Retail Market Study. A study of the retail space

A Retail Market Study of the Retail Space

The Retail Market by Tom Dougherty

This retail market study will look at the retail market as it stands today and the art of retail branding. We will look at the competitive positioning, brand promises, segmentation strategies and the influx of online retailing.

More importantly, we wanted to see what the trends are. Where is the retail market heading? And, with news of poor sales and store closings, where can retailers go from here? (Read a brand new article that details department store rebranding strategy here)

Let’s begin by looking back because we can learn from it.

History of Retail Branding

Today’s retail market is in the midst of great changes. The current competitive set is under fierce competition from new and emerging venues. Yesterday’s winners may be losers today as the brands seek importance and place in the shifting sands of retail expression.

Retail branding is both fashion and marketing
The retail space

This dynamic of change is not a new occurrence in retail. Like the ancient city of Pompeii and the modern city of Napoli, retailers live next to a snoozing volcano of transformation. This volcanic giant erupts at historical intervals and its pyroclastic flow and unstoppable sea of lava changes the landscape in a flash of the eye. It leaves former populations stranded, frozen in time, and builds new terrains for the lucky survivors.

More than 200 years ago, populations were centered within metropolitan areas. Suburban living was rare and rural residents made their way to nearby cities when purchases were needed. Back then, required clothing was either unable to be made and/or unavailable in the general store. Those residents of cities and metropolitan areas shopped in retail districts, often defined by the type of product that was available. There were streets and avenues that were known colloquially as the shoe district, milliner district, haberdashers and others.

Like the advent of supermarkets in food retailing, where various store fronts were brought together under one roof (i.e. green grocer and butcher shop), convenience drove the birth of the department store. These eponymous mega-stores brought the shingles of merchants together in one place. Suddenly, it was possible to shop for hats, shoes, dresses, and outerwear all in one place. The lucky city shopper was able to save time as well as sample all the finest and utilitarian goods available.

This retail market was a global phenomenon. In Britain, Kendals, Harrods, Selfridge, Baimbridge and others took hold. As the space moved towards this powerful market economy, department stores arrived all over the European continent. Le Bon Marché, Karstadt, Magasin and countless others — each representing the needs of the local population.

In the US, retail giants took root and Gimbels, Macy’s, John Wanamaker, Lit Brothers, Strawbridge and Clothier, Lord & Taylor, Marshal Fields, Frederick and Nelson began. Many never morphed into chain stores. Marble Palace, in New York, was one of the first department sores.

As the population shifted to the suburbs from the 1940s and 50s, these large department stores opened chain stores in larger markets. Sears Roebuck and Montgomery Ward were the equivalent of Amazon today. They allowed for home shopping from catalogs for the most rural customers because it was a department store in a book. These not only brought all the departments under one roof, their more efficient buying power enabled them to offer pricing that put additional pressures on small specialty retailers.

Retail branding lacks the most important differentiating messages
Retail Marketers Lack Important messaging

As a result, cities all over the globe saw more and more independent specialty stores shutter their windows and close. The department store appeared to be an irresistible source.

Eventually, it seemed that every major city had a string of independent department stores. Check out the listing for now defunct department stores on Wikipedia, for example. The brands number into the hundreds.

About 20-30 years ago, there was a great consolidation of brands as holding companies like Mays and Federated swallowed up local stores. In some instances, the new store brand names were consolidated to just a handful. Eventually, great legacy stores like Hecht’s, Wannamaker’s, Strawbridge, Bamberger’s and others went the way of the Studebaker and either closed or became branded as one of the winners — like Macy’s.

The first real challenge in the retail market to department store dominance was from the value institutions. Two Guys, EJ Korvettes, WT Grants, Kressge, Kress, Woolworths Kmart, Clover, Aimes, Bradlees, Jamesway, McCrory, and others appeared. They siphoned off the value shoppers from the major main line department stores. Those stores today are represented by Target, Wal-mart and Kmart.

In the traditional department store model, retailers counted on the efficiency of a one-stop shopping experience. But they also quickly understood shopping as a recreational experience. Put simply, they accepted that shopping was for fun as well as utility. What these stores were doing was selling an experience. Lavish first floors, escalators, elevators, balconies, and also marble and imported features, raised the experience to the level of theatre.

From the siege of discount department stores mentioned earlier, the main line department stores learned the value of loss leaders and clearance sales. Part of the entertainment value was certainly the thrill of the hunt. The department stores heads quickly learned that, at certain price points, even the most experienced shopper was willing to buy something they did not really need. Why? Because the price was simply too good to pass up.

Today, in the retail market world, new pressures have arrived. Specialty stores are on the rise again because shoppers are looking for the unique and unusual. Population centers have expanded and almost every community can support a mall (that is, a centralized design predicated upon the idea that a city shopping experience could be brought to any community) and a discount retailer like Wal-Mart, Kmart, and Target. But margins have eroded, discounting has become the norm, shoppers are savvier and the availability of online purchasing can fulfill the needs of the shopper. The thrill of the hunt can reside on your tablet or phone and when the shopper visits the department store they are aware of pricing and compare it to an online venue or a competitors web site live — even while in the store itself.

It is within this cobbled environment that we begin our retail market study. What does the future hold? How can any retail environment survive when most retailers are simply copying one another? At the end of the day, is price, discounting, and over-saturating the market the only game necessary playing? Are the department store websites eating their own young? These are just some of the many questions we will be contemplating through the course of this study.

A Snapshot of the Retail Market

As we’ve explained, the retail industry is amuck . Changes are afoot that retailers are having difficulty dealing with. We’ve seen Radio Shack, Barnes & Noble, Office Depot, Sears, Staples and Toys “R” Us close locations for a variety of reasons.

The entire retail market is so vast, we are going to concentrate on the apparel market. But even the apparel market sees retailers close locations, with J.C. Penney announcing 33 store closings by May and Abercrombie & Fitch to close 180 stores by 2015.

Like their retail brethren, the apparel retailers are in this pinch because they lack differentiation and their business models are outdated in a world of sea changes.

To begin, let’s map out how the retail market positions in the retail market itself. In the graphic below, you see the luxury retail markets (the Bergdorf Goodman and Von Maur’s of the world) existing on the top. This high-end section can blur into our middle-tiered players (department and specialty stores: Belk, Macy’s and GAP, for instance). The middle-tiered players blend into the value and discount retail providers (such as Wal-Mart and TJ Maxx).

 

The retail market space and retail branding
A detailed strategic chart of the retail market

The shoppers at Bergdorf Goodman would rarely go into Wal-Mart, and vice versa. The middle was intended to play to all shoppers.

In this paradigm, and because of their polar positions, luxury retailers and discount stores already come with a built-in audience. Those shoppers seeking exclusivity for the privileged and top designer fashion will frequent the high-end markets, while those seeking a value will hit the discount shop.

For example, Bergdorf Goodman offers a uniquely exquisite shopping experience. The store is uncluttered and displays recognizable products for the upper class.

In this region of the retail market, the shopper is readily defined and is willing to spend major bucks on the finest brands, quite happily. High-end stores represent a vision of either how they see themselves (elite) or how they aspire to see themselves.

The lowest sector of our retail market segment represents discount and value markets. It, like the luxury sector, also has a built-in set of loyal customers. Represented here are those seeking value, perhaps quantity, and locations close to home. (They, also like the high-end shopper, may seem themselves as smarter than the rest.)

Wal-Mart rules this portion of the market. The customer knows exactly what they will find at Wal-Mart, approximately how much they’ll spend, and can plan accordingly with their wallets. Same too with TJ Maxx, which offers fashionable brands at discounted prices, as well as Target and others positioned in this section.

This then leaves the largest portion of the retail market in and around the middle. Here we find department and specialty stores lurking about, but without any real defining factors that separate them from the other contenders – including those above and below them in this matrix.

Here’s the mess of what happening in the retail market

(Here is an article from the Chicago Sun Times about retail sales in November 2015) In this realm, the department store aims to steal market share from both the luxury and discount category. The lunacy in that is the only way these stores can gain market share is by way of discounting merchandise and building store locations nearby. That’s all.

Dillard's retail brandingLet’s take Dillard’s, for instance. When this department store comes to mind, we might think: “a bit upscale.” Maybe something along the lines of a Bon-Ton, but a little bit nicer. While that’s the thought, the message it advertises is quite murky. Dillard’s is marketing a preposterous mix of high fashion infused with heavy discounting and sales.

Basically, it is trying to be both luxury and discount. In that case, if you prefer luxury, you ignore Dillard’s because the luxury stores are right there next to it. If you prefer discount, you ignore Dillard’s because the discount stores are right there too. When you try to be everything to everybody, you end up being for nobody. You are undefined.

What this tells us is that Dillard’s (like any other department store that faces the same dilemma in the retail market) hasn’t found any singular means to identify itself, so it copies and hopes to steal a few customers from the high-end and low-end shops. It offers high-end fashion as a way to snag shoppers who may frequent the luxury stores (but that won’t work since the luxury shopper seeks experience), but also plays against the discount category by offering blowout sales throughout the year. Even Macy’s seems stuck in a world of tactics. Take a look at this Macy’s commercial from Black Friday 2015. All it demonstrates is no new ideas in the retail market.

Macy’s Black Friday Commercial

How about JC Penney as another example? Like Dillard’s, at JC’s we find some major brand names being offered for the shopper seeking a good sale. Our problem again is the need for the department store to pull from the luxury and value segment.

JC Penny retail brandingWhen JC Penney hired Ron Johnson a few years, it sensed the terrible trap it found itself. Johnson, the former retail chief for Apple, decided JC Penney was no longer going to offer discounted items. He, based on his experience at Apple, wanted to build a brand that shoppers sought out – even if they could get those items cheaper elsewhere.

With less than two years on the job, Johnson was fired by the JC Penney Board of Directors as the company lost $4.3 billion in sales and dropped 28.4% in holiday sales.

The problem JC Penney and Johnson faced is the same problem department stores are facing how. They are playing in the middle of the retail market and lack any kind of credible, singular identity.

To gain that identity, and steal share, these middle-tier retailers must become owners of a tangible concept. On a macro level, luxury and discount do this with experience and value. But on a micro level, nobody but Wal-Mart really owns cheap.

To break away from the set and highlight yourself as being different and better, each player within each segment must become known for something that is uniquely its own.

In simple terms, you must be known for something. Right now, the stores playing in the middle – trying to have a foot in one end and the other – are known for nothing. The high-end and discount stores (not to mention online outlets like Amazon) are pulling customers from them.

This is why JC Penney continues to struggle. It is playing a game in which what it offers is better served in other areas of the retail spectrum. JC Penney and those like it need to change its brand and business model.

Discount Stores

When we look into the abyss of discount stores in the retail market, we can basically see one big winner and a whole lot of second-rate copycats.

Here’s the gist of the problem with the category. Wal-Mart has taken claim of a unique position and isn’t moving anywhere. It owns affordability and has become the destination for the shopper who wants it all under one roof — at a fraction of the cost.

Brands like Target (Read why Target needs repositioning) try so hard to be like Wal-Mart that they even sound like the low-cost retailer. Take Target’s theme, “Expect more. Pay less.” and Wal-Mart’s, “Save money. Live Better.” If we are to draw a line in the sand, the leader (Wal-Mart) is always going to be the winner. It is the consumer’s default choice. How is Target going to beat the competition if it is just copying what the competition does?

From the inside-out perspective of the stores themselves, the difference between Target and Wal-Mart is simple. Wal-Mart brands for everyman, while Target attempts to pinpoint an audience a bit younger, more educated, hip and affluent.
We’re here to tell you it isn’t working.

Target. Retail BrandingTarget is just doing what Wal-Mart has done. There isn’t any mark of differentiation between the two in reality. For example, the same Apple products are offered at both. Food, and clothing, too.

So, how will Target ever win if it is doing the exact same thing the market leader is doing? It won’t. In the race to attract the discount shopper, copying the market leader always leads to second place or worse. That’s because when the reasons to choose are the same, the default choice is always the market leader.

Meanwhile, way, way off in the distance from successful Wal-Mart and semi-successful Target is Kmart.

In 2005, Kmart was taken on by the fumbling, Sears Holding Corporation. Following that came a series of failures: losing the Martha Stewart Living line in 2009 following comments made by Stewart that Kmart had “deteriorated” since merging with Sears (funny thing: she was right). Several years later, after dismal holiday sales, 100 Sears/Kmart stores closed.

Failure came to Kmart as a result of promising exclusivity of its product line. As an idea, that seemed right. But not when the Kmart brand itself is identified as downscale.

In some ways, this is about brand permission. When Kmart had an exclusive with the Martha Stewart line, the Martha Stewart brand suffered – meaning the exclusivity of it became meaningless. It is the Kmart brand itself that hampers sales, not what it offers. (It seems Kmart has yet to learn that. It now trots out the Adam Levine line.)

No celebrity line will work until Kmart fixes its own brand. It is definitely in need of brand repair.

TJ Maxx, Stein Mart and their shortcomings

The T.J. Maxx and Marshalls brands, owned by the TJX Company, appeal to shoppers seeking to save big bucks on big name brands. “If [it] says, ‘We like this $40 shirt you’re selling at Macy’s, but we want to retail for $22. We don’t need lining and we could use cheaper buttons.’ [it] will get what it asks because it will place an order for two million,” shared Howard Davidowitz, chair of the retail-consulting firm Davidowitz & Associates.

T.J. Maxx and Marshalls retail brandingTJX now sports over 3,000 retail stores nationwide (a total which also includes the furniture brand, HomeGoods). However, just because it has a lot of stores and sales are up doesn’t mean the prognosis is good. TJX’s game plan to oversaturate the market with stores might be good for short-term sales figures, but that doesn’t build preference.

What does make the TJX companies different is its specialty products section. Unique to the smaller discount stores is the garage sale of goods in the back of every TJX store, where you can find name brand kitchen and home goods.

Remember this: distinct sections like these drive people into a store because they provide an experience unlike any other. At a TJ’s, you can get clothes for cheap, but you come for the cool stuff in the back.

Stein Mart, meanwhile, brands itself as an upscale boutique. We’re not entirely sure they are that, however. The theme of “More fashion, less price” is basically the mirror of T.J.’s, Marshalls, or Ross (“Dress for Less’) for that matter.
Their website offers all sorts of after holiday deals: “Save an extra 30% off” and “Red Dot Clearance” litter the site. Not exactly the upscale boutique feel, is its

Stein Mart still plays in the same area as its competitors – Brand clothes for less price. Playing in that area is not the problem. There is a tremendous market for that shopper, but being the same as the competition means you are not preferred.

 

Thinking discount as a whole for the retail market

Let’s call the discount store category what it is — a sea of nondescript imitators.

Right now, nobody stands for anything other than price. That’s it. The huge problem is that Wal-Mart solely owns the position of being cheap. So everyone else loses by playing the price game, too.

Even with the brand discounters, like Stein Mart, offering you a great 30%-off deal, it is basically telling you, “We have no identity worth sharing, but come buy our stuff anyhow because it’s cheap.” When Target copies Wal-Mart’s tagline, it is because it’s gasping for air too.

It’s high time these brands grew up. Or some of them are going to be gone.

These stores must own something beyond price, because Wal-Mart already owns it. The idea is to own something emotionally that gives consumers a reason to prefer you, the same way a pickup driver may describe himself as a Ford man.

Tactically, though, these retailers can be known for something that no one else has, such as gift giving. (And if you uncover the emotional reasons why gift giving is important, then you really have something.)

What if Target (or someone) added a “Great Gifts for Everyone” section in its stores? This could be a place where you could always find interesting, Target-selected goods that are perfect as a presents. Suddenly, Target now owns “Gift Giving,” which brings customers to the store. (Again, the emotional undercurrents of gift giving are what will make the brand.)

This section wouldn’t simply be like all the other sections in the Target store (clothing, home, electronics, etc.), but an entity unto itself. Perhaps it’s a separate room, with different lighting and style, even music. Target could hire specialists for this section — masters of giving great gifts, with a history of doing so. Store demonstrations and talks could be given.

Forget playing the price war. Sell this concept.

Change has to happen soon in this category or demise is afoot.

Specialty Shops

If you consider all the specialty shops stationed all across the US, which sector would you say does this:

• Owns an event that happens more than two million times per year
• Is part of a $40 billion industry
• Includes nearly 10,000 individual shops

What category would that be?

It would be bridal salons, from the biggest (David’s Bridal, Bridal Warehouse) to the local shops to the luxury ones you see on reality TV. They have managed to own an event, get customers to pay for an expensive dress they will only use once (the brides hope) and hunt all over to find the perfect one.

The shops are all in the considered set (within the realities of access). They all stand for something. And many of them even have preference, most notably because of past experience.

Why can’t the rest of the specialty shop market follow suit?

At first glance, it looks like many are, segmenting the market to own something. Urban Outfitters, Gap and Abercrombie & Fitch are for the young & hip. L.L. Bean and Eddie Bauer are for those who treasure the outdoors. Men’s Warehouse and Jos. A. Bank are for the formal male (at a good price) and these two have merged.

However, most of what they (and others) offer can be found elsewhere. Let’s recap a few of the players in specialty, and then examine what strategies they can employ to take more important ownership as bridal shops do.

Urban Outfitters

Urban Outfitters retail brandingUrban Outfitters aims to attract the young and hip of those among us. That’s fine as it goes. But as we’ll see, Urban Outfitters is not alone in trying to attract this audience. It has a cool, free-living factor. Even its “Lighten Up” message suggests that. And it takes a stab at promoting what it deems is its unique fashion.

As a holding company (Urban Outfitters also owns Anthropologie and Free People) it’s done well, but the Urban Outfitters stores are not growing as quickly as its other brands with net sales dropping. Urban Outfitters, as a brand, is so dependent on “trendy” that its performance fluctuates.

Keep that in mind. If you are “trendy,” then you might hit the game-winner every now and then, but you will also shoot an air ball. For long-term health, you need a consistent offense.

Gap

The first thing you notice here is that Gap is no longer The Gap. The “the” has been eliminated. Long the go-to place for young, hip fashion, Gap is facing more competition and, therefore, less market share.

Gap retail brandingThe recent holiday season was a mixed bag for Gap, as sales soared on Black Friday but the retailer found customers less interested by December. Gap is doing better than the other two brands it owns (Banana Republic and Old Navy), but there are still problems.

Its marketing looks all the same as its competitors. If the Gap logo didn’t appear at the end, you wouldn’t be able to identify who the ad is for. They’re just so similar to what Urban Outfitters (and others) do.

Abercrombie & Fitch

Huffington Post recently released a list of nine brands that could be dead soon (its words) and, lo and behold, there was Abercrombie & Fitch. It cited a lack of variety among its clothes and high prices. Those may well be among the reasons, but it’s more than that.

You might remember A&F CEO Mike Jeffries’ comments last year that drew some Internet outrage. He said A&F was only for the “cool kids” and “only interested in people with washboard stomachs.” There’s more, but you get the drift.

Abercrombie & Fitch retail brandingNow, customers aren’t ignoring Abercrombie & Fitch simply out of protest to what Jeffries said. No, the reason is because, as a brand, A&F absolutely does think that way.

As we’ve seen, there’s simply nothing special about that kind of approach. It’s what everyone else is doing, and there’s something irritating about the A&F approach. It’s over the top in the washboard category. It’s a brand that’s trying too hard and it shows.

Not to belabor the point, let’s point out that there are others holding in a similar pattern, whether you’re talking about J. Crew or even Banana Republic, and move on.

The others

There are other ways to segment the market. Many shops do speak to a specific lifestyle but only one seems to do something other than the blatantly obvious. That would be Lane Bryant.

Lane Bryant took some heat for its sexy TV spot, which is silly. In an era in which Victoria’s Secret is splashed all over the airways and Miley Cyrus is twerking, this approach isn’t so taboo. In fact, it delves into a deep, emotional belief that Mr. Jeffries of A&F has misconstrued: If I don’t have washboard abs, am I still sexy?

LaneBryant retail brandingLane Bryant is saying that you can be – and it’s working. Owned by Ascena Retail Group, Lane Bryant’s year-to-year, comparable sales in November and December increased by 13%. That’s impressive given that holiday sales were generally down for retailers. (Check out this blog with our comments on a Lane Bryant advertising campaign)

Meanwhile, the outdoor enthusiasts of L.L. Bean and Eddie Bauer have certainly found a stake in the ground, but they execute it in the most obvious way. Therefore, it’s not all that emotional or important.

One of the more interesting corners of the specialty retail market is men’s wear – specifically, the situations surrounding Men’s Wearhouse and Jos. A. Bank. The two retailers have been battling each other for years and it was nastiest before the merger.

In fact, Jos. A. Bank is being purchased by Men’s Wearhouse, ending a feud that was bloody. It even took out a founder.

Men's Wearhouse retail brandingThe board of Men’s Wearhouse fired George Zimmer – and you all should know him. He’s the one with the gravely voice and beard that says, “You’re gonna like the way you look. I guarantee it.” The board believed the brand was too much about him and not about the products.

That’s true, but the new direction is blending into what other retailers are doing. You could say Men’s Wearhouse is becoming for those men who are young and hip. Sound familiar?

How to Win in the Retail Market

Before we take a look at what specialty shops can learn from the bridal salons, let’s take a step back and look at the apparel retail market as a whole.

As explained earlier in this study, retailers have mapped out a matrix in which consumers can decide where to go. There is the men-women line, intersected with the luxury-discount one. Consumers place themselves in the retail market as defined by the retailers.

The specialty shops sit over by the side. In general, they are more toward women and straddle the middle of luxury-discount. That is, they are in competition with the department stores.

Retail market study
The Retail Market in Flux

Department stores are in predicament. They are so undifferentiated that there is no self-identification. They are not luxury. They are not discount. They are not specifically for men. They are not specifically for women.

Within the specialty shop space of the retail market, there is the same matrix and you’d find most in the middle, with a slight edge to the female side because most of fashion resides over there.

At the moment, most specialty shops define themselves by a style. A consumer chooses, theoretically, by that style.

But what happens when that style is available at many locations?

The solution: Be known for something that no one is known for. For that reason, it might behoove specialty shops to first consider where they stand on the luxury-discount scale.

That’s because most are in the middle, but there’s a certain advantage to being one or another. If you are high-end luxury (like, say, Saks Fifth Avenue), you know your customers are rarely, if ever, going to dip into the low-end, discount pool of Wal-Mart for clothes.

By the same token, those who primarily shop at Wal-Mart would not go online and look for clothes at Bergdorf Goodman. Much of that is economics, of course, but there are also two completely different emotional drivers for each segment. The luxury shoppers see themselves as always wanting the best; the clothes and accessories are representations of being elite.

The discount shoppers, meanwhile, see themselves as smart. They believe those luxury shoppers are being railroaded into thinking it’s more important to have the most expensive dress compared to discount shoppers who believe their money is best used elsewhere.

Therefore, the first step the specialty stores need to take is to position themselves on the luxury-discount line. If they stay in the middle, then they will continue to find declining sales as department stores play there as does online shopping. (You can always find what you want for a good price online, the thinking goes.)

Reatil branding is stuck in the category paradigm
Look outside the category for solutions

The next step, and the most important one, is to own something. Right now, retailers are trying to own men’s clothes, young and hip, or outdoors. Young and hip, while having a relationship to fashion, is a cliché and, by itself, not that meaningful. Other demographics, like male or female, are simply reflections of what you offer.

Instead, you should own the reasons why your customers want to be young and hip, you would own an emotion.

Quantitative research would also determine what else you could own that is different – and more meaningful – than what the rest of the market is attempting to own.

That’s where you look to the bridal shops. They absolutely own something. An event. A season. A milestone. This sounds like more segmenting, but it’s really about positioning yourself against the competition that you are different and better.

For the men’s stores, for example, why couldn’t they own when you get that first professional job? The retailers would fear that that tactic would shrink your audience, but not really. If the emotional stakes are highlighted (you’ve made it), then your approach reached deeper and across more of the market.

Specialty shops are simply not that special anymore. They are lost in a quagmire of choices where everything blends into another. When that happens, sales fall short of expectations, stores are closed and irrelevancy sets in.

The Retail Market Summary

The current players in the retail market are in trouble. Sales are down, consolidation is the name of the game and competition lurks everywhere. Retailers aren’t helping themselves by producing the same, worn-out messages that depend on sales and clichés.

The retail numbers reflect that. While consumer spending rose .4% in January, the apparel retailers didn’t do so well. The industry is reporting weak sales in January, coming off a lackluster return during the holiday season as sales fell 14.6% on same-store sales industry wide.

The retail market and the retailers themselves are in full spin mode in discussing these two periods, saying the holiday season was shorter than in past years and that bad weather (especially on the population-heavy East Coast) kept buyers home.

Sure, those are factors but individual brands are suffering. Kohl’s reported a 2% drop in same-store sales, while Stein Mart had a .7% drop. Where are all the shoppers going?

To the Internet. Specifically, Amazon.

Amazon retail brandingThe Internet giant’s annual revenue has spiked each year, with total revenues expected to be reported at $75 billion for 2013.

Here’s what is strange: Amazon does not turn a profit, yet its stock is at record highs. In essence, what Amazon is doing – and what investors are counting on – is gobbling up more and more market share. To Amazon, the potential size of its market share is limitless.

And who is Amazon stealing market share from? Retailers, of course. The ones with brick and mortar stores, and their own e-commerce sites that can’t even begin to compete with the vastness of Amazon.

On-line shopping

The retail market is changing, although at a far slower pace than how the customer is changing. Retail stores are not the destinations they once were as none of them can compete with the size of inventory the Internet offers.

The Internet, especially Amazon, has other advantages. It owns ease of use and even bargain shoppers can hunt down a sale through it. It can handle orders from across – and to – the world.

Amazon Home page retail market study
Amazon is rewriting the retail market space. On-line Shopping.

This is the truth. There’s simply no logical reason to go to a retail outlet in today’s technological world.

If retailers continue down their current path, here’s what will happen. The pace of closing stores will increase. We’ve already seen recently that Staples is closing 225 stores, RadioShack is shutting down 1,100 and so many others are bleeding money.

To turn a profit, retailers will close so many stores they will become irrelevant and become simply suppliers to large retail sites (Amazon, Wal-Mart). Or they will become the equivalent of a local specialty shop.

Amazon will continue to grow and retail brands will market their offerings as “available at Amazon.” CEOs will be fired. Companies will downsize and consumers will become even less interested in the brands themselves. All that will matter will be price, look and fit.

There will be further consolation as companies look to share redundancies, cut costs and increase their market space.

Wearing something from Gap (or any other retailer for that matter) will mean nothing. The department stores will have these huge retail spaces that are empty of customers, especially customers buying product.

Basically, the doomsday scenario.

If you don’t believe it, the evidence is all around you.

Retail study Online retailers
EBAY is an established on-line retailer

That means retailers must make some hard decisions. They must be known for something that goes beyond what they sell and how much they sell it for.

In this retail market study, we have recommended that the department stores become known for a department. We have recommended specialty stores remember that their specialty is not about a style, a brand of clothing or a price. But that their specialty is an event, which could be a season, a type of activity or a point in someone’s life.

Most of all, none of the retailers can continue to blur the lines of definition by spouting the same messages as the rest of the field. They must be truly different and better.

Despite what the retailers say, they are not. The major learning while Stealing Share strategists were looking at the retail market was how much it was full of blaring noise. Everything – from style to messaging to operations – ran together to form a ceaseless blob that consumers are increasingly tuning out.

The differences between retailers are as thin as blades of grass. It may be the most undifferentiated markets we have ever seen. That is why the doomsday scenario is in play for many retail outlets.

Think about this. Only 10 years ago, Gap was the 18th largest retailer in the nation. Last year, it was 33rd. The Sears Holding Company (which owns both Sears and Kmart) saw sales drop 9.2% in 2013. J.C. Penney’s dropped a whopping 24.7%.

We could go on and on. But the future is coming and changes must be made. Take heed. If you don’t, you will lose.

 We have written extensively about the retail market

Sears and Kmart

The Target and Walmart Retailers

 Jos. A Bank and Mens’s Wearhouse a retail merger

Walmart is not invincible 

Retail Market should concentrate on experience

The failure of Radio Shack is a learning for all retailers

Marketing experts are the problem in the retail market

Lessons in retailing

Staples and Office Supply retailers

Retailers lack urgency

Value Propositions. A look at the retail market.

 

 

 

Breakfast cereal and the breakfast food market

An in-depth market study on the supermarket breakfast cereal and category

By Tom Dougherty

A brief history of Breakfast Cereal

Breakfast cereal, especially those loaded with sugar, are losing market share to a whole host of competitors: Yogurt, breakfast bars and even fast food.

What happened? And what can those brands do to take back market share? More importantly, what should the competitors (yogurt, bars, etc.) fear going forward? Things have gotten worse and the stakes are even higher. (Read a market study of consumer packaged goods here)

To truly understand this market, let’s begin by looking at the ready-to-eat breakfast market by looking back.

breakfast cereal is still a mainstayFor decades, the traditional breakfast food for the masses was oat-based porridge (a breakfast cereal). In early history, the meat-based breakfast was often considered the privy of the rich. In the US, as the market became increasingly affluent, porridges and other cereals were replaced by an upwardly mobile aspirational meat and egg-based breakfasts and the old cooked cereals were looked upon as plebeian.

In the late 1800s, health movements blossomed in the US and these reformers encouraged health conscious Americans to cut back on meat consumption at breakfast. The biggest change to the morning diet can be directly traced to one of the world’s greatest brands — Kellogg’s and its Seventh Day Adventists beginnings.

John Harvey Kellogg was a health and fitness force in his time and his sanitarium in Michigan was a recovery destination for well-to-do Americans for many decades. Health retreats at his sanatorium were more immersive of an experience than ranch-spas and adventure-spas of today. They were where the important and wealthy retreated for a rest cure.

breakfast cereal is not as dominant as they once were
The Breakfast Market is Changing

Kellogg’s religious belief emphasized exercise and vegetarianism, and led him to invent ready-to-eat breakfast foods made of grains for his visitors. Eventually, Kellogg’s of Battle Creek was born. Today, the Kellogg’s brand is synonymous with Corn Flakes and many other breakfast cereals.

Charles W. Post, a salesman who was admitted to Kellogg’s sanitarium, was impressed with the all-grain diet. As a result, he began experimenting with grain products. In 1898, he introduced Grape Nuts. The war was on over breakfast products and continues to this day.

Cereal Market
Oatmeal is a staple of the hot cereal market

Cooked breakfast cereal had a path of their own and coincided with the ready to eat cereals of Kellogg’s and Post. The American Cereal Company (Quaker Oats) created an oatmeal cereal in 1877. It invented the brand, using the Quaker Oats’ “Man in Quaker Garb” as a symbol of plain honesty and reliability. It gave Quaker Oats annual sales of $10 million.

Alexander Anderson’s creation of a steam-pressure method of shooting rice from guns produced puffed rice and puffed wheat. The brands started using associations with celebrities such as Babe Ruth and Shirley Temple. By 1964, the Quaker Oats Company sold over 200 products, grossed over $500 million, and claimed that eight million people ate Quaker Oats each day. In 2001, the much larger PepsiCo bought out Quaker Oats.

Kellogg reasoned that packaged, ready-to-eat breakfast cereal was more convenient than a product that had to be cooked. At the time, Battle Creek, Michigan, was a center both of the Seventh Day Adventist Church and of the ready-to-eat breakfast cereal industry.

Because both Kellogg and Post were located in Battle Creek, Michigan, the city became nicknamed the “Breakfast Cereal Capital of the World.”

breakfast cereal market studyAs the category matured, marketing took on a greater and greater role. It did not take long to realize that, once breakfast cereals were considered the healthier choice over meats, the choice of what breakfast cereal to eat was made by children. So, breakfast cereals were marketed to children, such as Froot Loops and Sugar Crisps, Cap’n Crunch and Fruity Pebbles.

In the United Kingdom, Force Wheat Flakes became the first ready-to-eat breakfast cereal at the turn of the last century. The cereal was at its peak consumption in Britain in 1930, selling 12.5 million packages in one year.

Back in the US, the 30’s saw the rise and interest in puffed breakfast cereal. The first puffed cereal was Kix, the result of marketing needs for new and exciting products to build the “puffed” category.

General Mills entered the market in 1924 with Wheaties and almost immediately started to market to children. Sugar was added to improve choice for children. Think about this: Kellogg’s Sugar Smacks had 56% sugar by weight. Spokespersons and mascots helped position the brands as important for children. Some are still familiar today such as the Rice Krispy’s elves, Tony the Tiger, Trix Rabbit and the trending sports figures on Wheaties (the breakfast of champions).

Canada has many, if not all, of the US based breakfast cereal in its market but cooked breakfast cereals, oatmeal, Cream of Wheat and Red River remains most typical.

China is famous for rice congee, (a type of porridge) eaten for breakfast.

Ireland is still famous for its oatmeal. The most famous variety of these is steel-cut oatmeal (like McCann’s). Oatmeal is very popular in Ireland and is a common breakfast there. However, the full Irish breakfast is one of eggs, sausages, broiled tomato and puddings.

Breakfast cereal really took off in the 50’s with the birth of baby boomers. Milk, orange juice and breakfast cereal (mostly Kellogg’s, Post and General Mills) represented the breakfast of Americans. In the mid-60’s, however, the market began the change.

More and more mothers began to work outside the home and families eating together for breakfast became more and more unusual. The focus turned to even quicker solutions for breakfast. Carnation launched its Instant Breakfast, which was in both taste and nutrition not much different than chocolate milk. Pop-Tarts hit the market and the sweetened toaster pastry began to be an accepted way to start your child’s day.

breakfast cerealThe real change in breakfast habits can be seen in the last 25 years. In recent years, we’ve seen a decline in diary consumption with fewer and fewer households buying milk and a turn from carbohydrates back to protein consumption. The trend nearly destroyed the orange juice market and has taken its toll on breakfast foods as well.

So, in many ways, the market has come full circle. Back to the very protein heavy diet that caused Mr. Kellogg to revolt and express a different view.

From our perspective, the industry is at a crossroads. The advent of Greek yogurt and protein bars are an indication of a market in flux. Where will we end up? Diet cereal brands like Special K have extended their brands to breakfast bars. Quaker markets breakfast bars, rolled oats and steel-cut oats that require 30 minutes to cook. Meanwhile, Cap’n Crunch, Lucky Charms, Raisin Bran and Sugar Frosted Flakes still fight for an ever-decreasing shelf space. What’s needed? Where will the market go?

Let’s take a look.

Cold Breakfast Cereal

If there’s a category in real danger within the breakfast realm, it’s definitely cold breakfast cereal. The days when the entire family sits down to eat cereal for breakfast are diminishing, even if those scenarios might have always been myths.

corn flakes breakfast cerealThe segment of cereals is the only one that is shrinking in the breakfast market. Volume dropped 7% from the four years between 2009-2013, and consumption has been dropping at least one percent each year for the last decade.

There are many reasons for this, all of which point to the same things: Cold cereal, especially the ones marketed to children, is not as important to us as it once was and the individual brands find themselves battling over the same ground (namely, taste and a funny character kids might like).

And they’ve been doing it for years.

The cold breakfast cereals category is still number one among ready-to-eat breakfast, holding at a $10 billion industry in the US. But that share is being eaten into by the competition, especially by yogurt, which has become a $7 billion industry.

So what has happened to cereal, especially if we consider the sugary cereals that have long dominated the category? And what can the cereals do about it?

Why the slip?

The slip in overall market share can be seen in hard market share numbers, as well as within the primary companies themselves. Kellogg’s, the second largest provider of cold cereal behind General Mills, laid off 2,000 workers last November, while General Mills reported a 2% drop in sales last year.

What happened?

There are numerous reasons and we’ll start with the most obvious. Cold breakfast cereal just isn’t your only choice any more. Yogurt, as mentioned above, is growing rapidly, having taken a 40% share of the US ready-to-eat breakfast market.

Kashi breakfast cerealThen there are the energy and cereal bars, not to mention the rise of breakfast among fast food restaurants. In a category that has seemingly maxed out on its potential, fast food restaurants have found that their greatest opportunity is in breakfast. That’s the reason why you see Taco Bell introducing breakfast and the number of fast food breakfast items jumping 17% in the last two years.

Even for the individual breakfast cereal brands themselves, there’s increased competition within their category. If you combine all the store brands together, they would represent the market leader ahead of General Mills and Kellogg’s.

But the increased competition is only one of the factors involved, including the perceived unhealthiness of cereal, especially those in the sugar category.

While some cereals have attempted to be healthier, the perception still exists. There are still cereals that, studies show, have one spoonful of sugar for every three spoonsful of breakfast cereal. Kellogg’s Honey Snacks and Post’s Golden Crisps have as much sugar as a Twinkie in each serving size. In addition, the consumption of milk has declined. You can’t have cereal without milk, unless you’re eating it straight of the box as a snack.

Breakfast behavior has also changed, especially among those in the younger demographic. They are the ones most likely to eat cereal, but they are looking for food that is convenient, such has breakfast bars or even fast food. They snack. They don’t sit down to eat.

In the US, anyway, there are fewer younger people. The birth rate has been in a five-year decline, with children below the age of 17 becoming the smallest segment of the US population.

Cold breakfast cereal is primarily a kid’s breakfast. With less of them around, the size of the cold cereal market is sure to shrink.

What’s a cold sugary cereal to do, short of encouraging couples to have more babies?

Before we get to that, let’s look at what the current breakfast cereal market is doing today.

The cold breakfast cereal playing field

If you look at the individual market shares of the individual brands, it’s difficult to draw any hard conclusions. The Cheerios brand holds the first and fourth spots with Honey Nut Cheerios up top and regular Cheerios in fourth. However, Honey Nut’s sales continue to grow, up 2.32% in 2013, while sales of regular Cheerios declined 5.92%.

You could see the healthier breakfast cereal trend upward as Special K saw sales rise more than 21%, while Cinnamon Toast Crunch dropped 8.04%

What is happening here?

Cheerios continues to be one of the top choices as a breakfast cerealHoney Nut Cheerios, as you might imagine, is focused on the honey. Its brand is “Must be the Honey,” using a bee named Buzz as its mascot/equity marker. It is obviously targeted toward children and its ads are very upbeat, often ending with Buzz tapping the cereal with his honey dipper.

Honey Nut Cheerios positions itself on the honey taste, which is a slightly different taste profile than other breakfast cereals. But it’s still sugar. It does borrow the whole grain of Cheerios to claim that it is good for your cholesterol. But the approach is not all that different from the Trix Rabbit, who is told directly by children, “Silly rabbit, Trix are for kids!”

But Trix has declined in market share as it has become one of the many cereals that faced the wrath of marketing sugar to children. It did it so directly that parents stopped buying it. (It could have said: “Silly rabbit, sugar cereal is for kids!”)

Basically, Trix didn’t have the cover of the overall Cheerios brand, which has long marketed itself as “made with 100% whole grain.” Its yellow box is instantly recognizable (and even nostalgic for some). It is currently being marketed under the “Love” tagline, but promotes itself has being good for a healthy heart.

It even has introduced a new campaign – of which the Love campaigns play a part – called the Family Breakfast Project, stating that, when families eat breakfast together, amazing things happen. This campaign directly takes on the changing trends of breakfast (needing fast meals, snacks, etc.) by encouraging viewers to return to the breakfast table. Its point is that being back at the table is better for families.

That approach comes close to what breakfast cereals should do to hold their top ranking. It addresses the category as a whole but it’s a bit sappy and, in this world of texts and cell phones, is not emotionally important.

However, Cheerios, an American staple, provides the “healthy” cover for Honey Nut Cheerios that is believable. It has the Cheerio whole grain in it and honey, while still sugar, doesn’t carry the same negativity of fruity flavors that a Trix has.

Cinnamon Toast Crunch is still among the market leaders, holding the fifth spot in most surveys. But its more than 8% drop in 2013 speaks to a falling brand.

Like most of the sugary breakfast cereals, Cinnamon Toast Crunch uses a character or two: the individual cereal squares that live in the bowl. The position is “Crave Those Crazy Squares,” while marketing on taste by saying it’s that cinnamon and sugar that makes the difference.

breakfast cereal choices include many products that have high sugar contentThere’s a deep problem here by basing marketing on taste (i.e., sugar). That’s because all of the sugary cereals market on that. Unless you have decided to not buy the sugary breakfast cereal for your kids and have left the market (as many have done), you are generally not switching to another cereal if it’s about taste. Your kids (or yourself) already like the taste of the cereal you prefer.

This is a problem in many sectors, not just breakfast cereal. The messaging, tone and look are all the same so they are often seen together, as one bunch. The main message for these cereals? Sugar!

But what about the healthy cereals?

 

Healthy Breakfast Cereal

While the steady demise of breakfast cereal is afoot, the separation between “healthy” and “sugary” cereals has remained intact. For every box of Cap’n Crunch on the supermarket shelves, you can easily find a box of Grape Nuts or Kashi.

breakfast cerealsIn 2013, the Department of Agriculture released a report headlined, “Recent trends in ready-to-eat cereals in the U.S.” In the introduction of this document, it was noted that manufacturers indicated that, “changes in the formation of breakfast cereal … may be due to several reasons, including response to public health concerns and consumer demand for healthier cereals.”

Seemingly, the public’s desire to live a healthy lifestyle has become a more important mainstream idea than it was a handful of years ago. This all means that, in order for  breakfast cereals to be healthy, it has to really be healthy to meet the needs of the masses and not simply a fringe group of shoppers.

Let’s look at Kashi, for instance. Recently, the healthy cereal brand took a tremendous hit for using GMO ingredients — a huge no-no for a healthy breakfast cereal. For the health conscious consumer, the once coveted Kashi brand broke its brand promise of being healthy. As such, the company has paid dearly for this mistake with a steady decline in market share.

One of the success stories in the healthy breakfastcereal category, however, is Special K. What makes Special K’s brand stand out from the rest? It’s simple really, it owns the position of being the healthiest cereal because it promises a certain lifestyle – and challenges its users to meet it.

breakfast cereal special KSpecial K has mustered up a challenge for consumers that it calls, “The Special K Challenge,” which consists of the following. “For meal number one, you may have a serving of any Special K Breakfast Cereal with 2/3-cup skim milk and fruit. For meal number two, you may have a Special K Protein Meal Bar, a Special K Protein Shake, or another serving of Special K cereal with 2/3 cup skim milk and fruit. Meal number three can be eaten normally. Throughout the day, one may consume two Special K snacks, choosing from Special K Protein Snack Bars, Special K2O Protein Water Mixes, Special K Cereal Bars, Special K Crackers, or Special K Fruit Crisps. For additional snacks, one may consume fruits and vegetables. Drinks may be consumed normally.”

The key here is consuming Special K products all day long — not a bad way to keep people coming back. But it also comes with a promise that you will lose weight, an important position that Special K is owning through its advertising.

Outside of Special K, we have a host of breakfast cereal brands that must meet the necessary health standards in order compete. Consumers are asking:

  • Is this cereal filled with fiber?
  • How much whole grain is present?
  • What are the grams of sugar per serving?
  • Are the health claims bogus or legit?
  • What’s the calorie count?
  • Is it low in saturated fats?
  • Will this taste good?
  • A list like this is probably headache enough for shoppers, and most likely why they would rather have a protein shake and be done with it.

The Entire Breakfast Category of Packaged Goods.

Cereal bars and toaster pastries

Cereal bars and toaster pastries are among the bright spots in the breakfast food category. Nutritionally, the pair seems to be at odds with one another. Yet, taken together, they (along with yogurt) are the only reason the “eat at home” breakfast segment continues to grow.

Kellogg’s Pop-Tarts and General Mills Toaster Strudels dominate the toaster pastries segment. Pop-Tarts has owned the segment, contributing strongly to Kellogg’s bottom line. Toaster Strudels have lagged Pop-Tarts but have also etched out its own place in the market.

The category continues to grow, mostly at the expense of cereals, although not at the pace of cereal bars.

Pop-Tarts

Pop-Tarts began around the same time as iconic cereal brands Apple Jacks, Fruit Loops, and Frosted Mini-Wheats. But it was positioned against those cereals – despite the intentions of Kellogg’s – because Pop Tarts doesn’t require a bath of milk to enjoy. Rather, all one needed was a toaster. When it launched in the 60’s, Kellogg’s was so protective of its cereal business that it created a set of detailed instructions for store operators telling them that Pop-Tarts could not be placed near the cereal and that they were in no way a substitute for cereal.

Times sure have changed. Pop-Tarts do just that now.

Pop-tarts as a breakfast option continues to growPop-Tarts have been marketed traditionally towards the youth market while trying to remain appealing to moms. It has utilized taglines like “made for fun” and the current, “crazy good,” while featuring a Pop-Tart swimming in peanut butter to promote the new “Gone Nutty” offerings.

While meaningless, Pop-Tarts’ advertising has been relentless. Kellogg’s has invested heavily in the Pop-Tarts brand and, although it misses the boat on meaning, it more than makes up for in frequency.

Kellogg’s has said that one of the reasons Pop-Tarts have remained a success for so long is through innovation such as the “Gone Nutty” offerings in the form of peanut butter and frosted chocolate peanut butter and college-branded Pop-Tarts. Kellogg’s has also “innovated” through cobranding with SpongeBob SquarePants, Hello Kitty, Barbie, and even Hardees with their Pop-Tart ice cream sandwich. You can even order a box of Pop Tarts with your name on it.

“Innovation” and advertising frequency, however, are not what has made the Pop-Tarts brand a success. The Pop-Tarts brand has been successful because it has naturally adapted to changing consumer tastes and behaviors. The form of the Pop-Tart allows it to be eaten cold, on the go, toasted, or as a snack.

Pop-Tarts Stix was created as an after-school or on-the-go snack. When you look at the reasons Pop-Tarts Stix failed, consumers clearly did not want Kellogg’s telling them how they should eat their Pop-Tarts. It is the versatility of the product that has made it successful, not to mention they taste pretty good.

Toaster Strudels

General Mills/Pillsbury introduced the world to the Toaster Strudel in 1985 claiming it to be part of the “hot, flaky breakfast revolution.” It does about a third of the revenue Pop-Tarts does and its sales have been soft as of late, falling 1% over the last full year. Unlike Pop-Tarts, Toaster Strudels are frozen and, therefore, must be heated.

While Kellogg’s was reluctant to position Pop-Tarts against cereals (and it happened anyway), Toaster Strudel embraced being the anti-cereal. It was a wise position because, in truth, any market share would likely come at the expense of cereal, theirs, Kellogg’s or another competitor.

Pillsbury made a decision early that, in order to break into the toaster pastries market, it would have to cannibalize some of its parent brand’s share. However, as sales have begun to decline, the consumer shift to “on the go” has accelerated.

Toaster Strudel has expanded the Pop-Tart category and has hurt the breakfast cereal marketIn an effort to curb attrition, Toaster Strudels recently launched an ad campaign featuring a child clad in lederhosen named Hans. The ad features the tagline, “Get zem going.”

Meaningless much like the before mentioned Pop-Tart commercial, sales may pick up for a short period but the campaign does nothing to build brand equity. More importantly, it positions the Toaster Strudel as nothing more than a harder to prepare Pop-Tart.

Much like cereal is married to milk, Toaster Strudels are married to the toaster and the trend is moving toward both healthy and portability. Toaster Strudel has neither.

Cereal Bars

The category of breakfast bars is made up of a mix of granola bars, energy bars, protein bars and cereal bars. You can place them in two markets – health and for lack of a better term, “not-health.”

breakfast cerealFor example, most people would not look at a Rice-Krispy’s bar and think health. It is, in fact, Rice-Krispy’s cereal congealed with marshmallows. The same can be said about Golden Graham bars and the like. However, Clif Bars have a reputation of being a healthier choice. Where the line is blurred is in a bar like Nutrigrain bars where they are still high in sugars and high-fructose corn syrup but do not reside on the same unhealthy level as the ilk in the Rice Krispy bar category.

From a positioning perspective, there are only a couple of basic positions bars occupy: snack/side item or meal replacement.

On the snack side, you have the unhealthy Rice Krispy bar, Lucky Charms Treats and the like to the healthier granola bars, Nutrigrain bars, and Nature Valley.

Many of the bars are positioning themselves against cereal and breakfast in general. Bars like the Cinnamon Toast Crunch Milk and other cereal bars (Cocoa Puffs and Honey Nut Cheerios also have a version), by their very nature, go against traditional cereal. In effect, they are saying, “When you don’t have time for a bowl of Cocoa Puffs, take it on the go with you.” Even Quaker’s cereal bars are similarly positioned.

On the meal replacement side, there are a whole host of protein, energy, and fiber bars. This is the area with the most potential of the growth. As healthy and on the go continue to converge, Clif Bar is even promoting its new Mojo bar to “Energize your day,” which clearly is an allusion to “Eat me for breakfast.”

In general, the meal replacement bars seem to be healthier and, as such, they tend to be more serious in imagery and tone in advertising, web and point of purchase. The more “snacky” you get, the less serious it becomes.

The reality is that even the cereal producers have noticed the trend of “on the go” and are capitalizing on that. But what does that mean for the future of regular, ole cereal on the breakfast table?

Yogurt

While the popularity of breakfast cereals has been on a steady decline, according to the NPD’s National Eating Trends, the consumption of yogurt in the United States has “more than doubled over the past ten years, and now nearly one in three people in every country eats yogurt.”

Yogurt is for breakfast, lunch and snackingThe steady increase in yogurt consumption is rather remarkable, and can be attributed to several key reasons: it appeals to both a younger and older audience, it can serve as a replacement meal for any breakfast item (or lunch for that matter) and can also be viewed as a dessert, and it is chalk-full of healthy benefits. These are three big reasons why yogurt is becoming an ideal replacement meal over cereal.

Let’s examine each of these reasons.

Yogurt appeals to specific demographics

In its extensive study on the yogurt industry, the NDP Group pinpointed the key demographic of yogurt eaters being between the ages of 18-34. What makes this group such fervent yogurt lovers? One key reason is they have grown up with it. Parents of this generation were introduced to yogurt as a healthy breakfast alternative in the early 60’s. For the kids of these parents (who are now in that 18-34 demographic), it is natural to have a yogurt for breakfast, rather than a bowl of cereal. The numbers don’t lie. The NPD group reported that, “These trends alone have led to 200 million extra servings of yogurt being sold a year.”

The other demographic that yogurt has appealed to strongly is the 60 and older age range. This group of consumers tends to find yogurt a safe bet in living a healthy and a less calorie-riddled lifestyle.

It’s an easy breakfast item

Let’s face it, traditional breakfast cereals take time to eat and can’t be brought with you in the way a container of yogurt can. It’s small, quick and all you need is a spoon. More than that, however, is yogurt’s ability to work as a meal (or snack) for breakfast, lunch or even dinner. It’s a simple yet nutritious meal. In Consumer Corner’s October, 13th retail study on the yogurt industry, it was noted that, “Refrigerated yogurts are the eighth largest selling subcategory in food, drug and mass market” and has become a growing option as well within the food service industry as a menu item.

Specifically, 45% of yogurt eaters consume it for breakfast, while 32% consume at lunch, or in the late afternoon (32%), late morning (25%) or late night (25%). With such widespread appeal, yogurt has clearly become the safe bet for breakfast eaters.

Yogurt is healthy

Here’s where Greek Yogurt comes into play. Package Facts noted that, “The U.S. market for yogurt sold at retail to be $7.3 billion in 2012… this group is attributed to sub category: Greek Yogurt.” Greek Yogurt stands out from other styles of yogurt as it’s considered to be rich and creamy in its texture. What’s more, the health benefits are abundant: there is more protein because the yogurt is thicker. Plus, when the lactose is strained, the yogurt loses some of its sugar and carbohydrates.

Let’s consider a few of the Greek yogurts

Chobani

Perhaps the most well known name of Greek yogurt (or strained yogurt) is Chobani. An Americanized version of a universally European term that means, “shepherd,” Chobani boasts the largest processing plant in all of the United States, located in Boise, Idaho. In fact, Chobani is pulling in close to $1.3 billion a year and have even started the Yogurt Bar concept in Soho, NY.

Greek yogurt has taken over the yogurt marketAccording to its owner, Hamdi Ulukaya, what’s made Chobani such a success is the company’s manufacturing process. For example, the company opted to never outsource any of the Chobani product line. Moreover, Ulukaya set the price point of the yogurt a little higher than the competition to meet future price projections.

That has been a wise move because there is a general belief among consumers that you always get what you paid for. We, at Stealing Share, have tested that belief with target audiences and it always comes back emotionally intensive no matter the category. Being priced slightly higher than the competition tells the audience you are a little bit better.

It’s working for Chobani. Business Insider recently shared that “[Chobani] now produces 2.2 million cases of yogurt a week, Ulukaya said, and has passed $1 billion in sales. When they started, Greek yogurt made up 0.2% of the yogurt market in the U.S. Now it makes up 50%, and Chobani has at least half of that market share.”

Kid’s yogurt

Outside of the Greek Yogurt movement, kid’s yogurt brands are also on the rise. From brands available for infants (YoBaby) to drinkable yogurt smoothies (Danimals) to squeezable bags (Plum Organics, Yogurt Mashups), and craziest of all — cereal flavored yogurts (YoPlait Trix), yogurt is being branded as the healthiest and quickest breakfast alternative for children.

Kid’s yogurt is filled with nutritional benefits. It can provide a quick serving of calcium, protein, and a litany of the necessary vitamins and minerals necessary for a growing body. With such benefits, it isn’t surprising that children ate “yogurt on 23 more occasions in 2012 than in 1998” according to a study by USA Today. With so many options to choose from, it wouldn’t be surprising to see that trend increase in the years to come.

Conclusion

The fact of the matter is that breakfast cereal may never recapture the prominence it once held. They will still hold the top spot, but the time has passed when they see their market share rise again.

Who will win in breakfast cereals?
Opportunity exists at junctures of change

That’s because we have changed as people. We are on the go, and have learned from technology (think your smart phone) that everything can be taken on the run and we don’t need the sit-down meal while we’re getting ready for work and getting the kids off to school.

And it’s not just adults who have changed. Children have too. They have also been taught by technology that’s it is an eat-in-your-car era and cereal, especially for pre-teens and teens, can seem childish or old-fashioned.

We are also a healthier bunch, living longer by watching what we eat. Fewer parents are willing to give their children sugary cereal that makes them obese. And, even those who are willing may opt for fast food in today’s fast-paced world.

In the face of that, what are traditional breakfast cereals to do? For one thing, they need to get better about branding. The model they have followed, especially for the sugary cereals, is basically the same as it was decades ago: Feature a cartoon character, emphasize the fun, and promote the taste. The strategy being that kids will clamor for it.

The problem is that there is little differentiation. They are all sugar. The characters are interchangeable from each other. And the cereal manufacturers are struggling to understand their consumers and, more importantly, the consumers who do not choose them.

There is a process to understanding those consumers, based on belief systems and switching triggers, that Stealing Share has developed that can get into what drives those consumers of cereal that goes beyond taste and even health.

We’re talking about emotion.

In this way, a breakfast cereal can better define its brand so that it is coveted by adults and children alike. Right now, many of the cereals – even the most successful ones – look out of touch. If they don’t update their brands, many of them could go the way of Life, Rice Krispy’s and Corn Flakes as brands that are falling at a rapid rate.

breakfast cerealsThis also goes for the market as a whole. Using those powerful triggers, the manufacturers can sell the category of cereal as being relevant in today’s world. That would raise the waters for all, although it may never regain its peak. But it can stop the bleeding.

But there is a more important factor for the food providers to consider. Trends are just that. They are trends. Meaning, that if the yogurts and bars don’t learn the lesson of the cereals, they’ll see their own market share dwindle. Yogurts are riding the crests of a new wave, but the individual brands also look and sound and taste alike. If they don’t differentiate themselves – especially in using the emotional triggers of the consumer – they will become just trendy.

So be warned, yogurts and breakfast bars. While you’re riding high now, you have also neglected to build meaningful brands – which means you are just as vulnerable as the cereals were when you took their market share.

Honey Nut Cheerios Healthy Hearts

 Kashi is an interesting player.

Kids are difficult to influence

Logistics – Parcel delivery market study

Logistics particularly as it relates to the consumer delivery business is a two horse race. FedEx and UPS have long duked it out, in effect, having a duopoly over an entire category. One might argue that the US Postal Service should be included in this group as well, but FedEx is one of the USPS’s biggest customers, co-opting its last mile delivery.

However, the industry is in a state of flux and all players, regardless of size, should take note.

The state of FedEx and UPS, the leaders of logistics

UPS Logo - LogisticsFedEx LogoBy all measurements, both FedEx and UPS continue to strengthen their market dominance. FedEx accounts for about $50 billion in revenue with UPS doing about $10 billion more. There are an ample number of customers to keep FedEx and UPS fat and happy for a while, with more and more consumers turning to online retail.

With that being said, what are these two saying about themselves to both preserve and attract new customers? First take a look at FedEx:

 

FedEx’s two main divisions, FedEx Express and FedEx Ground, are each on display here. FedEx is huge sponsor of the PGA and, during golf season, there are many ads like the first one. The ad touts the technology of FedEx Express with its app that can reroute packages to a local FedEx store, as if that is more convenient.

The second touts the price savings FedEx Ground customers could have over UPS Ground. While price is a sensitive issue for most businesses that ship a lot of products, it’s difficult to believe that the price differences between FedEx and UPS are all that significant, if they really exist at all. Each is going to do what it can to keep or get new business.

For UPS, it’s much of the same, ads trumpeting technology and cost savings. UPS played around with the idea of “What can Brown do for you,” which was a good segue into the idea of owning logistics. After all, isn’t what these delivery companies do, logistics?

What is lacking is any real reason to choose. Like many categories, the major players try to outmaneuver each other by claiming the very attributes that all players in the industry, regardless of size, possess. In fact, they are the bare minimum that any player must have. How can you be in the shipping business if you are not price competitive or have the technology deliver packages.

More over, both FedEx and UPS (especially UPS) try very hard to tell their stories from the perspective of the consumers who are receiving the package. Do consumers have much of a choice as to who actually ships the packages? That decision is often based upon price and when the consumer actually wants the item delivered.

Most typically, customers don’t have a choice between FedEx and UPS. The entity shipping the package makes that choice.

Being basically a duopoly affords both carriers the luxury of building larger and more sophisticated networks capable of delivering more shipments with each trying to outmaneuver the other. All the while each tries to woo more businesses to choose it over the other.

The FedEx and UPS brands both accomplish the same thing – getting stuff from one place to another. The FedEx brand feels a bit more sophisticated and harkens back to one of its old messages. “When it absolutely, positively has to be there overnight” is ultimately about piece of mind.

UPS feels more like the hard-working blue-collar challenger even though it actually ships more often than FedEx and has greater revenues.

Neither brand has proven over time to be superior to the other. They both work well and neither has really given customers a compelling and unique reason to choose one over the other.

Regional players are becoming more sophisticated and integrated

OnTrac LogoLaserShip LogoWhile FedEx and UPS continue to grow and optimize their networks, regional courier and LTL shippers are doing the same. Regional comDicom Logopanies like Dicom (Eastern Connection), LaserShip, GSO, OnTrac and even Pitt Ohio whois more of a LTL (less than truckload) once exclusively dealt with their own geographies. Now, those regional players are transporting parcels and freight that originated with another carrier. This model is not completely unlike the US Postal service delivering some packages the final mile for FedEx or UPS.

Regional players can ship most things quicker and less expensive than UPS and FedEx. The caveat is that, in most cases, the package must originate and arrive in the same coverage area in order to get these savings.

While these regional players present an alternative to the major players, they have a much more difficult climb. First, while they are known in certain circles and industries, what little awareness they have is limited to these niches. Their awareness pales in comparison to FedEx and UPS. Secondly, they all regurgitate FedEx and UPS sales messages – innovative technology and cost savings. Because of that, they have to prove some of the table stakes, such as timely delivery and size of delivery network.

When these regional players and their associated national networks act like FedEx and UPS, the best they can hope for is to be viewed as an equal. All their messaging does is reinforce the position of the market leaders. A company can’t gain share against a market leader by merely copying what the market leader says.

There is a unique advantage the regional players are not effectively exploiting. Each of these regional players should possess innate knowledge of their regional customers that is unique to the region in which they operate. The brand should always be from the perspective of the customer not the company itself and no regional player has positioned itself as that.

Local disruptors in the market

Uber Rush LogoMore companies are getting into the delivery business. Some with familiar names like Uber and others with not yet familiar names like Roadie. Using the same blueprint as Uber, these companies take a preexisting work force, drivers going from point a to point b, and pay them to move packages across town. (Or across the Roadie Logocountry, in the case of Roadie.)

None of these are being taken seriously as a competitor for traditional shoppers because they have not reached the needed critical mass. But the major players should take note, and they are.

While players like FedEx and UPS have an extensive driver and delivery network, they lack the driver density of the likes of Uber. Uber has the ability to pickup and deliver (on a local level) in real time, on-demand. Even the traditional bicycle courier can’t do that to the degree Uber or even Lyft can do it. FedEx and UPS can promise same-day delivery but Uber could be as close to instant as possible until we develop the coveted transporter.

A Major Development

Amazon has quickly ramped up its own delivery network, recently unveiling its new 767 plane with the words “Prime Air” written across the side.  Amazon claims having its own delivery network only augments its existing relationships with its current partners. But can Amazon be trusted?

TAmazon Logohe reality is that Amazon wants to own the entire supply chain. You don’t have to look much further than its expansion into private label products and cloud-based computing services to understand that. Amazon’s business is about getting stuff from one place to the other. Amazon doesn’t really make anything at all. Doesn’t that sound familiar?

The actual shipping part of delivering that stuff is expensive. It is good business for Amazon to want to control the costs of that. After all, it is by far the largest e-retailer in the US and is second in the world only to China’s massive Alibaba.

Ultimately, Amazon does not want to augment anything with its current delivery partners. It wants to replace them. And quickly and quietly, it is developing its own network to be able to do so. Its grocery delivery and same day Amazon Prime deliveries are prime examples of this. Amazon trucks deliver products ordered through Amazon.

What’s more is that the Amazon brand gives it permission to go down this road. In fact, its brand dictates the necessity for it to do so. But there is are two problems. First, severing the important relationships Amazon has with FedEx and particularly UPS could be problematic. Secondly, and more importantly, Amazon must convince other retailers to use it over FedEx or UPS.

The first issue is pretty cut and dried. Amazon will reach a point where it does not need FedEx or UPS but only for special circumstances. At this point, Amazon will be all in with its delivery model and there will be no turning back. It would be doubtful that either FedEx or UPS would welcome Amazon back anyway.

The second is much more difficult. Once Amazon gets really good at delivering its own stuff, it will reach out to other retailers who need delivery services. This will be a tough nut to crack because retailers will likely be hesitant to partner with a competitor that could use the delivery information as a competitive advantage. Amazon has become successful in part because it knows what to do with data and any additional data it can get on its competitors could hurt those competitors.

The opportunity

There still is real brand opportunity in this space. The natural default for most shippers is either FedEx or UPS and you can throw in USPS in there too. The reason those choices are always the default choice is simple. No one in the space has given anyone any reason to care. Reliability and price are really the only two things that matter at the end of the day and most, if not all of the players regardless of size, are reliable and are cost competitive. Cheaper options might take a bit longer but packages will still get there. Next day delivery will get there too but will be more expensive. In short, they all work.

Marketing Major Appliances – A Market Study

Introduction

Step into a Home Depot, hhgregg or any of the other big-box stores and you can see just how much space is devoted to selling and marketing major appliances. Lowes and Home Depot now account for the lion’s share of major appliance sales along with Best Buy. (Sears once the dominant player but that retailer blew it.)

Marketing major appliancesThese big box retail environments try to cram as many major appliances they can into their stores to reap the benefits of the high margins the major appliances provide.

These retail locations often have many different brands in an attempt to cover all bases. But how does a consumer decide on which brand to purchase?

Sometimes the reason to buy is to replace a worn-out or broken appliance. In many of those cases, consumers generally want the same brand to match their other household major appliances.

Others may have experience with a particular brand and still others know that they are simply in need of a new appliance.

Since there are some manufacturers that produce a number of brands (such as Whirlpool), do customers choose on the basis of manufacturer or brand? For the purposes of this study, we will only look at consumer brands, as marketing major appliances are based on brand not manufacturer.

What is important here is to look at the individual brands to get an understanding as to just how similar they all are and where there is room for them to improve.

What follows is a snapshot of where we see major appliance brands today.

The High-End/Premium Segment

First, let’s examine the high-end or premium segment. We won’t spend a whole lot of time on this segment only because they account for a very small percentage of major appliances sales in the US, though it is increasing.

Viking

Marketing Major Appliances - Viking LogoViking has fallen on hard times. Just a few years ago, Viking had a premium price point the quality of its products did not warrant. Issues, particularly with its wiring and general overall quality, plagued the company.

Marketing Major AppliancesAt that point in time, Viking was not manufacturing much of its appliance lines. In 2013, The Middleby Corporation acquired Viking and it has completely re-engineered the product lines.

Since then, Viking has regained some of its clout. But, as a brand, it is much need of repair.

Viking’s messages are expected, introducing the new Viking as something better. That is a defensive position against the competition.

Being better than what? Better than the way its appliances used to be or better than all other major appliances?

If it is the latter, that is not a claimable position because there is no opposite claim. Without an opposite claim in the market (“We’re worse!”), it does not provide a choice. For a brand to succeed, it must say who it is for and, often more importantly, who it is not for.

Miele

Miele is a German manufacturer with the themeline of Immer Miele LogoBesser, which means Forever Better. Like Viking, Miele talks about the product and not the user (big mistake). It’s still a pretty strong promise, as far as it goes.

It is a reminder that the product will actually be better forever and gives the consumer the confidence that they are always ahead in the technological changes in the market. That feeling – being with a winner – can be a strong claim. It suggests that you, the customer, is a winner by association.

Wolf/Sub-Zero

Sub-Zero Wolf LogoThe Wolf/Sub-Zero brand, with its characteristic red knobs and stainless steel finishes, has a pretty solid history of quality and performance – except when your built-in refrigerator needs repaired. The built-in workings of the appliances means repairing them is expensive and may require you to buy a whole new appliance.

That being said, Wolf talks about creating moments worth savoring. Is that about creating a moment or creating good food? From a brand perspective, it is a mixed message. Brand works best when it is single minded.

Make no mistake, the Wolf and Sub-Zero brands have generated growing awareness and preference. The red knobs of the Wolf major appliances and the stainless of the built-in refrigerators are iconic and the brand has been very successful in working with builders who specialize in high-end homes.

Thermador

Thermador LogoThermador has been around for quite some time. It focuses on innovation, as there have been many in its history. One of its exclusive features is the 5-star burner design, which serves a functional and cosmetic purpose. Its tag line, real innovations for real cooks, does a decent job recognizing the customer but it stumbles because it is still about Thermador.

One of the problems with the position of innovation is that, with the speed of technological change, innovation has become a table stake in the category. This is particularly seen in major appliances on the next tier down.

There are refrigerators that are connected to the internet and can send pictures of their contents so you know what you need at the grocery store. Even washing machines now have two separate washing areas. While Thermador promises innovation in cooking specifically, that is still a table stake promise.

Jenn-Air

Jenn Air LogoWith ovens that can connect to your mobile devices and touch screen ovens, Jenn-Air looks just as innovative as Thermador. However, Jenn-Air leaves the consumer guessing as to what its brand actually means.

Jenn-Air says its brand is about “sophisticated design, innovative technology, and exceptional performance.” So in other words, it has high-end major appliances. Actually, that theme could really apply to any appliance brand as the emotional difference between them is slight.

Bosch

Bosch LogoBosch is a bit of a tweener, falling both in the premium and mass-market segments. Some would argue that Jenn-Air might be in this spot as well. Bosch takes the same approach to its brand as does Jenn-Air, although it encapsulates it more clearly with “Invented for life.”

Bosch talks a little about its attention to detail and, much like Jenn-Air, says its major appliances represent, “uncompromising quality, technical perfection and maximum reliability.”

As a business, Bosch has done an excellent job in product performance, especially in its dishwashers and cooktops. Its dishwashers especially are viewed as some of the best on the market today.

There are a number of other high-end brands but all of them are much of the same. Brands like La Cornue, Bertazzoni, Gaggenau, True, Dacor and Aga Marvel tend to play in specific niches of this niche category, but their brand promises are very similar.

Other brands like Samsung, LG, Frigidaire Gallery and Professional, KitchenAid and Electrolux may have some products that are premium but, for the most part, they still mass market brands.

The sales process and what we know about premium major appliances brands

Looking at marketing major appliances in the premium or high-end category, there are a couple of things that stand out. For one, many attempt to differentiate with themes on design, the culinary experience, heritage and innovation. In other words, they all talk about the same things.

Marketing Major AppliancesTheir advantage is that consumers of premium major appliances are already predisposed to purchasing them. The premium appliance consumer is not one who, when the microwave breaks, heads to Home Depot to go get another one.

In a kitchen remodel, for example, a premium appliance consumer discusses appliance options with their designer or contractor who will lead them toward a particular brand or brands.

From the perspective of the premium appliance manufacturers, this is a terrible place to play in because they have no control. Marketing major appliances in this segment the brands cede control the contractor or designer.

There is little innate brand preference and that preference comes as a result of past experience with the brands. But that’s not stealing market share.

One thing is clear, premium appliance brands don’t know what drives customers to purchase their specific brands other than what drives a premium appliance customer to purchase ANY premium appliance brand – design, innovation, quality and cooking, if you go by what the market’s players say.

The Mass Market Segment

For the remainder of this study, we will look at marketing major appliances brands that are readily available, particularly in big box retail.

SamsungSamsung Logo

Samsung does have a premium-like line of major appliances called Chef Collection, but the vast majority of its sales are in mass market. It is a bit difficult for consumers to separate the Samsung appliance brand from the Samsung Electronics brand – especially since Samsung has used the same actors for both, Kristen Bell and Dax Shepard.

Samsung Electronics ad:

Samsung Washer ad:

Samsung is attempting to create a lifestyle. After all, Samsung can be used for everything from phones to major appliances. That is actually one of the things that makes it approachable. It’s clear that Samsung is leveraging its innovation-driven electronics brand to drive preference in the appliance market. It wants to be known as a technology expert.

marketing major appliancesThe problem with this strategy is that a product failure, product substitution, or, more dangerously, a technology failure on either side hurts the Samsung brand as a whole.

And let’s be honest for a moment, when you see the washer ad, how innovative is it if you can add to a load mid-cycle? Top loading washers have had that capability for years. If you are really concerned about adding additional items, wouldn’t one just choose a top loader in the first place?

Samsung tells the consumer that its major appliances can handle anything you can throw at them. The messaging is all about what the major appliances can do with the single exception of the ranges in which the messaging shifts to what the consumer can do with the range.

Although Samsung blurs its electronics and major appliances brands, neither owns a distinct position in the market space. For the Samsung appliance brand, you get design, innovation and ease of use.

All are table stakes of the category. Nothing Samsung says is a true reflection of the customer or who the customer aspires to be when they use the brand.

LG

LG LogoLG feels very similar to Samsung but humanizes its brand when marketing major appliances through its Life’s Good tagline. While not highly emotional, the tag line does attempt to connect with the consumer as if to say, “If you believe life’s good, then LG is the brand for you.”

However, it is much more likely that the brand is really trying to convey, “With LG, life’s good,” making the brand more about LG than about the customer it wishes to influence.

You also recognize that it’s about the manufacturer and not the customer by the way that the initials of Life’s Good are LG. If noticed, then the line becomes non-believable. It’s becomes only clever.

Much like Samsung, LG talks about innovation, design and ease of use.

LG Twin Wash Commercial

However, in a bit of a non sequitur, LG also introduces a new concept of fitness meeting fashion. This is a web series with Malin Akerman where she talks about staying healthy while looking great. The videos are a minute and a half long and she spends less than 10 seconds, at the very end, talking about the washing machine. These videos are clearly aimed at women who might connect with her but they do little in terms of building the brand of LG.

LG Side Kick where fitness meets fashion:

Unlike Samsung, LG is trying to market by just being different. Differentiation in the marketing sense requires two things: being different and being better. Other than the loose tie with fashion and fitness, there is nothing in the LG brand that represents anything better.

GE

GE Appliances LogoGE has a number of sub-brands: Profile, Café, Artistry, and Monogram. All of these GE sub-brands cite design and style as differentiators but there are some other differences as well.

GE Artistry

GE Artistry is the Target of the GE family of major appliances. It claims to be the height of appliance design and style, but it has stripped down all of the fancy features (like a timer on their range, for example) to give consumers major appliances that heat, clean, cool and cook.

Like the Target brand, GE is attempting to make GE Artistry cool, cheap and chic. It is a slight change in the marketing major appliances strategies.

This is a good example of an appliance brand understanding its consumer. There are many consumers who are just starting out, perhaps buying their first major appliances and who are drawn to a brand that enabled them to buy style without breaking the bank.

Below is a co-opted online ad of the GE Artistry series where the brand differentiators of cool, stylish and inexpensive are clearly laid out.

So the question is, does cool overcome cheap in major appliances? Major appliances by their very nature are meant to last for a considerable amount of time. With the GE Artistry sub-brand, at what point does the cool factor wear off?

While it may have a certain style today, appliance style may completely change in a matter of just a couple of years. For anyone thinking of an appliance that is supposed to last more than a couple of years, GE Artistry is probably not for them. From a brand perspective, the GE Artistry brand is often too of the moment.

GE Cafe

The GE Café sub-brand claims to be restaurant inspired. GE Café is also the only one of the GE sub-brands that says anything about innovation. The intention of the GE Café brand in marketing major appliances is to be for the serious cook who needs the features and power of restaurant quality major appliances.

This first ad discusses the power and advanced cooking technology of the major appliances to take “food further.”

What is seriously wrong with this ad is that it gives no credit to the cook. The ad is about the major appliance. While it assumed that a consumer knows that major appliances alone can’t make food, the argument is backwards. “GE major appliances take food further.” Rather, the argument should be “If you are always looking to take food further, GE Café is designed for you.” Then it becomes a real reflection of who the consumer aspires to be.

Compare that with the ad below:

While this ad demonstrates the innovative feature of the Keurig brewing system, it portrays this innovation as something that’s normal. It just makes things easier and good enough for everyday (and extra special days). All the power and advanced cooking technology seen in the other ad, and what GE Café is supposed to be about, is completely gone. Now the GE Café brand is about ease of use and everyday cooking.

GE Profile RefrigeratorGE Cafe RefrigeratorGE’s other brands, such as GE Monogram, GE and GE Profile, are about sophisticated style, craftsmanship and modern style, respectively. GE Monogram is meant to be GE’s high-end brand where the GE and GE Profile sub-brands are the everyman’s brand.

Instead of consumers identifying with a particular sub-brand of GE, they are stuck comparing features and price between the brands. There is no true preference.

That opens up the rest of the brands at Home Depot to the consumer’s considered set. The power GE thinks it is getting from differentiating its sub-brands actually makes the brands more suspect to competing non-GE brands.

In marketing major appliances, GE has tried to segment its market to the point where it is trying to be all things to all consumers. As such, it is for no one. GE wants to leverage the power of GE throughout all of its sub-brands but is depending too much on the consumer to be able to navigate them.

Walking into a Home Depot, for example, you can find all of these GE brands sitting together with price hangtags. There is nothing differentiating one from another thus canceling out any brand differentiation and reducing the individual power of marketing major appliances. How is the GE Café refrigerator that sells for $2700 any different than the GE Profile that sells for $2300? Standing in the store, is the GE Café brand worth $400 more without an ice and water dispenser?

Whirlpool

Whirlpool LogoWhirlpool has a bit more of a heritage than others, particularly in marketing major appliances. Its products promise innovation and design much like everyone else.

But the innovation and design come as a result of Whirlpool’s corporate position of making the most out of the moments that matter and innovation that develops at the pace of life.

Corporately, Whirlpool is focused on avoiding flash. Its major appliances are designed to be as easy and flexible as possible so that they do not impede running the house. Whirlpool understands that major appliances are simply tools to do tasks.

In this ad, Whirlpool credits consumers with taking care of their household, knowing that care can be messy. Then the ad posits how the product can help you “care.”

In this ad, the caring aspect of the brand is still present and is much less about the products than about the whole idea of caring. Whirlpool has successfully separated the product from the act of using the appliance in its strategy of marketing major appliances.

marketing major appliancesJust about anyone with children can think of a time where they were in a similar situation. Parents make lunches for their kids (yes even with cute notes) and they do laundry when a child falls in the mud or has an accident.

At those times, the appliance that keeps the food cold or washes the soiled clothes is irrelevant. It is everyone’s expectation that, when they go to the refrigerator to pull out the lunch meat or put a muddy shirt in the washing machine, that the food will be cold and the shirt will be clean.

These are table stakes of the entire appliance category. The brand of appliance does not matter.

In print, Whirlpool tries to convey the idea of being designed to simplify.Whirlpool Refrigerator Ad

Whirlpool says its refrigerators are not simplified but that their refrigerators somehow make “your coolest creations simple.”

Whirlpool should certianly be commended for at least attempting to make its brand a reflection of the customer, but can a refrigerator make what a consumer wants out of its contents more simple?

While the brand of Whirlpool is certianly a feel-good kind of brand, it lacks a key ingredient to incite change in a behavior. It is not pursuasive.

The Whirlpool brand wants consumers to believe that choosing another appliance brand will get in the way of running the house and taking care of the family.

Unfortunately for Whirlpool, that simply is not true. Unless the appliance is broken, which happens to all major appliances, getting in the way of running the house is not a point of failure. All major appliances work and are easy to use.

 

 

KitchenAid

KitchenAid Logo

KitchenAid is probably best known for its stand mixers and food processors. But it does have a full line of major kitchen major appliances as well.

Its brand is for those who create, paying homage to the users of the appliance for their ability to create.  KitchenAid does bring the consumer into its brand, probably better than the rest of the competitive landscape. The spot demonstrates that the user has more control over creating even better dishes with the KitchenAid line of products.

KitchenAid backs up those statements with the table stakes of design, performance and features to back up this idea. The important part is that the main themes are the reasons for preference and, therefore, make the table stakes more important.

Maytag

Maytag was once the king of marketing major appliances. There was a time when Maytag had a single message represented by a single iconic figure, the lonely Maytag repairman.


Jesse White was the original “loneliest guy in town” and that campaign went on for nearly 50 years. As everyone knows, the Maytag repairman was so lonely becase he had nothing to do – Maytag washers and dryers, and other major appliances, were so dependable that they did not need repairing.

In 2014, Maytag shifted their approach to the Maytag repairman:

The more active repairman is no longer a repairman. Rather, he represents the “hardworking hum of a Maytag home.”

marketing major appliancesMaytag once owned the whole idea of dependable in marketing major appliances. In much of the same way that Volvo once owned the idea of safety, Maytag very successfully owned what is supposed to be a table stake value.

However, as competitors’ products became more reliable, Maytag shifted its once iconic position.

While the concept of dependability is not as pronounced as it once was, it is still tightly woven into the fabric of Maytag, at least in words. It talks about its products as being “All kinds of (insert kitchen product category), one kind of dependable” or “You can’t have delectable without dependable.”

What is odd is that Maytag has nearly dropped all references to dependable in its print ads, with its washers and dryers and kitchen major appliances, instead focusing on best-in-class cleaning and hard work. It is a change fir them in the strategy of marketing major appliances

Even the print ads are missing the idea of dependability.

Maytag OvenMaytagPrint1_800

 

 

 

 

 

 

 

 

The equity of dependability is gone. It is is now simply nostalgic.

Maytag has diluted its brand with the repurposing of the Maytag repairman. Because dependability is now a table stake, it was right to step away from it. However, Maytag has landed in a spot that is unemotional (although quirky).

Fridgidaire/ElectroluxFrigidaire Electrolux Logo

We can combine these brands because there is so little difference between them and they are part of the same company. For the most part, Electrolux, the parent company, makes the same products for both then labels them differently even though there isn’t much difference between them in the first place.

The Fridgidaire/Electrolux brand as it currently stands is about time savings.


It has attempted to demonstrate how all of their kitchen major appliances can save their owners time, either with stainless steel that reduces fingerprints, faster preheating or a dishwasher that has more water coverage.

However, while time savings may not be completely applicable to a smudge proof refrigerator, Fridgidaire/Electrolux does a good job with living up to that promise with its washing machine, which can clean a load in 20 minutes.

marketing major appliancesFrom a brand perspective, the question is, “Is time savings a brand or a characteristic of a brand?” Further, is it the single most emotionally intensive thing that could be said to get a consumer to consider the Fridgidaire/Electrolux brand? What makes marketing major appliances effective?

To answer the first question, the idea of time-savings is not really true to all of Frigidaires products. Its gas cooktops don’t boil water faster, its microwaves don’t cook faster and its refrigerators don’t cool faster.

Secondly, do consumers who purchase Frigidaire products see themselves as someone who saves time or do they buy them because they believed they were the best value? Or do they believe that the product has the most features?

In marketing major appliances, there are other brands – Kenmore, Hotpoint, and Amana for example (all manufactured by Whirlpool). Hotpoint and Amana are low-priced value brands. Kenmore, once highly sought after, has become an also ran in this category, partly because of Sears/Kmart’s struggles and very limited distribution.

Summary of Marketing Major Appliances

What have we learned about marketing major appliances? It’s pretty easy to divide the category into two – high-end major appliances and mass market. Brands have a distinct fit in to each of these very broad categories.

After that, things get pretty murky.

Marketing major appliancesMarketing major appliances in the high-end segment, brands talk a lot about luxury, innovation and creating an experience. There are varying degrees but thematically each of them fall here. In effect, all of the high-end brands are claiming table stake values.

What the premium appliance brands have in their favor is that there are fewer of them to choose from, so each can have a bigger piece of the market share pie than their mass market brethren.

The high-end appliance brands work very closely with builders, interior designers and architects to build a relationship with the brand. Secondly, these brands either have a dedicated sales force or are sold only in stores that sell other high-end brands, making the sales force more knowledgable about each brand. The caveat to both of these advantages is that the brands are giving up control to a third party to sell their major appliances.

Marketing major appliancesIn marketing major appliances in the mass market, the story is even bleaker. The mass market brands have done a poor job in creating differentiation. The brands have nothing to do with the user and instead are all about the major appliances.

On the other hand, some brands attempt to own a table stake of the entire appliance category – innovation, design, style, it cools, it heats, it washes, etc. In effect, the mass market brands are trying to convince consumers to buy their brands simply because they are major appliances.

Further, there are any number of retail outlets selling one, two or all of the mass market brands. The brands are mixed up on the floor with specific major appliances grouped together. Consumers are then forced to make decisions on the brand of appliance based on features and price.

Marketing major appliancesEven if a consumer has a preference for a particular brand, with all of the brands present, that preference could easily be overcome by a feature or a sale on another brand. That’s because in the marketing of major appliances, brands themselves have not given anyone a real reason to choose.

Sure, appliance manufacturers and brands are likely saying, “Oh, we are the best designed, we have a washing machine that you can add to mid-cycle, or we make our major appliances easy to use and clean.” But again, those do not create preference. They should be the supporting points for an emotional brand that creates loyal customers.

Like Electrolux/Frigidaire’s attempt to capitalize on the idea of saving time or Maytag’s durability claims, it should be woven into everything the brand is and does.

This does not just apply to the mass market brands. The high-end brands should also take note. As this space becomes more and more crowded, the survival of all appliance brands may depend on it.

There is a better way

When marketing major appliances brands that can connect with and be a reflection of the consumers will have a distinct advantage in this category. In marketing major appliances, it would drive preference if a brand could give consumers the answer to, “Who am I when I use this appliance brand?”

Marketing major appliances This answer must come directly from the consumer’s beliefs not simply a fulfillment of a passing want or need. Beliefs are powerful. They are not transient but rather enduring guideposts that influence each and every decision we as human beings make everyday.

When brands are really derived from belief, not just wants and needs they have the DNA of the consumer built in them and resonate on such an emotional level that choosing a different brand would be akin to emotional suicide – a consumer would actually be choosing against who they believed they are or aspire to be.

Its easy to satisfy a want or need there are many options with many substitutes.

Aligning with a belief, now that is something different and in marketing major appliances, brands would be wise to pay attention, because the opportunity is there to steal market share.

Beer Marketing and Differentiation

Beer Marketing — Growing Beer Market Share

Introduction

Beer marketingThe following glance at beer marketing will give you a quick peak into how Stealing Share operates and finds solutions. Of course, no branding project would be complete without market research and all too often beer marketing lacks valuable research. This is just a cursory analysis. But it suggests a brand position that beer brands could use to steal share based on our own experience and expertise in branding beers. If your brand needs to steal share, feel free to email us or call us.

Commercials

Keeping the advertising in mind for all of beer marketing is important because to be successful in stealing market share your brand needs to be both different and better. So try to keep in mind all the beer ads you’ve ever seen (COORS, Budweiser, Michelob, Miller, MGD, Corona, Beck’s, Heineken, Red Stripe, Bud Light, Sam Adams, Amstel Light and Coors Light — for example). (You can view many of the category commercials here in our beer market study). Take a look before going on with this article.

It’s important to start by briefly describing the personality, position and promise of each of the brands. Here is a short example of just a few US domestic brands.

Brand Personality Position Promise
Budweiser Confident. Hip. King of beers “I get it.”
Miller Lite Hip. Youthful. Beer for friends It’s the experience.
Coors Lite Hip (a bit sophomoric) Cold. From the Rockies. Everyman Beer.
MGD Cool. Aloof. Genuine Seize the day.
Miller High Life Knowable The High Life Everything in perspective.
Coors Real Legendary Be an original.
Michelob Cool. Knowing. Tastes Imported Taste

 

Possible Meanings

Beer Marketing Positions
There are many possible positions. The goal is to find the one with the highest emotional intensity.

We considered the positions that a beer brand could take based on the advertising when mapping out the beer landscape with the goal to create meaningful beer marketing messages. Of course that assumes that the advertisers know what they are trying to convey – and THAT is a frightening assumption. Remember, for a brand position to have any meaning there must be an opposite position that a brand could chose for any of the positions to have true meaning to the customer. For example, “Best” is not a brand position because no one would claim “worst.” “Best” simply isn’t believable to the customer. But someone may claim the “intimate” position because a competitor could claim “casual.” That would be believable because it’s positioned against another’s positioning. Below are some possible positions a beer could choose:

Rules of Positioning

The following rules are helpful when selecting a beer marketing position to steal share in your market.

  1. Thrust:
    The positioning must demonstrate an active competitive advantage. This advantage answers the question of “why should I care” from the perspective of the consumer.
  2. Beer Marketing
    Strategy has rules

    Gravity:
    The positioning must have a powerful relevance to the target audience and their interest and receptiveness must be peaked.

  3. Definition:
    The positioning must be distinctive. It must set the brand apart from the competition.
  4. Density:
    The positioning must be single minded. It must have clarity and simplicity and must illuminate the target’s main precept.
  5. Synthesis:
    The positioning must be fused together in an emotional bond with the target audience. It must grab them in the gut.
  6. Integrity:
    The positioning must be believable. If the message raises suspicion – even if it is true – barriers are raised.
  7. Precision:
    The positioning must speak to the target that is best positioned to influence consumption or to consume that product or service.
  8. Convergence:
    The positioning must convey the same positioning message in all of the ways in which the consumer has of touching the brand.
  9. Momentum:
    The present positioning must build upon (but never mimic) the equity (if any) of past communications to leverage any residual positioning equity.
  10. Acceleration:
    The positioning must keep pace with the changing markets to evolve constantly making itself increasingly effective each day.

Beer Marketing and the Current Market

Next, we map out graphically how the major beer brands see themselves to check if there’s a position ready for the taking. This is an important exercise in developing beer marketing messages and beer brand positions.

Beer Marketing
Today the market is divided mostly by origin and price point.

Beer Marketing
Most microbrews define themselves by their origins or styles

Beer Marketing
To be fair, all the beers brands could be positioned one on top of the other as there is little differentiation

Beer Marketing Summary

All the major domestic beers are, by and large, competing for the same audience with vastly similar messaging. The market skews towards masculine-bawdy. Where are the beer marketing differences? How are they being delivered?

Quality, distinctive taste and better beer belongs to the imports and the micro-brews with some spillover into the specialty mass brews of Killians, Red Dog Blue Moon and the like.

Therefore, to claim a position as the superior tasting beer is in violation of rule 7 (integrity). It simply is not believable.

Like most mature markets, the beer marketing messages need to trade off personality and brand image rather than product benefit. After all, no one prefers a beer that they do not like. Taste or even a promise of better taste is not an effective lever to take market share.

Inside-out and Outside-in

Let’s dig deeper to accurately find positions that have the most meaning to customers and provide a market opportunity. Think about beer marketing from an inside-out perspective (how the beer brand presents itself) and an outside-in prospect perspective (how the customer feels about the brand).

Beer Marketing Implications

The most successful and powerful beer advertising of the past 10 years has toyed with this position. Bud’s anthemic “This Bud’s for you” and the original “Miller Time” campaign from years back found home in this quadrant. In today’s market, the closest player to this position is Corona, which has been one of the strongest and fastest growing beers in the import market.

Behavior Modeling Analysis

beerpres_b42_355To ensure that this beer marketing position has true and important meaning to the audience, we thought through the process (what it is customers think beer does), purpose (what the result of that process is) and the precept (what are the fundamental beliefs of the audiences that leads them to think that is the process). That brings us to the ruling precepts that are the most basic and critical precepts that motivate this audience. As you can see, a brand that fits into the sophisticated/intimate/confident position will appeal to this market ? and steal market share.

From our Behavior Modeling (Read more about it here) analysis we came up with the following precepts that support our market audit.

The Beer Marketing Prime Position

X beer is an authentic great tasting American beer for those of us that don’t need to follow the crowd.

Beer Opportunity.001

“This is the confident beer for those of us who know exactly where we stand. Some things in the world simply need no explanations. Good judgment has great rewards. Discriminating and smart enough to avoid trends and ads. Nourishes the spirit without pretense.”