There is an excellent story in the New York Times reporting on the success rate of new consumer products introduced in the last few years. The information, produced by marketing research firm Nielsen, shows that out of nearly 17,000 new products introduced since 2008 only 62 achieved modest sales of at least $50 million in the first year on the market and then followed this by experiencing a sales increase in the second year. These results point up the challenges marketers face with introducing new products in a cluttered competitive market.
To address the risks surrounding new products, another story in Advertising Age discusses how more marketers are turning to a co-branding strategy. As we discuss in our Managing Products tutorial, a co-branding strategy occurs when two or more known brands share a product label. In some cases both brands are owned by the marketer, such Crest Toothpaste with Scope both owned by Procter & Gamble, while in other cases the brands are from two different companies, such as Betty Crocker teaming with Hershey to market a cupcake mix. The principal advantage sought by a co-branding arrangement is the expectation that the power of two brands will lead to faster customers' acceptance, especially if each brand appeals to a different target market. Additionally, depending on the co-branding relationship, the cost of introducing the product may be spread over each brand.
The Advertising Age co-branding story presents examples of six recently introduced co-branded products. Sometimes the joining of brands makes sense, such as Kellogg's Peanut Butter Cereal that features Jif brand peanut butter. Other times, you have to take a step back and question how the brands can work together. For instance, the combination of Dial Body Wash and Froyo Frozen Yogurt may seem a bit odd.
When it comes to promotional techniques that are the most effective in business-to-business markets, it is safe to say that personal selling is still king. Despite the emergence of powerful Internet and social media promotional methods, convincing a business to make a purchase decision often requires a real salesperson establish a personal relationship with a buyer. In most cases, developing the relationship that results in a sale requires the seller meet the buyer face-to-face at the buyer's place of business.
In the consumer market, things are a little different. Consumer buying decisions are heavily impacted by non-selling promotion, such as advertising and sales promotion, rather than direct selling. Also, consumers make the majority of buying decisions on their own and not with the assistance of someone representing the products they purchase. However, this does not mean personal selling is not necessary in consumer markets. As we note in our Types of Selling Roles tutorial, direct selling by salespeople to consumers does happen. For instance, selling is easy to see when a salesperson assists a customer who is shopping in an upscale furniture store or when an automobile salesperson intercepts prospects as they enter a showroom.
There is another type of consumer selling that occurs where consumers come to a location and are engaged by a seller. These situations are best described as "home parties" where a host has invited many guests to their home (or other location) to listen to a seller explain their products. Over the years, several companies have successfully used this selling approach with the most well-known being Avon, Mary Kay Cosmetics and Tupperware.
Another example of home party selling is found in this Wall Street Journal story. It discusses a company called Willagirl that markets skin care products. But what makes this story interesting is that the sellers are not professional saleswomen or salesmen; the sellers are middle school aged girls. The direct selling technique used by Willagirl is similar to what Avon and others employ, including encouraging attendees to sample a wide range of products. For the young saleswomen, the company offers a high commission and enables sellers to earn a percentage of sales made by others they recruit to become sellers.
In April, we reported on an interesting case that was to be heard by the U.S. Supreme Court. The case revolves around the labeling of food products and specifically whether a company can sue a competitor for misleading labeling even though the label meets U.S. Food and Drug Administration (FDA) regulations.
The case involves POM Wonderful, a small juice product firm, and mega-marketer Coca-Cola. POM claims the label for Coca-Cola's Pomegranate Blueberry Juice is misleading because the product contains less than 1 percent pomegranates and blueberries. POM sued but was rebuffed by lower courts that said Coca-Cola's labeling was covered by certain FDA rules and, consequently, POM could not sue. POM was not satisfied with lower court rulings and took the issue to the Supreme Court.
The Supreme Court has now ruled with the voting members unanimously supporting POM's right to sue Coca-Cola. While the decision by the Supreme Court is a win for POM, it only means they can go forward with a lawsuit. Whether they can successfully prove their claims in a lower court remains to be seen.
However, according to this Advertising Age story, there may be far greater implications of this decision as it may lead many other companies to file misleading labeling claims against competitors. It may also be a wake up call for marketers to begin exercising greater care when designing their labels or face a potential legal response from competitors.
As a follow-up to our post earlier this week that focused on the critical role research plays in marketing decisions, it is equally important to understand that research should never be the only factor considered when making decisions. Why? Because, as we observe in our Marketing Research tutorial, there are risks associated with research. The risks can be considerable and exist with both secondary research and primary research.
For secondary research, which is accessing research that was previously conducted, a major risk involves not fully understanding whether the research is reliable. For example, marketers purchasing research reports need to be careful when interpreting results especially if the group producing the research is either not well known or does not describe in detail how the data was obtained.
For primary research, which marketers carry out for their own purposes by either doing it themselves or hiring a research firm, the issue is whether appropriate research methods are followed. For instance for survey research, it must be determined whether the right questions were asked and whether the right people were selected to participate.
To see how research can be risky, there are two stories this week that offer good examples. The first one deals with Tuesday's Republican primary campaign in Virginia where a long-shot candidate, David Brat, beat a high-ranking, incumbent candidate, Eric Cantor. According to this story, Cantor's campaign was decidedly optimistic of their election chances primarily because of polling research that was conducted for them. In fact, the story reports that research suggested Cantor had a significant lead going into Tuesday. While the reasons for the research mistake are somewhat cloudy, it would appear the voters who were polled were not fully representative of the overall population that eventually voted.
The other example discussed in this Los Angeles Times story, looks at how audience ratings of radio stations in Southern California may be way off due to poorly conducted research. The implications are significant as ratings are a key determent of what stations charge for advertising rates. The company conducting the research, Nielsen, claims it will need to recalculate the ratings, though it is not clear what exactly caused the problem. However, as with the Cantor polling error, it appears there may be an issue with the survey participants.
In our definition of marketing, we make it clear that marketing research is where all marketing decisions should begin. In fact, we consider research as being so critical that in our Marketing Research tutorial we state research is the "foundation of marketing." Unfortunately, many marketers, especially those in smaller firms, fail to devote enough effort to research. The main reasons they cite for not doing research primarily center on three issues: too costly, too time consuming, or too complicated.
However, there is one business segment that seems to be embracing research - online retailers. It is true that most companies with a web presence are doing some research, such as using a web analytics program to track where visitors go on a website. Yet, online sellers are going further by implementing experimentation techniques as a way to find out answers to such questions as: What is the ideal location for product placement on a website? What is the most effective wording to include with product information? What is the most attractive website design elements (e.g.colors) for displaying a product?
For online sellers, the preferred method for conducting research is through a technique called A/B testing. With A/B testing, two different versions of information are shown to different website visitors. For instance, if a retailer is testing to find out which picture of a product attracts more interest; half the visitors to a certain webpage will see the image of a product in one way (e.g., placed on the left) while the other half will see the image of the product in another way (e.g., placed in the middle). The option producing the best results (e.g., higher sales, higher click-thru rates, etc.) may then be chosen as the webpage layout to be presented to all visitors.
Additionally, this type of experimentation can extend well beyond just changing one variable in two ways. Using multivariate testing, research can be conducted where several different changes are tested at the same time (e.g., different font size, different background color, different customer support statements, etc.). Unlike A/B testing, where 50% of visitors are shown different content, with multivariate testing the breakdown will depend on how many variations are being tested. For instance, ten variations may mean only 10% of visitors are exposed to a certain testing page.
Good information on using experiments in online retailing can be found in this story from Internet Retailer. It provides insight on how several online sellers use A/B and multivariate testing. It also presents information on different firms offering these research services and the different rates they charge.