Krispy Kreme makes 2.7 billion donuts a year. But it took more than fresh, hot donuts to earn Krispy Kreme the title of ‘’hottest brand in America’’ in 2003
Krispy Kreme makes 2.7 billion donuts a year. But it took more than fresh, hot donuts to earn Krispy Kreme the title of ‘’hottest brand in America’’ in 2003
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Marketing Management
NO. 1
MARKETING SPOTLIGHT- NIKE
Nike hit the ground running in 1962.
Originally known as Blue Ribbon Sports, the company focused on providing
high-quality running shoes designed especially for athletes by athletes.
Founder Philip Knight believer that high-tech shoes for runners could be manufactured
at competitive prices if imported from abroad. The company’s commitment to
designing innovative footwear for serious athletes helped it build a cult
following among American consumers. By 1980, Nike had become the number-one
athletic shoe company in the United States.
From
the start, Nike’s marketing campaigns featured winning athletes as
spokespeople. The company signed on its first spokesperson, runner Steve
Prefontaine, in 1973. Prefontaine’s irreverent attitude matched Nike’s spirit.
Marketing campaigns featuring winning athletes made sense. Nike saw a `pyramid
of influence’’ – it saw that product and brand choices are influenced by the
preferences and behavior of a small percentage of top athletes. Using
professional athletes in its advertising campaigns was both efficient and
effective for Nike.
In
1985, Nike signed up then-rookie guard Michael Jordan as a spokesperson. Jordan
was still an up-and-comer, but he personified superior performance. Nike’s bet
paid off: The Air Jordan line of basketball shoes flew off the shelves, with
revenues of over $100 million in the first year alone. Jordan also helped build
the psychological image of the Nike brand. Phil Knight said. ``Sports are at
the heart of American culture, so a lot of emotion already exists around it.
Emotions are always hard to explain, but there’s something inspirational about
watching athletes push the limits of performance. You can’t explain much in 60
seconds, but when you show Michael Jordan, you don’t have to.’’
In
1988, Nike aired its first ads in the ``Just Do It’’ ad campaign. The $20
million month-long blitz-subtly encouraging Americans to participate more
actively in sports-featured 12 TV spots in all. The campaign challenged a
generation of athletic enthusiasts to chase their goals; it was a natural
manifestation of Nike’s attitude of self-empowerment through sports. The
campaign featured celebrities and noncelebrities. One noncelebrity and featured
Walt Stack, an 80-year-old long-distance nunnery, running across the Golden
Gate bridge as part of his morning routine. The ``Just Do It’’ trailer appeared
on the screen as the shirtless Stack ran on a chilly morning. Talking to the
camera as it zoomed in, and while still running. Stack remarked, ``People ask
me how I keep my teeth from chattering when it’s cold.’’ Pausing, Stack
matter-of-factly replied, ‘’I leave them in my locker.’’
As
Nike began expanding overseas to Europe, it found that its American style ads
were seen as too aggressive. The brand image was perceived as too
fashion-oriented. Nike realized that it had to ``authenticate’’ its brand in
Europe the way it had in America. That meant building credibility and relevance
in European sports, especially soccer. Nike became actively involved as a
sponsor of soccer youth leagues, local clubs, and national teams. Authenticity
required that consumers see the product being used by athletes, especially by
athletes who win. The big break came in 1994, when the Brazilian team (the only
national team fro which Nike had any real sponsorships) won the World Cup. The
victory led Nike to sign other winning teams, and by 2003 overseas revenues
surpassed U.S. revenues for the first time. Nike also topped $10 billion in
sales for the first time in the year as well.
Today,
Nike dominates the athletic footwear market. Nine of the 10 top-selling
basketball shoes, for example, are Nikes. Nike introduces hundreds of shoes
each year for 30 sports – averaging one new shoe style every day of the year.
Swooshes abound on everything from wristwatches to golf clubs to swimming caps.
Discussion
Questions
1. What have been the key success factors
for Nike?
2. Where is Nike vulnerable? What should it
watch out for?
3. What
recommendations would you make to senior marketing executives going forward?
What should they be sure to do with its marketing?
NO. 2
MARKETING SPOTLIGHT- DISNEY
The Walt Disney Company, a $27
billion-a-year global entertainment giant, recognizes what its customer’s value
in the Disney brand: a fun experience and homespun entertainment based on
old-fashioned family values. Disney responds to these consumer markets. Say a
family goes to see a Disney movie together. They have a great time. They want
to continue the experience. Disney Consumer Products, a division of the Walt
Disney Company, lets them do just that through product lines aimed at specific
age groups.
Take
the 2004 Home on the Range movie. In addition to the movie, Disney created an
accompanying soundtrack album, a line of toys and kid’s clothing featuring the
heroine, a theme park attraction, and a series of books. Similarly, Disney’s
2003 Pirates of the Caribbean had a theme park ride, merchandising program,
video game, TV series, and comic books. Disney’s strategy is to build consumer
segment around each of its characters, from classics like Mickey Mouse and Snow
White to new hits like Kim Possible. Each brand is created for a special age
group and distribution channel. Baby Mickey & Co. and Disney Babies both
target infants, but the former is sold through department stores and specialty
gift stores whereas the latter is a lower-priced option sold through
mass-market channels. Disney’s Mickey’s Stuff for Kids targets boys and girls,
while Mickey Unlimited targets teens and adults.
On
TV, the Disney Channel is the top primetime destination for kids age 6 to 14,
and Playhouse Disney is Disney’s preschool programming targeting kids age 2 to
6. Other products, like Disney’s co-branded Visa card, target adults.
Cardholders earn one Disney ``dollar’’ for every $ 100 charged to the card, up
to the card, up to $75,000 annually, then redeem the earnings for Disney
merchandise or services, including Disney’s theme parks and resorts, Disney
Stores, Walt Disney Studios, and Disney stage productions. Disney is even in Home
Depot, with a line of licensed kid’s room paint colors with paint swatches in
the signature mouse-and-ears shape.
Disney
also has licensed food products with character brand tie-ins. For example,
Disney Yo-Pals Yogurt features Winnie the Pooh and Friends. The four-ounce
yogurt cups are aimed at preschoolers and have an illustrated short story under
each lid that encourages reading and discovery. Keebler Disney Holiday Magic
Middles are vanilla sandwich cookies that have an individual image of Mickey, Donald
Duck, and Goofy imprinted in each cookie.
The
integration of all the consumer product lines can be seen with Disney’s ``Kim
Possible’’ TV program. The series follows the action-adventures of a typical
high school girl who, in her spare time, saves the world from evil villains.
The number-one-rated cable program in its time slot has spawned a variety of
merchandise offered by the seven Disney Consumer Product divisions. The
merchandise includes:
- Disney
Hardlines – stationery, lunchboxes, food products, room décor.
- Disney
Softlines – sportswear, sleepwear, daywear, accessories.
- Disney
Toys – action figures, wigglers, beanbags, plush, fashion dolls,
poseables.
- Disney
Publishing – diaries, junior novels, comic books.
- Walt
Disney Records – Kim Possible soundtrack.
- Buena
Vista Home Entertainment – DVD/video.
- Buena
Vista Games – Game Boy Advance.
``The success of Kim Possible is driven
by action – packed storylines which translate well into merchandise in many
categories,’’ said Andy Mooney, chairman, Disney Consumer Products Worldwide.
Rich Ross, president of entertainment, Disney Channel, added: ``Today’s kids
want a deeper experience with their favorite television characters, like Kim
Possible. This line of products extends our viewer’s experience with Kim,
Rufus, Ron and other show characters, allowing (kids) to touch, see and live
the Kim Possible experience.
Walt
Disney created Mickey Mouse in 1928 (Walt wanted to call his creation Mortimer
until his wife convinced him Mickey Mouse was better). Disney’s first
feature-length musical animation, Snow White and the Seven Dwarfs, debuted in
1973. Today, the pervasiveness of Disney product offerings is staggering – all
in all, there are over 3 billion entertainment-based impressions of Mickey
Mouse received by children every year. But as Walt Disney said. ``I only hope
that we don’t lose sight of one thing – that it was all started by a mouse.’’
Discussion
Questions
1. What have been the key success factors
for Disney?
2. Where is Disney vulnerable? What should
it watch out for?
3. What
recommendations would you make to their senior marketing executives going forward?
What should it be sure to do with its marketing?
NO. 3 MARKETING SPOTLIGHT- HSBC
HSBC is known as the ``world’s local
bank.’’ Originally called the Hong Kong and Shanghai Banking Corporation
Limited, HSBC was established in 1865 to finance the growing trade between
China and the United Kingdom. HSBC is now the second-largest bank in the world,
serving 100 million customers through 9,500 branches in 79 countries. The
company is organized by business line (personal financial services; consumer
finance; commercial banking; corporate investment banking and markets; private
banking), as well as by geographic segment (Asia-Pacific, U.K./Eurozone, North
America/NAFTA, South America, Middle East).
Despite
operating in 79 different countries, the bank works hard to maintain a local
feel and local knowledge in each area. HSBC’s fundamental operating strategy is
to remain close to its customers. As HSBC chairman Sir John Bond said in
November 2003, ‘’Our position as the world’s local bank enables us to approach
each country uniquely, blending local knowledge with a world-wise operating
platform.’’
For
example, consider HSBC’s local marketing efforts in New York City. To prove to
jaded New Yorkers that the London-based financial behemoth was ‘’the world’s
local bank, ``HSBC held a ‘’New York City’s Most Knowledgeable Cabbie’’
contest. The winning cabbie gets paid to drive full-time for HSBC for the year
and HSBC customers win, too. Any customer showing an HSBC bankcard, checkbook,
or bank statement can get a free ride in the HSBC-branded Bankcab. The campaign
demonstrates HSBC’s local knowledge. ‘’In order to make New Yorkers believe
you’re local, you have to act local,’’ said Renegade Marketing Group’s CEO Drew
Neisser.
Across
the world in Hong Kong, HSBC undertook a different campaign. In the region hit
hard by the Severe Acute Respiratory Syndrome, (SARS) outbreak, HSBC launched a
program to revitalize the local economy. HSBC’’ plowed back interest payments’’
to customers who worked in industries most affected SARS (cinemas, hotels,
restaurants, and travel agencies). The program eased its customer’s financial
burden. The bank also promoted Hong Kong’s commercial sector by offering
discounts and rebates for customers who use an HSBC credit card when shopping
and dining out, to help businesses affected by the downturn. More than 1, 5000
local merchants participated in the promotion.
In
addition to local marketing, HSBC does niche marketing. For example, it found a
little-known product area that was growing at 125 percent a year: pet
insurance. In December 2003 it announced that it will distribute nationwide pet
insurance through its HSBC Insurance agency, making the insurance available to
its depositors.
HSBC
also segments demographically. In the United States, the bank will target the
immigrant population, particularly Hispanics, now that it has acquired Bital in
Mexico, where many migrants to the United States deposit money.
Overall,
the bank has been consciously pulling together its worldwide businesses under a
single global brand with the ‘’world’s local bank’’ slogan. The aim is to link
its international size with close relationships in each of the countries in
which it operates. The company spends $600 million annually on global marketing
and will likely consolidate and use fewer ad agencies. HSBC will decide who
gets the account by giving each agency a ‘’brand-strategy exercise.’’ Agencies
will by vying for the account by improving on HSBC’s number 37 global brand
ranking.
Krispy Kreme makes 2.7 billion donuts a year. But it took more than fresh, hot donuts to earn Krispy Kreme the title of ‘’hottest brand in America’’ in 2003 |
Discussion Questions
1. What have been the key success factors
for HSBC?
2. Where is HSBC vulnerable? What should it
watch out for?
3. What
recommendations would you make to senior marketing executives going forward?
What should they be sure to do with its marketing?
NO .4
MARKETING SPOTLIGHT- KRISPY KREME
Krispy Kreme makes 2.7 billion donuts a
year. But it took more than fresh, hot donuts to earn Krispy Kreme the title of
‘’hottest brand in America’’ in 2003. Krispy Kreme’s stock price quadrupled in
the three years following its IPO in 2000, and the entire chain now generates a
billion dollars in annual revenues across more than 300 outlets.
How
did Krispy Kreme turn donuts into dollars? Careful brand positioning and local
marketing tell the story. ‘’We have a humble brand and product,’’ says Krispy
Kreme CEO Scott Livengood. ‘’It’s not flashy.’’ The company is not new – it was
founded in 1937- and part of its brand image is an old-fashioned feel. The
plain red, green, and white colors and retro graphics evoke the squeaky-clean
Happy Days of the 1950s, as do the Formica-filled, kid-friendly shops. ‘’We
want every customer experience to be associated with good times and warm
memories,’’ Livengood says.
That
company’s brand image also rests on its fresh, hot donuts – a freshness that’s
measured in hours. In a world of processed, prepackaged food, nothing beats a
fresh, hot donut. The company’s marketing is grassroots local. Krispy Kreme has
no traditional media advertising budget. Rather, local ‘’community marketing
managers’’ enlist the aid of local groups and charities. For example, the
company helps charities raise money by selling them donuts at half price which
they can re-sell at full price. Local bake sales become a promotional tool for
Krispy Kreme.
Another
tactic is giving away free donuts to TV, newspapers, and radio stations before
entering a market. Krsipy Kreme scored a publicity coup in 1996 when it opened
its first store in New York City. The company delivered boxes of donuts to the
Today Show, garnering millions of dollars worth of national exposure for the
price of a few donuts. Even the day of the IPO relied on the buzz from free
Krispy Kreme donuts on the floor of the stock exchange.
Each
local outlet is an emissary for the brand, and Krispy Kreme’s signature
Doughnut Theater defines the brand image. A multisensory experience, Doughnut
Theater occurs several times a day at each shop. When the store flicks on its
‘’Hot Doughnuts Now’’ sign, the performance is about to begin. A large plate
glass wall lets customers watch the whole process.
The
Doughnut Theater experience works on three levels. On a direct level, the
performance entertains customers and draws them into the donut-making
experience. On an indirect level, it shows that the products are freshly made
in a clean environment. On a subliminal level, as CEO Livengood describes it,
‘’The movement of the products on the conveyor through our proofbox has this
relaxing, almost mesmerizing effect. The only other thing like it is standing
on the oceanfront and watching the tide come in. it has that same consistent,
relaxing motion that is really positive to people.’’ People flock to the store
to see wave after wave of donuts emerge hot and deliciously fresh. They happily
stand in long lines around newly opened outlets to get the aroma of the donuts
being made, the sight of the vanilla glaze waterfall, and the warmth of the hot
donut that ‘’just melts in your mouth and tastes so good,’’ Livengood says.
Doughnut
Theater is a bit of show business that draws customers into the baking
experience and makes them feel like they are a part of the process. Another
aspect of show business is product placements on hit shows like. The Sopranos
and Will & Grace and movies like Bruce Almighty. Finally, international
expansion is fueled by celebrities like Dick Clark, Hank Aaron, and Jimmy
Buffet, who clamored for Krispy Kreme franchises of their own. Krispy Kreme
doesn’t just grant franchise rights to anyone.
Krispy
Kreme makes 65 percent of its revenue selling donuts directly to the public
through its 106 company-owned stores. Another 31 percent comes from selling
flour mix, donut-making machines, and donut supplies to its 186 franchised
stores. The final 4 percent of revenue comes from franchisee licenses and fees.
Krispy
Kreme is now expanding and selling donuts through convenience stores. Will this
hurt the brand? Stan Parker, Krispy Kreme’s senior vice president of marketing,
says it won’t because the company continues to emphasize freshness. It
replenishes the packaged donuts daily from the local Krispy kreme store and
removes any unsold packages. The donuts’ presence in convenience stores will
help remind people of the taste of a fresh, hot Krispy Kreme donut, and that
brings them back into a Krispy Kreme shop.
The
success of Krispy Kreme has been a wake-up call for competitor Dunkin’ Donuts,
which had become complacent. The one-two punch of Krispy Kreme in donuts and
Starbucks in coffee led Dunkin’ Donuts to revamp its menu and its stores,
neither of which had changed in years. Rather than innovate, Dunkin’ Donuts
looked at what customers were already eating elsewhere. It brought in basic
products like bagels, low-fat muffins, and breakfast sandwiches. Dunkin Donuts
still dwarfs Krispy Kreme in size, with 2003 revenues of $3 billion, but it
must work to find new ways of creating excitement that builds customer pride,
because one thing is sure: Krispy Kreme refuses to be dull.
Discussion
Questions
1. What have been the key success factors
for Krispy Kreme?
2. Where is Krispy Kreme vulnerable? What
should it watch out for?
3. What
recommendations would you make to senior marketing executives going forward?
What should they be sure to do with its marketing?
NO. 5
MARKETING SPOTLIGHT- SOUTHWEST AIRLINES
Southwest Airlines entered the airline
industry in 1971 with little money, but lots of personality. Marketing itself
as the LUV airline, the company featured a bright red heart as its first logo.
In the 1970s, flight attendants in red-orange hot pants served Love Bites
(peanuts) and Love Potions (drinks). With little money for advertising in the
early days, Southwest relied on its outrageous antics to generate word-of-mouth
advertising.
Later
ads showcased Southwest’s low fares, frequent flights, on-time arrivals, and
top safety record. Throughout all the advertising, the spirit of fun pervades.
For example, one TV spot showed a small bag of peanuts with the words, ‘’This
is what our meals look like a Southwest Airlines…. It’s also what our fares
look like.’’ Southwest used ads with humor to poke fun at itself and to convey
its personality.
Southwest’s
fun spirit attracts customers and employees alike. Although Southwest doesn’t
take itself seriously, it does take its work seriously. Southwest’s strategy is
to be the low-cost carrier. Indeed, the strategy takes on epic proportions. An
internal slogan, ‘’It’s not just a job, it’s a crusade,’’ embodies the company
mission to open up the skies, to give ordinary people a chance to fly by
keeping costs so low that it competes with ground transportation like cars and
buses. Employees see themselves as protecting ‘’small businesses and senior
citizens who count on us for low fares.’’
Southwest
can offer low fares because it streamlines operations. For example, it only
flies one type of aircraft, Boeing 737s, which have all been fitted with
identical flight instruments. This saves time and money by simplifying training
pilots, flight attendants, and mechanics only need to know procedures for a
single model of Boeing 737. Management can substitute aircraft, reschedule
flight crews, or transfer mechanics quickly. The tactic also saves money
through lower spare-parts inventories and better deals when acquiring new
planes. Southwest also bucks the traditional hub-and-spoke system and offers
only point-to-point service; it chooses to fly to smaller airports that have
lower gate fees and less congestion, which speeds aircraft turnaround.
Southwest’s 15- to 20- minute turnaround time (from flight landing to
departure) is half the industry average, giving it better asset utilization
(flying more flights and more passengers per plane per day.) The point is, if
the plane and crew aren’t in the air, they aren’t making money.
Southwest
grows by entering new markets that are overpriced and underserved by current
airlines. The company believes it can bring fares down by one-third to one-half
whenever it enters a new market, and it grows the market a every city it serves
by making flying affordable to people who previously could not afford to fly.
Even
though Southwest is a low-cost airline, it has pioneered many additional
services and programs like same-day freight service, senior discounts, Fun
Fares, and Fun Packs. Despite Southwest’s reputation for low fares and
no-frills service, the company wins the hearts of customers. It has been ranked
number one in terms of customer service, per the Department of Transportation’s
rankings, for 12 years in a row, yet the average price of a flight is $87.
Southwest has been ranked by Fortune magazine as America’s most admired airline
since 1997, as America’s third-most-admired corporation in 2004, and as one of
the top five best places to work in America. Southwest’s financial results also
shine: The Company has been profitable for 31 straight years. Following 911, it
has been the only airline to report profits every quarter, and one of the few
airlines that has had no layoffs amid a travel slump created by slow economy
and the threat of terrorism.
Although
the hot pants are long gone, the LUVing spirit remains at the heart of
Southwest. The company’s stock symbol on the NYSE is LUV and red hearts can be
found everywhere across the company. These symbols embody the Southwest spirit
of employees ‘’caring about themselves, each other and Southwest’s customers’’,
states an employee booklet. ‘’Our fares can be matched; our airplanes and
routes can be copied. But we pride ourselves on our customer service,’’ said
Sherry Phelps, director of corporate employment. That’s why Southwest looks for
and hires people who generate enthusiasm. In fact, having a sense of humor is a
selection criteria it uses for hiring. As one employee explained, ‘’we can
train you to do any job, but we can’t give you the right spirit.’’
Southwest
is so confident of its culture and its employees that in 2004 it allowed itself
to be the subject of a reality TV show called Airline. It’s not worried about
competitors copying the company. ‘’What we do is very simply, but it’s not
simplistic,’’ said president and COO Colleen Barrett. ‘’We really do everything
with passion.’’
Discussion
Questions
1. What are the key success factors for
Southwest Airlines?
2. Where
is Southwest Airlines vulnerable? What should it watch out for?
3. What
recommendations would you make to senior marketing executives moving forward?
What should they be sure to do with its marketing?
NO. 6
MARKETING SPOTLIGHT- WAL-MART
Wal-Mart Stores, Inc., is the largest
retailer in the world, with sales of $259 billion in 2003, 1.5 million
employees, and 4,300 facilities. Each week, over 100 million customers visit a
Wal-Mart store. Sam Walton founded the company in 1962 with a simple goal:
Offer low prices to everyone. His notions of hard work and thrift continue to
permeate Wal-Mart today, although he died in 1992. Employees see their jobs as
a mission ‘’to lower the world’s cost of living.’’ Wall –Mart’s philosophy is
to enable people of average means to buy more of the same products that were
previously available only to rich folks. The company works hard at being
efficient and using its buying clout to extract lower prices from suppliers,
and then passes those savings on to customers.
Wal-Mart
succeeds in the competitive American retail market for several reasons. First,
its low prices, vast selection, and superior service keep the customers coming
in the door. But one of Wal-Mart’s biggest strengths is not even inside the
store. Its unrivaled logistics ensure that it can keep prices low while keeping
the right goods on the shelves. As the biggest retailer in the United States.
Wal-Mart’s logistics demands are considerable. The company must coordinate with
more than 85,000 suppliers, manage billions in inventory in its warehouses, and
bring that inventory to its retail shelves.
To
streamline these tasks, Wal-Mart set up a ‘’hub-and-spoke’’ network of 103
massive distribution centers (DC). Strategically spaced across the country, no
store location is more than a day’s drive away from a DC. Wal-Mart is known as
‘’the king of store logistics’’ for its ability to effectively manage such a
vast network.
Sam
Walton was something of a visionary when it came to logistics. He had the foresight
to realize, as early as the 1960s, that his goals for company growth required
advanced information systems to manage high volumes of merchandise. The key to
low-cost retail is knowing what goods would sell and in what quantities –
ensuring that store shelves never have too much or too little of any item. In
1966, Walton hired the top graduate of an IBM school and assigned him the task
of computerizing Wal-Mart’s operations. As a result of this forward-looking
move, Wal-Mart grew to be the icon of just-in-time inventory control and
sophisticated logistics. By 1998, Wal-Mart’s computer database was second only
to the Pentagon’s in terms of capacity.
Wal-Mart’s
logistics success is astounding considering its size: Over 100 million items
per day must get to the right store at the right time. To accomplish this goal,
Wal-Mart developed several IT systems that work together. It all begins at the
cash register or point-of-sale (POS) terminal. Every time an item is scanned,
the information is relayed to headquarters via satellite data links. Using
up-to-the-minute sales information, Wal-Mart’s Inventory Management System
calculates the rate of sales, factors in seasonal and promotional elements, and
automatically places replenishment orders to distribution centers and vendor
partners.
Wal-Mart
uses its information systems for more than just logistics. Suppliers can use
its voluminous POS database to analyze customers’ regional buying habits. For
example, Proctor & Gamble learned that liquid Tide sells better in the
North and Northeast while Tide powder sells better in the South and Southwest.
P & G uses information such as this to tailor its product availability to
specific local regions. This means that it delivers different Tide products to
different Wal-Mart locations based on local customer preferences. Wal-Mart’s
may look the same on the outside, but the company uses its information systems
and logistics to customize the offerings inside each store to suit regional
demand.
Wal-Mart
continues to grow. Despite already having 3,200 stores in the united States,
Wal-Mart plans to add another 220-230 Super centers, 50-55 discount stores,
35-40 Sam’s Clubs, and 25-30 Neighborhood Markets in the United States alone,
and an additional 130 units internationally. If Wal-Mart maintains the average
growth rate of the past 10 years, it could become the world’s first
trillion-dollar company.
Discussion
Questions
1. What have been the key success factors
for Wal-Mart?
2. Where is Wal-Mart vulnerable? What
should it watch out for?
3. What recommendations would you make to
senior marketing executives going
forward? What should the company be sure to do with its marketing?
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