Tag: Stephen Hoch

J.C. Penney’s New Old CEO

Posted on April 10, 2013

JCP_Header_logoWith the company’s stock price tanking (12% yesterday), sales falling (25% for the year) and store traffic dropping off, J.C. Penney’s board decided on Monday to replace CEO Ron Johnson with former CEO Myron Ullman. Johnson, a retailing whiz at Apple before he moved to Penney, failed to get mileage out of a new strategy that eliminated coupons, cut out hundreds of brands and introduced a new boutique-type store-within-a store concept.

Was the board’s move a surprise? Long overdue? And what lies ahead for Penney given the retail sector’s ongoing challenge to persuade consumers to keep buying?

“It was clear that there were problems. The issue was how long the board’s patience would last,” says Wharton marketing professor Barbara Kahn, director of the school’s Jay H. Baker Retailing Center. “Ron Johnson asked for a full two years to test his ideas; [the board] didn’t grant him that…. He burned through money, no question. So from a business point of view, the ouster might be considered long overdue.”

If Johnson had been given more time, could he have made his new strategy work?

“That’s the big question,” says Kahn, who wrote a blog post about Penney before Johnson’s ouster. “Johnson says ‘yes’. Most in the industry say ‘no’. They say he didn’t test his strategies; he didn’t understand the customers; he didn’t understand his employee base. The margins are quite different in this business than at Apple — significantly lower at JCP – and he didn’t seem to appreciate that.”

His biggest mistake, she adds, is that he “didn’t test any of his ideas to see customers’ response and understanding. There is no question that his pricing strategy was flawed. Originally, the new pricing strategy was too confusing. The initial advertising was negative, and telling customers that they were stupid to adhere to the old price promotions is not effective or smart advertising. A few more pricing mishaps later, and finally JCP was back to coupons – which the customers demanded. And why did they demand the coupons? Because they provided a reason for the customer to come into the store. Because having a discount price provides a reference price, and we know customers base value on relative pricing strategies.”

Furthermore, in bad economic times, Kahn notes, “JCP customers needed even more incentive to go shopping. The coupons provided all of that. But by the time Johnson understood this, it was too late, and even the coupons were not effective.”

Kahn, however, also offers praise for parts of Johnson’s merchandising strategy: “It is creative and has potential. Whether there are the resources and time to implement it now is questionable.” She points to his proposal for “stores-within-stores on a ‘street’ around a ‘town center.’ The street would encourage people to linger in the store, surf the net, drink coffee. The town center would feature events. Both would increase the in-store retail experience and the initial response was good…. But there were too many stores-within-stores planned, and it was too difficult to get them implemented quickly enough. And the trouble with Martha Stewart … didn’t help at all.” Macy’s sued Penney last year after Johnson partnered with Martha Stewart Living Omnimedia to sell Stewart’s housewares in Penney stores, despite the fact that Macy’s has an exclusive contract with Stewart for certain housewares categories.

As for Ullman, “he came back out of loyalty for the store and the brand. He’s in a very tough position,” Kahn says. “There is a possibility that the store will have to go through bankruptcy to get out of the mess.” In addition, “it should be noted that some of these problems were exacerbated by a customer base that was likely hit hard by the recession. Many stores suffered during this time, although none as badly as Penney.”

Wharton marketing professor Stephen Hoch wonders why Johnson took the job in the first place. “It was a career move from hell, and I’m not sure why he wanted to leave Apple. More importantly, I never could understand his enthusiasm for ‘reinventing’ the moderate-[priced] department store,” which Hoch considers a flawed concept.

Ullman, he says, “is a seasoned retailer so he will do okay. But he was responsible for where they were when Johnson took over, and that [situation] obviously needed fixing.” Johnson’s pricing approach, Hoch adds, “was obviously not going to work, and he should have known that from his pre-Apple days.” The company has “suffered a tremendous body blow in terms of lost sales and a huge cash drain. It will not be easy for them to get back into the thick of things and succeed. The brand name is not that strong and never has been.”

Wharton management professor John R. Kimberly says Johnson’s ouster “came sooner than I expected. It was clear that his magic hadn’t transferred from Apple, but boards typically are slower to move.” And while the huge drop in sales no doubt played a role in the board’s decision, “it’s more about what was behind the drop that shook the board’s confidence, particularly the waffling on the ‘no sales’ policy and the Martha Stewart mess.”

Kimberly doesn’t think giving Johnson more time to execute his strategy would have worked. “Penney’s customers were not Apple’s customers, and it’s hard to imagine that you could really turn a JCP store into an Apple store. The whole ‘customer experience’ in the two rests on fundamentally different bases.” One of Johnson’s mistakes, he adds, is that “he may not have understood the roots of his success at Apple; he may have drawn the wrong lessons from his experience there. Certainly it wouldn’t be the first time that’s happened when a senior executive transitions from one industry to another.”

As for Penney’s chances of surviving in this increasingly difficult market, Kimberly acknowledges it will be tough. “They have some formidable competition, and they were already losing market share, which is why they [hired] Johnson in the first place. They are now even further behind. I can’t imagine investors are going to be thrilled, and it’s a stretch to imagine how they will win back customers. It will take a turnaround executive with a cast iron stomach and Teflon outerwear to rescue this one.”

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A Day to Give, not Spend

Posted on November 27, 2012

Consider it the antidote to Black Friday, Small Business Saturday and Cyber Monday.  A national coalition of organizations and individuals wants to brand today – the first Tuesday after Thanksgiving – as #GivingTuesday, an opportunity for people to give, not spend, as they enter into the holiday season.

According to the #GivingTuesday website, “more than 2,000 partners have come from all 50 states of the United States, and are either registered charities [a 501(c)3] with a specific #GivingTuesday initiative, or they are for-profit businesses, schools, religious or community groups who have committed to spearhead a project that will benefit at least one 501(c)3.”

The initiative’s sizeable list of participants ranges from The United Nations Foundation, The American Red Cross and Microsoft to The Economist, Groupon and Mashable, to name a few. The list also includes animal shelters, Big Brothers Big Sisters organizations, performing arts centers, city mayors and New York’s 92nd Street Y – a major catalyst behind the movement.

One wonders, however, how successful this initiative will be, given shoppers’ stretched budgets, their continuing focus on finding the best deals and the fact that many other charitable groups use this time of year to ask for donations.

Wharton marketing and psychology professor Deborah Small applauds the concept. “In general, #GivingTuesday is a good idea,” she says. “Although personal budgets may be constrained due to holiday shopping, charitable giving does go up at the end of the year. This could be due to associations between the holiday season and charitable giving, which I believe is what #GivingTuesday is trying to capitalize on, but it could also be due to tax incentives. People want to get in their donations by the end of the year to get the deductions.”

In terms of the recession, “charitable giving has gone down in absolute terms, but not relative to GDP,” Small adds. “In other words, people are spending less on charity just as they spend less on most discretionary purchases because they have less. However, they are not becoming stingier – i.e, giving a smaller proportion. This could be because social needs are more pervasive when the economy is weak so people feel a greater desire and responsibility to help others.”

According to Katherina Rosqueta, executive director of Penn’s Center for High Impact Philanthropy, the period between Thanksgiving and New Year’s has “historically been one of most active times of the year for philanthropic giving. So in some ways, #GivingTuesday is not really creating a new tradition; it’s highlighting a tradition that has long existed.”

What’s interesting, she says, is that people’s generosity remains alive and well, despite the recession. She points to the fact that donor advised funds – those specifically set aside for charitable giving – continue to increase in assets. Also, perhaps because of the recession, people want to make sure that their giving “actually makes a difference….  If you don’t have as much to give, you want to be smart about where [you donate]. This ability to have more confidence that what you are giving really matters is more in the forefront because of the recession.”  

Several studies have shown that, for individual donors in particular, “the information they value the most — and that is still not as available as they would like — is information around the effectiveness of their gift,” Rosqueta notes, adding that #GivingTuesday “provides an opportunity for people to make the case around what are some of the smartest philanthropic [opportunities] available to donors. Because of this initiative, maybe people will think, ‘Okay, today might be a good time for me to make a gift.”

The only downside to #GivingTuesday, Rosqueta suggests, would be if “it gets too noisy, so that donors no longer trust the information they receive. If voices like ours — which focus on bringing money to organizations and models that have evidence of impact — get drowned out by marketing, and people then tune out, that would be unfortunate. But the more that organizations are encouraging giving and actually providing solutions for people to consider, the more successful this can be.”

Wharton marketing professor Stephen Hoch is somewhat less hopeful. “I think this event is going to be buried by all the worthless media attention on Black Friday and Cyber Monday and so will receive little traction with the media, which is important in getting any attention from the public,” he states. “Moreover, I think that the entire Black Friday pseudo-sale is losing steam; it is so over the top at this point. It won’t be going away, but it will become more passé, since retailers can only open so early and there can only be so many door buster offers. My own view is that smart shoppers would be better off not shopping this past weekend and waiting for the inevitable markdowns if they really are interested in bargains.”

All non-profits struggle with fundraising, Hoch says, “but it is worse since the recession because once people start cutting back on their giving, it is not that easy to get them back into the giving groove.” At the same time, he adds, “I see no downside to trying this for either the organizers or the partners.”

 

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Is Burberry the Canary in the Luxury Coal Mine?

Posted on September 24, 2012

When Burberry recently reported that sales at stores open a year or more were flat, and suggested that profits are likely to be on the disappointing side, some people began to wonder if Burberry might be the canary in the coal mine – a harbinger of lower sales in the luxury sector over the coming months.

A Wall Street Journal article today supports that theory, noting that diamond sales in China are expected to grow more slowly this year than last, while Daimler AG has announced that its Mercedes-Benz division would miss its profit target in China and expects lower sales for its Porsche division.

Is London-based Burberry indeed an example of what we will see in the luxury goods market? What are the implications for the global economy and, equally important, for the upcoming holiday season?  

Burberry suggests that its slowdown is “a sign of an upcoming trend in the luxury segment,” says Wharton marketing professor Barbara Kahn. “Although it is hard to know for sure, there is some indication that this might be a correct analysis.”

Much of the ability of the luxury segment to maintain steady growth has been due to strong performance in China, she adds, and “recently, this growth has slowed down for several reasons. First, as the Chinese luxury consumer gets more sophisticated, [his or her] need for purchasing high-end visible status symbols slows down. Many of Burberry’s products are high status — and visibly so, due to the famous ‘check’ [design].” Now that consumers are gaining more confidence “in their own positions of wealth, these types of purchases may decrease.”

In addition, Kahn says, China’s economy is slowing down, “and there are indications that the government will not provide substantial stimulus mechanisms, as they have in the past, to keep up the growth levels.”

Burberry, a luxury fashion house that sells accessories and clothing for men, women and children, has approximately 235 stores and outlets, and can be found in more than 200 upper-end department stores worldwide.

An article in The New York Times noted that Burberry’s main customers, “known in the industry as traveling luxury consumers, [include] just over a third in Asia, a quarter in the Americas and a little less than a third in Europe.”  The article, published shortly after the disappointing figures were announced by the company, quotes Burberry CEO Angela Ahrendts acknowledging that “the external environment is becoming more challenging,” and suggesting that Chinese consumers may be slowing down their luxury purchases only temporarily, waiting to see how the upcoming leadership changeover in China affects their purchasing power. 

Wharton marketing professor Z. John Zhang has a slightly different take. “I don’t believe that the overall consumption of luxury goods in China is going down, and even if it is, it will not last for long,” he says, adding that economic downturns typically do not affect many luxury goods consumers, “especially in a country where the income disparity is huge. If anything, in a downturn, you need to look even better to impress your peers.”

Burberry’s lower sales could be due to a number of reasons, according to Zhang. “First, more and more people in China are going abroad for shopping. The people who could afford to travel abroad are those who could afford to buy luxury goods, and there will be a substitution effect. Second, there may be more fake luxury goods in the Chinese market. After all, during a downturn, you do what you must to survive. The supply of fake goods may have increased considerably now that the economy is getting tougher.”

The worst outcome for Burberry in China, he adds, is that “it is no longer on the top of the Chinese customer’s list of luxury goods [to purchase]. These consumers are constantly looking for new ways to distinguish themselves and to stand out in a crowd. It is an arms race [among] luxury brands to find new ways to provide exclusivity to their customers.” The disappointing news from Burberry could reflect the fact that the company “is losing favor with exacting Chinese consumers.”

So what’s ahead for Burberry and other luxury goods retailers?

“The luxury retail sector was the first to recover after the recession, partly due to strong demand from China,” says marketing professor Stephen Hoch. “Maybe they are now at a pausing point.” Any weakness that is evident, he adds, “would be due to Europe and China rather than the U.S., where the rich seem to be doing just fine relative to everyone else.” In China, if the new stores — where you would expect the biggest increase in same store sales since they are new — showed any weakness, “then this could be a big contributor,” he points out. “It is hard to predict whether Burberry is a harbinger of anything else. I tend to doubt it, but we will see.”

Kahn notes that the continuing uncertainty in Europe is definitely a factor in lower luxury goods purchasing. In addition, she has read reports suggesting that the new Chinese leadership team – expected to begin transitioning as early as next month – “is not likely to provide as much stimulus to the economy as they have in the past.”  Finally, if Burberry’s slowdown is indeed a general trend, and not unique to Burberry, “I would expect to see similar slowdowns in other highly visible status luxury purchases, such as LVMH and Chanel.”

And the outlook for the luxury goods sector during the all important holidays? “As usual, it is hard to predict the upcoming holiday season,” Kahn says. “The back-to-school season was reasonably strong — relative to our new, more moderated expectations — so people are cautiously optimistic. I think the current thought is that we should see a holiday season fairly similar to last year – which is reflecting the slow but steady growth patterns.”

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When Retailers Make Strange Bedfellows

Posted on July 13, 2012

The Neiman Marcus luxury retail chain announced a new partnership this week with discounter Target that will offer a limited collection of items from 24 American designers. According to an article in The Wall Street Journal, the items – ranging from clothing and accessories to leather goods and stationery — will be sold for the same price in both stores, and carry both company logos on their labels.

Neiman Marcus and Target are not two retailers one typically talks about in the same breath. But Wharton experts generally applaud the initiative and suggest it takes advantage of several shopping trends that have gained momentum since the economic downturn.

These days, “you can’t pigeonhole a customer into one store or type of retail experience,” says Wharton marketing professor Barbara Kahn, who is director of Wharton’s Jay H. Baker Retailing Center. “Neiman shoppers may also shop at Walmart or Target. People who stay at the Ritz Carlton for business may stay at Marriott when they are traveling with family. People who routinely shop at Walmart or Target may splurge for a special occasion at Neiman or Saks.”

Target has been partnering with many luxury brands “in hopes of continuing their own cache as a design-oriented retailer,” Kahn adds. “This partnership with Neiman Marcus follows in that stream. For Neiman Marcus, the idea is to lure customers who may not usually shop in Neiman to come into the store – particularly the younger consumer. Even Neiman’s core customer may buy at lower price points from time to time in other channels or retailers.”

Wharton marketing professor David Bell notes that shoppers are going to multiple retailers “and might be prepared to spread their patronage across seemingly very different types of stores. Segmentation is no longer completely ‘cut and dried.’ Target already has been able to attract a clientele that is more upscale than the stores’ product mix would imply. I doubt Neiman Marcus would do this kind of deal with J.C. Penney.”

According to the Journal article, the new collection will be available December 1 for three weeks at Target and Neiman stores and on-line. Target will be producing the 50 items being offered at a price range of $7.99 to $499.99 (with an average price of $60) and will feature such designers as Diane von Furstenberg, Derek Lam, Rodarte and Tory Burch, the article adds.

All this raises the question of what each store – and the individual designers – will be getting out of this partnership. For Target, the advantages are clear, says Erin Armendinger, managing director of the Baker Retailing Center. “It will bring a high-end feel and great designer brands to their customers – who tend to care about these things: Look at the Missoni deal last year.” As for Neiman, “it is hoping to bring in a new customer.”

Wharton marketing professor Stephen Hoch sees each retailer “borrowing brand equity from the other. Target borrows luxury and exclusivity from Neiman, and Neiman borrows affordable chic and democratization from Target.”

As for the designers themselves, they clearly stand to benefit from this deal. “It broadens their appeal and gets their name/designs better known,” says Kahn. “Although there was some reluctance earlier on by some designers, the Target promotions have been so successful and fun, and have not seemed to dilute the appeal of the designers who have participated, so I think people are less risk averse.” Hoch notes that “the designers want scale and more exposure beyond the cloistered world of haute couture. There have been many successful attempts like this one and I know of no disasters for the designer.”

And for whom does this experiment post the greater risk? “Definitely for Neiman Marcus,” says Armendinger. “They risk diluting their brand. The worst thing that could happen is that their customers perceive this as [the store] moving ‘down.’ On the other hand, in the best case, they will seem hip, young, fresh and a little bit more accessible.”

The biggest risk overall, adds Bell, is “brand dilution and erosion of positioning. Each store already has a pretty strong image, along with unique strengths and weaknesses, and the positioning could be disrupted by a ‘blending’ of the two stores. In addition, the risks and benefits might be asymmetric: Neiman could be seen as ‘cheap’ – or, in a better case, ‘good value’, while Target might be seen as ‘expensive,’ or, in a better case, ‘upscale.’”

The Journal article notes that the median household income for Neiman Marcus shoppers is $150,000 to $200,000 versus $64,000 for Target, while the median age is 48 at Neiman versus 40 at Target. Neiman has 77 stores versus 1,763 for Target.

Meanwhile, are there other retailer-combinations out there for whom such an experiment could work? Saks and H&M? or Nordstrom and T.J. Maxx or Walmart? According to Wharton marketing professor Leonard Lodish, “Target is different than the above retailers because Target has used design as part of its positioning since it was started. It will be harder for Walmart or T.J. Maxx to pull something like this off successfully.” Kahn, too, cites the design appeal that both chains have typically focused on: “The connection between Neiman and Target is that they both pride themselves on high-end design appeal, and they execute consistently to their own missions. They don’t try to be what they are not. That protects their brand when they experiment.”

Other “odd couple matchups” are possible, adds Hoch, although Target and Neiman “have a first mover advantage and a novelty effect.”

What could Neiman and Target do to ensure that this experiment is a success? “If they start doing things with these items that are not consistent with the designer image, it will mess things up — like sending out coupons or having temporary price reductions,” says Lodish. “They also need to very clearly differentiate the Target-Neiman [merchandise] from the Neiman-only [merchandise].”

One possible downside for Neiman, adds Kahn, is if the partnership “encourages too much traffic into their store at a busy time, which might chase away core customers. A temporary leave is bearable, but one hopes [customers] don’t translate this into never coming back. The other problem is if [the two retailers] haven’t put the collection together well and if it does not appeal to anyone, then there is excess inventory to get rid of.”

In the end, says Hoch, “the risks seem very minimal. It is an in-and-out promotion with minimal inventory commitment, like a flash sale. I am sure that they will produce [small] quantities and run out quickly. It is all about the buzz.”

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Has Procter & Gamble Made Some Bad Bets?

Posted on April 30, 2012

Last Friday’s quarterly earnings conference call put Procter & Gamble CEO Robert McDonald squarely in the hot seat, as some analysts openly blamed him for weak profits and a series of missteps, according to The Wall Street Journal.

Sales for P&G — the world’s largest maker of consumer packaged goods — increased 3%, compared to 8.5% for Unilever PLC and 6.5% for Colgate-Palmolive, the Journal reported, while its stock price has remained relatively unchanged compared to an increase of 13% for Unilever and 17% for Colgate.

Two unrelated issues are hurting P&G, says Wharton management professor Lawrence Hrebiniak. “The first is a strategic, product-mix issue. P&G has been focusing more and more on higher-end products, including beauty and cosmetics. These products are being hurt by down markets, especially in Europe. Some high-end products are doing well because of pent up demand and/or low interest rates — such as autos — but the same doesn’t hold for P&G’s stable of expensive offerings. The day of ‘rack ‘em, stack ‘em and sell ‘em’ at low cost that characterized the marketing of Tide and other commodities has changed, and the newer emphasis on the high-end isn’t faring well worldwide.”

A second, related issue is that growing emerging markets are looking for the low cost commodity products that P&G is emphasizing less and less, Hrebiniak adds. “Greater decentralization of structure and operations is needed to cater to local tastes and demands, but P&G seems weak in this regard. Perhaps too much centralization, coupled with downplaying the products that emerging markets are looking for, is hurting market share and the bottom line. McDonald and his team need to look carefully at strategic and operating issues — especially decentralization and getting closer to emerging markets — to turn things around.”

Some of the analysts on the conference call took the unusual step of blaming McDonald for the company’s woes, according to the Journal, which also pointed out that P&G saw a 16% decline in earnings, registered drops in market share in 55% of the categories and countries it operates in and plans to cut 4,000 jobs by 2016. P&G brands are available in 180 countries and range from Bounty, Crest and Pampers to Gillette, Tide and Pantene.

McDonald, who joined P&G in 1980, has been president and CEO since 2009 and chairman since 2010, and has been credited with spearheading a number of innovations at the company. What he hadn’t counted on, however, was a recession that has led to consumer demand for cheaper brands, and a backlash against the company’s decision to raise some of its prices at a time when other companies were holding steady. As Wharton marketing professor Stephen Hoch notes, “Consumers have turned much more price sensitive, and grocery retailers reinforce those behaviors [by] fighting to retain market share and continuing to push their store brands in order to reinforce a value image.” What P&G is mainly focused on, Hoch adds, is “retaining market share, since when you lose it — and they have plenty to lose as the top dog — it is not easy to get it back.”

Wharton management professor Louis Thomas says P&G’s current woes are because “its strategy over the years has been to build dominant market positions in product categories by starting price wars with competitors. In fact, P&G brand managers are given a strong incentive to defend market share and not profits. So brand managers routinely cut price, and thus margins, in order to hold market share.”

That strategy, Thomas says, has at least two limitations: First, “it is only effective as long as rivals are more financially constrained…. [But] many of P&Gs rivals, such as Unilever, are not financially constrained. In this case, P&G’s strategy simply leads to a prolonged price war, and because it is the bigger firm, it is hurt more than its rivals.” Second, this strategy is “vulnerable to innovation,” Thomas notes. “Other firms can introduce new and better products to limit the effectiveness of P&G’s price cutting. Unilever and Colgate have recently out-innovated P&G in many product categories.”   

What P&G needs to do, he adds, is “focus on improving existing products and introducing new ones [as well as] increasing advertising expenditures on these new products. This will allow prices/margins to improve and limit share gains by rivals. In the long run, firms simply cannot rely on price cutting to maintain their position in markets.” 

Innovation is key. “P&G has simply tried to raise prices without increasing differentiation,” Thomas says. ”This just leads to a classic prisoner’s dilemma where all firms lose in price wars. One way out is through product differentiation via innovation…. Aggressive pricing strategies have to go together with innovation for the industry leader if it wants to stay the leader. It’s like a strategic one-two punch.”

As for how much McDonald is to blame for the weak results, Thomas suggests that “the problems in certain categories like … shaving and detergents seem attributable to him. P&G was well ahead in those categories but rivals have gained as P&G slowed innovation.”

As for Hoch, “I don’t believe in the great man theory of leaders, and so I don’t see that McDonald is to blame exclusively…. Long term, I would absolutely not bet against P&G. This is not to say that they never blow it; they do. But they are still the class act in consumer packaged goods.”

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Experts All Atwitter about Super Bowl Ads

Posted on February 6, 2012

Super Bowl XLVI, and the $3.5 million that advertisers paid for 30-second spots, is over, but the ads linger on. Knowledge@Wharton Today asked Wharton faculty for their impressions of advertisers’ attempts to please the 100 million-plus viewers who tuned in to last night’s big game (which, by the way, the New York Giants won, 21 to 17, against the New England Patriots).

Marketing professor David Reibstein describes the ads as “less creative this year than in previous years. It also seemed to me there was a huge increase in the use of celebrities — Elton John, Beyoncé, Jerry Seinfeld, Jay Leno, etc. [Advertisers] may have been scared off by the negative reactions last year to the Groupon ads and some others.” Groupon’s Super Bowl XLV ad was criticized by some viewers when it pretended to talk about social issues — in one case, the crisis in Tibet — when it was instead promoting Groupon deals. Reibstein notes that animals (mainly dogs), kids and sexy bodies were also used extensively this year, and that automobile ads were another popular category “because of the value of gaining a customer.”

His favorite ads include:

For Wharton operations and information management professor Kartik Hosanagar, favorites included: The Acura commercial with Seinfeld — “a treat for Seinfeld fans; there was a storyline; it was funny and the short version of the ad worked quite well too” — and Budweiser’s End of Prohibition commercial:” Cinema lovers will love the cinematic feel to this ad. The entire look was unlike that for a typical beer commercial…. I like how they approached it with a different mindset.”

Hosanagar’s least favorite was the America’s Got Talent ad with Howard Stern. “I just didn’t get it,” he says.

Wharton marketing professor Eric Bradlow says that he was struck by two ads in particular. The first was the Dorito’s bribery ad. ”I thought it did a great job of being comedic, but also talked about the essence of the brand as being impulsive, ‘addictive in a good way,’ and a must have,” he says, adding that the commercial was also “tightly linked to the brand essence and hence made a lot of sense.” The most disappointing ads, Bradlow says, were the Coke ads with the polar bear. “They seemed like ‘been there, done that,’ and there were too many of them. This is a classic situation of ‘ad wear out’ because the ads all seemed too similar to each other.”

For Wharton marketing professor Stephen Hoch, “My only comment is that many of the ads had what looked like very expensive production value. This means that either the advertisers really went over the top on ad spending, or computer animation makes it cheap to look over the top.”

Meanwhile, the results of the second annual Wharton Future of Advertising Super Bowl Ad “Tweet Meet” are in, and the winning companies include Chrysler, Acura, Kia, Doritos and GE. The Tweet Meet featured a panel of experts and pundits that included Wharton marketing faculty, advertising executives, students and journalists, all of whom tweeted during the Super Bowl about commercials that “amused, disappointed or otherwise provoked them.” For complete results, click here.

And finally, “proving again the appeal of chatting online while watching TV, the tense end of Super Bowl XLVI on Sunday night set a new record for simultaneous Twitter messages,” according to an article in The New York Times. As the game was winding down, “Twitter counted 12,233 posts per second, the most for any English language event in the six-year history of the social-networking service,” the article noted, adding that Madonna’s halftime performance inspired 10,245 posts per second.

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Black Thursday, Anyone?

Posted on November 14, 2011

Target, Best Buy and Macy’s, among others, are doing it; J.C Penney isn’t, and Walmart is doing it in spades.  

The “it” is the move by some stores on Black Friday to push the boundaries of consumerism farther than ever before. While retailers for years have opened their doors in the early hours (think 4 a.m.) on Friday,the day after the Thanksgiving holiday,this year they are opening at midnight Thursday,or,in the case of Walmart, at 10 p.m. that night.

According to an article in The New York Times, however, a number of shoppers are antagonized, rather than energized, by the earlier hours. Some resent the pressure to leave their Thanksgiving dinners in order to get in line for sales and special offers. Others, the article says, claim the early hours are exploiting employees who have no choice but to work the shifts that their bosses demand.

So why not just succumb to the inevitable and open stores all day on Thanksgiving?

“Certainly,it doesn’t take too much to get there,” says Wharton marketing professor Barbara Kahn. “One retailer opens at midnight, everyone copies; then they open at 11 p.m., everyone copies and before you know it, Thanksgiving Thursday becomes like other Thursdays – except presumably some of the ‘hot sales’ prevail that we don’t necessarily see on other Thursdays.”

And just how effective is this race to the early hours for retailers hoping that buyers spend enough on Black Friday to help them “get in the black” (hence the name “Black Friday”) for the holiday season? “Anything retailers can do to create excitement and get consumers into the stores to shop will be helpful,” says Kahn. “If retailers are able to get a jump on their competitors,and get the deal-prone shopper into their store rather than into [another's], it’s an advantage for that retailer. Unfortunately,however,if it’s a good idea that is gaining attention from the media and from shoppers,other competitors feel forced to copy – which is exactly what has happened. Then no retailer has a particular advantage. All that [means] is that the shopping time table has moved earlier for everyone.”

Marketing professor Stephen Hoch agrees. “I see no upside for anyone now that most retailers have matched competitors’ early — or is it late? — openings,” he says. “In total, all that this retailer arms race does is shift sales around a little bit with no aggregate effect. It’s a feeble attempt to try and ignite mass market spending. What is crazy to me is that there are good and bad deals all year round, but some people treat Black Friday as the one over-the-top bargain hunting event of the year. Why not be a smart shopper all year round?”

Kahn notes,however,that the midnight or early Friday morning openings “are generally promotional opportunities – which are different from regular sales…. Sometimes it is about innovative new ideas or brands,like Kohl’s with their very successful J-Lo/Mark Anthony promotions or Target’s Missoni [collection]. Other times, it is planned pricing promotions that often have a time limit, which provides a ‘scarcity’ incentive — i.e.,get to the stores on time,or miss out on the deal. These are all … a part of the season strategy which is reflected in pricing decisions,inventory decisions,merchandising decisions,etc.”

If retailers are doing a good job managing their inventory to forecasted demand,she adds,“then these scheduled planned promotions will be all that shoppers see. But,if the shopping trends are not living up to forecasted levels,there is excess inventory,and we might see ‘unplanned promotions’ very close to Christmas day as retailers try to get rid of excess inventory.”

As for the effect of Thanksgiving creep on store employees, Wharton marketing professor Cassie Mogilner thinks that the trend towards earlier and earlier hours suggests “an unfortunate slide towards losing yet another holiday to gross consumerism. If many of the retailers open their doors on Thanksgiving, then yes, these stores will lose any competitive advantage. For the sake of their employees and for the expressed values of the company, I would recommend to stores that they differentiate themselves by not following the crowd, and that they be explicit about why they are not doing so.”

Consumers, Mogilner adds, appreciate brands that “share their values, connect to their emotions and are authentic. Caring about the well-being of employees and the preservation of this much loved, All-American holiday strongly conveys these sources of brand equity. If a store positions itself as wanting to foster the meaning of Thanksgiving … [including] spending time together with friends and family, I think there would be some value gained. This positioning should probably also convey a commitment to offering the same deals and access to those sought-after ‘steals’ the next day without cutting into precious family time.”

Kahn has a similar take. “Instead of joining in with other retailers racing to open earlier and earlier on Thanksgiving evening,the retailer could take the approach of saying,‘Let’s value family time and give thanks,’ and then say that in support of their employees and out of respect for the importance of giving thanks,they will not open at midnight Thursday, but will instead offer a special deal at noon on Friday. Something like that could differentiate a retailer in a positive way, and perhaps drive sales from other types of shoppers who might value this perspective.”

And what will Hoch be doing on Black Friday? “As an expert shopper,my rule is never go shopping on Black Friday unless it’s to buy groceries,” he says.  

A Seasonal Sales Shift: For Bargain Hunters, Retailers Make Every Day Feel like Christmas: Knowledge@Wharton

 

 

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