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al berrios & co. IMKTG REPORT 02.04.03: Sprint, Hospitality, Cable
THIS WEEK'S CONTENTS ARE:
[1] JUST SAY IT: *
[2] BRANDSTRATEGY: Speculations + Recommendations to
Sprint
[3] CONSUMERFOCUS: An Analysis of the Hospitality Industry
[4] MEDIA: al berrios & co. Premium Cable Viewers Study
Part II: HBO vs. SHO
[5] MANAGEMENT: Corporate Policy Dictates, But Do Consumers
Listen?
[6] Opinion REPORT: Launching our version of the editorial
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>> "That's one small step for a man, one giant leap for mankind." - Neil A. Armstrong
Good morning execs,
This section, normally reserved for my commentary, will be dedicated to the brave astronauts of the shuttle Columbia. Let's never loose our passion for asking "Why?"
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[2] BRANDSTRATEGY:
Speculations + Recommendations to Sprint
You have to ask yourself why the Chairman/CEO AND President/COO both quit the company last week. Could it be because the business of telecom is no longer a viable business in its current state? Could it be that even though wireless will be the next phase of telecommunications, Sprint PCS potentially stands to lose 25% of it's coverage with it's affiliates filing for bankruptcy (notably Ubiquitel)? al berrios & co. recommends that Sprint focus its resources on maintaining and resuscitating its PCS business, and pare down on its domestic and long distance operations.
BOTTOM LINE: This strategy would be in line with how consumer behavior has altered with wireless. By beefing up it's wireless network with stronger management, innovative service (not content) offerings, and buying up it's affiliates, Sprint PCS may succeed where all others are failing - reducing it's churn rate (currently the greatest in the industry, with a deficit last year), improving it's pricing strategy, forcing the rest of the industry to stop this silly price war, and improving it's network for even greater clarity and toughness, what supposedly they've been promoting since day one. And now, with the possibility of acquiring new licenses from NextWave, (who won a Supreme Court hearing re-granting their very valuable spectrum licenses back from the FCC), they could theoretically become bigger than Verizon Wireless or Cingular. The business of wireless and the business of landlines are two different beasts and the latter is increasingly less needed by consumers.
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[3] CONSUMERFOCUS:
An Analysis of the Hospitality Industry
Just how many hotel rooms can this country sustain? Interesting question not being asked by enough people. Let's take a look at Las Vegas that, with over 200,000 plus hotel rooms, finds the need to continue building more, largely due to Steve Wynn's newest effort, La Reve. At $2 billion, this place is going to be extravagant, and cannot afford to discount its offerings. And yet, too much supply means just that, massive discounting. Thanks to the internet, the hospitality industry has become a commodity business, training consumers to accept only the lowest prices.
BOTTOM LINE: The internet, my friends, has taken away the power of your marketing, by making your entire industry transparent. (But don't worry, air travel, telecom, and entertainment are all facing the same problem.) The only solution you think will work is banding together, under the brand Travelweb.com, to try and reclaim control of your pricing (following the example of Orbitz, the airlines' joint internet effort). But it's too late. Agents like Expedia and Priceline have permanently altered the product. Would you pay more a bank loan, knowing how low interest rates are? So why would travelers pay more for hotel rooms, when they know there's an oversupply selling for less? Sure, you claim that you have the lowest rates directly on your sites, however, if that were true, online ticketing on Travelocity and Hotwire, that provide more choice and comparison tools, wouldn't garner so much more traffic than your own sites. And that is the true answer to all your problems. Stop building, stop marketing, and start leveraging your agents and sites to offer consumers better choices, not just lower prices. Growth will come from the value you offer consumers, not expansion. And it all goes back to what consumers value the most. In al berrios & co.'s analysis of consumer perception to value, price is simply a sub-component of value, and not a strong enough foundation on which to build your business.
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[4] MEDIA: al berrios &
co. Premium Viewers Cable Study Part II: HBO vs. SHO
From December 2001 through October 2002, al berrios & co. was engaged to generate awareness for premium cable original programming. Every interaction with consumers was recorded, reviewed, analyzed, coded, and tabulated to generate the most objective data possible. In order to elicit response from consumers, al berrios & co. implemented its methodology. al berrios & co. recruited & trained over 30 associates to execute this engagement. They spent 1,940 man-hours (average) interacting with 219,757 consumers within 4,348 community chat rooms and message boards in 374 different web sites during the length of this engagement. Their interactions were unscripted, unplanned, and focused on generating awareness for our client. Consumers were selected randomly, between the hours of 10am through 8pm, Monday through Saturday. There were no population boundaries. Once the engagement was complete, al berrios & co. extracted data from thousands of transcripts of discussions with consumers. Although the data is skewed to one of the current two premium cable content providers, and wasn't generated with analysis as the goal, this data provides an excellent overview of what premium cable content viewers think and why, in their own words. View the powerpoint presentation. (If asked to choose to "open file in current location" or "save to disk", select open file in current location. Upload takes about 7 seconds).
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[5] MANAGEMENT: Corporate
Policy Dictates, But Do Consumers Listen?
There's been lots of discussion lately about obesity in America. Kraft has become an industry leader with its new corporate communications policies on advertising and healthy brand extensions. But is the food industry really exploiting overweight Americans, trying to addict everyone, even kids, to unhealthy foods? Outreach efforts primarily start with minority consumers, perceived to be the most vulnerable to a corporate conspiracy to fatten us up. However, foreign cultures in America don't simply alter their habits overnight, eating unhealthily upon encountering our fast food delicacies. Meaning, minorities in America probably become fat through their own volition. Although portions of meals have grown at restaurants (mainly as competitive strategy), leading U.S. homemakers to serve more at home as well, there's no evidence that consumers aren't aware of the risks involved in their dietary intake, or how to control it (otherwise, placing nutritional fact labels on packaging would be a great waste of time and money for food processors). McD's has recently been facing litigation from various parties about the fattiness of their foods, with claims that they falsely advertise that eating daily can be a healthy part of a well-balanced diet. However, judges continue to dismiss such cases because they are not convinced the general public doesn't have enough information about the health effects of eating too much McDonalds food.
BOTTOM LINE: Do consumers want their diets & exercise requirements dictated to them by corporate communications policies or do they want brands to reach out to them in a manner that genuinely reflect their lifestyles? The center of attention in this debate is kids, with the CDC promoting more active lifestyles. But if kids were lazy, we wouldn't have a growing extreme sports lifestyle (skateboarding, aggressive inline skating, etc.). Have you ever been to an arcade lately? A game called Dance Dance Revolution by Konami is making kids all over the country (well, at least the East Coast) exert enough energy to make onlookers tired. The game is a mock-dance competition, where the player has to jump and step in a sequence of extensive, rapid steps on a 4x8' (approx.) platform. This game is so popular, there are tournaments. Are kids lazy? No. Are they overweight? It depends on what they enjoy doing. Do they need the CDC to tell them to work out? No. The CDC aren't peers or parents, so why should kids listen? Consumers understand that when it comes to food brands, they have choices: because the cost of eating out is typically greater than the cost of eating at home, the majority of consumers aren't likely to be as influenced by "unhealthy brands" as obesity evangelists believe; when they shop at the supermarket, it's for the same ingredients found in restaurant food. al berrios & co. recommends that corporate communications policy should emulate genuine consumer lifestyles, not appear fake by being conservative. You're in the business of selling food, even healthy brand extensions, not selling exercise routines. Your social responsibility should go as far as clearly and prominently providing easy-to-read and understand information about your products, preferably at check-out, giving consumers the power to choose, not subtly encouraging them to stop doing what they normally enjoy doing.
READ MORE:
UNC
study confirms that food portion sizes increased in U.S. over two decades
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[6] Opinion REPORT: Agency
Reviews
In Feb. 2002, I published the last of what was our opinions, ROUNDTABLE. Recently, current events have made me want to explore subjects that don't exactly fit into the mission of the IMKTG REPORTS. As a result, I will resume publishing our editorial in what will be a test of exclusively online Opinion REPORTS. Hopefully, you'll find intriguing ideas or instigating insults, but either way, you'll want to respond. Click here for your first, and hopefully, not last, Opinion REPORT, exclusively online from al berrios & co. IMKTG REPORT.
Agency review managers - In no other industry, does a professional service provider get selected by an outside reviewer. Not in banking, law, or accounting. So why in advertising? Little by little, the entire industry has become a bad place to work in. Think about this: what are the barriers to entry to start your own agency? None, since anyone can claim to be creative and having contacts isn't a skill. What about managing a campaign? These days, media sellers provide enough sophisticated assistance in that area to not need other help. What about an operational structure? With the slow relegation of agencies as vendors by advertisers (most recently P&G placing their relationships with their agencies under the purview of their Purchasing Dept.), there's really not much to it than selling something that's almost a commodity in the eyes of your client. And HR? A joke. There are no employee relations at agencies since hiring and firing works on client terms. A tie to a client is the only skill you need to work. A student of mine recently applied to a large ad agency. I counseled her on her preparation for the interview on the basics: understand the firm, the culture, its clients, and the job requirements. I even gave her a contact of mine at the agency to give her interview tips. And at the interview, you know what the HR interviewer said? "Let's talk about your skills with Excel?" My student was ultimately rejected because she spent too much time explaining to the HR person the fundamentals of media planning, rather than how to use Excel. I was appalled. Sadly, the state of agencies is doubly worse by the advent of a consultant who's primary contributions to the ad industry is to review an agency's capabilities and assess whether the creativity of an agency is compatible with a client's culture and needs, how much to pay that agency, and finally, audit that agency's performance. As if a client was incapable of managing these things on their own. Frankly, if you're ready to hire an agency, you should be ready to decide for yourself how much to pay them and what you want out of them. But, due to those low barriers of entry, and the advent of tens of thousands of agencies all competing for the same crumbs, (ad budgets are no where near budgets for other professional services such as accounting or management consulting), clients continue to see a need for agency review managers. You think I'm wrong about the problems with the industry? Just look at how easy it was for Publicis and Interpublic to dismantle and eliminate legendary, decades-old names from their agency networks. There was no respect for pioneers that forged the industry, nor rationale other than financial reorganization (most likely due to the commoditization of creative brought about largely by industry consolidation). I wonder who gets cheated more, the client or folks like Meily, my student, who's only fault was knowing more than the HR "professional"?
Disclaimer:
The recommendations, commentary and opinions published herein are based on public
information sometimes referenced via hyperlinks. Any similarities or likeness
to any ideas or commentary from any other sources not referenced is purely coincidental.
al berrios & co. cannot control any results occurring from advice obtained
from this publication nor any opinion(s) conveyed by any reader of this publication.
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