Subject: The Three Face of Consumer-Focused Innovation

From: Chief Marketer <[email-masked]>
Date: Tue, 22 Mar 2005 06:10:02 -0600

March 22, 2005 | A PRIMEDIA Property |

Table of Contents
Consumer Marketing: The Three Faces of Consumer-Focused Innovation
Branding: Getting Emotional
Advertising: National Spot Radio the Only Loser in Ad Revenue
Direct Marketing: Catalog and Web Buyers, Together but Separate
Infomercials: Who's Afraid of "Consumer Reports"?
Let's Get Personal

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This Week's Stories
Consumer Marketing: The Three Faces of Consumer-Focused Innovation
Meeting the consumer's current needs isn't enough to guarantee success. According to Forrester Research, a marketer must also anticipate future needs. In a recently released report, Forrester analyst Christine Spivey Overby dubs this proactive approach "consumer-focused innovation" and outlines its three basic principles:

1) "Consumers are active co-innovators." According to Overby, "more and more, companies are using consumer insights to shape innovation from an embryonic concept to market testing." By way of example she cites Nestle's "relationship centers" in France and Japan, where nutritionists, marketers, and execs respond to more than 200,000 queries and requests from consumers every year.

2) "Consumers' latent needs are as important as their explicit needs." This is a corollary to the rule of marketing that advises taking focus groups with a pillar of salt, since consumers often don't consciously know--let alone can tell you--what it is they want or need.

3) "Experience trumps products." Starbucks is the oft-cited example here of how a company can distinguish itself by the experiential circumstances in which it wraps its products. Or as Overby says, "Consumer products firms will avoid the commodity death spiral by selling experiences--not products."

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Branding: Getting Emotional
By Beth Negus Viveiros
DIRECT NEWSLINE
Having an emotional bond gives marketers a license to go places with a consumer they wouldn't be welcome otherwise.

As an example of this, Bob Wallach, senior vice president of marketing, refrigerated division, ConAgra Foods, cited the Walt Disney Co. during a panel discussion at last week's MIT Sloan CMO Summit. Disney used the warm feelings the public had for its characters to make the leap from movies to theme parks to myriad other opportunities such as cruise ships, Wallach said.

Rick Dow, chief marketing officer of Midas, said that emotional resonance is vital "because there's no ties in business these days."

"Clients that believe in emotional branding let us do our best work," said Paul Tilley, senior vice president/group creative director, DDB Chicago. "When people buy Coke, they're buying Americana. When they buy tickets to DisneyWorld, they're buying magic.

To read more, visit DIRECT.

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Advertising: National Spot Radio the Only Loser in Ad Revenue
With the exception of national spot radio, every major media enjoyed year-over-year increases in ad spending in 2004, according to TNS Media Intelligence.

The greatest gainers in terms of percentage increase in ad spending were the Internet, with ad revenue up 20.4%, and outdoor media such as billboards, with a 20.1% increase. Ad spending on national spot radio dipped 0.7%, though local radio ad sales rose 1.1%, and network radio ad spending increased 2.7%.

The top media in terms of ad spending:

1) local newspapers--up 6.7%, to $24.56 billion
2) network TV--up 10.7%, to $22.52 billion
3) consumer magazines--up 11.2%, to $21.29 billion
4) spot TV (excluding Hispanic TV)--up 11.7%, to $17.31 billion
5) cable TV--up 13.8%, to $14.25 billion
6) Internet--up 21.4%, to $7.44 billion
7) local radio--up 1.1%, to $7.33 billion
8) b-to-b magazines--up 1.7%, to $5.21 billion
9) national syndication--up 15.8%, to $3.93 billion
10) Hispanic media--up 4.7%, to $3.89 billion.

Total ad spending rose 9.8%, to $141.09 billion in 2004.

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Direct Marketing: Catalog and Web Buyers, Together but Separate
LIST & DATA STRATEGIES FOR THE MULTICHANNEL MERCHANT
According to CATALOG AGE's Benchmark Report on Operations, a mean 35.5% of catalogers' orders come via the Web. So it stands to reason that Internet buyers account for a growing share of catalogers' print circulation.

But Web buyers often have different demographics and other characteristics than traditional catalog buyers, says Jim Coogan, president of Sante Fe, NM-based consultancy Catalog Marketing Economics. Therefore, you can't assume that the same circulation strategies and marketing tactics that are profitable when used among traditional buyers will yield the same results among Web buyers.

Managing Web buyers profitably requires understanding of their key metrics, Coogan says. Chief among them is measuring the incremental sales gained by mailing a print catalog to a Web buyer.

To figure that out, you need to segmenting buyers by order channel as well as by recency/frequency/monetary value (RFM). And when segmenting Web buyers, Coogan adds, be sure to divide them into two groups: those who have never received a print catalog and those who have. Coogan also suggests segmenting Web buyers by source: natural search, paid said, e-mail, affiliates, URL, print catalogs.

For other suggestions regarding segmenting and testing of online buyers, visit CATALOG AGE.

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Infomercials: Who's Afraid of "Consumer Reports"?
By Andrew Grossman
For marketers who rely on infomercials to pitch their wares, the saying "there are only so many hours in a day" means there are only so many spots available to buy. But fledgling cable TV network Expo TV is offering advertisers the equivalent of a 25-hour day: It is dedicated exclusively to infomercials.

Expo TV, which is positioning itself as a cross between "Consumer Reports" and QVC, is beginning a push to gain distribution through cable systems beyond the 400,000 households that subscribe to Insight Communications and rent digital set-top boxes.

Expo TV CEO Daphne Kwan says that the network, which is due to go broad in the third quarter of the year, will offer, in addition to infomercials, a heavy dose of product demonstrations and advice on how to select products. "What we're trying to create is a place where you'll want to learn about a product," Kwan says. "The thing you probably do now is just turn to your computer to get it done."

Don't expect to see products panned on Expo TV, however. The network will not slam bad products, but simply ignore them, according to Kwan. "If a product is not good, we will not have it on," she says. "We will research the products that they are selling. We will research the manufacturers. We will look to see how they long they have been around. We will look at Better Business Bureau information. We will look for any online feedback we can find."

But "Consumer Reports" most likely will not be among the sources referred to by Expo TV. "When 'Consumer Reports' comes out with a number-one ranking, [the item reviewed is] not usually an instant best-seller," Kwan says. "'Consumer Reports' tests for certain things your dad is looking for, not things you're looking for."

For instance, the magazine opined that most fitness equipment advertised on television was a waste of money because users could obtain the same benefits without spending any money. "We found that biking or walking provides the same -- or better -- benefits," "Consumer Reports" wrote about the Gazelle Freestyle Elite from Canton, OH-based Fitness Quest.

The magazine, counters Kwan, missed the point: that those products make "buyers more motivated to exercise than just doing crunches, largely because they are more fun and easier to do."

And in fact, according to "Ohio's Smart Business" magazine, infomercials for the Gazelle product line have generated $500 million in sales. When it comes to at least some sorts of merchandise, a paid commercial spot will trump a review from an ad-free magazine almost any time.

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Let's Get Personal
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