Feeding Sea Kitten To Your House Cat

The NPR reports PETA’s new campaign, “rebranding fish as Sea Kittens“.

PETA thought that by renaming fish sea kittens, compassionate people who would never dream of hurting a dog or a cat might extend that sympathy to fish, or sea kittens

School Market Research

Results from our work with one of our clients

A Bottle of Ice Cold Coca Cola

I was reading a book on Coca Cola, “The Real Thing” by Constance Hays. I realized I have not had a Coca Cola, the real thing not the diet type, for as far as I can remember. As I read about the mystique surrounding the flavor, the stories Coke built behind the flavor, and the public outcry about the new Coke I felt something missing from the story without the experience of enjoying Coca Cola.

The story about the Coke bottle, the reason for creating something is recognizable as Coke even from its fragments shows the essence of branding and  capturing customer’s imagination.

I now have an uncontrollable desire to drink ice cold coke, not from fountain, not from a can, not from a plastic bottle but from the original thick bottomed glass bottle.  From the stories Hays tells us I feel there is something magical about this brand. Yes, it is sugar water and I would not want to drink one everyday, but I now have to taste it.

I have not had a Pepsi either for the same duration. I do want to try that as well and take the Pepsi challenge.

Why can’t telecom providers be a house of brands?

Procter and Gamble is a house of brands. Each brand is run like a business with its own P&L. There is no attempt to bring together all the brands nor is there a need to do so. When they acquired Gillette, a company by itself, it came as another brand under P&G. There were no integration hassles or costs. What can’t a telecom company be like P&G?

When AT&T acquired Cingular Wireless, the network was completely integrated and the Cingular brand was quickly subsumed under at&t brand. When Sprint bought Nextel, they rebranded themselves as Sprint Nextel but attempted to integrate the two networks. Sprint Nextel expended considerable capital trying to integrate the two networks and is reported to be in the market to sell off Nextel, an admission that the merger did not work.

Why did Sprint try to integrate Nextel’s networks and operations when the two technologies and customer segments were completely different? Why did they not attempt to let Nextel brand stand by itself and preserve the network as is? When a telecom company acquires another why can’t they keep the separate companies as is without integrating the customers, the operations, the systems, the networks and the brand?

After all the positioning of the two companies and their customer segments have little overlap.
Sprint could have been the P&G of telecom, with multiple wireless offerings (like the Pantene and Head & Shoulders).

The answer lies in the valuation of the target at the time of acquisition and the strategic rationale. If we look at Sprint’s reasoning in 2004,

  1. Combination of Sprint Nextel will create America’s premier communications company — a leading wireless carrier augmented by a global IP network that will offer consumer business and government customers compelling new broadband wireless and integrated communications services.
  2. Expected to deliver operating cost and capital investment synergies with an estimated net present value of more than $12 billion.

The answer lies in the synergy calculation, lot of things ride on the value of the combined operation. The value of Nextel depended on the $12 billion NPV of synergy which requires the complete integration of operations. Without the integration, there is no cost savings or spillover effect and the merger itself may be questionable.

So acquiring Nextel, just to run it as its own operation would have required Sprint to value the deal by at least $12 billion below the $71 billion price tag. Nextel shareholders would not have agreed to that price.

When Sprint Nextel wrote down $20 billion in goodwill it showed that the deal was overvalued. The rumors about Nextel spin-off show that synergy is easier said than realized.

Next up, Deutsch Telecom is reported to be looking to by Sprint Nextel. Once again there are multiple technologies, DT’s T-Mobile USA uses GSM and its evolution while Sprint used CDMA and Nextel uses iDen. DT having seen the Sprint Nextel integration efforts will not attempt the same. If a deal has to happen then DT has to see Sprint Nextel by itself as a positive NPV acquisition and run Sprint Nextel brand in parallel with T-Mobile brand.

That will be an interesting experiment to watch and learn.

I am only taking the crumbs – Niche Strategy

How do you enter a market with large incumbents without being crushed by them? Market entry lesson from a hair stylist, Arrojo: (via WSJ)

WSJ: You sell and use P&G’s Wella brand in your studio and represent the brand at beauty shows. Why isn’t P&G upset about you launching your own competing brand of Arrojo product?

MR. ARROJO: I talked candidly with the P&G folks. They want market share of the beauty industry in the States, and Nick wants to keep building his business and brand. I’m a little dot compared to their business. If I sold to other salons tomorrow, [he sells primarily online, in his salon and through QVC] I’d get them upset perhaps. I’m not planning to go down that road at present. Sure I might make some more money selling shampoo, but I wouldn’t get to travel and the exposure and to be visible on stage. Don’t bite off the hand that fed you; don’t think you can rule the world.

In the rest of the interview Arrojo talks about Branding, customer loyalty and retaining customers even when their regular stylist quits. Arrojo charges $500 for a haircut, but when I read this interview I think he can pass for one of those management gurus who charge $50,000 for a speech.

Unbundling the Brand

In the CPG market the brands are unbundled from the corporation. You buy Pantene brand shampoo not P&G. There is some brand extension like using the Pantene brand for all hair care products. But most customers do not know or care about who makes Pantene. This level of unbundling was part of the strategy and not something forced on P&G or Lipton by the environment.

In the case of media companies NBC, ABC and HBO they are the brands and the product categories or the individual products to do not have a brand. The companies actively pursued bundling as the strategy like the Must See TV campaigns. The main brand is meant to evoke the same positive feelings across all the shows, from sitcoms to dramas. A successful show is used to position the main brand and leveraged to bundle with it other weaker and newer offerings. The shows are also very loosely tied to the media company because of the re-run market.

In the TiVo and Hulu world, an unbundling of the shows from the parent media company is unfolding and the companies can do nothing about it. Jason Fry of WSJ sees this as diminishing the role of a network to a bit pipe, like a cable company:

I don’t know what network hosts most of the programs saved on my TiVo. (A rare exception is “John Adams, but that says more about what a strong brand HBO has become.) I don’t have the faintest idea what time “John Adams” or most any other show airs. Why should I? Unless you’re talking about a baseball game, all I need to know about a show is that it’s on my TiVo screen when I want to watch it. As a result, I neither know nor care any more about the supposed qualities of NBC or the WB or any other network than I do about the supposed qualities of whatever company makes the coaxial cable Time Warner uses to bring a TV signal to my house. Content itself is becoming the brand — and networks used to hitting me with commercials while I sat captive on the couch have to work much, much harder to get my attention.

The media companies can either let this happen and stay on the sideline or be a driver in developing the individual brands. This requires them to recognize the changes in business models from traditional Ads, DVD sales and re-runs. In addition to branding the content they need to unbundle them so each brand competes on its own.

This is not totally new to the networks. They already have branded morning shows like Good Morning America and news programs like 20/20. But the problem with entertainment shows is who owns the content and who should spend for brand development. The bigger question in an unbundled media world in which the content becomes the brand is, what value does a media company add?