The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customer’s value in the Disney brand

The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customer’s value in the Disney brand

The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customer’s value in the Disney brand

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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.

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.

The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customer’s value in the Disney brand

The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customer’s value in the Disney brand

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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The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customer’s value in the Disney brand..

The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customer’s value in the Disney brand..

The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customer’s value in the Disney brand..

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Marketing Management

CASE: 1    Absolute Vodka: creating advertising history

The Absolute advertising campaign was often regarded by advertising experts as one of the most brilliant, innovative, successful and long-running campaigns ever. The several prestigious awards that the campaign has won since its first ad was launched stand as testimony to this fact (See Table) for details of some of the awards).

Table:    A brief list of awards won by Absolut advertisements

Year	Award(s)
1989	The Kelly Grand Prize for the ad 'Absolutla'
1990	Grand EFFIE Award for Absolut advertising campaign
1991	The Kelly Grand Prize for the ad 'Absolut Glasnost'
1992	Award of Excellence' for animation on the Internet by the communication Arts magazine
1993	Absolut Advertising Campaign introduced in the 'Hall of Fame' by the American Marketing Association
2000	Four Cresta Awards for international Advertising for the ads 'Absolut Accessory', 'Absolut Auckland', 'Absolut Voyeur' and 'Absolut Space' from Creative Standards International and the International Advertising Association
2002	Insight Award for Best online advertising
2003	EFFIE Gold Award for sustained success of the Absolut advertising campaign

‘Absolut adventure’: the making of a legend

In early 1979, Absolut vodka launched in the USA at the liquor trade convention held at Fairmont Hotel in New Orleans. Initially, the company concentrated its marketing efforts in and around New York, Los Angeles, San Francisco and Boston because these were the places where new trends were created, media attention was intense and the bar culture prevailed. V&S had sold around 25,000 cases of Absolut vodka when advertising agency TBWA took over its ad account in late 1979. Two at TBWA, Graham Turner and Geoff Hayes, were assigned the job of creating the ads for the ‘still not so popular Swedish vodka’. The duo began by getting familiar with the product’s  taste and conducting extensive research on different liquor ads of the previous 10 years. They found that most ads were pretentious and pompous, featuring people dressed in expensive attire and living lavish lifestyles with a small liquor bottle tucked in some corner. Moreover, none of the ads was targeted at people below 40.

After extensive research and effort, the admen came up with three different advertisement samples. The first featured a Russian soldier looking through a pair of binoculars with each lens reflecting the Absolut vodka bottle, accompanied by a slogan that read ‘Here’s something that Russians would really love to put behind bars.’ This ad was aimed at challenging the Russian vodka brand Stolichnaya. The second ad featured some of the favourite pastimes of Swedes, with a picture of the bottle; the slogan read ‘There’s nothing the Swedes enjoy more when it’s cold.’ The third ad featured only the Absolut vodka bottle with a halo over it, with a two-word slogan: ‘Absolut Perfection’ (a modified version of one of the ads created at NW Ayer). This ad was designed with the intention of humorously portraying as pure and natural.

The admen had come up with a dozen designs, which depicted the bottle in different ways accompanied by a two-word slogan. It was one of the simplest themes anyone associated with Absolute had created up until then. The ads featured the Absolut bottle, a description of the product and the two-word slogan with one word describing the theme and the other the brand name itself. In early 1980, V&S launched the first advertisement, ‘Absolut Perfection’, along these lines. Since then, the bottle has been retained as the centerpiece for every advertisement of Absolute vodka accompanied by a two-word slogan.

All Absolute ads were published in popular American newspapers and magazines like Newsweek, Time, New York, Los Angeles, New Yorker, New York Times, Interview and GQ. Carillon decided to continue using the same ad concept with a variety of themes. Experts felt that by using the same concept to depict various events, people or things, Absolut ads always gave people something to think about. Soon the ads had become a topic of interest among liquor consumers.

People began drinking Absolute not only because it was a new premium brand available on the market, but also to experience the image that its advertisement had created—that of simplicity and purity. Analysts credited the popularity of Absolute to its advertisements as they involved viewers in a creative process. Within three years, v Absolute vodka was being exported to 16 different markets worldwide as well as its home country, Sweden. In 1984, V&S exported six million litres of Absolute vodka. In the USA, sales were doubling every year (see the table).

Table    V&S: Income statements, 1997-2002 (SEK million)

Particulars/year	1997	1998	1999	2000	2001	2002
Net Sales	3223.6	3,446.9	4028.6	5711.5	6725.1	9092.8
Other operating revenues	(10.3)	32.3	43.2	104.3	175.3	149.6
Operating Expenses	(2449.8)	(2626.8)	(2924.9)	(4177.4)	(4741.2)	(6686.6)
Depreciation, amortization and write-downs	(105.7)	(130.7)	(85.6)	(235.0)	(394.9)	(519.2)
Non-recurring items	(17.0)	287.3	(143.3)	46.1	-	-
Operating Profit	640.8	1009.0	918.0	1449.5	1764.3	2036.6
Financial items, net	31.5	50.6	46.0	(16.2)	(292.6)	(167.6)
Profit before taxes	672.3	1059.6	964.0	1433.3	1471.7	1869.0
Taxes	(175.0)	(197.3)	(273.5)	(437.2)	(462.0)	(598.5)
Minority share	(0.4)	(0.8)	(0.3)	(61.9)	(0.5)	(5.7)
Net profit for the period	496.9	861.5	690.2	934.2	1009.2	1264.8

In 1985, Michel Roux, President of Carillon and in charge of US distribution, came up with the idea of getting Absolut bottle painted and using it as an ad. Initially, there was opposition to this idea as it was a departure from the central idea of having the bottle photographed. However, Roux went ahead and commissioned celebrated artist Andy Warhol to paint the bottle, marking the beginning of Absolut’s association with art. The painting attracted a lot of accolades and the celebrity association gave the brand a great deal of mileage.

Thereafter, several artists painted their own interpretations of the Absolut bottle. Analysts observed that painting an Absolut bottle had apparently become an issue of pride for many leading artists. Big names such as Keith Haring, Kenny Scharf, Stephen Sprouse, Edward Ruscha, Arman and Britto made their own interpretation of the Absolut bottle (see Table given below for details). The above exercise was not only in the form of painting, but also in sculpture, glasswork, photography, folk art, wood work, computer/digital art and many other media. As Absolut’s association with the world of art gave the brand a lot of media attention and publicity, the company began regularly publishing these art ads along with the regular ads. Analysts noted that what began as an advertising campaign to promote an unknown Swedish vodka brand had become a part of American culture.  

Table        Absolut’s association with art and fashion

Year		Name	Description
ABSOLUT ART
1990	Absolut Glasnost			This art collection featured paintings by 26 Russian artists including Alexander Kosolapov, Evgeny Mitta and Leonid Lamm.
1993	Absolut Latino			This collection featured artwork contributed by 16 artists from South and Central America. This collection showcased the artist’s interpretations of the Absolut bottle in traditional and contemporary Latino themes depicting the relationship between reality and illusion. Some of the artist who contributed to this collection were: Alberto Icaza, Vik Muniz and Monica Castillo.
1997	Absolut Expressions			This collection featured art work contributed by 14 African and America artists. The artists (including Anita Philyaw, Maliaka Favorite and Frank Bowling among others) presented their interpretations of the bottle in traditional African art, early American folk art and in abstract imagery through mediums like canvas, quilts, and sculptures.
1998-99	Absolut Originals			This included paintings contributed by 16 European artists including Damien Hirst, Maurizio Cattelan and Francesco Clemente.
2000	Absolut Ego (Paris) Absolut Exhibition (New York) Absolut Art			Collections featured paintings contributed by famous artists like Damien Hirst and Nam June Paik.
Absolut FASHION
1995	Absolut Newton			This campaign featured designer wear created by famous fashion designers John Galliano, Helmut Lang, Anna Molinari and Martine Sitbon. It was first featured as an eight-page insert in Vogue, a popular fashion magazine.
1997	Absolut Versace			This eight-page insert in Vogue featured designer wear created by Gianni Versace, the famous Italian designer. Gianni’s creations were modeled by famous models like Naomi Campbell, Kate Moss, Mark Findley and Marcus Schenkenberg, and photographed by famous fashion photographer Herb Ritts.
1999	Absolut Tom Ford/ Absolut Gucci			This campaign included designer collections created by Tom Ford (of Gucci) a famous American fashion designer. The campaign was shot at a discotheque in Paris and was included as an eight-page insert in Vogue.
2000	Absolut Gaultier			This campaign featured designs by Jean Paul Gaultier, inspired by Absolut and other Swedish legends. It was included as an eight-page insert in Vogue and other popular European fashion magazines.

Roux now began toying with the idea of making ads that were ‘stylish, hip and audacious’. With this began Absolut’s association with the world of fashion. In 1988, Roux commissioned the famous American fashion designer David Cameron to design an advertisement for the bottle. Instead of featuring the Absolute bottle, Cameron designed a dress (with the Absolute Vodka name and the text printed on it) that was modelled by a famous model of the day, Rachel Williams (she ‘represented’ the bottle). This print ad, named ‘Absolute Cameron’, was launched in February 1988 and gained tremendous publicity. On the day of its publication, 5000 women reportedly called TBWA wanting to buy the dress shown in the ad.

This led to the next phase of Absolute’s advertising strategy, wherein the bottle began to be represented in new, innovative ways. By the mid-1990s TBWA ran several ads linked to fashion, like Absolute Fashion (eight pages of coverage in Vogue), Absolute Style and Absolute Menswear, in popular fashion magazines like Vogue, Elle and GQ (see Table for details).

As the themes for the advertisements became more complicated, the cost of producing them went up substantially. For instance, some of the Absolute Christmas ads cost more than US$1 million to produce. Thus, over the years, V&S continually increased its advertising budget. TBWA spent approximately US$25 million on Absolute ads in 1990, an increase from US$750,000 in 1981. In 1997, Absolute also became associated with The Ice Hotel (an entire hotel made from ice) in Jukkasjarvi, Sweden. An ‘Absolute Ice Bar’ was added to the Ice Hotel, where different kinds of drinks made from various Absolute brands were served in glasses also made of ice.

By the end of the 1990s, Absolute ads began targeting not only the sophisticated, upper-class consumers but also sports fans, professionals, artists, intellectuals and even those who could not comprehend subjects like art and literature. Clearly, V&S was now aiming at a broader set of customers as the ads were featured in almost all kinds of magazines: sports, entertainment, art and fashion, business, and so on. By now the company had launched more than 1000 Absolut ads all over the world.

‘Absolut continuity’: the brand marches strongly ahead

By 2ooo, Absolute advertisements were recognized the world over for their stylish, humorous and innovative attributes. As people began collecting the ads, analyst observed that the brand had become an advertising phenomenon. More importantly, sales of Absolute were increasing over the years. Apart from the USA, Absolute was now exported to Russia and many Asian and Latin America countries. The brand generated most of its sales in the USA, Canada, Sweden, Greece, Spain, Germany and Mexico. In 2002, total sales stood at 7.5 million cases, making it the world’s largest premium spirit brands.

In 2002, Absolute was presented with the international advertising industry’s most prestigious awards for its online advertising on its website, www. absolut.com, and the Absolutes fashion campaign. Advertising experts regarded the website as ‘a premier online brand and lifestyle destination’.

Commenting on the creativity that Absolute ads stood for, Richard W. Lewis, author of Absolutes book: The Absolute Vodka Advertising Story, says, ‘Readers enjoy a relationship with this advertising that they have with few other advertising campaigns, especially in the print media. They are challenged, entertained, tickled, inspired and maybe even befuddled as they try to figure out what is happening inside an Absolute ad.’

In January 2003, the company launched Absolut Vanilia. Unlike the previous variants, Absolut Vanilia was launched in a white bottle. The launch of the new flavour was not only supported by print advertisements, but also with radio and outdoor ad campaigns. These ads were launched in a phased manner, beginning with teaser ads in different magazines in April 2003 followed by interactive online ads. The online ads were featured on websites like Maxim.com, EntertainmentWeekly.com, style.com, and Wired.com. These ads were created specifically to suit the product tag-line ‘a different kind of vanilla’.

In October 2003, in line with its penchant for creativity/innovation, Absolut ventured into the world of music with the launch of the Absolut Three Tracks project. This campaign featured music created by different artists according to their interpretations of the Absolut bottle. Analysts felt that the Absolut Three Tracks project, had opened am entirely new chapter in brand communications, as it enabled users to ‘listen to the Absolut brand.’ Commenting on this, Michael Persson, Director, Market Communications, ASC, said, ‘For years, our consumers have seen interpretations of the brand by some of the world’s most prominent artists and designers. With this new project they will also be able to listen to the brand: this is the voice of Absolut’.

Advertising experts felt that even 25 years after its launch, the Absolut advertising campaign was still going strong, innovatively, without changing the central theme. Even while creating music for Absolut Three Tracks, the bottle was used as the central theme. Aril Brikha, one of the artists who created a music track for Absolut Three Track said, ‘I had scanned the shape into a computer program that turns a picture into a tone—a futuristic way of including a picture without letting the listener know. I find it quite similar to previous Absolut projects where the bottle has been hidden in a picture.’ Industry observers as well as customers agreed on one issue: whatever the mode of expression—be it art, photography, technology, fashion or music—Absolut had until now stood for ‘brilliance in advertising’. Said an analyst, ‘We are surprised each year by the creativity and innovation of the brand. It is successful because it is contemporary. There is no end to the campaign.’

Questions:

1.                   Discuss the role advertising plays in increasing brand awareness and brand loyalty among consumers, especially for products that have very subtle differentiable attributes. In the above context, examine the impact Absolute advertisements had on its target audience. Do you think the advertisements fulfilled their purpose?

2.                  ‘The Absolute advertising campaign is successful because it is contemporary.’ How did TBWA maintain the ‘freshness’ of the Absolute campaign? Discuss with respect to the brand’s association with different media: art, fashion, technology and music.

3.                  Even though Absolute ads have been depicted in different media, the central theme of the campaign has remained unchanged (the bottle and the two-word slogan) over the years. In light of the above statement, do you think that the campaign will manage to hold sway or lose in impact in the near future? Give reasons to support your arguments.

CASE: 2       Tesco: the customer relationship management champion

Every three months, millions of people in the UK receive a magazine from the country’s number one retailing company, Tesco. Nothing exceptional about the concept—almost all leading retailing companies across the world send out mailers/magazines to their customers. these initiatives promote the store’s products, introduce promotional schemes and contain discount coupons. However, what sets Tesco apart from such run-of-the-mill initiatives is the fact that it has mass-customized these magazines.

Every magazine has a unique combination of articles, advertisements related to Tesco’s offerings and third-party advertisements. Tesco ensured that all its customers received magazines that contained material suited to their lifestyles. The company had worked out a mechanism for determining the advertisements and promotional coupons that would go in each of the over 150,000 variants of the magazine. This has been made possible by its would-renowned customer relationship management (CRM) strategy framework.

According to Tesco sources, the company’s CRM initiative was not limited to the loyalty card scheme; it was more of a company-wide philosophy. Industry observers felt that Tesco’s CRM initiatives enabled it to develop highly focused marketing strategies. Thanks to its CRM initiatives, the company became UK’s number one retailer in 1995, having struggled at number two behind rival Sainsbury’s for decades. In 2003, the company’s market share was 26.7 per cent, while Sainsbury’s market share was just 16.8 per cent.

CRM the Tesco way

Tesco’s efforts towards offering better services to its customers and meeting their needs can be traced back to the days when it positioned itself as a company that offered good-quality products at extremely competitive prices. Even its decision to offer premium-end merchandise and services in the 1970s was prompted by growing customer demand for the same (see Table 2.A for the company’s ‘core purpose’ and ‘values’, which highlight the importance placed on customer service).

The biggest customer service initiative (and the first focused CRM drive) came in the form of the loyalty card scheme that was launched in 1995. This initiative was partly inspired by the growing popularity of such schemes in other parts of the world and partly by Tesco’s belief that it would be able to serve its customers in a much better (and more profitable) manner

Table 2 A  Tesco: core purpose and values

CORE PURPOSE

Creating value for customers, to earn their lifetime loyalty

Values

1.   No one tries harder for customers:

understand customer better than anyone, be energetic, be innovative and be first for  ustomers, use our strengths to deliver unbeatable value to our customers  look after our people so they can look after our customers

 2.   Treat people how we like to be treated:

all retailers, there’s one team—the Tesco Team  trust and respect each other  strive to do our very best give support to each other and praise more than criticize ask more than tell and share knowledge so that it can be used enjoy work, celebrate success and learn from experience   by using such as scheme. Tesco knew that, at any of its outlets, the top 100 customers were worth as much as the bottom 4000 (in terms of sales). While the top 5 per cent of customers accounted for 20 per cent of sales, the bottom 25 per cent accounted for only 2 per cent. The company realized that by giving extra attention to the top customers (measured by the frequency of purchases and the amount spent) it stood to gain a great deal.

To ensure the programme’s success, it was essential that all Tesco employees understood the rationale for it as well as its importance. So, the company distributed over 140,000 educational videos about the programme to its staff at various stores. These videos explained why the initiative was being undertaken, what the company expected to gain from it, and why it was important for employees to participate whole-heartedly in it.

Table 2B:  Tesco: classifying customers

EXPENDITURE	SHOPPING FREQUENCY
	Daily	Twice weekly	Weekly	Stop start	Now and then	Hardly ever
High Spend	PREMIUM		STANDARD		POTENTIAL
Medium Spend	STANDARD		POTENTIAL		UNCOMMITTED
Low Spend	POTENTIAL		UNCOMMITTED
	FREQUENT		INFREQUENT		RARE

Impressed with the programme’s results over six months, the company had introduced the scheme in all its stores by February 1995. The stores captured every one of the over 8 million transactions made per week at Tesco stores in a database. All the transactions were linked to individual customer profiles and generated over 50 gigabytes of data every week. Dunnhumby used state-of-the-art data-mining techniques to manage and analyse the database. Initially, it took over a few weeks to analyse the vast amount  of data generated. To overcome this problem, Dunnhumby put in place new software that reduced this time to just a few days. As a result, it became possible to come up with useful and timely insights into customer behaviour  in a much faster way.

Table 2C:  How Tesco used the information generated by its Clubcards

Pricing	Discounts were offered on goods that were bought by highly price-conscious customers. While the company kept prices low on often-bought goods/staples, for less familiar lines it adopted a premium pricing policy.
Merchandising	The product portfolio was devised based on customer profiles and purchasing behaviour  records. Depending on the loyalty shown by customers towards a particular product, the substitute available for the same, and the seasonality, the product ranges were modified.
Promotion	Promotions were aimed at giving special (and more) rewards to loyal customers. Few promotions were targeted at the other customers.
Customer service	Extra attention was given to stocking those products that were bought by loyal customers.
Media effectiveness	The effectiveness of media campaigns could be evaluated easily by noticing changes in the buying patterns of those customers whom the said campaign was targeted at.
Customer acquisition	The launch of new ventures (such as TPF and Tesco.com) went smoothly since Tesco targeted the ‘right’ kinds of customers.
Market research	While conducting marketing research, Tesco was able to tap those customers that fitted accurately into the overall research plan.
Customer communication	It was possible to mass customize communication campaigns based on individual customer preferences and characteristics. Tesco began holding ‘customer evenings’ for interacting with customers, gathering more information, and gaining new customers through referrals

The analysis of the data collected enabled Tesco to accurately pinpoint the time when purchases were made, the amount the customer spent, and the kinds of products purchased. Based on the amount spent and the frequency of shopping, customers were classified into four broad categories: Premium, Standard, Potential and Uncommitted (see Table 2B). Further, profiles were created for all the customers on the basis of the types of products they purchased. Customers were categorized along dimensions such as Value, Convenience , Frozen, Healthy Eating, Fresh and Kids.

Tesco also identified over 5000 need segments based on the purchasing habits and behaviour patterns of its customers. Each of these segments could be targeted specifically with tailor-made campaigns and advertisements. The company also identified eight ‘primary life stage’ need segments based on the profiles of its customers. These segments included ‘single adults’, ‘pensioners’ and ‘urban professionals’, among others.

Using the information regarding customer classification, Tesco’s marketing department devised customized strategies for each category, Pricing, promotion and product-related decisions were taken after considering the preferences of customers. Also, customers received communication s that were tailored to their buying patterns. The data collected through its Clubcard loyalty card scheme allowed Tesco to modify its strategies on various fronts such as pricing, inventory management, shopping analysis, customer acquisition, new product launches, store management, online customer behaviour and media effectiveness (see Table 2C).

Tesco began giving many special privileges, such as valet parking and personal attention from the store manager, to its high-value customers. special cards were created for students and mothers, discounts were offered on select merchandise, and the financial service venture was included in the card scheme. The data generated were used innovatively (e.g. special attention given to expectant mothers in the form of personal shopping assistants, priority parking and various other facilities). The company also tied up with airline companies and began offering Frequent Flyer Miles to customers in return for the points on their Clubcards.

Reaping the benefits

Commenting on the way the data generated were used, sources at Dunnhumby said that the data allowed Tesco to target individual customers (the rifle-shot approach) instead of targeting them as a group (the carpet-bombing approach). Since the customers received coupons that matched their buying patterns, over 20 per cent of Tesco’s coupons were redeemed—as against the industry average of 0.5 per cent. The number of loyal customers has increased manifold since the loyalty card scheme was launched (see Figure 2A).

The quarterly magazine Tesco sent to its customers was customized based on the segments identified. Customers falling into different categories received magazines that were compiled specifically for them—the articles covered issues that interested them, and the advertisements and discount coupons were about those products/services that they were mostly likely to purchase. This customization attracted third-party advertisers, since it assured them that their products/services would be noticed by those very customers they planned to target. Naturally, Tesco recovered a large part of

Figure 2A:      Tesco increasing number of loyal customers

its investment in this exercise through revenues generated by outside advertisements.

The data collected through the cards helped the company enter the financial services business as well. The company carried out targeted research on the demographic data and zeroed in on those customers who were the most likely to opt for financial services. Due to the captive customer base and the cross-selling opportunity, the cost of acquiring customers for its financial services was 50 per cent less than it would be for a bank or financial services company.

Reportedly, the data generated by the Clubcard initiative played a major role in the way the online grocery retailing business was run. The data helped the company identify the areas in which customers were positively inclined towards online shopping. Accordingly, the areas in which online shopping was to be introduced were decided upon. Since the prospective customers were already favourably disposed, Tesco.com took off to a good start and soon emerged as one of the few profitable dotcom ventures worldwide. By 2003, the website was accessible to 95 per cent of the UK population and generated business of £ 15 million per week.

By sharing the data generated with manufacturers, Tesco was able to offer better services to its customers. It gave purchasing pattern information to manufacturers, but withheld the personal information provided by customers (such as names and addresses). The manufacturers used this information to modify their own product mixes and promotional strategies. In return for this information, they gave Tesco customers subsidies and incentives in the form of discount coupons.

The Clubcards also helped Tesco compete with other retailers. When Tesco found out that around 25 per cent of its customers who belonged to the high-income bracket were defecting to rival Marks & Spencer, it developed a totally new product range, ‘Tesco Finest’, to lure them back. This range was then promoted to affluent customers through personalized promotions. As planned, the defection of customers from this segment slowed down considerably.

In February 2003, Tesco launched a new initiative targeted at its female customers. Named ‘Me Time’, the new loyalty scheme offered ladies free sessions at leading health spas, luxury gyms and beauty saloons, and discounts  on designer clothes, perfumes, and cosmetics. This scheme was rather innovative since it allowed Tesco customers to redeem the points accumulated through their Clubcards at a large number of third-party outlets. Company official Crawford Davidson remarked, ‘Up until now, our customers have used Tesco Clubcard vouchers primarily to buy more shopping for the home. However, from now on, “Me Time” will give customers the options of spending the rewards on themselves.’

As a result of the above strategies, Tesco was able to increase returns even as it reduced promotions. Dunnhumby prepared a profit and loss statement for the activities of the marketing department to help assess the performance of the Clubcards initiative. Dunnhumby claimed that Tesco saved around £300 million every year through reduction in expenditure on promotions. The money saved thus was ploughed back into the business to offer more discounts to customers.

By the end  of the 1990s, over 10 million households in the UK owned around 14 million Tesco Clubcards. This explained why as high as 80 per cent of the company’s in-store transactions and 85 per cent of its revenues were accounted for by the cards. Thanks largely to this initiative, Tesco’s turnover went up by 52 per cent between 1995 and 2000, while floor space during the same period increased by only 15 per cent.

An invincible company? Not exactly…

Tesco’s customer base and the frequency with which each customer visited its stores had increased significantly over the years. However, according to reports, the average purchase per visit had not gone up as much as Tesco would have liked. Analysts said that this was not a very positive sign. They also said that, while it was true that Tesco was the market leader by a wide margin, it was also true Asda and Morrisons were growing rapidly.

Tesco’s growth was based largely on its loyalty card scheme. But in recent years, the very concept of loyalty cards has been criticized on various grounds. Some analysts claimed that the popularity of loyalty cards would decline in the future as all retailing companies would begin offering more or less similar schemes. Critics also commented that the name ‘loyalty card’ as a misnomer since customers were primarily interested in getting the best price for the goods and services they wanted to buy.

Research conducted by Black Sun, a company specializing in loyalty solutions, revealed that though over 50 per cent of UK’s adult population used loyalty cards, over 80 per cent of them said that they were bothered only about making cheaper purchases. Given the fact that many companies in the UK, such as HSBC, Egg and Barclaycard had withdrawn their loyalty cards, industry observers were skeptical of Tesco’s ability to continue reaping the benefits of its Clubcards scheme. Black Sun’s Director (Business Development) David Christopherson, said, ‘Most loyalty companies have a direct marketing background, which is results-driven, and focuses on the short term. This has led to a “points for prizes” loyalty model, which does not necessarily build the long-term foundations for a beneficial relationship with customers.’

Commenting on the philosophy behind Tesco’s CRM efforts, Edwina Dunn said, ‘Companies should be loyal to their customers—not the other way round.’ Taking into consideration the company’s strong performance since these efforts were undertaken, there would perhaps not be many who  would disagree with Edwina.

The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customer’s value in the Disney brand..

The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customer’s value in the Disney brand..

Questions:

1.                   Analyse Tesco’s Clubcards scheme in depth and comment on the various customer segmentation models the company developed after studying the data gathered.

2.                  How did Tesco use the information collected to modify its marketing strategies? What sort of benefits was the company able to derive as a result of such modifications?

3.                  What measures did Tesco adopt to support the CRM initiatives on the operational and strategic front? Is it enough for a company to implement loyalty card schemes (and CRM tools in general) in isolation? Why?

CASE: III   Pret a Manger: passionate about food

Introduction

Pret a Manger (French for ‘ready to eat’) is a chain of coffee shops that sells a range of upmarket, healthy sandwiches and desserts as well as a variety o coffees to an increasingly discerning set of lunchtime customers. Started in London, England, in 1986 by two university graduates, Pret a Manger has more than 120 stores across the UK. In 2002 it sold 25 million sandwiches and 14 million cups of coffee, and had a turnover of over £100 million. Buckingham Palace reportedly orders more than £1000 worth of sandwiches a week and British Prime Minister Tony Blair has had Pret sandwiches delivered  to number 10 Downing Street for working lunches. The company also has ambitious plans to expand further—it already has stores in New York, Hong Kong  and Tokyo, and has set its sights on further international growth.

Background and company history

In 1986, Pret a Manger was founded with one shop, in central London, and a £17,000 loan, by two property law graduates, Julian Metcalf and Sinclair Beecham, who had been students together at the University of Westminster in the early 1980s. At that time the choice of lunchtime eating in London and other British cities was more limited than it is today. Traditionally, some ate in restaurants while many favoured that well-known British institution, the pub, as a choice for lunchtime eating and drinking. There was, however, a growing awareness among many people of the benefits of healthy eating and a healthy lifestyle, and lunchtime habits were changing. There was a general trend towards taking shorter lunch brakes and, among office workers, to take lunch at their desks. For those who wanted food to take away, the choice in fast food was dominated by the large chains such as McDonald’s, Burger King and Kentucky Fried Chicken (now KFC) while other types of carry-out food, such as pizzas, were also available.

Sandwiches also played an important part in British lunchtime eating. Named after its eighteenth-century inventor, the Earl of Sandwich, the humble sandwich had long been a popular British lunch choice, especially for those with little time to spare. Prior to Pret’s arrival on the scene, sandwiches were sold mainly either pre-packed in supermarkets and high-street variety chain stores such as Marks and Spencer and Boots, or in the many small sandwich bars that were to be found in the business districts of large cities like London, Sandwich bars were usually small, independently owned or family run shops that made sandwiches to order for customers who waited in a queue, often out on to the pavement outside.

Dissatisfied with the quality of both the food and service from traditional sandwich bars, Metcalf and Beecham decided that Pret a Manger should offer something different. They wanted Pret’s food to be high quality and healthy, and preservative and additive free. In the beginning, they shopped for the food themselves at local markets and returned to the store where they made the sandwiches each morning. Pret’s offering was based around premium-quality sandwiches and other health-orientated lunches including salads, sushi and a range of desserts, priced higher than at traditional sandwich bars, and sold pre-packed in attractive and convenient packaging ready to go. There was also a choice of different coffees, as well as some healthy alternatives. Service aimed to be fast and friendly go give customers a minimum of queuing time.

Pret a Manger: ‘Passionate about What We do’

Pret a Manger strongly emphasizes the quality of its products. Its promotional material and website claims that it is:

‘passionate about food, rejecting the use of obscure chemicals, additives and preservatives common in so much of the prepared and fast food on the market today…it there’s a secret to our success so far we like to think its determination to focus continually on quality—not just our food, but in every aspect of what we do’.

Great importance is also placed on freshness. Unlike those sold in high-street shops or supermarkets, Pret’s sandwiches are all hand-made by staff in each shop starting at 6.30 every morning, rather than being prepared and delivered by a supplier or from a central location. Metcalf and Beecham believe this gives their sandwiches a freshness and distinctiveness. All food that hasn’t been sold in the shops by the end of the day is given away free to local charities.

Careful sourcing of supplies for quality has also always been important. Genetically modified ingredients are banned and the tuna Pret buys, for example, must be ‘dolphin friendly’. There is also a drive for constant product improvement and innovation—the company claims that its chocolate brownie dessert has been improved 33 times over the last few years—and, on average, a new product is tried out in the stores every four days. Aware that some of its customers are increasingly health conscious, Pret’s website menu carefully lists not only what is available, but also the ingredients and nutritional values in terms of energy, protein, fats and dietary fibre for each item.

The level and quality of service from staff in the shop is a critical factor. The stores are self-service, with customers helping themselves to sandwiches and other products form the supermarket-style refrigerated cabinets. Staff at the counter at the back of the store then serve customers coffee and take payment. Service is friendly, smiling and efficient, in contrast to many retail and restaurant outlets in Britain where, historically, service quality has not always been high. Prêt puts an emphasis on human resource management issues such as effective recruitment and training so as to have frontline staff who can show the necessary enthusiasm and also remain fast and courteous under the pressure of a busy lunchtime sales period. These staff are usually young and enthusiastic, some are students, many are international. The pay they receive is above the fast-food industry average and staff turnover is 98 per cent a year, which sounds high—however, this is against an industry norm of around 150 per cent. In 2001, Pret had 55,000 applications for 1500 advertised vacancies.

Recently, Fortune magazine voted Pret one of the top 10 companies to work for in Europe. According to its own promotional recruitment material, Pret is an attractive and fun place to work: ‘We don’t work nights, we wear jeans, we party!’ Service quality is checked regularly by the use of mystery shoppers: if a shop receives a good report, then the staff there receive a 75p an hour bonus in the week of the visit. Head office managers also visit stores on a regular basis and every three or four months every one of these managers works as a ‘buddy’, where they spend a day making sandwiches and working on the floor in one of the shops to help them keep in touch with what is going on. Store employees work in teams and are briefed daily, often on the basis of customer responses that come in from in-store reply cards, telephone calls and the company website. The website, which, lists the names and phone numbers of its senior executives, actively invites customers to comment or complain about their experience with Pret, and encourages them to contact the company. Great importance is placed on this customer feed-back, both positive and negative, which is discussed at weekly management meetings.

The design of the stores is also distinctive. Prominently featuring the company logo, they are fitted out in a high-tech with metal cladding and interiors in Pret’s own corporate dark red colour. Each store plays music, helping to create a stylish and lively atmosphere. Although the shops mainly sell carry out food and coffee in the morning and through the lunchtime period, many also have tables and seating where customers can drink coffee and eat inside the store or, weather permitting, on the pavement outside.

Growth and competition

Three years after the first Pret shop was launched another was opened and, after that, the chain began to grow so that, by 1998, there were 65 throughout London. In the late 1990s stores were also opened in other British cities such as Bristol, Cambridge and Manchester. Although growth in the UK has been rapid—between 2000 and 2002 the company opened 40 new outlets and there are over 120 throughout Britain—Pret’s policy has always been to own and manage all its own stores and not to franchise to other operators. In 2002, £1 million was spent in launching an Internet service that enables customers to order sandwiches online.

Plans for international growth have been more cautious. In 2000 the company made its first move overseas when it opened a shop near Wall Street in New York. However, there were problems on several fronts in moving into the USA. Metcalf is quoted saying, ‘As a private company its very difficult to set up abroad. We didn’t know where to begin in New York—we ended up having all the equipment for the shop made here and shipped over.’ There were also staffing and service quality difficulties—Pret reportedly found it difficult to recruit people in New York who had the required friendliness to serve in the stores and had to import British staff. Despite these problems, several other shops in New York have followed and, in 2001, Pret opened its first outlet in Hong Kong.

During the 1990s, coffee shops boomed as the British developed a growing taste for drinking coffee in pavement cafes, and competition for Pret grew as other chains entered the fray. Rivals like Coffee Republic, Caffè Nero, Costa Coffee (now owned by leisure group Whitbread) Aroma (owned by McDonald’s) and American worldwide operator Starbucks all came into the market, as well as a number of smaller independents. All these chains offer a wide range of coffees but with varying product offerings in terms of food, pricing and style (Starbucks, for example, offers comfortable arm-chairs around tables, which encourage people to linger or work in a laptop in the store). In a London shopping street it is not uncommon to see three or four rival outlets next door to or within a few yards of each other. However, it quickly became clear that the sector was overcrowded and, apart from Starbucks, some of the other chains reportedly struggled to make a profit. In 2002 Coffee Republic was taken over by Caffè Nero, which also eventually acquired the ailing Aroma chain from McDonald’s. Costa Coffee was the largest chain overall with over 300 shops throughout Britain, while Starbucks was expanding aggressively and aimed to have an eventual 4000 stores worldwide.

The future

As work and lifestyles get busier, the demand for convenience and fast foods continues to grow. In 2000, some estimates put the total value of the fast-food market in Britain, excluding sandwiches, at over £6 billion and growing about £200-£300 million a year. While the growth in sales of some types of fast food, like burgers, was showing signs of slowing down, sandwiches continued to increase in popularity so that by 2002 sales wee an estimated £3 billion. Customers are also getting more health conscious and choosy about what they eat and, increasingly, want nutritional information about food from labelling and packaging.

In January 2001, in a surprise move, Pret’s two founders sold a 33 per cent stake in the company to fast-food giant McDonald’s for an estimated £25 million. They claim that McDonald’s will not have any influence over what Pret does or the products it sells, but that the investment by McDonald’s will help their plan for future development. According to Metcalf:

‘We’ll still be in charge—we’ll have the majority of shares. Pret will continue as it does… The deal wasn’t about money—we could have sold the shares for much more to other buyers but they wouldn’t have provided the support we need.’

After a long run of success, Pret has ambitious plans for the future. It hopes to open at least 20 new stores a year in the UK. In late 2002 it opened its first store in Tokyo, Japan, in partnership with McDonald’s. The menu there is described as being 75 per cent ‘classic Pret’ with the remaining 25 per cent designed more to please local tastes. In other international markets, the plan is to move cautiously—Pret’s first move will be to open more stores in New York and Hong Kong, where it has already been successful.

Questions

1.                   How has Pret a Manger positioned its brand?

2.                  Explain how the different elements of the services marketing mix support and contribute to the positioning of Pret a Manger.

CASE: IV    The Sudkurier

The Sudkurier is a regional daily newspaper in south-western Germany. On average 310,000 people in the area read the newspaper regularly. The great majority of those readers subscribe to its home delivery service, which puts the paper on their doorsteps early in the morning. On the market for the last 35 years, the Sudkurier contains editorial sections on politics, the economy, sports, local news, entertainment and features, as well as advertising. The newspaper is financially independent and its staff is free of any political affiliation. Management at the Sudkurier would like to bring the paper into line with the current needs of its readers. For this purpose, the management team is considering the use of market research.

Management would like to have information about the following.

1.                       What newspaper or other media are the Sudkurier’s main competitors?

2.                      Do most readers read the Sudkurier for the local news, sports and classified ads, and should these sections therefore be expanded at the expense of the sections on politics and the economy?

3.                      Should the Sudkurier’s layout be modernized?

4.                      Do mostly lower levels of society read the Sudkurier?

5.                      Into what political category do readers and non-readers the Sudkurier?

6.                      Which suppliers of products and services consider the Sudkurier especially appropriate for their advertising?

7.                      What advertising or information dot the readers think is missing from the Sudkurier?

You are an employee of the Sudkurier who has been instructed to obtain the requested information and to prepare your findings for the decision-makers. You are in the fortunate position of receiving regular reports about the people’s media use from the Arbeitsgemeinschaft Media-Analyse e.V. Relevant excerpts from the most recent survey are shown here as Tables 3 and Table 4

Table 3   Media analysis of readership structure

Range in Circulation Area (1)		Readers per edition of SUDKURIER			National average in %
		RANGE		Total in %
		in %	Absolute
Total		53.5	310,000	100.0	100.0
Gender	Men	55.5	150,000	49.0	47.2
	Women	51.6	160,000	51.0	52.8
Age Groups	14-19 years	51.8	20,000	8.0	7.2
	20-29  years	41.0	50,000	15.0	19.1
	30-39  years	52.1	50,000	16.0	16.4
	40-49  years	61.8	50,000	16.0	15.2
	50-59  years	61.1	60,000	19.0	16.5
	60-69  years	53.6	40,000	13.0	13.5
	70  years and older	57.4	40,000	13.0	12.2
Educational Level	Secondary school without apprenticeship	49.4	60,000	18.0	17.6
	Secondary school with apprenticeship	50.8	100,000	31.0	39.6
	Continuing education without Abitur	60.8	110,000	36.0	27.0
	Abitur, university preparation, university/college	49.7	50,000	15.0	15.8
Occupation	Trainee, pupil, student	44.7	40,000	11.0	11.0
	Full-time employee	54.6	160,000	50.0	51.7
	Retire, pensioner	57.3	70,000	23.0	21.8
	Unemployed	52.4	50,000	16.0	15.5
Occupation of main wage earner	Self-employed, mid- to large business/Freelancer	63.8	20,000	5.0	3.1
	Self-employed, small business,/Farmer	59.9	30,000	10.0	7.1
	Managers and civil servants	58.6	30,000	9.0	8.7
	Other employees and civil servants	49.3	120,000	40.0	42.9
	Skilled staff	57.6	100,000	32.0	32.5
	Unskilled staff	38.7	10,000	4.0	5.6
Net Household Income/month	4500 and more	62.7	100,000	31.0	23.9
	3500-4500	52.7	60,000	19.0	20.8
	2500-3500	54.9	80,000	26.0	25.9
	to 2500	44.1	70,000	23.0	29.3
Number of wage earners	1 earner	45.4	100,000	33.0	40.4
	2  earner	56.5	130,000	41.0	42.6
	3  earner	62.7	80,000	25.0	16.9
Household Size	1 Person	41.8	50,000	14.0	17.9
	2 Persons	55.5	90,000	29.0	31.8
	3 Persons	59.5	70,000	22.0	22.4
	4 Persons and more	54.8	110,000	35.0	27.9
Children in Household	Children less than 2 years of age	52.7	10,000	4.0	3.8
	2 to less than 4 years	38.4	10,000	4.0	5.4
	4 to less than 6 years	45.8	10,000	5.0	5.2
	6 to less than 10 years	43.8	20,000	8.0	8.5
	10 to less than 14 years	54.1	30,000	10.0	9.2
	14 to less than 18 years	57.7	50,000	16.0	13.7
	No children under 14	54.9	250,000	79.0	77.4
	No children under 18	53.6	210,000	67.0	68.1
Driving Licence	Yes	55.2	250,000	80.0	73.0
	No	47.3	60,000	20.0	27.0
Private Automobile		55.5	270,000	86.0	80.0
Garden	own garden	60.4	240,000	76.0	57.0
	without garden	39.8	70,000	23.0	43.0
Housing	own house	62.1	180,000	58.0	46.0
	own apartment	45.9	10,000	3.0	3.0
	rent house or apartment	44.7	120,000	38.0	49.0
Electrical Appliances	Freezer/Deep freeze	59.6	200,000	62.0	51.0
Last Holiday Journey	Within the last 12 months	55.1	190,000	62.0	n.a.
	1-2 years ago	51.0	40 ,000	14.0	n.a.
	More than two years ago	48.6	50 ,000	16.0	n.a.
	Never	55.4	30 ,000	9.0	n.a.
Last Holiday Destination	Germany	57.4	70 ,000	23.0	n.a.
	Austria, Switzerland, South Tyrol	48.7	60 ,000	20.0	n.a.
	Elsewhere in Europe	53.4	130,000	42.0	n.a.
	Country outside Europe	51.4	20 ,000	5.0	n.a.
	Did not travel	56.4	30 ,000	9.0	n.a.
1) Entire circulation area 310 ,000 readers per edition Example: 53.5% of people older than 14 years in the circulation of the Sudkurier daily 55.5% of all men older than 14 years and 51.6% of women older than 14 read the  Sudkurier daily; that is 150 ,000 men and 160 ,000 women.

Table 4  Reader behaviour

What purchasing information is used? Media purchasing information for medium and long-term acquisition (11 product areas; Basis: total population) Daily newspaper                    61%                        Posters on the street               9 % Leaflets                                  36 % Television                              24% Radio                                     13% Magazines                             27 % Free newspapers                    49%	Credibility of advertising in the media Advertising in… is generally believable and reliable (Basis: broadest user group in each case) Regional newspaper                  49% Television                                  30% Public radio                                20% Privately-owned radio                14 % Magazines                                  15% Free newspaper                          23%
Advertising in… is most informative (Basis: broadest reading group) Regional newspapers (subscription)    62 %             Television                                            47% Public Radio                                        29% Privately-owned radio                         26% Magazines                                           27 % Free newspapers                                 36 %	Time spent reading daily newspaper (Basis: broadest user group) less than 15 minutes                       7 % 15-24 minutes                              21 % 25-34 minutes                              28 % 35-65 minutes                               34 % more than 65 minutes                   10 %
I often consult/depend on advertising in… (Basis: broadest user group in each case) Regional newspapers (subscription)         27 %             Television                                                 11% Public Radio                                             89% Privately-owned radio                                6% Magazines                                                   7 % Free newspapers                                       18 %

Source: Regional Press Study, Gfk-Medienforschung Contest-Census 

Questions:

1.                    Explain how you will methodically go about compiling the requested information covered in the seven questions for management. Include in your explanation an estimate of the expense involved in obtaining the information.

2.                   Develop a 10-question questionnaire for the purpose of making a survey

CASE: V    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.’’

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?

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