Selling commodities is difficult because people buy on emotion, or instinct if you will. Want and desire are powerful emotions that can stimulate the release of endorphins. It's why some people are shop-a-holics. It feels good to buy. But it's not that easy to get emotionally worked up about borax, chlorine, and salt. As an economic good, a commodity has no real differentiation, so small price differences in competing products can make huge differences in total sales.
Think about how you won't buy gasoline at one gas station because it's four cents cheaper around the corner. That's a commodity. Ever buy a piece of art that way? Of course not because art's value is in the eye of the beholder, is easily differentiated, and consequently will have wide price ranges. When art is sold, it's sold on the artist's reputation or the emotion the piece evokes for someone. Marketers work overtime to take commodity-like goods and then pretend they aren't commodities by creating and building an emotional appeal around the brand.
Take the above deodorant commercial. Did you hear mention of the product characteristics as a differentiator? Nowhere does this commercial say Old Spice is made with orange, lemon, clary sage, heliotrope, pimento berry and musk, even though those were the original Old Spice ingredients. The creative team instead focused on delivering an emotional image; something with a human connection that ties back to the product.
In this case in a humorous way, they are talking about sex-appeal and are really targeting women who are by far the larger purchasers of family groceries still. The subliminal note is if you get Old Spice for your husband, he will look like this ........ or maybe the message is he will ride a horse? I don't know but I am wearing Old Spice and on a horse right now. Look at me....
Anyway ..... can't you just envision someone describing wine with "subtle notes of clary sage layered with heliotrope and pimento berry?" You can find thousands of examples of that kind of marketing in wine. But if professional marketers push emotional connections and ignore or make secondary the product characteristics, why should we market luxury goods that way? I think the answer to that question is most wineries don't really think about brand building. They think about selling wine and are locked into a habit that predated varietal marketing; a time when consumers couldn't already tell you what chardonnay tasted like.Why do wine producers still insist on talking about who their family is, or how the warm sunny days, cool nights, special soils, with subtle notes of <fill in the blank with any obscure aroma> makes their wine special? Is that approach creating an emotional lift? Are you feeling any endorphins flowing? Is that building your brand? I've seen no research to suggest that kind of marketing even tips a purchase decision. More likely it's going to be color, appellation, scarcity (ego) or a feeling and/or familiarity for the brand.
How outdated is that kind of marketing? When I hear someone taking the "notes-and-hints-of..." approach, I have a distinct emotional response. I think of Thurston Howell III, jaw protruding wearing an ascot and a club emblazoned jacket. <......you have to say this in your best East Coast boarding school accent...> "Oh Lovey! Isn't it the cocktail hour? Will we be dressing tonight? ..... No? Oh .... then just bring me a glass of anything, as long as it has a note of ollieberry." (Editor's note: How many consumers can even describe the characteristics of ollieberries?) Does it make sense to sell anything these days if the potential emotional response is equivalent to the consumers view of Wall Street vs. Main Street? It's an emotional connection for sure, but is it the connection you want to set for your brand? Stuffiness does not sell wine, although exclusivity and mystery can help a brand if properly approached.
What do you think? Can wine be sold on the product characteristics? How are you creating an emotional connection to your production with the consumer? Please log in below and offer your insights into this topic and share your thoughts with the community.
Rob, I think both of us may be in for some criticism. You for this blog post, and me for for writing something similar in an upcoming book,
ReplyDelete"Four key truths about why people buy wine help to explain why brands are so important:
1. Wine drinkers never understand a premium wine as well as the winery company that sells it. Their relationship is not through months of hard and loving graft but rather fleeting and superficial.
2. Wine drinkers perceive premium wine brands in their own terms. Given they have imperfect knowledge of the wine they have to select something relevant to them perhaps by label design rather than taste.
3. Wine drinkers’ perception will focus on benefits that are often intangible — this can seem irrational to wine growers. This is because consumers focus on what a wine can do for them rather than what it actually is. The benefits to them are intangible but are still real in their minds.
4. Wine drinkers’ perceptions are not at the conscious level. When we ask people why they purchased a wine we may get a rational answer but not the whole story. Feelings about wine are not always easily articulated because they are complex and emotional."
Which I bastardized from what David Arnold says about brands.
The criticism of us will go something like this. Here I'll quote Mike Veseth from Wine Wars,
"Terroirists seek to preserve and protect an idea of wine that is more natural, more connected to the earth, more deeply embedded in culture … Do you oppose simple, maybe even stupid wines that exist only because marketing campaigns can sell them? Then you may oppose Yellow Tail or Two Buck Chuck…"
The issue I have with this sort of criticism, as a marketer, is that premium wine marketing requires substantiation. The terroir provides that substantiation, as does the taste profile of course. But the terrior is not enough to differentiate a wine from the rest of the wines in that appellation. And from other wines from other appellations with equally good terroir.
The differentiation comes from the brand story, which, when done well, can be called brand management. Of which this blog post so succinctly puts the case for.
I once worked with an Operations Manager who was ex-Ford. In his old car factory he made Fords and Mazdas that were exactly the same model except the badge, put on at the end of the assembly line. Yet Ford outsold Mazda by three times. This crusty old Ops man, mired in oil and lube, man saw the importance of branding. Will winemakers, dusted in that famous dirt, also see that their hard work needs a little more help to sell all their wine through at a premium price?
I'll watch the responses with interest.
What an interesting post Bruce. Thanks for the well-thought scribbles.
ReplyDeleteMy point in this post is to ask winery producers to move past simple descriptions of earth and families to sell wine. Authenticity is great. Family farming is great. Sustanability is great. Each of those can be part of an emotive story but aren't sufficient in and of themselves. They all need color and all marketing from labels to premesis have to be intertwined for success.
For what its worth, another thing I don't understand is wine regions talking about each other as if they were competitors. They should be co-laborers. Sure there is a level of competitiveness, but so much more to be gained by being confident in your regions wine and what it represents. How much brand value is built when a region or winery says "We aren't like Napa"... Is that the positive emotive quality by which to brand build? Avis for a long time was "we try harder" and that seemed to work. I think that approach has limited value in luxury goods because you cement your brand as second-rate.
ReplyDelete"advertisers, once they realised that Playboy was popular with the upwardly mobile, middle-class male, flocked to buy space and – for the first time ever – porn became integrated with consumer culture. In this way, Playboy didn't simply commodify sexuality; it also sexualised commodities."
ReplyDeleteWait .... did you just infer porn sells wine?
DeleteRob, your challenge to wineries to purposefully forge an emotional connection with consumers is as ambitious as it is vital.
ReplyDeleteYou are asking wineries to take a leap of faith, to step outside their comfort zone of Quality / Terroir / Heritage and to venture into the world of thoughts and feelings. You are asking them to limn the meaning of wine. To dwell on its many pleasures. And to use those thoughts and feelings to engage consumers in ways that are novel and inspiring.
In short, you are asking wineries to be creative. Don’t they have enough on their plate?
Fred - thanks for logging in. Now take the tounge out of the side of your mouth. :O)
DeleteAll good points; although there are plenty of successful commercial wines already selling on lifestyle. See Barefoot, Cupcake, Ménage A Trois, etc. These are sweeter (or off dry) wines that are easy for the average American to drink; plus they promise a laid back experience free of terroir / heritage / family mumbo jumbo. Barefoot sells ~15MM cases p/ year, Cupcake +3MM, Ménage +1MM. These wines have crossed over to become brands, which transcend appellation (Barefoot is sourced globally and consumers could care less).
ReplyDeletePremium and lux producers would be wise to examine the success of these brands; in particular their sweetness and drinkability. Unfortunately many premium wines are “winemaker” driven (i.e. driven by the winemakers own palate) and not consumer preference.
Rob, most of the industry has historically sold to itself - telling the story that they are comfortable with and what they think makes them different. These are mainly esoteric, fact based stories that inform the very few that actually care but do nothing to convey emotion. The fact that "my chardonnay comes from a family vineyard in Carneros planted to dijon clones on clay loam aged in new french oak and put through 100% malolactic fermentation" is interesting to those of us in the industry but absolutely of little consequence to most consumers. This is akin to the luxury watchmaker marketing by talking about the source of the metal inside the instrument or the automaker talking about the alloy in its disc brakes - a very small handful of consumers care and the vast majority don't - they are concerned with how the product makes them feel and how it performs period - wineries need to take a lesson from these other industries..
ReplyDeleteThank you so much for this post ; we feel less alone all the sudden. Focusing on delivering an emotional image is what we are trying to do here in France at our urban winery called Microcosmos. The good thing here is that advertisement for wine is banned, so small producers, like us, don't have to suffer from global brands and they can try to build their local brand by telling people a true story and making them feel their passion and dedication for wine. It works on the younger consumers because they really want to identify with us and our 'do it yourself' kind of business. Of course, wines have to be good. We have so many good wines in France that talking only about there characteristics for selling is not enough. We believe that consumer want authenticity and want to get to know the producer and that's become almost more important than the wine itself.
ReplyDeleteGood post! I like it because it reminds readers that the days of selling on 100-point scores will soon be gone. I'm in 100% agreement that "emotional" connections must be established because, in fact, that's the way wine has traditionally been sold.
ReplyDeleteThere is a powerful emotional tie to Bordeaux premier grand crus, for instance, because the Bordelais (with help from the British wine trade, and later, people like Parker) have long established a supremacy in wine consumers' minds to the point where consumers pay any amount for them, no matter how good or bad they may be. Wines without that pedigree need to be sold in similar fashion, in a different way: it might not entail arbitrary or mythological rankings, appealing to wine lovers' emotional (and often irrational) mania for drinking the "best," but it might hit on other qualities that plug directly into consumers' sense of self or value system.
Bottom line, it should go beyond the numbers game, forcing producers and marketers to finally get off their lazyboy chairs and actually work on concepts that differentiate their brand. I like it, because it will force consumers to think about wine in different ways, and it will force producers to work harder on crafting wines that are genuinely different from other products (as opposed to churning out wines that conform to pre-set parameters for 90+ scores). In the long run, everyone wins when this happens, because we'll be producing and drinking better wines, probably for better prices!
Quite the riveting read.
ReplyDeleteI agree with you to some extent, but I still believe that aroma and flavour profiles do play have some in influence in purchasing decisions.
Of course we will always try and describe what we are experiencing when we're trying wine. The problem is wine is art to some extent, and people experience art in different ways. Wine whether great or average is only as good as the person drinking it. If you like White Zin, by all means drink that. But there is a strong likelihood you wont understand or experience the same flavor profiles as that described on a back label. If the winery is depending on that replacing an emotional connection with the brand, that's a mistake in my view.
DeleteREGARDING THIS HIGHLIGHTED COMMENT:
ReplyDelete"Why do wine producers still insist on talking about who their family is, or how the warm sunny days, cool nights, special soils, with subtle notes of makes their wine special? Is that approach creating an emotional lift? . . . I'VE SEEN NO RESEARCH TO SUGGEST THAT KIND OF MARKETING EVEN TIPS A PURCHASE DECISION . [Capitalization added to highlight text. ~~ Bob] . . ."
ON MARKETING TO "MILLENNIALS" ("GENERATION Y") . . .
Excerpt from the PressDemocrat
(January 19, 2010):
"Marketing Wine to Gen Y No Easy Task"
[Link: http://www.pressdemocrat.com/article/20100119/BUSINESS/100119413/1036/BUSINESS?template=printart]
By Kevin McCallum
Staff Writer
Wine marketers hoping to get their message across to mobile, fickle 20-somethings have their work cut out for them.
While research shows these young people are embracing wine earlier and at a greater rate then either Baby Boomers or Gen Xers, these so-called Gen Yers or Millennials -- broadly speaking those born between the late 1970s and late 1990s -- are proving impervious to traditional marketing and advertising methods.
“You need to be authentic with this generation,” 29-year-old journalist Nadira Hira
[a reporter for Fortune magazine who focuses on Generation Y] told hundreds of wine executives gathered in Santa Rosa Tuesday . . . at the second annual Direct To Consumer Symposium held at the Hyatt Vineyard Creek Hotel. . . .
-- AND --
Excerpt from Bloomberg
(March 19, 2013, 2013):
"Authenticity Key to Wooing Younger Wine Consumers, Price Says"
[Link: http://www.bloomberg.com/news/print/2013-03-19/authenticity-key-to-wooing-younger-wine-consumers-price-says.html]
By Ryan Flinn
Staff Reporter
California’s $20 billion wine industry needs to work harder to entice young consumers who resist conventional marketing, said William Price, a co-founder of buyout firm TPG Capital and chairman of Vincraft Group.
Younger wine buyers, those born in the 1980s and 1990s and known as Generation Y, or millennials, are the fastest-growing segment of the U.S. wine market and are notoriously averse to obvious marketing tactics, said Price, who spoke on a wine- business panel at Bloomberg’s San Francisco bureau yesterday.
“The key thing to the younger drinkers is being authentic -- they have super-sensitive noses about what’s not authentic about your brand,” Price said. “Just trying to be sure what you stand for is true in every aspect in your business, all the way from where you contact people to how you make your wine, how you grow your grapes.”
. . .
-- AND --
Excerpt from the Los Angeles Times "Business" Section
(March 1, 2013):
"Wineries Pour Efforts Into Targeting Younger Drinkers”
[Link: http://articles.latimes.com/print/2013/mar/01/business/la-fi-young-wine-drinkers-20130228]
By Tiffany Hsu
Staff Writer
Increasingly, Chardonnays, Pinots and Cabernets are sharing shelf space at your local store with some unusual names -- such as Bodacious Brunette red and Buxum Blonde and Angel Food whites.
Veteran wine collectors might turn up their well-trained noses. But the wineries promoting such brands aren't targeting those buyers.
With many of their best customers nearing retirement age and starting to cut back, American vintners are going after younger consumers in a bid to keep their $33-billion industry growing.
That means more irreverent labels, easy drinking wines, singles events and laid-back tastings -- all aimed at demystifying the elite atmosphere surrounding wine while grooming the next generation of oenophiles.
"The battle is on" for younger drinkers, said Danny Brager, an alcoholic-beverages expert for global measurement company Nielsen. "Everyone's being aggressive."
The courtship was on display last fall in a former bank building in downtown Los Angeles where event organizing company Second Glass hosted one of its Wine Riot parties.
. . .
Hi Bob. Thanks for the thoughtful post. Do you have a conclusion to draw from these articles?
DeleteRob,
DeleteMarketing to "Millennials" is something I am still trying to wrap my brain around.
Self-evidently, the domestic wine industry fears Gen Yers failing to follow in the footsteps of the Gen Xers and Baby Boomers in becoming wine enthusiasts. Anecdotal evidence is that Millennials are more apt to adopt craft beers and spirits-based cocktails as their alcoholic beverages of choice. Wine critics -- and all mainstream paid media critics in general -- are seen as irrelevant. They take their advice from peers and cohorts.
(Aside: In a November 9, 2012 published interview with The Wall Street Journal, wine columnist Lettie Teague stated "He [Robert Parker] will probably end up donating a good portion of it [his 10,000 bottle wine cellar] o charity one day, as his daughter, Maia, is of drinking age but prefers tequila to wine." How ironic. Link: http://online.wsj.com/article/SB10001424052970203707604578095193009322644.html )
Perhaps this discussion lends itself to the SVB on Wine blog soliciting and publishing the opinions of the scions of Napa and Sonoma Valley winery families on how they see the situation -- and how they are preparing for the coming demographic shift in consumption?
See my next comment on "differentiating" commodities.
~~ Bob
SERENDIPITOUSLY FOUND ON THE WEB TODAY: RESEARCH ON MILLENNIAL WINE CONSUMERS . . .
DeleteExcerpts from WineBusiness.com
(May 12, 2010, 2012):
“The Market for Fine Wine in the United States”
[Fine Wine 2010 Conference in Ribera del Duero (Spain)]
[Link: http://www.winebusiness.com/news/?go=getArticle&dataid=73903]
By Graham Holter
Graham Holter
Associate Director – Publishing
Wine Intelligence market research firm (United Kingdom)
. . .
According to the data presented by [David] Francke [managing director of California’s Folio Fine Wine Partners], US wine drinking is compressed into a small segment of the population.
Sixteen per cent of core wine drinkers consume wine once a week or more frequently, which accounts for around 96 per cent of consumption. Thirty-five million adults drink virtually all of the wine sold in America, Francke said.
[Bob's aside: Corresponds with the "80-20 Rule of Marketing" -- 80% of your sales revenue comes from 20% of your customer base. For those more interested in this observed phenomenon, Google these keywords: "Pareto principle" and "Joseph Juran."]
. . .
Wine Intelligence has studied the US wine market in detail and categorised the wine drinking population -- which it measures at 47 million -- into profile groups. Two of these segments -- Millennial Treaters and Experienced Explorers -- were introduced to conference delegates by Erica Donoho, Wine Intelligence’s country manager for the USA.
Millennial Treaters, she said, represent just 6 per cent of wine drinkers, but they account for 13 per cent of market value.
“They’re a young group, under 30, and they’re exciting market players to look at,” she said. “Wine was introduced to them at a young age and it’s something they’re embracing wholeheartedly. When we ask them lots of questions, one theme that keeps coming up is there’s a pressure -- especially among the men in this group -- to know more about wine. They’re receptive to information; they want to be marketed to with some instruction.
“They’re really interested in sharing knowledge with friends and family, and it’s an amazing way to target this group. They want to share their experience and their knowledge.
“The social etiquette of wine choosing is becoming increasingly important.”
Typically, such consumers will use the varietal as a major buying cue, but two thirds of them are also influenced by country or region of origin.
[BOB’S ASIDE: THE ARTICLE GOES ON TO DISCUSS EXPERIENCED EXPLORERS, WHICH AS A DEMOGRAPHIC GROUP ACCOUNTS FOR 17% OF THE WINE DRINKING POPULATION AND 33% OF THE MARKET VALUE.]
SOME STATISTICS ON FEMALE DRINKERS . . . COURTESY OF A NEW BOOK COMING OUT:
DeleteExcerpts from Wall Street Journal “Review” Section
(June 22-23, 2013, Page C1ff)
“Why She Drinks"
[Adapted from "Her Best-Kept Secret: Why Women Drink -- And How They Can Regain Control," to be published July 2 by Simon & Schuster.]
[Link: http://online.wsj.com/article/SB10001424127887323893504578555270434071876.html]
By Gabrielle Glaser
[Gabrielle Glaser was formerly a reporter for the Associated Press and The New York Times, and was Warsaw correspondent for National Public Radio.]
. . .
. . . According to the Wine Institute, an industry trade group, women buy the lion's share of the nearly 800 million gallons of wine sold in the U.S. annually -- and they are its primary drinkers.
. . .
Gallup pollsters have repeatedly found that the more educated and well off a woman is, the more likely she is to imbibe. White women are more likely to drink than women of other racial backgrounds, but in the past few decades the percentage of women who classify themselves as regular drinkers has risen across the board. An analysis of the drinking habits of 85,000 Americans in 2002 found that 47% of white women reported being regular drinkers, up from 37% in 1992. The percentage of black women who said they drank regularly rose from 21% to 30%, and the percentage of Hispanic women who said the same grew from 24% to 32%. (American Indian and Asian-American women were not included in the study.)
. . .
The growing sales of wine to women can be traced to some clever marketing decisions in the 1960s by California's vintners. Wineries had all but perished during Prohibition, and the beverage was considered the drink of poor immigrants and Skid Row drunks. Americans, accustomed to more straightforward spirits and beer, were slow to warm to wine's complexities.
Wine also felt off-limits to women. It was consumed mostly in restaurants, where waiters offered men the wine list, the first taste and the cork. Strategists saw a growth opportunity in the vast numbers of postwar housewives. "We used to joke that if we could just get a bottle of sherry into the kitchen, we'd be off and running," says Harvey Posert, one of the industry's early promoters.
Vineyards got an unexpected boost from Jacqueline Kennedy, who in 1962 led 56 million viewers on a televised tour of the White House. In the dining room, the camera panned to the elegantly laid table, lingering for a few seconds on the crystal glasses next to each place setting. Few could afford the first lady's designer clothes, but the crystal, manufactured in West Virginia, was a small piece of Camelot glamour that women could own for themselves. It took the Morgantown Glass Co. factory years to fill all the orders.
Getting female buyers for the wine, though, was another challenge. In California, where laws allowed wine to be sold in supermarkets, Robert Mondavi's marketers hired middle-age housewives to stand at in-store tasting booths. The saleswomen offered shoppers sips from bottles that would pair perfectly with what they had planned for dinner. The friendly older women helped turn the younger women into confident consumers.
Women's magazines offered tips on how to order, serve and drink the stuff; McCall's magazine, in 1977, featured wine as essential to an "Anti-Stress Diet." Meanwhile, women in California were beginning to make wine, too, experimenting with tastes and textures that appealed to them.
Today, wine is certainly in American kitchens. It's there for enjoyment, of course, but also as a respectable antidote to modern stress -- especially for women.
. . .
AND SEE THIS INFOGRAPHIC:
"Infographic: America's Love of Wine"
Wine Business Monthly received this really cool infographic on America's Love of Wine from SpareFoot
[Link: http://www.winebusiness.com/blog/?go=getBlogEntry&dataId=118485]
For some time I have felt there is merit to including scale of operations in the wine discussion. This is not to suggest large volumes equal bad wine or small producers create better wines - it is just different and this has the opportunity to connect on many levels with consumers.
ReplyDeleteWhy do people flock to farmers markets in the summer? Because they generally get to connect directly with small producers and there is something about this experience that makes consumers willing to pay more. Farmers Markets are not low cost shopping venues.
Someone once said it is natural for people to want what they can't have - if a wine is truly produced in small quantities - then why not put the number of bottles or cases produced on the back label? This gives both consumers and retailers something real to latch on to and justify a purchase and create a basis for future buying decisions.
Or what about being really brave and providing a guarantee - if you do not like this wine - give us a call and we will make it right. This is crazy but shows confidence and if it really becomes a problem then read Edward de Bono and make a change.
Thanks for posting Ron. Appreciate you logging in.
DeleteScale does matter in marketing wine brands. Smaller brands have a more natural ability to connect at an emotional level. The question for them is: Are you maximizing your small, artisanal, family-farm, David vs Goliath, welcome to my home, meet my family, etc .... and are you consistent with the emotive message in all the marketing you do. Larger brands have to replace more commodity-like products with some other message .... like in the Old Spice commercial.
One big reason you can use descriptions of the primary components of wine flavor (aroma & taste) (when accurate) for wine as a key component of marketing wine is because by definition wine is an organoleptic product people actually experience the variety and intensity of flavors directly. For 98% of wine consumers the difference in flavors across the spectrum of wine tends to be far greater than that for beer, soda or spirits. The flavor variation of wine is remarkable as is the ability to taste bitter compounds in wine a primary driver of preference. Cabernets are as varied as can be whereas Vodka or lite beer very in flavor profile about as much as bottled water.
ReplyDeleteThe industry has issues with marketing based on emotion because media usage is still very dependent on television for a key demographic, women above 30 years of age. The wine business has little if any ability, or belief in using the traditional components of the marketing mix (tv, radio, print) so they continue to depend on the traditional label design, in store, events, media relations and some not very well executed social media.
Driving trial for wine is a mandatory part of the marketing mix and tying the flavor to the marketing message is still a viable strategy. When you get the flavor and the emotional message tied together you are hard to beat. Beer and spirits (especially white spirits) are far better and brand marketing and building emotional connections because “necessity is the mother of invention”
Thanks for the comments Anon 5:35. I would suggest 98% of wine consumers don't relate to product descriptions because wine is so complex. Its great for me to have those types of discussions with colleagues .... trying to work on our own palates, but the overwhelming masses of consumers, even if you tell them what the wine tastes like - won't relate in an emotive manner.
Delete(PREFACE: DELETED AND RESUBMITTED TO CORRECT FOR SOME TYPOS.)
ReplyDeleteON “DIFFERENTIATING” COMMODITIES:
Abstract from Harvard Business Review
(January 1980, Page Unknown):
"Marketing Success Through Differentiation – of Anything”
[Link: http://hbr.org/1980/01/marketing-success-through-differentiation-of-anything/ar/1]
By Theodore Levitt
(now deceased. Levitt was “the Edward W. Carter Professor of Business Administration at the Harvard Business School and head of the marketing area of instruction”)
There is no such thing as a commodity. All goods and services are differentiable. Though the usual presumption is that this is more true of consumer goods than of industrial goods and services, the opposite is the actual case.
In the marketplace, differentiation is everywhere. Everybody -- producer, fabricator, seller, broker, agent, merchant -- tries constantly to distinguish his or her offering from all others. This is true even of those who produce and deal in primary metals, grains, chemicals, plastics, and money.
Fabricators of consumer and industrial goods seek competitive distinction via product features -- some visually or measurably identifiable, some cosmetically implied, and some rhetorically claimed by reference to real or suggested hidden attributes that promise results or values different from those of competitors’ products.
So too with consumer and industrial services -- what I call, to be accurate, “intangibles.” On the commodities exchanges, for example, dealers in metals, grains, and pork bellies trade in totally undifferentiated generic products. But what they “sell” is the claimed distinction of their execution -- the efficiency of their transactions in their clients’ behalf, their responsiveness to inquiries, the clarity and speed of their confirmations, and the like. In short, the offered product is differentiated, though the generic product is identical.
When the generic product is undifferentiated, the offered product makes the difference in getting customers and the delivered product in keeping them. When the knowledgeable senior partner of a well-known Chicago brokerage firm appeared at a New York City bank in a tight-fitting, lime green polyester suit and Gucci shoes to solicit business in financial instrument futures, the outcome was predictably poor. The unintended offering implied by his sartorial appearance contradicted the intended offering of his carefully prepared presentation. No wonder that Thomas Watson the elder insisted so uncompromisingly that his salespeople be attired in their famous IBM “uniforms.” While clothes may not make the person, they may help make the sale.
The usual presumption about so-called undifferentiated commodities is that they are exceedingly price sensitive. A fractionally lower price gets the business. That is seldom true except in the imagined world of economics textbooks. In the actual world of markets, nothing is exempt from other considerations, even when price competition rages.
During periods of sustained surplus, excess capacity, and unrelieved price war, when the attention of all seems riveted on nothing save price, it is precisely because price is visible and measurable, and potentially devastating in its effects, that price deflects attention from the possibilities of extricating the product from ravaging price competition. These possibilities, even in the short run, are not confined simply to nonprice competition, such as harder personal selling, intensified advertising, or what’s loosely called more or better “services.”
To see fully what these possibilities are, it is useful first to examine what exactly a product is.
FOR $6.95, BUY A PDF OF THIS TIMELESS ARTICLE:
http://hbr.org/product/marketing-success-through-differentiation-of-anything/an/80107-PDF-ENG
ON MARKETING “INTANGIBLES”:
ReplyDeleteAbstract from Harvard Business Review
(May 1981, Page Unknown):
" Marketing Intangible Products and Product Intangibles”
[Link: http://hbr.org/1981/05/marketing-intangible-products-and-product-intangibles/ar/1]
By Theodore Levitt
(now deceased, Levitt was “the Edward W. Carter Professor of Business Administration at the Harvard Business School and head of the marketing area of instruction”)
Distinguishing between companies according to whether they market services or goods has only limited utility. A more useful way to make the same distinction is to change the words we use. Instead of speaking of services and goods, we should speak of intangibles and tangibles. Everybody sells intangibles in the marketplace, no matter what is produced in the factory.
The usefulness of the distinction becomes apparent when we consider the question of how the marketing of intangibles differs from the marketing of tangibles. While some of the differences might seem obvious, it is apparent that, along with their differences, there are important commonalities between the marketing of intangibles and tangibles.
Put in terms of our new vocabulary, a key area of similarity in the marketing of intangibles and tangibles revolves around the degree of intangibility inherent in both. Marketing is concerned with getting and keeping customers. The degree of product intangibility has its greatest effect in the process of trying to get customers. When it comes to holding on to customers -- to keeping them -- highly intangible products run into very special problems.
First, this article identifies aspects of intangibility that affect sales appeal of both intangible and tangible products. And, next, it considers the special difficulties sellers of intangibles face in retaining customers.
INTANGIBILITY OF ALL PRODUCTS
Intangible products -- travel, freight forwarding, insurance, repair, consulting, computer software, investment banking, brokerage, education, health care, accounting -- can seldom be tried out, inspected, or tested in advance. Prospective buyers are generally forced to depend on surrogates to assess what they’re likely to get.
They can look at gloriously glossy pictures of elegant rooms in distant resort hotels set exotically by the shimmering sea. They can consult current users to see how well a software program performs and how well the investment banker or the oil well drilling contractor performs. Or they can ask experienced customers regarding engineering firms, trust companies, lobbyists, professors, surgeons, prep schools, hair stylists, consultants, repair shops, industrial maintenance firms, shippers, franchisers, general contractors, funeral directors, caterers, environmental management firms, construction companies, and on and on.
Tangible products differ in that they can usually, or to some degree, be directly experienced -- seen, touched, smelled, or tasted, as well as tested. Often this can be done in advance of buying. You can test-drive a car, smell the perfume, work the numerical controls of a milling machine, inspect the seller’s steam-generating installation, pretest an extruding machine.
In practice, though, even the most tangible of products can’t be reliably tested or experienced in advance. To inspect a vendor’s steam-generating plant or computer installation in advance at another location and to have thoroughly studied detailed proposals and designs are not enough. A great deal more is involved than product features and physical installation alone.
FOR $6.95, BUY A PDF OF THIS TIMELESS ARTICLE:
http://hbr.org/product/marketing-intangible-products-and-product-intangibles/an/81306-PDF-ENG
A PORTEND FOR MILLENNIALS AND THEIR PROPENSITY FOR BUYING AND READING BOOKS -- LESS THAN SANGUINE NEWS FOR ASPIRING WINE BOOK WRITERS . . .
ReplyDeleteExcerpts from Wall Street Journal “Opinion” Section
(June 26 2013, Page A15):
"The Young and the Bookless;
Many of my college students hadn't read for fun since 'Harry Potter.'"
[Link: http://online.wsj.com/article/SB10001424127887323844804578526963222895632.html]
By Danny Heitman
[a columnist for the Baton Rouge Advocate, is the author of "A Summer of Birds: John James Audubon at Oakley House" ( Louisiana State University Press, 2008).]
. . .
This spring, in addition to my primary job as a journalist, I taught my first college writing course. It was a class of 16, most of them freshmen. They were sharp, engaging and curious students, but I quickly noticed that much of their writing didn't display the kind of familiarity with English that comes from reading a lot.
For my first quiz, I included a bonus question asking my students to name the last book they had read for fun. More than half of the students listed one of the Harry Potter books by J.K. Rowling, titles most popular with middle-school youngsters. The answers suggested that most of my students hadn't read a book for pleasure in nearly a decade.
I was saddened to learn this, although I shouldn't have been surprised. A landmark 2007 study by the National Endowment for the Arts noted a sharp decline in reading for pleasure among young people. The number of 17-year-olds who never read for pleasure increased to 19% in 2004 from 9% in 1984. According to the report, almost half of Americans between ages 18 and 24 never read books for fun.
When the NEA study appeared six years ago, I convinced myself that the young nonreaders identified in the report were probably mediocre students with little aptitude for language arts. But meeting my own students -- smart young people who were trying to write English without reading much of it -- made me realize that the grim numbers about America's reading habits have real faces among some of the best and brightest members of the next generation.
. . .
Rob,
ReplyDeleteOn the subject of "key influencers" on wine buying decisions -- be they wine writers or "the wisdom of crowds" -- from today's Wine Business Monthly e-mail news blast . . .
"Friends Most Influential in Wine Buying Decision"
Wine drinkers still relied mainly on recommendations from family and friends when selecting the wine brand and variety they are likely to buy.
[ Link: http://www.afr.com/p/national/friends_most_influential_in_wine_a8WuErUwMk6eM57VuGfFlN ]
~~ Bob
From today’s Wall Street Journal:
ReplyDelete“Social Media Fail to Live Up to Early Marketing Hype”
Link: http://online.wsj.com/articles/companies-alter-social-media-strategies-1403499658#printMode
Excerpts:
“Social media are not the powerful and persuasive marketing force many companies hoped they would be,” concludes Gallup Inc., which on Monday is releasing a report that examines the subject.
Gallup says 62% of the more than 18,000 U.S. consumers it polled said social media had no influence on their buying decisions. Another 30% said it had some influence. U.S. companies spent $5.1 billion on social-media advertising in 2013, but Gallup says “consumers are highly adept at tuning out brand-related Facebook and Twitter content.” (Gallup’s survey was conducted via the Web and mail from December 2012 to January 2013. The survey has a margin of error of plus or minus 1 percentage point.)
In a study last year, Nielsen Holdings NV found that global consumers trusted ads on television, print, radio, billboards and movie trailers more than social-media ads.