2. Discuss the role integrated marketing communications plays in the marketing of canned/packaged tuna for a company such as Chicken of the Sea. How might the company use the various IMC tools as part of its marketing program? Integrated marketing communications plays a very important role in the marketing of canned/tuna as the various companies use all of the IMC tools, although to different degrees. Media advertising is used to create and maintain brand awareness and to help differentiate a brand. The major product attributes that are emphasized in media advertising are taste and quality. As noted in question 1, given the low involvement decision making process for tuna, the companies use peripheral cues in their ads such as catchy slogans and jingles as well as personality characters and symbols. Media advertising is also important in the introduction of new types of tuna products. As discussed in the case, there have been several important product innovations in the category in recent years such as tuna in a pouch, tuna salad kits, flavored tuna, and Lunch To-Go products. StarKist and Chicken of the Sea have used media advertising to introduce these product innovations to consumers. It is important to note that the level of media advertising in the tuna category is really very low as most of the promotional budgets of the three major competitors are being allocated to sales promotion. StarKist spends the most on television advertising for ads featuring its Charlie the Tuna personality character. Chicken of the Sea spends nearly its entire media budget on radio, print ads and floor signage ads. Bumble Bee has not been running any media advertising for several years, choosing to focus its attention on consumer and trade promotion. The primary IMC tool used by the marketers in the canned/packaged tuna category is sales promotion. As discussed in the case, price competition as well the significant market share of private label brands have shifted the power from the marketers to the retailers who demand, and usually get, trade and promotional allowances from the manufacturers. The three competitors also rely heavily on consumer promotions in the form of national FSIs, check out coupons, point-of-purchase displays, premium offer, price-off deals, and contests and sweepstakes. You might ask students to examine Exhibit 16-26 of the text which contains a promotional calendar showing the various promotions Chicken of the Sea uses for its products over the course of a year. Chicken of the Sea International has also recently implemented the Mermaid Club which is a consumer loyalty program that is designed to encourage repeat purchase and get consumers more involved with the brand. The heavy emphasis on sales promotion in the tuna industry is a very good example of a promotional trap which is discussed in Chapter 16 and shown in Exhibit 16-8. It will be very difficult for the competitors to break out of this trap unless they agree to cut back promotional spending. However, they are afraid to do so because of a fear of losing market share to other national brands and/or private label brands offered by the retailers. While sales promotion and media advertising are the IMC tools used the most by the marketers of canned/packaged tuna, they also used direct marketing, the Internet, publicity/public relations and personal selling. Direct marketing is used by periodically sending target direct mail pieces that contain coupons or premium offers to consumers. COSI is also beginning to do direct marketing through email to consumers who join its Mermaid Club. Publicity/public relations is also an important part of the IMC program of the various companies. Each company regularly issues new releases dealing with health and nutritional issues related to tuna and other products. For example, the industry recently has had to deal with negative publicity concerning the mercury content in tuna and its potential impact on pregnant women. Each company as well as the industry’s major trade association, the United States Tuna Foundation, have ongoing public relations efforts that address major issues facing the industry. Each company also works to generate publicity for its products and marketing efforts. As noted in the case, Chicken of the Sea’s public relations firm issued video news releases to generate publicity over Jessica Simpson’s visit to the company. StarKist and COSI often issues news releases regarding their upcoming advertising campaigns to advertising and marketing publications such as Advertising Age, AdWeek and Brand Week as well trade publications such as Progressive Grocer, Grocery Headquarters and Food Engineering. Another type of public relations activity that is used by the competitors in the tuna category is event sponsorship. For example, Chicken of the Sea sponsored the U.S. Synchronized Swim team that competed in the 2000 Olympics and used its sponsorship to offer a sweepstakes whereby consumers could win a trip to games in Sydney, Australia. The Internet has also become an important IMC tool for the tuna companies as they all maintain web sites that contain company information, product information, recipes, health and nutritional information, new releases and examples of their advertising. As discussed in the video, Chicken of the Sea’s web site is an important part of their IMC program. The site contains an easy-to-use recipe generator, resources on health and nutrition, as well as games and educational content. It also includes the Mermaid Store, where consumers can shop for everything from T-shirts to watches to sporting goods featuring the classic mermaid logo. The web site has become an integral part of Chicken of the Sea’s IMC program as the company uses other forms of media to drive consumers to the site and engage them in the brand. COSI uses its web site as the vehicle through which consumers can join their customer loyalty program called the Mermaid Club. 3. Discuss how Chicken of the Sea’s marketing personnel and advertising agency might evaluate the appropriateness of using Jessica Simpson as a spokesperson for the company and whether she is a good fit for the brand. This question provides the instructor with the opportunity to apply the information in Chapter 6 that discusses the use of celebrities as endorsers. There are a number of ways Chicken of the Sea International marketing personnel and ad agency can evaluate how well Jessica Simpson might work as a spokesperson for the company. One basic consideration is whether she might overshadow the product and the advertising message. This is important since consumers might pay attention to Simpson and not notice that she is promoting the Chicken of the Sea brand. However, since tuna is a low involvement product, it is likely that any advertising using Simpson will contain a simple message promoting attributes such as taste or quality. Thus, it should not be difficult to generate strong brand and advertising awareness by using her. Another consideration is overexposure. Simpson did sign an endorsement deal with Pizza Hut and appeared in a commercial that premiered on the 2004 Super Bowl. However, at the time of the case she was not serving as a spokesperson for any other companies or brands so this should not present a problem to COSI. The company must also consider whether there is any risk associated with using Simpson as an endorser. In general this should not be a problem since she has a wholesome image and is not as controversial as other young female pop stars such as Brittany Spears or Christina Aguilera. However, Simpson has become known for her ditzy behavior and comments on The Newlyweds MTV show and COSI may have some concern that she might say or do something that would be even more embarrassing than the fish or chicken gaffe. As with any celebrity, there is a certain amount of risk associated using her as any inappropriate acts or behaviors she might engage in would be covered heavily by the media and could reflect negatively on COSI if she was a spokesperson for the company. One of the most important considerations for COSI regarding Simpson is that of target audience receptivity. As noted in the case the core target market for Chicken of the Sea is 25 to 54 year old women and it is unlikely that this group will identify with Simpson and may even have negative opinions toward her because of her ditzy blonde image. Moreover, the company must consider whether these women would see her as a credible spokesperson for Chicken of the Sea, particularly considering the fact that she was not even aware of whether the product was tuna or chicken. Chicken of the Sea’s advertising agency will be challenged to develop a campaign using Simpson that will be received favorably by the core target audience. On the other hand, younger consumers may be more receptive to Simpson as a spokesperson since she is very attractive and popular celebrity. The information from the Marketing Evaluations/TVQ study supports this argument as Simpson has a Q score of 23 among 12-17 year olds but only a 9 among those 18-34 and a 10 among those 25-49. It is also important to note that the percentage of those familiar with Simpson is very high among the 12-17 year old group (72%) as well as the 18-34 year olds (76%). However, the familiarity score drops to 49 percent for those in the 35-49 year old age group. Exhibit 1 also show that Simpson’s Q score among the core target market of 25-54 females is an 8 while the percentage of those familiar with her is 55. Students should be encouraged to analyze the Q scores and other information provided in Exhibits 1 and 2 for both Simpson as well as other female musical performers. Another factor COSI must consider is how well she fits with the company and brand as an endorser. As discussed in Chapter 6, advertisers must try to match the desired image for the company and/or brand with the image and characteristics of the celebrity. Students should be encouraged to consider how McCracken’s meaning transfer model might be applied to Simpson as a spokesperson for Chicken of the Sea. This requires them to consider the cultural meaning of Jessica Simpson and whether this is the image that COSI wants to have transferred to the company and/or brand. Students should be asked to discuss the meaning/image of Simpson and how it was acquired. They are likely to note that her image originally was that of a young, attractive singer with somewhat of a wholesome image. However, her meaning changed dramatically as a result of her role on the MTV show Newlyweds as she became known more as a “ditzy blonde” who often says and/or does dumb things. COSI must consider if they want their brand associated with this image as it might be a turn off to older women in their core target market. Some students may argue that Simpson can be portrayed in a role as the Chicken of the Sea mermaid since she is a very attractive young woman who bears a resemblance to the latest version of the well known icon. One way of evaluating this suggestion is to consider how well Simpson image matches the characteristics COSI tries to portray in the mermaid. The case notes that the attributes of the mermaid include being trustworthy, magical, attractive, friendly, approachable, contemporary and fitting with the Chicken of the Sea brand. Simpson’s image actually fits well with most of these attributes although it is questionable as to whether she would be perceived as trustworthy and as fitting with the Chicken of the Sea brand. 4. Discuss the pros and cons of Chicken of the Sea International hiring Jessica Simpson as a spokesperson for the company. Can the company afford to hire her and spend the money on TV advertising to use her effectively? Many of the pros and cons of COSI hiring Simpson as an endorser have been addressed in the answer to the previous question. However, it still may be helpful to have students make a list of reasons why the company would benefit from having her as a spokesperson as well as why this would not be a wise decision. Arguments in favor of hiring her include the opportunity for COSI to build on the favorable publicity that has resulted from her famous fish or chicken faux pas. Using her as an endorser may be a particularly effective way to increase awareness and interest in the brand among younger consumers. Awareness of Simpson is probably even higher in early 2004 than the Q scores results indicate since she received a tremendous amount of exposure and publicity in late 2003 and early 2004. Moreover, since tuna is a low involvement product, consumers may be receptive to advertising for Chicken of the Sea featuring Simpson. One option that the company was considering was to feature her in print ads with the headline stating “Our mermaid has never looked so good.” It is likely that COSI could generate a great deal of publicity if the company hired Simpson as a spokesperson which would result in exposure and attention for the company and brand that would extend well beyond the media time or space that was actually purchased. There are, however, a number of arguments that could be made against using Simpson. One of the primary arguments against using her is that the 25 to 54 year old women in COSI’s core target market may not respond favorably to Simpson and may even be turned off by seeing her in ads for the brand. This group purchases most of the tuna and may not be influenced by Simpson because of her ditzy blonde image and or lack of relevance to the product. Another problem with using Simpson is that COSI really does not have a large media budget and probably cannot afford to use television on a regular basis. A celebrity such as Simpson would be more effective in TV commercials than print or radio ads, which is where COSI spends most of their advertising dollars. The case notes that COSI is planning on spending approximately $11 million on advertising in 2004. However, Simpson’s endorsement fees would have to come from this budget as would production costs for commercials. This means there would be less money available to run ads in media traditionally used by COSI such as radio, print and in-store. Students might note that COSI is now a $600 million company and the proposed media budget of $11 million is less than two percent of sales. However, the company spends a great deal of money on consumer and trade promotion so the overall marketing communications budget is a much higher percentage of sales than two percent. 5. What would you do if you were Don George? Would you recommend that the company hire Simpson as a spokesperson? Why or why not? The ultimate decision Don George and COSI must make is whether to hire Jessica Simpson as a spokesperson. As noted in the case, COSI will probably have to pay her more than a million dollars which is a very large sum of money for a company that does not spend much money on media advertising. The main question George must try to answer is what type of return on investment the company would get if it were to hire Simpson. While she would probably be effective at increasing advertising and brand awareness, the ultimate issue is whether using her would help increase sales as well. One way of looking at this is to consider what the return would be if she helps COSI increase its market share. One market share point in the canned tuna market (including food service, and warehouse/club stores) represents approximately $20 million in sales. If COSI’s profit margin is 4 percent, the company would generate $800,000 in profits for each share point gain. Based on these figures, Simpson would have to help the company increase its share of the canned tuna market by a little over one point to cover the costs of using her. However, Simpson could also be used to endorse other COSI canned seafood products so the cost of using her could be allocated across these items as well. Of course there is no guarantee Simpson will help the company move the sales needle as increases in advertising and brand awareness do not always result in sales increases. While it is important for COSI to analyze this decision from a financial and ROI perspective, there are other considerations that factor into the decision. One of COSI’s goals is to try to attract new and younger users to the brand and Simpson may be helpful in achieving this. Of course George must also consider whether there might be some type of backlash among the older women who comprise the core target audience as they may not like the ditzy blonde image that Simpson has come to personify. COSI decided not to hire Simpson as a spokesperson. In the authors’ discussion with Don George, he indicated that the company was reluctant to pay the large amount of money that would be required to retain Simpson and felt that COSI’s limited media budget would not allow them to use her effectively. Moreover, he felt that COSI was benefiting from all of the publicity that was generated by the Simpson faux pas and thus she was serving as a type of quasi endorser but not really costing the company any money. George was also concerned as to how retailers might react if COSI retained Simpson as they might view this as evidence that the company had marketing funds available and thus put more pressure on them to provide more trade promotion dollars. Since the time of the case, Jessica Simpson has gone on to become a major celebrity as she has starred in several movies including Dukes of Hazard and also released a new album in 2006 called “A Public Affair.” In 2006 her marriage to singer Nick Leachey ended and the couple was divorced which resulted in a tremendous amount of media attention. Simpson has become one of the hottest stars in the entertainment industry and commands seven figures for endorsement deals. It is extremely unlikely that Chicken of the Sea could afford to use her as a spokesperson nor would she be likely to agree to promote the brand given her high profile status. Teaching Note Gateway: Searching for the Right Agency Case Overview This case examines Gateway, one of the major competitors in the personal computer industry, and its search to find the right advertising agency and positioning platform for the company. Gateway has switched advertising agencies nine times from 1997 to 2005 and three times in a 14 month period from early 2002 to 2003. Gateway’s sales have declined from a high of $9.6 billion in 2000 to $3.8 billion in 2005, which includes approximately $1 billion of revenue from eMachines which the company acquired in 2004. Gateway has undergone several changes in management as well as its business strategy over the past five years. These changes have had an impact on its agency relationships and are a major reason why the company has changed its ad campaigns and agencies so often. The case can be used with Chapter 3 as it deals with reasons why agencies lose clients and ways how they gain new accounts. The case provides an excellent opportunity to discuss reasons why Gateway has changed agencies so many times and the factors that have contributed to its agency switching. It also provides an opportunity to discuss the role of in-house agencies and the value of using an outside agency versus handling advertising internally. The case can also be used with Chapter 8 where we discuss creative strategy and how some companies are constantly searching for the right advertising campaign. The classroom discussion of this case can be enhanced by showing the series of Gateway commercials that are provided on the DVD provided in the instructor’s supplement package that accompanies the text. Ten Gateway commercials appear on tape one including four spots from the “People Rule” campaign developed by McCann-Erickson and six developed by Siltanen/Keehn during its brief tenure as Gateway’s agency in 2001-2002. Three of the commercials develop by S/K are spots from the campaign featuring Ted Waitt and the talking cow who advises him on ways to entice customers to buy Gateway products. The other three commercials are stylish, product-focused ads including a comparative ad used to take on the highly successful Apple iMac personal computer. You should review these commercials and read the background information on them provided in the Instructor’s Video Manual before teaching the case. You might also pay attention to advertising being run by Gateway at the time the case is being taught. Gateway print ads can often be found in PC enthusiasts magazines such as PC World, PC Magazine, Wired, and Computer World. Ads targeting business customers can be found in publications such as Fortune, Forbes, and BusinessWeek. Examples of current Gateway advertising can be found on the Woo Agency web site at www.wooagency.com. Discussion Questions 1. Analyze Gateway’s decisions to change advertising agencies so many times over the past six years. Identify and discuss specific factors that may have led to each decision to change agencies. As noted in Chapter 3, some companies have long-lasting relationships with their advertising agencies while others change agencies more frequently. Decisions to switch agencies can be driven by a variety of factors including increases in the client’s size, changes in the markets it serves, reorganizations that lead to changes in top management, changes in a company’s marketing and/or marketing strategy, poor performance or service by the agency, and declining sales. A detailed list of reasons why agencies lose clients, along with a discussion of how agencies gain clients, is provided in Chapter 3 (pp. 93-95). A good way to approach this question is to consider what factors may have contributed to each agency change made by Gateway over the past six years. The first issue that should be discussed is Gateway’s initial decision to hire an outside agency. As the case notes, up until 1993 Gateway relied solely on print advertising that was produced in-house. However, as the company grew rapidly, it decided to add television ads to the media mix and retain the services of an outside agency to work with its in-house advertising department. Some discussion should focus on Gateway’s hiring of the Carmichael Lynch, Minneapolis and the company’s need for an outside agency. It is very unlikely that Gateway’s in-house advertising department had the ability to produce quality television commercials and the expertise of an outside agency was needed. As discussed on pp. 75-78 of the text, companies may rely on an in-house advertising department initially, but often hire outside agencies as they grow and their advertising budgets and needs increase. Outside agencies usually have more highly skilled personnel such as creative talent and other marketing communication specialists and provide a broader perspective to companies than they might get from an in-house advertising department. Carmichael Lynch served as Gateway’s agency for four years until Gateway decided to move its advertising to a larger global agency, D’Arcy Masius Benton & Bowles. The decision to hire DMB&B was made because Gateway wanted a larger agency with global capabilities that could help the company with its growing international business in Europe and Asia. This is an example of a situation where a client changes agencies because it feels a larger agency is needed to handle its business and, in this case, an agency that could handle its growing international business. The next agency change Gateway made the decision to drop DMB&B and take its advertising back in house, while using a small creative boutique, DiMassimo Brand Advertising, to handle its creative work for television advertising. The decision to drop DMB&B appears to have been the result of personality conflicts, a lack of rapport between agency personnel and Gateway’s in-house advertising department, and dissatisfaction with the type of ads the agency was creating. As the case notes, Gateway CEO Ted Waitt is known for his dislike of traditional advertising that uses actors and scripted approaches and favors more unscripted, folksy ads with “real people.” You might note that in addition to moving the advertising back in house and hiring DiMassimo, Waitt brought back Henry Corra to work on Gateway’s advertising. This is a very good example of the important role personal relationships often play in agency decisions. Waitt was always been very fond of Corra and his creative style and a strong trust and personal relationship had developed between the two. The next agency change to discuss is the decision to move from DiMassimo Brand Advertising and once again hire another large outside agency, McCann Erickson Worldwide. This decision was made after Jeff Weitzen, a former AT&T executive, was brought in to run Gateway in early 1998 as Ted Waitt decided to step back from the day-to-day operations of the company. The decision to hire McCann appears to have been based on several factors including the preferences of Weitzen and other new top managers, as well as a change in Gateway’s corporate strategy. Gateway had begun implementing its “beyond the box” strategy and transforming itself from a manufacturer of personal computers into a company that would derive its revenue from a variety of sources. Weitzen and other felt that new advertising was needed to help communicate this new strategy to the market. Many advertising and industry analysts felt that the “People Rule” campaign developed by McCann was a very good campaign and was successful in positioning Gateway as a customer friendly company. However, McCann Erickson’s tenure ended after a management shake-up that resulted in Weitzen’s resignation and Waitt resuming control of the company in January 2001. It should be noted that Gateway posted a financial loss in the fourth quarter of 2000 as its core PC business was not profitable. There are a number of factors that appear to have led to the decision to dismiss McCann Erickson including the management shake-up, the decline in profits, and Waitt’s dislike for large agencies. The case also mentions that there was speculation that Gateway was dissatisfied with the level of service it was receiving from McCann after the agency had won the Microsoft account. After dropping McCann Erickson, Waitt decided to move Gateway’s advertising back in house and once again rely on Henry Corra to direct its commercials as the company returned to the “You’ve got a friend in the business” tagline. However, during this period, the Siltanen/Keehn agency was working with Gateway on a project basis. The founders of S/K had worked on the Apple Computer account when they were with the TBWA/Chiat/Day agency in Los Angeles which meant that they had very good insight into the personal computer industry. This is a good example of how experience in a particular industry and reputation can be important factors in gaining new business. S/K also did some very good creative work for Gateway including the campaign featuring the commercials with Ted Waitt and the talking cow. The next agency change to discuss is the decision to drop S/K after only 10 months and hire the Arnell Group, New York. This decision appears to have been driven by the decision by Gateway to change its positioning and image from folksy to hip. The Arnell Group was known of its branding work with retail clients such as Banana Republic and was hired to help with the makeover of the Gateway Country stores as well as the advertising. Again, we see an example of how a change in strategy often results in a decision to change agencies. The next agency change made by Gateway was from the Arnell Group to Leo Burnett. A factor that may have played an important role in this decision was the fact that Gateway’s new executive vice president of consumer marketing was a former Leo Burnett executive who was very familiar with the agency and the work it has done through the years with various clients. It might also be noted that Leo Burnett is based in Chicago and thus might be perceived by Ted Waitt as better able to identify with and understand the folksy, Midwestern culture of Gateway. Leo Burnett’s 16 month tenure represented Gateway’s longest agency relationship since McCann Erickson had the business from 1998 to early 2001. However, Burnett became the next agency to go through the revolving door due to changes occurring at Gateway as the company hired Grey, San Francisco to handle its business-to-business advertising as well as some of its consumer advertising. Neither of the campaigns developed by Leo Burnett was successful including “The Comforts of Gateway” consumer effort and the b-to-b-campaign that used the “Humanology” tagline. Grey had been brought in to handle Gateway’s B-to-B advertising but as new management took over the company, they were given the opportunity to compete against Burnett for other parts of the business including back-to-school ads and ads touting Gateway’s Olympic sponsorship. However, Leo Burnett sensed that the nature of Gateway’s advertising was changing to focus more on response driven ads such as ads in retailer circulars and direct response ads. Thus, Burnett decided to pass its defense of the account to its below the line unit, Arc North America, which specialized more in this area. Although Gateway acquired eMachines, the company was now being run by the latter as Wayne Inouye took over as CEO of the company and put his own management team in place. T. Scott Edwards also was replaced as Senior V.P. of Marketing by Cathy Stauffer who came from electronics retailer The Good Guys. The new management team favored the type of advertising used by eMachines which involved striking deals to get its products featured prominently in Sunday circulars for consumer electronics retailers such as Best Buy and Circuit City. The next agency change came when Gateway decided to hire Crispin Porter Bogusky as its agency in September 2004. The company’s new strategy involved positioning feature-packed Gateway computers as a premium brand while eMachines-branded PCs would be positioned as a value brand. The company was looking for big ideas for a new campaign that would be launched to help differentiate the Gateway brand and under the direction of its new Senior V.P. of marketing began contacting new agencies. As discussed in the opening vignette to Chapter 3, Crispin Porter Bogusky had become one of the hottest agencies in the advertising industry and was known for taking companies with smaller ad budgets and using a variety of IMC tools to successfully build their brand image. Thus, it is not surprising that Gateway would feel that CP+B might be able to help restore some luster to its brand image and help differentiate Gateway-branded PCs. However, as noted in the case, CP+B and Gateway could not agree on the strategic direction of the company and the two ended up parting ways. It really is not clear as to what happened between Gateway and CP+B. However, in 2005 the agency acquired several other new accounts including Volkswagen and Miller Lite and may have decided to focus its energy more on these clients. Also, given the problems Gateway was having, CP+B may have felt hat it was better off resigning the account rather than become the next agency to be shown the door. Following the departure of CP+B, Gateway moved its advertising to the Woo Agency, a small independent shop in Los Angeles which specializes in brand and response-driven advertising. Its clients also include Tire Pros, The Coffee Bean & Tea Leaf, LA Fitness, Gold’s Gym, Winchell’s Donuts, Mattress Gallery and The Good Guys. Its experience with retail and direct-response advertising is one of the reasons Gateway chose Woo as its agency. As of Fall 2006, the Woo Agency was still handling Gateway’s advertising. 2. Discuss how Gateway’s frequent agency switching has affected the company’s branding and positioning efforts. What recommendations would you make to Gateway management regarding its agency switching and its impact on the company? Gateway’s frequent agency switching has obviously affected the company’s branding and positioning efforts, particularly more recently, as the changes have made it difficult to establish any continuity and consistency in its advertising. Over the past nine years Gateway has used a number of tagline/campaign themes including the following; •“You’ve got a friend in the business ( 1994 to 1997) •“From South Dakota to the rescue” (1997) •“Let’s talk about your Gateway” (1998) •“Yourware” (1999) •“Gateway@Work (business-to-business) (1999) •“People rule” (2000/2001) •“You’ve got a friend in the business (2001) •“Gateway: A Better Way” (2002) •“The Comforts of Gateway” (2003-2004) •“Humanology” (business-to-business) 2003/2004 •“Technology You Can Trust” 2005/2006 As can be seen from this list, Gateway has used more than 10 different advertising themes over the past nine years and six since early 2001. Most of these taglines have lasted less than a year which has made it difficult for the company to establish a clear identity and image. You might ask students to discuss whether they feel there is a consistent theme running through all of the different taglines. As discussed in the case, Gateway has always tried to position itself as a company that assists its customers in understanding technology and how it can help them in their daily lives. This theme is reflected in the most recent campaign which uses the “Technology You Can Trust” theme. It should be noted that most of the recent changes in positioning themes have come about following a change in Gateway’s overall corporate strategy. It is not surprising that the company would develop a new advertising tagline that might better represent its new strategic direction of trying to expand beyond personal computers and become more of a provider of a wide range of digital electronic products. However, it will be important for Gateway to settle on an advertising theme and stay with this tagline. Unfortunately, when companies are in Gateway’s position and experiencing declining sales and profits, it is not unusual for them to keep changing their positioning and advertising in hopes of finding an approach that will strike a responsive chord with their customers. It is likely that Gateway will always strive to be a humanistic brand, holding true to its core philosophy that, no matter how much technology evolves in the future, it is of little value unless it can do something to improve the user's life today. The challenge facing Gateway is to find a way to deliver this message and stay with it long enough. 3. If you were an executive at an advertising agency and Gateway’s decided to switch agencies again, would you advise your account development team to pursue the company’s business? Why or why not? An interesting issue to discuss is why large agencies keep pitching Gateway when the company has a history of changing agencies so often. First, it should be noted that despite its recent problems, Gateway is still a very large company with sales of nearly $4 billion and is the third largest personal computer company in the U.S. Moreover, Gateway spends an estimated $40 million a year on advertising which makes it a very large account that will attract the interest of many agencies. Large Fortune 500 or 1000 companies such as Gateway are very high profile accounts that are coveted by many advertising agencies. Most agencies are likely to view Gateway as a significant opportunity since the company still has a significant market share, a strong product line, and a viable business model as one of the two major direct sellers of personal computers and other electronic products. Gateway may be able to return to profitability as the economy rebounds and spending on personal computers and other electronic products by both businesses and consumers increases. Some agencies may be reluctant to pursue an account such as Gateway for several reasons, not the least of which is the company’s track record of switching agencies so often. Agencies often invest a great deal of money to pitch a new client and become involved with them. A great deal of time, effort, and money is often spent by an agency when they take on a new client to become familiar with the company’s industry, market segments, competition, its marketing strategy, and its customers. Primary and secondary research studies are often conducted which the agency bearing some of the cost of these studies. For a large account such as Gateway, additional personnel may be hired in various areas such as account management, creative, and other areas of the agency to service the account. Agencies view all of this as an investment that they can recoup over several years. If the client drops the agency after only a year or so, this may result in the agency losing money along with the opportunity costs of not pursuing some other account. Another issue agencies must consider is the tendency of Gateway founder Ted Waitt to meddle with the company’s advertising. Although Waitt is no longer active in Gateway, he is still the company’s largest shareholder and thus his opinions may still find their way to Gateway’s management. As described in the case, Waitt is not considered to be a fan of traditional advertising and has played a major role in the decision to dismiss several of Gateway’s agencies. Consideration must be given to whether Waitt might interfere with an agency’s ability to develop good advertising for Gateway. Moreover, even if the agency developed effective advertising, there is still the possibility that Gateway may still find it difficult to increase its sales and market share given the formidable competition the company faces from Dell, Hewlett-Packard, Lenovo and Apple. This might result in a decision by Gateway’s top management to once again change agencies. The problems facing Gateway extend beyond its advertising as the personal computer market has become extremely competitive and profit margins on PCs are very narrow. Gateway is now getting most of its sales from its low margin retail business and is struggling to compete in the business and government markets as well as in direct-to-consumer sales which have higher profit margins. The cost cutting measures which were begun by Inouye have also resulted in reductions in Gateway’s advertising and promotion budget which makes it more difficult to build brand equity and also makes them a less attractive account to many of the larger agencies. IBM Brand Equity Restoration and Advertising Evolution Teaching Note Case Overview This case examines the various advertising campaigns used by IBM from 1995 to 2006, a period during which “Big Blue” has undergone a transformation in its business strategy that has resulted in one of the most dramatic and successful turnarounds in American corporate history. The case deals with the role of advertising in business-to-business marketing as well as advertising campaign evolution and brand equity restoration. It also provides insight into the challenges of marketing a complex, multifaceted brand to a broad array of customers with many different needs across a variety of industries. The case illustrates how a company’s branding and positioning strategies change over time. It also gives students the opportunity to track the evolution of IBM’s advertising and to evaluate how the various campaigns used by the company over the past 11 years have communicated the desired message to the target audience. A Power Point presentation file accompanies the case which provides examples of print, outdoor and television advertising from the various campaigns. Students should be encouraged to down load the power point file and evaluate the ads as they read and prepare the case. You might also encourage them to visit the IBM web site and examine the various types of online marketing tools that are used by the company, particularly in support of its advertising campaigns. This case is very broad in scope and can be used in a variety of areas. However, it may be best suited for use with Chapters 8 and 9 of the text, which focus on Creative Strategy Development and Implementation and the development of advertising campaigns. The case allows students to analyze the creative strategy and executions used by IBM for the various campaigns. It also provides insight into how each campaign was developed in response to changes in IBM’s marketing strategy. It is important for students to understand that the various IMC campaigns developed by Ogilvy & Mather were done to reflect changes in the way IBM wanted to position itself to businesses. The case can also be used with Chapter 20 on International Advertising and Promotion as nearly all of the campaigns discussed in the case were global in scope. Discussion Questions 1. What is the primary objective of IBM’s advertising? How have the objectives of its advertising changed over the years? The primary objective of IBM’s advertising is to start a dialog with companies that might benefit from its various products and services. IBM is a well known company and nearly everyone in the business community is aware of them and believes they have a general understanding of what they do. However, IBM has to create a better understanding among C-level executives (Chief Executive Officers, Chief Financial Officers, and Chief Information Officers) and middle managers in the businesses it is targeting for its technology products, as well as its consulting services. In some cases the advertising is designed to drive a potential user to IBM’s website to learn more about its products and consulting services. Like most business-to-business marketers, IBM has a well trained sales force that calls on key decision makers in the companies it targets. An important objective of IBM’s advertising is to help get the company into the consideration set of these decision makers so they will accept the sales call to learn more. The purpose of the advertising is also to ensure that key decision makers in companies are aware of IBM and its capabilities. A further goal is to generate leads that IBM’s sales force can follow up on to provide more information and hopefully create a relationship. The call to action is to encourage them to make some form of contact with IBM, either by calling for more information, or checking out IBM’s capabilities and offerings on the Internet. The objectives of IBM’s advertising have changed over the years to reflect changes in its business strategy. In the mid to late 1990’s, during the height of the dot-com craze, the advertising had to communicate that IBM was “still in the game,” that it’s technology was not obsolete, that it could help companies adapt their businesses to new ways of doing business on the Internet, that it was nimble and flexible, and that it could handle a variety of business needs, encompassing different industries and businesses. After IBM purchased Price Waterhouse Coopers, its Business Process Transformation Services and consulting related to this area became a major growth priority. IBM wanted to communicate that there was another entire side to the business, aside from technology, which was the rationale for “The Other IBM” campaign. Most recently, with the “Innovation That Matters” campaign, IBM is communicating that it customizes solutions and recommendations based on each firm’s needs and strengths and can help firms develop new ways of doing business to give them a unique competitive advantage. 2. Evaluate each of the campaigns described in the case and the accompanying ads shown in the Power Point file. Are the intended branding messages being communicated clearly and do the ads speak equally well to users, as well as non-users, of IBM products and services? Students should be asked to analyze each campaign discussed in the case and evaluate the various print ads, commercial photo boards, and out-of-home ads that are provided. They should put themselves in the position of a CIO, CFO or a CEO who is currently not using IBM’s services and consider whether they understand IBM’s offerings from the ads. Do the ads peak their interest? Do they make them want to contact IBM to learn more? Do they communicate the message that IBM is a credible supplier of those products and services and a good option to fulfill their needs? Does the copy seem to be at the right level of complexity and does it interact well with the imagery to communicate effectively? 3. What were the pros and cons of staying with the “e-business” campaign? Could it have been updated and retained or did it lose its relevance? The e-business campaign served IBM well as it positioned them at the forefront of the trend in moving business processes onto the Internet, a movement that was a priority for nearly every company during the mid to late ‘90s. Most businesses wanted to move more of their operations to the web, but because so much was new and evolving, they needed the help of a knowledgeable partner with expertise in this area.. By coining the term “e-business” and focusing on it in their advertising, IBM became indelibly linked with best practices in doing business on the Internet. However, once IBM had established their expertise in this area, focusing on “e-business” alone became limiting. It was for this reason that IBM shifted away from “e-business” to the “ON Demand” campaign. “ON Demand” was introduced at a time when supply chain management and just-in-time operations had come to be highly valued by companies as a better way to do business. In this way, IBM was able to broaden the way they were perceived, from being an “e-business” expert to being an expert in supply chain management processes and making businesses more responsive to customers needs and emerging opportunities. 4. How was the “ON Demand” campaign adapted to keep the umbrella tagline, while providing the specifics needed to communicate the “sub-business” component details? The “ON Demand” campaign used a series of print ads, television commercials and out-of-home ads to communicate all the different types of businesses and problems that were helped by IBM. Examples included: “Fighting Cancer is ON” to show how IBM helped analyze medical data; “Napster is ON” to show IBM helped Napster work with universities so their networks were not overwhelmed by demand for music from students; “China is ON” to show how IBM was helping China develop the infrastructure it needs to prepare for future growth; “The PGA Tour is ON” to demonstrate how IBM helps sporting events transmit data. Using case examples is a tactic that IBM often incorporates into its advertising. These cases serve two purposes. First they provide examples of companies as well as business problems with which other firms can identify. Also, by showing the breadth of problem-solving skills IBM possesses, businesses will deduce that IBM can help them find solutions to their issues or problems, thereby enabling them to better capitalize on their unique opportunities. The challenge IBM faces in its advertising is that the business is exceedingly complex and it is difficult, if not impossible, to communicate all the products and services IBM offers to all its potential customers. The dilemma is whether to create one generic campaign that might be too general and not address the needs of individuals or being too specifically focused on any one type of problem. The approach taken in the “ON Demand” campaign seems like a good advertising solution, for the reasons stated above. 5. Do you think IBM’s advertising campaigns have changed too often over the past 11 years? Were the changes made because the campaigns were not working well or was it an intentional evolution in the advertising and branding message IBM wanted to communicate? Over the 11 year period discussed in the case, IBM has had five major campaigns including a sequence of changing taglines. These have included “Subtitles - Solutions for a small planet” which ran from 1995 to 1997; the “e-business” campaign which had several sub-campaigns and ran from 1998 to 2002; the”ON Demand” campaign which ran from 2002 to 2005; “The Other IBM” and “Help Desk” campaigns which ran from 2005 to early 2006; and the “Innovation That Matters - What makes you special?” campaign which began in March 2006. The campaigns have really not communicated specific information about IBM’s products such a servers, networks, software, and computers, as the primary focus of each has been on total business solutions. They have mirrored the aspects of better business processes and management that have been priorities for key company decision makers in the target audience at each point in time. In this way, IBM has communicated that they understand their customers’ most pressing business issues and opportunities. The succession of campaigns has also broadened the branding message for IBM, from the earlier perception that IBM only meant technology to the more recent positioning of the company as a total business partner. The most recent “What makes you special?” campaign theme is designed to counter the perception that IBM is a large bureaucratic monolith that tries to use the same approach to solve each customer’s problems. Rather it communicates that IBM is a valuable business partner that works with customers to understand their specific problems and needs and can help them do special things. This message, combined with the lack of pretension in the tonality of the ads, may appeal to small and mid-sized businesses, which constitute one of IBM’s largest growth opportunities in the future. The changes have enabled IBM to seem relevant and up-to-date. Some students may argue that IBM has changed campaigns too often, particularly over the past few years. However, it is important to note that IBM competes in a very dynamic and competitive industry that is constantly changing. The marketplace has undergone a transformation. The IT consulting industry has matured and companies are seeking relationships with partners who can provide deep industry and business process consulting and management expertise. IBM’s corporate strategy has changed over the past decade and continues to evolve as the company strives to maintain its competitive advantage. The marketing challenge for IBM has been to increase awareness and consideration of its capabilities in areas such as business process transformation services. Thus, it is not surprising that changes have been made in IBM’s advertising to inform customers of its capabilities and to differentiate itself from competitors. The downside of frequently changing campaign tagline changes is that it makes it more difficult to solidify one message or perception in consumers’ minds. It often takes repeated exposure to an advertising campaign before the branding and positioning message is effectively communicated. By changing it’s advertising campaigns and taglines frequently, IBM may have difficulty communicating its desired branding and positioning message with its entire target audience before moving on to the next major campaign. 6. Is there value to business-to-business marketers such as IBM in advertising through mass media that also reaches the general consumer market? Evaluate the media choices used by IBM such as advertising on golf tournaments, on Sunday morning news shows, in airports, and even on the Super Bowl. Since IBM divested its personal computer business, should they continue to advertise to consumers, for example on the Super Bowl? The target audience for IBM’s advertising is clearly business executives as well as middle managers who might be involved in making decisions regarding the choice information technology and consulting services providers. Thus, much of the company’s advertising is going to be targeted to media that reaches these individuals including general business magazines such as Business Week, Forbes, Fortune, and Business 2.0 as well as newspapers such as The Wall Street Journal and Barron’s. IBM also runs ads in vertical publications that target specific areas of business such as information systems, finance, marketing and management as well as specific industries. Television advertising can also be targeted to business executives through cable networks such as CNBC, Bloomberg Financial News and various programs on CNN such as “Lou Dobb’s Money Line.” IBM, as well as other business-to-business marketers will often advertise in mass market media even though many people outside of their target audience will be exposed to the ads. B-to-B marketers recognize that they may have to accept a certain amount of “waste coverage” or overexposure whereby the media coverage is broader than the target audience, particularly if a media vehicle does a good job of reaching a high percentage of those in the target audience. For example, IBM advertises on televised sporting events such as professional golf and tennis matches and NFL football games as well as news programs. While not all the viewers of these events are business people, a high percentage of its potential customers can be reached through these media vehicles. IBM also advertises in USA TODAY which is a general consumer newspaper. However, it also reaches a very large number of business executives who read it while traveling. IBM also uses out-of-home advertising in places such as airline terminals and executive lounges in airports worldwide. This is an effective way to reach its target audience which spends a great deal of time traveling for business. These advertisements often mirror the print work by featuring c-level executives asking thought provoking questions and suggesting that that IBM has the answers. Selective advertising through mass media may be used by IBM for several other reasons even though it reaches many consumers who are outside of their primary target audience. Some studies have shown that purchasing advertising time and space in consumer mass media may be more cost efficient, despite the wasted coverage, than trying to reach the target audience through a variety of business media. Ads in these media help increase awareness for IBM and editorially cast them in a favorable light because of a favorable association with the editorial content of a publication or television program. Advertising to viewers in a more relaxed environment, without the clutter of a lot of other business-to-business ads, increases the chance the message will register with their target audience. According to the theory of effective reach, target consumers need to see an ad, on average, between 3 and 10 times in order to register the message. By reaching the target through a variety of media, he or she is more likely to notice it than if the ad was repeated solely in the same vehicle, which they might ignore or tune out. Advertising in high profile media vehicles also can motivate IBM’s internal employee organization when they see their company sponsoring an event such as the Super Bowl or Masters Golf Tournament, advertising boldly on prestigious programming, or making a statement in leading magazines and/or newspapers. Since spinning-off its personal computer division to Lenovo, IBM no longer sells products to the end consumer market so they are not trying to deliver a sales message to this group. However, IBM may still be concerned with its image among the general public and feel that there is value in having them see some of its image-oriented advertising. 7. How has the target audience for IBM’s products and services evolved over time? How have the types of business problems that IBM addresses in their advertising changed? Prior to the mid-1990’s, IBM was viewed almost exclusively as a technology company, selling mainframes, servers, and software to IT professionals. Since that time, IBM has gradually expanded it products and services to focus more and more on solving a range of business problems, enabling businesses to innovate, respond more quickly to consumer needs and business opportunities, and to develop unique competitive advantages. IBM’s B-to-B dialogue has therefore expanded to include “C-level” executives (chief executive officers, chief information officers, and chief marketing officers). IBM has positioned itself as a partner in developing overall business strategies that will move their customers ahead. Their advertising has shifted over the years from focusing on products and technology to showing how IBM partners with clients and customizes solutions to meet their needs by drawing from all of IBM’s areas of expertise. They have positioned themselves in essence, as opportunity identifiers, problem solvers, and implementation facilitators. 8. What were the advantages and disadvantages of using a creative tactic such as the metaphorical King Arthur’s Round Table commercial and print ads that were part of “The Other IBM” campaign? The King Arthur ads were a departure from previous IBM ads as well as from advertising done by other technology companies. This was intentional as the ads grabbed the attention of viewers and/or readers which increased the likelihood that they would be noticed. However, they also were a clever way to deliver the message as the ads portray age-old business problems that are faced by companies and organizations, from supply-chain issue to human resources. They were an effective way to make the point that the types of problems, issues and opportunities that affect organizations have really not changed that much over time. Students can be asked if there are any downsides to this approach. Do the characters from King Arthur’s court seem relevant today? Are C-level executives likely to identify with them? Do the problems really seem parallel? Is the comparison meaningful? Is the humor likely to be appreciated? Is there a limit to how different a B-to-B ad can look and feel? Do the characters have to be appealing to be effective? It was important for IBM to call attention to the “other side” of its business as business consulting services is a huge and increasingly large part of IBM’s future growth plans. “The Other IBM” tagline communicates that Business Consulting is as large and important as the tech side, which has long been the company’s heritage and primary association. The campaign encouraged potential customers who weren’t aware of IBM’s capabilities in this area, to seek more information to learn more. The King Arthur’s Round Table ads were a clever way of executing the creative strategy for this campaign. 9. What is the value of using testimonials and case studies across a variety of businesses and industries integrated marketing communications campaigns? Throughout the different campaigns, IBM has used testimonials and case studies across a variety of business sizes and industries to illustrate how its products and services have helped companies. These have included the nuns who were excited about IBM’s new technology in the “Solutions for a small planet” campaign; the surprisingly wide array of organizations that became “e-businesses” and benefited from transitioning to the Internet (e.g., “the Hermitage Museum in Russia is an e-business”, “Vespa is an e-business”, “National Geographic is an e-business”, “Olympics.com is an e-business”); the businesses that became more “ON Demand” with IBM’s help (Napster, China, the PGA); and most recently, the businesses that were able to innovate in ways to make them even more special and successful (a grocery chain, a university, or insurance companies). The use of examples and mini-case studies makes the benefits that IBM’s help can bring to an organization seem more real and easier to envision. Without these examples, IBM’s services and capabilities might seem very abstract and potential customers would have difficulty envisioning what IBM might do for them. The testimonials and case studies have been an extremely effective way to make an umbrella campaign, that often has had to be summarized in a 30 second spot or a single page insertion, translate to a wide variety of potential customers. 10. Does IBM’s advertising provide enough information to decision makers and does it matter that no references to the prices of its products and/or services are made in the ads ? One key piece of information that is missing from the IBM ads is pricing. From a practical standpoint, it would be nearly impossible to quote prices, given IBM’s wide variety of products and services. IBM could, however, communicate that the price for their services is “less than you’d think”, or “surprisingly affordable.” Instead, any reference at all to pricing is omitted. A major source of business for IBM is mid-size companies, defined as having 500 employees or more. There is a risk that a firm that has never used IBM before might feel they cannot afford their services, or that any benefits in operations might be wiped out by consulting fees. Concerns of what it might cost to hire IBM might be one of the primary reasons a firm will not take up IBM’s call to action and contact them. This is testable. If IBM finds price is one of the primary obstacles they must overcome, they might address it in future advertising. The downside to mentioning pricing in their ads is that they might be calling attention to pricing early on, before a sales representative can demonstrate how IBM might help the prospect. Pricing is also a tricky and complex matter. Aside from varying by the scope of the project, the value of the services might depend on cost savings from changes in operations, which could require an in-depth analysis to identify. 11. Evaluate the decision by IBM to consolidate all of its worldwide advertising with the Ogilvy & Mather agency. What are the pros and cons of using one agency to handle all of its advertising? As noted in the case, IBM made a major decision in 1994 to dismiss more than 40 agencies around the world and consolidate all of its advertising with Ogilvy & Mather Worldwide. A number of factors were behind this decision. One of the major reasons given by IBM for consolidating all of its advertising with Ogilvy & Mather was that the company had been projecting too many images with its advertising divided among so many agencies. IBM recognized that it was competing in a global market for computers and other information technology products and services and felt that it was important to deliver clear, consistent messages that reinforced and built on the equity in the IBM name. The agency consolidation move allowed IBM to gain greater control over and facilitate coordination of its worldwide advertising. IBM also felt that a high tech product such as computers and information technology services consulting could be advertised using a global advertising campaign since the reasons for purchasing them are the same the world over. Companies are also consolidating their global advertising in an effort to increase efficiency and save money. Finally, advances in technology such as the Internet, e-mail, video conferencing, and other communication tools make it much easier to manage accounts around the globe. The risk of the consolidation decision is that one centralized agency may not be able to develop as effective advertising in many foreign markets as a local agency. Local agencies often have a better understanding of the marketing and advertising environment in their country or region and thus may be able to develop more effective advertising than a large multinational agency. Using a single agency also means that a marketer has no backup agency to turn to if there are problems such as an ineffective ad campaign. Companies who consolidate also face the problem of selling the idea to regional offices and local country managers who may not like having control of advertising taken from them. However, major companies such as IBM recognize that hey must develop a consistent global image for the company and/or its brands and speak with one coordinated voice to customers around the world. This teaching note was prepared by Professor Michele Greenwald, Visiting Professor at HEC, Paris, as an aid to instructors in the classroom use of the case. Mazda – positioning a product line Teaching note Case Overview This case examines Mazda North American Operations and the efforts of the automobile company and its advertising agency, Doner, to its position its vehicles in the highly competitive U.S. automotive market. The case begins by describing the IMC program developed by Doner to reposition the subcompact Mazda Protegé model in the late 1990s using the “Get In. Be Moved” tagline. The repositioning of the Protegé was very successful and Doner began using the tagline in advertising for other Mazda vehicles. However, Mazda’s marketing executives were concerned that “Get In. Be Moved” theme was too passive and vague and was not effective in positioning Mazda as a company that makes sporty vehicles that appeal to the driving enthusiast. In 2001 Mazda began using a new creative platform in advertising and replaced the “Get In. Be Moved” tagline with a new theme based on the phrase “Zoom-Zoom.” The case provides an opportunity for students to evaluate the change in Mazda’s positioning strategy and the IMC campaign used to reposition the Protegé, as well as a new campaign for the MAZDA6 sports sedan. A Power Point file containing print ads for the Protegé5 and MAZDA6 are included with the case. Students should be encouraged to review these ads when analyzing the case to gain more insight into the advertising used for these models. You should also encourage students to visit the Mazda web site at www.mazda.usa.com where information is available on the various Mazda models including the MAZDA6, Mazda5, MX5-Miata, CX-7, MPV, Mazda Tribute and the RX-8. It should be noted that Mazda has dropped the Protégé name and this model is now called the Mazda3. Discussion Questions 1. Analyze the role of integrated marketing communications in the marketing of automobiles such as the Mazda Protegé and MAZDA6. How is each IMC tool used to market automobiles? Integrated marketing communications play a very important role in the marketing of automobiles such as the Mazda Protegé and MAZDA6. Many automobile buyers base their purchase decisions on product related attributes such as price, quality, reliability, durability and performance, as well as on factors such as style and brand image. A variety of IMC tools are used to provide consumers with information about the Protegé as well as to create an image that will appeal to the target market for the car. The case notes that Mazda’s turnaround strategy in 1997 called for a change in the positioning of the Protegé. The car was originally positioned as a step up from a compact sedan and but as a car that retained compact attributes such as fuel efficiency and a low price. The new strategy called for positioning the Protegé as a cool, fun, hip-to-drive car for young professional women in their early 20s to mid-30s. To accomplish this repositioning, the advertising for the Protegé began focusing on attributes such as the car’s euro-chic styling, room for friends, value, reliability, and cool features such as CD players and air-conditioning. Mazda uses all aspects of the promotional mix to market its automobiles and other vehicles. Advertising on television as well as in magazines played a very important role creating and reinforcing an image of the Protegé as a car that is cool, fun, and hip-to drive. The TV commercial depicting the group of hip 20-somethings carpooling in the Protegé and driving through the surrealistic cityscape was designed to help create the above noted image and positioning for the car. Direct marketing was used by building a data base of customers who enter the sweepstakes on the Mazda web site and/or request more information about the Protegé. These customers were sent information about the Protegé and occasionally received direct mail pieces. Interactive media and the Internet were also used as part of the IMC program for the Protegé. Mazda’s interactive agency created the “Protegé road trip” on Mazda’s web site where consumers could take a cyber journey to learn more about the car. Mazda also mailed a CD-ROM with music, movie reviews and interviews to consumers who requested more information about the Protégé. Sales promotion techniques such as a consumer sweepstakes and dealer incentives and contests were also part of the Protegé launch. Mazda also generated a considerable amount of publicity for the Protegé and its advertising campaign through press releases and various public relations activities. Finally, promotional efforts for the Protegé were extended to dealerships to support the personal selling effort and to convert the showroom into a “Protegé World” that extended the advertising and positioning theme to the showroom floor. Sponsorship of events such as auto racing and motocross is also a very important part of Mazda’s IMC program. An integrated approach was also used in the introductory campaign for the MAZDA6 that involved the use of media advertising; a direct mail program which included the mailing of videos and CD-ROMS to prospective buyers,; event sponsorship; participation in various promotions sponsored by ESPN; showroom displays in Mazda dealerships; online advertising, and a specific section on the MadzaUSA web site. You might go through each of the IMC tools used for the Protegé and the MAZDA6 and discuss the role each plays in the marketing communications program for these vehicles. 2. Evaluate Mazda’s decision to drop the “Get In. Be Moved’ tagline for the Protegé and adopt the “Zoom-Zoom” theme for its advertising. The decision to drop the successful “Get In. Be Moved” tagline would appear to be based on Mazda’s desire to return to and build upon its heritage and long-term positioning of making fun-to-drive cars that are sporty and appeal to the driving enthusiast in everyone. While the “Get In” tagline may have worked well for the Protegé, Mazda’s marketing team felt that it really did not differentiate the brand very well nor contribute to the aforementioned positioning platform. To effectively position an automobile, it is necessary to develop an image over time. Mazda positioned itself as a company that made sporty cars that appealed to driving enthusiasts way back in the 1970’s, and attributed much of its early success in the U.S. market success to this image. The success of the Mazda RX-7 sports car and the Miata roadster reinforced this positioning platform. The highly successful launch of the Mazda Tribute sport utility vehicle, which was positioned as having the “soul of a sports car” and accompanied by ads using the “Zoom-Zoom” mantra, provided further support that the sports car tie-in would be beneficial to Mazda. Subsequent use of “Zoom-Zoom” in advertising for other vehicles led to increases in advertising and brand awareness. For a company that struggled with a brand identity in the 1990’s, the adoption of the “Zoom-Zoom” advertising was a smart move. In part, the mantra contributes to the positioning that has made Mazda successful in the past. The “Get In. Be Moved” theme would not have been as successful in achieving the sporty positioning that Mazda is trying to achieve. 3. Evaluate the strategy Mazda of North America is using for the new MAZDA6 sports sedan. Do you agree with the decision to use a more mature and less playful approach to advertising for the MAZDA6? As noted in the case, the MAZDA6 introduction was one of the most important in Mazda’s history. The MAZDA6 competes in the mid-size sedan segment, which is the most important segment of the automobile market due to its size, and success or failure in this segment may have a halo effect that carries over to the rest of the product line. In addition, cars that compete in this segment often constitute the foundation upon which the product line is based. To compete in this segment, Mazda will have to go head-to-head with the Toyota Camry, Honda Accord and Nissan Altima, all of which are highly successful and worthy adversaries. In addition, the target market for the MAZDA6 is consumers in their mid-30’s, typically male, and somewhat less of a car enthusiast, which makes this group somewhat different than the customer for the other Mazda models. Mazda’s strategy for the “6” must strike a balance between the sporty positioning and a more reserved, mature approach. They must be careful not to give up on the positioning that has made them successful, but recognize the needs of a more mature audience, and translate “sporty” into “enthusiast.” At the same time, they must find a way to differentiate themselves from the firmly entrenched competitors such as Toyota, Honda and Nissan. The MAZDA6 strategy appears to be well designed. The retention of the “Zoom-Zoom” mantra helps to maintain the sporty positioning strategy, which should serve as a basis for differentiation. The ads themselves appear to be more mature, less playful and suggest that the MAZDA6 is a more “grown-up” option, without abandoning the fun aspects of driving. The focus on handling, performance and mechanical aspects should appeal to the enthusiast, who may be looking for something different from the standard midsize car (after all, getting older doesn’t mean one has to act older!). The highly integrated media campaign also looks promising. An increase in print ads may be necessary to explain some of the sporty features of the new MAZDA6, while the television spots are still exciting and fun to watch. The media schedule, which is heavily weighted to ESPN, the NFL and NCAA College Football, reinforces the sporty aspects of the car, while reaching the sought target audience. Tie-ins to other sports programming such as ESPN’s Pigskin Pick’Em, Exhilarating Moments and Truck 2 Promo should help reach the target for the MAZDA6. Mazda has also integrated elements of previously successful campaign including the Internet, publicity and public relations, direct mail, and event sponsorship into the IMC program. Receiving recognition from automotive magazines such as Car and Driver’s award for one of the 10 Best Cars for 2003 is great publicity that can be promoted in media advertising and other venues such as the web site for the MAZDA6. 4. What recommendations would you make to Mazda regarding its integrated marketing communications strategy as the company moves forward? When Mazda has been successful, it is due in large part to having an image as a company that makes sporty, fun-to-drive cars. This positioning helped them achieve success with the RX-8 and the Miata. When Mazda has gone away from this positioning the company has lost its basis for differentiation and its models have become “just another car”. To be successful, companies must develop a sound positioning strategy and maintain it over time. In the 1990’s it was not clear as to what Mazda brand stood and the company had trouble differentiating its vehicles from the competition. However, by establishing and maintaining the sporty positioning strategy, Mazda now has a stronger image and identity for its various models. For those consumers that want some exhilaration and fun in their driving, Mazda models such as the Mazda3 (formerly the Protégé) and MAZDA6 should appeal to them. A lesson can be learned by observation of the BMW’s strategy of differentiation. Their “Ultimate Driving Machine” position has been used for nearly two decades and has been very successful over the years. Case Teaching Note Under Armour Enters The Basketball Shoe Market Case Overview This case examines Under Armour (UA), the highly successful athletic apparel and footwear company that was founded in 1996 and is now approaching $1 billion in sales. The case discusses the factors that have led to the rapid growth of Under Amour, the company’s marketing strategy, and the important role integrated marketing communications has played in helping build UA into one of the most valuable brands in the sports industry. A major focus of the case is Under Armour’s efforts to enter the athletic footwear market. UA has been successful in marketing cleated footwear for football, baseball, softball, lacrosse and soccer. However, the company’s efforts to enter the mainstream athletic shoe market with products such as cross training and running shoes has not gone very well thus far. Despite its limited success with these products, UA launched a new line of basketball shoes in late 2010 in an effort to compete with industry leader Nike which controls 95 percent of this market. The case discusses UA’s strategy for entering the basketball shoe market by using Milwaukee Bucks NBA star guard Brandon Jennings as its primary endorser. Jennings was beginning only his second season in the NBA when Under Armour launched its new Micro G product line and despite his future potential as an up and coming player in the league, one can question whether this was an effective way to compete against Nike and its stable of NBA stars such as Kobe Bryant, LeBron James, Dwayne Wade and Kevin Durant. This case can be used as a basis for analyzing the factors that have led to the tremendous success of Under Armour and the important role IMC has played in this process. It can also be used to discuss issues such as sponsorships, the use of athletes as endorsers and branding, as well as the consumer decision making process for athletic shoes. The use of this case can be enhanced by showing the Under Armour video case that is available on DVD 3 as well as various Under Armour commercials that are available on DVD 2. Some of the commercials used by UA to enter the cross training, running, and basketball shoe markets are available on this DVD. You can also find examples of Under Armour advertising on the company’s web site under the Brandon Jennings blog section (http://blog.underarmour.com/wheninrome). Discussion questions are provided at the end of the case and are covered in the remainder of this note. Discussion Questions 1. What are the reasons for the success of Under Armour since its founding by Kevin Plank? What do you view the most important factors that have contributed to the growth of the company? There are a number of factors that account for the tremendous success of Under Armour. The company had a first-mover advantage in the performance apparel market as UA pioneered this category by developing compression clothing that wicks sweat away from the body and provides athletes and fitness buffs a way to stay cool and dry during workouts, practices, and games. Under Armour products are of very high quality which allows the company to command a price premium and help differentiates them from other brands of sports apparel. A second reason for the success of Under Armour is that the company has a very strong brand image as they have focused on brand building as a core asset and a source of competitive advantage. UA’s brand image is particularly strong among younger consumers as a survey by Piper Jaffray & Co. of 700 students found that Under Armour is the solid number 2 athletic brand in the U.S. behind Nike and finished nearly tied with them as the preferred clothing brand. Under Armour is becoming the sports apparel brand of choice among the younger generation as brand recognition and preference among this segment is very high. Another reason for the success of Under Armour is that its “Protect this house” advertising campaign was very unique and struck a responsive chord with consumers. The tagline became part of popular culture and helped differentiate the UA brand, particularly among young athletes. It is also important to note that UA has been successful because it has been able to secure distribution in key sporting goods stores such as The Sports Authority, Dick’s Sporting Goods and many specialty retailers. Under Armour also generates a significant amount of sales through its direct to consumer channel which includes its own stores as well as online sales. In the UA video case Steve Battista , Senior Vice President of Brand, notes that the four keys to success for the company are: •Build a great product •Tell a great story about the product •Provide great service (support for retailers as well as consumers) •Build a great team of people (management, employees, athletes/endorsers) 2. What are the key components of Under Armour’s integrated marketing communications program? Discuss the role IMC has played in helping build the Under Armour brand. Under Armour has used a full repertoire of integrated marketing communications tools to build its brand. The components of the IMC program include: •Media advertising - UA developed a very effective advertising campaign based on the “Protect This House” theme. The initial advertising tapped into the raw emotion of football and helped position UA as a high performance brand for serious athletes as well as those who train for and participate in various sports. •Sponsorships - UA has made effective use of sponsorships at the high school, collegiate and professional levels. They sponsor high school All American games for a number of sports which help them to tap into the young male and female market. They have sponsorship deals with a number of high profile Division 1 collegiate teams which gives help generate exposure for the brand, particularly on television. The sponsorship agreement with the NFL to provide football cleats also is an important deal as it has helped the company gain market share in the cleated footwear market. UA also has sponsorship deals with several professional baseball teams such as the Chicago Cubs as its logo appears on the ivy-covered wall at Wrigley Field (the only brand allowed there). •Athlete endorsers – Under Armour has also signed a number of high profile athletes to endorsement deals including numerous NFL athletes as well as Major League Baseball players. The company also has endorsement deals with a variety of athletes who compete in individual sports such as swimmer Michael Phelps, skier Lindsey Vonn, UFC champion Georges St. Pierre, and freestyle skier Jen Hudak among others. •Product placements – UA used product placements very effectively in its early days in movies such as “Any Given Sunday” and the ESPN series “Playmakers.” Under Armour gear is often worn by athletes who appear on sports talk shows and on many television shows such as “The Amazing Race.” •Internet – UA has made very effective use of online marketing to help build its brand, communicate with consumers and generate sales. The company often creates micro sites to help with the launch of new products and also uses a variety of social media as part of its IMC program including YouTube, twitter, Facebook and blogs. •Public relations/publicity – Under Armour has become a very high profile company that generates a considerable amount of attention from the media. Stories on the company often appear in the media and help tell UA’s authentic story and generate exposure for the brand. All of these IMC tools play a very important role in building and maintaining Under Armour’s brand identity. It is important to note that product quality is a key component to the strong brand image of UA as IMC programs are more effective when they are promoting a quality product that enjoys a loyal customer base. However, Under Armour has been able to create a very unique brand image that resonates well with both men and women who are competitive and confident. 3. Evaluate Under Armour’s decision to enter the mainstream athletic shoe market and compete in product/market segments such as cross training, running and basketball shoes? One of the challenges Under Armour has faced since going public in 2005 is that the company must continue to grow revenue as well as profits to satisfy the demands of the investment community. As can be seen in Figure 1 of the case, UA has a 33% compounded growth rate over the past 5 years and is approaching $1 billion in sales. The company has a 70% market share in compression apparel and now faces strong competition from other sports apparel companies in this market including Nike’s Dri-fit products and the adidas Climacool line. While UA has been expanding into other segment of the apparel market such as golf, tennis, skiing/snowboarding, running, and hunting, it is not surprising that they would look beyond apparel for growth opportunities. Athletic footwear is a very large market, particularly the running and basketball shoe segments, as consumers wear these types of shoes on a daily basis as well as for sports activities. As noted in the case, basketball shoes are $2.5 billion market while the market for running shoes is even larger and has been estimated to be as high as $5 billion. Thus, even if UA could gain small amount of market share in these segments, the revenue would be significant. You might point out to students that each market share point in the basketball shoe market is worth approximately $25 million in revenue. Thus, if UA could capture 4% of this market it would add $100 million to the company’s total revenue. Of course, the key question is whether UA can capture even a small amount of market share given that they must compete against industry giant Nike as well as other major athletic shoe companies such as adidas and Reebok. It is worth noting the success UA has had in cleated footwear such as football, baseball, softball, soccer and lacrosse. However, these markets are closer to UA’s core business and brand image and the company’s strong relationships with retailers such as The Sports Authority and Dicks Sporting goods were helpful in entering these markets. They are likely to find that the running and basketball shoe markets are much more difficult to penetrate. They have had only limited success with running shoes which may be due to the fact that many runners are loyal to brands such as Nike, Asics, New Balance, Saucony and others. A major challenge they will face in the basketball shoe market is the presence of Nike which has a 95% market share. Nike has dominated the basketball shoe market in the U.S. for years dating back to when they signed Michael Jordan as an endorser and created the Air Jordan shoe line. Michael Jordan remains a very effective endorser for Nike even though he retired in 2003 and the Jordan line remains a top seller. Nike has most of the NBA’s top players under endorsement contract including Kobe Bryant and LeBron James and has shoe lines named after these super stars. Under Armour will have to battle adidas and Reebok for the remaining 5% of the market not controlled by Nike and each of these companies has large promotional budgets. Adidas has endorsement deals with Derrick Rose and Dwight Howard, while Reebok signed John Wall who was the number one pick in the 2010 NBA draft. It will be very difficult for UA to match these three companies in terms of advertising and promotion spending as well as for endorsement deals. 4. Evaluate the strategy used by Under Armour to enter the basketball shoe market and compete against Nike as well as adidas and Reebok. Discuss the pros and cons of the company’s decision to use Brandon Jennings as their primary endorser for its new basketball shoe line. It should be noted that Under Armour is taking a very cautious and measured approach to entering the basketball shoe market. While the company did debut the shoes at an exclusive media party in penthouse of hotel in New York, they did not utilize a major public relations campaign for the launch. The company is working closely with retailers to determine where the shoes will be sold as they are using a selective distribution strategy that may include the use of smaller independent retailers in various markets, such as Jimmy Jazz in New York City and Baltimore’s Downtown Locker Room. Under Armour’s launch strategy is based on limiting the distribution of its new shoes which could create pent-up demand and help generate buzz for the shoes as they may become a must-have, hot item among younger consumers. Under Armour is relying very heavily on Milwaukee Bucks guard Brandon Jennings to help draw attention to its Micro G line of basketball shoes. The company has developed print ads featuring Jennings that will be used in various sports publications that reach the key market segment of young males as well as TV commercials that can be aired during basketball games on cable networks such as TNT, ESPN and NBA TV. They are also using an online marketing campaign that include social media such as Facebook, Twitter and YouTube as well as The Brandon Jennings Diary blog on the UA web site. UA’s decision to use Jennings as the primary endorser for its new basketball shoe line is interesting and can be viewed as somewhat risky. The pros of using Jennings is that he appears to be an up and coming NBA star as he had a very successful rookie season and started out well in his second season before being injured. UA was also able to sign him to a four year endorsement deal for $2 million while he was playing in Europe which is relatively low by NBA standards. Note that Reebok recently paid John Wall $25 million for a 5 year deal which is more than 10 times what UA is spending for Jennings. Under Armour rarely signs high profile athletes to endorsement deals, as the company does not have the marketing budget to out bid companies such as Nike, adidas and Reebok for the star players. The company often looks for up and coming players who can develop into stars and are loyal to the company. If Jennings recovers from his injury and continues to play well, he can be an effective endorser for the Micro G line. The cons of using Jennings as the primary endorser is that he is still somewhat of an unproven player and may not have the ability to influence consumer purchase decisions to the same degree as proven NBA stars such as Kobe Bryant, Lebron James and Kevin Durant (all of whom wear Nike shoes) or Dwight Howard and Derrick Rose (who wear adidas). Brandon Jennings is also playing in Milwaukee which is not a high profile city and for a team that does not command much media attention. Bryant plays for the Los Angeles Lakers which won the NBA championship in 2010 and whose games often appear on national television. Lebron James signed with the Miami Heat in 2010 where he joined star players Dwight Howard and Chris Bosch to form what has been called a new dream team. One might argue that Under Armour should have signed a more established and high profile NBA star as the primary endorser for its new line of basketball shoes. However, it is important to note that many of the top players are already under contract and the company would have to be willing to spend large sums of money to sign a super star player. As noted above, since its founding UA has always sought the up and coming athlete rather than compete with Nike, adidas and Reebok for the super star endorsers. Under Armour is likely to sign more players to endorsement deals if the Micro G line gains traction in the market and generates revenue for the company. 5. Do you think Under Armour will be successful in entering the basketball shoe market? Why or why not? A major challenge UA faces in entering the basketball shoe market is to seen as a legitimate brand in this space. UA feels that their brand image and strong presence in performance apparel, as well as cleated footwear, may help them be perceived a viable competitor in this market. A key determinant of success in this market will be the quality of the UA Micro G line as companies such as Nike, adidas and Reebok all have quality basketball shoes. Under Armour feels that they have a quality shoe and that features such as being lightweight and low to the ground provide an alternative to heavier, thicker foam shoes. Basketball shoes must be able to perform well and provide cushioning and comfort for the foot. Any problems with product quality can lead to negative word-of-mouth that will travel very fast, particularly in social media circles. UA has done extensive testing of their shoes and feels they can compete on a quality basis. Given this, success will be determined by how well they market the new Micro G line and whether the shoe can gain traction in the basketball market. Students should be asked to take a position as to whether Under Armour will be successful in its efforts to enter the basketball shoe market and to offer support for their prediction. They have a lot riding on this launch as success in basketball shoes can help Under Amour solidify its position as a major competitor and brand in the athletic shoe market, open new distribution channels and, of course, provide a new source of revenue. If UA is not successful, they may find it very difficult to become an athletic footwear company and will have to rely on the apparel market for future growth. Instructors should monitor various online sources to track how Under Armour does over the next two years in its efforts to enter the basketball shoe market as well with the re-launch of its running shoes. Using Advertising to Fight the War on Drugs: The Power of Social Marketing or a Waste of Money? Teaching Note Case Overview This case examines the advertising efforts that have been used by the Partnership for a Drug Free America (PDFA) for the past nearly 20 years, and more recently the U.S. government through the Office of National Drug Control Policy (ONDCP), to deal with the problem of illicit drug use. The PDFA consists of a coalition of advertising, marketing and media people, and has been conducting the largest public-service advertising and social marketing campaign in history with the goal of helping kids and teens avoid drug use by influencing their attitudes through persuasive information. In 1998 the U.S. government became involved in the use of advertising to fight the war on drugs when the U.S. Congress approved The Media Campaign Act of 1998 which directed the ONDCP to conduct a national media campaign for the purpose of reducing and preventing drug abuse among young people in the United States. As part of this legislation, the federal government allocated a billion dollars over a five year period for a mass-media based drug prevention campaign. However, after only a few years, the PDFA and ONDCP found themselves in a battle for control of the anti-drug advertising efforts over issues such as the type of ads that should be used, and whether monies should be allocated primarily to media advertising or to support a more broad-based integrated marketing communications program. Moreover, both organizations have had to deal with questions regarding the effectiveness of the anti-drug advertising campaign in reducing drug use and whether the government should continue to fund their efforts. This case can be used with Chapter 19 which deals with measuring the effectiveness of the promotional program, as well as with Chapter 22 which deals with social and ethical aspects of advertising and promotion and the use of advertising to deal with the problem of drug abuse. This case should be of interest to students as they have probably seen many of the anti-drug ads run by the PDFA and the ONDCP and can discuss whether they feel these messages have had any effect on them or their peers with regard to attitudes toward drug use or actual behavior. The classroom discussion of this case can be enhanced by showing some of the anti-drug ads created by the PDFA that are available on DVD 4 of the video supplement package. The DVD contains recent commercials developed by various ad agencies for the Partnership that address various drug problems such as the use of methamphetamines, prescription/over-the-counter drug abuse, steroids and an intervention campaign. Several of the print ads from the ONDCP’s campaigns can be found in the set of acetates that are provided in the supplement package. You might also encourage students to visit the web sites of the PDFA (www.drugfree.org) and the ONDCP (www.whitehousedrugpolicy.gov). The PDFA web site has a section containing many the Partnerships latest commercials by category including drug, agency, audience and medium. The ONDCP site has a Media Campaign section that contains the latest television and radio commercials as well as print ads. Discussion Questions 1. Evaluate the creative strategy used by the Partnership for a Drug Free America in its advertising campaign, particularly with respect to the use of strong fear appeals. In the early years of the PFDA campaign, numerous agencies provided pro bono creative. Many of the messages attempted to employ strong fear appeals to “scare” the audience into not using drugs. Ads showing a rat eating cocaine until it died, or in which an analogy was drawn between using drugs and pointing a gun to one’s head (a shot is heard at the very end of the commercial) along with others of this nature were commonly employed. In many of the cases, the commercials were not effective as viewers engaged in selective exposure by not watching, paid little attention to the ads or counter argued with them. As noted in the case, the ads were often exaggerated, distorted or misrepresented. The effective use of fear appeals, particularly those indicating physical harm, is often a difficult task to achieve. As noted in the text, some studies have demonstrated a curvilinear impact of fear, in which the message increases in effectiveness to a point, then decreases. In some of the early PFDA commercials, the appeals may have been too strong which limited their effectiveness. Research has also indicated that fear appeals are likely to work best with nonusers as opposed to users of drugs. Given that one of the goals of the campaign was to reach young people before they started using drugs, the use of fear appeals could be effective, as long as the level of fear is not too high. On the other hand, the likelihood of impacting users is lower. Some studies have demonstrated that more rational messages are likely to work than fear appeals, particularly with adolescents. Noting that this age group tends to be skeptical and even cynical, approaching them with a matter of fact approach might prove to be more useful than attempting to scare them. A good example of this skepticism was the famous ad “This is your brain on drugs” commercial which featured an adult frying an egg and drawing an analogy to frying one’s brain. The commercial was parodied on TV shows, bumper stickers, and t-shirts and likely did more harm to the anti-drug cause than good. Later in the campaign, the appeals were considered by the drug czar John P. Walters to be too “soft” and “indirect”. He argued that the anti-drug ads were ineffective and that the message had become diluted. Walters and the ONDCP called for stronger appeals and ads linking drug use to terrorism. The PDFA refused to produce spots that contained this message, so the ONDCP had them produced themselves. Reaction by teens to the terrorism linked spots would seem to favor the PDFA position. While 60% of those participating in the research said that if drug money went to support terrorism they would think about not using drugs, most of the feedback indicated that the commercials were an over reaction, a “typical adult overstatement”, and insulting to them. As noted by one creative executive: “Kids told us, “I did not bomb the World Trade Center. I just smoked a joint at lunch.” The research on fear appeals indicates that they must be used carefully and pre-tested prior to being used. 2. Discuss the market segmentation strategies used by the PDFA and ONDCP in the anti-drug campaigns. Which of these segmentation strategies would be most likely to be effective? As noted in the case, a number of segmentation bases have been used in the anti-drug advertising campaign of the PDFA and ONDCP. The segmentation strategy used most often is based on demographic variables, specifically age. Throughout the PFDA campaigns, specific messages have been developed for different age groups, ranging from the very young to adults. When the ONDCP became involved, segmentation took on an even more critical role, with socio-economic, ethnicity, and geographic factors being used. The research indicating the importance and value of reaching parents led to additional attention being placed on them as a segment as well. Another important segmentation strategy used in these campaigns is based on reaching drug users and nonusers. As noted earlier, responses to various types of appeals may differ depending upon whether the individual is using drugs. Users may be less rational and less receptive to the anti-drug messages than nonusers. The latter might internalize the anti-drug messages and view them as support for the decision that they have made not to use drugs. Segmentation on the basis of geographical criteria has also been employed. Many of the commercials developed appeared to target “inner city” or urban youth, particularly those involving appeals for hard drugs like crack cocaine. In the early days of the campaign there seemed to be a perception that only those living in the inner cities used drugs. However, studies have shown young people living in the suburbs, as well as rural areas are not immune from drug abuse. Depicting drug abuse as a problem limited to the inner cities could lead to a false sense of security for suburban and rural inhabitants, or a basis for denial that the problem exists where they live. Age is another important market segmentation base. Reaching children before they begin using drugs is an important goal of the campaign. Previous research has shown that the appeals have had different impact on various age groups. Earlier research provided by the PFDA indicated that the appeals were not working with well with 13-18 year olds and considered them the most difficult segment to reach. It is obvious that appeals must be developed for different age groups, as they will have different lifestyles, needs, and motives that may impact their likelihood of using drugs. Additionally, the distinction between appealing to kids and their parents is a critical one. For many children, their parents are their role models, and they are respected if not revered. As noted, many parents did not recognize that they still could make an impact on their children’s decision to use drugs. Thus the development of advertising strategies to reach them as well as their children is a critical one. As noted toward the end of the case, the emphasis on targeting continues to change. First there was emphasis on youth and nonusers. Then the appeals targeted parents, with the belief that they could impact their children. By the end of 2003, there was again a shift back to focusing on youth. This switch lead to a change in creative as well as media strategy. There is also a lack of consistency in respect to the appeals based on the type of drugs used. Early ads focused on hard core drugs, then the campaigns addressed less addictive substances as well as marijuana and hard core drugs, and then again shifted back to a strong focus on marijuana. This lack of concentration over the years may be contributing to the perceived ineffectiveness of the program. Regardless of the segmentation strategy employed, it is obvious that an undifferentiated strategy is not going to be successful. It should also be noted that there are different media habits for the various segments as they will not all watch the same TV shows nor read the same magazines. The Internet has become a more important medium to some segments than others. Thus, the PDFA and ONDCP will need to continue to segment the market, understand these segments and determine the most effective way to reach them if they hope to be successful. 3. Much of the controversy surrounding the anti-drug advertising campaigns has involved the determination of the effectiveness of the ads. Evaluate the various approaches used to determine the effectiveness of the anti-drug ads. What types of measures should be used to evaluate the effectiveness of the campaign? Given the tremendous amount of money spent each year to develop and run the anti-drug advertisements, measuring the effectiveness of the campaign is essential. If the government is to continue to expend hundreds of millions of dollars on the anti-drug campaigns and advertising and media companies are going to continue to contribute their time and effort, they need to be sure that this money is being well spent. In addition, they need to know which program elements are working and which are not. Therefore, the issue is not whether there measures of effectiveness should be taken, but rather what these measures should be. What is interesting about this case is that the criteria used to measure the effectiveness of the campaign may not be in line with the objectives of the campaign. As noted, many of the objectives involved the changing of attitudes toward drug use by enhancing positive aspects of not using drugs and negative aspects of social use which ultimately would lead to behavioral change. Unfortunately, many of the bases for evaluation have involved a direct attempt to equate declines in drug usage to the campaigns themselves. For example, the last two studies cited in the case used effectiveness measures that included attitudinal and behavioral intention results, but then seemed to focus on the fact that drug had not decreased. As with other attempts to measure advertising effectiveness, it is extremely difficult to determine the direct impact of the ads on behavior. As is the case with product/service advertising, there are many other factors that will influence behavior. For products and services it may be price, availability, quality, competition and other factors. With respect to using drugs, other factors will also have an impact including peer pressure, availability, price, and characteristics of the user such as his or her self-esteem. Attempting to relate increases and decreases in drug use figures directly to the impact of the advertising campaigns is likely to be extremely difficult. Many of the studies also may have been influenced by the fact that they employ self-report measures. Asking respondents whether they saw and recall the ads may be valid measures, but attitudinal and/or behavioral measures may be impacted by socially desirable responses—particularly among adolescents. If you asked a teen their reaction or attitude toward an anti-drug ad, they will be inclined to overstate the amount of influence. If you asked them if they did drugs, or if the ads would make them less likely to do so, they may be unwilling to respond positively to the first question and negatively to the second. Thus, the survey results may be distorted. Perhaps the greatest value of the research used to measure effectiveness would be an attempt to assess recall of the messages and assign a value to the appeals themselves. In this way, some communications measures of the impact of the campaigns would be taken, with the information useful in developing future commercials. This information might also be useful for determining the relative effectiveness of media placements, if it could be determined where these commercials and ads were seen or heard. However, equating the effectiveness of the campaign to increases or decreases in the use of drugs may be too much to ask. 4. Discuss the merits of using an integrated marketing communications program that encompasses a variety of communication tools to prevent drug use versus an approach that relies primarily on media advertising. One of the basic premises of IMC is that the various marketing communication tools offer different advantages and disadvantages and that the utilization of an integrated approach will lead to a more effective and cost efficient communications program. This is likely to be the case for the war on drugs, though many of those involved in the PDFA might disagree. However, the anti-drug campaign may benefit from the use of a variety of IMC tools to deliver the message regarding the dangers of using drugs. However, the requirement that as much as 80% of the budget be spent on media does not support the use of an IMC approach. As noted by Richard Earle, the use of an integrated campaign designed to drive viewers to the websites of the PDFA and/or ONDCP offers great potential. As noted in the text, a number of companies and organizations have used this strategy such as the U.S Army, Nike, Mazda, and many others. The PDFA and ONDCP would best be advised to consider a combination of mass media and other IMC tools to achieve their communication goals. A problem that might hinder the use of a more integrated campaign could be the ability to measure its effectiveness. It is very difficult to measure the effectiveness of media advertising and adding more communication tools to the mix may make it even more difficult to do so. However, the fact that an integrated approach may complicate the measurement of effectiveness, does not mean it should be abandoned. In the case, it is mentioned that the Allen Rosenshine, vice chairman of the PDFA, criticized the integrated marketing communications effort, noting that it is too complex and that establishing 19 communications objectives complicated things. He argued for an effort in which advertising and message repetition is the core of the strategy, thus simplifying the process. However, it has been noted by advertising industry journalists that that Mr. Rosenshine’s advertising agency, BBDO Worldwide, has used IMC programs for many of its clients. An additional consideration in whether the PDFA should move to more of an integrated approach is where the support for this effort will come from. The PFDA relies heavily on with pro bono work and media support which is donated by the advertising agencies and media companies. A factor to consider in the allocation mix is the impact that the shifting of the emphasis of the campaign to other IMC tools such as direct media or the Internet might have on the pro bono support the PDFA receives. 5. Evaluate the advertising campaign developed by Ogilvy & Mather for the ONDCP linking drug use with terrorism. Do you think these ads were an effective way of changing the attitudes and behavior of young people with regard to the use of drugs? Why or why not? The goal of the drugs-and-terror campaign developed for and sponsored by the ONDCP was to link drug use with the support of terrorism by suggesting that illegal drug sales are a major source of money for terrorists. The ads implied that the weapons and other supplies used by terrorists were paid for by the money they get from drug sales. The idea behind the campaign was that people would be less likely to use illegal drugs if they understood that by using them they might be supporting terrorism. The campaign was launched five months after the September 11, 2001 terrorist attacks and was designed to capitalize on the public’s outrage over the terrorist attack as part of the effort to fight drug abuse in the United States. A second part of the campaign was designed to refute the notion that illegal drug use is a victimless crime and shifted the focus from terrorism to personal harm with ads suggesting that the purchase of drugs supported drug-cartel attacks on innocent people. The campaign was very controversial and was criticized by many different groups. Some were critical of the government’s effort to draw a connection between drug money and terrorism, arguing that it was not fair to blame nonviolent drug users for the actions of terrorists or drug cartels. Other groups such as the National Organization for Marijuana Legalization argued that the campaign created a false impression that terrorism is caused by drugs rather than the illegality of drugs. Groups such as NORML argued that legalization of some drugs is the answer to the problem rather than trying to discourage drug use. The Partnership for a Drug-Free America was also opposed to the campaign, as it did not agree with the strategy behind the ads. The Partnership feels that the best way to deal with the problem is to promote drug resistance techniques, positive alternatives to drug use and parental involvement. The ONDCP decided to stop running the controversial campaign in May of 2003. The reason given for the decision was that the campaign put the ONDCP in a battle with the PDFA since the ads were produced outside of the Partnership by the drug office’s agency, Ogilvy & Mather. The ONDCP wanted to present a more united front with the Partnership to Congress which has to vote to extend the anti-drug campaign. The drug office announced that it would be directing more of its money toward youth-oriented media and focus its effort on halting drug use among kids rather than trying to deter them from starting to use drugs. 6. Evaluate the merits of the anti-drug advertising campaign from a social perspective. Should the government be involved in this effort or is the PDFA the more appropriate organization? It is unlikely that anyone would challenge the goal of the anti-drug campaigns of the PDFA and ONDCP as drug use among young people is a major societal problem. As noted in the case, the original founders of the PFDA had no political agenda, and established the organization with truly altruistic goals in mind. The fact that the original concept was based on pro bono work and contributions speaks even more to the intentions of the founders and participants. The work of the PDFA over the past two decades is often recognized as an example of an effective cause-related marketing campaign and how advertising can be used to deal with a social problem. However, many experts feel that the involvement by the ONDCP altered the landscape in the use of advertising to fight the war on drugs. Critics argued that government involvement politicized the effort and interfered with the efforts of the PDFA. In addition, many disagreed with the use of tax dollars to fund the anti-drug campaign arguing that it was not really a good investment of government funds. Perhaps the biggest concern is that of direct involvement of the federal government. The PFDA consists of practitioners in the advertising and media industries and the campaign is an extension of their expertise to a worthy cause. It entails the use of advertising which is what they do day-to-day and they are good at it. Government officials are not likely to be as knowledgeable of advertising and media strategy as those who work in these industries. The case notes the fact that the marriage between the PDFA and ONDCP was not a happy one and one might speculate as to the reasons why and who was to blame. Nevertheless, an adversarial relationship has developed that is likely to be counterproductive unless steps are taken to address the problems between the two organizations. Another factor to consider is the actual amount of government money being allocated to the campaign. One might argue that so long as the creative and media time is being provided on a pro bono basis, the effort is worthwhile as there is no direct cost to the taxpayer. However, when tax dollars are being spent to run the ads, accountability becomes much more of an issue. People want to know where their tax dollars are being spent and if it is a worthwhile use of these monies. Thus, there will be more pressure to produce positive results to demonstrate the value of the investment. The war on drugs is not the first time that advertising has bee used to address a social problem, nor is it likely to be the last. Drug use among young people is a major problem in the United States and that steps must be taken to remedy the situation. The best way to do this may yet to be determined, but advertising and other IMC tools can be of value in this ongoing battle. XM Satellite Radio: Competing in the New Digital World Teaching Note Case Overview This case examines XM Satellite Radio Inc., the leader in the satellite-delivered radio market. XM’s founding was promoted by the radio industry’s first major technological development since the popularization of FM radio in the 1970s – the transmission of radio signals by satellite. XM launched its satellite radio service nationally in November 2001 while Sirius, its only direct competitor, launched its service in June 2002. The challenge facing both companies has been to sell consumers on the concept of satellite radio which requires the purchase of a receiver unit and payment of a monthly subscription fee for the service. The two companies are engaged in a battle for subscribers and technological leadership and have spent large sums of money over the past two years to acquire programming for their satellite systems. Many analysts predict that the two companies will have 18 to 20 million subscribers by 2010. By the end of the second quarter of 2006, XM had 6.9 million subscribers while Sirius had 4.6 million. While XM and Sirius continue to compete with one another, they also are facing competition from other digital-based technologies including MP3 players such as the immensely popular Apple iPod, Internet radio and developments that are occurring among traditional terrestrial AM and FM radio stations. The case provides a brief history and overview of XM and its programming content. There is also a discussion of the integrated marketing communications program used by XM to create awareness and generate trial when its new service was launched, including media advertising and demonstration programs that made it possible for consumers to experience the benefits offered by satellite radio. The case also includes a discussion of the competition XM is facing from Sirius, as well as other digital technologies. It concludes with a section on the current status of XM and the challenges the company faces as it struggles to attract more subscribers and achieve profitable growth. This case is based in part on an interview with Steve Cook, Executive Vice President Automotive for XM Satellite Radio, who joined the fledgling company shortly after the launch of the service. The case illustrates how classical consumer package goods marketing tactics can be successfully utilized to generate trial and repeat purchase in a different type of industry. The case also shows that as with all new product introductions, there is a learning curve regarding integrated marketing communications strategy and tactics. We recommend using the case with Chapter 11 of the text which deals with Broadcast Media. IMC Perspective 11-4 introduces students to the digital revolution that is impacting the radio industry. In teaching the case, the focus should be on the challenges facing XM in terms of integrated marketing communications and what the company needs to do to continue to attract subscribers and compete with Sirius. In addition to media advertising, both companies are using a variety of sales promotion tools such as rebates, price deals, spiffs and other tactics to attract and retain customers. The case can also be used as the basis for an interesting discussion regarding developments in the radio industry and how satellite, as well as traditional terrestrial radio, is being impacted by new digital technologies. A number of ads and collateral material used by XM Satellite Radio are available in the accompanying power point file for students to examine as they prepare the case. You might also encourage them to visit the company’s web site at www.xmradio.com for current information on XM satellite radio. Discussion Questions 1. Which competitors should XM target in the future: Sirius, terrestrial radio, MP3 players and podcasts, or Internet radio? Sirius – Targeting its only direct competitor might be the smallest opportunity strategy as Sirius currently, and over the short term at least, has the smallest user base of all the competitive options. Spending too much time focusing on Sirius might divert attention from the larger, more important job facing XM which is growing satellite radio as a viable product category. Moreover, targeting Sirius legitimizes them as an alternate satellite radio form and attacking them could undermine XM’s advertising strategy which has been to position itself as the best option to AM and FM radio. While Sirius is a direct competitor, they also are helping to grow the satellite radio category which is important for both companies if they are going to survive. It may be too early in the product life cycle of satellite radio for XM to focus its attention on trying to take customers away from Sirius. Terrestrial Radio- XM has the strongest package of benefits versus terrestrial radio and its efforts might be best applied to pointing out these advantages which include more content and program options, commercial free music, better sound quality, and the ability to listen to the same programming anywhere in the country. The greatest potential for new subscribers is in converting the huge segment of the U.S. population that currently listens to terrestrial radio. XM’s tagline, used in advertising and on their website, “Beyond AM. Beyond FM. XM.” positions the brand as the best satellite radio option and as better than traditional radio. MP3 Players - XM’s advantages versus MP3 players are primarily in the ease of use area, as XM does not require searching, downloading and uploading and there is little change required in radio listening behavior. XM is at a disadvantage, however, because it does not provide the customized play list and being able to listen to your own music whenever you want as can be done with a MP3 player. XM’s advantages relative to MP3 players are most appealing to older consumers who seem to like the element of surprise radio gives them and enjoy listening to the personalities and genre experts XM provides. Also, they may not want to bother spending the time customizing music or other content for an MP3 player. A campaign following this approach could be run in publications that target the older segment of the market such as people over the age of 50. Internet Radio - The pros and cons of XM versus Internet radio are similar to those of the MP3 player market. However, Internet radio may be even more threatening as the streaming format allows for “real time” communication of content, and doesn’t require all the time spent to download and upload listening material. However, it may be some time before Internet radio is available in cars which is where much radio listening occurs. Combination - If only one competitor were to be chosen, XM might focus on competing against MP3 players by heavily marketing its combination XM/MP3 player unit. This would provide the most benefits to the most people, both now and in the future, as the market for MP3 players and Internet podcasting continues to explode. The combination offers the best of both “new age” formats: the infinite choice of MP3 players as well as the personalities, expertise, live content, and ease of use of XM satellite radio, including the ability to record audio content for subsequent listening. The best way to determine the optimal strategy is to assess: The size of the market segments represented by the various forms of competition The advantages XM has versus each competitor and determining whether they are important to consumers Projected growth rates and trends for each form of competition New technologies on the horizon that will make XM’s points of difference and advantages versus each competitor more or less compelling in the future 2. Should XM try to appeal to all demographic groups or target specific segments? If the latter, which segments should they target and why? What types of advertising and promotion tactics can be used to market XM to these groups? The fact that Sirius is becoming inextricably linked with Howard Stern, who appeals most strongly to young adult males, may create an opportunity for XM as Sirius may be boxing itself in from an image standpoint. This young, macho male association is further reinforced by Sirius’ other deals with NASCAR and the NFL and gives XM the opportunity to position itself more broadly to a wider age male demo as well as to the female demo, which at this point is underdeveloped. Females currently make up 35 percent of XM’s users but account for 50 percent of the U.S. population. Another group XM can target with specific programming and marketing is the Hispanic market. Hispanics currently make up 15 percent of the U.S. population; they have the highest growth rate of any ethnic group, and are above average consumers of radio. Since Sirius has less revenue and a smaller marketing budget than XM, the company may be unable to afford a marketing program targeting this ethnic group. Hispanics also have a tendency to be very loyal if they are satisfied with a product or service. 3. What are XM’s options for their advertising creative strategy going forward? Should they focus on their content and programming, digital sound quality, ease of use versus the other alternatives, their innovative hardware, a combination of these factors, or some other attributes? The key issue for XM is whether to pursue the same advertising creative strategy for every market segment and demographic group or whether to customize the message based on each user groups’ “hot buttons” and areas of interest. Decisions also have to be made regarding points of difference that should be communicated for XM versus the competition. The major points that can be used as the basis of the creative strategy are that XM has: a. The best overall content due to its breadth (best for families/something for everyone) b. The best sound quality as rated by objective sources such as Sound & Vision magazine c. Ease of use versus MP3 players that require searching, downloading and uploading d. The latest innovations in hardware e. A combination of these factors The print ads provided with the case shows how XM is positioning itself as the best satellite radio option based on a combination of attributes such as best hardware (portability, storage and playback features) and breadth of content (commercial free music, sports, news and talk radio, comedy, and business programming). The earlier magazine insert that appeared when XM was first introduced focused on the breadth of programming by showing all of the channels. Students can be asked what they think of XM’s advertising. They can be asked what approach they might recommend as an improvement and why. XM needs to consider whether it should have one campaign that it uses to communicate with all of its potential customers across various media, or whether it should vary the advertising message by medium. For example, if targeting the senior population, ads might be placed in Modern Maturity (the magazine of the American Association of Retired People and the largest circulation magazine in the United States). Such an ad might focus on those XM channels that play music from the decades of the 1940’s, 1950’s and 1960’s, Frank’s Place (that features songs by Frank Sinatra), and/or “old time radio” with shows such as “The Lone Ranger” and “Dragnet”, as well as news programming. To target females, XM might place ads in magazines such as Good Housekeeping, Redbook, Family Circle, and Oprah Magazine that feature XM’s programming for women such as Oprah & Friends, Ellen DeGeneres, iVillage, and Take 5 as well as cooking, fashion, and celebrity news. Ads aimed at the younger target audience might be placed in magazines such as Rolling Stone, Vibe, Seventeen, and Cosmo and might feature XM programming that appeals to younger audiences such as various music formats and its irreverent talk shows. Advertising that focuses on hardware might be used for specific target audiences. The new Samsung, Delphi and Pioneer products that combine an MP3 player with XM might be featured in ads directed at the 18-34 year olds, touting the benefits most important to this target - that XM provides the ultimate in choice. Ad copy might focus on the unique combination of benefits including the ability to have your own play list, the benefit of XM’s hip and cool stations that are the first to feature new artists, and the ability to record what is heard on XM for later listening pleasure. 4. Are there any other sampling or promotional programs that XM should pursue to attract new subscribers and retain them? XM is doing a thorough job of sampling the product at retail through in-store demos and in automobiles, both with pre-purchase installations and through rental car programs. However, there are other opportunities to allow potential customers to sample its service in environments where they will be spending a good deal of time and be receptive to hearing music, news, or talk radio. Two examples would be on the more upscale, Metroliner and Acela train routes, similar to the Jet Blue and AirTran Airways programs, and in sports clubs where people are working out. The demographics of sports clubs are desirable for XM, as the customers tend to be young, hip, and have slightly higher incomes. The three primary ways to impact repeat purchase should be identified: 1) Increasing the percent of free trials through new user promotions that result in conversions or commitments to at least a one-year plan 2) Encouraging longer contract commitments 3) Encouraging users to buy multiple units for their homes, cars, boats, and family members Students can be asked to identify additional tactics to encourage customer retention. For example, while XM has encouraged customer retention through the pricing of their different plan options, they could develop a buzz marketing/tell-a-friend type of promotion whereby current users become evangelists for the product. Current users who refer a friend that signs up would get one month of XM service for free. To maximize conversion from car dealer programs, it’s important to make sure that users who have not activated the units know how to do so and how to use the service. These people can be contacted via phone several weeks after purchasing their new vehicles to see if they need help or have questions. To encourage longer contract commitments, users whose initial contract period is about to expire should be contacted via direct mail and phone and given incentives to trade-up in length of commitment, such as a special offer on the latest hardware (like cell phone companies do). 5. What type of programs can XM develop with retailers to increase their share of “aftermarket” installations? Key to creating impact at point-of-sale is the trial/display of units that allow customers to sample the XM’s sound quality and programming. Attached to these units are marketing materials such as brochures and signage that communicate XM’s marquis programming. Products should also be displayed out of the box, as impulse purchase decisions are affected by the look of the products (as with Apple iPods, where the sleek/stylized look of the product has been a key feature). It’s nearly impossible to replicate the factory installation trial programs through retail outlets, since consumers would have to purchase the hardware and pay for the installation to try the product. If consumers choose not to subscribe, they would be unable to return the hardware. To create excitement at point-of-sale, promotions could be considered such as providing a free CD with the purchase of a unit and/or a CD with commitment to a one-year subscription. This would be a win/win for retailers, as it would both drive users into the store for the promotion and would encourage them to visit both the satellite radio departments and CD music departments of the store. They might also consider using a sweepstakes whereby people who purchase an XM system would automatically be entered, or prospective customers might be encouraged to visit the company’s web site to enter. The sweepstakes prizes might include a car with a factory-installed XM satellite radio system, the opportunity to be a guest on the show of their favorite XM radio channel host, or other prizes such as a portable XM receiver or combination XM receiver/MP3 player. Both XM and Sirius currently use rebates as an extra incentive for retail buyers of their satellite radio systems. Sirius has been offering rebates of up to $100 while XM reduced its rebates to around $20 to $30 in the summer of 2006. XM has indicated that it wants to continue cutting the costs of its components to reduce prices rather than rely on rebates. However, the use of rebates has been a very effective for Sirius as the sales promotion tactic helped the company win nearly 60% of retail sales in the second quarter of 2006. XM may have to reconsider its position on rebates if it continues to lose sales to Sirius because of the difference in the rebate offer. Consumers may be attracted to Sirius because of the larger rebate and retailers may find it easier to sell the brand over XM because of the cost savings. This may result in retailers pushing Sirius over XM and may continue to be a problem unless XM can clearly differentiate its products and programming or lower its equipment costs. Another trade promotion tool being used by XM and Sirius is push money or spiffs, as the case notes that both companies pay between $10 and $20 to retailers each time someone buys a satellite radio in a store and activates it. As long as the incentive fees are equal, neither company will gain a competitive advantage by using them. However, they may find themselves in a promotional trap whereby neither of them can eliminate the use of spiffs unless the other does so. 6. How can XM best combat the momentum Sirius gained from the advent of Howard Stern? To maximize the benefit of signing Howard Stern, Sirius focused much of their advertising budget in the four months prior to his coming and the two months after his arrival on promoting his show. A great deal of the advertising for Sirius continues to focus on Stern which means there is less emphasis on communicating the breadth of their programming. Moreover, Sirius has become inextricably linked to Stern. While Howard Stern is enjoyed by many, the “shock jock” is perceived negatively by perhaps even more. XM has the opportunity to differentiate itself from Sirius, seem like a better value, and appear more “wholesome” by focusing on its breadth of content. However, XM may have to be somewhat careful here as their line up includes Opie and Anthony, whose program also includes irreverent content. 7. Is there a cooperative advertising message (such as Intel Inside) that XM can further promote with its distribution partners to increase the synergy and awareness for the brand and its unique benefits? XM may be able to work with automotive companies to deliver a type of ingredient/component branding message about the benefits of having its satellite radio system as an accessory in a vehicle. XM benefits greatly when prestigious partner brands such as Lexus, Cadillac, Infiniti, Audi and others advertise that they offer XM Satellite radio in their vehicles. Since XM has 60 percent of auto makers as exclusive partners, it should receive the majority of automotive advertising that promotes satellite radio. XM might further encourage its automotive partners to promote the availability of its satellite radio system as a factory installed option by providing a cooperative advertising allowance. XM might also co-sponsor research that demonstrates the value of having XM in a new vehicle and how it increases purchase intentions. Encouraging XM product mentions in advertising done by its automobile partner will also help increase awareness and prestige due to favorable associations with these brands. ___________________________________________________________________________ This teaching note was prepared by Professor Michele Greenwald, Visiting Professor at HEC Paris, as an aid to instructors in the classroom use of the case. Solution Manual Case for Advertising and Promotion: An Integrated Marketing Communications Perspective George E. Belch, Michael A. Belch, Michael A. Guolla 9780070891302
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